Company Quick10K Filing
Constellation Pharmaceuticals
Price6.55 EPS-3
Shares26 P/E-2
MCap169 P/FCF-3
Net Debt-49 EBIT-80
TEV120 TEV/EBIT-1
TTM 2019-09-30, in MM, except price, ratios
10-Q 2020-03-31 Filed 2020-05-06
10-K 2019-12-31 Filed 2020-03-10
10-Q 2019-09-30 Filed 2019-11-06
10-Q 2019-06-30 Filed 2019-08-07
10-Q 2019-03-31 Filed 2019-05-08
10-K 2018-12-31 Filed 2019-03-14
10-Q 2018-09-30 Filed 2018-11-08
10-Q 2018-06-30 Filed 2018-08-14
S-1 2018-06-22 Public Filing
8-K 2020-06-16
8-K 2020-06-12
8-K 2020-06-04
8-K 2020-06-04
8-K 2020-05-14
8-K 2020-05-06
8-K 2020-04-03
8-K 2020-01-13
8-K 2020-01-02
8-K 2019-12-10
8-K 2019-12-09
8-K 2019-10-01
8-K 2019-09-24
8-K 2019-09-20
8-K 2019-08-07
8-K 2019-06-17
8-K 2019-06-06
8-K 2019-05-16
8-K 2019-05-15
8-K 2019-05-08
8-K 2019-04-01
8-K 2019-03-20
8-K 2019-03-14
8-K 2019-02-19
8-K 2019-01-07
8-K 2019-01-03
8-K 2018-12-10
8-K 2018-11-08
8-K 2018-11-01
8-K 2018-10-10
8-K 2018-08-29
8-K 2018-08-14
8-K 2018-07-23

CNST 10Q Quarterly Report

Part I - Financial Information
Item 1. Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Item 4. Controls and Procedures.
Part II - Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 6. Exhibits
EX-31.1 cnst-ex311_7.htm
EX-31.2 cnst-ex312_8.htm
EX-32.1 cnst-ex321_9.htm
EX-32.2 cnst-ex322_6.htm

Constellation Pharmaceuticals Earnings 2020-03-31

Balance SheetIncome StatementCash Flow
135705-60-125-1902016201720182020
Assets, Equity
-11.9-13.5-15.1-16.8-18.4-20.02016201720182020
Rev, G Profit, Net Income
55317-17-41-652016201720182020
Ops, Inv, Fin

10-Q 1 cnst-10q_20200331.htm 10-Q cnst-10q_20200331.htm

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 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 March 31, 2020

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: 001-38584

 

CONSTELLATION PHARMACEUTICALS, INC.

(Exact name of registrant as specified in its charter)

 

 

Delaware

26-1741721

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification Number)

 

 

215 First Street, Suite 200

Cambridge, Massachusetts

02142

(Address of principal executive offices)

(Zip code)

(617) 714-0555

(Registrant’s telephone number, including area code)

 

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, $0.0001 par value per share

 

CNST

 

Nasdaq Global Select Market

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 Exchange Act.

 

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 Exchange Act).    Yes      No  

As of April 30, 2020, the registrant had 41,838,071 shares of common stock, $0.0001 par value per share, outstanding.

 

 


FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements, which reflect our current views with respect to, among other things, our operations and financial performance. All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q, including statements regarding our strategy, future operations, future financial position, future revenue, projected costs, prospects, plan, objectives of management and expected market growth are forward-looking statements. You can identify these forward-looking statements by the use of words such as “outlook,” “believes,” “expects,” “potential,” “continues,” “may,” “will,” “should,” “seeks,” “approximately,” “predicts,” “intends,” “plans,” “estimates,” “anticipates” or the negative version of these words or other comparable words. Such forward-looking statements are subject to various risks and uncertainties. Accordingly, there are or will be important factors that could cause actual outcomes or results to differ materially from those indicated in these statements. We believe these factors include but are not limited to those described under “Risk Factors” and include, among other things:

