v3.26.1
Acquisition of Faeth and Pipe Issuance
 6 Months Ended
Jun. 30, 2026
Business Combination [Abstract]  
ACQUISITION OF FAETH AND PIPE ISSUANCE

3. ACQUISITION OF FAETH AND PIPE ISSUANCE

 

On February 17, 2026, the Company acquired Faeth Therapeutics pursuant to the Merger Agreement.

Under the terms of the Merger Agreement, the Company issued to the stockholders of Faeth an aggregate of 10,497.0980 shares of Series B Preferred Stock, par value $0.0001 per share, representing 10,497,098 shares of common stock of the Company, par value $0.0001 per share (“Common Stock”), on an as-converted-to-common basis and without giving effect to any beneficial ownership limitations. The outstanding warrant to purchase shares of Faeth Subsidiary capital stock was converted into a warrant to purchase an aggregate of 2.1020 shares of Series B Preferred Stock, representing a warrant to purchase 2,102 shares of Common Stock on an as-converted-to-common basis and without giving effect to any beneficial ownership limitations. In addition, all outstanding options to purchase Faeth Subsidiary common stock were assumed by the Company and were converted into options to purchase an aggregate of 252,210 shares of Common Stock (the “Assumed Options”). In connection with the Acquisition, stock options to purchase 6,338,670 shares of Faeth common stock, held by certain Faeth employees, were immediately exercised by the Faeth employees, of which 4,273,182 options had their vesting accelerated. Faeth HoldCo paid $15.6 million to cover tax liabilities created by such exercise of the options.

Concurrently with the acquisition of Faeth Therapeutics, on February 17, 2026, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with new and returning investors to raise $200.0 million of gross proceeds in which investors were issued an aggregate of 14,440.395 shares of Series B Preferred Stock, or 14,440,395 on an as-converted-to-common basis (without giving effect to any beneficial ownership limitations) at a price of $13,850 per share, or $13.85 per share on an as-converted-to-common basis, (collectively, the “2026 Private Placement”). The 2026 Private Placement closed on February 20, 2026.

Following the receipt of stockholder approval on June 10, 2026, each share of Series B Preferred Stock automatically converted into 1,000 shares of Common Stock, subject to certain beneficial ownership limitations established by each holder (pursuant to which 501.899 shares of Series B Preferred Stock remain unconverted as of June 30, 2026). As a result of the transactions, equityholders of the Company immediately prior to the acquisition owned approximately 4.9% of the Common Stock, equityholders of Faeth Therapeutics immediately prior to the acquisition owned approximately 40.6% of the Common Stock, and investors in the 2026 Private Placement owned approximately 54.5% of the Common Stock, in each case, calculated on a fully-diluted, as-converted-to-common basis (without giving effect to any beneficial ownership limitations) using the treasury stock method and based on the implied equity values of the Company and Faeth Therapeutics.

The Acquisition was accounted for as an asset acquisition with the Company as the accounting acquirer. Upon completion of the Acquisition and the 2026 Private Placement, the Company obtained control of Faeth’s assets, consisting primarily of cash, prepayments of tax gross-up payments related to the accelerated vesting of options held by Faeth employees prior to the Acquisition, and acquired IPR&D. In accordance with Accounting Standards Codification Topic 805, Business Combinations (“ASC 805”), under the asset acquisition method of accounting, the assets acquired and liabilities assumed are recognized and measured at fair value and no goodwill is recorded or recognized. Acquired IPR&D that has no future alternative use is expensed at the time of acquisition.

The estimated fair value of the consideration transferred of $145.8 million is summarized as follows (in thousands):

Assumed Options

 

 

 

$

452

 

Series B Preferred Stock

 

 

 

 

145,384

 

Total consideration transferred

 

 

 

$

145,836

 

 

The fair value of the consideration transferred was measured using the price per share the investors paid as part of the 2026 Private Placement. The Assumed Options reflects the portion of the acquisition date fair-value based measure that relates to the pre-combination service period.

The following table summarizes the allocation of the estimated fair value of the consideration transferred to the net assets acquired by the Company (in thousands):

Assets acquired:

 

 

 

 

 

Cash and cash equivalents

 

 

 

$

6,464

 

Prepaid expenses

 

 

 

 

11,487

 

Other current assets

 

 

 

 

554

 

Property and equipment, net

 

 

 

 

10

 

Other non-current assets

 

 

 

 

412

 

Total assets acquired

 

 

 

 

18,927

 

Liabilities assumed:

 

 

 

 

 

Accounts payable and accrued liabilities

 

 

 

 

5,844

 

Compensation and employee benefits liabilities

 

 

 

 

204

 

Total liabilities assumed

 

 

 

 

6,048

 

   Net assets acquired

 

 

 

$

12,879

 

In-process research and development

 

 

 

 

132,957

 

Total consideration transferred

 

 

 

$

145,836

 

The Company recognized $4.8 million of research and development expenses and $6.2 million of general and administrative expenses related to the accelerated vesting of 4,273,182 options held by Faeth employees prior to the Acquisition during the six months ended June 30, 2026.

The Company recognized $9.1 million of research and development expenses and $6.5 million of general and administrative expenses for tax gross-up payments related to the vesting of these options. The Company acquired $11.4 million of prepaid expenses related to the tax gross-up payments included in the net assets acquired by the Company, which were recognized as expense during the six months ended June 30, 2026. The tax gross-up payments are not in scope for accounting under ASC 718 and are recognized in the period in which they are incurred.

For the Assumed Options that were not vested as of the Acquisition, the Company recognized $0.7 million and $0.1 million of general and administrative and research and development expenses respectively during the six months ended June 30, 2026.