Related Party Transactions

3 Months Ended

Mar. 31, 2024

Related Party Transactions [Abstract]

Related Party Transactions

Related Party Transactions

Paragon Agreement

Paragon and Parapyre each beneficially owns less than 5% of the Company's capital stock through their respective holdings of the Company's Common Stock. Fairmount Funds Management LLC ("Fairmount") beneficially owns more than 5% of the Company's capital stock on an as-converted basis, has two seats on the Company's board of directors (the "Board") and beneficially owns more than 5% of Paragon, which is a joint venture between Fairmount and FairJourney Biologics. Fairmount appointed Paragon's board of directors and has the contractual right to approve the appointment of any executive officers. Parapyre is an entity formed by Paragon as a vehicle to hold equity in Spyre in order to share profits with certain employees of Paragon.

In connection with the Asset Acquisition, the Company assumed the rights and obligations of Pre-Merger Spyre under the Paragon Agreement. Under the Paragon Agreement, Spyre is obligated to compensate Paragon for its services performed under each research program based on the actual costs incurred with mark-up costs pursuant to the terms of the Paragon Agreement. Spyre is also obligated under the Paragon Agreement to issue Parapyre annual equity grants of warrants in accordance with the Parapyre Option Obligation.

For the three months ended March 31, 2024, the Company recognized expenses related to services provided by Paragon subsequent to the Asset Acquisition totaling $17.1 million, which included $5.4 million of stock-based compensation expense, and were recorded as Research and development expenses in the consolidated statements of operations. As of March 31, 2024 and December 31, 2023, $15.5 million and $16.6 million, respectively, was unpaid and was included in Related party accounts payable and other current liabilities on the Company's consolidated balance sheets.

For the three months ended March 31, 2024, the Company made payments totaling $18.2 million to Paragon.

On July 12, 2023 and December 14, 2023, the Company exercised the option to license certain intellectual property rights (collectively, the "Option") available under the Paragon Agreement with respect to the SPY001 and SPY002 research programs, respectively, and expects to enter into a SPY001 license agreement (the "SPY001 License Agreement") and a SPY002 license agreement (the "SPY002 License Agreement"). Our Option available under the Paragon Agreement with respect to the SPY003 and SPY004 programs remains unexercised.

Following the execution of each of the SPY001 License Agreement and SPY002 License Agreement, the Company will be obligated to pay Paragon up to $22.0 million upon the achievement of specific development, regulatory and clinical milestones for the first product under each agreement, respectively, that achieves such specified milestones. Upon execution of each of the SPY001 License Agreement and the SPY002 License Agreement, we expect to pay Paragon a $1.5 million fee for nomination of a development candidate, as applicable, and the Company expects to be obligated to make a further milestone payment of $2.5 million upon the first dosing of a human subject in a Phase 1 trial. With respect to the SPY002 License Agreement only, on a product by product basis, the Company expects to pay Paragon sublicensing fees of up to approximately $20.0 million upon the achievement of mostly commercial milestones.

The following is the summary of expenses related to the Paragon Agreement, which were ultimately settled in cash (in millions):

	Three Months Ended March 31,				Financial Statement Line Item
	2024		2023
Reimbursable costs under the Paragon Agreement	$	11.7	$	—	Research and development

Parapyre Option Obligation

Pursuant to the Paragon Agreement, the Company agreed to issue Parapyre an annual equity grant of warrants, on the last business day of each of the years ended December 31, 2023 and December 31, 2024, to purchase 1% of the then outstanding shares of the Company's Common Stock, on a fully diluted basis, during the term of the Paragon Agreement

The following is the summary of Related party accounts payable and other current liabilities (in millions):

	March 31, 2024		December 31, 2023
Reimbursable costs under the Paragon Agreement	$	10.1	$	16.6
Parapyre warrants liability	5.4		—
Total related party accounts payable	$	15.5	$	16.6

Mark McKenna Option Grant

On February 1, 2024, the Board appointed Mark McKenna as a Class I director. Mr. McKenna and the Company are parties to a consulting agreement, pursuant to which Mr. McKenna agreed to continue to provide consulting services as an independent contractor to the Company, with an effective date of August 1, 2023 (the “Vesting Commencement Date”). As compensation for Mr. McKenna’s consulting services, on November 22, 2023, he was granted non-qualified stock options to purchase 477,000 shares of the Company’s Common Stock under the 2016 Plan (as defined in Note 8) with an exercise price of $10.39 per share, which vest as to 25% on the one year anniversary of the Vesting Commencement Date and thereafter vest and become exercisable in 36 equal monthly installments, subject to Mr. McKenna’s continued service to the Company through each applicable vesting date. For the three months ended March 31, 2024, the Company recognized $0.3 million in stock-based compensation expense related to Mr. McKenna's consulting agreement. There was no such expense for the three months ended March 31, 2023.