administrative or ministerial changes that are not adverse to any holder other than in any de minimis respect), provided that the terms of each Strongbridge Rollover Option with an exercise price of $4.50 or less (prior to the adjustment described above) were amended to provide that it shall remain exercisable for a period of time following the effective time of the Scheme equal to the lesser of (A) the maximum remaining term of such corresponding Strongbridge Option and (B) the fourth anniversary of the effective date of the Merger, in each case regardless of whether the holder of such Strongbridge Rollover Option experiences a termination of employment or service on or following the effective time of the Scheme and (iv) the Company issued to each holder of a Strongbridge Rollover Option one CVR with respect to each Strongbridge Share subject to the applicable Strongbridge Option, provided that in no event shall such holder be entitled to any payments with respect to such CVR unless the corresponding Strongbridge Option has been exercised on or prior to any such payment. Additionally, on completion of the Acquisition, (a) each outstanding and unexercised Strongbridge warrant (except private placement warrants) was assumed by the Company such that, upon exercise, the applicable holders will have the right to have delivered to them the reference property (as such term is defined in the Strongbridge assumed warrants) and (b) each outstanding and unexercised Strongbridge private placement warrant was assumed by the Company such that the applicable holders will have the right to subscribe for Company Shares, in accordance with certain terms of the Strongbridge private placement warrants. The Acquisition was accounted for as a business combination using the acquisition method of accounting under the provisions of ASC 805, Business Combinations. The Acquisition will diversify and increase the Company’s revenue base into the specialized commercial platforms and expand the development pipeline. Additionally, the Company expects to achieve significant synergies by eliminating redundant processes and headcount, most notably within the commercial, executive and general and administrative functions. Acquisition consideration The acquisition-date fair value of the consideration transferred totaled $169.1 million, which consisted of the following: Fair value of consideration transferred (in thousands, except share number) Xeris Biopharma Holdings, Inc. common shares (58,082,606 shares) $ 137,655 Unexercised Strongbridge options assumed by Xeris Pharma and converted into options to purchase Company Shares 6,404 Strongbridge warrants 2,467 Contingent consideration (Contingent value rights) 22,531 Total consideration $ 169,057 The Company’s acquisition accounting is primarily pending final valuation and potential CVR fair value adjustments to the consideration. The fair value of the common stock issued was determined based on the closing market price of shares of the Company’s common stock on the acquisition date. The fair value of the private placement warrants was determined using the Black-Scholes valuation model which considers the expected terms of the private placement warrants from the acquisition closing date as well as the risk-free interest rate, current exercise price of $2.50 multiplied by (the average of Xeris Pharma closing prices for the 20-day period ending three trading days prior to acquisition closing date/the average of Strongbridge closing prices for the 20-day period ending three trading days prior to acquisition closing date) and a volatility of 50%. The CVRs represent contingent additional consideration of up to $1.00 for each CVR, payable to CVR holders, to satisfy future performance milestones, settleable in cash, common stock, or a combination of cash and common stock, at the Company's sole election. The CVRs are conditioned upon the achievement of the following: • Keveyis Milestone: $0.25 per CVR, upon the earlier of the first listing of any patent in the FDA's Orange Book for Keveyis by the end of 2023 or the first achievement of at least $40 million in net sales of Keveyis in 2023; • 2023 Recorlev Milestone: $0.25 per CVR, upon the first achievement of at least $40 million in net sales of Recorlev in 2023; and • 2024 Recorlev Milestone: $0.50 per CVR, upon the first achievement of at least $80 million in net sales of Recorlev in 2024. Refer to "Note 12 - Fair Value Measurements", for information related to the fair value measurements on CVRs and valuation methods utilized. XERIS BIOPHARMA HOLDINGS, INC. Notes to Consolidated Financial Statements 102
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