ITEM 7.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion and analysis of financial condition and operating results together with our financial statements and the related notes appearing in this Form 10-K. Some of the information contained in this discussion and analysis or set forth elsewhere in this Form 10-K, including information with respect to our plans and strategy for our business and related financing, includes forward-looking statements that involve risks and uncertainties. As a result of many important factors, including those set forth in the section of this Form 10-K captioned “Item 1A. Risk Factors” and elsewhere in this Form 10-K, our actual results could differ materially from the results described in, or implied by, the forward-looking statements contained in the following discussion and analysis. For convenience of presentation some of the numbers have been rounded in the text below.
Overview
We are a vertically integrated, clinical stage gene therapy company with six programs in clinical development and a broad pipeline of preclinical and research programs. We have core capabilities in viral vector design and optimization and gene therapy manufacturing, as well as a potentially transformative gene regulation technology. Led by an experienced management team, we have taken a portfolio approach by licensing, acquiring and developing technologies that give us depth across both product candidates and indications. Our initial focus is on three distinct areas of unmet medical need: ocular, including inherited retinal diseases and large degenerative ocular diseases, neurodegenerative diseases, and severe forms of xerostomia. Though initially focusing on the eye, central nervous system and salivary gland, we intend to expand our focus in the future to develop additional gene therapy treatments for patients suffering from a range of serious diseases.
We are an exempted company incorporated under the laws of the Cayman Islands in 2018, and prior to that, we commenced operations as MeiraGTx Limited, a private limited company incorporated under the laws of England and Wales in 2015. Our discussion of our financial condition and results of operations is based upon our financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”). Since our formation, we have devoted substantially all of our resources to developing our technology platform, establishing our viral vector manufacturing facilities and our cGMP plasmid and DNA production facility and developing manufacturing processes, advancing the product candidates in our ophthalmology, salivary gland and neurodegenerative disease programs, building our intellectual property portfolio, organizing and staffing our company, developing our business plan, raising capital, and providing general and administrative support for these operations. To date, we have financed our operations primarily with cash on hand and proceeds from the sales of our Series A ordinary shares, Convertible Preferred C Shares and ordinary shares. Through December 31, 2021, we received gross proceeds of approximately $446.0 million from sales of our ordinary shares, Series A ordinary shares and convertible preferred C shares and $130.0 million from the collaboration, option and license agreement with Janssen Pharmaceuticals, Inc. (“Janssen”), one of the Janssen Pharmaceuticals Companies of Johnson & Johnson (the “Collaboration Agreement”). As of December 31, 2021, we had cash and cash equivalents of $137.7 million, as well as $22.4 million in receivables due from Janssen in the first quarter of 2022 in connection with the Collaboration Agreement.
We are a clinical stage company and have not generated any product revenues to date. We have six clinical programs and a pipeline of preclinical programs. Since inception, we have incurred significant operating losses. Our net losses for the years ended December 31, 2021 and 2020 were $79.6 million and $58.0 million, respectively. As of December 31, 2021, we had an accumulated deficit of $340.6 million. We do not expect to generate revenue from sales
109
Table of Contents
of any products for several years, if at all. Under the Collaboration Agreement, we received an upfront payment in the amount of $100.0 million in March 2019 and a milestone payment in the amount of $30.0 million in December 2021. Additionally, pursuant to the Collaboration Agreement, we are eligible to receive research and development funding and additional potential milestone payments and royalties.
Our total operating expenses were $110.9 million and $78.1 million for the years ended December 31, 2021 and 2020, respectively. While we expect our operating expenses to continue to increase in connection with our ongoing development activities related to our product candidates, including the ongoing Phase 3 Lumeos clinical trial of botaretigene sparoparvovec for the treatment of patients with XLRP and the initiation of a Phase 3 clinical trial of AAV-RPE65 for the treatment of retinal dystrophy associated with mutations in the RPE65 gene, we believe that certain of these increases will be partially offset by the research funding in connection with the Collaboration Agreement. In addition, we expect to continue incurring increasing costs associated with our clinical activities for AAV-hAQP1 for the treatment of radiation-induced xerostomia and xerostomia associated with Sjogren’s syndrome. We expect to file an IND application for AAV-GAD in the first half of 2022. We also incurred expenses during the year ended December 31, 2021 and expect to continue to incur expenses related to research activities in additional therapeutic areas to expand our pipeline, developing our potentially transformative gene regulation technology, hiring additional personnel in manufacturing, research, clinical operations, quality and other functional areas, and associated cash and share-based compensation expense, as well as the further development of internal manufacturing capabilities and capacity and other associated costs including the management of our intellectual property portfolio.
As a result of these anticipated expenditures and the acquisition, development and startup of our new Shannon, Ireland manufacturing facilities, we raised net proceeds of $81.9 million during the year ended December 31, 2020 from an at-the market offering and a public offering of our ordinary shares. We will require additional capital in the future, which we may raise through equity offerings, debt financings, marketing and distribution arrangements and other collaborations, strategic alliances and licensing arrangements or other sources to enable us to complete the development and potential commercialization of our product candidates. Furthermore, we expect to continue incurring costs associated with being a public company. Adequate additional financing may not be available to us on acceptable terms, or at all. Our failure to raise capital as and when needed would have a negative effect on our financial condition and our ability to pursue our business strategy. In addition, attempting to secure additional financing may divert the time and attention of our management from day-to-day activities and harm our product candidate development efforts. If we are unable to raise capital when needed or on acceptable terms, we would be forced to delay, reduce or eliminate certain of our research and development programs.
Based on our cash and cash equivalents at December 31, 2021 and the research funding and milestone payments we expect to receive under the Collaboration Agreement, we estimate that such funds will be sufficient to enable us to fund our operating expenses and capital expenditure requirements through the second quarter of 2023. We have based these estimates on assumptions that may prove to be wrong, and we may use our available capital resources sooner than we currently expect. See “Liquidity and Capital Resources.” Because of the numerous risks and uncertainties associated with the development of our product candidates, any future product candidates, our platform and technology and because the extent to which we may enter into collaborations with third parties for development of any of our product candidates is unknown, we are unable to estimate the amounts of increased capital outlays and operating expenses associated with completing the research and development of our product candidates.
Adequate additional funds may not be available to us on acceptable terms, or at all. To the extent that we raise additional capital through the sale of equity or convertible securities, your ownership interest will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect your rights as a shareholder. Any future debt financing or preferred equity or other financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends and may require the issuance of warrants, which could potentially dilute your ownership interests.
110
Table of Contents
If we raise additional funds through collaborations, strategic alliances, or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce, or terminate our product development programs or any future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.
Because of the numerous risks and uncertainties associated with drug development, we are unable to predict the timing or amount of increased expenses or when or if we will be able to achieve or maintain profitability. Even if we are able to generate revenue from product sales, we may not become profitable. If we fail to become profitable or are unable to sustain profitability on a continuing basis, then we may be unable to continue our operations at planned levels and be forced to reduce or terminate our operations.
Highlights and Recent Developments
Recent Clinical Development Highlights and Anticipated 2022 Milestones
Botaretigene Sparoparvovec (AAV-RPGR) for the Treatment of XLRP:
AAV-hAQP1 for the Treatment of Grade 2/3 Radiation-Induced Xerostomia:
o AAV-hAQP1 appears safe and well-tolerated at each dose tested.
Riboswitch Gene Regulation Platform:
111
Table of Contents
AAV-GAD for the Treatment of Parkinson’s Disease:
AAV-CNGB3 and AAV-CNGA3 for the Treatment of ACHM:
Manufacturing and Process Development:
Components of Our Results of Operations
License Revenue
Our license revenue consisted of the amortization of the upfront and milestone payments we received in connection with the Collaboration Agreement.
Operating Expenses
Our operating expenses since inception have consisted primarily of general and administrative costs and research and development costs.
General and Administrative Expenses
General and administrative expenses consist primarily of salaries and other related costs, including share-based compensation, for personnel in our executive, finance, legal, business development and administrative functions. General and administrative expenses also include legal fees relating to intellectual property and corporate matters; professional fees for accounting, auditing, tax and consulting services; insurance costs; travel expenses; and office facility-related expenses, which include direct depreciation costs.
We expect that our general and administrative expenses will increase in the future as we increase our personnel headcount to support increased research and development activities. We have also incurred and expect to continue to incur increased expenses associated with being a public company, including costs of accounting, audit, legal, regulatory and tax-related services associated with maintaining compliance with Nasdaq and SEC requirements; director and officer insurance costs; and investor and public relations costs.
Research and Development Expenses
Research and development expenses consist primarily of costs incurred for our research activities, including our discovery efforts, and the development of our product candidates, and include:
112
Table of Contents
● acquisition of in process research and development;
We expense research and development costs as incurred.