 

our ongoing clinical trials, including our Phase 2 clinical trial of CPI-0610, our Phase 1b/2 clinical trial of CPI-1205 and our Phase 1/2 clinical trial of CPI-0209;

 

our plans to advance our clinical-stage product candidates into later stage trials, including our plans to conduct a Phase 3 trial of CPI-0610

 

the initiation, timing, progress and results of our current and future preclinical studies and clinical trials and our research and development programs;

 

our plans to develop and, if approved, subsequently commercialize CPI-0610, CPI-1205, CPI-0209 and any other product candidates, including in combination with other drugs and therapies;

 

the timing of and our ability to submit applications for, obtain and maintain regulatory approvals for CPI-0610, CPI-1205, CPI-0209 and other product candidates;

 

our expectations regarding our ability to fund our operating expenses and capital expenditure requirements with our cash, cash equivalents and marketable securities;

 

the potential advantages of our product candidates;

 

our estimates regarding the potential market opportunity for our product candidates;

 

our manufacturing, commercialization and marketing capabilities and strategy;

 

our intellectual property position;

 

our ability to identify products, product candidates or technologies with significant commercial potential that are consistent with our commercial objectives;

 

our estimates regarding expenses, future revenue, timing of any future revenue, capital requirements and needs for additional financing;

 

the impact of government laws and regulations;

 

our competitive position;

 

developments relating to our competitors and our industry;

 

our ability to maintain and establish collaborations or obtain additional funding;

 

the impact of the COVID-19 pandemic on our ability to enroll and monitor patients in our clinical trials, collect data, secure needed supplies, initiate new clinical trials, meet our current milestones and timeline, and continue to successfully execute on our plans and operations; and

 

our expectations regarding the time during which we will be an emerging growth company or smaller reporting company as defined in federal securities laws and regulations.

We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements we make. We have included important factors in the cautionary statements included in this Quarterly Report on Form 10-Q, particularly in the “Risk Factors” section, that we believe could cause actual results or events to differ materially from the forward-looking statements that we make. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, collaborations, joint ventures or investments we may make or enter into.

You should read this Quarterly Report on Form 10-Q and the documents that we have filed as exhibits to this Quarterly Report on Form 10-Q completely and with the understanding that our actual future results may be materially different from what we expect. The forward-looking statements contained in this Quarterly Report on Form 10-Q are made as of the date of this Quarterly Report on Form 10-Q, and we do not assume any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law.

2


Constellation Pharmaceuticals, Inc.

Table of Contents

 

 

 

 

 

Page

 

 

PART I – FINANCIAL INFORMATION

 

 

 

 

 

 

 

Item 1.

 

Condensed Consolidated Financial Statements (Unaudited)

 

4

 

 

Condensed Consolidated Balance Sheets (Unaudited) as of March 31, 2020 and December 31, 2019

 

4

 

 

Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited) For the Three Months Ended March 31, 2020 and 2019

 

5

 

 

Condensed Consolidated Statements of Stockholders’ Equity (Unaudited) For the Three Months Ended March 31, 2020 and 2019

                  

6

 

 

Condensed Consolidated Statements of Cash Flows (Unaudited) For the Three Months Ended March 31, 2020 and 2019

 

7

 

 

Notes to Unaudited Condensed Consolidated Financial Statements

 

8

Item 2.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

17

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

 

26

Item 4.

 

Controls and Procedures

 

27

 

 

 

 

 

 

 

PART II – OTHER INFORMATION

 

 

 

 

 

 

 

Item 1.

 

Legal Proceedings

 

28

Item 1A.

 

Risk Factors

 

28

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

 

68

Item 6.

