6. Fair Value Measurements

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Fair Value of Aevitas

The Company valued its retained investment in Aevitas, as part of the deconsolidation of its holdings (see Note 3, Asset Purchase Agreements) in accordance with ASC Topic 820, Fair Value Measurements and Disclosures, and estimated the fair value to be $2.6 million based on a per share value of $0.328. The following inputs were utilized to derive the value: risk free rate of return of 3.7%, volatility of 80% and a discount for lack of marketability of 39.7%.

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Common Stock Warrant Liabilities

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Checkpoint

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On December 16, 2022, Checkpoint closed on an offering for the sale of shares of its common stock and pre-funded warrants as part of a registered direct offering (the “Checkpoint December 2022 Registered Direct Offering”). The common stock and the pre-funded warrants were sold together with common stock warrants and placement agent warrants (the “Checkpoint December 2022 Common Stock and Placement Agent Warrants”). Net proceeds from the Checkpoint December 2022 Registered Direct Offering were $6.7 million after deducting commissions and other transaction costs.

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The Company deemed the Checkpoint December 2022 Common Stock and Placement Agent Warrants to be classified as liabilities on the balance sheet as they contain terms for redemption of the underlying security that are outside its control. The Checkpoint December 2022 Common Stock and Placement Agent Warrants were recorded at the time of closing at a fair value determined by using the Black-Scholes model. As the total fair value of the common stock warrant liability exceeded the total proceeds, no proceeds were allocated to Checkpoint common stock and pre-funded warrants as part of the transaction. Checkpoint revalued the Checkpoint December 2022 Common Stock and Placement Agent Warrants at December 31, 2022, resulting in a fair value of $11.2 million.

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The Company revalued the Checkpoint December 2022 Common Stock and Placement Agent Warrants at September 30, 2023 using the Black-Scholes model. This resulted in a decrease in common stock warrant liability of $9.2 million, with an offsetting gain recorded to change in fair value of warrant liabilities in the unaudited condensed consolidated Statements of Operations.

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A summary of the weighted average (in aggregate) significant unobservable inputs (Level 3 inputs) used in measuring the warrant liability that are categorized within Level 3 of the fair value hierarchy was as follows:

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Avenue

On October 11, 2022, Avenue announced the closing of an underwritten public offering of 3,636,365 common and pre-funded units.  Each common unit consists of one share of common stock and one warrant to purchase one share of common stock, and each pre-funded unit consists of one pre-funded warrant to purchase one share of common stock and one warrant to purchase one share of common stock. Each share of common stock (or pre-funded warrant) was sold together with one warrant at a combined purchase price of $3.30 per common unit (or $3.2999 per pre-funded unit after reducing $0.0001 attributable to the exercise price of the pre-funded warrants). Avenue also simultaneously closed on the sale of an additional 545,454 warrants to purchase common stock (the “October 2022 Warrants”), which were sold pursuant to a partial exercise of the underwriter’s over-allotment option. Avenue received net proceeds of approximately $10.3 million at closing after deducting underwriting discounts and commissions and other expenses of the offering.  

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On January 27, 2023, Avenue entered into an agreement with a single institutional investor for the sale of 448,000 shares of common stock at a price of $1.55 per share and pre-funded warrants to purchase 1,492,299 shares of common stock at $1.549 per pre-funded warrant.  Each pre-funded warrant had an exercise price of $0.001 per share. In a concurrent private placement, Avenue also agreed to issue to the same investor a total of 1,940,299 warrants to purchase up to one share of common stock (the “January 2023 Warrants”) each at an exercise price of $1.55 per share and a purchase price of $0.125. Avenue received approximately $2.8 million in net proceeds from both transactions and recorded $2.2 million in expense associated with the issuance of the common warrants (see Note 13, Stockholders’ Equity).

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The October 2022 Warrants originally contained a one-time down-round price protection feature. In connection with the January 2023 Registered Direct and Private Placement, the down-round price protection feature was triggered and the exercise price for the October 2022 Warrants was permanently adjusted to $1.55, which was the offering price for the January 2023 Registered Direct and Private Placement. The Black-Scholes model was used to value the October 2022 Warrants and January 2023 Warrants as of September 30, 2023.

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The Company deemed the warrants to be classified as liabilities on the balance sheet as they contain terms for redemption of the underlying security that are outside its control. The October 2022 Warrants were recorded at the time of closing at a fair value of $8.3 million.

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A summary of the weighted average (in aggregate) significant unobservable inputs (Level 3 inputs) used in measuring the warrant liability that are categorized within Level 3 of the fair value hierarchy was as follows:

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Urica

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The fair value of Urica’s contingently issuable placement agent warrants in connection with Urica’s first close of its preferred offering in December 2022, was measured using a Monte Carlo simulation valuation methodology. A summary of the weighted average (in aggregate) significant unobservable inputs (Level 3 inputs) used in measuring Urica’s warrant liability that are categorized within Level 3 of the fair value hierarchy was as follows:

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At September 30, 2023 and December 31, 2022 the value of the Urica’s contingent payment warrant was approximately $0.1 million.