UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
(Amendment No. 1)
CURRENT REPORT
Pursuant to Section 13 or 15(d)
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Emerging growth company
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EXPLANATORY NOTE
Item 9.01 | Financial Statements and Exhibits. |
(a) Financial Statements of Businesses Acquired.
The financial statements of the Bile Acid Business as of and for the six months ended June 30, 2023 (unaudited) and as of and for the year ended December 31, 2022 (audited) are filed as Exhibit 99.3 and Exhibit 99.4, respectively, to this Amendment and incorporated herein by reference.
(b) Pro Forma Financial Information.
The unaudited pro forma condensed combined balance sheet as of June 30, 2023, the unaudited pro forma condensed combined statements of operations for the six months ended June 30, 2023, the unaudited pro forma combined statement of operations for the year ended December 31, 2022, and notes to the unaudited pro forma condensed combined financial information of the Company, all giving effect to the Acquisition and the PIPE, are filed as Exhibit 99.5 to this Amendment and incorporated herein by reference.
(d) Exhibits.
Exhibit No. |
Description | |
2.1*+ | Asset Purchase Agreement, dated July 16, 2023, by and between Mirum Pharmaceuticals, Inc. and Travere Therapeutics, Inc. | |
10.1+ | Form of Subscription Agreement | |
10.2+ | Form of Registration Rights Agreement | |
23.1 | Consent of BDO USA, P.C., Independent Auditors. | |
99.1+ | Press Release, dated July 17, 2023 | |
99.2+ | Mirum Corporate Presentation Deck on Bile Acid Portfolio Acquisition | |
99.3 | Historical Financial Statements of the Bile Acid Business as of and for the Six Months Ended June 30, 2023 (unaudited). | |
99.4 | Historical Financial Statements of the Bile Acid Business as of and for the Year Ended December 31, 2022 (audited). | |
99.5 | Unaudited Pro Forma Condensed Combined Financial Information of Mirum Pharmaceuticals, Inc. | |
104 | Cover Page Interactive File (the cover page tags are embedded within the Inline XBRL document). |
* | Certain confidential information contained in this Exhibit, marked in brackets, has been omitted, because it is both not material and of the type of information that the registrant treats as private or confidential. |
+ | Previously filed. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Mirum Pharmaceuticals, Inc. | ||||||
Date: November 2, 2023 | By: | /s/ Christopher Peetz | ||||
Christopher Peetz | ||||||
President and Chief Executive Officer |
Exhibit 23.1
Consent of Independent Auditor
We hereby consent to the incorporation by reference in the Registration Statements on Form S-3 (No. 333-274973, 333-267357 and 333-265210) and Form S-8 (Nos. 333-270399, 333-263397, 333-254043, 333-238086, and 333-233502) of Mirum Pharmaceuticals, Inc. of our report dated October 2, 2023, relating to the combined financial statements of the Bile Acid Business of Travere Therapeutics, Inc. as of and for the year ended December 31, 2022, which appears in this Form 8-K/A.
/s/ BDO USA, P.C.
San Diego, California
November 2, 2023
Exhibit 99.3
BILE ACID BUSINESS OF TRAVERE THERAPEUTICS, INC.
Combined Financial Statements as of and for the six months ended June 30, 2023
BILE ACID BUSINESS OF TRAVERE THERAPEUTICS, INC.
INDEX TO THE UNAUDITED COMBINED FINANCIAL STATEMENTS
Page | ||||
Unaudited Combined Balance Sheet at June 30, 2023 |
2 | |||
Unaudited Combined Statement of Operations for the six months ended June 30, 2023 |
3 | |||
Unaudited Combined Statement of Net Parent Investment for the six months ended June 30, 2023 |
4 | |||
Unaudited Combined Statement of Cash Flows for the six months ended June 30, 2023 |
5 | |||
Notes to Unaudited Combined Financial Statements |
6 |
1
BILE ACID BUSINESS OF TRAVERE THERAPEUTICS, INC.
COMBINED BALANCE SHEET
(unaudited, in thousands)
June 30, 2023 | ||||
Assets |
||||
Current assets: |
||||
Accounts receivable, net |
$ | 6,342 | ||
Inventory |
2,552 | |||
Prepaid expenses |
197 | |||
|
|
|||
Total current assets |
9,091 | |||
Intangible assets, net |
42,835 | |||
Deferred tax assets |
31,999 | |||
Other assets |
308 | |||
|
|
|||
Total assets |
$ | 84,233 | ||
|
|
|||
Liabilities and Net Parent Investment |
||||
Current liabilities: |
||||
Accounts payable |
$ | 242 | ||
Accrued expenses |
8,042 | |||
Business combination-related contingent consideration, current portion |
6,900 | |||
|
|
|||
Total current liabilities |
15,184 | |||
|
|
|||
Business combination-related contingent consideration, less current portion |
67,200 | |||
|
|
|||
Total liabilities |
82,384 | |||
|
|
|||
Commitments and contingencies (See Note 7) |
||||
Net parent investment |
1,849 | |||
|
|
|||
Total liabilities and net parent investment |
$ | 84,233 | ||
|
|
The accompanying notes are an integral part of these Combined Financial Statements.
2
BILE ACID BUSINESS OF TRAVERE THERAPEUTICS, INC.
COMBINED STATEMENT OF OPERATIONS
(unaudited, in thousands)
Six Months Ended June 30, | ||||
2023 | ||||
Net product sales |
$ | 53,606 | ||
Operating expenses: |
||||
Cost of goods sold |
1,518 | |||
Research and development |
7,572 | |||
Selling, general and administrative |
17,831 | |||
Change in fair value of contingent consideration |
8,596 | |||
|
|
|||
Total operating expenses |
35,517 | |||
|
|
|||
Operating income |
18,089 | |||
Total other expense |
(159 | ) | ||
|
|
|||
Income before income tax provision |
17,930 | |||
Income tax provision |
(4,380 | ) | ||
|
|
|||
Net income |
$ | 13,550 | ||
|
|
The accompanying notes are an integral part of these Combined Financial Statements.
3
BILE ACID BUSINESS OF TRAVERE THERAPEUTICS, INC.
COMBINED STATEMENT OF NET PARENT INVESTMENT
(unaudited, in thousands)
Net Parent Investment | ||||
Balance as of December 31, 2022 |
$ | 10,496 | ||
Net income |
13,550 | |||
Share based compensation |
2,323 | |||
Net transfers to parent |
(24,520 | ) | ||
|
|
|||
Balance as of June 30, 2023 |
$ | 1,849 | ||
|
|
The accompanying notes are an integral part of these Combined Financial Statements.
4
BILE ACID BUSINESS OF TRAVERE THERAPEUTICS, INC.
COMBINED STATEMENT OF CASH FLOWS
(unaudited, in thousands)
For the Six Months Ended June 30, |
||||
2023 | ||||
Cash Flows From Operating Activities: |
||||
Net income |
$ | 13,550 | ||
Adjustments to reconcile net income to net cash provided by operating activities: |
||||
Depreciation and amortization |
5,882 | |||
Deferred income taxes |
488 | |||
Share based compensation |
2,323 | |||
Change in estimated fair value of contingent consideration |
8,596 | |||
Payments from change in fair value of contingent consideration |
(4,890 | ) | ||
Loss on allowance for inventory |
608 | |||
Other |
159 | |||
Changes in operating assets and liabilities: |
||||
Accounts receivable |
345 | |||
Inventory |
(761 | ) | ||
Prepaid expenses |
412 | |||
Other assets |
69 | |||
Accounts payable |
(799 | ) | ||
Accrued expenses |
(599 | ) | ||
|
|
|||
Net cash provided by operating activities |
25,383 | |||
|
|
|||
Cash Flows From Financing Activities: |
||||
Net transfers to Parent |
(24,520 | ) | ||
Payment of business combination-related contingent consideration |
(863 | ) | ||
|
|
|||
Net cash used in financing activities |
(25,383 | ) | ||
|
|
|||
Net change in cash and cash equivalents |
| |||
Cash and cash equivalents, beginning of year |
| |||
|
|
|||
Cash and cash equivalents, end of year |
$ | | ||
|
|
The accompanying notes are an integral part of these Combined Financial Statements.
5
BILE ACID BUSINESS OF TRAVERE THERAPEUTICS, INC.
NOTES TO THE UNAUDITED COMBINED FINANCIAL STATEMENTS
NOTE 1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
Description of Business
On July 16, 2023, Travere Therapeutics, Inc. (Travere or the Company or the Parent) executed an Asset Purchase Agreement (the Purchase Agreement) with Mirum Pharmaceuticals, Inc. (Mirum or the Buyer) for the sale of its business of development, manufacture (including synthesis, formulation, finishing or packaging) and commercialization of its bile acid product lines, Chenodal and Cholbam (the Business, we, us or our) for an aggregate purchase price, subject to certain adjustments pursuant to the terms of the Purchase Agreement, of up to $445 million in cash, with $210 million due at the closing and up to $235 million after the closing, upon the achievement of certain milestones based on specified amounts of annual net sales. The transaction closed on August 31, 2023. Per the Purchase Agreement, Travere is transferring all rights, title, interest and specified assets related to the Business products as part of the transaction. The Company and Mirum have also entered into a transition services agreement (TSA) pursuant to which the Company has agreed to perform certain services for a period of time following the closing, with respect to Mirums use and operation of the assets purchased in the transaction.
The Businesss product Cholbam® (cholic acid capsules) is for the treatment of bile acid synthesis disorders due to single enzyme defects and is further indicated for adjunctive treatment of patients with peroxisomal disorders. Chenodal (chenodiol tablets) is for the treatment of patients suffering from gallstones in whom surgery poses an unacceptable health risk due to disease or advanced age. Cholbam and Chenodal are both approved for use in the United States.
Interim Financial Statements
The accompanying unaudited interim carve-out financial statements of the Business (Combined Financial Statements) should be read in conjunction with the audited annual Combined Financial Statements and notes thereto for the year ended December 31, 2022. The Business operated as part of Travere and consisted of acquired businesses. Separate financial statements have not historically been prepared for the Business. The interim Combined Financial Statements have been derived from Traveres historical accounting records as if the Businesss operations had been conducted independently from Travere and were prepared on a stand-alone basis in accordance with U.S. generally accepted accounting principles (GAAP). Accordingly, since they are interim statements, the accompanying Combined Financial Statements do not include all of the information and notes required by GAAP for annual Combined Financial Statements, but reflect all adjustments consisting of normal, recurring adjustments, that are necessary for a fair statement of the financial position, results of operations and cash flows for the interim periods presented. Interim results are not necessarily indicative of the results that may be expected for any future periods.
Basis of Presentation
The Combined Financial Statements include all revenues and costs directly attributable to the Business and an allocation of expenses related to certain Travere corporate functions (refer to Note 10 Corporate Allocations). These expenses have been allocated to the Business based on direct usage or benefit where specifically identifiable, with the remainder allocated using the most meaningful respective allocation methodologies, which were primarily based on proportionate direct research and development expenses, headcount, or other relevant measures. The Business considers these allocations to be a reasonable reflection of the utilization of services or the benefit received. However, the allocations may not be indicative of the actual expense that would have been incurred had the Business operated as an independent, stand-alone entity, nor are they indicative of the Businesss future expenses. Actual costs that may have been incurred if the Business had been a standalone company would depend on a number of factors, including the chosen organization structure and functions outsourced or performed by employees.
The Combined Financial Statements include assets and liabilities specifically attributable to the Business, including any corporate or centrally held assets and liabilities that relate specifically to the Business. The historical results of operations, financial position and cash flows of the Business presented in these Combined Financial Statements may not be indicative of what they would have been had the Business been an independent stand-alone entity, nor are they necessarily indicative of the Businesss future results of operations, financial position and cash flows.
As the attributable assets, liabilities and operations of the Business were not historically held by a single legal entity, net parent investment is shown in lieu of shareholders equity in the Combined Financial Statements. This represents Traveres interest in the recorded assets of the Business and represents the cumulative investment by Travere in the Business through the dates presented, inclusive of operating results.