 

Exhibits

 

69

 

 

 

 

 

Signatures

 

70

 

 

3


PART I—FINANCIAL INFORMATION

Item 1. Financial Statements

CONSTELLATION PHARMACEUTICALS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share amounts)

(Unaudited)

 

 

 

March 31, 2020

 

 

December 31, 2019

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

190,464

 

 

$

334,332

 

Marketable securities

 

 

168,385

 

 

 

49,602

 

Prepaid expenses and other current assets

 

 

2,817

 

 

 

3,055

 

Total current assets

 

 

361,666

 

 

 

386,989

 

Property and equipment, net

 

 

867

 

 

 

971

 

Restricted cash

 

 

425

 

 

 

425

 

Operating lease, right-of-use assets

 

 

10,103

 

 

 

10,745

 

Total assets

 

$

373,061

 

 

$

399,130

 

 

 

 

 

 

 

 

 

 

Liabilities and Stockholders' Equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

3,558

 

 

$

7,278

 

Accrued expenses and other current liabilities

 

 

12,980

 

 

 

12,915

 

Current portion of lease liabilities - operating lease

 

 

2,747

 

 

 

2,562

 

Total current liabilities

 

 

19,285

 

 

 

22,755

 

Long-term debt, net of current portion and discount

 

 

29,681

 

 

 

29,642

 

Operating lease liabilities, net of current portion

 

 

8,016

 

 

 

8,759

 

Other long-term liabilities

 

 

553

 

 

 

390

 

Total liabilities

 

 

57,535

 

 

 

61,546

 

Stockholders' equity:

 

 

 

 

 

 

 

 

Preferred stock, $0.001 par value; 5,000,000 shares authorized; no shares issued

   or outstanding at March 31, 2020 and December 31, 2019, respectively

 

 

 

 

 

 

Common stock, $0.0001 par value; 200,000,000 shares authorized

   at March 31, 2020 and December 31, 2019, respectively; 41,822,064

   and 41,719,039 shares issued and outstanding at March 31, 2020 and

   December 31, 2019, respectively;

 

 

4

 

 

 

4

 

Additional paid-in capital

 

 

660,443

 

 

 

656,973

 

Accumulated other comprehensive loss

 

 

(90

)

 

 

(6

)

Accumulated deficit

 

 

(344,831

)

 

 

(319,387

)

Total stockholders' equity

 

 

315,526

 

 

 

337,584

 

Total liabilities and stockholders' equity

 

$

373,061

 

 

$

399,130

 

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

 

4


CONSTELLATION PHARMACEUTICALS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(In thousands, except share and per share amounts)

(Unaudited)

 

 

Three Months Ended March 31,

 

 

 

2020

 

 

2019

 

Operating expenses:

 

 

 

 

 

 

 

 

Research and development

 

$

20,075

 

 

$

15,677

 

General and administrative

 

 

5,908

 

 

 

4,429

 

Total operating expenses

 

 

25,983

 

 

 

20,106

 

Loss from operations

 

 

(25,983

)

 

 

(20,106

)

Other income (expense):

 

 

 

 

 

 

 

 

Interest income

 

 

1,404

 

 

 

755

 

Interest expense

 

 

(850

)

 

 

(75

)

Total other income (expense), net

 

 

554

 

 

 

680

 

Loss before income taxes

 

 

(25,429

)

 

 

(19,426

)

Income tax expense

 

 

15

 

 

 

 

Net loss

 

$

(25,444

)

 

$

(19,426

)

Net loss per share attributable to common stockholders, basic

   and diluted

 

$

(0.61

)

 

$

(0.75

)

Weighted average number of common shares used in net loss per share

   attributable to common stockholders, basic and diluted

 

 

41,765,635

 

 

 

25,804,595

 

 

 

 

 

 

 

 

 

 

Comprehensive loss:

 

 

 

 

 

 

 

 

Net Loss

 

$

(25,444

)

 

$

(19,426

)

Other comprehensive gain (loss):

 

 

 

 

 

 

 

 

Unrealized gain (loss) on marketable securities

 

 

(84

)

 

 

9

 

Total other comprehensive gain (loss):

 

$

(84

)

 

$

9

 

Comprehensive loss

 

$

(25,528

)

 

$

(19,417

)

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

 

5


CONSTELLATION PHARMACEUTICALS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands, except share and per share amounts)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

Other

 

 

 

 

 

 

 

 

Total

 

 

 

Common Stock

 

 

