UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from _________________ to _________________
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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.
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).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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 Exchange Act.
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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 Exchange Act). Yes ☐ No
As of May 2, 2022, the registrant had
Table of Contents
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Page |
PART I. |
5 |
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Item 1. |
5 |
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5 |
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Condensed Consolidated Statements of Operations and Comprehensive Loss |
6 |
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7 |
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9 |
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10 |
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Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
20 |
Item 3. |
34 |
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Item 4. |
34 |
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PART II. |
35 |
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Item 1. |
35 |
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Item 1A. |
35 |
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Item 2. |
83 |
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Item 3. |
83 |
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Item 4. |
83 |
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Item 5. |
83 |
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Item 6. |
84 |
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85 |
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i
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements in this Quarterly Report on Form 10-Q, or this Quarterly Report, may constitute “forward-looking statements” for purposes of the federal securities laws. Our forward-looking statements include, but are not limited to, statements regarding our or our management team’s expectations, hopes, beliefs, intentions or strategies regarding the future. In addition, any statements that refer to projections, forecasts or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. The words “anticipate,” “believe,” “contemplate,” “continue,” “could,” “estimate,” “expect,” “intends,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “will,” “would” and similar expressions may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking. Forward-looking statements in this Quarterly Report may include, for example, statements about:
The forward-looking statements contained in this Quarterly Report are based on current expectations and beliefs concerning future developments and their potential effects on us. There can be no assurance that future developments affecting us will be those that we have anticipated. These forward-looking statements involve a number of risks, uncertainties (some of which are beyond our control) or other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements. These risks and uncertainties include, but are not limited to, those factors described in the section titled “Risk Factors” of this Quarterly Report. Should one or more of these risks or uncertainties materialize, or should any of our assumptions prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements. Some of these risks and uncertainties may in the future be amplified by the ongoing COVID-19 pandemic, including as a result of the
ii
emergence of new variants, and there may be additional risks that we consider immaterial, or which are unknown. It is not possible to predict or identify all such risks. We do not undertake any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.
You should read this Quarterly Report completely and with the understanding that our actual future results may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements.
SUMMARY OF MATERIAL RISKS ASSOCIATED WITH OUR BUSINESS
Our business is subject to numerous risks and uncertainties that you should be aware of before making an investment decision, including those highlighted in the section entitled “Risk Factors.” These risks include, but are not limited to, the following:
iii
The risks described above should be read together with the text of the full risk factors discussed in the section entitled “Risk Factors” and the other information set forth in this Quarterly Report, including our consolidated financial statements and the related notes, as well as in other documents that we file with the Securities and Exchange Commission, or the SEC. The risks summarized above or described in full elsewhere in this Quarterly Report are not the only risks that we face. Additional risks and uncertainties not presently known to us, or that we currently deem to be immaterial may also materially adversely affect our business, financial condition, results of operations and future growth prospects.
iv
PART I—FINANCIAL INFORMATION
Item 1. Financial Statements.
