MeiraGTx Holdings plc
For the period ended Dec 31, 2023. Filed Mar 15, 2024.
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FY2023 · Filed Mar 15, 2024
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Item 8. Report of Independent Registered Public Accounting Firm
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, 2023 and 2022, 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, 2023, 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, 2023 and 2022, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2023, 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.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
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| | | Accrued Clinical Trial Costs |
| Description of the Matter | | As discussed in Note 2 to the consolidated financial statements, the Company records costs for clinical trial activities based upon estimates of costs incurred through the balance sheet date that have yet to be invoiced by the contract research organizations and other vendors. Auditing the Company’s accruals for clinical trial costs is challenging due to the fact that information necessary to estimate the accruals is accumulated from multiple sources. In addition, in certain circumstances, the estimate of services that have been incurred during the reporting period requires judgment because the timing and pattern of vendor invoicing does not correspond to the level of services provided and there may be delays in invoicing from clinical study sites and other vendors. |
| How We Addressed the Matter in Our Audit | | To test the accrued clinical trial costs, our audit procedures included, among others, testing the completeness and accuracy of the underlying data used in the estimates and evaluating the significant assumptions including, but not limited to, patient enrollment and costs per patient, and rate of progress, which are used by management to estimate the recorded accruals. To assess the reasonableness of the significant assumptions, we corroborated the progress of clinical trials with the Company’s clinical team and obtained information directly from third parties related to active patient progress and currently enrolled patients. We also tested subsequent invoices received from such third parties and inspected the Company’s contracts with third parties and any pending change orders to assess the costs per patient and impact to the accrual through the balance sheet date. |
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| | | Accounting for Asset Purchase and Related Agreements with Janssen Pharmaceuticals Inc. |
| Description of the Matter | | As discussed in Note 11 to the consolidated financial statements, the Company concurrently entered into various agreements with Janssen Pharmaceuticals, Inc. including but not limited to an Asset Purchase Agreement, a Supply Agreement, and a Termination Agreement that terminated an existing Collaboration, Option and License Agreement, as amended (collectively, the “Agreements”). These Agreements resulted in the recognition of deferred revenue in the amount of $36.9 million and a gain on sale of nonfinancial assets in the amount of $54.2 million as of and for the year ended December 31, 2023.Accounting for the Agreements required the Company to make significant judgments, including but not limited to the identification of performance obligations, including determining whether the Agreements included a customer option for additional goods and services or whether it included a material right, as well as the standalone selling price of each identified performance obligation and nonfinancial asset to be transferred. The standalone selling price of the performance obligations and nonfinancial assets to be transferred were not directly observable; therefore, the Company estimated the standalone selling prices using an adjusted market assessment or a cost plus a margin approach. The estimated standalone selling prices were sensitive to changes in certain assumptions within the models such as expected market share and product profitability. In developing these assumptions, management considered both observable and unobservable inputs and changes to these assumptions could have a material effect on the estimated relative standalone selling price of each performance obligation and nonfinancial asset and the timing and pattern of income recognition. As a result, |
| auditing the identification of performance obligations and nonfinancial assets to be transferred and the related standalone selling prices required especially complex auditor judgment. | ||
| How We Addressed the Matter in Our Audit | | To audit the Company’s accounting for the Agreements, we tested the completeness of the identified performance obligations and nonfinancial assets and evaluated the reasonableness of the allocation of the total consideration among the identified performance obligations and nonfinancial assets. Our audit procedures included, among others, reading the Agreements and evaluating whether the terms of the contracts (including future purchase options) resulted in the existence of one or more material rights. We tested and evaluated the accuracy and completeness of the underlying data used in management's calculation of the standalone selling price for each performance obligation and nonfinancial asset transferred by comparing the significant assumptions described above to current industry trends using available industry information and other relevant factors. We also performed a sensitivity analysis of the significant assumptions to evaluate the effect that a change in the estimated standalone selling price of certain performance obligations resulting from changes in the significant assumptions would have on the allocation of transaction price to each performance obligation, as well as on the gain on sale of nonfinancial assets recognized during the period. |
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/s/Ernst & Young LLP
We have served as the Company’s auditor since 2016.
Jericho, New York
March 15, 2024
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