10-Q 1 acrs-20220930x10q.htm 10-Q
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7

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark one)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2022

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                      

Commission File Number 001-37581

Aclaris Therapeutics, Inc.

(Exact Name of Registrant as Specified in Its Charter)

Delaware
(State or Other Jurisdiction of
Incorporation or Organization)

46-0571712
(I.R.S. Employer
Identification No.)

640 Lee Road, Suite 200
Wayne, PA
(Address of principal executive offices)

19087
(Zip Code)

Registrant’s telephone number, including area code: (484324-7933

N/A

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class:

 

Trading Symbol(s)

Name of Each Exchange on which Registered

Common Stock, $0.00001 par value

 

ACRS

The Nasdaq Stock Market, LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  No 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes  No 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Securities Exchange Act of 1934:

Large accelerated filer  

Accelerated filer  

Non-accelerated filer  

Smaller reporting company  

Emerging growth company  

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Securities Exchange Act of 1934).   Yes  No 

The number of outstanding shares of the registrant’s common stock, par value $0.00001 per share, as of the close of business on October 31, 2022 was 66,683,191.

ACLARIS THERAPEUTICS, INC.

INDEX TO FORM 10-Q

    

PAGE

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

2

Unaudited Condensed Consolidated Balance Sheets as of September 30, 2022 and December 31, 2021

2

Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss for the three and nine months ended September 30, 2022 and 2021

3

Unaudited Condensed Consolidated Statements of Stockholders’ Equity for the three and nine months ended September 30, 2022 and 2021

4

Unaudited Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2022 and 2021

5

Notes to Unaudited Condensed Consolidated Financial Statements

6

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

20

Item 3. Quantitative and Qualitative Disclosures about Market Risk

36

Item 4. Controls and Procedures

36

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

38

Item 1A. Risk Factors

38

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

38

Item 6. Exhibits

38

Signatures

40

Part I. FINANCIAL INFORMATION

Item 1. Financial Statements

ACLARIS THERAPEUTICS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In thousands, except share and per share data)

    

September 30, 

December 31, 

    

2022

    

2021

Assets

Current assets:

Cash and cash equivalents

$

61,653

$

27,349

Short-term marketable securities

 

186,409

 

164,065

Accounts receivable, net

597

623

Prepaid expenses and other current assets

 

7,914

 

12,995

Total current assets

 

256,573

 

205,032

Marketable securities

 

 

34,242

Property and equipment, net

 

1,145

 

1,335

Intangible assets

6,992

7,048

Other assets

 

2,922

 

3,554

Total assets

$

267,632

$

251,211

Liabilities and Stockholders’ Equity

Current liabilities:

Accounts payable

$

7,667

$

9,985

Accrued expenses

 

9,154

 

10,051

Current portion of lease liabilities

766

693

Discontinued operations

2,202

2,202

Total current liabilities

 

19,789

 

22,931

Other liabilities

1,638

 

2,172

Contingent consideration

26,000

28,400

Deferred tax liability

 

367

 

367

Total liabilities

 

47,794

 

53,870

Commitments and contingencies (Note 16)

Stockholders’ Equity:

Preferred stock, $0.00001 par value; 10,000,000 shares authorized and no shares issued or outstanding at September 30, 2022 and December 31, 2021

Common stock, $0.00001 par value; 100,000,000 shares authorized at September 30, 2022 and December 31, 2021; 66,679,641 and 61,228,446 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively

 

1

 

1

Additional paid‑in capital

 

875,982

 

792,971

Accumulated other comprehensive loss

 

(1,465)

 

(224)

Accumulated deficit

 

(654,680)

 

(595,407)

Total stockholders’ equity

 

219,838

 

197,341

Total liabilities and stockholders’ equity

$

267,632

$

251,211

The accompanying notes are an integral part of these condensed consolidated financial statements.

