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Discontinued Operations | 6 Months Ended
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Jun. 30, 2024
Discontinued Operations and Disposal Groups [Abstract] |
Discontinued Operations | 3. DISCONTINUED OPERATIONS Mural Oncology Separation On November 15, 2023 (the “Separation Date”), the Company completed the separation of its oncology business into Mural Oncology plc (“Mural”), a new, independent, publicly-traded company (the “Separation”). The Separation was effected by means of a distribution of all of the outstanding ordinary shares of Mural to the Company’s shareholders (the “Distribution”), in which each of the Company’s shareholders received one ordinary share, nominal value $0.01 per share, of Mural for every ten ordinary shares, par value $0.01 per share, of the Company (the “Distribution Ratio”) held by such shareholder as of the close of business on November 6, 2023, the record date for the Distribution. The historical results of the oncology business have been reflected as discontinued operations in the Company’s accompanying condensed consolidated financial statements for the three and six months ended June 30, 2023 and as of December 31, 2023. In connection with the Separation, the Company entered into a separation agreement with Mural, dated as of November 13, 2023 (the “Separation Agreement”), that, among other things, sets forth the Company’s agreements with Mural regarding the principal actions taken or to be taken in connection with the Separation, including the Distribution. The Separation Agreement identified those assets to be transferred to, liabilities to be assumed by, and contracts to be assigned to Mural, including the operating lease for the office and laboratory space at 852 Winter Street in Waltham, Massachusetts, and it provided for when and how such transfers, assumptions and assignments were to occur. The purpose of the Separation Agreement was to provide Mural and the Company with those assets necessary to operate their respective businesses and to retain or assume the respective liabilities related to those assets. Under the terms of the Separation Agreement, the Company granted Mural a perpetual, worldwide, non-exclusive, royalty-free, fully paid-up license (or, as the case may be, sublicense) to certain IP controlled by the Company as of the date of the Distribution to allow Mural to use such IP for the oncology business, and Mural granted the Company a perpetual, worldwide, non-exclusive, royalty-free, fully paid-up license (or, as the case may be, sublicense) to the IP transferred to Mural as part of the Separation for the Company’s use outside of the oncology business. Each of Mural and the Company agreed to releases with respect to pre-Distribution claims, and cross-indemnities with respect to post-Distribution claims, that are principally designed to place financial responsibility for the obligations and liabilities allocated to Mural under the Separation Agreement, and financial responsibility for the obligations and liabilities allocated to the Company under the Separation Agreement. The Company and Mural are also each subject to certain confidentiality restrictions and information sharing obligations. The transfer of assets and liabilities to Mural was effected through a contribution in accordance with the Separation Agreement, as summarized below:
(In thousands) |  | November 15, 2023 |
ASSETS |  |  |
Current Assets: |  |  |
Cash and cash equivalents |  | $ | 275,000 |
Total current assets |  |  | 275,000 |
Property, plant and equipment, net |  |  | 10,096 |
Right-of-use assets |  |  | 14,513 |
Goodwill |  |  | 7,800 |
Deferred tax asset |  |  | 1,799 |
Total assets |  | $ | 309,208 |
LIABILITIES |  |  |
Current Liabilities |  |  |
Operating lease liabilities—short-term |  | $ | 6,036 |
Total current liabilities |  |  | 6,036 |
Operating lease liabilities—long-term |  |  | 9,412 |
Total liabilities |  |  | 15,448 |
Net assets transferred to Mural |  | $ | 293,760 |
The Company determined that the Separation and the Distribution qualified as tax-free for U.S. federal income tax purposes, which required significant judgment by management. In making such determination, the Company applied U.S. federal tax law to relevant facts and circumstances and obtained: (i) a favorable private letter ruling from the Internal Revenue Service; (ii) a tax opinion; and (iii) other external tax advice related to the concluded tax treatment. If the Separation and Distribution were to ultimately fail to qualify for tax-free treatment for U.S. federal income tax purposes, the Company and/or its shareholders could be subject to significant liabilities, which could have material adverse impacts on the Company’s business, financial condition, results of operations and cash flows in future reporting periods. Furthermore, other than taxes recorded on the transfer of IP, the Company determined that the Separation and related Distribution qualified as tax-free for Irish tax purposes, which required significant judgment by management. In making such determination, the Company applied Irish tax law to relevant facts and circumstances and obtained: (i) a tax opinion; and (ii) other external tax advice related to the concluded tax treatment. If the Separation and Distribution were to ultimately fail to qualify for tax-free treatment for Irish tax purposes, the Company and/or its shareholders could be subject to significant liabilities, which could have material adverse impacts on the Company’s