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DISCONTINUED OPERATIONS

3 Months Ended

Mar. 31, 2025

Discontinued Operations and Disposal Groups [Abstract]

On April 24, 2024, the Company and Napp entered into the Napp Purchase Agreement, pursuant to which the Company sold to Napp, effective as of April 24, 2024, the following:

•all of the Company’s rezafungin assets, including all of the Company’s right to receive future milestones and royalties under a license agreement between Melinta Therapeutics, LLC, or Melinta, and the Company, or the Melinta License Agreement, and a collaboration and license agreement between Mundipharma and the Company, or the Mundipharma Collaboration Agreement,

•all rezafungin intellectual property rights, including patents and know-how, all product data, regulatory approvals and documentation,

•rezafungin and comparator inventory,

•specified prepaid assets and specified contracts, in exchange for Napp’s assumption of certain liabilities of the rezafungin business, including the ongoing costs of the ReSPECT Phase 3 clinical trial and the ReSTORE Phase 3 clinical trial in China and the Company’s obligations from and after closing under the Melinta License Agreement,

•the Commercial Supply Agreement between the Company and Melinta, and

•the Commercial Supply Agreement between the Company and Mundipharma, or the Mundipharma Commercial Supply Agreement.

No Company employees were transferred to Napp.

The Company, Napp and Mundipharma also entered into an Assignment and Novation Agreement to transfer the Mundipharma Collaboration Agreement and Mundipharma Commercial Supply Agreement from the Company to Napp, or the Novation Agreement. In the Novation Agreement, Mundipharma agreed to forgive the Company’s obligation to refund a $11.1 million development milestone advance due as of December 31, 2024, net of royalties, to Mundipharma under the Mundipharma Collaboration Agreement, provided that (a) the Company performed its obligation to provide carryover services under a Transition Services Agreement with Napp, or the TSA, for a period of 45 days following the closing, (b) the Company delivered all of the purchased assets, including product know-how and product-data, in accordance with the Napp Purchase Agreement and a know-how transfer plan delivered in connection with the Napp Purchase Agreement and (c) the Company performed its obligation to provide other services in accordance with the TSA for 75 days following the closing. On July 18, 2024, the Company received a notice of satisfaction from Mundipharma that it had completed the required performance obligations under the TSA and, accordingly, the $11.1 million development milestone advance previously made to the Company, and reimbursable to Mundipharma, was forgiven by Mundipharma.

The action to divest rezafungin was taken because of the Company’s strategy to streamline its portfolio and focus on the Cloudbreak platform and other financial considerations.

The Company has determined that the sale of rezafungin represents a strategic shift that had a major effect on its result of operations. Rezafungin met the criteria to be reported as discontinued operations at the time of the sale. The Company has separately reported the financial results of rezafungin as discontinued operations in the condensed consolidated statements of operations and comprehensive loss for all prior year periods presented.

There were no assets and liabilities related to discontinued operations as of March 31, 2025 and December 31, 2024, as all balances were recognized in income from discontinued operations at the completion of the transaction.

There were no discontinued operations during the three months ended March 31, 2025. The results of operations from discontinued operations during the three months ended March 31, 2024, have been reflected as loss from discontinued operations, net of income taxes in the condensed consolidated statements of operations and comprehensive loss and consisted of the following:


	Three Months Ended March 31,
(In thousands)	2024
Major line items constituting pretax income (loss) of discontinued operations
Revenues:


Total revenues	$	7,490
Operating expenses:
Cost of product revenue	1,563
Research and development	5,674
Selling, general and administrative	2,402
Total operating expenses	9,639






Loss from discontinued operations, net of income taxes	$	(2,149)

The cash flows related to discontinued operations have not been segregated and are included in the condensed consolidated statements of cash flows. The total net cash used in operating activities from discontinued operations was $6.9 million for the three months ended March 31, 2024. There were no investing or financing activities from discontinued operations for the three months ended March 31, 2024.

Cost of Product Revenue

Cost of product revenue consists primarily of costs related to materials, third-party contract manufacturing, freight-in and overhead. Prior to regulatory approval, all direct and indirect manufacturing costs were charged to R&D expense in the period incurred.

Research and Development Expenses

See Note 2.

Selling, General and Administrative Expenses

SG&A expenses relate to selling, finance, human resources, legal and other administrative activities. SG&A expenses consist primarily of salaries and related benefits, including stock-based compensation, related to our executive, finance, legal, business development, commercial planning and support functions. Other SG&A expenses include facility and overhead costs not otherwise included in cost of product revenue or R&D expenses, consultant expenses, travel expenses, professional fees for auditing, tax, legal, and other services, the branded prescription drug fee, and any accrued interest and penalties on accrued indirect tax liabilities.