CEREVEL THERAPEUTICS HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts and per share data)
(Unaudited)
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As of |
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March 31, |
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December 31, |
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ASSETS |
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Current assets: |
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Cash and cash equivalents |
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$ |
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$ |
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Marketable securities |
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Prepaid expenses and other current assets |
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Total current assets |
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Marketable securities |
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Property and equipment, net |
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Operating lease assets |
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Restricted cash |
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Other long-term assets |
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Total assets |
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$ |
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$ |
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LIABILITIES AND STOCKHOLDERS’ EQUITY |
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Current liabilities: |
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Accounts payable |
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$ |
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$ |
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Accrued expenses and other current liabilities |
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Operating lease liabilities, current portion |
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Total current liabilities |
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Operating lease liabilities, net of current portion |
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Financing liability, related party (Notes 5 and 6) |
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Financing liability (Notes 5 and 6) |
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Other long-term liabilities |
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Total liabilities |
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Stockholders’ equity: |
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Preferred stock, $ |
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Common stock, $ |
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Additional paid-in capital |
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Accumulated other comprehensive loss |
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( |
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( |
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Accumulated deficit |
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( |
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( |
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Total stockholders’ equity |
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Total liabilities and stockholders’ equity |
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$ |
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$ |
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The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
5
CEREVEL THERAPEUTICS HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(In thousands, except share amounts and per share data)
(Unaudited)
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For the Three Months Ended |
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2022 |
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2021 |
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Operating expenses: |
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Research and development |
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$ |
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$ |
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General and administrative |
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Total operating expenses |
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Loss from operations |
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( |
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Interest income, net |
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Other income (expense), net |
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( |
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Loss before income taxes |
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( |
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( |
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Income tax benefit (provision), net |
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— |
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— |
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Net loss |
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$ |
( |
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$ |
( |
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Net loss per share, basic and diluted |
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$ |
( |
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$ |
( |
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Weighted-average shares used in calculating net loss per share, basic and diluted |
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Comprehensive loss: |
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Net loss |
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$ |
( |
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$ |
( |
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Other comprehensive loss |
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Changes in fair value attributable to instrument-specific credit risk |
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— |
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Unrealized gains (losses) on securities available-for-sale |
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( |
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— |
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Total other comprehensive loss |
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( |
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— |
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Comprehensive loss |
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$ |
( |
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$ |
( |
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The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
6
CEREVEL THERAPEUTICS HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(In thousands, except share amounts)
(Unaudited)
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Common stock |
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Additional |
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Accumulated other |
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Accumulated |
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Total |
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Shares |
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Amount |
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capital |
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loss |
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deficit |
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equity |
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Balance at December 31, 2021 |
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$ |
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$ |
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$ |
( |
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$ |
( |
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$ |
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Issuance of common stock under equity incentive plans related to vesting of RSUs |
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— |
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— |
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— |
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— |
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— |
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Issuance of common stock under equity incentive plans related to exercise of options |
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— |
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— |
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— |
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Equity-based compensation expense |
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— |
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— |
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— |
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— |
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Other comprehensive loss |
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— |
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— |
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— |
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( |
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— |
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( |
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Net loss |
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— |
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— |
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— |
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— |
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( |
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( |
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Balance at March 31, 2022 |
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$ |
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$ |
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$ |
( |
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$ |
( |
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$ |
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The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
7
CEREVEL THERAPEUTICS HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(In thousands, except share amounts)
(Unaudited)
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Common stock |
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Additional |
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Accumulated other |
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Accumulated |
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Total |
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Shares |
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Amount |
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capital |
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loss |
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deficit |
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equity |
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Balance at December 31, 2020 |
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$ |
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$ |
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$ |
— |
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$ |
( |
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$ |
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Issuance of common stock under equity incentive plans related to vesting of RSUs |
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— |
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— |
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— |
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— |
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— |