Research and development activities are central to our business model. We expect that our research and development expenses will continue to increase substantially for the foreseeable future as we initiate additional preclinical and clinical trials of our existing product candidates, including the ongoing Phase 3 Lumeos trial of botaretigene sparoparvovec for the treatment of patients with XLRP and the initiation of a Phase 3 clinical trial of AAV-RPE65 for the treatment of retinal dystrophy associated with mutations in the RPE65 gene, and continue to discover and develop additional product candidates. Certain of these increases in research and development costs will be partially offset by the research funding provided in connection with the Collaboration Agreement we entered into in January 2019. In addition, we expect to continue incurring increasing research and development costs associated with our clinical activities for AAV-hAQP1 for the treatment of radiation-induced xerostomia and xerostomia associated with Sjogren’s syndrome.
We cannot determine with certainty the duration and costs of future clinical trials of our product candidates or any other product candidate we may develop or if, when, or to what extent we will generate revenue from the commercialization and sale of any product candidate for which we obtain marketing approval. We may never succeed in obtaining marketing approval for any product candidate. The duration, costs and timing of clinical trials and development of our existing product candidates or any other product candidate we may develop will depend on a variety of factors, including:
● uncertainties in clinical trial design and patient enrollment rates;
● significant and changing government regulation and regulatory guidance;
● the timing and receipt of any marketing approvals; and
A change in the outcome of any of these variables with respect to the development of a product candidate could mean a significant change in the costs and timing associated with the development of that product candidate. For example, if the FDA or another U.S. or foreign regulatory authority were to require us to conduct clinical trials beyond those that we anticipate will be required for the completion of clinical development of a product candidate, or if we experience significant delays in our clinical trials due to patient enrollment or other reasons, we would be required to expend significant additional financial resources and time on the completion of clinical development.
113
Table of Contents
Other non-operating income (expense)
Other non-operating income (expense) includes the following:
Foreign currency (loss) gain
Our consolidated financial statements are presented in U.S. dollars, which is our reporting currency. The financial position and results of operations of our subsidiaries MeiraGTx UK II Limited, MeiraGTx Ireland DAC, MeiraGTx Netherlands B.V., MeiraGTx B.V. and MeiraGTx Belgium are measured using the foreign subsidiaries’ local currency as the functional currency. These entities’ cash accounts holding U.S. dollars and intercompany payables and receivables are remeasured based upon the exchange rate at the date of remeasurement with the resulting gain or loss included in the consolidated statement of operations and comprehensive loss. Expenses of such subsidiaries have been translated into U.S. dollars at average exchange rates prevailing during the period. Assets and liabilities have been translated at the rates of exchange on the consolidated balance sheet date. The resulting translation gain and loss adjustments are recorded directly as a separate component of shareholders’ equity and as other comprehensive loss on the consolidated statement of operations and comprehensive loss.
Other comprehensive income (loss)
Other comprehensive income (loss) includes the following:
Foreign currency translation gain (loss)
Expenses of subsidiaries have been translated into U.S. dollars at average exchange rates prevailing during the period. Assets and liabilities have been translated at the rates of exchange on the consolidated balance sheet date. The resulting translation gain and loss adjustments are recorded directly as a separate component of shareholders’ equity and as other comprehensive loss on the consolidated statements of operations and comprehensive loss.
Critical Accounting Policies and Use of Estimates
Management’s discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these consolidated financial statements requires us to make estimates and judgements that affect the reporting amounts of assets, liabilities and expenses and the disclosure of contingent assets and liabilities in our consolidated financial statements. On an ongoing basis, we evaluate our estimates and judgements, including those related to license and collaboration revenue, share-based compensation and accrued expenses. We base our estimates on historical experience, known trends and events and various other factors that we believe to be reasonable under the circumstances, the results of which form the basis for making judgements about the carrying value of assets and liabilities that are not readily apparent from our sources. Actual results may differ from these estimates under different assumptions.
While our significant accounting policies are described in more detail in the notes to our financial statements appearing in this Form 10-K, we believe that the following accounting policies are those most critical to the judgments and estimates used in the preparation of our financial statements.
Collaboration Arrangements
We evaluate our collaborative arrangements pursuant to Accounting Standards Codification (“ASC”) 808, Collaborative Arrangements (“ASC 808”) and ASC 606, Revenue from Contracts with Customers (“ASC 606”). We consider the nature and contractual terms of collaborative arrangements and assess whether the arrangement involves a joint operating activity pursuant to which we are an active participant and are exposed to significant risks and rewards with respect to the arrangement. If we are an active participant and exposed to significant risks and rewards with respect
114
Table of Contents
to the arrangement, we account for the arrangement as a collaboration under ASC 808. To date, we have entered into two separate collaboration agreements, both of which are with Janssen, which were determined to be within the scope of ASC 808.
ASC 808 does not address recognition or measurement matters related to collaborative arrangements. Payments between participants pursuant to a collaborative arrangement that are within the scope of other authoritative accounting literature on income statement classification are accounted for using the relevant provisions of that literature. If the payments are not within the scope of other authoritative accounting literature, the income statement classification for the payments is based on an analogy to authoritative accounting literature or if there is no appropriate analogy, a reasonable, rational and consistently applied accounting policy election. Payments received from a collaboration partner to which this policy applies may include upfront payments in respect of a license of intellectual property, development and commercialization-based milestones, and royalties.
Revenue Recognition
Arrangements with collaborators may include licenses to intellectual property, research and development services, manufacturing services for clinical and commercial supply, and participation on joint steering committees. We evaluate the promised goods or services to determine which promises, or group of promises, represent performance obligations. In contemplation of whether a promised good or service meets the criteria required of a performance obligation, we consider the stage of development of the underlying intellectual property, the capabilities and expertise of the customer relative to the underlying intellectual property, and whether the promised goods or services are integral to or dependent on other promises in the contract. When accounting for an arrangement that contains multiple performance obligations, we must develop judgmental assumptions, which may include market conditions, reimbursement rates for personnel costs, development timelines and probabilities of regulatory success to determine the stand-alone selling price for each performance obligation identified in the contract.
When we conclude that a contract should be accounted for as a combined performance obligation and recognized over time, we must then determine the period over which revenue should be recognized and the method by which to measure revenue. We generally recognize revenue using a cost-based input method.
The Collaboration Agreement is accounted for under ASC 808, however, as ASC 808 does not address recognition or measurement matters such as determining the appropriate unit of accounting or when the recognition criteria are met, we account for the consideration received from Janssen in accordance with ASC 606. In accordance with ASC 606, we recognize revenue when the customer or collaborator obtains control of promised goods or services, in an amount that reflects the consideration which we expect to receive in exchange for those goods or services. To determine revenue recognition for arrangements that we determine are within the scope of ASC 606, we perform the following five steps:
i. identify the contract(s) with a customer;
ii. identify the performance obligations in the contract;
iii. determine the transaction price;
v. recognize revenue when (or as) the entity satisfies a performance obligation.
We only apply the five-step model to contracts when we determine that it is probable we will collect the consideration we are entitled to in exchange for the goods or services we transfer to the customer.
115
Table of Contents
At contract inception, once the contract is determined to be by analogy within the scope of ASC 606, we assess the goods or services promised within the contract to determine whether each promised good or service is a performance obligation. The promised goods or services for our arrangements typically consist of a license to our intellectual property and research, development and manufacturing services. We may provide options to additional items in such arrangements, which are accounted for as separate contracts when the customer elects to exercise such options, unless the option provides a material right to the customer. Performance obligations are promises in a contract to transfer a distinct good or service to the customer that (i) the customer can benefit from on its own or together with other readily available resources, and (ii) is separately identifiable from other promises in the contract. Goods or services that are not individually distinct performance obligations are combined with other promised goods or services until such combined group of promises meet the requirements of a performance obligation.
We determine transaction prices based on the amount of consideration we expect to receive for transferring the promised goods or services in the contract. Consideration may be fixed, variable, or a combination of both. At contract inception for arrangements that include variable consideration, we estimate the probability and extent of consideration we expect to receive under the contract utilizing either the most likely amount method or expected amount method, whichever best estimates the amount expected to be received. We then consider any constraints on the variable consideration and include in the transaction price variable consideration to the extent it is deemed probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved.
We then allocate the transaction price to each performance obligation based on the relative standalone selling price and recognize as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) control is transferred to the customer and the performance obligation is satisfied. For performance obligations which consist of licenses and other promises, we utilize judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress. We evaluate the measure of progress each reporting period and, if necessary, adjust the measure of performance and related revenue recognition.
We record amounts as accounts receivable when the right to consideration is deemed unconditional. When consideration is received, or such consideration is unconditionally due, from a customer prior to transferring goods or services to the customer under the terms of a contract, a contract liability is recorded as deferred revenue.
Amounts received prior to satisfying the revenue recognition criteria are recognized as deferred revenue in our consolidated balance sheet. Amounts expected to be recognized as revenue within the 12 months following the balance sheet date are classified as deferred revenue – related party, current. Amounts not expected to be recognized as revenue within the 12 months following the balance sheet date are classified as deferred revenue – related party.
Income Taxes
Since we have recurring losses and a valuation allowance against deferred tax assets, there was no tax expense (benefit) for the years ended December 31, 2021 and 2020.
