UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 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 UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT OF 1934 |
From the transition period from to .
Commission File Number
(Exact name of registrant as specified in its charter)
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(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
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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.
Large accelerated filer |
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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 August 6, 2024,
FATE THERAPEUTICS, INC.
FORM 10-Q
TABLE OF CONTENTS
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Item 1. |
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5 |
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Condensed Consolidated Balance Sheets as of June 30, 2024 (Unaudited) and December 31, 2023 |
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7 |
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Notes to Condensed Consolidated Financial Statements (Unaudited) |
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Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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Item 3. |
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31 |
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Item 4. |
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Item 1. |
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32 |
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Item 1A. |
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Item 2. |
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76 |
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Item 3. |
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76 |
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Item 4. |
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76 |
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Item 5. |
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Item 6. |
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78 |
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80 |
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2
RISK FACTOR SUMMARY
Below is a summary of the principal factors that make an investment in our common stock speculative or risky. This summary does not address all of the risks that we face. Additional discussion of the risks summarized in this risk factor summary, and other risks that we face, can be found below under the heading “Risk Factors” and should be carefully considered, together with other information in this Quarterly Report on Form 10-Q and our other filings with the Securities and Exchange Commission (SEC) before making investment decisions regarding our common stock.
3
4
PART I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements (Unaudited)
Fate Therapeutics, Inc.
Condensed Consolidated Balance Sheets (Unaudited)
(in thousands, except share and per share data)
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June 30, |
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December 31, |
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2024 |
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2023 |
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(unaudited) |
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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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Accounts receivable |
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Short-term investments |
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Prepaid expenses and other current assets |
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Total current assets |
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Long-term investments |
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Property and equipment, net |
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Operating lease right-of-use assets |
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Restricted cash |
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Other 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 |
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Deferred revenue |
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Operating lease liabilities, current portion |
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Total current liabilities |
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CIRM award liability |
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Operating lease liabilities, net of current portion |
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Stock price appreciation milestones |
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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 income (loss) |
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Accumulated deficit |
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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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See accompanying notes.
5
Fate Therapeutics, Inc.
Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited)
(in thousands, except share and per share data)
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Three Months Ended June 30, |
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Six Months Ended June 30, |
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2024 |
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2023 |
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2024 |
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2023 |
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(unaudited) |
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(unaudited) |
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$ |
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$ |
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$ |
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$ |
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Operating expenses: |
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Research and development |
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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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Other income (expense): |
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Interest income |
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Change in fair value of stock price appreciation milestones |
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Other income |
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Total other income |
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Net loss |
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$ |
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Other comprehensive income (loss): |
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Unrealized (loss) gain on available-for-sale securities, net |
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Comprehensive loss |
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$ |
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$ |
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$ |
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$ |
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Net loss per common share, basic and diluted |
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$ |
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$ |
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$ |
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$ |
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Weighted-average common shares used to compute basic and diluted net loss per share |
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See accompanying notes.
6
Fate Therapeutics, Inc.
Condensed Consolidated Statements of Cash Flows (Unaudited)
(in thousands)
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Six Months Ended June 30, |
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2024 |
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2023 |
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(unaudited) |
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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 used in operating activities: |
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Depreciation and amortization |
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Stock-based compensation |
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Accretion and amortization of premiums and discounts on investments, net |
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Amortization of collaboration contract assets |
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Deferred revenue |
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Change in fair value of stock price appreciation milestones |
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Grant income from FT516 CIRM Award |
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Changes in operating assets and liabilities: |
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Accounts receivable |
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Prepaid expenses and other assets |
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Accounts payable and accrued expenses |
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Right-of-use assets and lease liabilities, net |
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Net cash used in operating activities |
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Investing activities |
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Purchases of property and equipment |
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Purchases of investments |
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Maturities of investments |
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Net cash (used in) provided by investing activities |
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Financing activities |
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Issuance of common stock from equity incentive plans, net of issuance costs |
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Proceeds from public offering of common stock, net of issuance costs |
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Proceeds from issuance of pre-funded warrants, net of issuance costs |
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Proceeds from FT819 CIRM award |
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— |
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Net cash provided by financing activities |
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Net change in cash, cash equivalents and restricted cash |
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Cash, cash equivalents and restricted cash at beginning of the period |
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Cash, cash equivalents and restricted cash at end of the period |
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$ |
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$ |
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Supplemental schedule of noncash investing and financing activities |
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Purchases of property and equipment in accounts payable |
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$ |
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$ |
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Accrued issuance costs included in additional paid-in-capital |
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$ |
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$ |
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See accompanying notes.
