Company: TVRD
Filing Date: 2025-02-14
Form Type: S-4/A
Source: 0001104659-25-013053
Chunk: 796

Company: Tvardi Therapeutics, Inc.
Filing Date: 2025-02-14
Form: S-4/A
Chunk 796
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 provide a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter 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 matter below, providing a separate opinion on the critical audit matter or on the account or disclosure to which it relates. Royalty Financing Obligation

| ​ | Description of the Matter | ​ | ​ | As discussed in Note 10 to the financial statements, on November 1, 2023, the Company entered into a Royalty Purchase and Sale Agreement (“royalty financing obligation”) with a third party, pursuant to which the Company sold certain of its rights to receive royalty and milestone payments in exchange for up to $40.0 million. The Company received initial upfront proceeds of $17.5 million, less certain expenses, followed by a $20.0 million milestone payment prior to December 31, 2023, based | ​ |

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TABLE OF CONTENTS

| ​ | ​                                        | ​ | ​ | on conditions met per the agreement. The Company will repay the lender at a multiple of the initial proceeds received, which may vary based on timing and amount of cash flows received from its licensing partners. The Company determined that the royalty financing should be treated as a financing arrangement under ASC 470 classified as a liability.                                                                                                                                                                                                                                                                                                                                  
 Auditing the Company’s accounting for the royalty financing obligation was complex due to the judgment that was required in determining the balance sheet classification of the royalty financing obligation.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 | ​ |
| ​ | How We Addressed the Matter in Our Audit | ​ | ​ | We obtained an understanding, evaluated the design, and tested the operating effectiveness of controls that address the risk of material misstatement, including controls over management’s review of the terms and conditions of the royalty financing obligation agreement and the related accounting treatment.                                                                                                                                                                                                                                                                                                                                                                            
 To audit the Company’s accounting related to the royalty financing, we evaluated the terms of the royalty financing obligation and the interpretation of the related accounting guidance to determine sale vs. financing and other underlying accounting conclusions. To test the initial classification of the royalty financing obligation, we performed audit procedures that included