As of December 31, 2021, we had federal and state net operating losses (“NOLs”) in the United States of approximately $73.6 million and $73.3 million, respectively, and carryforward tax losses in the UK of approximately $164.3 million which are available to reduce future taxable income. The U.S. federal and state NOLs incurred prior to January 1, 2018 in the amount of approximately $6.8 million and $6.7 million, respectively, will begin to expire in 2036. The U.S. NOLs incurred after December 31, 2017 and the UK carryforward tax losses will be indefinitely carried forward. As of December 31, 2021, we also had orphan drug and research and development credits in the U.S. in the amount of $6.7 million, which will begin to expire in 2036 and research and development credits in the UK in the amount of $1.5 million, which can be carried forward indefinitely.
116
Table of Contents
Research and Development
Research and development costs are charged to expense as incurred. These costs include, but are not limited to, employee-related expenses, including salaries, benefits and travel of our research and development personnel; expenses incurred under agreements with contract research organizations and investigative sites that conduct clinical and preclinical studies and manufacture the drug product for the clinical studies and preclinical activities; acquisition of in-process research and development; facilities; supplies; rent, insurance, certain legal fees, stock-based compensation, depreciation and other costs associated with clinical and preclinical activities and regulatory operations. Research funding under collaboration agreements and refundable research and development credits / tax credits received are recorded as an offset to these costs.
Costs for certain development activities, such as outside research programs funded by us, are recognized based on an evaluation of the progress to completion of specific tasks with respect to their actual costs incurred. Payments for these activities are based on the terms of the individual arrangements, which may differ from the pattern of costs incurred, and are reflected in the financial statements as prepaid or accrued research and development expense, as the case may be.
Share-Based Compensation
Options
We grant share options to employees, non-employee members of our board of directors and non-employee consultants as compensation for services performed. Employee and non-employee members of the board of directors’ awards of share-based compensation are accounted for in accordance with ASC 718, Compensation—Stock Compensation, or ASC 718. ASC 718 requires all share-based payments to employees and non-employee directors, including grants of share options, to be recognized in the statement of operations and comprehensive loss based on their grant date fair values. The grant date fair value of share options is estimated using the Black-Scholes option valuation model.
Using this model, fair value is calculated based on assumptions with respect to (i) the fair value of our ordinary shares on the grant date; (ii) expected volatility of our ordinary share price, (iii) the periods of time over which employees and members of our board of directors are expected to hold their options prior to exercise (expected term), (iv) expected dividend yield on our ordinary shares, and (v) risk-free interest rates.
Our ordinary shares were not traded on a public exchange prior to our IPO in June 2018. Therefore, we believe that our future volatility will differ materially during the expected term from the volatility that would be calculated from our historical share prices to date. Consequently, expected volatility is based on an analysis of guideline companies in accordance with ASC 718. The expected dividend yield is zero as we have never paid dividends and do not currently anticipate paying any in the foreseeable future. Risk-free interest rates are based on quoted U.S. Treasury rates for securities with maturities approximating the option’s expected term.
Restricted Share Units
The Company grants restricted share units (“RSUs”) to employees, non-employee members of our board of directors and non-employee consultants as compensation for services performed. Awards of RSUs are accounted for in accordance with ASC 718, Compensation - Stock Compensation, or ASC 718. ASC 718 requires all share-based payments to employees and non-employee directors, including grants of RSUs, to be recognized in the consolidated statement of operations and comprehensive loss based on their grant date fair values. The grant date fair value of RSUs is determined using the closing market price of the Company’s ordinary shares on the date of grant.
117
Table of Contents
Restricted Shares
In connection with certain employment, service and research agreements, we have granted restricted ordinary shares as compensation. The shares are recognized in the statement of operations and comprehensive loss based on their grant date fair values. Compensation cost relating to share grants with service-based graded vesting schedules is recognized based on the vesting schedule.
Results of Operations
Comparison of the Years Ended December 31, 2021 and 2020
(in thousands)
Operating expenses:
Other non-operating income (expense)
Other comprehensive income (loss):
Foreign currency translation gain (loss) 2,226 (3,103) 5,329
License Revenue
License revenue was $37.7 million for the year ended December 31, 2021, compared to $15.6 million for the year ended December 31, 2020. This increase represents the increased amortization of the $100.0 million upfront payment as well as amortization of the $30.0 million milestone payment received in connection with the Collaboration Agreement.
General and Administrative Expenses
General and administrative expenses were $43.8 million for the year ended December 31, 2021, compared to $44.2 million for the year ended December 31, 2020. The decrease of $0.4 million was primarily due to a decrease in share-based compensation of $1.3 million and payroll and payroll related costs of $0.8 million, which was partially offset by increases in insurance of $0.3 million, facility costs of $0.9 million, professional fees of $0.2 million and $0.3 of other general and administrative expenses.
118
Table of Contents
Research and Development Expenses
Research and development expenses for the years ended December 31, 2021 and 2020 were as follows (in millions):
Gross research and development expenses $ 141.5 $ 96.6 $ 44.9
Janssen reimbursements (69.0) (57.4) (11.6)
Tax incentive reimbursement (5.4) (5.3) (0.1)
Research and development expenses $ 67.1 $ 33.9 $ 33.2
Gross research and development expenses for the year ended December 31, 2021 increased $44.9 million as compared to the prior year primarily due to an increase of $21.8 million in research and clinical trial costs related to our ophthalmology, neurology, gene regulation and salivary gland programs, $7.6 million in manufacturing of our clinical trial materials, $10.3 million in payroll and payroll related costs, $3.6 million in depreciation, $1.8 million in rent and facility costs, $3.7 million in share-based compensation and $2.2 million in other research costs, which was partially offset by a decrease of $6.2 million in acquired research and development costs.
Reimbursements under the Collaboration Agreement for the year ended December 31, 2021 increased $11.6million as compared to the prior year primarily due to an increase in activity in the programs licensed under the Collaboration Agreement.
Tax incentive reimbursement for the year ended December 31, 2021 increased $0.1 million as compared to the prior year primarily due to the increase in allowable research and development costs.
Foreign Currency (Loss) Gain
Foreign currency loss was $6.3 million for the year ended December 31, 2021 compared to a gain of $3.4 million for the year ended December 31, 2020. The change of $9.7 million was primarily due to a weakening of the pound sterling and euro against the U.S. dollar and an increase in the amounts due from foreign subsidiaries in 2021.
Interest Income
Interest income was $0.2 million for the year ended December 31, 2021 compared to $1.3 million for the year ended December 31, 2020. The decrease was due to a lower average cash balance and lower interest rates during 2021.
Other Comprehensive Income (Loss) – Foreign Currency Translation Gain (Loss)
Foreign currency translation adjustments resulted in a translation gain of $2.2 million for the year ended December 31, 2021 compared to a translation loss of $3.1 million for the year ended December 31, 2020. The change in the amount of $5.3 million was primarily due to a strengthening of the U.S. dollar against the pound sterling and euro during the year ended December 31, 2021.
Liquidity and Capital Resources
Since our inception, we have incurred significant operating losses. For the year ended December 31, 2021, we used $10.5 million in cash flows from operations. We did not generate positive cash flows from operations during the year and there are no assurances that we will generate positive cash flows in the future. Additionally, there are no assurances that we will be successful in obtaining an adequate level of financing for the development and
119
Table of Contents
commercialization of our product candidates. We expect to incur significant expenses and operating losses for the foreseeable future as we advance the preclinical and clinical development of our product candidates. We expect that our research and development and general and administrative costs will increase in connection with conducting preclinical studies and clinical trials for our product candidates, building out internal capacity to have products manufactured to support preclinical studies and clinical trials, expanding our intellectual property portfolio, and providing general and administrative support for our operations. In addition, on August 4, 2020 we entered into agreements to acquire the buildings for our second cGMP viral vector manufacturing facility and our first cGMP plasmid and DNA production facility in Shannon, Ireland to expand our manufacturing and supply chain capabilities. We closed on the acquisition of the first building in August 2020 and closed on the second building in January 2021. As a result of these incurred and expected expenses we will need additional capital to fund our operations, which we may obtain from additional equity or debt financings, collaborations, licensing arrangements, or other sources.
We do not currently have any approved products and have never generated any revenue from product sales. We have historically financed our operations primarily through cash on hand and proceeds from the sale of our ordinary shares, series A ordinary shares and convertible preferred C shares. In March 2019 and December 2021, we received a $100.0 million upfront payment and a $30.0 million milestone payment, respectively, in connection with the Collaboration Agreement, which also provides us with research funding, and we are eligible to receive additional potential milestone payments and royalties.
Based on our current cash, cash equivalents and accounts receivable – related party at December 31, 2021 and the research funding and milestone payments we expect to receive under the Collaboration Agreement, we estimate that we will be able to fund our operating expenses and capital expenditure requirements through the second quarter of 2023. We have based these estimates on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we expect.
Cash Flows
We had $137.7 million and $209.5 million of cash and cash equivalents as of December 31, 2021 and 2020, respectively.