7
Fate Therapeutics, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
1. Organization and Summary of Significant Accounting Policies
Organization
Fate Therapeutics, Inc. (the Company) was incorporated in the state of Delaware on April 27, 2007 and has its principal operations in San Diego, California. The Company is a clinical-stage biopharmaceutical company dedicated to bringing off-the-shelf, multiplexed-engineered, induced pluripotent stem cell (iPSC)-derived cellular immunotherapies to patients for the treatment of cancer and autoimmune diseases.
As of June 30, 2024, the Company has devoted substantially all of its efforts to product development, raising capital and building infrastructure and has not generated any revenues from any sales of its therapeutic product candidates. To date, the Company’s revenues have been derived from collaboration agreements and government grants.
Public Equity Offering
In March 2024, the Company completed a public offering of common stock in which investors purchased
Private Placement of Pre-Funded Warrants
In March 2024, in conjunction with the public offering, the Company issued in a private placement, in lieu of common stock to certain investors, pre-funded warrants to purchase
Use of Estimates
The Company’s unaudited condensed consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States (U.S. GAAP). The preparation of the Company’s unaudited condensed consolidated financial statements requires management to make estimates and assumptions that impact the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities in the Company’s unaudited condensed consolidated financial statements and accompanying notes. The most significant estimates and assumptions in the Company’s unaudited condensed consolidated financial statements relate to its stock price appreciation milestone obligations, contracts containing leases, and accrued expenses. Although these estimates are based on the Company’s knowledge of current events and actions it may undertake in the future, actual results may ultimately materially differ from these estimates and assumptions.
Principles of Consolidation
The unaudited condensed consolidated financial statements include the accounts of the Company and its subsidiaries. To date, the aggregate operations of these subsidiaries have not been significant, and all intercompany transactions and balances have been eliminated in consolidation.
Cash, Cash Equivalents and Restricted Cash
Cash and cash equivalents include cash in readily available operating accounts, money market accounts and money market funds. The Company considers all highly liquid investments with an original maturity of three months or less from the date of purchase to be cash equivalents.
The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the unaudited condensed consolidated balance sheets that sum to the total of the same such amounts shown in the unaudited condensed consolidated statements of cash flows as of June 30, 2024 and 2023 (in thousands):
8
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Six Months Ended June 30, |
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2024 |
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2023 |
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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 shown in the unaudited condensed consolidated statement of cash flows |
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$ |
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$ |
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For each of the six months ended June 30, 2024 and 2023, the restricted cash balance includes cash-collateralized irrevocable standby letters of credit for $
Unaudited Interim Financial Information
The accompanying interim condensed consolidated financial statements are unaudited. These unaudited interim condensed consolidated financial statements have been prepared in accordance with U.S. GAAP and following the requirements of the U.S. Securities and Exchange Commission (SEC) for interim reporting. As permitted under those rules, certain footnotes or other financial information that are normally required can be condensed or omitted. The interim unaudited condensed consolidated financial statements should be read in conjunction with the Company’s financial statements and accompanying notes for the fiscal year ended December 31, 2023, contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, filed by the Company with the SEC on February 26, 2024. In management’s opinion, the unaudited interim condensed consolidated financial statements have been prepared on the same basis as the audited financial statements and include all adjustments, which include only normal recurring adjustments, necessary for the fair presentation of the Company’s financial position and its results of operations and comprehensive loss and its cash flows for the periods presented. The results for the three and six months ended June 30, 2024 are not necessarily indicative of the results expected for the full fiscal year or any other interim period or any future year or period.
Collaborative Arrangements
The Company analyzes its collaboration arrangements to assess whether they are within the scope of ASC Topic 808, Collaborative Arrangements (ASC 808), to determine whether such arrangements involve joint operating activities performed by parties that are both active participants in the activities and exposed to significant risks and rewards that are dependent on the commercial success of such activities. To the extent the arrangement is within the scope of ASC 808, the Company assesses whether aspects of the arrangement between the Company and its collaboration partner are within the scope of other accounting literature, including ASC Topic 606, Revenue from Contracts with Customers (ASC 606). If it is concluded that some or all aspects of the arrangement represent a transaction with a customer, the Company will account for those aspects of the arrangement within the scope of ASC 606.
