2021 Corporate Restructuring Completion and 2023 Strategic Actions

12 Months Ended

Dec. 31, 2023

2021 Corporate Restructuring Completion and 2023 Strategic Actions

2021 Corporate Restructuring Completion and 2023 Strategic Actions

16. 2021 Corporate Restructuring Completion and 2023 Strategic Actions

2021 Corporate Restructuring

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

For the year ended December 31, 2022, the Company incurred restructuring and related expenses of $12.8 million of which $5.9 million were related to R&D expenses and $6.9 million were related to selling, general and administrative expenses. Of the total $12.8 million recognized for the year ended December 31, 2022, cash-related expenses were $5.8 million and non-cash expenses were $7.0 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.

Since the 2021 Restructuring was announced and through its completion in September 2022, the Company incurred total restructuring and related expenses of $33.0 million of which $16.5 million was each related to R&D expenses and selling, general and administrative expenses. Of the total $33.0 million, cash-related expenses were $17.4 million and non-cash expenses were $15.6 million. As of December 31, 2022, all of the 2021 Restructuring and related expenses were fully recognized by the Company.

2023 Strategic Actions

In February 2023, the Company announced new strategic actions (the “2023 Strategic Actions”) that included the discontinuation of its research activities, including the inhaled Janus kinase (JAK) inhibitor program, resulting in a 17% reduction in headcount in March 2023. In order to support the timely progression of the ampreloxetine Phase 3 study (CYPRESS) and the recently completed of the YUPELRI Peak Inspiratory Flow Rate (PIFR-2) Phase 4 study, the Company prioritized its R&D resource allocation to these two programs.

As a result of the Company’s discontinued investment in research activities, the Company incurred restructuring and related expenses of $2.7 million for the year ended December 31, 2023, primarily related to R&D expenses. Of the total $2.7 million incurred for the year ended December 31, 2023, cash-related expenses were $1.2 million and non-cash expenses were $1.5 million which was primarily related to the loss on the sale of R&D laboratory equipment and the modification of equity-based awards for employees affected by the reduction in headcount. 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. The Company does not expect to recognize any additional employee-related expenses, including share-based compensation, related to the 2023 Strategic Actions.

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

(In thousands)
Balance at December 31, 2022	$	—
Net accruals		1,188
Cash paid		(1,188)
Balance at December 31, 2023	$	—

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, and 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. While the Company has not yet completed a new sublease, based on its evaluation, the Company determined that

the estimated undiscounted future sublease income exceeds the Sublease Assets’ carrying value, and as a result, the Company did not recognize an impairment charge as of December 31, 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.