2

ACLARIS THERAPEUTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(Unaudited)

(In thousands, except share and per share data)

Three Months Ended

Nine Months Ended

September 30, 

September 30, 

    

2022

    

2021

    

2022

    

2021

Revenues:

Contract research

$

1,090

$

1,415

$

3,529

$

4,556

Licensing

17,898

214

18,378

612

Other

30

30

92

92

Total revenue

19,018

1,659

21,999

5,260

Costs and expenses:

Cost of revenue

923

1,099

3,146

3,564

Research and development

 

23,656

13,976

 

56,741

 

29,711

General and administrative

 

5,813

5,979

 

17,987

 

16,676

Licensing

7,300

7,300

Revaluation of contingent consideration

2,200

900

(2,400)

22,139

Total costs and expenses

 

39,892

 

21,954

 

82,774

 

72,090

Loss from operations

 

(20,874)

 

(20,295)

 

(60,775)

 

(66,830)

Other income (expense), net

 

922

 

(851)

 

1,502

 

(1,231)

Net loss

$

(19,952)

$

(21,146)

$

(59,273)

$

(68,061)

Net loss per share, basic and diluted

$

(0.30)

$

(0.35)

$

(0.92)

$

(1.23)

Weighted average common shares outstanding, basic and diluted

 

66,675,337

 

61,219,321

 

64,718,008

 

55,215,037

Other comprehensive (loss) income:

Unrealized gain (loss) on marketable securities, net of tax of $0

$

(139)

$

5

$

(1,241)

$

(5)

Foreign currency translation adjustment

176

96

Total other comprehensive (loss) income

 

(139)

 

181

 

(1,241)

 

91

Comprehensive loss

$

(20,091)

$

(20,965)

$

(60,514)

$

(67,970)

The accompanying notes are an integral part of these condensed consolidated financial statements.

3

ACLARIS THERAPEUTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF

STOCKHOLDERS’ EQUITY

(Unaudited)

(In thousands, except share data)

Accumulated

Common Stock

Additional

Other

Total

Par

Paidin

Comprehensive

Accumulated

Stockholders’

  

  Shares 

  

Value

  

Capital

  

Loss

  

Deficit

  

Equity

Balance at December 31, 2021

61,228,446

$

1

$

792,971

$

(224)

$

(595,407)

$

197,341

Issuance of common stock in connection with exercise of stock options and vesting of restricted stock units

509,037

49

49

Unrealized loss on marketable securities

(748)

(748)

Stock-based compensation expense

2,346

2,346

Net loss

(18,789)

(18,789)

Balance at March 31, 2022

61,737,483

$

1

$

795,366

$

(972)

$

(614,196)

$

180,199

Issuance of common stock in connection with exercise of stock options and vesting of restricted stock units

91,388

88

88

Issuance of common stock under at-the-market sales agreement, net of offering costs of $2,341

4,838,709

72,659

72,659

Unrealized loss on marketable securities

(354)

(354)

Stock-based compensation expense

3,692

3,692

Net loss

(20,532)

(20,532)

Balance at June 30, 2022

66,667,580

$

1

$

871,805

$

(1,326)

$

(634,728)

$

235,752

Issuance of common stock in connection with vesting of restricted stock units

12,061

(11)

(11)

Unrealized loss on marketable securities

(139)

(139)

Stock-based compensation expense

4,188

4,188

Net loss

(19,952)

(19,952)

Balance at September 30, 2022

66,679,641

$

1

$

875,982

$

(1,465)

$

(654,680)

$

219,838

Accumulated

Common Stock

Additional

Other

Total

Par

Paidin

Comprehensive

Accumulated

Stockholders’

  

  Shares 

  

Value

  

Capital

  

Income (Loss)

  

Deficit

  

Equity

Balance at December 31, 2020

45,109,314

$

$

542,286

$

(94)

$

(504,542)

$

37,650

Issuance of common stock in connection with exercise of stock options and warrants and vesting of restricted stock units

666,144

(2,579)

(2,579)

Issuance of common stock in connection with public offering, net of offering costs of $7,011

6,306,271

103,348

103,348

Unrealized loss on marketable securities

(35)

(35)

Foreign currency translation adjustment

(11)

(11)

Stock-based compensation expense

2,675

2,675

Net loss

(28,754)

(28,754)

Balance at March 31, 2021

52,081,729

$

$

645,730

$

(140)

$

(533,296)

$

112,294

Issuance of common stock in connection with exercise of stock options and vesting of restricted stock units

1,024,666

1,041

1,041

Issuance of common stock in connection with public offering, net of offering costs of $8,899

8,098,592

1

134,851

134,852

Unrealized gain on marketable securities

25

25

Foreign currency translation adjustment

(69)

(69)

Stock-based compensation expense

3,833

3,833

Net loss

(18,161)

(18,161)

Balance at June 30, 2021

61,204,987

$

1

$

785,455

$

(184)

$

(551,457)

$

233,815

Issuance of common stock in connection with vesting of restricted stock units

21,763

29

29

Unrealized gain on marketable securities

5

5

Foreign currency translation adjustment

176

176

Stock-based compensation expense

3,702

3,702

Net loss

(21,146)

(21,146)

Balance at September 30, 2021

61,226,750

$

1

$

789,186

$

(3)

$

(572,603)

$

216,581

The accompanying notes are an integral part of these condensed consolidated financial statements.