ASC 808 provides guidance for the presentation and disclosure of transactions in collaborative arrangements, but it does not provide recognition or measurement guidance. Therefore, if the Company concludes a counterparty to a transaction is not a customer or otherwise not within the scope of ASC 606, the Company considers the guidance in other accounting literature as applicable or by analogy to account for such transaction. The classification of transactions under the Company’s arrangements is determined based on the nature and contractual terms of the arrangement along with the nature of the operations of the participants.
Revenue Recognition
The Company analyzes its collaboration arrangements to assess whether they are within the scope of ASC 808, to determine whether such arrangements involve joint operating activities performed by parties that are both active participants in the activities and exposed to significant risks and rewards that are dependent on the commercial success of such activities. If the Company concludes that some or all aspects of the arrangement represent a transaction with a customer, the Company accounts for those aspects of the arrangement within the scope of ASC 606.
For arrangements attributable to ASC 606, the Company recognizes revenue in a manner that depicts the transfer of control of a product or a service to a customer and reflects the amount of the consideration the Company is entitled to receive in exchange for such product or service. In doing so, the Company follows a five-step approach: (i) identify the contract 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, and (v) recognize revenue when (or as) the customer obtains control of the product or service.
Leases
The Company determines if a contract contains a lease at the inception of the contract. The Company currently has leases related to its facilities leased for office and laboratory space, which are classified as operating leases. These leases result in operating
9
right-of-use (ROU) assets, current operating lease liabilities, and non-current operating lease liabilities in the Company’s consolidated balance sheets. The Company does not have any financing leases. Leases with a term of
Lease liabilities represent an obligation to make lease payments arising from the lease and ROU assets represent the right to use the underlying asset identified in the lease for the lease term. Lease liabilities are measured at the present value of the lease payments not yet paid discounted using the discount rate for the lease established at the lease commencement date. To determine the present value, the implicit rate is used when readily determinable. For those leases where the implicit rate is not provided, the Company determines an incremental borrowing rate based on the information available at the lease commencement date in determining the present value of lease payments. ROU assets are measured as the present value of the lease payments and also include any prepaid lease payments made and any other indirect costs incurred and exclude any lease incentives received. Lease terms may include the impact of options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Lease expense for operating leases is recognized on a straight-line basis over the lease term. The Company aggregates all lease and non-lease components for each class of underlying assets into a single lease component.
Stock-Based Compensation
Stock-based compensation expense represents the cost of the grant date fair value of employee stock option and restricted stock unit grants recognized over the requisite service period of the awards (usually the vesting period) on a straight-line basis. Performance-based stock units/awards represent a right to receive a certain number of shares of the Company’s common stock based on the achievement of corporate performance goals and continued employment during the vesting period. At each reporting period, and to the extent achievement of one or any of the performance conditions is probable, the Company reassesses the probability of the achievement of such corporate performance goals and any increase or decrease in share-based compensation expense resulting from an adjustment in the estimated shares to be released is treated as a cumulative catch-up in the period of adjustment. For stock awards for which vesting is subject to both performance-based milestones and market conditions, expense is recorded over the derived service period after the point when the achievement of the performance-based milestone is probable or the performance condition has been achieved.
The Company estimates the fair value of stock option grants using the Black-Scholes option pricing model, with the exception of option grants for which vesting is subject to both performance-based milestones and market conditions, which are valued using a lattice-based model. The fair value of restricted stock units, including performance-based restricted stock units, is based on the closing price of the Company’s common stock as reported on The Nasdaq Global Market on the date of grant. The Company recognizes forfeitures for all awards as such forfeitures occur.
Comprehensive Loss
Comprehensive loss is defined as a change in equity during a period from transactions and other events and circumstances from non‑owner sources. Other comprehensive loss includes unrealized gains and losses, other than losses attributable to a credit loss which are included in other income and expense, on investments classified as available-for-sale securities, which was the only difference between net loss and comprehensive loss for the applicable periods.