Traveres cash and marketable debt securities have not been assigned to the Business for any of the periods presented because those balances are not legally held by the Business. Travere uses a centralized approach to cash management and financing of its operations. The net results of these transactions between the Business and Travere are reflected in net parent investment on the combined balance sheet. These arrangements are not reflective of the manner in which the Business would have financed its operations had it been a stand-alone business separate from Travere during the periods presented.
6
BILE ACID BUSINESS OF TRAVERE THERAPEUTICS, INC.
Traveres long-term debt and related interest expense have not been attributed to the Business for any of the period presented.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Combination
The Combined Financial Statements have been prepared on a standalone basis and include the results of certain components of legal entities in which the Business operates in conjunction with other Parent businesses, as well as corporate allocations.
Use of Estimates
The Combined Financial Statements are prepared in accordance with U.S. GAAP. These accounting principles require management to make certain estimates, judgments and assumptions. The Business believes the estimates, judgments and assumptions made when accounting for specific items and matters are reasonable, based on the information available at the time they are made. Due to inherent uncertainty involved in making estimates, actual results reported in future periods may be affected by changes in these estimates. On an ongoing basis, the Business evaluates its estimates and assumptions. These estimates and assumptions include revenue recognition, forecasting probability-weighted cash flows based upon estimates of forecasted revenues, estimating reserves for inventory, estimating the useful lives of depreciable and amortizable assets, estimating the fair value of contingent consideration, estimating corporate allocations, and estimating of valuation allowances and uncertain tax positions.
Revenue Recognition
The Business recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements that an entity determines are within the scope of Accounting Standards Codification (ASC) 606, Revenue from Contracts with Customers (ASC 606), the entity performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the entity satisfies a performance obligation. The Business only applies the five-step model to contracts when it is probable that the entity will collect substantially all the consideration it is entitled to in exchange for the goods or services it transfers to the customer. See Note 3 for further discussion.
Research and Development Expenses
The Business expenses all research and development costs as they are incurred. The Businesss research and development costs are composed of salaries and bonuses, benefits, share based compensation, license fees, costs paid to third-party contractors to perform research, conduct clinical trials, develop drug materials, manufacture drug product supplies to support clinical development, and associated overhead expenses and facilities costs. The Business charges direct internal and external program costs to the respective development programs. The Business also incurs indirect costs that are not allocated to specific programs because such costs benefit multiple development programs and allow us to increase our pharmaceutical development capabilities. These consist of internal shared resources related to the development and maintenance of systems and processes applicable to all of our programs.
Nonrefundable advance payments for goods and services to be received in the future for use in research and development activities are recorded as prepaid expenses. The prepaid amounts are expensed as the related goods are delivered or the services are performed, or when it is no longer expected that the goods will be delivered or the services rendered.
Share Based Compensation
The Parent maintains share based compensation plans under which it receives services from employees as consideration for equity instruments of the Parent. These Combined Financial Statements include both the expense of employees within the Business as well as expenses of the Parent that were allocated to the Business for share based compensation. These share based compensation costs are measured at fair value. The fair value of stock option awards under the employee stock purchase plan is generally determined using a Black-Scholes option-pricing model that incorporates assumptions about expected volatility, risk-free rate, dividend yield, and expected life. The fair value of restricted stock units and performance stock units is generally based on the closing market price of the Parents common stock on the grant date. Forfeitures are recognized as they occur. Expense is generally recognized on a straight-line basis over the requisite service period during which awards are expected to vest. We present share based compensation expense within research and development expenses and selling, general, and administrative expenses on the combined statement of operations.
7
BILE ACID BUSINESS OF TRAVERE THERAPEUTICS, INC.
Supplier Concentration Risk
The Business has no manufacturing capabilities and relies on third party manufacturers who are sole source suppliers for manufacturing of its products. The Business expects the manufacturers of each product to be single source suppliers to the Business.
Accounts Receivables, Net
Trade accounts receivable are recorded net of reserves for prompt pay discounts and expected credit losses. The allowance for credit losses was zero at June 30, 2023. For the six months ended June 30, 2023, bad debt expense recorded in the combined statement of operations was immaterial.
Inventory, Related Reserves and Cost of Goods Sold
Inventory, which is recorded at the lower of cost or net realizable value, includes materials, and other direct and indirect costs and is valued using the first-in, first-out method. The Business periodically analyzes its inventory levels to identify inventory that may expire prior to expected sale or has a cost basis in excess of its estimated realizable value, and writes down such inventory as appropriate. In addition, the Businesss products are subject to strict quality control and monitoring which the Businesss manufacturers perform throughout their manufacturing process. The Business does not directly manufacture any product. The Business has a single supplier for Chenodal, and prospectively arranges for manufacture from contract service providers for its product Cholbam. The inventory reserve was $3.7 million at June 30, 2023.
Cost of goods sold includes the cost of inventory sold, third party manufacturing and supply chain costs, product shipping and handling costs, and provisions for excess and obsolete inventory.
Intangible Assets, Net
The Businesss intangible assets consist of licenses and purchased technology. Intangible assets with definite lives are amortized on a straight-line basis over their estimated useful lives and are reviewed periodically for impairment.
Goodwill
Goodwill represents the excess of purchase price over fair value of net assets acquired in a business combination and is not amortized. Goodwill is subject to impairment testing at least annually or when a triggering event occurs that could indicate a potential impairment. Goodwill is presented within intangible assets, net on the combined balance sheets. For the six months ended June 30, 2023, there was no impairment to goodwill.
Impairment of Long-Lived Assets
The Businesss long-lived assets are comprised of intangible assets. The Business evaluates its finite-lived intangible assets for impairment whenever events or changes in circumstances indicate the carrying value of an asset or group of assets may not be recoverable. If these circumstances exist, recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset group to future undiscounted net cash flows expected to be generated by the use and eventual disposition of the asset group. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. There was no impairment related to finite-lived intangible assets in the six months ended June 30, 2023.
Contingent Consideration
The Business records contingent consideration resulting from a business combination at its fair value on the acquisition date. On a quarterly basis, the Business revalues these obligations and records increases or decreases from their fair value as an adjustment to the combined statement of operations. Changes to contingent consideration obligations can result from changes to discount rates, accretion of the liability due to the passage of time, changes in revenue forecasts and changes in our estimates of the likelihood or timing of achieving commercial revenue milestones.
Income Taxes
Income taxes as presented in the Combined Financial Statements of the Business attribute current and deferred income taxes of Travere to the Business stand-alone financial statements in a manner that is systematic, rational and consistent with the asset and liability method prescribed by FASB ASC Topic 740: Income Taxes (ASC 740). Accordingly, the Businesss income tax provision was prepared following the separate return method. The separate return method applies ASC 740 to the stand-alone
8
BILE ACID BUSINESS OF TRAVERE THERAPEUTICS, INC.
financial statements of each member of the consolidated group as if the group members were a separate taxpayer and a stand-alone enterprise. The calculation of the Businesss income taxes on a separate return basis requires a considerable amount of judgment and use of both estimates and allocations. As a result, actual transactions included in the consolidated financial statements of Travere may not be included in the separate Combined Financial Statements of the Business. Similarly, the tax treatment of certain items reflected in the Combined Financial Statements of the Business may not be reflected in the consolidated financial statements and tax returns of Travere. Therefore, such items as net operating losses, credit carryforwards and valuation allowances may exist in Traveres consolidated financial statements that may or may not exist in the stand-alone Combined Financial Statements. As such, the income taxes of the Business as presented in the Combined Financial Statements may not be indicative of the income taxes that the Business will generate in the future.
Operations of the Business are included in the consolidated U.S. federal and certain state and local income tax returns filed by Travere, where applicable. In jurisdictions where the Business has been included in the tax returns filed by Travere, any income taxes payable resulting from the related income tax provisions have been reflected in the balance sheet within net parent investment.
Deferred income taxes arise from temporary differences between amounts recorded in the Combined Financial Statements and the tax basis of assets and liabilities using enacted tax rates in effect for the years in which the differences are expected to affect taxable income. Deferred tax assets are evaluated based on the guidelines for realization and are reduced by a valuation allowance if deemed necessary. The Business establishes valuation allowances when necessary to reduce deferred income tax assets to the amounts that it believes are more likely than not to be recovered. Each quarter the Business evaluates the need to retain all or a portion of the valuation allowance on the Businesss deferred tax assets.
ASC 740 addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under the standard, the Business may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the tax authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement. ASC 740 also provides guidance on de-recognition, classification, interest and penalties on income taxes, accounting in interim periods and requires increased disclosures. The Businesss policy is to record estimated interest and penalty related to the underpayment of income taxes or unrecognized tax benefits as a component of its income tax provision.
See Note 9 - Income Taxes for additional information.
Legal Contingencies
The Business may, from time to time, be involved in various claims and legal actions that arise in the ordinary course of business. The Business accrues for legal contingencies when it is determined probable that a liability has been incurred and the amount of the loss can be reasonably estimated. See Note 7 for further discussion.
Transaction Costs
Approximately $0.9 million of costs related to the separation of the Business have been incurred by Travere for the six months ended June 30, 2023. These costs include legal, consulting and advisory fees. Travere has assumed these separation costs incurred to date and none of these separation costs were allocated to the Businesss Combined Financial Statements. To the extent separation costs are incurred that will directly benefit the Business as a stand-alone company, or for which the Business is the legal obligor, such costs will be allocated to the Business.
Recently Issued Accounting Pronouncements
From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (FASB) or other standard setting bodies. Unless otherwise discussed, the Business believes that the impact of recently issued standards that are not yet effective will not have a material impact on its combined financial position or results of operations upon adoption.
NOTE 3. REVENUE RECOGNITION
Net Product Sales
Product sales consist of bile acid products (Chenodal and Cholbam). The Business sells its products through direct-to-patient distributors worldwide, with the United States and Canada representing 96% and 2% of net product sales, respectively, and rest of world representing 2% of net product sales, based on the product shipment destination.
9
BILE ACID BUSINESS OF TRAVERE THERAPEUTICS, INC.
The Businesss revenues have been derived from the sale of bile acid products, which primarily treat bile acid disorders and enzyme defects. Revenues are recognized in satisfaction of a single performance obligation when the customer obtains control of the Businesss product, which occurs upon delivery to the customer. The Business receives payments from its product sales, primarily through third party payers, based on terms that generally are within 30 days of delivery of product to the patient. Contracts do not contain significant financing components based on the typical period of time between performance of services and collection of consideration.
Deductions from Revenue
Revenues from product sales are recorded at the net sales price, which includes provisions resulting from discounts, rebates and co-pay assistance that are offered to customers, health care providers, payers and other indirect customers relating to the Businesss sales of its products. These provisions are based on the estimates of the amounts earned or to be claimed on the related sales. These amounts are treated as variable consideration, estimated and recognized as a reduction of the transaction price at the time of the sale, using the most likely amount method, and are classified as a reduction of accounts receivable (if the amount is payable to a customer) or as a current liability (if the amount is payable to a party other than a customer). The Business includes these estimated amounts in the transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized for such transactions will not occur. Where appropriate, these reserves take into consideration the Businesss historical experience, current contractual and statutory requirements and specific known market events and trends. Overall, these reserves reflect the Businesss best estimates of the amount of consideration to which it is entitled based on the terms of the contract. If actual results in the future vary from the Businesss provisions, the Business will adjust the estimate, which would affect net product sales and earnings in the period such variances become known. For the six months ended June 30, 2023, the Business recorded an immaterial net product sales increase, related to performance obligations satisfied in previous periods.
Government Rebates: The Business calculates the rebates that it will be obligated to provide to government programs and deducts these estimated amounts from its gross product sales at the time the revenues are recognized. Allowances for government rebates and discounts are established based on actual payer information, which is reasonably estimated at the time of delivery, and the government-mandated discounts applicable to government-funded programs. Rebate discounts are included in other current liabilities in the accompanying combined balance sheets.
Prompt Pay Discounts: The Business offers discounts to certain customers for prompt payments. The Business accrues for the calculated prompt pay discount based on the gross amount of each invoice for those customers at the time of sale.