Product Revenue

In December 2022 and January 2023, the Company entered into separate Commercial Supply Agreements with Mundipharma and Melinta Therapeutics, LLC, or Melinta, for the batch supply of REZZAYO naked vials for commercial use. Under the Commercial Supply Agreements, Mundipharma and Melinta were required to submit purchase orders to the Company for batches of REZZAYO naked vials. The Company concluded that the delivery of each batch of REZZAYO naked vials and the related quality assessment certification represented a distinct performance obligation. The Commercial Supply Agreements were terminated upon the effectiveness of the assignment to Napp on April 24, 2024.

The transaction price recognized as revenue for each performance obligation under the Commercial Supply Agreements consisted of variable consideration which was determined based on the estimated per vial costs, plus the contractually stated margin rate. The amounts recognized as revenue were adjusted, as needed, each reporting period based on actual costs incurred for each batch. Variable consideration was included in the transaction price only to the extent that it was considered probable that a significant reversal in the amount of cumulative revenue recognized would not occur when the uncertainty associated with the variable consideration was subsequently resolved. The Company has made an accounting policy election to exclude from the transaction price any indirect taxes collected from customers. As a result, any such collections were recorded as indirect tax liabilities. The transaction price was fully allocated to the single performance obligation.

The Company concluded that the performance obligation was satisfied and product revenue was recognized when the customer obtained control of the product, which occurred at a point in time, typically upon the later of (i) completion of a positive quality assessment, or (ii) shipment of the Company’s product to the customer.

Shipping and handling activities that were performed after a customer obtained control of the product were treated as activities to fulfill the promise to a customer and any amounts billed to a customer represented revenues for the product provided. Costs related to such shipping and handling were classified as cost of product revenue.

Collaboration Revenue

(i) Napp Purchase Agreement

In connection with the execution of the Napp Purchase Agreement, the Company modified its existing collaboration and license arrangements and Commercial Supply Agreements with Mundipharma and Melinta. As a result of the modified revenue contracts and the termination of these revenue arrangements, the Company concluded the Napp Purchase Agreement and the other aforementioned arrangements represented a bundled arrangement with a single commercial objective that required assessment under the guidance for revenue recognition. As a result, the Company identified the distinct performance obligations within the arrangements (including whether the distinct performance obligations were within the scope of ASC 606), determined the transaction price and the standalone selling prices of the distinct performance obligations, and allocated the transaction price using the relative standalone selling price method to the distinct performance obligations.

Revenue Recognition

On April 24, 2024, as of the execution date of the Napp Purchase Agreement (and all other bundled arrangements), the Company determined the transaction price is equal to $21.2 million for the sale of all rezafungin assets, including the Company’s right to receive future milestones and royalties from Mundipharma and Melinta, all rezafungin intellectual property rights, including patents and know-how, rezafungin and comparator inventory, specified prepaid assets, the Commercial Supply Agreements with Melinta and Mundipharma, and certain transition services. The transaction price includes the forgiveness of $25.3 million in contract liabilities (inclusive of the $11.1 million development milestone advance) and $0.6 million for the transition services agreement. The Company paid $2.1 million to Napp and forgave $2.6 million in accounts receivable, both of which are included as a reduction to the transaction price.

The $21.2 million transaction price was allocated to the distinct performance obligations on the basis of their respective relative standalone selling prices.

All Rezafungin assets. The Company transferred all rezafungin assets, including all rezafungin intellectual property rights, including patents and know-how, rezafungin and comparator inventory in April 2024 at a point in time. Therefore, the Company recognized the revenue related to this bundled performance obligations in the amount of $20.8 million as revenue in the results from operations from discontinued operations.

Specified Prepaid Assets and Contracts. The Company transferred specified prepaid and contracts in April 2024 at a point in time. The nature of the assets transferred were determined to be outside the scope of ASC 606 and therefore, the $0.3 million was recorded as part of the loss on disposal of discontinued operations.

Transition Services. The Company performed its services under the TSA over the initial 76-day period subsequent to the effective date of the Napp Purchase Agreement. In connection with the carryover services provided after the sale of rezafungin, the Company recognized $0.1 million as revenue in the results of operations from discontinued operations during the second quarter of 2024. The Company's costs to provide the TSA services predominantly related to employee labor costs which were reported within R&D and SG&A expenses within the results of operations from discontinued operations during the second quarter of 2024. The remaining unsatisfied performance obligation as of March 31, 2025 was zero.