Net Loss Per Common Share
Basic net loss per common share is calculated by dividing the net loss by the weighted-average number of shares of common stock outstanding for the period, without consideration for common stock equivalents. The
Basic and diluted net loss per share attributable to stockholders for the three and six months ended June 30, 2024 and 2023 are calculated as follows (in thousands, except share and per share data):
10
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Three Months Ended June 30, |
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Six Months Ended June 30, |
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2024 |
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2023 |
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2024 |
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2023 |
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Numerator: |
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Net loss |
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Denominator: |
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Shares used to compute net loss per share, basic and diluted |
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Weighted-average common shares outstanding |
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Weighted-average pre-funded warrants |
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Weighted-average common shares outstanding used to |
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Net loss per share, basic and diluted |
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Basic and diluted |
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$ |
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$ |
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$ |
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$ |
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The following weighted-average outstanding shares of potentially dilutive securities are excluded from the computation of diluted net loss per share for the periods presented because including them would have been anti-dilutive:
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As of June 30, |
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2024 |
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2023 |
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Convertible preferred stock |
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Outstanding options to purchase common stock |
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Outstanding restricted stock units |
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Total |
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2. Collaboration and License Agreements
Ono Collaboration and Option Agreement
On September 14, 2018, the Company entered into a Collaboration and Option Agreement (the Ono Agreement) with Ono Pharmaceutical Co., Ltd. (Ono) for the joint development and commercialization of two off-the-shelf iPSC-derived CAR T-cell product candidates (Candidate 1 and Candidate 2). Pursuant to the terms of the Ono Agreement, the Company received an upfront, non-refundable and non-creditable payment of $
In December 2020, the Company entered into a letter agreement with Ono (the Ono Letter Agreement) pursuant to which Ono delivered proprietary antigen binding domains targeting an antigen expressed on certain solid tumors for incorporation into Candidate 2 and paid the Company a milestone fee of $
In June 2022, the Company entered into an amendment with Ono to the Ono Agreement (the 2022 Ono Amendment). Pursuant to the 2022 Ono Amendment, the companies agreed to designate an additional antigen expressed on certain solid tumors for research and preclinical development, and Ono agreed to contribute proprietary antigen binding domains targeting such additional solid tumor antigen (Candidate 3). In addition, for both Candidate 2 and Candidate 3, Ono and the Company expanded the scope of the collaboration to include the research and preclinical development of iPSC-derived CAR NK cell product candidates (in addition to iPSC-derived CAR T-cell product candidates) targeting the designated solid tumor antigens. Similar to Candidate 2, the Company granted to Ono, during a specified period of time, a preclinical option (Candidate 3 Development Option) to obtain an exclusive license under certain intellectual property rights, subject to payment of an option exercise fee to the Company by Ono, to further develop and commercialize Candidate 3 in all territories of the world, where the Company retains rights to co-develop and co-commercialize Candidate 3 in the United States and Europe under a joint arrangement with Ono under which the Company is eligible to share at least
11
approximately $
On November 7, 2022, Ono exercised its option to obtain a license to develop and commercialize Candidate 2 (the Candidate 2 Development Option). At the inception of the Ono Agreement, the Company determined the Candidate 2 Development Option represented an option with no material right. As such, the option exercise was treated as a separate contract with a single performance obligation of granting and delivering Ono a license to further develop and commercialize Candidate 2. The Company exercised its option (the CDCC Option) to co-develop and co-commercialize Candidate 2 in the United States and Europe. The Company and Ono are proceeding under a joint development plan for the ongoing development of Candidate 2. As a result, the Company received an Option Exercise Payment (as defined under the Ono Agreement) of $
On November 30, 2023, the Company entered into an amendment with Ono to the Ono Agreement (the 2023 Ono Amendment and collectively with the 2022 Ono Amendment, the Ono Amendments). Under the 2023 Ono Amendment, aggregate estimated research and preclinical development fees payable by Ono to the Company have been increased by approximately $
Under the terms of the Ono Agreement (as amended by the Ono Amendments), for Candidate 2 and for Candidate 3 (subject to exercise by Ono of its Candidate 3 Development Option), the Company is eligible to receive additional payments upon the achievement of certain clinical, regulatory and commercial milestones (the Ono Milestones) with respect to each Candidate in an amount up to $
The Ono Agreement will terminate with respect to a Candidate if Ono does not exercise its development option for a candidate within the option period, or in its entirety if Ono does not exercise any of its development options for the candidates within their respective option periods. In addition, either party may terminate the Ono Agreement in the event of breach, insolvency or patent challenges by the other party; provided, that Ono may terminate the Ono Agreement in its sole discretion (x) on a Candidate-by-Candidate basis at any time after the second anniversary of the effective date of the Ono Agreement or (y) on a Candidate-by-Candidate or country-by-country basis at any time after the expiration of the development option period, subject to certain limitations. The Ono Agreement will expire on a Candidate-by-Candidate and country-by-country basis upon the expiration of the applicable royalty term, or in its entirety upon the expiration of all applicable payment obligations under the agreement.