Product Returns: Consistent with industry practice, the Business offers its customers a limited right to return product purchased directly from the Business, which is principally based upon the products expiration date. Generally, shipments are only made upon a patient prescription, thus returns are minimal. For the six months ended June 30, 2023, product returns were immaterial.
Co-pay Assistance: The Business offers a co-pay assistance program, which is intended to provide financial assistance to qualified commercially insured patients with prescription drug co-payments required by payers. The calculation of the accrual for co-pay assistance is based on an identification of claims and the cost per claim associated with product that has been recognized as revenue.
NOTE 4. INVENTORY
Inventory, net of reserves, consisted of the following at June 30, 2023 (in thousands):
June 30, 2023 | ||||
Raw materials |
$ | 1,403 | ||
Finished goods |
1,149 | |||
|
|
|||
Total inventory |
$ | 2,552 | ||
|
|
10
BILE ACID BUSINESS OF TRAVERE THERAPEUTICS, INC.
NOTE 5. INTANGIBLE ASSETS, NET
Amortizable Intangible Assets
Manchester Pharmaceuticals LLC
In 2014, the Company acquired intangible assets with finite lives related to the Chenodal product rights, trade names, and customer relationships with fair values of $67.8 million $0.2 million, and $0.4 million, respectively. The useful lives related to the acquired product rights, trade names, and customer relationships are expected to be approximately 16, 1 and, 10 years, respectively. Amortization of product rights, trade names and customer relationships are being recorded in selling, general and administrative expense over their respective lives.
Cholbam Asset Purchase
In 2015, the Company completed its acquisition from Asklepion of all worldwide rights, titles and ownership of Cholbam, including all related contracts, data assets, intellectual property, regulatory assets and the pediatric priority review voucher. The Business capitalized $75.9 million and $7.3 million for the U.S. and international economic interest, respectively. The useful lives related to the economic interest is expected to be approximately 10 years. As of December 31, 2022, the international economic interest had been fully amortized. Amortization of economic interest are being recorded in selling, general and administrative expense.
Amortizable intangible assets as of June 30, 2023 (in thousands):
Useful Life |
Gross Carrying Amount |
Accumulated Amortization |
Net Book Value | |||||||||||
Chenodal product rights |
16 | $ | 67,849 | $ | (39,277 | ) | $ | 28,572 | ||||||
Economic interest - Cholbam revenue |
10 | 75,900 | (62,603 | ) | 13,297 | |||||||||
Manchester customer relationships |
10 | 403 | (373 | ) | 30 | |||||||||
|
|
|
|
|
|
|||||||||
Total amortizable intangible assets |
$ | 144,152 | $ | (102,253 | ) | $ | 41,899 | |||||||
|
|
|
|
|
|
Amortization expense for the six months ended June 30, 2023 was $5.9 million.
Goodwill
As of June 30, 2023, the Business had goodwill of $0.9 million.
NOTE 6. ACCRUED EXPENSES
Accrued expenses consist of the following at June 30, 2023 (in thousands):
June 30, 2023 | ||||
Accrued royalties |
$ | 3,025 | ||
Sales discounts, rebates, and allowances |
2,864 | |||
Research and development |
957 | |||
Compensation related costs |
558 | |||
Miscellaneous accrued |
638 | |||
|
|
|||
Total accrued expenses |
$ | 8,042 | ||
|
|
NOTE 7. COMMITMENTS AND CONTINGENCIES
Legal Proceedings
From time to time in the normal course of business, the Business is subject to various legal matters such as threatened or pending claims or litigation. Although the results of claims and litigation cannot be predicted with certainty, the Business does not believe it is a party to any claim or litigation the outcome of which, if determined adversely to it, would individually or in the aggregate be reasonably expected to have a material adverse effect on its results of operations or financial condition.
11
BILE ACID BUSINESS OF TRAVERE THERAPEUTICS, INC.
NOTE 8. FAIR VALUE MEASUREMENTS
The Business utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are described below:
Level 1 Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;
Level 2 Quoted prices in markets that are not active or financial instruments for which all significant inputs are observable, either directly or indirectly; and
Level 3 Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable.
Financial instruments with carrying values approximating fair value accounts receivable and accounts payable, due to their short-term nature.
The following table presents the Business assets and liabilities, measured and recognized at fair value on a recurring basis, classified under the appropriate level of the fair value hierarchy as of June 30, 2023 (in thousands):
As of June 30, 2023 |
Fair Value Hierarchy at June 30, 2023 | |||||||||||||||
Total carrying and estimated fair value |
Quoted prices in active markets (Level 1) |
Significant other observable inputs (Level 2) |
Significant unobservable inputs (Level 3) |
|||||||||||||
Liabilities: |
||||||||||||||||
Business combination-related contingent consideration |
$ | 74,100 | $ | | $ | | $ | 74,100 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
$ | 74,100 | $ | | $ | | $ | 74,100 | ||||||||
|
|
|
|
|
|
|
|
The Company acquired two businesses, related to the Cholbam and Chenodal products, whose purchase price included potential future payments that are contingent on the achievement of certain milestones and percentages of future net sales derived from the products acquired. The Business recorded contingent consideration liabilities at their fair value on the acquisition date and revalues them at the end of each reporting period. In estimating the fair value of the Businesss contingent consideration, the Business uses a Monte Carlo Simulation. The determination of the contingent consideration liabilities requires significant judgements including the reasonableness of estimates and assumptions included in the forecasts of future net sales, long term growth rates and the discount rates applied to such forecasts. Changes in these estimates and assumptions could have a significant impact on the fair value of the contingent consideration liabilities.
Discount rates used to determine the fair value at June 30, 2023 are as follows:
Revenue Discount | Payment Discount | |||||||||||
Cholbam | Chenodal | |||||||||||
June 30, 2023 |
7.50 | % | 7.50 | % | 6.90 | % |
12
BILE ACID BUSINESS OF TRAVERE THERAPEUTICS, INC.
Based on the fair value hierarchy, the Business classified the fair value of contingent consideration within Level 3 because valuation inputs are based on projected revenues discounted to a present value.
The following table sets forth a summary of changes in the estimated fair value of the Businesss Level 3 business combination-related contingent consideration for the six months ended June 30, 2023 (in thousands):
Fair Value Measurements of Acquisition-Related Contingent Consideration (Level 3) |
||||
2023 | ||||
Balance at January 1 |
$ | 71,200 | ||
Changes in the fair value of contingent consideration |
8,596 | |||
Contractual payments |
(2,756 | ) | ||
Contractual payments included in accrued liabilities at June 30 |
(2,940 | ) | ||
|
|
|||
Balance at June 30 |
$ | 74,100 | ||
|
|
NOTE 9. INCOME TAXES
The Business has not filed separate tax returns as it has been included in the consolidated income tax returns of Travere. Accordingly, the income tax provision included in these Combined Financial Statements was calculated using a method consistent with a separate return basis, as if the Business filed a stand-alone tax return and was not considered part of a consolidated tax return. The amounts allocated for income taxes are not necessarily indicative of the actual amounts that would have been recorded had Business been held within a separate stand-alone entity.
Our effective tax rate is 24.4% during the six months ended June 30, 2023. The income tax expense of $4.4 million for the six months ended June 30, 2023 was primarily related to book income taxed at the statutory tax rate and state taxes in the United States.
NOTE 10. CORPORATE ALLOCATIONS
The Business has historically operated as part of Travere and not as a stand-alone company. Accordingly, Travere has allocated certain shared costs to the Business that are reflected as expenses in these Combined Financial Statements including, but not limited to, general corporate expenses such as senior management, legal, human resources, finance, accounting, treasury, tax, IT, benefits, communications, ethics and compliance, corporate employee benefits, incentives and share based compensation, lease expense, shared services processing and administration and depreciation for corporate fixed assets. Management considers these allocations to be a reasonable reflection of the utilization of services by, or the benefits provided to it. The allocation methods used include a pro rata basis of direct research and development expenses, headcount, or other measures. The following table summarizes allocations for corporate expenses, as well as respective financial statement line item where the costs were classified, for the six months ended June 30, 2023 (in thousands):
Six Months Ended June 30, | ||||
2023 | ||||
Research and development |
$ | 2,902 | ||
Selling, general and administrative |
6,615 | |||
|
|
|||
Total |
$ | 9,517 | ||
|
|
NOTE 11. SHARE BASED COMPENSATION
Certain of the Businesss employees participate in share based compensation plans sponsored by the Parent. The Parents share based compensation plans include stock options, restricted stock units, and performance stock units. All awards granted under the plans are based on the Parents common shares and, as such, are reflected in the Parents Consolidated Statements of Stockholders Equity and not in the Businesss combined statement of net parent investment. Share based compensation expense includes expense attributable to the Business based on the awards and terms previously granted to the Businesss employees and an allocation of Parents corporate and shared functional employee expenses.
13
BILE ACID BUSINESS OF TRAVERE THERAPEUTICS, INC.
The Business recognized share based compensation expense consisted of the following for the six months ended June 30, 2023 (in thousands):
Six Months Ended June 30, |
||||
2023 | ||||
Research and development |
$ | 583 | ||
Selling, general and administrative |
1,740 | |||
|
|
|||
Total share based compensation expense |
$ | 2,323 | ||
|
|
Share based compensation expense includes an allocation of Parents corporate and shared functional employee expenses and consisted of the following for the six months ended June 30, 2023 (in thousands):
Six Months Ended June 30, |
||||
2023 | ||||
Research and development |
$ | 487 | ||
Selling, general and administrative |
1,250 | |||
|
|
|||
Total share based compensation expense |
$ | 1,737 | ||
|
|
NOTE 12. SUBSEQUENT EVENTS
In July 2023, the Business renewed its contract with an existing CMO and committed to purchase $6.8 million over the next three years for a minimum purchase of $2.3 million per year in active pharmaceutical ingredients, which is planned to support commercial sales of Cholbam.
In October 2023, the Company received notification from the French authorities requesting reimbursement based upon reference discount rates applied to total Kolbam sales during 2016 through 2020. The Combined Financial Statements do not reflect the resulting sales reserve of $5.4 million in net product sales that will be recorded in subsequent periods given the Company has concluded it is probable that a payment will occur. The Company plans to appeal the reimbursement decision.
These Combined Financial Statements are derived from the Consolidated Financial Statements of Travere Therapeutics, Inc. The Business has evaluated transactions or other events that occurred through November 2, 2023, the date these combined financial statements were available for issuance, noting no additional events which would affect the Combined Financial Statements as of June 30, 2023.
14
Exhibit 99.4
BILE ACID BUSINESS OF TRAVERE THERAPEUTICS, INC.
Combined Financial Statements as of and for the year ended December 31, 2022 and Independent Auditors Report
1
INDEX TO THE COMBINED FINANCIAL STATEMENTS
Page | ||||
Independent Auditors Report |
3 | |||
Combined Balance Sheet at December 31, 2022 |
4 | |||
Combined Statement of Operations for the year ended December 31, 2022 |
5 | |||
Combined Statement of Net Parent Investment for the year ended December 31, 2022 |
6 | |||
Combined Statement of Cash Flows for the year ended December 31, 2022 |
7 | |||
Notes to Combined Financial Statements |
8 |
2
Independent Auditors Report
Board of Directors
Bile Acid Business of Travere Therapeutics, Inc.
San Diego, California
Opinion
We have audited the combined financial statements of Bile Acid Business of Travere Therapeutics, Inc. (the Business), which comprise the combined balance sheet as of December 31, 2022, and the related combined statements of operations, net parent investment, and cash flows for the year then ended, and the related notes to the combined financial statements.
In our opinion, the accompanying combined financial statements present fairly, in all material respects, the financial position of the Business as of December 31, 2022, and the results of its operations and its cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America.
Basis for Opinion
We conducted our audit in accordance with auditing standards generally accepted in the United States of America (GAAS). Our responsibilities under those standards are further described in the Auditors Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of the Business and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audit. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Responsibilities of Management for the Financial Statements
Management is responsible for the preparation and fair presentation of the combined financial statements in accordance with accounting principles generally accepted in the United States of America, and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of combined financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the combined financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Businesss ability to continue as a going concern within one year after the date that the combined financial statements are issued or available to be issued.
