Discontinued Operations

9 Months Ended

Dec. 31, 2024

Discontinued Operations and Disposal Groups [Abstract]

In accordance with ASC 205, the Company determined that the closure of substantially all operations in the Company’s Therapeutics operating segment in November 2024 represented a strategic shift that will have a major effect on the Company’s operations and financial results, thus meeting the criteria to be reported as discontinued operations as of December 31, 2024. Discontinued operations include research and development costs, including lab-related research services, clinical development, and collaboration costs, as well as personnel-related, lease, equipment, and depreciation costs associated with the former Therapeutics operating segment. Also included are restructuring costs, including cash severance payments, benefits continuation, stock-based compensation, and exit costs associated with the Company abandoning the lease for its South San Francisco, California lab facility (the “South San Francisco Facility”) following the November 2024 Reduction Plan.

General corporate overhead costs for shared services historically allocated to the former Therapeutics operating segment that do not meet the requirements to be presented in discontinued operations have been allocated to the continuing operations in accordance with ASC 205-20 for the periods presented herein, as the costs were not directly attributable to the discontinued operations of the former Therapeutics operating segment. These costs were $0.5 million and $1.6 million for the three months ended December 31, 2024 and 2023, respectively, and $2.4 million and $6.3 million for the nine months ended December 31, 2024 and 2023, respectively.

The Company will not have any significant continuing involvement in the operations of the former Therapeutics operating segment after the disposal transaction.

The following table summarizes the major classes of assets and liabilities of the discontinued operations:


	December 31, 2024		March 31, 2024
	(in thousands)
Prepaid expenses and other current assets	$	1,057	$	1,400
Total current assets of discontinued operations	$	1,057	$	1,400

Property and equipment, net(1)	$	54	$	5,852
Operating lease ROU assets	—		10,764
Other assets	427		1,219
Total assets noncurrent assets of discontinued operations	$	481	$	17,835

Accounts payable (includes related party amounts of nil and $3,809, respectively)	$	886	$	6,203
Accrued expenses and other current liabilities (includes related party amounts of $2,190 and $6,752, respectively)	4,873		11,431
Operating lease liabilities(2)	4,064		3,738
Total current liabilities of discontinued operations	$	9,823	$	21,372

Operating lease liabilities, noncurrent(2)	$	4,925	$	8,010
Total noncurrent liabilities of discontinued operations	$	4,925	$	8,010

(1)In connection with the November 2024 Reduction Plan, the Company wrote off leasehold improvements and disposed of certain laboratory equipment and software. The loss on disposal of property and equipment was immaterial for the three and nine months ended December 31, 2024.

(2)The Company's operating lease for the South San Francisco Facility has a remaining contractual period of 2.1 years. As of December 31, 2024, the future minimum lease payments included in the measurement of the Company’s operating lease liabilities were $1.1 million for the remainder of fiscal 2025, $4.6 million for fiscal 2026, and $3.9 million for fiscal 2027, and the total imputed interest was $0.7 million.

The following table summarizes the condensed operating results of the discontinued operations:


	Three Months Ended December 31,				Nine Months Ended December 31,
	2024		2023		2024		2023
	(in thousands)
Operating expenses:
Research and development (includes related party expenses of $260 and $2,781 for the three months ended December 31, 2024 and 2023, respectively, and $445 and $10,989 for the nine months ended December 31, 2024 and 2023, respectively)(1)(2)	$	6,700	$	16,996	$	31,611	$	77,779
Restructuring and other charges(2)	12,060		1,280		14,078		3,726
Total operating expenses	18,760		18,276		45,689		81,505
Net loss from discontinued operations(3)	$	(18,760)	$	(18,276)	$	(45,689)	$	(81,505)

(1)For the three months ended December 31, 2024 and 2023, the Company recorded operating lease costs of $0.9 million and $1.1 million, respectively, and variable operating lease costs of $0.3 million and $0.2 million, respectively, associated with the South San Francisco Facility. For the nine months ended December 31, 2024 and 2023, the Company recorded operating lease costs of $3.0 million and $3.1 million, respectively, and variable operating lease costs of $0.8 million and $0.6 million, respectively, associated with the South San Francisco Facility.

