| Summary of Significant Accounting Policies | 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. 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 ● Level 1: Observable inputs such as quoted prices in active markets for identical assets the reporting entity has the ability to access as of the measurement date; ● Level 2: Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and ● Level 3: Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions. 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) Cash and cash equivalents $ 186,938 $ 186,938 $ — 0 — 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 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 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. 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 . 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. The change in asset retirement obligations is as follows (in thousands): For the Years Ended December 31, 2021 2020 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, . 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. 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, . Collaboration Arrangements The Company evaluates its collaborative arrangements pursuant to ASC 808, Collaborative Arrangements Revenue from Contracts with Customers 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 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; iv. allocate the transaction price to the performance obligations within the contract; and 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 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. 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 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 subsidiari |