Auditors Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the combined financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors report that includes our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with GAAS will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the combined financial statements.
In performing an audit in accordance with GAAS, we:
| Exercise professional judgment and maintain professional skepticism throughout the audit. |
| Identify and assess the risks of material misstatement of the combined financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the combined financial statements. |
| Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Businesss internal control. Accordingly, no such opinion is expressed. |
| Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the combined financial statements. |
| Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about the Businesss ability to continue as a going concern for a reasonable period of time. |
We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control-related matters that we identified during the audit.
/s/ BDO USA, P.C.
San Diego, California
October 2, 2023
3
BILE ACID BUSINESS OF TRAVERE THERAPEUTICS, INC
COMBINED BALANCE SHEET
(In thousands)
December 31, 2022 |
||||
Assets |
||||
Current assets: |
||||
Accounts receivable, net |
$ | 6,687 | ||
Inventory |
2,399 | |||
Prepaid expenses |
591 | |||
Other current assets |
18 | |||
|
|
|||
Total current assets |
9,695 | |||
Intangible assets, net |
48,717 | |||
Deferred tax assets |
32,487 | |||
Other assets |
377 | |||
|
|
|||
Total assets |
$ | 91,276 | ||
|
|
|||
Liabilities and Net Parent Investment |
||||
Current liabilities: |
||||
Accounts payable |
$ | 1,041 | ||
Accrued expenses |
8,539 | |||
Business combination-related contingent consideration, current portion |
7,000 | |||
|
|
|||
Total current liabilities |
16,580 | |||
Business combination-related contingent consideration, less current portion |
64,200 | |||
|
|
|||
Total liabilities |
80,780 | |||
Commitments and contingencies (See Note 7) |
||||
Net parent investment |
10,496 | |||
|
|
|||
Total liabilities and net parent investment |
$ | 91,276 | ||
|
|
The accompanying notes are an integral part of these Combined Financial Statements.
4
BILE ACID BUSINESS OF TRAVERE THERAPEUTICS, INC
COMBINED STATEMENT OF OPERATIONS
(In thousands)
Year Ended December 31, |
||||
2022 | ||||
Net product sales |
$ | 102,558 | ||
Operating expenses: |
||||
Cost of goods sold |
3,172 | |||
Research and development |
13,920 | |||
Selling, general and administrative |
32,637 | |||
Change in fair value of contingent consideration |
15,006 | |||
|
|
|||
Total operating expenses |
64,735 | |||
|
|
|||
Operating income |
37,823 | |||
Total other expense |
(261 | ) | ||
|
|
|||
Income before income tax provision |
37,562 | |||
Income tax provision |
(8,661 | ) | ||
|
|
|||
Net income |
$ | 28,901 | ||
|
|
The accompanying notes are an integral part of these Combined Financial Statements.
5
BILE ACID BUSINESS OF TRAVERE THERAPEUTICS, INC
COMBINED STATEMENT OF NET PARENT INVESTMENT
(In thousands)
Net Parent Investment | ||||
Balance as of December 31, 2021 |
$ | 21,796 | ||
Net income |
28,901 | |||
Share based compensation |
3,851 | |||
Net transfers to parent |
(44,052 | ) | ||
|
|
|||
Balance as of December 31, 2022 |
$ | 10,496 | ||
|
|
The accompanying notes are an integral part of these Combined Financial Statements.
6
BILE ACID BUSINESS OF TRAVERE THERAPEUTICS, INC
COMBINED STATEMENT OF CASH FLOWS
(In thousands)
For the year ended | ||||
December 31, | ||||
2022 | ||||
Cash Flows From Operating Activities: |
||||
Net income |
$ | 28,901 | ||
Adjustments to reconcile net income to net cash provided by operating activities: |
||||
Depreciation and amortization |
12,360 | |||
Deferred incomes taxes |
(6,758 | ) | ||
Share based compensation |
3,851 | |||
Change in estimated fair value of contingent consideration |
15,006 | |||
Payments from change in fair value of contingent consideration |
(8,602 | ) | ||
Loss on allowance for inventory |
1,416 | |||
Other |
261 | |||
Changes in operating assets and liabilities: |
||||
Accounts receivable |
378 | |||
Inventory |
(854 | ) | ||
Prepaid expenses and other current assets |
172 | |||
Other assets |
116 | |||
Accounts payable |
253 | |||
Accrued expenses |
145 | |||
Other non-current liabilities |
(114 | ) | ||
|
|
|||
Net cash provided by operating activities |
46,531 | |||
|
|
|||
Cash Flows From Financing Activities: |
||||
Net transfers to parent |
(44,052 | ) | ||
Payment of business combination-related contingent consideration |
(2,479 | ) | ||
|
|
|||
Net cash used in financing activities |
(46,531 | ) | ||
|
|
|||
Net change in cash and cash equivalents |
| |||
Cash and cash equivalents, beginning of year |
| |||
|
|
|||
Cash and cash equivalents, end of year |
$ | | ||
|
|
The accompanying notes are an integral part of these Combined Financial Statements.
7
BILE ACID BUSINESS OF TRAVERE THERAPEUTICS, INC
NOTES TO COMBINED FINANCIAL STATEMENTS
NOTE 1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
Description of Business
On July 16, 2023, Travere Therapeutics, Inc. (Travere or the Company or the Parent) executed an Asset Purchase Agreement (the Purchase Agreement) with Mirum Pharmaceuticals, Inc. (Mirum or the Buyer) for the sale of its business of development, manufacture (including synthesis, formulation, finishing or packaging) and commercialization of its bile acid product lines, Chenodal and Cholbam (the Business, we, us or our) for an aggregate purchase price, subject to certain adjustments pursuant to the terms of the Purchase Agreement, of up to $445 million in cash, with $210 million due at the closing and up to $235 million after the closing, upon the achievement of certain milestones based on specified amounts of annual net sales. The transaction closed on August 31, 2023. Per the Purchase Agreement, Travere is transferring all rights, title, interest and specified assets related to the Business products as part of the transaction. The Company and Mirum have also entered into a transition services agreement (TSA) pursuant to which the Company has agreed to perform certain services for a period of time following the closing, with respect to Mirums use and operation of the assets purchased in the transaction.
The Businesss product Cholbam® (cholic acid capsules) is for the treatment of bile acid synthesis disorders due to single enzyme defects and is further indicated for adjunctive treatment of patients with peroxisomal disorders. Chenodal (chenodiol tablets) is for the treatment of patients suffering from gallstones in whom surgery poses an unacceptable health risk due to disease or advanced age. Cholbam and Chenodal are both approved for use in the United States.
Basis of Presentation
Throughout the period covered by the accompanying carve-out financial statements of the Business (Combined Financial Statements), the Business operated as part of Travere and consisted of acquired businesses. Separate financial statements have not historically been prepared for the Business. The Combined Financial Statements have been derived from Traveres historical accounting records as if the Businesss operations had been conducted independently from Travere and were prepared on a stand-alone basis in accordance with U.S. generally accepted accounting principles (GAAP).
The Combined Financial Statements include all revenues and costs directly attributable to the Business and an allocation of expenses related to certain Travere corporate functions (refer to Note 10 Corporate Allocations). These expenses have been allocated to the Business based on direct usage or benefit where specifically identifiable, with the remainder allocated using the most meaningful respective allocation methodologies, which were primarily based on proportionate direct research and development expenses, headcount, or other relevant measures. The Business considers these allocations to be a reasonable reflection of the utilization of services or the benefit received. However, the allocations may not be indicative of the actual expense that would have been incurred had the Business operated as an independent, stand-alone entity, nor are they indicative of the Businesss future expenses. Actual costs that may have been incurred if the Business had been a standalone company would depend on a number of factors, including the chosen organization structure and functions outsourced or performed by employees.
The Combined Financial Statements include assets and liabilities specifically attributable to the Business, including any corporate or centrally held assets and liabilities that relate specifically to the Business. The historical results of operations, financial position and cash flows of the Business presented in these Combined Financial Statements may not be indicative of what they would have been had the Business been an independent stand-alone entity, nor are they necessarily indicative of the Businesss future results of operations, financial position and cash flows.
As the attributable assets, liabilities and operations of the Business were not historically held by a single legal entity, net parent investment is shown in lieu of shareholders equity in the Combined Financial Statements. This represents Traveres interest in the recorded assets of the Business and represents the cumulative investment by Travere in the Business through the dates presented, inclusive of operating results.
Traveres cash and marketable debt securities have not been assigned to the Business for any of the periods presented because those balances are not legally held by the Business. Travere uses a centralized approach to cash management and financing of its operations. The net results of these transactions between the Business and Travere are reflected in net parent investment on the combined balance sheet. These arrangements are not reflective of the manner in which the Business would have financed its operations had it been a stand-alone business separate from Travere during the period presented.
Traveres long-term debt and related interest expense have not been attributed to the Business for any of the period presented.
8
BILE ACID BUSINESS OF TRAVERE THERAPEUTICS, INC
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Combination
The Combined Financial Statements have been prepared on a standalone basis and include the results of certain components of legal entities in which the Business operates in conjunction with other Parent businesses, as well as corporate allocations.
Use of Estimates
The Combined Financial Statements are prepared in accordance with U.S. GAAP. These accounting principles require management to make certain estimates, judgments and assumptions. The Business believes the estimates, judgments and assumptions made when accounting for specific items and matters are reasonable, based on the information available at the time they are made. Due to inherent uncertainty involved in making estimates, actual results reported in future periods may be affected by changes in these estimates. On an ongoing basis, the Business evaluates its estimates and assumptions. These estimates and assumptions include revenue recognition, forecasting probability-weighted cash flows based upon estimates of forecasted revenues, estimating reserves for inventory, estimating the useful lives of depreciable and amortizable assets, estimating the fair value of contingent consideration, estimating corporate allocations, and estimating of valuation allowances and uncertain tax positions.
Revenue Recognition
The Business recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements that an entity determines are within the scope of Accounting Standards Codification (ASC) 606, Revenue from Contracts with Customers (ASC 606), the entity performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the entity satisfies a performance obligation. The Business only applies the five-step model to contracts when it is probable that the entity will collect substantially all the consideration it is entitled to in exchange for the goods or services it transfers to the customer. See Note 3 for further discussion.
Research and Development Expenses
The Business expenses all research and development costs as they are incurred. The Businesss research and development costs are composed of salaries and bonuses, benefits, share based compensation, license fees, costs paid to third-party contractors to perform research, conduct clinical trials, manufacture drug product supplies to support clinical development, and associated overhead expenses and facilities costs. The Business charges direct internal and external program costs to the respective development programs. The Business also incurs indirect costs that are not allocated to specific programs because such costs benefit multiple development programs and allow us to increase our pharmaceutical development capabilities. These consist of internal shared resources related to the development and maintenance of systems and processes applicable to all of our programs.
Nonrefundable advance payments for goods and services to be received in the future for use in research and development activities are recorded as prepaid expenses. The prepaid amounts are expensed as the related goods are delivered or the services are performed, or when it is no longer expected that the goods will be delivered or the services rendered.
Share Based Compensation
The Parent maintains share based compensation plans under which it receives services from employees as consideration for equity instruments of the Parent. These Combined Financial Statements include both the expense of employees within the Business as well as expenses of the Parent that were allocated to the Business for share based compensation. These share based compensation costs are measured at fair value. The fair value of stock option awards under the employee stock purchase plan is generally determined using a Black-Scholes option-pricing model that incorporates assumptions about expected volatility, risk-free rate, dividend yield, and expected life. The fair value of restricted stock units and performance stock units is generally based on the closing market price of the Parents common stock on the grant date. Forfeitures are recognized as they occur. Expense is generally recognized on a straight-line basis over the requisite service period during which awards are expected to vest. We present share based compensation expense within research and development expenses and selling, general, and administrative expenses on the combined statement of operations.