(ii) Mundipharma Collaboration Agreement

On September 3, 2019, the Company entered into the Mundipharma Collaboration Agreement with Mundipharma, a related party, for a strategic collaboration to develop and commercialize rezafungin in an intravenous formulation, or the Mundipharma Licensed Product, for the treatment and prevention of invasive fungal infections.

Collaboration. Under the Mundipharma Collaboration Agreement, the Company was responsible for leading the conduct of an agreed global development plan, or the Global Development Plan, that included the Phase 3 pivotal clinical trial of the Mundipharma Licensed Product for the treatment of candidemia and/or invasive candidiasis, or the ReSTORE Trial, and the Phase 3 pivotal clinical trial of the Mundipharma Licensed Product for the prophylaxis of invasive fungal infections in adult allogeneic blood and marrow transplant recipients, or the ReSPECT Trial, as well as specified GLP-compliant non‑clinical studies and CMC development activities for the Mundipharma Licensed Product. Mundipharma was responsible for performing all development activities, other than Global Development Plan activities, that were necessary to obtain and maintain regulatory approvals for the Mundipharma Licensed Product outside of the U.S. and Japan, or the Mundipharma Territory, at Mundipharma’s sole cost.

Termination. The Mundipharma Collaboration Agreement was terminated upon the effectiveness of the assignment to Napp on April 24, 2024.

Revenue Recognition

Prior to the Mundipharma Collaboration Agreement termination on April 24, 2024, the Company determined the transaction price was equal to the up-front fee of $30.0 million, plus the R&D funding of $31.2 million, plus milestones achieved of $27.9 million.

The transaction price was allocated to the performance obligations on the basis of the relative stand-alone selling price estimated for each performance obligation. In estimating the stand-alone selling price for each performance obligation, the Company utilized discounted cash flows and developed assumptions that required judgment and included forecasted revenues, expected development timelines, discount rates, probabilities of technical and regulatory success and costs for manufacturing clinical supplies.

A description of the distinct performance obligations identified under the Mundipharma Collaboration Agreement was as follows:

Licenses of Intellectual Property. The license to the Company’s intellectual property, bundled with the associated know-how, represented a distinct performance obligation. The license and associated know-how was transferred to Mundipharma in September 2019.

Research and Development Services. The Company and Mundipharma shared equally in the costs of ongoing rezafungin clinical development in the Mundipharma Territory up to the specified cap, which represented a distinct performance obligation. The Company recorded these cost-sharing payments due from Mundipharma as collaboration revenue. The Company concluded that progress towards completion of the performance obligation related to the R&D services was best measured in an amount proportional to the R&D expenses incurred and the total estimated R&D expenses.

Clinical Supply Services. The Company’s initial obligation to supply rezafungin for ongoing clinical development in the Mundipharma Territory represented a distinct performance obligation. The Company concluded that progress towards completion of the performance obligations related to the clinical supply services was best measured in an amount proportional to the clinical supply services expenses incurred and the total estimated clinical supply services.

Milestone Payments. In November 2020, the Company achieved a milestone under the Mundipharma Collaboration Agreement, and received payment for this milestone in January 2021. Mundipharma was entitled to credit the full amount of this milestone payment toward future royalties payable to the Company, subject to a limit on the amount by which royalty payments to the Company may be reduced in any quarter. If Mundipharma had not fully credited the amount of such milestone payment toward royalties payable to the Company before the earlier of (i) December 31, 2024 and (ii) termination of the Mundipharma Collaboration Agreement by Mundipharma, the Company would have been obligated to refund the uncredited portion of such milestone payment to Mundipharma on the earlier of such dates. The full amount was forgiven in July 2024 as part of the rezafungin asset sale and the Company included it in the transaction price of the Napp Purchase Agreement. In December 2021, August 2022, December 2023 and January 2024, the Company achieved milestones under the Mundipharma Collaboration Agreement that the Company deemed to be tied to all the performance obligations identified in the original agreement. Revenue associated with these milestones was allocated proportionately to the original transaction price which was allocated to the performance obligations on the basis of the relative stand-alone selling price estimated for each performance obligation. In conjunction with the performance obligations already delivered, revenue was recognized based on the progress of these performance obligations, the unrecognized portion was recorded as contract liabilities at the reporting period end and was recognized as revenue over the remaining progress of these performance obligations. The Company received payment for these milestones in January 2022, September 2022, February 2024 and April 2024, respectively.

Royalties. As the license was deemed to be the predominant item to which sales-based royalties related, the Company recognized royalty revenue when the related sales occurred.

