Acquisitions

3 Months Ended

Mar. 31, 2024

Business Combination and Asset Acquisition [Abstract]

Acquisitions

Acquisitions

Asset Acquisition

In October 2023, we acquired all of the outstanding equity of IVIVA Medical, Inc. (IVIVA), an early-stage company focused on developing manufactured kidney products, in exchange for an upfront cash payment of approximately $50.0 million. In addition to the upfront payment, the transaction consideration includes potential earnout consideration, payable in cash, structured as a two percent royalty on net sales of IVIVA’s kidney products, subject to certain reductions. The transaction was

accounted for as an asset acquisition as substantially all of the fair value was concentrated in a single in-process research and development (IPR&D) asset we acquired. We allocated $46.0 million of the purchase price to the IPR&D and recorded the expense within research and development in our consolidated statements of operations for the year ended December 31, 2023. For tax purposes, the purchase price allocated to the IPR&D is not deductible and was capitalized into the tax basis of the equity we acquired. We also recorded an intangible asset of $1.3 million related to the asset acquisition and recorded the amount within goodwill and other intangible assets, net in our consolidated balance sheet as of December 31, 2023.

Business Combination

On October 29, 2023, we entered into an Agreement and Plan of Merger (the Merger Agreement) with Miromatrix Medical Inc. (Miromatrix), a publicly traded company developing bioengineered kidney and liver products. On December 13, 2023, we completed the transactions contemplated by the Merger Agreement and Miromatrix became a wholly-owned subsidiary of United Therapeutics. Pursuant to the terms of the Merger Agreement, we paid former Miromatrix shareholders $3.25 per share in cash at closing, representing cash consideration paid to former Miromatrix shareholders of $89.1 million. Former Miromatrix shareholders also received one contractual contingent value right per share, representing the right to receive a contingent payment of $1.75 per share in cash (an aggregate of approximately $54.0 million) upon the first implantation of Miromatrix’s development-stage, fully-implantable kidney product known as mirokidney into a living human patient by the end of 2025 in a clinical trial meeting requirements set forth in the form of the Contingent Value Rights Agreement attached to the Merger Agreement (the Milestone). In addition to the cash consideration noted above, the aggregate purchase price included $2.5 million that we ascribed to the contingent value rights, of which $1.4 million was recorded as a measurement period adjustment during the three months ended March 31, 2024.

Purchase Price Allocation

The merger met the definition of a business combination in accordance with ASC 805, Business Combinations, and as such, we applied the acquisition method to account for the transaction, which requires, among other things, that assets acquired and liabilities assumed be recognized at their fair values as of the closing date. The aggregate purchase price was allocated to the major categories of assets acquired and liabilities assumed based upon their estimated fair values at the closing date using primarily Level 2 and Level 3 inputs. These Level 2 and Level 3 valuation inputs included an estimate of future cash flows and discount rates. Additionally, estimated fair values were based, in part, upon third-party valuations of certain assets, which included specifically-identified intangible assets.

The allocation of the purchase price to the assets acquired and liabilities assumed, including the residual amount allocated to goodwill, is based upon preliminary information and is subject to change within the measurement period (up to one year from the closing date) as additional information concerning final asset and liability valuations is obtained. The primary elements of this preliminary purchase price allocation that are not yet finalized relate to the forecast of future cash flows utilized in the valuation of the acquired IPR&D intangible asset and the contingent value rights, as well as our assessment of tax attributes. The following table summarizes the revised consideration transferred for the acquisition and the amounts of the assets acquired and liabilities assumed as of the closing date.

Purchase Price Allocation	Fair Value (in millions)
Cash	$	5.1
Other current assets	1.1
Intangible assets:
IPR&D	63.0
Goodwill(1)	7.1
Deferred tax assets, net	15.5
Property, plant, and equipment, net	4.5
Other non-current assets	2.6
Total fair value of assets acquired	$	98.9
Accounts payable and accrued expenses	3.1
Other current liabilities	1.4
Other non-current liabilities	2.8
Total fair value of liabilities assumed	$	7.3
Total purchase price	$	91.6

(1)The goodwill is not deductible for income tax purposes.

We determined the fair value of the IPR&D using the multi-period earnings method under the income approach. This method reflects the present value of the projected cash flows that are expected to be generated by the IPR&D, less charges representing the required return on other assets to sustain those cash flows. The multi-period earnings method is a Level 3

fair value measurement. Significant assumptions inherent in determining fair value of the IPR&D included annual net cash flows over a period of time and a discount rate applied to those cash flows to reflect the overall risk of the asset.

We ascribed $2.5 million to the contingent value rights as of the closing date based on a probability weighted discounted cash flow model, utilizing probability adjusted expectations of achieving the Milestone. In making this determination, we considered expectations regarding the timing and probability of achieving the Milestone by the end of 2025.

Following the acquisition, the operating results of Miromatrix have been included in our consolidated financial statements. The acquisition did not have a material impact on our consolidated financial statements, and therefore, historical and pro forma disclosures have not been presented.

Costs incurred to complete the acquisition and integrate Miromatrix into our business were expensed as incurred and included within selling, general, and administrative in our consolidated statements of operations. During the year ended December 31, 2023, we recognized $3.5 million of acquisition-related costs. These costs represented transaction costs, legal fees, and professional third-party service fees.