10-Q 1 gkos-20230930x10q.htm 10-Q
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended September 30, 2023

or

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

Commission file number: 001-37463 

GLAUKOS CORPORATION

(Exact name of registrant as specified in its charter)

Delaware

33-0945406

(State or other jurisdiction of
incorporation or organization)

(I.R.S. Employer Identification No.)

One Glaukos Way

Aliso Viejo, California

92656

(Address of registrant’s principal executive offices)

(Zip Code)

(949) 367-9600

(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

GKOS

New York Stock Exchange

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 October 30, 2023, there were 48,799,581 shares of the registrant’s Common Stock, $0.001 par value per share, outstanding.

GLAUKOS CORPORATION

Form 10-Q

For the Quarterly Period Ended September 30, 2023

Table of Contents

   

Page

PART I: FINANCIAL INFORMATION

4

Item 1.

Financial Statements

4

Condensed Consolidated Balance Sheets

4

Condensed Consolidated Statements of Operations

5

Condensed Consolidated Statements of Comprehensive Loss

6

Condensed Consolidated Statements of Stockholders’ Equity

7

Condensed Consolidated Statements of Cash Flows

8

Notes to Condensed Consolidated Financial Statements

9

Item 2.

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

24

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

36

Item 4.

Controls and Procedures

36

PART II: OTHER INFORMATION

37

Item 1.

Legal Proceedings

37

Item1A.

Risk Factors

37

Item 5.

Other Information

51

Item 6.

Exhibits

52

SIGNATURES

53

2

Note Regarding Forward-Looking Statements

This report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (Securities Act), and Section 21E of the Securities Exchange Act of 1934, as amended (Exchange Act) All statements other than statements of historical or current facts included in this report are forward-looking statements. In some cases, you can identify forward-looking statements by the following words: "may," "will," "could," "would," "should," "expect," "intend," "plan," "anticipate," "believe," "estimate," "predict," "project," "potential," "continue," "ongoing" or the negative of these terms or other comparable terminology, although not all forward-looking statements contain these words. Any statements in this Quarterly Report on Form 10-Q regarding future operations, expected operating results and financial performance, the Company’s strategy for growth, product development activities, regulatory approvals, including timing and likelihood of success, market position and expenditures are forward-looking statements. These forward-looking statements are based on management’s beliefs and assumptions based on the information currently available to management. Although we believe that we have a reasonable basis for each forward-looking statement contained in this report, we caution you that these forward-looking statements involve risks, uncertainties and other factors that may cause actual results, levels of activity, performance or achievements to be materially different from the information expressed or implied by these forward-looking statements.

You are urged to carefully review the disclosures we make concerning the risks we face and other factors that may affect the outcome of our forward-looking statements and our business and operating results, including the risks set forth in the "Risk Factors" section of this report, which includes a discussion of important factors that may cause actual results to differ materially from those expressed or implied by the forward-looking statements. As a result of these factors, we cannot assure you that the forward-looking statements in this report will prove to be accurate, and actual results may differ materially from those expressed or implied by the forward-looking statements. In light of the significant uncertainties in these forward-looking statements, you should not regard these statements as a representation or warranty by us or any other person that we will achieve our objectives and plans in any specified time frame, or at all. You are therefore cautioned not to place undue reliance on the forward-looking statements included in this report, which speak only as of the date of this document. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

We use Glaukos, our logo, iStent, iStent inject, iStent infinite, iPrism, iDose, iPRIME, MIGS, Avedro, Photrexa, iLink, KXL, Epioxa, iLution, Retina XR and other marks as trademarks. This report contains references to our trademarks and service marks and to those belonging to other entities. Solely for convenience, trademarks and trade names referred to in this report, including logos, artwork and other visual displays, may appear without the ® or ™ symbols, but such references are not intended to indicate in any way that we will not assert, to the fullest extent under applicable law, our rights or the rights of the applicable licensor to these trademarks and trade names. We do not intend our use or display of other entities’ trade names, trademarks or service marks to imply a relationship with, or endorsement or sponsorship of us by, any other entity.

References throughout this document to “we,” “us,” “our,” the “Company,” or “Glaukos” refer to Glaukos Corporation and its consolidated subsidiaries.