4

ACLARIS THERAPEUTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)

Nine Months Ended

September 30, 

    

2022

    

2021

Cash flows from operating activities:

    

    

    

    

Net loss

$

(59,273)

$

(68,061)

Adjustments to reconcile net loss to net cash used in operating activities:

Depreciation and amortization

 

607

 

726

Stock-based compensation expense

 

10,226

 

10,209

Revaluation of contingent consideration

(2,400)

22,139

Loss on extinguishment of debt

752

Changes in operating assets and liabilities:

Accounts receivable

26

(39)

Prepaid expenses and other assets

 

3,408

 

(8)

Accounts payable

 

(2,319)

 

1,293

Accrued expenses

 

1,273

 

(2,070)

Net cash used in operating activities

 

(48,452)

 

(35,059)

Cash flows from investing activities:

Purchases of property and equipment

 

(500)

 

(108)

Purchases of marketable securities

 

(118,729)

 

(199,862)

Proceeds from sales and maturities of marketable securities

 

129,155

 

41,514

Net cash provided by (used in) investing activities

 

9,926

 

(158,456)

Cash flows from financing activities:

Proceeds from issuance of common stock in connection with public offerings, net of issuance costs

238,200

Proceeds from issuance of common stock under the at-the-market sales agreement, net of issuance costs

72,744

Repayment of debt

(11,483)

Payments of employee withholding taxes related to restricted stock unit award vesting

(34)

(3,122)

Proceeds from exercise of employee stock options and the issuance of stock

120

1,459

Net cash provided by financing activities

 

72,830

 

225,054

Net increase in cash and cash equivalents

 

34,304

 

31,539

Cash and cash equivalents at beginning of period

 

27,349

 

22,063

Cash and cash equivalents at end of period

$

61,653

$

53,602

Supplemental disclosure of non-cash investing and financing activities:

Additions to property and equipment included in accounts payable

$

4

$

The accompanying notes are an integral part of these condensed consolidated financial statements.

5

ACLARIS THERAPEUTICS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. Organization and Nature of Business

Overview

Aclaris Therapeutics, Inc. was incorporated under the laws of the State of Delaware in 2012. In 2015,  Aclaris Therapeutics International Limited (“ATIL”) was established under the laws of the United Kingdom as a wholly-owned subsidiary of Aclaris Therapeutics, Inc. In 2017, Confluence Life Sciences, Inc. (now known as Aclaris Life Sciences, Inc.) (“Confluence”) was acquired by Aclaris Therapeutics, Inc. and became a wholly-owned subsidiary thereof.  Aclaris Therapeutics, Inc., ATIL and Confluence are referred to collectively as the “Company.”  The Company is a clinical-stage biopharmaceutical company focused on developing novel drug candidates for immuno-inflammatory diseases.  In addition to developing its novel drug candidates, the Company is pursuing strategic alternatives, including identifying and consummating transactions with third-party partners, to further develop, obtain marketing approval for and/or commercialize its novel drug candidates.  

Liquidity

The Company’s condensed consolidated financial statements have been prepared on the basis of continuity of operations, realization of assets and the satisfaction of liabilities in the ordinary course of business.  As of September 30, 2022, the Company had cash, cash equivalents and marketable securities of $248.1 million and an accumulated deficit of $654.7 million.  Since inception, the Company has incurred net losses and negative cash flows from its operations.  Prior to the acquisition of Confluence, the Company had never generated revenue.  There can be no assurance that profitable operations will ever be achieved, and, if achieved, will be sustained on a continuing basis. In addition, development activities, including clinical and preclinical testing of the Company’s drug candidates, will require significant additional financing.  The future viability of the Company is dependent on its ability to successfully develop its drug candidates and to generate revenue from identifying and consummating transactions with third-party partners to further develop, obtain marketing approval for and/or commercialize its development assets or to raise additional capital to finance its operations.  The Company will require additional capital to complete the clinical development of zunsemetinib (ATI-450), ATI-1777 and ATI-2138, to develop its preclinical compounds, and to support its discovery efforts.  