Paid-in

 

 

Comprehensive

 

 

Accumulated

 

 

 

 

Stockholders'

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Gain

 

 

Deficit

 

 

 

 

Equity

 

Balances at December 31, 2019

 

 

41,719,039

 

 

$

4

 

 

$

656,973

 

 

$

(6

)

 

$

(319,387

)

 

 

 

$

337,584

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

2,559

 

 

 

 

 

 

 

 

 

 

 

2,559

 

Stock option exercises

 

 

103,025

 

 

 

 

 

 

911

 

 

 

 

 

 

 

 

 

 

 

911

 

Unrealized loss on marketable securities

 

 

 

 

 

 

 

 

 

 

 

(84

)

 

 

 

 

 

 

 

(84

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(25,444

)

 

 

 

 

(25,444

)

Balances at March 31, 2020

 

 

41,822,064

 

 

$

4

 

 

$

660,443

 

 

$

(90

)

 

$

(344,831

)

 

 

 

$

315,526

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

Other

 

 

 

 

 

 

 

 

Total

 

 

 

Common Stock

 

 

Paid-in

 

 

Comprehensive

 

 

Accumulated

 

 

 

 

Stockholders'

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Gain

 

 

Deficit

 

 

 

 

Equity

 

Balances at December 31, 2018

 

 

25,803,135

 

 

$

3

 

 

$

337,992

 

 

$

 

 

$

(233,837

)

 

 

 

$

104,158

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

1,313

 

 

 

 

 

 

 

 

 

 

 

1,313

 

Vesting of common stock issued upon early

   exercise of unvested options

 

 

85

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock option exercises

 

 

3,754

 

 

 

 

 

 

21

 

 

 

 

 

 

 

 

 

 

 

21

 

Unrealized gain on marketable securities

 

 

 

 

 

 

 

 

 

 

 

9

 

 

 

 

 

 

 

 

9

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(19,426

)

 

 

 

 

(19,426

)

Balances at March 31, 2019

 

 

25,806,974

 

 

$

3

 

 

$

339,326

 

 

$

9

 

 

$

(253,263

)

 

 

 

$

86,075

 

 

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

 

6


CONSTELLATION PHARMACEUTICALS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 

 

Three Months Ended March 31,

 

 

 

2020

 

 

2019

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net loss

 

$

(25,444

)

 

$

(19,426

)

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

 

 

 

 

 

 

 

 

Depreciation and amortization expense

 

 

147

 

 

 

168

 

Stock-based compensation expense

 

 

2,559

 

 

 

1,313

 

Non-cash interest expense

 

 

202

 

 

 

18

 

Amortization and accretion on marketable securities

 

 

(156

)

 

 

(212

)

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Prepaid expenses and other current assets

 

 

238

 

 

 

128

 

Operating lease, right-of-use assets

 

 

642

 

 

 

690

 

Accounts payable

 

 

(3,720

)

 

 

1,768

 

Accrued expenses and other current liabilities

 

 

60

 

 

 

(2,116

)

Operating lease liabilities

 

 

(558

)

 

 

(664

)

Net cash used in operating activities

 

 

(26,030

)

 

 

(18,333

)

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Purchase of marketable securities

 

 

(135,161

)

 

 

(63,123

)

Purchases of property and equipment

 

 

(38

)

 

 

(234

)

Proceeds from maturities and sales of marketable securities

 

 

16,450

 

 

 

 

Net cash used in investing activities

 

 

(118,749

)

 

 

(63,357

)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Proceeds from issuance of long-term debt

 

 

 

 

 

19,649

 

Payment of debt issuance costs

 

 

 

 

 

(125

)

Proceeds from issuance of common stock upon stock option exercises

 

 

911

 

 

 

21

 

Net cash provided by financing activities

 

 

911

 

 

 

19,545

 

Net decrease in cash, cash equivalents and restricted cash

 

 

(143,868

)

 

 

(62,145

)

Cash, cash equivalents and restricted cash at beginning of period

 

 

334,757

 

 

 