The following table summarizes our sources and uses of cash for the period presented:
For the Years Ended December 31,
(in thousands)
Net cash used in operating activities $ (10,530) $ (63,967)
Net cash used in investing activities (61,717) (37,020)
Net cash provided by financing activities 1,708 82,728
Operating Activities
During the year ended December 31, 2021, our cash used in operating activities of $10.5 million was primarily due to our net loss of $79.6 million as we incurred expenses associated with research activities on our clinical programs, manufacturing of our clinical trial materials, preclinical research programs and general and administrative expenses. The net loss included non-cash charges of $37.8 million, which consisted of $20.8 million of share-based compensation, $6.3 million of a foreign currency loss, $7.9 million of depreciation and amortization, $1.0 million of shares issued in connection with a license agreement, $1.0 million of shares issued in connection with an asset acquisition, $0.4 million of a fair value adjustment, $0.2 million of net change in right-of-use assets and liabilities, $0.1 million of amortization of interest on asset retirement obligations and $0.1 million of loss on disposal of equipment, furniture and fixtures. Additionally, operating assets, consisting of accounts receivable-related party, prepaid expenses, tax incentive
120
Table of Contents
receivable, other current assets and other assets, decreased by $17.3 million and operating liabilities, consisting of accounts payable, accrued expenses, and deferred revenue-related party, increased by $14.0 million.
During the year ended December 31, 2020, our cash used in operating activities of $64.0 million was primarily due to our net loss of $58.0 million as we incurred expenses associated with research activities on our clinical programs, manufacturing of our clinical trial materials, preclinical research programs and general and administrative expenses. The net loss included non-cash charges of $26.7 million, which consisted of $7.7 million for acquired research and development, $18.4 million of share-based compensation, $3.4 million of a foreign currency gain and $4.1 million of depreciation and amortization. Additionally, operating assets, consisting of accounts receivable-related party, prepaid expenses, tax incentive receivable, security deposits and other current assets, increased by $20.8 million and operating liabilities, consisting of accounts payable, accrued expenses, and deferred revenue-related party, decreased by $11.9 million.
Investing Activities
Net cash used in investing activities for the year ended December 31, 2021 of $61.7 million consisted primarily of $8.9 million in payments for the acquisition of the second building and long-term lease of our manufacturing facility in Ireland, $6.5 million in connection with equity method and other investments and $46.3 million for purchases of property and equipment for our manufacturing, laboratory and process development facilities and buildout costs of our new facilities in Ireland.
Net cash used in investing activities for the year ended December 31, 2020 of $37.0 million consisted primarily of $14.0 million in payments for the acquisition of the first building and long-term lease for our manufacturing facilities in Ireland, $2.1 million for the purchase of an intangible asset and $20.9 million for purchases of property and equipment for our manufacturing, laboratory and process development facilities and buildout costs of our facilities in the UK and Ireland.
Financing Activities
Net cash provided by financing activities was $1.7 million for the year ended December 31, 2021, which is primarily from the exercise of share options.
Net cash provided by financing activities was $82.7 million for the year ended December 31, 2020, which consisted primarily of gross proceeds of $87.0 million from an at-the market offering and a public offering of our ordinary shares, which was offset by $5.1 million in offering costs, as well as $0.8 million from the exercise of share options.
Off-Balance Sheet Arrangements
We have not entered into any off-balance sheet arrangements under applicable SEC rules and do not have any holdings in variable interest entities.
Emerging Growth Company Status
The Jumpstart Our Business Startups Act of 2012, (the “JOBS Act”), permits an “emerging growth company,” which we are, to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies until those standards would otherwise apply to private companies. We have elected to take advantage of this extended transition period.
121
Table of Contents
ITEM 7A.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
We are exposed to market risks in the ordinary course of our business. These risks primarily include foreign currency exchange rate sensitivities and interest rate risk.
We currently operate in the United States, the United Kingdom, and the European Union. Our activities in these jurisdictions expose us to currency exchange rate fluctuations primarily between the U.S. Dollar and the British Pound Sterling and Euro. When the U.S. Dollar strengthens against these currencies, the U.S. Dollar value of non-U.S. Dollar based losses increases. To the extent that our international activities recorded in local currencies increase in the future, our exposure to fluctuations in currency exchange rates will correspondingly increase. With respect to our foreign currency exposures as of December 31, 2021, a 10% unfavorable movement in foreign currency exchange rates would not expose us to a significant increase in net loss. We have not engaged in derivative financial instruments as a means of hedging this financial statement risk.
We had cash and cash equivalents of $137.7 million as of December 31, 2021, which consist of non-interest-bearing and interest-bearing bank deposits. Other than accounts payable and accrued expenses incurred in the ordinary course of business, we had no other debt outstanding as of December 31, 2021. We had cash and cash equivalents of $209.5 million as of December 31, 2020, which consisted of non-interest-bearing and interest-bearing bank deposits. Such interest-earning instruments carry a degree of interest rate risk; however, historical fluctuations in interest income have not been significant for us.
122
Table of Contents
ITEM 8.FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
MEIRAGTX HOLDINGS PLC AND SUBSIDIARIES
FOR THE YEARS ENDED DECEMBER 31, 2021 AND 2020
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm (PCAOB ID 42) F-2
Consolidated:
Balance Sheets F-3
Statements of Operations and Comprehensive Loss F-4
Statements of Shareholders' Equity F-5
Statements of Cash Flows F-6
Notes to Consolidated Financial Statements F-7
F-1
Table of Contents
Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Directors of MeiraGTx Holdings plc and Subsidiaries
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of MeiraGTx Holdings plc and Subsidiaries (the “Company”) as of December 31, 2021 and 2020, the related consolidated statements of operations and comprehensive loss, shareholders' equity and cash flows for each of the two years in the period ended December 31, 2021, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2021, in conformity with U.S. generally accepted accounting principles.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ Ernst & Young LLP
We have served as the Company’s auditor since 2016.
Jericho, New York
March 10, 2022
F-2
Table of Contents
MEIRAGTX HOLDINGS PLC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share amounts)
December 31, December 31,
ASSETS
CURRENT ASSETS:
Accounts receivable - related party 22,384 38,479
Property, plant and equipment, net 75,860 44,042
Intangible assets, net 1,791 2,119
In-process research and development 783 852
Equity method and other investments 6,656 —
Right-of-use assets - operating leases, net 22,782 21,486
Right-of-use assets - finance leases, net 27,645 21,596
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Lease obligations, current 3,374 2,583
Deferred revenue - related party, current 21,820 23,545
Other current liabilities — 24
Asset retirement obligations 2,081 1,814
Deferred income tax liability 196 214
Other long-term liabilities 953 —
COMMITMENTS (Note 14)
SHAREHOLDERS' EQUITY:
Accumulated other comprehensive loss (2,671) (4,897)
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 320,164 $ 363,697
See Notes to Consolidated Financial Statements
F-3
Table of Contents
MEIRAGTX HOLDINGS PLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(in thousands, except share and per share amounts)
For the Years Ended December 31,
License revenue - related party $ 37,701 $ 15,563
Operating expenses:
Other non-operating income (expense):
Foreign currency (loss) gain (6,293) 3,426
Interest expense (288) (139)
Other comprehensive income (loss):
Foreign currency translation gain (loss) 2,226 (3,103)
Basic and diluted net loss per ordinary share $ (1.80) $ (1.54)
See Notes to Consolidated Financial Statements
F-4
Table of Contents
MEIRAGTX HOLDINGS PLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2021 AND 2020
(in thousands, except share amounts)
Accumulated Other Total
Shares Amount of Par Value Loss Deficit Equity
Share-based compensation — — 18,417 — — 18,417
Other comprehensive loss — — — (3,103) — (3,103)
Share-based compensation — — 20,784 — — 20,784
Other comprehensive income — — — 2,226 — 2,226
See Notes to Consolidated Financial Statements
F-5
Table of Contents
MEIRAGTX HOLDINGS PLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
For the Years Ended December 31,
Cash flows from operating activities:
Foreign currency loss (gain) 6,293 (3,426)
Depreciation and amortization 7,873 4,172
Net change in right-of-use assets and liabilities 161 (387)
Loss on disposal of equipment, furniture and fixtures 56 213
Gain on termination of lease liability — (144)
Loss on equity method investment 9 —
Amortization of interest on asset retirement obligations 148 136
Issuance of shares in connection with license agreement 976 —
Issuance of shares in connection with asset acquisition 1,020 7,685
Fair value adjustment 434 —
(Increase) decrease in operating assets:
Accounts receivable - related party 16,391 (15,402)
Tax incentive receivable 310 (715)
Increase (decrease) in operating liabilities:
Other current liabilities (23) 24
Deferred revenue - related party (7,487) (15,563)
Net cash used in operating activities (10,530) (63,967)
Cash flows from investing activities:
Purchase of property, plant and equipment (46,351) (20,924)
Payment for right-of-use asset (8,866) (13,968)
Purchase of intangible asset — (2,128)
Equity method and other investments (6,500) —
Net cash used in investing activities (61,717) (37,020)
Cash flows from financing activities:
Payments on lease obligations - financing leases (1) (23)
Exercise of share options 1,709 841
Proceeds from the issuance of ordinary shares — 87,051
Issuance costs in connection with ordinary shares — (5,141)
Net cash provided by financing activities 1,708 82,728
Net decrease in cash and cash equivalents (70,539) (18,259)
Effect of exchange rate changes on cash (1,278) 422
Cash and cash equivalents at beginning of year 209,520 227,357
Cash and cash equivalents at end of year $ 137,703 $ 209,520
Supplemental disclosure of non-cash transactions:
Asset retirement obligations in connection with leases $ 120 $ —
Issuance of shares in connection with asset acquisition $ 519 $ 7,685
Supplemental disclosure of cash flow information:
Cash paid for interest $ 139 $ 3
See Notes to Consolidated Financial Statements
F-6
Table of Contents
MEIRAGTX HOLDINGS PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Principal Business Activity
The Company
MeiraGTx Holdings plc and subsidiaries (the “Company” or “Meira Holdings”), an exempted company incorporated under the laws of the Cayman Islands, is a vertically integrated, clinical stage gene therapy company with six programs in clinical development and a broad pipeline of preclinical and research programs. The Company has core capabilities in viral vector design and optimization and gene therapy manufacturing, as well as a potentially transformative gene regulation technology. Led by an experienced management team, the Company has taken a portfolio approach by licensing, acquiring and developing technologies that give depth across both product candidates and indications. The Company’s initial focus is on three distinct areas of unmet medical need: ocular diseases, including inherited retinal diseases as well as large degenerative ocular diseases, neurodegenerative diseases and severe forms of xerostomia. Though initially focusing on the eye, central nervous system and salivary gland, the Company intends to expand its focus in the future to develop additional gene therapy treatments for patients suffering from a range of serious diseases. The Company also owns and operates a current good manufacturing practices, or cGMP, multi-product, multi-viral vector manufacturing facility in London, United Kingdom (“UK”), which includes fill and finish capabilities and can supply the Company’s clinical and potential commercial material. Additionally, on August 4, 2020, the Company entered into agreements to acquire the buildings for its second cGMP viral vector manufacturing facility and its first cGMP plasmid and DNA production facility in Shannon, Ireland to expand its manufacturing and supply chain capabilities. The Company closed on the acquisition of the first building in August 2020 and closed on the acquisition of the second building in January 2021.