Supplier Concentration Risk
The Business has no manufacturing capabilities and relies on third party manufacturers who are sole source suppliers for manufacturing of its products. The Business expects the manufacturers of each product to be single source suppliers to the Business.
9
BILE ACID BUSINESS OF TRAVERE THERAPEUTICS, INC
Collaboration Agreements
In February 2021, the Company entered into a limited co-promotion agreement with Albireo Pharma, Inc. (Albireo), whereby the Cholbam dedicated sales representatives devoted a portion of their efforts to promoting Albireos product, Bylvay (odevixibat), in the United States following the July 2021 launch of the product. The initial term of the arrangement was two years from the July 2021 launch of Bylvay, terminable at will by either party after one year following launch. In June 2022, the Company and Albireo mutually agreed to terminate the co-promotion agreement upon the one-year anniversary of the launch, with such termination effective July 20, 2022. For the year ended December 31, 2022, the Business recognized $1.7 million related to the co-promotion agreement, which was offset against selling, general, and administrative expenses.
Accounts Receivables, Net
Trade accounts receivable are recorded net of reserves for prompt pay discounts and expected credit losses. The allowance for credit losses was zero at December 31, 2022. For the year ended December 31, 2022 bad debt expense recorded in the combined statement of operations was immaterial. The Businesss evaluation and application of ASU No. 2016-13, Financial Instruments - Credit Losses for the current period included an assessment of aged trade receivables balances and their underlying credit risk characteristics. The Businesss evaluation of past events, current conditions, and reasonable and supportable forecasts about the future resulted in an expectation of immaterial credit losses.
Inventory, Related Reserves and Cost of Goods Sold
Inventory, which is recorded at the lower of cost or net realizable value, includes materials, and other direct and indirect costs and is valued using the first-in, first-out method. The Business periodically analyzes its inventory levels to identify inventory that may expire prior to expected sale or has a cost basis in excess of its estimated realizable value, and writes down such inventory as appropriate. In addition, the Businesss products are subject to strict quality control and monitoring which the Businesss manufacturers perform throughout their manufacturing process. The Business does not directly manufacture any product. The Business has a single supplier for Chenodal, and prospectively arranges for manufacture from contract service providers for its product Cholbam. The inventory reserve was $3.5 million at December 31, 2022.
Cost of goods sold includes the cost of inventory sold, third party manufacturing and supply chain costs, product shipping and handling costs, and provisions for excess and obsolete inventory.
Intangible Assets, Net
The Businesss intangible assets consist of licenses and purchased technology. Intangible assets with definite lives are amortized on a straight-line basis over their estimated useful lives and are reviewed periodically for impairment.
Goodwill
Goodwill represents the excess of purchase price over fair value of net assets acquired in a business combination and is not amortized. Goodwill is subject to impairment testing at least annually or when a triggering event occurs that could indicate a potential impairment. Goodwill is presented within intangible assets, net on the combined balance sheet. For the year ended December 31, 2022 there were no impairments to goodwill.
Impairment of Long-Lived Assets
The Businesss long-lived assets are comprised of intangible assets. The Business evaluates its finite-lived intangible assets for impairment whenever events or changes in circumstances indicate the carrying value of an asset or group of assets may not be recoverable. If these circumstances exist, recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset group to future undiscounted net cash flows expected to be generated by the use and eventual disposition of the asset group. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. There were no impairments related to finite-lived intangible assets in the year ended December 31, 2022.
Contingent Consideration
The Business records contingent consideration resulting from a business combination at its fair value on the acquisition date. On a quarterly basis, the Business revalues these obligations and record increases or decreases from their fair value as an adjustment to the combined statement of operations. Changes to contingent consideration obligations can result from changes to discount rates, accretion of the liability due to the passage of time, changes in revenue forecasts and changes in our estimates of the likelihood or timing of achieving commercial revenue milestones.
10
BILE ACID BUSINESS OF TRAVERE THERAPEUTICS, INC
Income Taxes
Income taxes as presented in the Combined Financial Statements of the Business attribute current and deferred income taxes of Travere to the Business stand-alone financial statements in a manner that is systematic, rational and consistent with the asset and liability method prescribed by FASB ASC Topic 740: Income Taxes (ASC 740). Accordingly, the Businesss income tax provision was prepared following the separate return method. The separate return method applies ASC 740 to the stand-alone financial statements of each member of the consolidated group as if the group members were a separate taxpayer and a stand-alone enterprise. The calculation of the Businesss income taxes on a separate return basis requires a considerable amount of judgment and use of both estimates and allocations. As a result, actual transactions included in the consolidated financial statements of Travere may not be included in the separate Combined Financial Statements of the Business. Similarly, the tax treatment of certain items reflected in the Combined Financial Statements of the Business may not be reflected in the consolidated financial statements and tax returns of Travere. Therefore, such items as net operating losses, credit carryforwards and valuation allowances may exist in Traveres consolidated financial statements that may or may not exist in the stand-alone Combined Financial Statements. As such, the income taxes of the Business as presented in the Combined Financial Statements may not be indicative of the income taxes that the Business will generate in the future.
Operations of the Business are included in the consolidated U.S. federal and certain state and local income tax returns filed by Travere, where applicable. In jurisdictions where the Business has been included in the tax returns filed by Travere, any income taxes payable resulting from the related income tax provisions have been reflected in the balance sheet within net parent investment.
Deferred income taxes arise from temporary differences between amounts recorded in the Combined Financial Statements and tax basis of assets and liabilities using enacted tax rates in effect for the years in which the differences are expected to affect taxable income. Deferred tax assets are evaluated based on the guidelines for realization and are reduced by a valuation allowance if deemed necessary. The Business establishes valuation allowances when necessary to reduce deferred income tax assets to the amounts that it believes are more likely than not to be recovered. Each quarter the Business evaluates the need to retain all or a portion of the valuation allowance on the Businesss deferred tax assets.
ASC 740 addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under the standard, the Business may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the tax authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement. ASC 740 also provides guidance on de-recognition, classification, interest and penalties on income taxes, accounting in interim periods and requires increased disclosures. The Businesss policy is to record estimated interest and penalty related to the underpayment of income taxes or unrecognized tax benefits as a component of its income tax provision.
See Note 9 - Income Taxes for additional information.
Legal Contingencies
The Business may, from time to time, be involved in various claims and legal actions that arise in the ordinary course of business. The Business accrues for legal contingencies when it is determined probable that a liability has been incurred and the amount of the loss can be reasonably estimated. See Note 7 for further discussion.
Recently Issued Accounting Pronouncements
From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (FASB) or other standard setting bodies. Unless otherwise discussed, the Business believes that the impact of recently issued standards that are not yet effective will not have a material impact on its combined financial position or results of operations upon adoption.
NOTE 3. REVENUE RECOGNITION
Net Product Sales
Product sales consist of bile acid products (Chenodal and Cholbam). The Business sells its products through direct-to-patient distributors worldwide, with the United States and Canada representing 97% and 2% of net product sales, respectively, and rest of world representing less than 1% of net product sales, based on the product shipment destination.
11
BILE ACID BUSINESS OF TRAVERE THERAPEUTICS, INC
The Businesss revenues have been derived from the sale of bile acid products, which primarily treat bile acid disorders and enzyme defects. Revenues are recognized in satisfaction of a single performance obligation when the customer obtains control of the Businesss product, which occurs upon delivery to the customer. The Business receives payments from its product sales, primarily through third party payers, based on terms that generally are within 30 days of delivery of product to the patient. Contracts do not contain significant financing components based on the typical period of time between performance of services and collection of consideration.
Deductions from Revenue
Revenues from product sales are recorded at the net sales price, which includes provisions resulting from discounts, rebates and co-pay assistance that are offered to customers, health care providers, payers and other indirect customers relating to the Businesss sales of its products. These provisions are based on the estimates of the amounts earned or to be claimed on the related sales. These amounts are treated as variable consideration, estimated and recognized as a reduction of the transaction price at the time of the sale, using the most likely amount method, and are classified as a reduction of accounts receivable (if the amount is payable to a customer) or as a current liability (if the amount is payable to a party other than a customer). The Business includes these estimated amounts in the transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized for such transactions will not occur. Where appropriate, these reserves take into consideration the Businesss historical experience, current contractual and statutory requirements and specific known market events and trends. Overall, these reserves reflect the Businesss best estimates of the amount of consideration to which it is entitled based on the terms of the contract. If actual results in the future vary from the Businesss provisions, the Business will adjust the estimate, which would affect net product sales and earnings in the period such variances become known. For the year ended December 31, 2022, the Business recorded a net product sales increase of $0.6 million, related to performance obligations satisfied in previous periods.
Government Rebates: The Business calculates the rebates that it will be obligated to provide to government programs and deducts these estimated amounts from its gross product sales at the time the revenues are recognized. Allowances for government rebates and discounts are established based on actual payer information, which is reasonably estimated at the time of delivery, and the government-mandated discounts applicable to government-funded programs. Rebate discounts are included in other current liabilities in the accompanying combined balance sheet.
Prompt Pay Discounts: The Business offers discounts to certain customers for prompt payments. The Business accrues for the calculated prompt pay discount based on the gross amount of each invoice for those customers at the time of sale.
Product Returns: Consistent with industry practice, the Business offers its customers a limited right to return product purchased directly from the Business, which is principally based upon the products expiration date. Generally, shipments are only made upon a patient prescription thus returns are minimal. For the year ended December 31, 2022, product returns were immaterial.
Co-pay Assistance: The Business offers a co-pay assistance program, which is intended to provide financial assistance to qualified commercially insured patients with prescription drug co-payments required by payers. The calculation of the accrual for co-pay assistance is based on an identification of claims and the cost per claim associated with product that has been recognized as revenue.
NOTE 4. INVENTORY
Inventory, net of reserves, consisted of the following at December 31, 2022 (in thousands):
2022 | ||||
Raw materials |
$ | 1,231 | ||
Finished goods |
1,168 | |||
|
|
|||
Total inventory |
$ | 2,399 | ||
|
|
NOTE 5. INTANGIBLE ASSETS, NET
Amortizable Intangible Assets
Manchester Pharmaceuticals LLC
In 2014, the Company acquired intangible assets with finite lives related to the Chenodal product rights, trade names, and customer relationships with fair values of $67.8 million $0.2 million, and $0.4 million, respectively. The useful lives related to the acquired product rights, trade names, and customer relationships are expected to be approximately 16, 1 and, 10 years, respectively. Amortization of product rights, trade names and customer relationships are being recorded in selling, general and administrative expense over their respective lives.
12
BILE ACID BUSINESS OF TRAVERE THERAPEUTICS, INC
Cholbam Asset Purchase
In 2015, the Company completed its acquisition from Asklepion of all worldwide rights, titles and ownership of Cholbam, including all related contracts, data assets, intellectual property, regulatory assets and the pediatric priority review voucher. The Business capitalized $75.9 million and $7.3 million for the U.S. and international economic interest, respectively. The useful lives related to the economic interest is expected to be approximately 10 years. As of December 31, 2022, the international economic interest had been fully amortized. Amortization of economic interest are being recorded in selling, general and administrative expense.
Amortizable intangible assets as of December 31, 2022 (in thousands):
Useful Life |
Gross Carrying Amount |
Accumulated Amortization |
Net Book Value |
|||||||||||||
Chenodal product rights |
16 | $ | 67,849 | $ | (37,175 | ) | $ | 30,674 | ||||||||
Economic interest - Cholbam revenue |
10 | 75,900 | (58,842 | ) | 17,058 | |||||||||||
Manchester customer relationships |
10 | 403 | (353 | ) | 50 | |||||||||||
|
|
|
|
|
|
|||||||||||
Total amortizable intangible assets |
$ | 144,152 | $ | (96,370 | ) | $ | 47,782 | |||||||||
|
|
|
|
|
|
Amortization expense for the year ended December 31, 2022 was $12.4 million.