(iii) Melinta License Agreement

On July 26, 2022, the Company entered into the Melinta License Agreement with Melinta under which the Company granted Melinta an exclusive license to develop and commercialize products that contained or incorporated rezafungin, or the Melinta Licensed Product, in the U.S., or the Melinta Territory.

Continued Development and Regulatory Activities. The Company was responsible, at its sole expense, for conducting an agreed upon development plan, or the Melinta Development Plan, that included, among other activities, (a) completion of the ReSPECT Phase 3 pivotal clinical trial for the prophylaxis of invasive fungal infections in adult allogeneic blood and marrow transplant recipients, or the Prophylaxis Indication, (b) preparation and submission to the FDA of a supplemental new drug application, or sNDA, for the Melinta Licensed Product in the Prophylaxis Indication, (c) site close-out activity worldwide (outside of China) for the ReSTORE Phase 3 pivotal clinical trial for the treatment of candidemia and invasive candidiasis, or the Treatment Indication, (d) certain nonclinical studies and other nonclinical activities, (e) certain CMC activities for the Melinta Licensed Product, and (f) all other development activities that were required by the FDA to obtain marketing approval of the Melinta Licensed Product in the Treatment Indication and the Prophylaxis Indication in the Melinta Territory.

The Company remained the holder of the rezafungin IND and new drug application, or NDA, before the Melinta License Agreement was assigned as part of the Napp Purchase Agreement.

Termination. The Melinta License Agreement was terminated upon the effectiveness of the assignment to Napp on April 24, 2024.

Revenue Recognition

Prior to the Melinta License Agreement termination on April 24, 2024, the Company determined the transaction price was equal to the up-front fee of $30.0 million, plus a milestone achieved of $20.0 million. The transaction price was allocated to the performance obligations on the basis of the relative stand-alone selling price estimated for each performance obligation. In estimating the stand-alone selling price for each performance obligation, the Company utilized discounted cash flows and developed assumptions that required judgment and included forecasted revenues, expected development timelines, discount rates, probabilities of technical and regulatory success, costs to continue the R&D efforts and costs for manufacturing clinical supplies.

A description of the distinct performance obligations identified under the Melinta License Agreement was as follows:

Research and Development Services. The Company was required to provide R&D services, at its sole expense, as described under the Melinta Development Plan, which represented a distinct performance obligation. The Company concluded that progress towards completion of the performance obligation related to the R&D services was best measured in an amount proportional to the R&D expenses incurred and the total estimated R&D expenses.

Clinical Supply Services. The Company’s obligation to supply rezafungin for ongoing clinical development in the Melinta Territory represented a distinct performance obligation. The Company concluded that progress towards completion of the performance obligations related to the clinical supply services was best measured in an amount proportional to the clinical supply services expenses incurred and the total estimated clinical supply services.

Milestone Payments. In March 2023, the Company achieved a milestone under the Melinta License Agreement that the Company deemed to be tied to all the performance obligations identified in the original agreement. Revenue associated with the milestone was allocated proportionately to the original transaction price which was allocated to the performance obligations on the basis of the relative stand-alone selling price estimated for each performance obligation. In conjunction with the performance obligations already delivered, revenue was recognized based on the progress of these performance obligations, the unrecognized portion was recorded as contract liabilities at the reporting period end and was recognized as revenue over the remaining progress of these performance obligations. The Company received payment for this milestone in April 2023.

Royalties. As the license was deemed to be the predominant item to which sales-based royalties related, the Company recognized royalty revenue when the related sales occurred.

As of the termination date of both the Mundipharma Collaboration Agreement and the Melinta License Agreement, there was no aggregate transaction price allocated to performance obligations that was unsatisfied.

As of March 31, 2025 and December 31, 2024, the Company recorded no accounts receivable or contract liabilities associated with the Mundipharma Collaboration Agreement and Melinta License Agreement. As of March 31, 2025, the Company recorded accounts receivable associated with the Napp Purchase Agreement of $1.7 million.

The following table presents collaboration and product revenue, included within discontinued operations, disaggregated by collaborator and timing of revenue recognition, for the three months ended March 31, 2024 (in thousands):


	Three Months Ended March 31, 2024
	Mundipharma		Melinta
Revenue from Collaboration, License and Commercial Agreements:
Point in Time:


License of Intellectual Property - upon milestone achieved	$	813	$	—

Product Revenue	2,826		—
Royalty Revenue	26		76
Over Time:
Research and Development Services	3,266		317
Clinical Supply Services	166		—

Total Revenue from Collaboration, License and Commercial Agreements	$	7,097	$	393