Acquisitions
On October 4, 2021, the Company acquired Bullseye Therapeutics, Inc. (“Bullseye”), a company engaged in developing mechanisms to deliver retinal drugs and gene therapies to the eye. Bullseye was renamed MeiraGTx Therapeutics, Inc.
On April 9, 2020, the Company acquired Emrys Bio Inc. (“Emrys”), a pre-clinical biopharmaceutical company developing brain-derived neurotrophic factor gene therapy for treatment of genetic obesity disorders, as well as the development of gene therapy product candidates for other central nervous system diseases. Emrys was renamed MeiraGTx Bio, Inc.
These acquisitions are part of the Company’s continuing efforts to expand its focus to develop additional gene therapy treatments for patients suffering from a range of serious diseases. (See Note 3 for additional information).
Basis of Presentation
The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”). Any reference in these notes to applicable guidance is meant to refer to the authoritative United States generally accepted accounting principles as found in the Accounting Standards Codification (“ASC”) and Accounting Standards Update (“ASU”) of the Financial Accounting Standards Board (“FASB”).
Liquidity
The Company has not yet achieved profitable operations. There is no assurance that profitable operations, if ever achieved, could be sustained on a continuing basis. In addition, development activities, clinical and preclinical testing, and commercialization of the Company’s product candidates will require significant additional financing. The Company’s accumulated deficit at December 31, 2021 totaled $340.6 million, and management expects to incur substantial losses in future periods. The success of the Company is subject to certain risks and uncertainties,
F-7
Table of Contents
MEIRAGTX HOLDINGS PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
including among others, uncertainty of product development; competition in the Company’s field of use; uncertainty of capital availability; uncertainty in the Company’s ability to enter into agreements with collaborative partners; expanding and protecting the Company’s intellectual property portfolio; dependence on third parties; dependence on key personnel; the COVID-19 pandemic and mitigation measures. For the year ended December 31, 2021, the Company used $10.5 million in cash flows from operations and there are no assurances that the Company will generate positive cash flows in the future. Additionally, there are no assurances that the Company will be successful in obtaining an adequate level of financing for the development and commercialization of its product candidates.
As of December 31, 2021, the Company had cash and cash equivalents in the amount of $137.7 million, which consisted of depository and money market accounts. On January 30, 2019, the Company entered into a collaboration, option and license agreement with Janssen Pharmaceuticals, Inc. (“Janssen”), one of the Janssen Pharmaceuticals Companies of Johnson & Johnson (the “Collaboration Agreement”), for the research, development and commercialization of gene therapies for the treatment of inherited retinal diseases (“IRD”). Under the terms of the Collaboration Agreement, the Company received an upfront payment of $100.0 million in March 2019 and a $30.0 million milestone payment in December 2021. The Company also receives funding for certain research, manufacturing, clinical development and commercialization costs, potential additional milestone payments upon the achievement of such milestones and royalties on future net sales of products. The Company estimates that its cash and cash equivalents on hand and accounts receivable – related party at December 31, 2021 will be sufficient to cover its expenses for at least the next twelve months from the date of issuance of these consolidated financial statements.
Risks and Uncertainties
The Company operates in an industry that is subject to intense competition, government regulation and rapid technological change. The Company’s operations are subject to significant risk and uncertainties including financial, operational, technological, regulatory and other risks, including the potential risk of business failure.
There are also many uncertainties regarding the pandemic caused by the novel coronavirus, or COVID-19, and the Company continues to monitor the impact of the pandemic on all aspects of its business, including how the pandemic will impact its financial condition, liquidity, operations, clinical studies, employees, vendors, and industry. While the pandemic did not materially affect the Company's financial results and business operations in the year ended December 31, 2021 and 2020, the Company is unable to predict the impact that COVID-19 will have on its financial position and operating results in future periods due to numerous uncertainties. The Company will continue to assess the evolving impact of the COVID-19 pandemic and will make adjustments to its operations as necessary.
The Company’s capital resources and operations to date have been funded primarily with the proceeds from the Collaboration Agreement and private and public equity offerings. In the future, the Company may seek to raise additional capital through equity offerings, debt financings, marketing and distribution arrangements and other collaborations, strategic alliances and licensing arrangements or other sources to enable it to complete the development and potential commercialization of its product candidates. The COVID-19 outbreak and mitigation measures also have had, and may continue to have, an adverse impact on global economic conditions, which could have an adverse effect on the Company’s ability to raise capital when needed.
F-8
Table of Contents
MEIRAGTX HOLDINGS PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. Summary of Significant Accounting Policies
Consolidation
The accompanying consolidated financial statements include the accounts of Meira Holdings and its wholly owned subsidiaries:
MeiraGTx Limited, a limited company incorporated under the laws of England and Wales;
MeiraGTx, LLC, a Delaware limited liability company (“Meira LLC”);
MeiraGTx UK II Limited, a limited company incorporated under the laws of England and Wales (“Meira UK II”);
MeiraGTx Ireland DAC, a designated activity company incorporated under the laws of Ireland (“Meira Ireland”);
MeiraGTx Netherlands B.V., a private company with limited liability incorporated under the laws of the Netherlands (“Meira Netherlands”);
MeiraGTx Belgium, a private company with limited liability incorporated under the laws of Belgium (“Meira Belgium”);
BRI-Alzan, Inc., a Delaware corporation (“BRI-Alzan”);
MeiraGTx Bio Inc., a Delaware corporation (“Meira Bio”);
MeiraGTx B.V., a private company with limited liability incorporated under the laws of the Netherlands (“Meira B.V.”);
MeiraGTx Neurosciences, Inc., a Delaware corporation (“Meira Neuro”);
MeiraGTx Therapeutics, Inc., a Delaware corporation (“Meira Therapeutics”); and
MeiraGTx UK Limited, a limited company incorporated under the laws of England and Wales (“Meira UK”).
All intercompany balances and transactions between the consolidated companies have been eliminated in consolidation.
Use of Estimates
Management considers many factors in selecting appropriate financial accounting policies and controls, and in developing the estimates and assumptions that are used in the preparation of these consolidated financial statements. Management must apply significant judgment in this process. In addition, other factors may affect estimates, including expected business and operational changes, sensitivity and volatility associated with the assumptions used in developing estimates, and whether historical trends are expected to be representative of future trends. The estimation process often may yield a range of potentially reasonable estimates of the ultimate future outcomes and management must select an amount that falls within that range of reasonable estimates. This process may result in actual results differing materially from those estimated amounts used in the preparation of the financial statements if these results differ from historical experience, or other assumptions do not turn out to be substantially accurate, even if such assumptions are reasonable when made. In preparing these consolidated financial statements, management used significant estimates in the following areas, among others: collaboration revenue, the accounting for research and development costs, share-based compensation, leases, asset retirement obligations and tax incentive receivable.
