Baudax Bio, Inc. (Baudax Bio or the Company) is a pharmaceutical company primarily focused on developing and commercializing innovative products for acute care settings.  Baudax Bio believes it can bring valuable therapeutic options for patients, prescribers and payers, such as its lead product candidate, intravenous (IV) meloxicam, to the acute care markets.

In March 2019, the Company received a second Complete Response Letter (CRL) from the U.S. Food and Drug Administration (FDA), regarding the New Drug Application (NDA), for IV meloxicam, and in April 2019 the Company announced it had implemented a strategic  restructuring initiative, and corresponding reduction in workforce, aimed at reducing operating expenses, while maintaining key personnel needed to evaluate strategic partnerships and obtain FDA approval of IV meloxicam.

On October 31, 2019, the Company announced that it had received a written decision from the FDA granting its appeal of the CRL relating to the NDA seeking approval for IV meloxicam. The FDA granted the Company’s appeal and indicated that the Company’s application provides sufficient evidence of effectiveness and safety to support approval.  The letter also states that before IV meloxicam can be approved and legally marketed, agreed upon labeling (prescribing information) must be negotiated with the FDA. The Company resubmitted the NDA for IV meloxicam in December 2019 and the FDA has set a PDUFA goal date of February 20, 2020.

The Separation

Pursuant to the Separation Agreement between Recro Pharma, Inc. (Recro) and Baudax Bio, Recro transferred the assets, liabilities, and operations of its Acute Care business to the Company (the Separation) and, on November 21, 2019, the distribution date, each Recro shareholder received one share of the Company’s common stock for every two and one-half shares of Recro common stock held of record at the close of business on November 15, 2019, the record date for the distribution (the Distribution).  Additionally, Recro contributed $19,000 of cash to Baudax Bio in connection with the Separation. Following the Distribution and Separation, Baudax Bio operates as a separate, independent company. References to “the Company” represent Baudax Bio or the Acute Care Business of Recro for periods prior to the Separation.

Basis of Presentation

For all periods prior to the Separation, the accompanying combined financial statements represent the Acute Care Business of Recro and are derived from Recro’s consolidated financial statements. The Acute Care Business of Recro did not consist of a separate, standalone group of legal entities for public company reporting and certain other corporate functions in the periods prior to the Separation and, accordingly, allocations were required through the Distribution date. These combined financial statements, prior to the Separation, reflect the Company’s historical financial position, results of operations and cash flows as the business was operated as part of Recro prior to the Separation, in conformity with U.S. generally accepted accounting principles (U.S. GAAP). See Note 15 for a description of the agreements entered into between Recro and Baudax Bio following the Separation.

Prior to the Separation, the combined financial statements include certain assets and liabilities that have historically been held at the Recro corporate level, but which are specifically identifiable or allocable to the Company. All intracompany transactions and accounts have been eliminated. All intercompany transactions between the Company and Recro are considered to be effectively settled in the combined financial statements at the time the transaction is recorded. The total net effect of the settlement of these intercompany transactions is reflected in the combined statements of cash flows as a financing activity and in the combined balance sheet as parent company net investment. The Company does not record interest expense on amounts funded by Recro. Long-term debt held at the Recro corporate level was retained by Recro and was not assumed by the Company.

Historically, certain corporate level activity costs have been incurred and reported within the legal entity that includes the Recro Acute Care Business. The Company’s combined financial statements, prior to the Separation, include an allocation of these expenses related to these certain Recro corporate functions, including senior management, legal, human resources, finance, and information technology through the distribution date. These expenses are included in general and administrative expense and have been allocated based on direct usage or benefit where identifiable, with the remainder allocated on a pro rata basis of expenses, headcount, or other measures. The Company considers the expense allocation methodology and results to be reasonable for all periods presented, however, the allocations may not be indicative of the actual expense that would have been incurred had the Company operated as an independent, publicly-traded company for the periods presented prior to the Separation. For the years ended December 31, 2019 (prior to the Separation) and 2018, a total of $7,278 and $5,165, respectively, of costs have been allocated to Recro’s contract manufacturing and development segment (the CDMO business).

The income tax amounts in these combined financial statements for periods prior to the Separation have been calculated based on a separate return methodology and are presented as if the Company was a standalone taxpayer in each of its tax jurisdictions prior to the Separation. Because of the Company’s history of losses as a standalone entity, a full valuation allowance is recorded against deferred tax assets in all periods presented.

Upon the Separation, the Company adopted its own share‑based compensation plan. Recro maintains its stock-based compensation plan at a corporate level. The Company’s employees participated in Recro’s stock-based compensation plans prior to the Separation and a portion of the cost of those plans is included in the Company’s combined financial statements using an allocation methodology similar to the methodology used to allocate the cash compensation of the related employees.

The parent company net investment balances in these combined financial statements represents the accumulated deficit of the Recro Acute Care Business and the net funding provided to the Company, which are reflected as net transfers from parent in the combined statements of parent company net investment prior to the Separation.

Subsequent to the Separation, the accompanying consolidated financial statements are presented on a consolidated basis and include all of the accounts and operations of Baudax Bio and its subsidiaries. The consolidated financial statements reflect the financial position, results of operations and cash flows of Baudax Bio in accordance with U.S. GAAP. All significant intercompany accounts and transactions are eliminated in consolidation.

The Company has determined that it operates in a single segment involved in the development of innovative products for hospital and other acute care settings.