3

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

GLAUKOS CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except par values)

September 30, 

December 31, 

2023

2022

    

(unaudited)

    

 

Assets

Current assets:

Cash and cash equivalents

$

108,929

$

119,525

Short-term investments

191,928

233,170

Accounts receivable, net

39,326

36,073

Inventory

39,781

37,841

Prepaid expenses and other current assets

19,565

17,250

Total current assets

399,529

443,859

Restricted cash

5,856

7,078

Property and equipment, net

103,075

94,403

Operating lease right-of-use assets

27,273

25,826

Finance lease right-of-use asset

44,786

46,601

Intangible assets, net

289,184

307,869

Goodwill

66,134

66,134

Deposits and other assets

12,797

10,613

Total assets

$

948,634

$

1,002,383

Liabilities and stockholders' equity

Current liabilities:

Accounts payable

$

10,413

$

14,403

Accrued liabilities

56,734

57,956

Total current liabilities

67,147

72,359

Convertible senior notes

282,430

281,400

Operating lease liability

30,572

28,905

Finance lease liability

70,784

72,172

Deferred tax liability, net

7,249

7,264

Other liabilities

12,793

10,278

Total liabilities

470,975

472,378

Commitments and contingencies (Note 12)

Stockholders' equity:

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

-

-

Common stock, $0.001 par value; 150,000 shares authorized; 48,748 and 47,782 shares issued and 48,720 and 47,754 shares outstanding as of September 30, 2023 and December 31, 2022, respectively

49

48

Additional paid-in capital

1,039,266

997,470

Accumulated other comprehensive income (loss)

764

(2,975)

Accumulated deficit

(562,288)

(464,406)

Less treasury stock (28 shares as of September 30, 2023 and December 31, 2022)

(132)

(132)

Total stockholders' equity

477,659

530,005

Total liabilities and stockholders' equity

$

948,634

$

1,002,383

See accompanying notes to condensed consolidated financial statements.

4

GLAUKOS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

(in thousands, except per share amounts)

Three Months Ended

Nine Months Ended

September 30, 

September 30, 

    

2023

    

2022

    

2023

    

2022

 

Net sales

$

78,048

$

71,269

$

232,346

$

211,635

Cost of sales

18,510

16,861

56,684

51,757

Gross profit

59,538

54,408

175,662

159,878

Operating expenses:

Selling, general and administrative

54,247

47,149

161,034

140,998

Research and development

33,301

28,870

101,706

87,459

Acquired in-process research and development

-

-

3,000

10,000

Litigation-related settlement

-

-

-

(30,000)

Total operating expenses

87,548

76,019

265,740

208,457

Loss from operations

(28,010)

(21,611)

(90,078)

(48,579)

Non-operating expense:

Interest income

2,710

744

6,252

1,415

Interest expense

(3,398)

(3,481)

(10,205)

(10,311)

Other expense, net

(1,709)

(2,981)

(2,978)

(9,792)

Total non-operating expense

(2,397)

(5,718)

(6,931)

(18,688)

Loss before taxes

(30,407)

(27,329)

(97,009)

(67,267)

Income tax provision

37

247

873

468

Net loss

$

(30,444)

$

(27,576)

$

(97,882)

$

(67,735)

Basic and diluted net loss per share

$

(0.63)

$

(0.58)

$

(2.03)

$

(1.43)

Weighted average shares used to compute basic and diluted net loss per share

48,675

47,614

48,284

47,346

See accompanying notes to condensed consolidated financial statements.

5

GLAUKOS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(unaudited)

(in thousands)

Three Months Ended

Nine Months Ended

September 30, 

September 30, 

    

2023

    

2022

    

2023

    

2022

 

Net loss

$

(30,444)

$

(27,576)

$

(97,882)

$

(67,735)

Other comprehensive income (loss):

Foreign currency translation gain

561

342

822

1,500

Unrealized income (loss) on short-term investments

590

(450)

2,917

(5,338)

Other comprehensive income (loss):

1,151

(108)

3,739

(3,838)

Total comprehensive loss

$

(29,293)

$

(27,684)

$

(94,143)

$

(71,573)

See accompanying notes to condensed consolidated financial statements.