Additionally, the Company has made estimates of the impact of the COVID-19 pandemic within the consolidated financial statements and there may be changes to those estimates in future periods. Actual results may differ from these estimates.
F-9
Table of Contents
MEIRAGTX HOLDINGS PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Cash and Cash Equivalents
The Company considers all highly liquid instruments with an original maturity of 90 days or less at the time of purchase to be cash equivalents. Cash and cash equivalents consist of checking and money market accounts that are readily convertible into cash.
Financial Instruments
The carrying value of accounts receivable-related party, tax incentive receivable, other current assets, and accounts payable reported in the consolidated balance sheets equal or approximate fair value due to their short maturities.
Tax Incentive Receivable
Meira UK II is eligible to participate in a UK research and development tax incentive programs under which it is eligible to receive a cash refund from Her Majesty’s Revenue & Customs (“HMRC”) for a percentage of the qualified research and development costs expended by Meira UK II under the small and medium sized enterprises (“SME”) program and the research and development expenditures credit (“RDEC”) program. The SME cash refund is available to companies with less than 500 employees and annual aggregate revenue of less than 100.0 million euro or total aggregate assets less than 86.0 million euro during the reimbursable period. The Company’s estimate of the amount of cash refund it expects to receive related to the SME and RDEC programs is included in tax incentive receivable in the accompanying consolidated balance sheets and such amounts are recorded as a reduction of research and development expense in the statements of operations. During the years ended December 31, 2021 and 2020, the Company recorded reductions to research and development expenses of $5.4 million and $5.3 million, respectively.
In addition, the Company incurs Value Added Tax (“VAT”) on services provided by UK and EU vendors, which it is entitled to reclaim. The Company’s estimate of the amount of cash refund it expects to receive related to VAT was $1.9 million and $4.0 million as of December 31, 2021 and 2020, respectively, which is included in other current assets in the accompanying consolidated balance sheets.
Fair Value Measurements
Fair value is defined as the price that would be received upon sale of an asset or paid upon transfer of a liability in an orderly transaction between market participants at the measurement date and in the principal or most advantageous market for that asset or liability. The fair value should be calculated based on assumptions that market participants would use in pricing the asset or liability, not on assumptions specific to the entity. In addition, the fair value of liabilities should include consideration of non-performance risk including the Company’s own credit risk.
The Company follows ASC Topic 820, Fair Value Measurements and Disclosures, or ASC 820, for application to financial assets and liabilities. In addition to defining fair value, the standard expands the disclosure requirements around fair value and establishes a fair value hierarchy for valuation inputs. The hierarchy prioritizes the inputs into three levels based on the extent to which inputs used in measuring fair value are observable in the market. Each fair value measurement is reported in one of the three levels which are determined by the lowest level input that is significant to the fair value measurement in its entirety. These levels are:
F-10
Table of Contents
MEIRAGTX HOLDINGS PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The table below represents the values of the Company's financial assets and liabilities that are required to be measured at fair value on a recurring basis (in thousands):
Fair Value Measurement Using:
Significant Significant Other Significant
December 31, Observable Inputs Observable Inputs Unobservable
Description 2021 (Level 1) (Level 2) (Level 3)
Cash and cash equivalents $ 66,585 $ 66,585 $ — $ —
Other long-term liabilities $ 953 $ 953 $ — $ —
Fair Value Measurement Using:
Significant Significant Other Significant
December 31, Observable Inputs Observable Inputs Unobservable
Description 2020 (Level 1) (Level 2) (Level 3)
Equity Method and Other Investments
The Company accounts for equity investments under the equity method of accounting when the requirements for consolidation are not met, and the Company has significant influence over the operations of the investee. Equity method investments are initially recorded at cost and subsequently adjusted for the Company’s share of net income or loss and cash contributions and distributions and are included in equity method and other investments in the accompanying consolidated balance sheets. Equity investments that do not result in consolidation and are not accounted for under the equity method are measured at fair value, with any changes in fair value recognized in net income (loss). For any such investments that do not have readily determinable fair values, the Company elects the measurement alternative to measure the investments at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. Equity method investments are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. If it is determined that a loss in value of the equity method investment is other than temporary, an impairment loss is measured based on the excess of the carrying amount of an investment over its estimated fair value. Impairment analyses are based on current plans, intended holding periods, and available information at the time the analysis is prepared.
Concentrations of Credit Risk
The Company maintains its cash and cash equivalents primarily in depository and money market accounts within two large financial institutions in the United States and one large financial institution in the United Kingdom and Ireland. Cash balances deposited at these major financial banking institutions exceed the insured limit. The Company has not experienced any losses on its bank deposits and believes these deposits do not expose the Company to any significant credit risk.
Intangible Assets
Intangible assets consist of purchased rights to licensed technology as it relates to the Company’s manufacturing processes and has future alternative use in the Company’s operations. The licensed technology is being amortized on a straight-line basis over 7 years, which represents the estimated periods of benefit and the expected pattern of consumption (see Note 7).
F-11
Table of Contents
MEIRAGTX HOLDINGS PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Property, Plant and Equipment, Net
Property, plant and equipment are stated at cost, net of accumulated depreciation. Depreciation is calculated using the straight-line method over the estimated useful lives of the respective assets. Leasehold improvements are depreciated over the lesser of their useful lives or the life of the lease (see Note 6).
The estimated useful lives of the asset categories are as follows:
Asset Category Useful Lives
Computer and office equipment 3 years
Laboratory equipment 5 years
Manufacturing equipment 7 years
Furniture and fixtures 5 years
Leasehold improvements lesser of useful life or remaining term of lease
Expenditures for leasehold improvements are capitalized, and expenditures for maintenance and repairs are expensed to operations as incurred.
ASC Topic 360, Property, Plant and Equipment, addresses the financial accounting and reporting for impairment or disposal of long-lived assets. The Company reviews the recorded values of long-lived assets for impairment whenever events or changes in business circumstances indicate that the carrying amount of an asset or group of assets may not be fully recoverable. The Company recorded no material impairment charges in 2021 or 2020.
Leases
The Company accounts for leases in accordance with ASC 842. The Company determines if an arrangement is a lease at contract inception. A lease exists when a contract conveys the right to control the use of identified property, plant, or equipment for a period of time in exchange for consideration. The definition of a lease embodies two conditions: (1) there is an identified asset in the contract that is land or a depreciable asset (i.e., property, plant, and equipment), and (2) the Company has the right to control the use of the identified asset. The Company accounts for the lease and non-lease components as a single lease component.
From time to time the Company enters into direct financing lease arrangements that include a lessee obligation to purchase the leased asset at the end of the lease term, a bargain purchase option, or provides for minimum lease payments with a present value of 90% or more of the fair value of the leased asset at the date of lease inception.
Operating leases where the Company is the lessee are included in right-of-use (“ROU”) assets and lease obligations are included on the Company’s consolidated balance sheets. The lease obligations are initially and subsequently measured at the present value of the unpaid lease payments at the lease commencement date and subsequent reporting periods.
Finance leases where the Company is the lessee are included in ROU assets – finance leases, net and lease obligations on the Company’s consolidated balance sheets. The lease obligations are initially measured in the same manner as for operating leases and are subsequently measured at amortized cost using the effective interest method.
Key estimates and judgments include how the Company determined (1) the discount rate used to discount the unpaid lease payments to present value, (2) lease term and (3) lease payments.
F-12
Table of Contents
MEIRAGTX HOLDINGS PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
ASC 842 requires a lessee to discount its unpaid lease payments using the interest rate implicit in the lease or, if that rate cannot be readily determined, its incremental borrowing rate. As most of the Company’s leases where it is the lessee do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The Company’s incremental borrowing rate for a lease is the rate of interest it would have to pay on a collateralized basis to borrow an amount equal to the lease payments under similar terms. The Company uses the implicit rate when readily determinable.
The lease term for all of the Company’s leases includes the non-cancellable period of the lease plus any additional periods covered by either a lessee option to extend (or not to terminate) the lease that is reasonably certain to be exercised, or an option to extend (or not to terminate) the lease controlled by the lessor.
The ROU asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for lease payments made at or before the lease commencement date less any lease incentives received.
For operating leases, the ROU asset is subsequently measured throughout the lease term at the carrying amount of the lease liability, minus any accrued lease payments, less the unamortized balance of lease incentives received. Lease expense for lease payments is recognized on a straight-line basis over the lease term.
For finance leases, the ROU asset is subsequently amortized using the straight-line method from the lease commencement date to the earlier of the end of its useful life or the end of the lease term unless the lease transfers ownership of the underlying asset, or the Company is reasonably certain to exercise an option to purchase the underlying asset. In those cases, the ROU asset is amortized over the useful life of the underlying asset. Amortization of the ROU asset is recognized and presented separately from interest expense on the lease liability.
