9. Fair value re-measurement of warrants granted to Gilead

Total fair value re-measurement for the years ended 31 December 2021 and 31 December 2020 can be split up as follows:

Gilead warrants B

We measured the warrants (initial and subsequent warrant B) at fair value and recognized a warrant issuance liability at closing date of the transaction on 23 August 2019. Upon approval of the issuance of initial warrant B on 22 October 2019 (warrant approval date) the variable consideration was re-measured with a corresponding impact on the transaction price allocated to the performance obligation relating to our drug discovery platform, and the warrant issuance liability became a financial liability measured at fair value with changes through profit or loss as from that moment.

The issuance of initial warrant B was approved on 22 October 2019 by the extraordinary general meeting of shareholders and is not yet exercised by Gilead at 31 December 2021. The fair value measurement of this financial liability is categorized as level 3 in the fair value hierarchy. Initial warrant B has been valued on the basis of a Longstaff-Schwartz Monte Carlo model. The input data used in the model were derived from market observations (volatility, discount rate and share price) and from management estimates (number of shares to be issued and applied discount for lack of marketability). The recognized fair value gain of €3.0 million for the year ended 31 December 2021, is mainly the result of the decrease of our share price and of its implied volatility in 2021. The fair value of the financial liability related to the initial warrant B of €0.2 million on 31 December 2021 (€3.2 million on 31 December 2020) is presented as current financial instrument in our consolidated statement of financial position and will be re-measured at each reporting period.

Subsequent warrant B is still subject to approval by an extraordinary general meeting of shareholders and is therefore still presented as warrant issuance liability in our deferred income (we refer to note 25 for more information). Subsequent warrant B has been valued on the basis of a Longstaff-Schwartz Monte Carlo model. The input data used in the model were derived from market observations (volatility, discount rate and share price) and from management estimates (number of shares to be issued and applied discount for lack of marketability).