4. Fair Value Measurements

Cash Equivalents and Short-Term Investments

The Company’s money market funds are classified within Level 1 of the fair value hierarchy and are valued based on quoted prices in active markets for identical securities. The Company’s short-term investments are comprised of agency bonds, commercial paper, corporate notes and treasury bonds. All short-term investments have been classified within Level 1 or Level 2 of the fair value hierarchy because of the sufficient observable inputs for revaluation. The Company’s Level 2 investments are valued using third-party pricing sources. The pricing services utilize industry-standard valuation models, including both income and market-based approaches, for which all significant inputs are observable, either directly or indirectly, to estimate fair value. These inputs include reported trades of and broker/dealer quotes on the same or similar investments, issuer credit spreads, benchmark investments, prepayment/default projections based on historical data and other observable inputs. The following table sets forth the Company’s financial instruments that were measured at fair value on a recurring basis by level within the fair value hierarchy (in thousands):

Convertible Senior Notes

As of March 31, 2024 and December 31, 2023, the fair value of the 2.75% convertible senior notes due 2025 (the 2025 Notes) was $35.8 million and $35.6 million, respectively. The fair value was determined on the basis of market prices observable for similar instruments and is considered Level 2 in the fair value hierarchy (See Note 7 for additional information regarding the 2025 Notes).

Warrant Liability

In November 2023, the Company entered into a Credit Agreement and Guaranty (the Braidwell Credit Agreement) with Braidwell LP (together with its affiliates, Braidwell). In connection with the Braidwell Credit Agreement, the Company issued warrants (the Braidwell Warrants) to Braidwell to purchase an aggregate of approximately 2.58 million shares of the Company's common stock.

The Braidwell Warrants are valued using the Black Scholes valuation model and are considered Level 3 in the fair value hierarchy. As of March 31, 2024 and December 31, 2023, the fair value of the Braidwell Warrants was $15.2 million and $28.7 million, respectively. Assumptions for the warrant liability are as follows:

Contingent Consideration

In connection with the Company's acquisition of Interventional Pain Technologies, Inc. (Vyrsa) in the fourth quarter of 2023, the Company is subject to certain contingent consideration. Changes in the fair value of the contingent consideration liability for the three months ended March 31, 2024 were as follows (in thousands):

Upon the achievement of the regulatory approval milestone in the three months ended March 31, 2024, the Company accrued an additional $5.0 million and made contingent consideration payments of $9.8 million. This resulted in $0.2 million remaining in the current portion of contingent liabilities as of March 31, 2024. Additionally, the Company reduced the valuation of the remaining milestones by $1.5 million.

The regulatory approval milestone and product development milestone consideration are valued using the probability-weighted average discount cash flow model, and the revenue milestone consideration is valued using the Monte Carlo simulation model. The contingent consideration is considered Level 3 in the fair value hierarchy. As of March 31, 2024, the fair value of the contingent consideration related to the product development and revenue milestones were $1.6 million and $13.9 million, respectively. As of December 31, 2023, the fair value of the contingent consideration related to the regulatory approval, product development and revenue milestones were $5.0 million, $1.7 million and $15.5 million, respectively.