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Pulmatrix Transaction | 9 Months Ended
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Sep. 30, 2024
Business Combination And Asset Acquisition [Abstract] |
Pulmatrix Transaction | 2. Pulmatrix Transaction On May 28, 2024, the Company executed a bill of sale and assignment agreement with Pulmatrix, Inc. ("Pulmatrix") whereby the Company acquired from Pulmatrix certain lab assets and assumed certain liabilities, including the lease for an R&D facility in Bedford, Massachusetts. Concurrently, the Company and Pulmatrix entered into an intellectual property cross-license agreement (the "Cross License Agreement") for the Company's out-licensing of its Cricket® Device to Pulmatrix and in-licensing of Pulmatrix's iSPERSE™ technology, and a master service agreement. The parties and landlord also entered into an amendment to lease and consent to assignment of the lease. Each of these agreements became effective upon the closing of the collective transaction (the "Pulmatrix Transaction") on July 8, 2024 (the "Effective Date"). The Company also entered into employment agreements with 13 Pulmatrix R&D employees who began employment with the Company on the Effective Date. Pursuant to the Cross License Agreement, the Company granted to Pulmatrix certain exclusive and non-exclusive rights to develop, use, manufacture, market, offer and sell its single-use disposable dry powder inhaler (the "Cricket Device") for the inhaled delivery of dihydroergotamine in any formulation whatsoever (including Pulmatrix's’s PUR3100 treatment of acute migraine), and the inhaled delivery of one or more active pharmaceutical ingredients formulated with iSPERSE for the treatment of neurological disease in humans (collectively, the “Cricket License”). In return, Pulmatrix granted to the Company certain exclusive and non-exclusive rights to develop, use, manufacture, market, offer and sell iSPERSE formulations of clofazimine and insulin, and formulations of iSPERSE with one or more active pharmaceutical ingredients for the treatment of nontuberculous mycobacteria lung disease in humans, endocrine disease in humans, and interstitial lung diseases in humans (collectively, the “iSPERSE License”). The Company may also provide certain development services to Pulmatrix under the Master Services Agreement, including but not limited to, activities to develop a dry powder formulation of the active pharmaceutical ingredient that Pulmatrix provides to the Company for oral inhalation using iSPERSE. Accounting Treatment The Pulmatrix Transaction was accounted for as a business combination using the acquisition method of accounting, which requires, among other things, the assets acquired and liabilities assumed to be recognized at their respective fair values as of the Effective Date. The excess of the fair value of the net assets acquired over the purchase price in this non-cash transaction was recorded as a gain on bargain purchase. The fair values of identifiable assets acquired and liabilities assumed by the Company from Pulmatrix as of the Effective Date are reflected below (in thousands):
|  | Amount |
Assets: |  |  |
iSPERSE License – IPR&D |  | $ | 4,300 |
Right-of-use asset – Bedford R&D facility |  |  | 10,057 |
Property and equipment |  |  | 959 |
Total assets |  |  | 15,316 |
Liabilities: |  |  |
Operating lease liability – Bedford R&D facility |  |  | 10,057 |
Total liabilities |  |  | 10,057 |
Net assets acquired – Gain on bargain purchase |  | $ | 5,259 |
The fair value of the Cricket License transferred to Pulmatrix was determined to be immaterial based on the current market availability of numerous third party single-dose dry powder inhalers and the significant time, cost, and risk required to potentially commercialize the Cricket Device. The transfer of the Cricket License was within the scope of ASC 606 as a sale of functional intellectual property, however, since no value was attributed to the Cricket License, no revenue was recognized by the Company. The fair value of the iSPERSE License was determined by applying a cost approach, which assesses current replacement cost to acquire or construct a substitute asset of comparable utility as of the Effective Date. The iSPERSE License was deemed to have a fair value of $4.3 million based on the estimate of internal and external costs to recreate the underlying technology, which are inputs not observable in the market and therefore considered Level 3 measurements. The iSPERSE technology will be utilized in the Company's continuing R&D efforts and accounted for as IPR&D. The fair values of the right-of-use asset and lease liability for the assumed R&D facility operating lease were assessed in accordance with ASC 842, Leases, based on discounted cash flows from future lease payments, utilizing the Company’s incremental borrowing rate of 7.25%. In June 2024, in anticipation of the facility lease assumption on the Effective Date, the Company transferred $0.7 million to a depository account at a financial institution to collateralize a conditional stand-by letter of credit as required under the lease. This amount is reflected as long-term restricted cash as of September 30, 2024. The lease term extends from the Effective Date through November 30, 2033 with monthly payments of $0.1 million increasing 3% annually starting on December 1, 2024. See Note 15 – Commitments and Contingencies. Property and equipment were assessed for monetary benefit, remaining economic life, and relative risk based on the Company's industry knowledge and analysis of sales of comparable equipment to arrive at fair value. Transaction costs totaling $0.1 million were expensed as incurred and reflected in the condensed consolidated statements of operations for the three and nine months ended September 30, 2024. Pro forma results of operation for the Transaction have not been presented, as the effects of the Transaction were not material to the condensed consolidated financial statements.

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- Definition The entire disclosure for a business combination (or series of individually immaterial business combinations) completed during the period, including background, timing, and recognized assets and liabilities. The disclosure may include leverage buyout transactions (as applicable). + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Topic 805 -SubTopic 20 -Name Accounting Standards Codification -Section 50 -Paragraph 5 -Subparagraph (b) -Publisher FASB -URI https://asc.fasb.org/1943274/2147479907/805-20-50-5 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 805 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org/805/tableOfContent + Details
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