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Issuance of common stock under equity incentive plans related to exercise of options |
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— |
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— |
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— |
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Reclassification of private placement warrants from equity to other long-term liabilities |
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— |
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— |
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( |
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— |
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— |
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( |
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Equity-based compensation expense |
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— |
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— |
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— |
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— |
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Net loss |
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— |
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— |
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— |
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— |
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( |
) |
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( |
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Balance at March 31, 2021 |
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$ |
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$ |
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$ |
— |
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$ |
( |
) |
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$ |
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The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
8
CEREVEL THERAPEUTICS HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
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For the Three Months Ended |
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2022 |
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2021 |
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Cash flows from operating activities: |
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Net loss |
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$ |
( |
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$ |
( |
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Adjustments to reconcile net loss to net cash flows used in operating activities: |
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Depreciation and amortization |
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Adjustments to operating lease expense |
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( |
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( |
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Equity-based compensation |
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Change in fair value of financing liabilities |
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( |
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— |
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Change in fair value of private placement warrants |
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— |
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Other non-cash items |
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— |
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Changes in operating assets and liabilities, net: |
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Prepaid expenses and other current assets |
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Other assets |
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( |
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( |
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Accounts payable |
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( |
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Accrued expenses and other liabilities |
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( |
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Operating lease liability |
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— |
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Net cash flows used in operating activities |
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( |
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( |
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Cash flows from investing activities: |
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Purchases of marketable securities |
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( |
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— |
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Maturities and redemptions of marketable securities |
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— |
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Purchases of property and equipment |
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( |
) |
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( |
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Net cash flows used in investing activities |
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( |
) |
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( |
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Cash flows from financing activities: |
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Proceeds from the exercise of stock options |
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Deferred costs related to financing activities |
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( |
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— |
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Net cash flows provided by financing activities |
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Net decrease in cash, cash equivalents and restricted cash |
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( |
) |
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( |
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Cash, cash equivalents and restricted cash, beginning of the period |
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Cash, cash equivalents and restricted cash, end of the period |
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$ |
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$ |
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Reconciliation of cash, cash equivalents and restricted cash: |
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Cash and cash equivalents |
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$ |
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$ |
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Restricted cash |
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Total cash, cash equivalents and restricted cash |
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$ |
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$ |
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Supplemental cash flow disclosures from non-cash investing and financing activities: |
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Fixed asset additions included in accounts payable and other current liabilities |
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$ |
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$ |
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Unpaid offering costs included in accounts payable and other current liabilities |
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$ |
— |
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$ |
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The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
9
CEREVEL THERAPEUTICS HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Nature of Operations
Unless the context otherwise requires, references in these notes to “Cerevel,” “the company,” “we,” “us” and “our” and any related terms are intended to mean Cerevel Therapeutics Holdings, Inc. and its consolidated subsidiaries.
We are a clinical-stage biopharmaceutical company pursuing a targeted approach to neuroscience that combines a deep understanding of disease-related biology and neurocircuitry of the brain with advanced chemistry and central nervous system (CNS) target receptor selective pharmacology to discover and design new therapies. We seek to transform the lives of patients through the development of new therapies for neuroscience diseases, including schizophrenia, epilepsy and Parkinson’s disease. We are advancing our extensive and diverse pipeline with numerous clinical trials underway or planned, including three ongoing Phase 3 trials and an open-label extension trial for tavapadon in Parkinson's, two planned Phase 2 trials and a planned open-label extension trial for emraclidine in schizophrenia and an ongoing Phase 2 proof-of-concept trial with an open-label extension trial for darigabat in focal epilepsy. We have built a highly experienced team of senior leaders and neuroscience drug developers who combine a nimble, results-driven biotech mindset with the proven expertise of large pharmaceutical company experience and capabilities in drug discovery and development.
Our portfolio of product candidates is based on a differentiated approach to addressing neuroscience diseases, which incorporates three key pillars: (1) targeted neurocircuitry, where we seek to unlock new treatment opportunities by precisely identifying and targeting the neurocircuit that underlies a given neuroscience disease, (2) receptor subtype selectivity, where we selectively target the receptor subtype(s) related to the disease physiology to minimize undesirable off-target effects while maximizing activity and (3) differentiated pharmacology, where we design full and partial agonists, antagonists and allosteric modulators to precisely fine-tune the receptor pharmacology and neurocircuit activity to avoid over-activation or over-suppression of the endogenous physiologic range. In addition, our portfolio is supported by robust data packages and rigorous clinical trial execution designed to elucidate the key points of differentiation for our compounds. We believe that this science-driven approach is critical to achieving optimal therapeutic activity while minimizing unintended side effects of currently available therapies.
For additional information on our formation, please read Note 1, Nature of Operations, to our audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2021 (our Annual Report).
2. Risks and Liquidity
We are subject to risks and uncertainties common to clinical-stage companies in the biopharmaceutical industry. These risks include, but are not limited to, the introduction of new products, therapies, standards of care or new technological innovations, our ability to obtain and maintain adequate protection for our in-licensed technology, data or other intellectual property and proprietary rights and compliance with extensive government regulation and oversight. In addition, we are dependent upon the services of our employees, including key personnel, consultants, third-party contract research organizations and other third-party organizations.
Our product candidates, currently under development or that we may develop, will require significant additional research and development efforts, including extensive clinical testing and regulatory approval prior to commercialization. These efforts require significant amounts of additional capital, adequate personnel infrastructure and extensive compliance and reporting capabilities. There can be no assurance that our research and development activities will be successfully completed, that adequate protection for our licensed or developed technology will be obtained and maintained, that products developed will obtain necessary government regulatory approval or that any approved products will be commercially viable.