Additional funds may not be available on a timely basis, on commercially acceptable terms, or at all, and such funds, if raised, may not be sufficient to enable the Company to continue to implement its long-term business strategy.  The Company’s ability to raise additional capital may be adversely impacted by the potential worsening of global economic conditions, including inflationary pressures, and the recent disruptions to, and volatility in, the credit and financial markets in the United States and worldwide resulting from the COVID-19 pandemic and geopolitical tensions.  If the Company is unable to raise sufficient additional capital or generate revenue from transactions with potential third-party partners for the development and/or commercialization of its drug candidates, it may need to substantially curtail planned operations. The Company’s failure to raise capital as and when needed could have a negative impact on its financial condition and ability to pursue its business strategies.  

The Company has evaluated whether there are conditions and events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that its condensed consolidated financial statements are issued.  As of the report date, the Company does not believe that substantial doubt exists about its ability to continue as a going concern.  The Company believes its existing cash, cash equivalents and marketable securities are sufficient to fund its operating and capital expenditure requirements for a period greater than 12 months from the date of issuance of these condensed consolidated financial statements.

6

2. Summary of Significant Accounting Policies

Unaudited Interim Financial Information

The accompanying condensed consolidated balance sheet as of September 30, 2022, the condensed consolidated statements of operations and comprehensive loss for the three and nine months ended September 30, 2022 and 2021, the condensed consolidated statement of stockholders’ equity for the three and nine months ended September 30, 2022 and 2021, and the condensed consolidated statements of cash flows for the nine months ended September 30, 2022 and 2021 are unaudited.  The unaudited interim condensed consolidated financial statements have been prepared on the same basis as the audited annual financial statements contained in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on February 24, 2022 and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments necessary for the fair statement of the Company’s financial position as of September 30, 2022, the results of its operations and comprehensive loss for the three and nine months ended September 30, 2022 and 2021, its changes in stockholders’ equity for the three and nine months ended September 30, 2022 and 2021 and its cash flows for the nine months ended September 30, 2022 and 2021.  The condensed consolidated balance sheet data as of December 31, 2021 was derived from audited financial statements but does not include all disclosures required by generally accepted accounting principles in the United States (“GAAP”).  The financial data and other information disclosed in these notes related to the three and nine months ended September 30, 2022 and 2021 are unaudited. The results for the three and nine months ended September 30, 2022 are not necessarily indicative of results to be expected for the year ending December 31, 2022, any other interim periods, or any future year or period.  The unaudited interim financial statements of the Company included herein have been prepared, pursuant to the rules and regulations of the SEC. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted from this report, as is permitted by such rules and regulations. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto for the year ended December 31, 2021 included in the Company’s Annual Report on Form 10-K filed with the SEC on February 24, 2022.  

Basis of Presentation

The accompanying condensed consolidated financial statements have been prepared in conformity with GAAP.  The condensed consolidated financial statements of the Company include the accounts of the operating parent company, Aclaris Therapeutics, Inc., and its wholly-owned subsidiaries, ATIL and Confluence.  All intercompany transactions have been eliminated.  Based upon the Company’s revenue, the Company believes that gross profit does not provide a meaningful measure of profitability and, therefore, has not included a line item for gross profit on the condensed consolidated statement of operations.  

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting periods.  Significant estimates and assumptions reflected in these financial statements include, but are not limited to, contingent consideration and the valuation of stock-based awards.  Estimates are periodically reviewed in light of changes in circumstances, facts and experience.  As of the date of issuance of these financial statements, the Company is not aware of any specific event or circumstance that would require an update to its estimates, assumptions and judgments or revise the carrying value of its assets or liabilities.  Actual results could differ from the Company’s estimates.

Reclassifications

Certain prior year amounts have been reclassified to conform to the current year financial statement presentation.

7

Significant Accounting Policies

The Company’s significant accounting policies are disclosed in the audited consolidated financial statements for the year ended December 31, 2021 included in the Company’s Annual Report on Form 10-K filed with the SEC on February 24, 2022.  Except as set forth below, there have been no changes to the Company’s significant accounting policies from those disclosed in the annual report.

