Acquisition of Pionyr Therapeutics

9 Months Ended

Sep. 30, 2023

9. Acquisition of Pionyr Therapeutics

On August 4, 2023, the Company acquired Pionyr, pursuant to the Pionyr Acquisition Agreement. Under the terms of the Pionyr Acquisition Agreement, the Company issued to the stockholders of Pionyr 1,800,652 shares of the Company’s common stock (including 153,121 shares of the Company’s non-voting common stock), and 4,153,439 shares of Series A Preferred Stock, which was a newly designated series of preferred stock that is intended to have economic rights equivalent to the Company’s common stock, but with only limited voting rights. The Series A Preferred Stock converted to shares of the Company’s common stock pursuant to stockholder approval at a special meeting of stockholders held on October 11, 2023. See “Note 15 – Subsequent Event” for additional information on stockholder approval of the conversion. Each stockholder of Pionyr at the time of closing also received one contractual

CVR for each share of Pionyr stock held at closing. The CVR entitles the holder to receive 50% of net proceeds, outside of royalties, for any potential monetization of Pionyr legacy programs within two years.

Acquisition Accounting

The Company concluded that the Acquisition should be accounted for as a capitalization transaction, primarily based on the following facts and circumstances:

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The purpose of the transaction was for the Company to acquire the cash, cash equivalents and marketable securities of Pionyr;

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A nominal amount of Pionyr’s others assets were acquired, primarily related to the right-of-use-asset for Pionyr’s office and lab space lease located in San Francisco, California. The Company is actively seeking a tenant to sublease the space;

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Prior to the Acquisition, Pionyr was finalizing the wind down of all development activities that were ongoing. There will be no continuing operations of Pionyr other than the remaining wind down activities;

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No value has been ascribed to the legacy intellectual property assets acquired; and

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No assembled workforce or substantive processes were acquired that together could significantly contribute to the ability to create outputs.

Under the recapitalization accounting model, the assets acquired and liabilities assumed were recognized at their fair value on August 4, 2023. The equity issued by the Company was recognized on the basis of the net fair value of the assets acquired and liabilities assumed. Cash consideration transferred and transaction costs incurred attributable to the Acquisition are reflected as reductions to equity. The Company incurred $1.4 million of transaction costs that were direct and incremental to the Acquisition.

The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the Acquisition date (in thousands):


Assets Acquired	As of August 4, 2023
Cash and cash equivalents	$	40,926
Marketable securities		20,362
Prepaid expenses and other current assets		1,359
Right-of-use-asset		3,889
Deposits and other assets		406
Total assets acquired	$	66,942
Liabilities Assumed
Accounts payable		(2,844	)
Accrued expenses and other current liabilities		(8,097	)
Operating lease liability		(1,485	)
Long-term portion of operating lease liability		(5,647	)
Other long term liabilities		(852	)
Total liabilities assumed	$	(18,925	)

Net assets acquired (1)	$	48,017

(1) Net assets acquired does not include the remaining costs to complete the wind down of Pionyr development activities and operations.

Fair value of equity issued and consideration transferred in connection with the Acquisition (in thousands):


	As of August 4, 2023
Issuance of Series A Preferred Stock	$	32,837
Issuance of common stock		14,236
Cash consideration paid to settle Pionyr restricted stock units ("RSUs") and stock options		738
Cash consideration paid to Pionyr unaccredited stockholders		206
Total	$	48,017

The CVR was not accounted for as a derivative on the date of merger, nor was it included in the consideration transferred to acquire Pionyr. As of August 4, 2023 and September 30, 2023, the contingent consideration cannot be reasonably estimated, and the contingency was not resolved.