Our unaudited condensed consolidated financial statements have been prepared on the basis of continuity of operations, the realization of assets and the satisfaction of liabilities in the ordinary course of business. We have incurred significant operating losses since our inception and, as of March 31, 2022, had an accumulated deficit of $
We have funded our operations primarily with the net proceeds received from the issuance of preferred stock and common stock, net proceeds from the consummation of our Business Combination (as defined in Note 14, Related Parties, to these unaudited condensed consolidated financial statements) and our Funding Agreements (as defined in Note 5, Financing Liabilities, to these unaudited condensed consolidated financial statements). We believe that our available cash, cash equivalent and marketable security resources as of March 31, 2022, will enable us to fund our operating expense and capital expenditure requirements through at least 12 months from the issuance date of these financial statements.
10
Impact of the Ongoing COVID-19 Pandemic
We are closely monitoring the impact of the ongoing COVID-19 pandemic on all aspects of our business, including how it has impacted and may continue to impact our operations and the operations of our suppliers, vendors and business partners. The extent to which COVID-19 impacts our business, results of operations and financial condition will depend on future developments, which, despite progress in vaccination efforts, are highly uncertain and cannot be predicted with confidence, including the duration of the pandemic, new information that may emerge concerning the severity of COVID-19, such as new variants, which may impact rates of infection and vaccination efforts, developments or perceptions regarding the safety of vaccines and the extent and effectiveness of actions to contain COVID-19 or treat its impact, including vaccination campaigns and lockdown measures, among others.
We have not incurred any significant impairment losses in the carrying values of our assets as a result of the pandemic and we are not aware of any specific related event or circumstance that would require us to revise our estimates reflected in our unaudited condensed consolidated financial statements. Our estimates of the impact on our business may change based on new information that may emerge concerning COVID-19 and the actions to contain it or treat its impact and the economic impact on local, regional, national and international markets.
3. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements include those of the company and its subsidiaries, Cerevel Therapeutics, Inc., Cerevel Therapeutics, LLC and Cerevel MA Securities Corp., after elimination of all intercompany accounts and transactions. The accompanying unaudited condensed consolidated financial statements and notes hereto have been prepared in conformity with the rules and regulations of the Securities and Exchange Commission (SEC) for interim financial reporting and, therefore, omit or condense certain footnotes and other information normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) as set forth in the Financial Accounting Standards Board’s (FASB) accounting standards codification. Any reference in these notes to applicable guidance is meant to refer to the authoritative GAAP as found in the Accounting Standards Codification (ASC) and Accounting Standards Update (ASU) of the FASB.
In the opinion of management, all adjustments necessary for a fair statement of the financial information, which are of a normal and recurring nature, have been made for the interim periods reported. Results of operations for the three months ended March 31, 2022 and 2021, are not necessarily indicative of the results for the entire fiscal year or any other period. The unaudited condensed consolidated financial statements for the three months ended March 31, 2022 and 2021, have been prepared on the same basis as and should be read in conjunction with our audited consolidated financial statements and notes included in our Annual Report.
Use of Estimates
The preparation of condensed consolidated financial statements in conformity with GAAP requires us to make estimates, judgments and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements, and the reported amounts of expenses during the reporting periods. Significant estimates and assumptions made in the accompanying condensed consolidated financial statements include, but are not limited to, the fair value of our financing liabilities, the fair value of stock options, the accrual for research and development expense and the recoverability of our net deferred tax assets and the related valuation allowance. The impact on accounting estimates and judgments on our financial condition and results of operations due to COVID-19 has introduced additional uncertainties. We evaluate our estimates and assumptions on an ongoing basis using historical experience and other factors and adjust those estimates and assumptions when facts and circumstances change. Actual results could differ materially from those estimates.
Restricted Cash
In connection with our entering into the lease agreement for our headquarters in Cambridge, MA, in July 2019, we were required to provide a security deposit in the form of a letter of credit. We have classified this amount as restricted cash within our condensed consolidated balance sheets as of March 31, 2022 and December 31, 2021.