115,017

 

Cash, cash equivalents and restricted cash at end of period

 

$

190,889

 

 

$

52,872

 

 

 

 

 

 

 

 

 

 

Supplemental disclosure of cash flow information:

 

 

 

 

 

 

 

 

Interest paid

 

$

648

 

 

$

 

Supplemental disclosure of noncash investing and financing

   information:

 

 

 

 

 

 

 

 

Purchases of property and equipment included in accounts payable and accrued expenses

 

$

5

 

 

$

216

 

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

 

7


CONSTELLATION PHARMACEUTICALS, INC.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

1. Nature of the Business and Basis of Presentation

Constellation Pharmaceuticals, Inc. (“Constellation” or the “Company”) is a clinical-stage biopharmaceutical company using its expertise in epigenetics to discover and develop novel therapeutics that address serious unmet medical needs in patients with cancers associated with abnormal gene expression or drug resistance. The Company was incorporated in January 2008 as EpiGenetiX, Inc. under the laws of the State of Delaware. On March 31, 2008, the Company changed its name to Constellation Pharmaceuticals, Inc.

The Company is subject to risks and uncertainties common to early-stage companies in the biotechnology industry, including, but not limited to, development by competitors of new technological innovations, dependence on key personnel, protection of proprietary technology, compliance with government regulations and the ability to secure additional capital to fund operations. Product candidates currently under development will require significant additional research and development efforts, including extensive preclinical and clinical testing and regulatory approval prior to commercialization. These efforts require significant amounts of additional capital, adequate personnel and infrastructure and extensive compliance-reporting capabilities. Even if the Company’s drug development efforts are successful, it is uncertain when, if ever, the Company will realize significant revenue from product sales.

The accompanying financial statements have been prepared on the basis of continuity of operations, realization of assets and the satisfaction of liabilities and commitments in the ordinary course of business. Since inception, the Company has funded its operations with the proceeds of sales of convertible preferred stock, payments received in connection with collaboration agreements, borrowings under loan agreements, and proceeds from sales of its common stock public and private offerings

The Company has incurred losses since inception, including net losses of $25.4 million for the three months ended March 31, 2020, and $85.6 million for the year ended December 31, 2019. As of March 31, 2020, the Company had an accumulated deficit of $344.8 million. The Company expects to continue to generate operating losses in the foreseeable future. Based on the Company’s current operating plan, the Company expects that its cash, cash equivalents and marketable securities at March 31, 2020, will be sufficient to fund its operating expenses and capital expenditure requirements for at least 12 months from the issuance date of the interim financial statements. Management’s belief with respect to its ability to fund operations is based on estimates that are subject to risks and uncertainties. If actual results are different from management’s estimates, the Company may need to seek additional funding sooner than would otherwise be expected. There can be no assurance that the Company will be able to obtain additional funding on acceptable terms, if at all.

The Company’s financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”).

2. Summary of Significant Accounting Policies

Unaudited Interim Consolidated Financial Information

The accompanying unaudited condensed consolidated financial statements as of March 31, 2020 and for the three months ended March 31, 2020 and 2019 have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim consolidated financial statements. Certain information and footnote disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. These financial statements should be read in conjunction with the Company’s audited financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019 (the “Annual Report”).

The unaudited condensed consolidated financial statements include the accounts of Constellation Pharmaceuticals, Inc. and its wholly owned subsidiary, Constellation Securities Corporation. All intercompany transactions and balances of the subsidiary have been eliminated in consolidation. In the opinion of management, all adjustments, consisting only of normal recurring adjustments necessary for a fair statement of the Company’s financial position as of March 31, 2020, and results of operations for the three months ended March 31, 2020 and 2019, stockholders’ equity for the three months ended March 31, 2020 and 2019, and cash flows for the three months ended March 31, 2020 and 2019 have been made. The Company’s results of operations for the three months ended March 31, 2020 are not necessarily indicative of the results of operations that may be expected for the year ending December 31, 2020.