As of December 31, 2022, amortization expense for the next five years and thereafter is expected to be as follows (in thousands):
2023 |
$ | 11,862 | ||
2024 |
11,862 | |||
2025 |
6,108 | |||
2026 |
4,238 | |||
2027 |
4,238 | |||
Thereafter |
9,474 | |||
|
|
|||
Total |
$ | 47,782 | ||
|
|
Goodwill
As of December 31, 2022, the Business had goodwill of $0.9 million.
NOTE 6. ACCRUED EXPENSES
Accrued expenses consist of the following at December 31, 2022 (in thousands):
2022 | ||||
Accrued royalties |
$ | 2,893 | ||
Sales discounts, rebates, and allowances |
2,723 | |||
Compensation related costs |
1,307 | |||
Research and development |
711 | |||
Miscellaneous accrued |
905 | |||
|
|
|||
Total accrued expenses |
$ | 8,539 | ||
|
|
NOTE 7. COMMITMENTS AND CONTINGENCIES
Contingencies
In October 2021, our Kolbam distributor in France notified us that the French authorities are asking for reimbursement for a portion of Kolbam sales in France during the periods from 2015-2020. During this period, the Business had aggregate revenues from sales of Kolbam in France of approximately $8.0 million. At this time, the Business is not able to estimate the potential liability that may be incurred, if any.
13
BILE ACID BUSINESS OF TRAVERE THERAPEUTICS, INC
Legal Proceedings
From time to time in the normal course of business, the Business is subject to various legal matters such as threatened or pending claims or litigation. Although the results of claims and litigation cannot be predicted with certainty, the Business does not believe it is a party to any claim or litigation the outcome of which, if determined adversely to it, would individually or in the aggregate be reasonably expected to have a material adverse effect on its results of operations or financial condition.
NOTE 8. FAIR VALUE MEASUREMENTS
The Business utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are described below:
Level 1 Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;
Level 2 Quoted prices in markets that are not active or financial instruments for which all significant inputs are observable, either directly or indirectly; and
Level 3 Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable.
Financial instruments with carrying values approximating fair value include accounts receivable and accounts payable, due to their short-term nature.
The following table presents the Businesss asset and liabilities, measured and recognized at fair value on a recurring basis, classified under the appropriate level of the fair value hierarchy as of December 31, 2022 (in thousands):
As of December 31, 2022 |
Fair Value Hierarchy at December 31, 2022 | |||||||||||||||
Total carrying | Quoted prices in | Significant other | Significant | |||||||||||||
and estimated | active markets | observable | unobservable | |||||||||||||
fair value | (Level 1) | inputs (Level 2) | inputs (Level 3) | |||||||||||||
Liabilities: |
||||||||||||||||
Business combination-related contingent consideration |
$ | 71,200 | $ | | $ | | $ | 71,200 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
$ | 71,200 | $ | | $ | | $ | 71,200 | ||||||||
|
|
|
|
|
|
|
|
The Company acquired two businesses, related to the Cholbam and Chenodal products, whose purchase price included potential future payments that are contingent on the achievement of certain milestones and percentages of future net sales derived from the products acquired. The Business recorded contingent consideration liabilities at their fair value on the acquisition date and revalues them at the end of each reporting period. In estimating the fair value of the Businesss contingent consideration, the Business uses a Monte Carlo Simulation. The determination of the contingent consideration liabilities requires significant judgements including the reasonableness of estimates and assumptions included in the forecasts of future net sales, long-term growth rates and the discount rates applied to such forecasts. Changes in these estimates and assumptions could have a significant impact on the fair value of the contingent consideration liabilities.
Discount rates used to determine the fair value at December 31, 2022 are as follows:
Revenue Discount | Payment Discount | |||||||||||
Cholbam | Chenodal | |||||||||||
December 31, 2022 |
7.75 | % | 8.00 | % | 8.10 | % |
Based on the fair value hierarchy, the Business classified the fair value of contingent consideration within Level 3 because valuation inputs are based on projected revenues discounted to a present value.
14
BILE ACID BUSINESS OF TRAVERE THERAPEUTICS, INC
The following table sets forth a summary of changes in the estimated fair value of the Businesss Level 3 business combination-related contingent consideration for the year ended December 31, 2022 (in thousands):
Fair Value Measurements | ||||
of Acquisition-Related | ||||
Contingent Consideration | ||||
(Level 3) | ||||
2022 | ||||
Balance at January 1 |
$ | 67,100 | ||
Changes in the fair value of contingent consideration |
15,006 | |||
Contractual payments |
(8,066 | ) | ||
Contractual payments included in accrued liabilities at December 31, |
(2,840 | ) | ||
|
|
|||
Balance at December 31 |
$ | 71,200 | ||
|
|
NOTE 9. INCOME TAXES
The Business has not filed separate tax returns as it has been included in the consolidated income tax returns of Travere. Accordingly, the income tax provision included in these Combined Financial Statements was calculated using a method consistent with a separate return basis, as if the Business filed a stand-alone tax return and was not considered part of a consolidated tax return. The amounts allocated for income taxes are not necessarily indicative of the actual amounts that would have been recorded had Business been held within a separate stand-alone entity.
In the jurisdictions where the Business was included in the consolidated tax reporting of Travere, the current tax expense of the Business represents the income tax to be deemed paid to the Travere tax holding group. For the purpose of these Combined Financial Statements, it was assumed that payable balances were relieved through net parent investment.
Income before income taxes includes the following components (in thousands):
Year Ended December 31, | ||||
2022 | ||||
United States |
$ | 37,562 | ||
|
|
|||
Total |
$ | 37,562 | ||
|
|
The components of the provision for income taxes, in the combined statement of operations are as follows (in thousands):
Year Ended December 31, | ||||
2022 | ||||
Current |
||||
Federal |
$ | 11,951 | ||
State |
3,468 | |||
|
|
|||
15,419 | ||||
Deferred |
||||
Federal |
(4,620 | ) | ||
State |
(2,138 | ) | ||
|
|
|||
(6,758 | ) | |||
|
|
|||
Total income tax provision |
$ | 8,661 | ||
|
|
15
BILE ACID BUSINESS OF TRAVERE THERAPEUTICS, INC
The following is a reconciliation of the statutory federal income tax to the Businesss effective tax provision:
2022 | ||||
Statutory rate - federal |
$ | 7,888 | ||
State taxes, net of federal benefit |
1,786 | |||
Tax credits |
(973 | ) | ||
Change in state rate tax |
(697 | ) | ||
Return to provision adjustments and other true-ups |
731 | |||
Other |
(74 | ) | ||
|
|
|||
Income tax provision |
$ | 8,661 | ||
|
|
The significant components of the Businesss deferred tax assets and liabilities as of December 31, 2022 are as follows (in thousands):
2022 | ||||
Deferred tax assets: |
||||
Capitalized research and development |
$ | 3,042 | ||
Contingent consideration |
18,338 | |||
Other accrued expenses |
1,975 | |||
Share based compensation |
1,565 | |||
Intangible assets greater than book |
7,567 | |||
|
|
|||
Total deferred tax assets |
$ | 32,487 | ||
|
|
We recognize deferred tax assets to the extent that we believe that these assets are more likely than not to be realized. In making such a determination, we consider all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, and results of recent operations. If we determine that we would be able to realize our deferred tax assets in the future in excess of their net recorded amount, we would make an adjustment to the deferred tax asset valuation allowance, which would reduce the provision for income taxes. We considered all positive and negative evidence and based on the weight of such evidence concluded that a valuation allowance is not necessary as of December 31, 2022.
As of December 31, 2022, the Business had $0.2 million in unrecognized tax benefits of which $0.2 million related to orphan drug and research and development tax credits. To the extent unrecognized tax benefits are recognized, the recognition of the $0.2 million tax benefit would reduce the effective tax rate. The Business does not anticipate that the amount of unrecognized tax benefits as of December 31, 2022 will change materially within the following 12 months.
A reconciliation of the Businesss unrecognized tax benefits as of December 31, 2022 is provided in the following table (in thousands):
2022 | ||||
Balance as of January 1 |
$ | 89 | ||
Increase in current period positions |
123 | |||
|
|
|||
Balance as of December 31 |
$ | 212 | ||
|
|
The Business did not recognize any interest and penalties for the year ended December 31, 2022.
NOTE 10. CORPORATE ALLOCATIONS
The Business has historically operated as part of Travere and not as a stand-alone company. Accordingly, Travere has allocated certain shared costs to the Business that are reflected as expenses in these Combined Financial Statements including, but not limited to, general corporate expenses such as executive management, legal, human resources, finance, accounting, treasury, tax, IT, benefits, communications, ethics and compliance, corporate employee benefits, incentives and share based compensation, lease expense, shared services processing and administration and depreciation for corporate fixed assets. Management considers these allocations to be a reasonable reflection of the utilization of services by, or the benefits provided to it. The allocation methods used include a pro rata basis of direct research and development expenses, headcount, or other measures. The following table summarizes allocations for corporate expenses, as well as respective financial statement line item where the costs were classified, for the year ended December 31, 2022 (in thousands):
16
BILE ACID BUSINESS OF TRAVERE THERAPEUTICS, INC
Year Ended December 31, | ||||
2022 | ||||
Research and development |
$ | 5,397 | ||
Selling, general and administrative |
9,951 | |||
|
|
|||
Total |
$ | 15,348 | ||
|
|
NOTE 11. SHARE BASED COMPENSATION
Certain of the Businesss employees participate in share based compensation plans sponsored by the Parent. The Parents share based compensation plans include stock options, restricted stock units, and performance stock units. All awards granted under the plans are based on the Parents common shares and, as such, are reflected in the Parents Consolidated Statements of Stockholders Equity and not in the Businesss combined statement of net parent investment. Share based compensation expense includes expense attributable to the Business based on the awards and terms previously granted to the Businesss employees and an allocation of Parents corporate and shared functional employee expenses.
Share based compensation expense recognized by the Business consisted of the following for the year ended December 31, 2022 (in thousands):
Year Ended December 31, | ||||
2022 | ||||
Research and development |
$ | 831 | ||
Selling, general and administrative |
3,020 | |||
|
|
|||
Total share based compensation expense |
$ | 3,851 | ||
|
|
Share based compensation expense includes an allocation of Parents corporate and shared functional employee expenses consisting of the following for the year ended December 31, 2022 (in thousands):
Year Ended December 31, | ||||
2022 | ||||
Research and development |
$ | 748 | ||
Selling, general and administrative |
2,070 | |||
|
|
|||
Total allocated share based compensation expense |
$ | 2,818 | ||
|
|
NOTE 12. SUBSEQUENT EVENTS
In July 2023, the Business renewed its contract with an existing CMO and committed to purchase $6.8 million over the next three years for a minimum purchase of $2.3 million per year in active pharmaceutical ingredients, which is planned to support commercial sales of Cholbam.
These Combined Financial Statements are derived from the Consolidated Financial Statements of Travere Therapeutics, Inc. The Business has evaluated transactions or other events that occurred through October 2, 2023, the date these combined financial statements were available for issuance, noting no additional events which would affect the Combined Financial Statements as of December 31, 2022.
17
Exhibit 99.5
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
On August 31, 2023 (the Closing Date), Mirum Pharmaceuticals, Inc., a Delaware corporation, (the Company, Mirum) completed the purchase from Travere Therapeutics, Inc. (Travere) of substantially all of the assets of Travere that are primarily related to its business of development, manufacture (including synthesis, formulation, finishing or packaging) and commercialization of Chenodal and Cholbam (also known as Kolbam) (such assets, the Bile Acid Business and such transaction, the Acquisition) pursuant to the Asset Purchase Agreement (the Purchase Agreement), dated July 16, 2023, with Travere. In connection with and immediately prior to the closing of the Acquisition, the Company completed a private placement of 8,000,000 shares of its common stock at a price per share of $26.25, resulting in aggregate net proceeds of approximately $202.2 million (the PIPE and, together with the Acquisition, the Transactions).
