Asset Acquisition

6 Months Ended

Jun. 30, 2024

Business Combination and Asset Acquisition [Abstract]

On June 22, 2023, the Company acquired Pre-Merger Spyre pursuant to the Acquisition Agreement, by and among the Company, Aspen Merger Sub I, Inc., a Delaware corporation and a wholly owned subsidiary of the Company (“First Merger Sub”), Sequoia Merger Sub II, LLC, a Delaware limited liability company and wholly owned subsidiary of the Company (“Second Merger Sub”), and Pre-Merger Spyre. Pursuant to the Acquisition Agreement, First Merger Sub merged with and into Pre-Merger Spyre, pursuant to which Pre-Merger Spyre was the surviving corporation and became a wholly owned subsidiary of the Company (the “First Merger”). Immediately following the First Merger, Pre-Merger Spyre merged with and into Second Merger Sub, pursuant to which Second Merger Sub became the surviving entity. Pre-Merger Spyre was a pre-clinical stage biotechnology company that was incorporated on April 28, 2023 under the direction of Peter Harwin, a Managing Member of Fairmount, for the purpose of holding rights to certain intellectual property being developed by Paragon. Fairmount is a founder of Paragon.

The Company completed the Asset Acquisition of Pre-Merger Spyre, in accordance with the terms of the Acquisition Agreement. Under the terms of the Acquisition Agreement, the Company issued 517,809 shares of Common Stock and 364,887 shares of Series A Preferred Stock to former Pre-Merger Spyre security holders. In addition, outstanding and unexercised stock options to purchase 2,734 shares of common stock were assumed from the Amended and Restated Spyre 2023 Equity Incentive Plan.

At the acquisition date, the Company recorded forward contracts to represent the obligation to issue shares of Common Stock and shares of Series A Preferred Stock, respectively. The forward contract related to the Common Stock was recorded as Additional paid-in capital as the instrument is indexed to the Common Stock. The forward contract related to the Series A Preferred Stock was recorded as a liability, as the underlying stock has a cash redemption feature. On July 7, 2023, both the shares of Common Stock and Series A Preferred Stock were issued and the forward contract liability associated with the Series A Preferred Stock was settled accordingly.

The Company concluded that the arrangement met the definition of an asset acquisition rather than a business combination, as substantially all of the fair value of the gross assets acquired was concentrated in a single identifiable asset, Pre-Merger Spyre's option to exclusively license certain intellectual property rights (the "Option"). The Company determined that the Option was a single asset as the Company's strategy relied on developing the entire portfolio of individual treatments to create combination treatments that simultaneously address different mechanisms of inflammatory bowel disease with a single treatment. The Company also determined that the pipeline candidates within the portfolio were similar in nature and risk profile. In addition, the Company did not obtain any substantive processes, assembled workforce, or employees capable of producing outputs in connection with the Asset Acquisition.

The Company determined that the cost to acquire the asset was $113.3 million which was recorded as acquired in-process research and development ("IPR&D"). The fair value of the consideration issued consisted of the 364,887 shares of Series A Preferred Stock (14,595,480 shares of Common Stock on an as-converted basis) and 517,809 shares of Common Stock, valued at $291.08 per share and $7.277 per share, respectively.

The Asset Acquisition costs are shown on the following table (in millions):


	June 22, 2023
Consideration transferred in Series A Preferred Stock and Common Stock	$	110.0
Transaction costs incurred by Pre-Merger Spyre	3.2
Fair value of Parapyre Option Obligation assumed by Pre-Merger Spyre	0.1
Total cost to acquire asset	$	113.3

The allocation of the purchase price to net assets acquired is as a follows:


	June 22, 2023
Acquired in-process research and development	$	130.5
Cash acquired	3.0
Assumed liabilities	(20.2)
Total cost to acquire asset	$	113.3