Strategic Actions

6 Months Ended

Jun. 30, 2023

Strategic Actions

Strategic Actions

10. Strategic Actions

In February 2023, the Company announced and has since initiated the following strategic actions (the “2023 Strategic Actions”):

Capital Return Program Increase

The Company’s board of directors authorized a $75.0 million increase to the existing $250.0 million capital return program initiated in September 2022, bringing the total capital return program to $325.0 million. For the three and six months ended June 30, 2023, the Company repurchased 7.28 million shares and 12.44 million shares, respectively, on the open market at a weighted average cost of $11.05 per share and $10.90 per share, respectively. For the three and six months ended June 30, 2023, the total aggregate cost of the repurchases, excluding fees and expenses, was $80.5 million and $135.6 million, respectively. Since the initiation of the capital return program, the Company has repurchased $263.8 million of shares, as of June 30, 2023, and the Company has approximately $61.2 million remaining in the capital return program which is expected to be completed by the end of 2023. In July 2023, the Company repurchased an additional 1.04 million shares on the open market at a weighted average cost of $9.88 per share for a total aggregate cost of $10.3 million, excluding fees and expenses. The Company has approximately $50.9 million remaining, as of July 31, 2023, that it is expected to complete by the end of 2023.

Discontinued Investment in Research Activities

The Company discontinued its research activities, including the inhaled Janus kinase (JAK) inhibitor program, resulting in a 17% reduction in headcount in March 2023. The Company plans to seek a partnership to continue progression of its inhaled JAK inhibitor program. In order to support the timely progression of the ampreloxetine Phase 3 study (CYPRESS) and the completion of the YUPELRI Peak Inspiratory Flow Rate (PIFR-2) Phase 4 study, the Company has prioritized its R&D resource allocation to these two programs.

As a result of the Company’s discontinued investment in research activities, for the three and six months ended June 30, 2023, the Company incurred restructuring and related expenses of $1.2 million and $2.7 million, respectively, primarily related to R&D expenses. The $1.2 million of restructuring expenses recognized for the three months ended June 30, 2023 was classified as non-cash expenses and was related to a loss on sale of R&D laboratory equipment. The R&D laboratory equipment sold had a carrying value of $2.7 million, and the sale generated net cash proceeds of $1.5 million.

Of the total $2.7 million incurred for the six months ended June 30, 2023, cash-related expenses were $1.2 million and non-cash expenses were $1.5 million which were primarily related to the modification of equity-based awards for employees affected by the reduction in headcount and a loss of the sale of R&D laboratory equipment. The Company does not expect to recognize any additional employee-related expenses, including share-based compensation, related to the 2023 Strategic Actions.

As a result of the broader corporate restructuring announcement in September 2021 (the “2021 Restructuring”) for the three and six months ended June 30, 2022, the Company incurred restructuring and related expenses of $3.0 million and $12.3 million, respectively. Of the $3.0 million incurred for the three months ended June 30, 2022, $1.0 million was related to R&D expenses and $2.0 million was related to selling, general and administrative expenses. Of the $12.3 million incurred for the six months ended June 30, 2022, $5.7 million was related to R&D expenses and $6.6 million was related to selling, general and administrative expenses. Of the total $12.3 million incurred for the six months ended June 30, 2022, cash-related expenses were $6.0 million and non-cash expenses were $6.3 million which were primarily related to the modification of equity-based awards for employees affected by the 2021 Restructuring and certain related awards for other employees.

Selected information relating to accrued cash-related restructuring expenses from the recently announced 2023 Strategic Actions was as follows:

(In thousands)
Balance at December 31, 2022	$	—
Net accruals		1,188

Cash paid		(1,174)
Balance at June 30, 2023	$	14

All of the restructuring expenses from the 2021 Restructuring were fully recognized and paid in 2022.

The Company also evaluated the impact of the 2023 Strategic Actions 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.

In March 2023, the Company placed approximately 42,000 square feet of its vacant office and laboratory space in South San Francisco (“Sublease Assets”) on the market for sublease. The Company’s impairment evaluation process for the Sublease Assets consisted of comparing the estimated undiscounted future sublease income of the Sublease Assets to its carrying value. The Company estimated the sublease income using market participant assumptions, including the length of time to enter into a sublease and sublease payments, which the Company evaluated using recent sublease negotiations and current local subleasing trends. Based on its evaluation, the Company determined that its estimated sublease income exceeded the Sublease Assets’ carrying value, and as a result, the Company did not recognize an impairment charge as of June 30, 2023. The Company will continue to update its sublease cash flow estimates based on changes in market conditions, and the Company may record a non-cash impairment charge in future periods as these estimates change.