6

GLAUKOS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(unaudited)

(in thousands)

Accumulated

Additional

other

Common stock

paid-in

comprehensive

Accumulated

Treasury stock

Total

    

Shares

    

Amount

    

capital

    

(loss) income

    

deficit

    

Shares

    

Amount

    

equity

Balance at December 31, 2022

47,782

$

48

$

997,470

$

(2,975)

$

(464,406)

 

(28)

$

(132)

$

530,005

Common stock issued under stock plans, net

187

1,301

1,301

Stock-based compensation

10,184

10,184

Other comprehensive income

1,650

1,650

Net loss

(34,626)

(34,626)

Balance at March 31, 2023

47,969

$

48

$

1,008,955

$

(1,325)

$

(499,032)

 

(28)

$

(132)

$

508,514

Common stock issued under stock plans, net

444

 

 

(702)

 

 

 

 

 

(702)

Acquired in-process R&D acquired through the issuance of common stock

3,000

 

 

 

3,000

Stock-based compensation

 

 

9,873

 

 

 

 

 

9,873

Other comprehensive income

 

 

 

938

 

 

 

 

938

Net loss

 

 

 

 

(32,812)

 

 

 

(32,812)

Balance at June 30, 2023

48,413

$

48

$

1,021,126

$

(387)

$

(531,844)

(28)

$

(132)

$

488,811

Common stock issued under stock plans, net

335

1

7,656

7,657

Stock-based compensation

10,484

10,484

Other comprehensive income

1,151

1,151

Net loss

(30,444)

(30,444)

Balance at September 30, 2023

48,748

$

49

$

1,039,266

$

764

$

(562,288)

(28)

$

(132)

$

477,659

Accumulated

Additional

other

Common stock

paid-in

comprehensive

Accumulated

Treasury stock

Total

    

Shares

    

Amount

    

capital

    

(loss) income

    

deficit

    

Shares

    

Amount

    

equity

Balance at December 31, 2021

46,993

$

47

$

952,432

$

15

$

(365,211)

 

(28)

$

(132)

$

587,151

Common stock issued under stock plans, net

124

1,515

1,515

Stock-based compensation

6,923

6,923

Other comprehensive loss

(3,402)

(3,402)

Net income

5,377

5,377

Balance at March 31, 2022

47,117

$

47

$

960,870

$

(3,387)

$

(359,834)

 

(28)

$

(132)

$

597,564

Common stock issued under stock plans, net

331

 

1

 

237

 

 

 

 

 

238

Stock-based compensation

 

 

10,539

 

 

 

 

 

10,539

Other comprehensive loss

 

 

 

(328)

 

 

 

 

(328)

Net loss

 

 

 

 

(45,536)

 

 

 

(45,536)

Balance at June 30, 2022

47,448

$

48

$

971,646

$

(3,715)

$

(405,370)

(28)

$

(132)

$

562,477

Common stock issued under stock plans, net

245

 

 

4,350

 

 

 

 

 

4,350

Stock-based compensation

 

 

9,411

 

 

 

 

 

9,411

Other comprehensive income

 

 

 

(108)

 

 

 

 

(108)

Net loss

 

 

 

 

(27,576)

 

 

 

(27,576)

Balance at September 30, 2022

47,693

$

48

$

985,407

$

(3,823)

$

(432,946)

(28)

$

(132)

$

548,554

See accompanying notes to condensed consolidated financial statements.

7

GLAUKOS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

(in thousands)

Nine Months Ended September 30, 

    

2023

    

2022

 

Operating Activities

Net loss

$

(97,882)

$

(67,735)

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

Depreciation

6,455

4,710

Amortization of intangible assets

18,684

18,684

Noncash lease expense

3,218

3,378

Amortization of debt issuance costs

1,030

1,030

Deferred income tax benefit

(15)

(17)

Gain on disposal of fixed assets

881

29

Stock-based compensation

30,541

26,873

Unrealized foreign currency losses

991

4,219

Amortization of premium on short-term investments

(1,041)

601

Other liabilities

2,231

-

Acquired in-process R&D acquired through the issuance of common stock

3,000

-

Changes in operating assets and liabilities:

Accounts receivable, net

(3,535)

(3,121)

Inventory

(2,903)

(11,881)

Prepaid expenses and other current assets

(2,355)

(3,355)

Accounts payable and accrued liabilities

(6,149)

(1,847)

Other assets

(244)

(515)

Net cash used in operating activities

(47,093)

(28,947)

Investing activities

Purchases of short-term investments

(193,538)

(47,256)

Proceeds from sales and maturities of short-term investments

238,735

97,494

Purchases of property and equipment

(16,034)

(22,044)

Proceeds from disposal of property and equipment

-

96

Investment in company-owned life insurance

(2,147)

(166)

Net cash provided by investing activities

27,016

28,124

Financing activities

Proceeds from exercise of stock options

6,624

2,871

Proceeds from share purchases under Employee Stock Purchase Plan

6,278

5,630

Payment of employee taxes related to vested restricted stock units

(4,646)