Contingent Consideration

The Company initially recorded a contingent consideration liability at fair value on the date of acquisition related to future potential payments resulting from the acquisition of Confluence based upon significant unobservable inputs including the achievement of development, regulatory and commercial milestones, as well as estimated future sales levels and the discount rates applied to calculate the present value of the potential payments. Significant judgement was involved in determining the appropriateness of these assumptions.  These assumptions are considered Level 3 inputs.  Revaluation of the contingent consideration liability can result from changes to one or more of these assumptions.  The Company evaluates the fair value estimate of the contingent consideration liability on a quarterly basis with changes, if any, recorded as income or expense in the condensed consolidated statement of operations.

The fair value of contingent consideration is estimated using a probability-weighted expected payment model for regulatory milestone payments and a Monte Carlo simulation model for commercial milestone and royalty payments and then applying a risk-adjusted discount rate to calculate the present value of the potential payments.  Significant assumptions used in the Company’s estimates include the probability of achieving regulatory milestones and commencing commercialization, which are based on an asset’s current stage of development and a review of existing clinical data. Probability of success assumptions ranged between 10% and 40% at September 30, 2022.  Additionally, estimated future sales levels and the risk-adjusted discount rate applied to the potential payments are also significant assumptions used in calculating the fair value.  The discount rate ranged between 10.9% and 11.6% depending on the year of each potential payment.

Revenue Recognition

The Company accounts for revenue in accordance with Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers.  Under ASC Topic 606, revenue is recognized when a customer obtains control of promised goods or services in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services.  

To determine revenue recognition in accordance with ASC Topic 606, the Company 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 in the contract, and (v) recognize revenue when (or as) performance obligations are satisfied.  At contract inception, the Company assesses the goods or services promised within a contract with a customer to identify the performance obligations, and to determine if they are distinct.  The Company recognizes the revenue that is allocated to each distinct performance obligation when (or as) that performance obligation is satisfied.  The Company only recognizes revenue when collection of the consideration it is entitled to under a contract with a customer is probable.

Licensing Revenue

Licenses of Intellectual Property – The Company recognizes revenue received from non-refundable, upfront fees related to the licensing of intellectual property when the intellectual property is determined to be distinct from the other performance obligations identified in the arrangement, the license has been transferred to the customer, and the customer is able to use and benefit from the license. 

8

Milestone and Royalty Payments – The Company considers any future potential milestones and sales-based royalties to be variable consideration. The Company recognizes royalties and commercial milestone payments as revenue when the sales occur or the milestones are achieved pursuant to the sales-based royalty exception under ASC 606 - 10-55-65. The Company recognizes revenue from regulatory milestones when the regulatory milestone is achieved.

3. Fair Value of Financial Assets and Liabilities

The following tables present information about the fair value measurements of the Company’s financial assets and liabilities which are measured at fair value on a recurring and non-recurring basis, and indicate the level of the fair value hierarchy utilized to determine such fair values:

September 30, 2022

(In thousands)

    

Level 1

    

Level 2

    

Level 3

    

Total

Assets:

    

    

    

    

    

    

    

    

Cash equivalents

$

46,713

$

$

$

46,713

Marketable securities

 

186,409

186,409

Total assets

$

46,713

$

186,409

$

$

233,122

Liabilities:

Contingent consideration

$

$

$

26,000

$

26,000

Total liabilities

$

$

$

26,000

$

26,000

December 31, 2021

(In thousands)

    

Level 1

    

Level 2

    

Level 3

    

Total

Assets:

    

    

    

    

    

    

    

    

Cash equivalents

$

21,678

$

$

$

21,678

Marketable securities

 

198,307

198,307

Total assets

$

21,678

$

198,307

$

$

219,985

Liabilities:

Contingent consideration

$

$

$

28,400

$

28,400

Total liabilities

$

$

$

28,400

$

28,400

As of September 30, 2022 and December 31, 2021, the Company’s cash equivalents consisted of a money market fund, which was valued based upon Level 1 inputs.  The Company’s marketable securities as of September 30, 2022 and December 31, 2021 consisted of commercial paper, and asset-backed, U.S. government, foreign government agency and corporate debt securities, which were all valued based upon Level 2 inputs.  Marketable securities also included U.S. government agency debt securities as of September 30, 2022, which were valued based upon Level 2 inputs.