The Company determined that the Ono Agreement, Ono Letter Agreement, and Ono Amendments (collectively, the Ono Arrangement) were within the scope of ASC 808 and applicable to such guidance. The Company concluded that certain units of account, specifically the grant of a research license to certain intellectual property and the performance of research and preclinical development, within the Ono Arrangement represented a customer relationship and applied relevant guidance from ASC 606 to evaluate the appropriate accounting for those units of account. In accordance with this guidance, the Company identified its promised goods and services, including its grant of a research license to Ono to certain of its intellectual property subject to certain conditions, its conduct of research and preclinical development services, and its participation in a joint steering committee. The Company determined that its grant of a research license to Ono to certain of its intellectual property was not distinct from its conduct of research and preclinical development services and participation in a joint steering committee. Accordingly, the Company determined that the research license, the research and preclinical development services, and the participation in a joint steering committee during the development option period, should be accounted for as one combined performance obligation, and that the combined performance obligation is transferred over the expected term of the conduct of the research and preclinical development services. The Company also determined that, subject to the guidance of ASC 606, the license to develop and commercialize Candidate 2 upon exercise of the Candidate 2 Development Option was distinct and separable from the development and commercialization activities, which are accounted for under ASC 808. The termination of the Ono Agreement with respect to Candidate 1 did not impact this assessment.
In accordance with ASC 606, the Company determined that the initial transaction price for research and preclinical development under the Ono Arrangement equaled $4
12
Company’s conduct of research and preclinical development services based on actual costs incurred as a percentage of the estimated total costs expected to be incurred over the expected term of conduct of the research and preclinical development services. The Company recorded the $
In May 2024, following Ono's exercise of the Candidate 2 Development Option and delivery of the development and commercialization license, the Company achieved a $
The Company recognized revenue of $
The Company recognized contra-research and development expense of $
As a direct result of the Company’s entry into the Ono Arrangement, the Company incurred an aggregate of $
Janssen Collaboration and Option Agreement
On April 2, 2020 (the Janssen Agreement Effective Date), the Company entered into a Collaboration and Option Agreement (the Janssen Agreement) with Janssen Biotech, Inc. (Janssen), part of the Janssen Pharmaceutical Companies of Johnson & Johnson. Additionally, on the Janssen Agreement Effective Date, the Company entered into a Stock Purchase Agreement (the Stock Purchase Agreement) with Johnson & Johnson Innovation - JJDC, Inc. (JJDC). On January 3, 2023, the Company received notice of termination from Janssen of the Janssen Agreement. The termination took effect on April 3, 2023, and during the three months ended March 31, 2023, the Company performed wind-down activities including discontinuing development of all collaboration product candidates under the Janssen Agreement. The Company was reimbursed for all wind-down activities.
Under the terms of the Janssen Agreement and the Stock Purchase Agreement taken together, the Company received $
The Company recognized revenue of $
In connection with the Janssen Agreement, the Company incurred $
Memorial Sloan Kettering Cancer Center License Agreement
On May 15, 2018, the Company entered into an Amended and Restated Exclusive License Agreement (Amended MSKCC License) with MSKCC. The Amended MSKCC License amends and restates the Exclusive License Agreement entered into between the Company and MSKCC on August 19, 2016, pursuant to which the Company entered into an exclusive license agreement with MSKCC for rights relating to compositions and methods covering iPSC-derived cellular immunotherapy, including T-cells and NK-cells derived from iPSCs engineered with chimeric antigen receptors (CARs).