8


Concentrations of Credit Risk and of Significant Suppliers

Financial instruments that potentially expose the Company to concentrations of credit risk consist primarily of cash, cash equivalents and marketable securities. The Company maintains most of its cash, cash equivalents and marketable securities at two accredited financial institutions in amounts that could exceed federally insured limits. Cash equivalents are invested in an institutional money market fund. The Company does not believe that it is subject to unusual credit risk beyond the normal credit risk associated with commercial banking relationships.

The Company is dependent on third-party manufacturers to supply products for research and development activities in its programs. In particular, the Company relies and expects to continue to rely on a small number of manufacturers to supply it with its requirements for the active pharmaceutical ingredients and formulated drugs related to these programs. These programs could be adversely affected by a significant interruption in the supply of active pharmaceutical ingredients and formulated drugs.

Summary of Significant Accounting Policies

The Company’s significant accounting policies are described in Note 2, “Summary of Significant Accounting Policies,” to the Consolidated Financial Statements included in the Annual Report. There have been no material changes to the significant accounting policies previously disclosed in the Annual Report other than as noted below.

Cash, Cash Equivalents and Restricted Cash

Cash equivalents consists of highly liquid investments that are readily convertible into cash with original maturities of three months or less from the date of purchase. The Company has a policy of making investments only in government securities or with commercial institutions that have at least an investment grade credit rating. The Company invests its cash primarily in reverse repurchase agreements (RRAs), government securities and obligations, corporate debt securities and money market funds. RRAs are collateralized by deposits in the form of government securities and obligations for an amount not less than 102% of their value. The Company does not record an asset or liability as the Company is not permitted to sell or repledge the associated collateral. The Company has a policy that the collateral has at least the prevailing credit rating of US Government Treasuries and Agencies. The Company utilizes a third-party custodian to manage the exchange of funds and ensure that collateral received is maintained at 102% of the value of the RRAs on a daily basis. RRAs have stated maturities of less than 30 days.

As of March 31, 2020, the Company classified $0.4 million as restricted cash related to a letter of credit issued as a security deposit in connection with Company's lease of its corporate office facilities (Note 10). Cash, cash equivalents and restricted cash consists of the following (in thousands):

 

 

 

March 31, 2020

 

 

December 31, 2019

 

Cash and cash equivalents

 

$

190,464

 

 

$

334,332

 

Restricted cash

 

 

425

 

 

 

425

 

Cash, cash equivalents and restricted cash

 

$

190,889

 

 

$

334,757

 

 

Fair Value Measurements

Certain assets and liabilities are carried at fair value under GAAP. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. Financial assets and liabilities carried at fair value are to be classified and disclosed in one of the following three levels of the fair value hierarchy, of which the first two are considered observable and the last is considered unobservable:

 

Level 1 – Quoted prices in active markets for identical assets or liabilities.

 

Level 2 – Observable inputs (other than Level 1 quoted prices), such as quoted prices in active markets for similar assets or liabilities, quoted prices in markets that are not active for identical or similar assets or liabilities, or other inputs that are observable or can be corroborated by observable market data.

 

Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to determining the fair value of the assets or liabilities, including pricing models, discounted cash flow methodologies and similar techniques.

The Company’s cash equivalents and marketable securities are carried at fair value, determined according to the fair value hierarchy described above (see Note 3). The carrying values of the Company’s accounts payable and accrued expenses approximate their fair values due to the short-term nature of these liabilities. The carrying value of the Company’s outstanding debt as of March 31, 2020 (see Note 7) approximated fair value (a Level 3 measurement) based on interest rates currently available to the Company.

9


Recently adopted accounting pronouncements

In July 2017, the FASB issued ASU No. 2017-11, Earnings Per Share (Topic 260), Distinguishing Liabilities from Equity (Topic 480), Derivatives and Hedging (Topic 815) I. Accounting for Certain Financial Instruments with Down Round Features II. Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception (“ASU 2017-11”). Part I applies to entities that issue financial instruments such as warrants, convertible debt or convertible preferred stock that contain down-round features. Part II replaces the indefinite deferral for certain mandatorily redeemable noncontrolling interests and mandatorily redeemable financial instruments of nonpublic entities contained within ASC Topic 480 with a scope exception and does not impact the accounting for these mandatorily redeemable instruments. The new guidance is effective for the Company for annual periods beginning after December 15, 2019. The adoption of ASU 2017-11 on January 1, 2020 did not have a material impact on the Company’s financial position, results of operations or cash flows.

