Fair Value of Financial Assets and Liabilities

12 Months Ended

Sep. 30, 2025

Fair Value of Financial Assets and Liabilities

3. Fair Value of Financial Assets and Liabilities

The following tables present information about the Company’s financial assets and liabilities that were subject to fair value measurement on a recurring basis as of September 30, 2025 and 2024 and indicate the fair value hierarchy of the valuation inputs utilized to determine such fair value:


	Fair Value Measurements at September 30, 2025 Using:
	Level 1		Level 2		Level 3		Total
	(in thousands)
Assets:
Cash equivalents:
Money market funds	$	11,580	$	—	$	—	$	11,580
Marketable securities:
U.S. Treasury notes		156,566		—		—		156,566
		168,146		—		—		168,146
Liabilities:
Series 1 nonconvertible preferred stock		—		—		1,311		1,311
	$	—	$	—	$	1,311	$	1,311


	Fair Value Measurements at September 30, 2024 Using:
	Level 1		Level 2		Level 3		Total
	(in thousands)
Assets:
Cash equivalents:
Money market funds	$	33,448	$	—	$	—	$	33,448
Marketable securities:
U.S. Treasury notes		210,953		—		—		210,953
		244,401		—		—		244,401
Liabilities:
Series 1 nonconvertible preferred stock		—		—		1,350		1,350
	$	—	$	—	$	1,350	$	1,350

Cash equivalents as of September 30, 2025 and 2024 consist of money market funds that are readily convertible to cash and with less than 90 days until maturity.

During the years ended September 30, 2025, 2024, and 2023, there were no transfers between Level 1, Level 2 and Level 3.

The fair value of Level 1 instruments are valued using quoted prices in active markets. The fair value of Level 2 instruments classified as marketable securities were determined through third-party pricing services. The pricing services use many observable market inputs to determine value, including reportable trades, benchmark yields, credit spreads, broker/dealer quotes, bids, offers, and current spot rates.

The outstanding shares of Series 1 nonconvertible preferred stock as of September 30, 2025 and 2024 are measured at fair value. These outstanding shares are financial instruments that might require a transfer of assets because of the liquidation features in the contract and are therefore recorded as liabilities and measured at fair value. The fair value of the outstanding shares is based on significant inputs not observable in the market, which represent a Level 3 measurement within the fair value hierarchy. The Company utilizes a probability-weighted valuation model, which takes into consideration various outcomes that may require the Company to transfer assets upon liquidation. Changes in the fair values of the Series 1 nonconvertible preferred stock are recognized in other income (expense) in the consolidated statements of operations.

The recurring Level 3 fair value measurements of the Company’s outstanding Series 1 nonconvertible preferred stock using probability-weighted discounted cash flow include the following significant unobservable inputs:


Series 1 nonconvertible preferred stock	Range
	September 30,
Unobservable Input	2025	2024
Probabilities of payout	0%-65%	0%-65%
Discount rate	8.25%	9.00%

The following table provides a rollforward of the aggregate fair value of the Company’s outstanding Series 1 nonconvertible preferred stock for which fair value is determined by Level 3 inputs:


	Series 1 Nonconvertible Preferred Stock
	(in thousands)
Balance, September 30, 2022	$	1,423
Change in fair value		—
Balance, September 30, 2023		1,423
Change in fair value		(73	)
Balance, September 30, 2024		1,350
Change in fair value		(39	)
Balance, September 30, 2025	$	1,311

In April 2023, the Company entered into a royalty sale agreement with an affiliate of OMERS, pursuant to which the Company was paid a $200,000 cash purchase price in exchange for 54.5% of future quarterly royalty payments on net sales of MAVYRET/MAVIRET, after June 30, 2023, through June 30, 2032, subject to a cap on aggregate payments equal to 1.42 times the purchase price. The Company accounted for the upfront payment as a liability related to the sale of future royalties. The carrying value of the liability related to the sale of future royalties approximates fair value as of September 30, 2025 and 2024 and is based on current estimates of future royalties expected to be paid to OMERS over the next 10 years, which are considered Level 3 inputs. See Note 8 for a rollforward of the liability.

- 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

ENANTA PHARMACEUTICALS INC 10-K