Fair Value Measurements and Fair Value of Financial Instruments

12 Months Ended

Dec. 31, 2025

Fair Value Measurements and Fair Value of Financial Instruments

3.	Fair Value Measurements and Fair Value of Financial Instruments

The authoritative guidance on fair value measurements establishes a three-tier fair value hierarchy for disclosure of fair value measurements as follows:

Level 1 - Quoted prices in active markets for identical assets or liabilities.

Level 2 - Observable inputs other than Level 1 prices, 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 assets or liabilities.

Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

As of December 31, 2025 and 2024, financial assets measured at fair value on a recurring basis consisted of cash equivalents and marketable securities. Cash equivalents consist primarily of money market funds and other investments that are readily convertible into cash and have maturities of three months or less at the time of acquisition. The fair value of cash equivalents was $34.7 million and $75.3 million as of December 31, 2025 and, 2024, respectively. The Company considers marketable securities with maturities greater than three months at the time of acquisition to be available for sale securities. The fair value of available for sale securities was $78.1 million and $82.8 million as of December 31, 2025, and 2024, respectively. These available-for-sale securities have expected maturities ranging from 0.5 to 12.0 months, and securities with an expected maturity greater than 12 months as of the balance sheet date, are classified in long-term. There were no available-for-sale securities with expected maturities greater than 12 months as of December 31, 2025. The fair value of marketable securities, which are Level 2 financial instruments, is based upon market prices quoted on the last day of the fiscal period or other observable market inputs. The Company obtains pricing information from its investment manager and generally determines the fair value of investment securities using standard observable inputs, including reported trades, broker-dealer quotes, bids and/or offers.

The Company evaluates securities with unrealized losses, if any, to determine whether the decline in fair value has resulted from credit loss or other factors, including various qualitative factors. As of December 31, 2025, the Company has not recognized any impairment or credit losses on the Company’s available for sale securities. While the Company classifies these securities as available for sale, the Company does not intend to sell its investments and based on its current plans, the Company currently believes it has the ability to hold these investments until maturity.

The carrying values of the Company’s accounts payable and accrued expenses and other current liabilities approximate their fair values due to the short-term nature of these liabilities.

Assets and liabilities measured at fair value are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires management to make judgments and consider factors specific to the asset or liability.

The Company’s Level 3 liabilities that are measured at fair value on a recurring basis consist of the Series A common stock warrant liability related to the warrant to purchase 1,000 shares of Series A common stock with an exercise price of $69.94 per share and an expiration date of July 18, 2026, the third anniversary date of the closing of the Company’s IPO. The fair value of the Series A common stock warrant liability was immaterial as of December 31, 2025 and 2024, as well as the change in fair value during the years ended December 31, 2025 and 2024. There were no transfers within the hierarchy during the periods presented.

The following tables set forth the Company’s financial assets that were measured at fair value on a recurring basis by level within the fair value hierarchy (in thousands):


		December 31, 2025
	Valuation	Amortized		Unrealized		Unrealized
	Hierarchy	Cost		Gains		Losses		Fair Value
Assets
Cash equivalents:
Money market funds	Level 1	$	33,219	$	—	$	—	$	33,219
Corporate debt securities	Level 2		1,499		—		—		1,499
Total cash equivalents			34,718		—		—		34,718
Short-term marketable securities:
Commercial paper	Level 2		18,061		14		(4)		18,071
Corporate debt securities	Level 2		1,500		3		—		1,503
U.S. Treasury securities	Level 2		50,340		92		—		50,432
Agency securities	Level 2		2,033		1		—		2,034
Asset-backed securities	Level 2		6,049		16		(2)		6,063
Total short-term marketable securities			77,983		126		(6)		78,103
Total cash equivalents and marketable securities		$	112,701	$	126	$	(6)	$	112,821


		December 31, 2024
	Valuation	Amortized		Unrealized		Unrealized
	Hierarchy	Cost		Gains		Losses		Fair Value
Assets
Cash equivalents:
Money market funds	Level 1	$	72,800	$	—	$	—	$	72,800
U.S. Treasury securities	Level 2		2,477		—		—		2,477
Total cash equivalents			75,277		—		—		75,277
Short-term marketable securities:
Commercial paper	Level 2		14,447		25		(1)		14,471
Corporate debt securities	Level 2		6,909		7		—		6,916
U.S. Treasury securities	Level 2		27,493		123		—		27,616
Agency securities	Level 2		21,345		12		(2)		21,355
Asset-backed securities	Level 2		5,030		22		—		5,052
Total short-term marketable securities			75,224		189		(3)		75,410
Long-term marketable securities:
U.S. Treasury securities	Level 2		4,884		36		—		4,920
Asset-backed securities	Level 2		2,480		8		—		2,488
Total long-term marketable securities			7,364		44		—		7,408
Total cash equivalents and marketable securities		$	157,865	$	233	$	(3)	$	158,095

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

+ References

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+ Details

Sagimet Biosciences Inc. 10-K