In August 2018, the FASB issued ASU No. 2018-13, Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement (“ASU 2018-13”), which modifies certain disclosure requirements on fair value measurements. The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. All other amendments should be applied retrospectively to all periods presented upon their effective date. ASU 2018-13 is effective for fiscal years beginning after December 15, 2019 and interim periods within those years. The adoption of ASU 2018-13 on January 1, 2020 did not have a material impact on the Company’s financial position, results of operations or cash flows.

In August 2018, the FASB issued ASU No. 2018-15, Intangibles - Goodwill and Other - Internal-Use Software. This ASU addresses the accounting for implementation, setup and other upfront costs paid by a customer in a cloud computing or hosting arrangement. The guidance aligns the accounting treatment of these costs incurred in a hosting arrangement treated as a service contract with the requirements for capitalization and amortization costs to develop or obtain internal-use software. The guidance is effective for fiscal years beginning after December 15, 2019 and early adoption is permitted. The guidance can be adopted either retrospectively or prospectively. The adoption of ASU 2018-15 on January 1, 2020 did not have a material impact on the Company’s financial position, results of operations or cash flows.

In November 2018, the FASB issued ASU No. 2018-18, Collaborative Arrangements (Topic 808), Clarifying the Interaction between Topic 808 and Topic 606. The ASU clarifies when transactions between collaborative participants are in the scope of ASC 606. The ASU also provides some guidance on presentation of transactions not in the scope of ASC 606 ASU 2018-18 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2019. Early adoption is permitted for fiscal years, and interim periods within those years. The adoption of ASU 2018-18 on January 1, 2020 did not have a material impact on the Company’s financial position, results of operations or cash flows.

In March 2019, the FASB issued ASU No. 2019-01, Leases (Topic 842) Codification Improvements, which provides clarification on implementation issues associated with adopting ASU 2016-02. The implementation issues noted in ASU 2019-01 include determining the fair value of the underlying asset by lessors that are not manufacturers or dealers, presentation on the statement of cash flows for sales-type and direct financing leases, and transition disclosures related to Topic 250, Accounting Changes and Error Corrections. The adoption of ASU 2019-01 on January 1, 2020 did not have a material impact on the Company’s financial position, results of operations or cash flows.

Recently issued accounting pronouncements

In June 2016, the FASB issued ASU 2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments,” which represents a new credit loss standard that will change the impairment model for most financial assets and certain other financial instruments. Specifically, this guidance will require entities to utilize a new “expected loss” model as it relates to trade and other receivables. In addition, entities will be required to recognize an allowance for estimated credit losses on available-for-sale debt securities, regardless of the length of time that a security has been in an unrealized loss position. The new guidance is effective for the Company for annual and interim periods beginning after December 15, 2022. Early adoption is permitted. The Company is currently evaluating the potential impact that the adoption of this guidance may have on the consolidated financial statements

 

In December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes, or ASU 2019-12, which includes amendments to simplify the accounting for income taxes by removing certain exceptions to the general principles in ASC 740, Income Taxes, or ASC 740. The amendments also improve consistent application of and simplify U.S. GAAP for other areas of ASC 740 by clarifying and amending existing guidance. The new guidance is effective for the Company for annual periods beginning after December 15, 2021 and interim periods within fiscal years beginning after December 15, 2022. Early adoption of the amendments is permitted. The Company is currently evaluating ASU 2019-12.