The Company has elected not to recognize ROU assets and lease liabilities for all short-term leases that have a lease term of 12 months or less at lease commencement. Lease payments associated with short-term leases are recognized as an expense on a straight-line basis over the lease term.
Asset Retirement Obligations
Accounting for asset retirement obligations requires legal obligations associated with the retirement of long-lived assets to be recognized at fair value when incurred and capitalized as part of the related long-lived asset. In the absence of quoted market prices, the Company estimates the fair value of its asset retirement obligations using Level 3 present value techniques, in which estimates of future cash flows associated with retirement activities are discounted using a credit-adjusted risk-free rate of 8%. Asset retirement obligations currently reported on the Company’s consolidated balance sheets were measured during a period of historically low interest rates. The impact on measurements of new asset retirement obligations using different rates in the future may be significant.
The Company uses estimates to determine the asset retirement obligations at the end of the lease term and discounts such asset retirement obligations using an estimated discount rate. Interest on the discounted asset retirement obligation is amortized over the term of the lease using the effective interest method and is recorded as interest expense in the consolidated statements of operations and comprehensive loss.
F-13
Table of Contents
MEIRAGTX HOLDINGS PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The change in asset retirement obligations is as follows (in thousands):
For the Years Ended December 31,
Balance at beginning of period $ 1,814 $ 1,655
Additional asset retirement obligations during the period 120 —
Amortization of interest 148 136
Effects of exchange rate (1) 23
Balance at end of period $ 2,081 $ 1,814
Share-Based Compensation Expense
Options
The Company grants share options to employees, non-employee members of the Company’s board of directors and non-employee consultants as compensation for services performed. Employee and non-employee members of the board of directors’ awards of share-based compensation are accounted for in accordance with ASC 718, Compensation - Stock Compensation, or ASC 718. ASC 718 requires all share-based payments to employees and non-employee directors, including grants of share options, to be recognized in the consolidated statement of operations and comprehensive loss based on their grant date fair values. The grant date fair value of share options is estimated using the Black-Scholes option valuation model.
Using this model, fair value is calculated based on assumptions with respect to (i) the fair value of the Company’s ordinary shares on the grant date; (ii) expected volatility of the Company’s ordinary share price, (iii) the periods of time over which the optionees are expected to hold their options prior to exercise (expected term), (iv) expected dividend yield on the Company’s ordinary shares, and (v) risk-free interest rates.
As there had been no public market for the Company’s ordinary shares until the Company’s initial public offering (“IPO”) on June 7, 2018, the estimated fair value of the ordinary shares until that time had been determined by the Company’s board of directors as of the date of each option grant, with input from management, considering the most recently available third-party valuations of ordinary shares and the board of directors’ assessment of additional objective and subjective factors that it believed were relevant and which may have changed from the date of the most recent valuation through the date of the grant. The assumptions underlying these valuations represented management’s best estimate, which involved inherent uncertainties and the application of management’s judgment. As a result, if the Company had used different assumptions or estimates, the fair value of its ordinary shares and its share-based compensation expense could have been materially different.
The fair value of ordinary shares after the Company’s IPO was determined based upon the closing share price on the date of grant.
Since the Company’s ordinary shares had not been traded on a public exchange prior to the Company’s IPO and have only been traded on a public exchange for a short period of time since the Company’s IPO, the Company believes that it does not have sufficient company-specific information available to determine the expected term based on its historical data. As a result, the expected term of share options granted to the optionees is determined using the average of the vesting period and contractual life of the option, an accepted method for the Company’s option grants under the Securities and Exchange Commission’s (“SEC”) Staff Accounting Bulletin No. 107 and No. 110, Share-Based Payment.
F-14
Table of Contents
MEIRAGTX HOLDINGS PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Similarly, the Company believes that its future volatility could differ materially during the expected term from the volatility that would be calculated from its historical share prices to date. Consequently, expected volatility is based on an analysis of guideline companies in accordance with ASC 718. The expected dividend yield is zero as the Company has never paid dividends and does not currently anticipate paying any in the foreseeable future. Risk-free interest rates are based on quoted U.S. Treasury rates for securities with maturities approximating the option’s expected term.
Restricted Shares
In connection with certain employment, service and research agreements, the Company has granted restricted ordinary shares as compensation. The ordinary shares are recognized in the consolidated statements of operations and comprehensive loss based on their grant date fair values. Compensation cost relating to share grants with service-based graded vesting schedules is recognized based on the vesting schedule.
Restricted Share Units
The Company grants restricted share units (“RSUs”) to employees, non-employee members of the Company’s board of directors and non-employee consultants as compensation for services performed. Awards of RSUs are accounted for in accordance with ASC 718, Compensation - Stock Compensation, or ASC 718. ASC 718 requires all share-based payments to employees, non-employee members of the Company’s board of directors and non-employee consultants, including grants of RSUs, to be recognized in the consolidated statement of operations and comprehensive loss based on their grant date fair values. The grant date fair value of RSUs is determined using the closing market price of the Company’s ordinary shares on the date of grant.
Collaboration Arrangements
The Company evaluates its collaborative arrangements pursuant to ASC 808, Collaborative Arrangements (“ASC 808”) and ASC 606, Revenue from Contracts with Customers (“ASC 606”). The Company considers the nature and contractual terms of collaborative arrangements and assesses whether the arrangement involves a joint operating activity pursuant to which the Company is an active participant and is exposed to significant risks and rewards with respect to the arrangement. If the Company is an active participant and is exposed to significant risks and rewards with respect to the arrangement, the Company accounts for the arrangement as a collaboration under ASC 808. To date, the Company has entered into two separate collaboration agreements, both of which are with Janssen, which were determined to be within the scope of ASC 808.
ASC 808 does not address recognition or measurement matters related to collaborative arrangements. Payments between participants pursuant to a collaborative arrangement that are within the scope of other authoritative accounting literature on income statement classification are accounted for using the relevant provisions of that literature. If the payments are not within the scope of other authoritative accounting literature, the income statement classification for the payments is based on an analogy to authoritative accounting literature or if there is no appropriate analogy, a reasonable, rational and consistently applied accounting policy election. Payments received from a collaboration partner to which this policy applies may include upfront payments in respect of a license of intellectual property, development and commercialization-based milestones, and royalties.
Refer to the discussion in Note 12 for further information related to the accounting for the Collaboration Agreement.
Revenue Recognition
Arrangements with collaborators may include licenses to intellectual property, research and development services, manufacturing services for clinical and commercial supply, and participation on joint steering committees. The Company evaluates the promised goods or services to determine which promises, or group of promises, represent
F-15
Table of Contents
MEIRAGTX HOLDINGS PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
performance obligations. In contemplation of whether a promised good or service meets the criteria required of a performance obligation, the Company considers the stage of development of the underlying intellectual property, the capabilities and expertise of the customer relative to the underlying intellectual property, and whether the promised goods or services are integral to or dependent on other promises in the contract. When accounting for an arrangement that contains multiple performance obligations, the Company must develop judgmental assumptions, which may include market conditions, reimbursement rates for personnel costs, development timelines and probabilities of regulatory success to determine the stand-alone selling price for each performance obligation identified in the contract.
When the Company concludes that a contract should be accounted for as a combined performance obligation and recognized over time, the Company must then determine the period over which revenue should be recognized and the method by which to measure revenue. The Company generally recognizes revenue using a cost-based input method.
The Collaboration Agreement with Janssen is accounted for under ASC 808, however, as ASC 808 does not address recognition or measurement matters such as determining the appropriate unit of accounting or when the recognition criteria are met, the Company accounts for the consideration received from Janssen in accordance with ASC 606. In accordance with ASC 606, the Company recognizes revenue when its customer or collaborator obtains control of promised goods or services, in an amount that reflects the consideration which the Company expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements that the Company determines are within the scope of ASC 606, it performs the following five steps:
i. identify the contract(s) with a customer;
ii. identify the performance obligations in the contract;
iii. determine the transaction price;
v. recognize revenue when (or as) the entity satisfies a performance obligation.
The Company only applies the five-step model to contracts when it determines that it is probable it will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer.
At contract inception, once the contract is determined to be by analogy within the scope of ASC 606, the Company assesses the goods or services promised within the contract to determine whether each promised good or service is a performance obligation. The promised goods or services in the Company’s arrangements typically consist of a license to the Company’s intellectual property and research, development and manufacturing services. The Company may provide options to additional items in such arrangements, which are accounted for as separate contracts when the customer elects to exercise such options, unless the option provides a material right to the customer. Performance obligations are promises in a contract to transfer a distinct good or service to the customer that (i) the customer can benefit from on its own or together with other readily available resources, and (ii) is separately identifiable from other promises in the contract. Goods or services that are not individually distinct performance obligations are combined with other promised goods or services until such combined group of promises meet the requirements of a performance obligation.