For additional information related to our other significant accounting policies, please read Note 4, Summary of Significant Accounting Policies, to our audited consolidated financial statements included in our Annual Report.
Recent Accounting Guidance
From time to time, new accounting pronouncements are issued by the FASB or other standard setting bodies and adopted by the company as of the specified effective date. Unless otherwise discussed, the company believes that the impact of recently issued standards that are not yet effective will not have a material impact on our financial position or results of operations upon adoption.
11
4. Pfizer License Agreement
In August 2018, we entered into a license agreement with Pfizer (the Pfizer License Agreement) pursuant to which we were granted an exclusive, sublicensable, worldwide license under certain Pfizer patent rights, and a non-exclusive, sublicensable, worldwide license under certain Pfizer know-how to develop, manufacture and commercialize certain compounds and products, which currently constitute substantially all of our asset portfolio, in the field of treatment, prevention, diagnosis, control and maintenance of all diseases and disorders in humans, subject to the terms and conditions of the Pfizer License Agreement.
Under the Pfizer License Agreement, we are solely responsible for the development, manufacture, regulatory approval and commercialization of compounds and products in the field and we will pay Pfizer tiered royalties on the aggregate net sales during each calendar year, determined on a product-by-product basis, with respect to products under the Pfizer License Agreement, and we may pay potential milestone payments to Pfizer, based on the successful achievement of certain regulatory and commercial milestones. To date,
For additional information related to our Pfizer License Agreement, please read Note 6, Pfizer License Agreement, to our audited consolidated financial statements included in our Annual Report.
5. Financing Liabilities
Funding Agreements
On April 12, 2021 (the Effective Date), we entered into a funding agreement with NovaQuest Co-Investment Fund XVI, L.P. (NovaQuest and the NovaQuest Funding Agreement) and a funding agreement with BC Pinnacle Holdings, LP (Bain, the Bain Funding Agreement and, together with the NovaQuest Funding Agreement, the Funding Agreements), pursuant to which NovaQuest and Bain will provide funding to support our development of tavapadon for the treatment of Parkinson’s disease.
Under the terms of the Funding Agreements, we will receive up to $
In return, we agreed to pay to NovaQuest and Bain significant regulatory milestone, sales milestone and royalty payments upon approval of tavapadon by the FDA that collectively will not exceed $
We determined that each funding agreement represents a financial instrument that is considered to be a debt host containing embedded redemption features due to certain contingencies related to repayment. We elected to account for the Funding Agreements in accordance with the fair value option as permitted under ASC 825, Financial Instruments.
As of March 31, 2022 and December 31, 2021, the estimated fair value of the financing liability related to potential amounts payable to Bain under the Bain Funding Agreement, which is reflected within our condensed consolidated balance sheets as financing liability, related party, totaled $
During the three months ended March 31, 2022, we recognized gains of approximately $
12
For additional information related to our Funding Agreements, please read Note 8, Financing Liabilities, to our audited consolidated financial statements included in our Annual Report.
6. Fair Value Measurements
The tables below present information about our assets and liabilities that are measured and carried at fair value on a recurring basis and indicate the level within the fair value hierarchy we utilized to determine such fair values:
As of March 31, 2022 (In thousands) |
|
Quoted |
|
|
Significant |
|
|
Significant |
|
|
Total |
|
||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cash equivalents |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Money market funds |
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
||
Commercial paper |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Marketable securities (current) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
U.S. government treasuries |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Corporate debt securities |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Commercial paper |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Marketable securities (non-current) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
U.S. government treasuries |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Restricted cash |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Money market funds |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Total assets |
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
|||
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Financing liability, related party |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
||
Financing liability |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
||
Total liabilities |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|
$ |
|
||
As of December 31, 2021 (In thousands) |
|
Quoted |
|
|
Significant |
|
|
Significant |
|
|
Total |
|
||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cash equivalents |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Money market funds |
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
||
Corporate debt securities |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Commercial paper |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Marketable securities (current) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
U.S. government treasuries |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Corporate debt securities |
|
|||||||||||||||