13
Pursuant to the Amended MSKCC License, MSKCC granted to the Company additional licenses to certain patents and patent applications relating to new CAR constructs and off-the-shelf CAR T-cells, including the use of clustered regularly interspaced short palindromic repeat and other innovative technologies for their production, in each case to research, develop, and commercialize licensed products in the field of all human therapeutic uses worldwide. The Company has the right to grant sublicenses to certain licensed rights in accordance with the terms of the Amended MSKCC License, in which case it is obligated to pay MSKCC a percentage of certain sublicense income received by the Company.
The Company is obligated to pay to MSKCC an annual license maintenance fee during the term of the agreement and is required to make milestone payments upon the achievement of specified clinical, regulatory and commercial milestones for licensed products as well as royalty payments on net sales of licensed products.
In the event a licensed product achieves a specified clinical milestone, MSKCC is then eligible to receive certain milestone payments totaling up to $
The following table summarizes the common stock multiples and the stock price appreciation milestone payments under the terms of the agreement:
Common stock multiple |
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Ten-trading day trailing average common stock price |
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$ |
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$ |
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$ |
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|||
Stock price appreciation milestone payment (in millions) |
|
$ |
|
|
$ |
|
|
$ |
|
|||
In July 2021, the Company achieved the specified clinical milestone for a licensed product under the Amended MSKCC License and the Company’s ten-trading day trailing average common stock price exceeded the first pre-specified threshold. As a result, the Company remitted the first milestone payment of $
To determine the estimated fair value of the remaining stock price appreciation milestones, the Company uses a Monte Carlo simulation methodology which models future Company common stock prices based on the current stock price and several key variables.
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As of June 30, |
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As of December 31, |
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2024 |
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2023 |
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Risk-free interest rate |
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% |
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% |
||
Expected volatility |
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% |
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% |
||
Estimated term (in years) |
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||
Closing stock price as of remeasurement date |
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$ |
|
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$ |
|
||
The key inputs to the Monte Carlo simulation to determine the fair value of the stock price appreciation milestones include the Company’s stock price as of the measurement date; the estimated term, which is based in part on the last valid patent claim date; the expected volatility of the Company’s common stock, estimated using the Company’s historical common stock volatility as of the remeasurement date; and the risk-free rate based on the U.S. Treasury yield for the estimated term determined. Fair value measurements are highly sensitive to changes in these inputs and significant changes could result in a significantly higher or lower fair value and resulting expense or gain.
At each balance sheet date, the Company remeasures the fair value of the stock price appreciation milestones, with changes in fair value recognized as a component of other income (expense) in the unaudited condensed consolidated statements of operations and comprehensive loss. Amounts are included in current or non-current liabilities based on the estimated timeline associated with the individual potential payments. During the three and six months ended June 30, 2024, the Company recorded other income of $
14
3. California Institute for Regenerative Medicine Awards
FT819 CIRM Award
In February 2024, the Company was awarded $
Following the conclusion of the Award Period, the Company, in its sole discretion, has the option to treat the FT819 CIRM Award either as a loan or as a grant. If the Company does not elect to treat the FT819 CIRM Award as a loan within 10 years of the award date, the award will be considered a grant and the Company will be obligated to pay CIRM, on a quarterly basis, a low single-digit royalty on commercial sales of FT819 until such aggregate royalty payments equal nine times the total amount awarded to the Company under the FT819 CIRM Award.
Since the Company may, at its election, repay some or all of the FT819 CIRM Award, the Company accounts for the award as a liability until the time of election. In May 2024, the Company received the first disbursement under the FT819 CIRM Award in the amount of $
FT516 CIRM Award
In April 2018, the Company executed an award agreement with CIRM pursuant to which CIRM awarded the Company $
Pursuant to the terms of the FT516 CIRM Award, the Company, in its sole discretion, has the option to treat the FT516 CIRM Award either as a loan or as a grant. During the first quarter of 2023, the Company elected to treat the FT516 CIRM Award as a grant. As such, the liability associated with the FT516 CIRM Award was derecognized and such amount was recorded as other income during the six months ended June 30, 2023.