The Company determines transaction price based on the amount of consideration the Company expects to receive for transferring the promised goods or services in the contract. Consideration may be fixed, variable, or a combination of both. At contract inception for arrangements that include variable consideration, the Company estimates the probability and extent of consideration it expects to receive under the contract utilizing either the most
F-16
Table of Contents
MEIRAGTX HOLDINGS PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
likely amount method or expected amount method, whichever best estimates the amount expected to be received. The Company then considers any constraints on the variable consideration and includes in the transaction price variable consideration to the extent it is deemed probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved.
The Company then allocates the transaction price to each performance obligation based on the relative standalone selling price and recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) control is transferred to the customer and the performance obligation is satisfied. For performance obligations which consist of licenses and other promises, the Company utilizes judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress. The Company evaluates the measure of progress each reporting period and, if necessary, adjusts the measure of performance and related revenue recognition.
The Company records amounts as accounts receivable when the right to consideration is deemed unconditional. When consideration is received, or such consideration is unconditionally due, from a customer prior to transferring goods or services to the customer under the terms of a contract, a contract liability is recorded as deferred revenue.
Amounts received prior to satisfying the revenue recognition criteria are recognized as deferred revenue in the Company’s consolidated balance sheet. Amounts expected to be recognized as revenue within the 12 months following the balance sheet date are classified as deferred revenue – related party, current. Amounts not expected to be recognized as revenue within the 12 months following the balance sheet date are classified as deferred revenue – related party.
The Company’s collaboration revenue arrangements include the following:
Up-front License Fees: If a license is determined to be distinct from the other performance obligations identified in the arrangement, the Company recognizes revenues from nonrefundable, up-front fees allocated to the license when the license is transferred to the licensee and the licensee is able to use and benefit from the license. For licenses that are bundled with other promises, the Company utilizes judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress for purposes of recognizing revenue from non-refundable, up-front fees. The Company evaluates the measure of progress each reporting period and, if necessary, adjusts the measure of performance and related revenue recognition.
Milestone Payments: At the inception of an agreement that includes research and development milestone payments, the Company evaluates each milestone to determine when and how much of the milestone to include in the transaction price. The Company first estimates the amount of the milestone payment that the Company could receive using either the expected value or the most likely amount approach. The Company primarily uses the most likely amount approach as that approach is generally most predictive for milestone payments with a binary outcome. Then, the Company considers whether any portion of that estimated amount is subject to the variable consideration constraint (that is, whether it is probable that a significant reversal of cumulative revenue would not occur upon resolution of the uncertainty.) The Company updates the estimate of variable consideration included in the transaction price at each reporting date which includes updating the assessment of the likely amount of consideration and the application of the constraint to reflect current facts and circumstances.
Royalties: For arrangements that include sales-based royalties, including milestone payments based on a level of sales, and the license is deemed to be the predominant item to which the royalties relate, the Company will recognize revenue at the later of (i) when the related sales occur, or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied). To date, the Company has not recognized any revenue related to sales-based royalties or milestone payments based on the level of sales.
F-17
Table of Contents
MEIRAGTX HOLDINGS PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Research and Development Services: The Company is incurring research and development costs, with Janssen responsible for up to 100% of the costs, depending on the type of research and development services being performed. The Company records costs associated with the development activities as research and development expenses in the consolidated statement of operations and comprehensive loss consistent with ASC 730, Research and Development. The reimbursement of the research and development costs by Janssen is representative of the joint risk sharing nature of the arrangement. The Company considered the guidance in ASC 808 and recognizes the payments received from Janssen as a reduction to research and development expense when the related costs are incurred.
Research and Development
Research and development costs are charged to expense as incurred. These costs include, but are not limited to, employee-related expenses, including salaries, benefits and travel of the Company’s research and development personnel; expenses incurred under agreements with contract research organizations and investigative sites that conduct clinical and preclinical studies and for the drug product for the clinical studies and preclinical activities; facilities; supplies; rent, insurance, certain legal fees, share-based compensation, depreciation, other costs associated with clinical and preclinical activities and regulatory operations and acquisition of in process research and development write-offs. Research funding under collaboration agreements and refundable research and development credits / tax credits are recorded as an offset to these costs.
Costs for certain development activities, such as Company funded outside research programs, are recognized based on an evaluation of the progress to completion of specific tasks with respect to their actual costs incurred. Payments for these activities are based on the terms of the individual arrangements, which may differ from the pattern of costs incurred, and are reflected in the consolidated financial statements as prepaid or accrued research and development expenses, as the case may be.
Foreign Currencies
The Company’s consolidated financial statements are presented in U.S. dollars, the reporting currency of the Company. The financial position and results of operations of Meira UK II, Meira Ireland, Meira Netherlands, Meira Belgium and Meira B.V. are measured using the foreign subsidiaries’ local currency as the functional currency. These entities’ cash accounts holding U.S. dollars are remeasured based upon the exchange rate at the date of remeasurement with the resulting gain or loss included in the consolidated statements of operations and comprehensive loss. Expenses of such subsidiaries have been translated into U.S. dollars at average exchange rates prevailing during the period. Assets and liabilities have been translated at the rates of exchange on the consolidated balance sheet dates. The resulting translation gain and loss adjustments are recorded directly as a separate component of shareholders' equity and as other comprehensive loss on the consolidated statements of operations and comprehensive loss.
Income Taxes
Income taxes are recorded in accordance with ASC Topic 740, Income Taxes, or ASC 740, which provides for deferred taxes using an asset and liability approach. The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Deferred tax assets and liabilities are determined based on the difference between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Realization of net deferred tax assets is dependent on future taxable income. Valuation allowances are provided if, based upon the weight of available evidence, it is more likely than not that some, or all, of the deferred tax assets will not be realized. Realization of net deferred tax assets is dependent on future taxable income (see Note 11).
F-18
Table of Contents
MEIRAGTX HOLDINGS PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Company accounts for uncertain tax positions in accordance with the provisions of ASC 740. When uncertain tax positions exist, the Company recognizes the tax benefit of tax positions to the extent that the benefit will more likely than not be realized. The determination as to whether the tax benefit will more likely than not be realized is based upon the technical merits of the tax position as well as consideration of the available facts and circumstances. As of December 31, 2021 and 2020, the Company recorded unrecognized tax positions of $0.7 and $0.5 million, respectively. No interest and penalties have been accrued relative to the unrecognized tax positions.
The Company is required to estimate income taxes in each of the jurisdictions in which it operates.
Net Loss per Ordinary Share
Basic net loss per ordinary share is computed by dividing net loss by the weighted average number of shares of the Company’s ordinary shares outstanding during the period of computation. Diluted net loss per ordinary share is computed similar to basic net loss per share except that the denominator is increased to include the number of additional ordinary shares that would have been outstanding if the ordinary share equivalents had been issued at the beginning of the year and if the additional ordinary shares were dilutive (treasury stock method) or the two-class method, whichever is more dilutive. For all periods presented, basic and diluted net loss per ordinary share are the same as any additional ordinary share equivalents would be anti-dilutive.
The following securities are considered to be ordinary share equivalents, but were not included in the computation of diluted net loss per ordinary share because to do so would have been anti-dilutive:
December 31, December 31,
Restricted ordinary shares subject to forfeiture 173,097 290,000
Other Comprehensive Loss
Other comprehensive loss is defined as the change in equity of a business enterprise during a period from transactions and other events and circumstances from non-owner sources. The only component of other comprehensive loss impacting the Company is foreign currency translation.
Segment Information
Management has concluded it has a single reporting segment for purposes of reporting financial condition and results of operations.
The Company’s license revenue, research funding and deferred revenue from its Collaboration Agreement are generated in the United Kingdom.
The following table summarizes non-current assets by geographical area (in thousands):
December 31, December 31,
F-19
Table of Contents
MEIRAGTX HOLDINGS PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Recent Accounting Pronouncements Not Yet Adopted
In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which adds a new Topic 326 to the Codification and removes the thresholds that companies apply to measure credit losses on financial instruments measured at amortized cost, such as loans, receivables, and held-to-maturity debt securities. Under current GAAP, companies generally recognize credit losses when it is probable that the loss has been incurred. The revised guidance will remove all recognition thresholds and will require companies to recognize an allowance for credit losses for the difference between the amortized cost basis of a financial instrument and the amount of amortized cost that the company expects to collect over the instrument’s contractual life. ASU 2016-13 also amends the credit loss measurement guidance for available-for-sale debt securities and beneficial interests in securitized financial assets. The guidance is applicable for fiscal years beginning after December 15, 2019 and interim periods within those years, however, the FASB extended the effective date for smaller reporting companies to fiscal years beginning after December 15, 2022. The Company is currently evaluating the potential impact of the adoption of this standard on its related disclosures.
3. Acquisitions
Bullseye Therapeutics, Inc.
On October 4, 2021 (the “Bullseye Closing Date”), the Company acquired the stock of Bullseye, a company engaged in developing mechanisms to deliver retinal drugs and gene therapies to the eye. As a result, Bullseye is a wholly-owned subsidiary of the Company and was renamed MeiraGTx Therapeutics, Inc.