10


3. Fair Value of Financial Assets and Liabilities

The following tables present information about the Company’s financial assets and liabilities measured at fair value on a recurring basis and indicate the level of the fair value hierarchy utilized to determine such fair values (in thousands):

 

 

 

March 31, 2020

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

$

185,473

 

 

$

 

 

$

 

 

$

185,473

 

Commercial paper

 

 

 

 

 

4,991

 

 

 

 

 

 

4,991

 

 

 

$

185,473

 

 

$

4,991

 

 

$

 

 

$

190,464

 

Marketable securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate debt securities

 

$

 

 

$

42,927

 

 

$

 

 

$

42,927

 

Commercial paper

 

 

 

 

 

95,244

 

 

 

 

 

 

95,244

 

Government securities

 

 

 

 

 

30,214

 

 

 

 

 

 

30,214

 

Total

 

$

 

 

$

168,385

 

 

$

 

 

$

168,385

 

 

 

 

December 31, 2019

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

$

303,345

 

 

$

 

 

$

 

 

$

303,345

 

Commercial paper

 

 

 

 

 

8,986

 

 

 

 

 

 

8,986

 

Corporate debt securities

 

 

 

 

 

2,001

 

 

 

 

 

 

2,001

 

Reverse Repurchase Agreements (RRAs)

 

 

 

 

 

20,000

 

 

 

 

 

 

20,000

 

 

 

$

303,345

 

 

$

30,987

 

 

$

 

 

$

334,332

 

Marketable securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate debt securities

 

$

 

 

$

12,748

 

 

$

 

 

$

12,748

 

Commercial paper

 

 

 

 

 

26,808

 

 

 

 

 

 

26,808

 

Government securities

 

 

 

 

 

10,046

 

 

 

 

 

 

10,046

 

Total

 

$

 

 

$

49,602

 

 

$

 

 

$

49,602

 

 

Money market funds were valued by the Company using quoted prices in active markets for similar securities, which represent a Level 1 measurement within the fair value hierarchy.

During the three months ended March 31, 2020 and the year ended December 31, 2019, there were no transfers between Level 1 and Level 2. The fair value of Level 2 instruments classified as cash equivalents and marketable debt securities were determined through third-party pricing services.

11


4. Marketable Securities

The following table summarizes the Company’s marketable securities and cash equivalents as of March 31, 2020, and December 31, 2019, respectively,

 

 

 

March 31, 2020

 

 

 

Amortized

Cost

 

 

Unrealized

Gains

 

 

Unrealized

Losses

 

 

Fair

Value

 

(in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

$

185,473

 

 

$

 

 

$

 

 

$

185,473

 

Commercial paper

 

 

4,991

 

 

 

 

 

 

 

 

 

4,991

 

Total cash equivalents

 

$

190,464

 

 

$

 

 

$

 

 

$

190,464

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Marketable securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate debt securities

 

$

43,208

 

 

$

 

 

$

(281

)

 

$

42,927

 

Commercial paper

 

 

95,244

 

 

 

 

 

 

 

 

 

95,244

 

Government securities

 

 

30,023

 

 

 

191

 

 

 

 

 

 

30,214

 

Total marketable securities

 

$

168,475

 

 

$

191

 

 

$

(281

)

 

$

168,385

 

Total cash equivalents and marketable securities

 

$

358,939

 

 

$

191

 

 

$

(281

)

 

$

358,849

 

 

 

 

December 31, 2019

 

 

 

Amortized

Cost

 

 

Unrealized

Gains

 

 

Unrealized

Losses

 

 

Fair

Value

 

(in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

$

303,345

 

 

$

 

 

$

 

 

$

303,345

 

Commercial paper

 

 

8,986

 

 

 

 

 

 

 

 

 

8,986

 

Corporate debt securities

 

 

2,001

 

 

 

 

 

 

 

 

 

2,001

 

Reverse Repurchase Agreements (RRAs)

 

 

20,000

 

 

 

 

 

 

 

 

 

20,000

 

Total cash equivalents

 

$

334,332

 

 

$

 

 

$

 

 

$

334,332

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Marketable securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate debt securities

 

$

12,753

 

 

$

 

 

$

(5

)

 

$

12,748<