(2)See Note 13, “Equity Incentive Plans and Stock-Based Compensation,” for details on total stock based compensation related to discontinued operations.

(3)Pre-tax net loss from discontinued operations equals net loss from discontinued operations as there was no provision for (benefit from) income tax related to discontinued operations for the three and nine months ended December 31, 2024 and 2023.

During the three and nine months ended December 31, 2024, the Company recorded restructuring charges of $12.1 million and $14.1 million, respectively, related to discontinued operations, of which $1.8 million and $3.6 million, respectively, were related to cash severance payments and benefits continuation, and $0.3 million and $0.5 million, respectively, were related to stock-based compensation related to equity modifications in connection with the reductions in force. In addition, in connection with the November 2024 Reduction Plan, the Company abandoned the South San Francisco Facility in December 2024. As a result, the Company determined to record a lease abandonment charge of $8.3 million to accelerate all amortization of the remaining carrying value of the operating lease ROU asset for the South San Francisco Facility, and impairment losses of $1.7 million related to leasehold improvements for this facility. The Company recorded the expenses associated with this facility exit in restructuring and other charges in the table above and within discontinued operations in the condensed consolidated statements of operations and comprehensive loss for the three and nine months ended December 31, 2024.

During the three and nine months ended December 31, 2023, the Company recorded restructuring charges of $1.3 million and $3.7 million, respectively, within restructuring and other charges in the table above and net loss from discontinued operations within the condensed consolidated statements of operations, of which $0.3 million and $2.7 million, respectively, were related to cash severance payments and benefits continuation, and $1.0 million and $1.0 million, respectively, were related to stock-based compensation related to equity modifications in connection with the reductions in force. There were no impairments to ROU assets and property and equipment for the three and nine months ended December 31, 2023.

The following table shows the total amount incurred and accrued related to one-time employee termination benefits from discontinued operations:


	One-Time Employee Termination Benefits
	(in thousands)
Accrued restructuring costs included in accrued expenses and other current liabilities as of March 31, 2024	$	22
Restructuring charges incurred during the period	4,045
Amounts paid during the period	(3,352)
Accrued restructuring costs included in accrued expenses and other current liabilities as of December 31, 2024	$	715

The following table summarizes the condensed cash flow information of the discontinued operations:


	Nine Months Ended December 31,
	2024		2023
	(in thousands)
Operating activities (non-cash adjustments to net loss):
Depreciation and amortization	$	1,789	$	2,421
Stock-based compensation expense	$	2,742	$	9,863

Impairment of long-lived assets	$	10,033	$	—

Changes in operating assets and liabilities:
Prepaid expenses and other current assets	$	343	$	1,756
Operating lease ROU assets	$	2,449	$	2,435
Other assets	$	792	$	157
Accounts payable (includes related party amounts of $(3,809) and $3,879 for the nine months ended December 31, 2024 and 2023, respectively)	$	(5,272)	$	309
Accrued expenses and other current liabilities (includes related party amounts of $(4,562) and $42 for the nine months ended December 31, 2024 and 2023, respectively)	$	(6,616)	$	(6,013)
Operating lease liabilities	$	(2,759)	$	(2,459)
Cash flows from investing activities:
Purchases of property and equipment	$	(152)	$	(468)
Proceeds from sale of property and equipment	$	2,360	$	5

Disposition of SubsidiaryOn August 1, 2023, the Company completed the sale of Lemonaid Health Limited, its wholly-owned, indirect U.K. subsidiary. Lemonaid Health Limited was not a significant subsidiary, and the disposition of Lemonaid Health Limited did not constitute a strategic shift that would have a major effect on the Company’s operations or financial results. As a result, the results of operations for Lemonaid Health Limited were not reported as discontinued operations under the guidance of ASC 205. During the nine months ended December 31, 2023, the Company recorded $2.4 million of loss on the disposition of Lemonaid Health Limited and transaction-related costs within general and administrative expenses. There were no charges incurred during the three and nine months ended December 31, 2024.