The following unaudited pro forma condensed combined financial information has been prepared to illustrate the estimated effects of the Acquisition and the PIPE. The unaudited pro forma condensed combined financial information has been prepared by the Company in accordance with Article 11 of SEC Regulation S-X. The unaudited pro forma condensed combined financial information gives effect to the Transactions as follows:
| The unaudited pro forma condensed combined balance sheet as of June 30, 2023 combines the historical consolidated balance sheets of the Company and the Bile Acid business of Travere, giving effect to the Transactions as if they had occurred on June 30, 2023. |
| The unaudited pro forma condensed combined statements of operations for the six months ended June 30, 2023 combine the historical operating results of the Company and the Bile Acid business of Travere, giving effect to the Acquisition as if it had occurred on January 1, 2022. |
| The unaudited pro forma condensed combined statements of operations for the year ended December 31, 2022 combine the historical operating results of the Company and the Bile Acid business of Travere, giving effect to the Acquisition as if it had occurred on January 1, 2022. |
The unaudited pro forma condensed combined financial information is presented for informational purposes only and is not necessarily indicative of what the Companys financial position or results of operations actually would have been had the Purchase Agreement been completed as of the dates indicated. In addition, the unaudited pro forma condensed combined financial information does not purport to project the future financial position or operating results of the Company.
The unaudited pro forma condensed combined financial statements reflect managements preliminary estimates of the fair value of purchase consideration and the fair values of tangible and intangible assets acquired. Independent valuation specialists have conducted an analysis to assist management of the Company in determining the fair value of the assets acquired. The Companys management is responsible for these third-party valuations and appraisals. Since these unaudited pro forma condensed combined financial statements have been prepared based on preliminary estimates of the fair value of purchase consideration and fair values of assets acquired, the actual amounts to be reported in future filings may differ materially from the amounts used in the pro forma condensed combined financial statements.
The Acquisition is expected to be accounted for as an asset acquisition as substantially all of the fair value is concentrated in developed technology, an intangible asset. The Bile Acid Business assets will be measured and recognized as an allocation of the transaction price based on their relative fair values as of the transaction date.
The unaudited pro forma condensed combined financial statements have been derived from and should be read together with:
| The historical audited financial statements and the related notes contained in the Companys Annual Report on Form 10-K as of and for the year ended December 31, 2022, filed March 8, 2023. |
| The historical audited combined financial statements of the Bile Acid business of Travere as of and for the year ended December 31, 2022, and the related notes. |
| The historical unaudited financial statements and the related notes contained in the Companys Quarterly Report on Form 10-Q as of and for the six months ended June 30, 2023, filed August 7, 2023. |
| The historical unaudited combined financial statements of the Bile Acid business of Travere as of and for the six months ended June 30, 2023, and the related notes. |
MIRUM PHARMACEUTICALS, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF JUNE 30, 2023
(In thousands, except share and per share amounts)
HISTORICAL MIRUM |
HISTORICAL BILE ACID BUSINESS OF TRAVERE |
TRANSACTION ACCOUNTING ADJUSTMENTS |
PRO FORMA COMBINED |
|||||||||||||||||
(Note 2) | (Note 4) | |||||||||||||||||||
ASSETS |
||||||||||||||||||||
Current assets: |
||||||||||||||||||||
Cash and cash equivalents |
$ | 297,228 | $ | | $ | (9,403 | ) | (a), (g) | $ | 287,825 | ||||||||||
Short-term investments |
32,726 | | | 32,726 | ||||||||||||||||
Accounts receivable |
35,326 | 6,342 | (6,342 | ) | (b) | 35,326 | ||||||||||||||
Inventory |
8,509 | 2,552 | 10,348 | (c) | 21,409 | |||||||||||||||
Prepaid expenses and other current assets |
9,729 | 197 | (126 | ) | (d) | 9,800 | ||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Total current assets |
383,518 | 9,091 | (5,523 | ) | 387,086 | |||||||||||||||
Property and equipment, net |
866 | | | 866 | ||||||||||||||||
Operating lease right-of-use asset |
1,614 | | | 1,614 | ||||||||||||||||
Intangible assets, net |
56,437 | 42,835 | 156,648 | (e) | 255,920 | |||||||||||||||
Deferred tax assets |
| 31,999 | (31,999 | ) | (b) | | ||||||||||||||
Other assets |
1,153 | 308 | | 1,461 | ||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Total assets |
$ | 443,588 | $ | 84,233 | $ | 119,126 | $ | 646,947 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
LIABILITIES AND STOCKHOLDERS EQUITY |
||||||||||||||||||||
Current liabilities: |
||||||||||||||||||||
Accounts payable |
$ | 14,446 | $ | 242 | $ | (242 | ) | (b) | $ | 14,446 | ||||||||||
Accrued expenses |
42,693 | 8,042 | (5,794 | ) | (a), (b), (g), (h) | 44,941 | ||||||||||||||
Operating lease liabilities |
1,064 | | | 1,064 | ||||||||||||||||
Business combination-related contingent consideration, current portion |
| 6,900 | (6,900 | ) | (b) | | ||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Total current liabilities |
58,203 | 15,184 | (12,936 | ) | 60,451 | |||||||||||||||
Operating lease liabilities, noncurrent |
1,154 | | | 1,154 | ||||||||||||||||
Convertible notes payable, net |
305,611 | | | 305,611 | ||||||||||||||||
Business combination-related contingent consideration, less current portion |
| 67,200 | (67,200 | ) | (b) | | ||||||||||||||
Other liabilities |
10 | | | 10 | ||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Total liabilities |
364,978 | 82,384 | (80,136 | ) | 367,226 | |||||||||||||||
Commitments and contingencies |
||||||||||||||||||||
Net parent investment |
| 1,849 | (1,849 | ) | (f) | | ||||||||||||||
Stockholders Equity: |
||||||||||||||||||||
Preferred stock, at par |
| | | | ||||||||||||||||
Common stock, at par |
4 | | 1 | (a) | 5 | |||||||||||||||
Additional paid-in capital |
575,522 | | 202,238 | (a) | 777,760 | |||||||||||||||
Accumulated deficit |
(496,992 | ) | | (1,128 | ) | (g), (h) | (498,120 | ) | ||||||||||||
Accumulated other comprehensive income |
76 | | | 76 | ||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Total stockholders equity |
78,610 | 1,849 | 199,262 | 279,721 | ||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Total liabilities and stockholders equity |
$ | 443,588 | $ | 84,233 | $ | 119,126 | $ | 646,947 | ||||||||||||
|
|
|
|
|
|
|
|
MIRUM PHARMACEUTICALS, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2023
(In thousands, except share and per share amounts)
HISTORICAL MIRUM |
HISTORICAL BILE ACID BUSINESS OF TRAVERE |
TRANSACTION ACCOUNTING ADJUSTMENTS |
PRO FORMA COMBINED |
|||||||||||||||
(Note 4) | ||||||||||||||||||
Revenue: |
||||||||||||||||||
Product sales, net |
$ | 61,595 | $ | 53,606 | $ | | $ | 115,201 | ||||||||||
License revenue |
7,500 | | | 7,500 | ||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||
Total revenue |
69,095 | 53,606 | | 115,201 | ||||||||||||||
Operating expenses: |
||||||||||||||||||
Cost of sales |
11,791 | 1,518 | 16,814 | (i), (j), (n) | 30,123 | |||||||||||||
Research and development |
45,557 | 7,572 | | 53,129 | ||||||||||||||
Selling, general and administrative |
63,168 | 17,831 | (296 | ) | (i), (l), (o) | 80,703 | ||||||||||||
Change in fair value of contingent consideration |
| 8,596 | (8,596 | ) | (n) | | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||||
Total operating expenses |
120,516 | 35,517 | 7,922 | 163,955 | ||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||
Income (loss) from operations |
(51,421 | ) | 18,089 | (7,922 | ) | (48,754 | ) | |||||||||||
|
|
|
|
|
|
|
|
|||||||||||
Other income (expense): |
||||||||||||||||||
Interest income |
5,899 | | | 5,899 | ||||||||||||||
Interest expense |
(7,968 | ) | | | (7,968 | ) | ||||||||||||
Loss from termination of revenue interest purchase agreement |
(49,076 | ) | | | (49,076 | ) | ||||||||||||
Other income expense, net |
(1,085 | ) | (159 | ) | | (1,244 | ) | |||||||||||
|
|
|
|
|
|
|
|
|||||||||||
Net income (loss) before income taxes |
(103,651 | ) | 17,930 | (7,922 | ) | (101,143 | ) | |||||||||||
|
|
|
|
|
|
|
|
|||||||||||
Provision for income taxes |
517 | 4,380 | | (p) | 4,897 | |||||||||||||
|
|
|
|
|
|
|
|
|||||||||||
Net (loss) income |
$ | (104,168 | ) | $ | 13,550 | $ | (7,922 | ) | $ | (106,040 | ) | |||||||
|
|
|
|
|
|
|
|
|||||||||||
Net loss per share, basic and diluted (Note 5) |
$ | (2.75 | ) | N/A | $ | (2.31 | ) | |||||||||||
Weighted-average shares of common stock outstanding, basic and diluted (Note 5) |
37,892,513 | N/A | 45,892,513 |
MIRUM PHARMACEUTICALS, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2022
(In thousands, except share and per share amounts)
HISTORICAL MIRUM |
HISTORICAL BILE ACID BUSINESS OF TRAVERE |
TRANSACTION ACCOUNTING ADJUSTMENTS |
PRO FORMA COMBINED |
|||||||||||||||
(Note 4) | ||||||||||||||||||
Revenue: |
||||||||||||||||||
Product sales, net |
$ | 75,062 | $ | 102,558 | $ | | $ | 177,620 | ||||||||||
License revenue |
2,000 | | | 2,000 | ||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||
Total revenue |
77,062 | 102,558 | 179,620 | |||||||||||||||
Operating expenses: |
||||||||||||||||||
Cost of sales |
12,374 | 3,172 | 33,109 | (i), (j), (n) | 48,655 | |||||||||||||
Research and development |
106,842 | 13,920 | 1,816 | (k) | 122,578 | |||||||||||||
Selling, general and administrative |
89,066 | 32,637 | 2,607 | (i), (k), (l), (m) | 124,310 | |||||||||||||
Change in fair value of contingent consideration |
15,006 | (15,006 | ) | (n) | | |||||||||||||
|
|
|
|
|
|
|
|
|||||||||||
Total operating expenses |
208,282 | 64,735 | 22,526 | 295,543 | ||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||
Income (loss) from operations |
(131,220 | ) | 37,823 | (22,526 | ) | (115,923 | ) | |||||||||||
|
|
|
|
|
|
|
|
|||||||||||
Other income (expense): |
||||||||||||||||||
Interest income |
3,857 | | | 3,857 | ||||||||||||||
Interest expense |
(15,979 | ) | | | (15,979 | ) | ||||||||||||
Change in fair value of derivative liability |
906 | | | 906 | ||||||||||||||
Other income (expense), net |
365 | (261 | ) | | 104 | |||||||||||||
|
|
|
|
|
|
|
|
|||||||||||
Net income (loss) before income taxes |
(142,071 | ) | 37,562 | (22,526 | ) | (127,035 | ) | |||||||||||
|
|
|
|
|
|
|
|
|||||||||||
Provision for (benefit from) income taxes |
(6,406 | ) | 8,661 | | (p) | 2,255 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||||
Net income (loss) |
$ | (135,665 | ) | $ | 28,901 | $ | (22,526 | ) | $ | (129,290 | ) | |||||||
|
|
|
|
|
|
|
|
|||||||||||
Net loss per share (Note 5): |
||||||||||||||||||
Basic |
$ | (4.01 | ) | N/A | $ | (3.09 | ) | |||||||||||
Diluted |
$ | (4.02 | ) | N/A | $ | (3.10 | ) | |||||||||||
Weighted average shares of common stock outstanding (Note 5): |
||||||||||||||||||
Basic |
33,839,072 | N/A | 41,839,072 | |||||||||||||||
Diluted |
33,982,493 | N/A | 41,982,493 |
NOTES TO THE UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL STATEMENTS
Note 1 Description of Transaction
On July 16, 2023, the Company executed an Asset Purchase Agreement (such agreement, the Purchase Agreement, and the transactions contemplated thereby, the Acquisition) with Travere Therapeutics, Inc. (Travere). At the closing (the Closing) of the Acquisition, the Company purchased from Travere all of the assets of Travere that were primarily related to its business of development, manufacture (including synthesis, formulation, finishing or packaging) and commercialization of Chenodal and Cholbam (also known as Kolbam, and together with Chenodal, the Bile Acid Medicines) (the Bile Acid Business) for an aggregate purchase price, subject to certain adjustments pursuant to the terms of the Purchase Agreement, of up to $445.0 million in cash, with $210.0 million due at Closing and up to $235.0 million after the Closing, upon the achievement of certain milestones based on specified amounts of annual net sales (tiered from $125.0 million to $500.0 million) of the Bile Acid Medicines (the Milestone Events).