business, financial condition, results of operations and cash flows in future reporting periods. In connection with the Separation, the Company also entered into a tax matters agreement with Mural, dated as of November 13, 2023. The tax matters agreement governs the Company’s and Mural’s respective rights, responsibilities and obligations with respect to taxes (including taxes arising in the ordinary course of business and taxes, if any, incurred as a result of any failure of the Distribution, together with certain related transactions, to qualify as tax-free for U.S. federal income tax purposes), tax attributes, the preparation and filing of tax returns, the control of audits and other tax proceedings, and assistance and cooperation in respect of tax matters. In connection with the Separation, the Company also entered into an employee matters agreement with Mural, dated as of November 13, 2023 (as amended, the “Employee Matters Agreement”). The Employee Matters Agreement governs the Company’s, Mural’s and their respective subsidiaries’ and affiliates’ rights, responsibilities and obligations after the Separation with respect to, employment, benefits and compensation matters relating to employees and former employees (and their respective dependents and beneficiaries) who are or were associated with the Company, including those who became employees of Mural in connection with the Separation; the allocation of assets and liabilities generally relating to employees, employment or service-related matters and employee benefit plans; other human resources, employment and employee benefits matters; and the treatment of equity-based awards granted by the Company prior to the Separation. The Company entered into two transition services agreements with Mural. On November 13, 2023, Alkermes, Inc., a wholly-owned subsidiary of the Company (“Alkermes US”), and Mural Oncology, Inc., a wholly-owned subsidiary of Mural (“Mural US”), entered into one transition services agreement, pursuant to which the Company and its subsidiaries will provide, on an interim, transitional basis, various services to Mural and its subsidiaries, and a second transition services agreement, pursuant to which Mural and its subsidiaries will provide certain services to the Company and its subsidiaries, in each case for a term of two years, unless earlier terminated in accordance with the terms of the applicable agreement. Discontinued Operations The Company determined that the Separation met the criteria for classification of the oncology business as discontinued operations in accordance with Topic 205.The following summarizes the loss from discontinued operations for the three and six months ended June 30, 2024 and 2023:
|  | Three Months Ended |  |  | Six Months Ended |
|  | June 30, |  |  | June 30, |
(In thousands) |  | 2024 |  |  | 2023 |  |  | 2024 |  |  | 2023 |
Operating expenses from discontinued operations |  |  |  |  |  |  |  |  |  |  |  |
Cost of goods manufactured |  | $ | — |  |  | $ | 11 |  |  | $ | — |  |  | $ | 22 |
Research and development |  |  | 3,913 |  |  |  | 32,563 |  |  |  | 6,429 |  |  |  | 62,430 |
Selling, general and administrative |  |  | — |  |  |  | 9,502 |  |  |  | — |  |  |  | 16,146 |
Total operating expenses from discontinued operations |  |  | 3,913 |  |  |  | 42,076 |  |  |  | 6,429 |  |  |  | 78,598 |
Operating loss from discontinued operations |  |  | (3,913 | ) |  |  | (42,076 | ) |  |  | (6,429 | ) |  |  | (78,598 | )
Income tax benefit from discontinued operations |  |  | (613 | ) |  |  | (40 | ) |  |  | (1,009 | ) |  |  | (6,767 | )
Net loss and comprehensive loss from discontinued operations |  | $ | (3,300 | ) |  | $ | (42,036 | ) |  | $ | (5,420 | ) |  | $ | (71,831 | )
There were no assets and $4.5 million of liabilities related to the Separation at December 31, 2023. All assets related to the Separation were transferred to Mural as of the Separation Date. The $4.5 million of liabilities classified as “Liabilities related to discontinued operations” in the accompanying condensed consolidated balance sheet related to bonus amounts accrued for employees that transferred to Mural during 2023 and through the Separation Date that were paid by the Company in the first quarter of 2024, in accordance with the terms of the Employee Matters Agreement. The following table summarizes the significant non-cash items and capital expenditures of the discontinued operations that are included in the accompanying condensed consolidated statements of cash flows for the six months ended June 30, 2023:
|  | Six Months Ended |
(In thousands) |  | June 30, 2023 |
OPERATING ACTIVITIES: |  |  |
Depreciation |  | $ | 240 |
Share-based compensation expense |  |  | 2,937 |
Right-of-use assets |  |  | 4,364 |
Operating lease liabilities |  |  | (2,927 | )
INVESTING ACTIVITIES: |  |  |
Additions of property, plant and equipment |  | $ | (173 | )

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- Definition The entire disclosure related to a disposal group. Includes, but is not limited to, a discontinued operation, disposal classified as held-for-sale or disposed of by means other than sale or disposal of an individually significant component. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 205 -SubTopic 20 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org/205-20/tableOfContent Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 360 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org/360/tableOfContent + Details
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