Corporate Restructuring Update

6 Months Ended

Jun. 30, 2022

Corporate Restructuring Update

Corporate Restructuring Update

12. Corporate Restructuring Update

On September 15, 2021, the Company announced a strategic update and corporate restructuring (the “Restructuring”) to focus on leveraging its expertise in developing and commercializing respiratory therapeutics. As part of the Restructuring, the Company initiated a reduction in workforce of approximately 75%. Approximately 75% of the total reduction in workforce occurred in November 2021, and the remainder was completed in February 2022.

For the three and six months ended June 30, 2022, the Company incurred Restructuring and related expenses of $1.6 million and $10.9 million, respectively, of which $0.4 million and $5.1 million were related to R&D expenses and $1.2 million and $5.8 million were related to selling, general and administrative expenses, respectively. Of the total $1.6 million recognized for the three months ended June 30, 2022, cash-related expenses were $1.2 million and non-cash expenses were $0.4 million which were primarily related to the modification of equity-based awards for employees affected by the Restructuring and certain related awards for other employees. Of the total $10.9 million recognized for the six months ended June 30, 2022, cash-related expenses were $6.0 million and non-cash expenses were $4.9 million which were also primarily related to the modification of equity-based awards for employees affected by the Restructuring and certain related awards for other employees.

Since the Restructuring announcement in September 2021, the Company has incurred total Restructuring and related expenses of $31.1 million of which $15.7 million was related to R&D expenses and $15.4 million was related to selling,

general and administrative expenses. Of the total $31.1 million, cash-related expenses were $17.6 million and non-cash expenses were $13.5 million, which were primarily related to the modification of equity-based awards.

The Company estimates that it will incur total Restructuring and related expenses of approximately $31.9 million comprised of $17.6 million in cash expenses and $14.3 million in non-cash expenses. These expenses are primarily comprised of severance and other related costs which are being recognized ratably over the future service period. Based on the above estimate, approximately 97% of the total estimated Restructuring and related expenses have been recognized by the Company from September 2021 through June 2022.

Selected information relating to accrued cash-related Restructuring expenses was as follows:

(In thousands)
Balance at December 31, 2021	$	9,550
Net accruals		6,275
Cash paid		(15,233)
Balance at June 30, 2022	$	592

The Company expects to recognize the remaining Restructuring and related expenses of approximately $0.8 million in the third quarter of 2022. The remaining Restructuring and related expense estimate is comprised of non-cash expenses and is subject to a number of assumptions, and the actual amount may differ. We may also incur additional costs not currently contemplated due to events that may occur as a result of, or that are associated with, the Restructuring.

The Company also evaluated the impact of the Restructuring on the carrying value of its long-lived assets, such as property and equipment and operating lease assets. This process included evaluating the estimated remaining lives, significant changes in the use, and potential impairment charges related to its long-lived assets. Based on its evaluation, the Company determined that its long-lived assets were not impaired as of June 30, 2022, and it has not recognized any impairment charges related to its long-lived assets since the Restructuring announcement.