The Company additionally agreed to use certain specified resources and efforts during stipulated time-periods to obtain regulatory approval and to cause the Milestone Events to be achieved. The Company and Travere have also entered into a transitional services agreement (TSA) pursuant to which Travere has agreed to perform certain services for a period of time following the consummation of the Acquisition with respect to the Companys use and operation of the assets purchased in the Acquisition.
In connection with and immediately prior to the Closing of the Acquisition, the Company completed the private placement of 8,000,000 shares of its common stock at a price per share of $26.25, resulting in aggregate net proceeds of approximately $202.2 million (the PIIPE and, together with the Acquisition, the Transactions), which it used to finance the upfront payment at the Closing of the Acquisition.
Note 2 Basis of Presentation
The Acquisition is expected to be accounted for as an asset acquisition in accordance with U.S.GAAP as substantially all of the fair value is concentrated in developed technology, an intangible asset. The assets acquired in the Acquisition will be measured and recognized as an allocation of the transaction price based on their relative fair values as of the transaction date. The fair value measurements utilize estimates based on key assumptions of the Acquisition, including historical and current market data.
The unaudited pro forma adjustments included herein are preliminary and may be adjusted as additional
information becomes available and as additional analyses are performed. Revisions to the purchase price allocation of the assets acquired may have a significant impact on the pro forma amounts. The pro forma adjustments related to the Acquisition reflect the fair value of the assets as of the date indicated. The pro forma adjustments do not necessarily reflect the fair values that would have been recorded if the acquisition occurred on June 30, 2023.
The unaudited pro forma condensed combined balance sheet as of June 30, 2023, gives effect to the Transactions as if they had been completed on June 30, 2023. The unaudited pro forma condensed combined statement of operations for the six months ended June 30, 2023, and year ended December 31, 2022, gives effect to the Transactions as if they had been completed on January 1, 2022.
The pro forma adjustments reflecting the consummation of the Acquisition and the PIPE are preliminary and based on certain currently available information and certain assumptions and methodologies that the Companys management believes are reasonable under the circumstances. The unaudited condensed combined pro forma adjustments, which are described in the accompanying notes, may be revised as additional information becomes available and is evaluated. Therefore, it is likely that the actual adjustments will differ from the pro forma adjustments, and it is possible that the differences may be material. The Companys management believes that its assumptions and methodologies provide a reasonable basis for presenting all of the significant effects of the Transactions based on information available to management at this time and that the pro forma adjustments give appropriate effect to those assumptions and are properly applied in the unaudited pro forma condensed combined financial information.
The unaudited pro forma condensed combined financial information does not give effect to any anticipated
synergies, operating efficiencies, tax savings, or cost savings that may be associated with the Acquisition. The unaudited pro forma condensed combined financial information is not necessarily indicative of what the actual results of operations and financial position would have been had the Transactions taken place on the dates indicated, nor are they indicative of the future results of operations or financial position of the post-combination company. They should be read in conjunction with the historical financial statements and notes thereto of the Company.
Note 3 Estimated Purchase Price and Preliminary Purchase Price Allocation
The accompanying unaudited pro forma condensed combined financial statements reflect an estimated
preliminary purchase price of approximately $212.8 million comprised of cash consideration of $210.4 million and transaction costs of $2.4 million. For purposes of this pro forma analysis, the above estimated purchase price has been allocated based on the relative fair value of the preliminary estimate of the fair value of assets and liabilities to be acquired
(in thousands) |
As of June 30, 2023 | |||
Preliminary Purchase Price Allocation: |
||||
Inventory |
$ | 12,900 | ||
Developed technology |
198,513 | |||
Assembled workforce |
970 | |||
Other current and noncurrent assets |
379 | |||
|
|
|||
Total assets acquired |
$ | 212,762 | ||
|
|
The guidance in Accounting Standards Codification topic 805, Business Combinations, (ASC 805) requires an initial screen test to determine if substantially all of the fair value of the gross assets acquired is concentrated in a single asset or group of similar assets. If that screen is met, the set is not a business. The initial screen test was met as the Company determined that substantially all of the fair value was concentrated in the acquired developed technology.
Note 4 Pro Forma Adjustments Unaudited Pro Forma Condensed Combined Financial Statements
The following provides explanations of the various adjustment to the unaudited pro forma condensed combined financial statements:
(a) | The adjustment is to reflect the cash proceeds of $210.0 million from the sale and issuance of the shares pursuant to the PIPE, less issuance costs of $7.5 million paid upon close and $0.2 million in accrued expenses, offset by the cash payment of $210.4 million to Travere for the Acquisition. |
(b) | To eliminate the Bile Acid Businesss historical operating assets and liabilities that were not acquired or assumed in connection with the Acquisition. |
(c) | To adjust acquired inventory, as follows: |
(in thousands) |
As of June 30, 2023 |
|||
Eliminate the historical inventory of the Bile Acid Business |
$ | (2,552 | ) | |
Record the preliminary estimated fair value of acquired inventory |
12,900 | |||
|
|
|||
Total |
$ | 10,348 | ||
|
|
(d) | To adjust acquired prepaid assets to an estimate of their fair values, as follows: |
(in thousands) |
As of June 30, 2023 |
|||
Eliminate the historical prepaid assets of the Bile Acid Business |
$ | (197 | ) | |
Record the preliminary estimated fair value of prepaid assets acquired |
71 | |||
|
|
|||
Total |
$ | 126 | ||
|
|
The value of the acquired prepaid assets will be amortized to expense over the remaining periods of the respective prepaid assets.
(e) | To adjust acquired intangible assets, as follows: |
(in thousands) |
As of June 30, 2023 |
|||
Eliminate the historical intangible assets of the Bile Acid Business |
$ | (42,835 | ) | |
Record the preliminary estimated fair value of acquired intangible assets |
199,483 | |||
|
|
|||
Total |
$ | 156,648 | ||
|
|
(f) | To eliminate Traveres historical investment in its Bile Acid Business. |
(g) | To adjust for the Companys transaction costs that were capitalized as part of the purchase price allocation of $0.3 million in accrued expenses, $0.6 million in accumulated deficit for expenses accrued for but not capitalized, and $1.5 million in cash to complete the Acquisition. |
(h) | To adjust for professional service expenses related to the Acquisition borne by the Company of $1.8 million. |
(i) | To adjust amortization expense related to acquired intangibles of $15.9 million in cost of sales and $0.3 million in selling, general and administrative for the year ended December 31, 2022, and $7.9 million in cost of sales and $0.2 million in selling, general and administrative for the six months ended June 30, 2023. |
(j) | To recognize additional cost of sales expenses related to the step up on the acquired inventory to its proportionate fair value. |
(k) | In connection with the Acquisition, the Company entered into the TSA pursuant to which Travere will provide certain services to the Company with respect to the Companys use and operation of the assets purchased for a transitional period for an estimated amount of $2.0 million, of which $1.8 million is allocated to research and development and $0.2 million to selling, general and administrative based on the work being performed. The pro forma adjustment reflects expenses that can be reasonably estimated for the year ended December 31, 2022. TSA services provided by Travere are not anticipated to last beyond 12 months post-close. |
(l) | To adjust for a retention bonus provided to certain Bile Acid Business employees. The retention bonus is earned over 18 months of continuous employment with the Company, reflected as $0.3 million for the year ended December 31, 2022, and $0.2 million for the six months ended June 30, 2023. |
(m) | Professional service expenses borne by the Company of $1.8 million would be expensed in the period of acquisition and are reflected for pro forma purposes as if the Acquisition occurred on January 1, 2022. Transaction costs borne by Travere would be reflected in the period prior to the acquisition and are excluded from the pro forma condensed combined statement of operations. |
(n) | To eliminate change in fair value of contingent consideration related to Traveres contingent consideration and reflect the royalty expense not reflected in the historical condensed combined statement of operations paid on net sales of Chenodal and Cholbam of $11.2 million for the year ended December 31, 2022, and $5.9 million for the six months ended June 30, 2023. |
(o) | To adjust for transaction costs that were reported in the current year. |
(p) | The Company has a history of cumulative losses and based on all available evidence, it has determined that its deferred tax assets are not more likely to be realized and recorded a full valuation allowance. On a combined basis, with the addition of the Bile Acid Business, the Company does not expect to be in a cumulative income position and therefore it does not expect to have a change in its judgment related to the realizability of its deferred tax assets and maintain a full valuation allowance. Accordingly, no tax-related adjustments have been reflected for the pro forma adjustments. |
Note 5 Net Loss per Share
Net loss per share was calculated using the historical weighted average shares outstanding, and the issuance of additional shares pursuant to the PIPE, assuming the shares were outstanding since January 1, 2022. As the Transactions are being reflected as if they had occurred at the beginning of the period presented, the calculation of weighted average shares outstanding for basic and diluted net loss per share assumes that the shares issuable pursuant to the PIPE have been outstanding for the entirety of the period presented.
Document and Entity Information |
Aug. 31, 2023 |
---|---|
Cover [Abstract] | |
Amendment Flag | true |
Entity Central Index Key | 0001759425 |
Document Type | 8-K/A |
Document Period End Date | Aug. 31, 2023 |
Entity Registrant Name | Mirum Pharmaceuticals, Inc. |
Entity Incorporation State Country Code | DE |
Entity File Number | 001-38981 |
Entity Tax Identification Number | 83-1281555 |
Entity Address, Address Line One | 950 Tower Lane |
Entity Address, Address Line Two | Suite 1050 |
Entity Address, City or Town | Foster City |
Entity Address, State or Province | CA |
Entity Address, Postal Zip Code | 94404 |
City Area Code | 650 |
Local Phone Number | 667-4085 |
Written Communications | false |
Soliciting Material | false |
Pre Commencement Tender Offer | false |
Pre Commencement Issuer Tender Offer | false |
Security 12b Title | Common stock, par value $0.0001 per share |
Trading Symbol | MIRM |
Security Exchange Name | NASDAQ |
Entity Emerging Growth Company | true |
Entity Ex Transition Period | true |
Amendment Description | On September 5, 2023, Mirum Pharmaceuticals, Inc. (the “Company”) filed a Current Report on Form 8-K with the Securities and Exchange Commission (the “Original 8-K”) reporting the Company’s completion of the acquisition of substantially all of the assets of Travere Therapeutics, Inc. (“Travere”) that are primarily related to the development, manufacture (including synthesis, formulation, finishing or packaging) and commercialization of Chenodal and Cholbam (also known as Kolbam) (such assets, the “Bile Acid Business”) pursuant to an Asset Purchase Agreement, dated July 16, 2023, by and between the Company and Travere (such transaction, the “Acquisition”). In connection with and immediately prior to the closing of the Acquisition, the Company completed a private placement of 8,000,000 shares of its common stock at a price per share of $26.25, resulting in aggregate net proceeds of approximately $202.2 million (the “PIPE”). The Company is filing this amendment to the Original 8-K (“Amendment”) to amend and supplement the Original 8-K to include historical financial statements of the Bile Acid Business and pro forma financial information as required by Items 9.01(a) and 9.01(b), respectively, of Form 8-K and that were excluded from the Original 8-K in reliance on the instructions to such items. Except as noted in this paragraph, no other information contained in the Original 8-K is amended or supplemented. This Amendment should be read together with the Original 8-K. |
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