4. Investments
The Company invests portions of excess cash in United States treasuries, commercial paper, non-U.S. government securities, municipal securities, and corporate debt securities with maturities ranging from to
15
The following table summarizes the Company’s investments accounted for as available-for-sale securities as of June 30, 2024 and December 31, 2023 (in thousands, except for maturity in years):
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Maturity |
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Amortized |
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Unrealized |
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Unrealized |
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Estimated |
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June 30, 2024 |
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Classified as current assets: |
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||||
Money market fund |
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$ |
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$ |
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$ |
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$ |
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|||||
U.S. Treasury debt securities |
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|
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|
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( |
) |
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||||
Non-US government securities |
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( |
) |
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Corporate debt securities |
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( |
) |
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Commercial paper |
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|
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( |
) |
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Total short-term investments |
|
|
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$ |
|
|
$ |
( |
) |
|
$ |
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$ |
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Classified as non-current assets: |
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||||
U.S. Treasury debt securities |
|
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$ |
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$ |
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$ |
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$ |
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Corporate debt securities |
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|
|
( |
) |
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Total long-term investments |
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$ |
|
|
$ |
( |
) |
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$ |
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$ |
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|||
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||||
December 31, 2023 |
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Classified as current assets: |
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|
||||
Money market fund |
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$ |
|
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$ |
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$ |
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$ |
|
|||||
U.S. Treasury debt securities |
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( |
) |
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Non-US government securities |
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Municipal securities |
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( |
) |
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Corporate debt securities |
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|
( |
) |
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Commercial paper |
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|
|
( |
) |
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|
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Total short-term investments |
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|
|
$ |
|
|
$ |
( |
) |
|
$ |
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$ |
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Classified as non-current assets: |
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Corporate debt securities |
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$ |
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$ |
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$ |
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$ |
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Total long-term investments |
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|
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$ |
|
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$ |
|
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$ |
|
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$ |
|
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As of June 30, 2024 and December 31, 2023, the Company had $
16
5. Fair Value Measurements
The following table presents the Company’s financial assets and liabilities measured at fair value on a recurring basis as of June 30, 2024 and December 31, 2023 (in thousands):
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Fair Value Measurements at |
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Total |
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Quoted Prices |
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Significant |
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Significant |
|
||||
As of June 30, 2024 |
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Financial assets: |
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||||
Money market funds |
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$ |
|
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$ |
|
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$ |
— |
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$ |
— |
|
||
U.S. Treasury debt securities |
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|
|
|
|
|
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— |
|
|
|
— |
|
||
Non-US government securities |
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|
|
— |
|
|
|
|
|
|
— |
|
||
Corporate debt securities |
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|
|
|
— |
|
|
|
|
|
|
— |
|
||
Commercial paper |
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|
|
|
— |
|
|
|
|
|
|
— |
|
||
Total financial assets measured at fair value on a recurring basis |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|||
|
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Financial liabilities: |
|
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|
|
|
|
|
|
|
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|
||||
Stock price appreciation milestones |
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
||
Total financial liabilities measured at fair value on a recurring basis |
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
||
|
|
|
|
|
|
|
|
|
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|
||||
As of December 31, 2023 |
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|
||||
Financial assets: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Money market funds |
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
||
U.S. Treasury debt securities |
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
||
Non-U.S. government securities |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
||
Municipal securities |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
||
Corporate debt securities |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
||
Commercial paper |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
||
Total assets measured at fair value on a recurring basis |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Financial liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Stock price appreciation milestones |
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
||
Total financial liabilities measured at fair value on a recurring basis |
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
||
Level 1 assets consisted of money market funds and U.S. Treasury securities measured at fair value based on quoted prices in active markets as provided by the Company’s investment managers.
Level 2 assets consisted of corporate debt securities, commercial paper, municipal securities, and non-U.S. government securities measured at fair value using standard observable inputs, including reported trades, broker/dealer quotes, and bids and/or offers. The Company validates the quoted market prices provided by its investment managers by comparing the investment managers’ assessment of the fair values of the Company’s investment portfolio balance against the fair values of the Company’s investment portfolio balance obtained from an independent source.
There were no Level 3 assets held by the Company as of June 30, 2024.
Level 3 liabilities consisted of stock price appreciation milestones associated with the Amended MSKCC License as described in detail in Note 2.
17
The following table presents the changes in fair value of the Company’s Level 3 stock price appreciation milestones liability for the six months ended June 30, 2024 (in thousands):
Balance at December 31, 2023 |
|
$ |
|
|
Changes in fair value of stock price appreciation milestones liability |
|
|
|
|
Balance at March 31, 2024 |
|
$ |
|
|