In determining the fair value of its Level 2 investments, the Company relies on quoted prices for identical securities in markets that are not active. These quoted prices are obtained by the Company with the assistance of a third-party pricing service based on available trade, bid and other observable market data for identical securities.  The Company compares the quoted prices obtained from the third-party pricing service to other available independent pricing information to validate the reasonableness of the quoted prices provided.  The Company evaluates whether adjustments to third-party pricing are necessary and, historically, the Company has not made adjustments to quoted prices obtained from the third-party pricing service.  During the three and nine months ended September 30, 2022 and 2021, there were no transfers into or out of Level 3.

9

The overall $2.4 million decrease in the fair value of the contingent consideration liability during the nine months ended September 30, 2022 was mainly due to higher discount rates, resulting from higher risk-free rates and wider credit spreads, being applied to potential payments relative to prior periods.  The decrease was partially offset by an increase in the contingent consideration liability as a result of the impact of the passage of time and other valuation model assumption modifications.

As of September 30, 2022 and December 31, 2021, the fair value of the Company’s available-for-sale marketable securities by type of security was as follows:

September 30, 2022

Gross

Gross

Amortized

Unrealized

Unrealized

Fair

(In thousands)

Cost

Gain

Loss

Value

Marketable securities:

Corporate debt securities

$

47,270

$

$

(472)

$

46,798

Commercial paper

59,659

59,659

Asset-backed debt securities

21,366

(176)

21,190

Foreign government agency debt securities

4,039

(27)

4,012

U.S. government and agency debt securities

55,542

(792)

54,750

Total marketable securities

$

187,876

$

$

(1,467)

$

186,409

December 31, 2021

Gross

Gross

Amortized

Unrealized

Unrealized

Fair

(In thousands)

Cost

Gain

Loss

Value

Marketable securities:

Corporate debt securities(1)

$

40,993

$

6

$

(50)

$

40,949

Commercial paper

71,837

71,837

Asset-backed debt securities

36,166

(43)

36,123

Foreign government agency debt securities

4,073

(13)

4,060

U.S. government debt securities(2)

45,465

(127)

45,338

Total marketable securities

$

198,534

$

6

$

(233)

$

198,307

(1) Included in Corporate debt securities is $9.2 million with maturity dates between one and five years.

(2) Included in US government debt securities is $25.0 million with maturity dates between one and five years.

4. Property and Equipment, Net

Property and equipment, net consisted of the following:

September 30, 

December 31, 

(In thousands)

2022

2021

Computer equipment

    

$

1,381

    

$

1,380

Lab equipment

1,886

1,605

Furniture and fixtures

620

620

Leasehold improvements

1,123

1,123

Property and equipment, gross

 

5,010

 

4,728

Accumulated depreciation

 

(3,865)

 

(3,393)

Property and equipment, net

$

1,145

$

1,335

Depreciation expense was $0.2 million for each of the three months ended September 30, 2022 and 2021, and   $0.6 million for each of the nine months ended September 30, 2022 and 2021.

10

5. Intangible Assets

Intangible assets consisted of the following:

Gross Cost

Accumulated Amortization

Remaining

September 30, 

December 31, 

September 30, 

December 31, 

(In thousands, except years)

   

Life (years)

   

2022

   

2021

   

2022

   

2021

Other intangible assets

4.8

$

751

$

751

$

388

$

332

In-process research and development

n/a

6,629

6,629

Total intangible assets

$

7,380

$

7,380

$

388

$

332

Amortization expense was $19 thousand for each of the three months ended September 30, 2022 and 2021, and $56 thousand for each of the nine months ended September 30, 2022 and 2021.

As of September 30, 2022, estimated future amortization expense was as follows:

Year Ending

(In thousands)

    

December 31,

2022

$

18

2023

 

75

2024

 

75

2025

75

2026

75

Thereafter

45

Total

$

363

6. Accrued Expenses

Accrued expenses consisted of the following:

September 30, 

December 31, 

(In thousands)

    

2022

    

2021

Employee compensation expenses

$

3,830

$

4,389

Research and development expenses

3,587

1,278

Litigation settlements (see Note 16)

2,650

Other

 

1,737

 

1,734

Total accrued expenses

$

9,154

$

10,051