(2,399)

Principal paid on finance lease

(517)

(380)

Net cash provided by financing activities

7,739

5,722

Effect of exchange rate changes on cash and cash equivalents

520

(1,927)

Net (decrease) increase in cash, cash equivalents and restricted cash

(11,818)

2,972

Cash, cash equivalents and restricted cash at beginning of period

126,603

110,124

Cash, cash equivalents and restricted cash at end of period

$

114,785

$

113,096

Supplemental disclosures of cash flow information

Taxes paid, net of refunds

$

1,218

$

372

Interest paid on convertible senior notes

$

3,953

$

3,953

Other interest paid

$

3,237

$

3,350

Supplemental schedule of noncash investing and financing activities

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

$

3,201

$

3,258

See accompanying notes to condensed consolidated financial statements.

8

GLAUKOS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Note 1.  Organization and Basis of Presentation

Organization and business

Glaukos Corporation (Glaukos or the Company), incorporated in Delaware on July 14, 1998, is an ophthalmic medical technology and pharmaceutical company focused on developing novel therapies for the treatment of glaucoma, corneal disorders, and retinal diseases. The Company developed Micro-Invasive Glaucoma Surgery (MIGS) to serve as an alternative to the traditional glaucoma treatment paradigm and launched its first MIGS device commercially in 2012. The Company also offers commercially a proprietary bio-activated pharmaceutical therapy for the treatment of a rare corneal disorder, keratoconus, that was approved by the United States (U.S.) Food and Drug Administration (FDA) in 2016. The Company is developing a portfolio of platforms to support ongoing pharmaceutical and medical device innovations. Products or product candidates for each of these platforms are designed to advance the standard of care through better treatment options across the areas of glaucoma; corneal disorders such as keratoconus, dry eye and refractive vision correction; and retinal diseases such as neovascular age-related macular degeneration, diabetic macular edema and retinal vein occlusion.

The accompanying condensed consolidated financial statements include the accounts of Glaukos and its wholly-owned subsidiaries. The Company translates the financial statements of its foreign subsidiaries using end-of-period exchange rates for assets and liabilities and average exchange rates during each reporting period for results of operations. All significant intercompany balances and transactions among the consolidated entities have been eliminated in consolidation.

Basis of presentation

The accompanying condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted (GAAP) in the U.S. for interim financial information and pursuant to the instructions to Form 10-Q and Article 10 of Regulation S-X.

As permitted by Form 10-Q and Article 10 of Regulation S-X, under those rules, certain footnotes and other financial information that are normally required by GAAP have been condensed or omitted. The unaudited interim financial statements have been prepared on a basis consistent with the audited financial statements. In the opinion of management, the unaudited interim financial statements reflect all adjustments necessary for the fair presentation of the Company’s financial information contained herein. All such adjustments are of a normal and recurring nature. The condensed consolidated balance sheet as of December 31, 2022 has been derived from audited financial statements at that date, but excludes disclosures required by GAAP for complete financial statements. These interim financial statements do not include all disclosures required by GAAP and should be read in conjunction with the Company’s financial statements and accompanying notes for the fiscal year ended December 31, 2022, which are contained in the Company’s Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission (SEC) on February 24, 2023. The Company’s results of operations for the three and nine months ended September 30, 2023 are not necessarily indicative of the results to be expected for the year ending December 31, 2023 or for any other interim period.

Recent developments

On May 16, 2023, the Company issued $3.0 million of its common stock in connection with the acquisition of intellectual property rights regarding certain formulations and methods for treating an ophthalmic disorder, including all related patents and patent applications, technology and know-how. The Company accounted for the transaction as an asset acquisition as the set of acquired assets did not constitute a business. The Company may have ongoing milestone payments based on achieving certain clinical and regulatory milestones depending on the success of the development and approval of the proprietary technologies. Additionally, if these proprietary technologies are commercialized, the Company may also have royalty payments and commercial milestone obligations that are determined based upon annual net sales thresholds. The Company does not have any accrued liabilities related to this transaction as of September 30, 2023.

9

On July 17, 2023, the Company entered into a collaboration and marketing agreement (Collaboration and Marketing Agreement) with Radius XR, Inc. (Radius), in which the Company became the exclusive sales agent to market, promote and solicit orders for the Radius XR™ wearable patient engagement and diagnostic system within the United States. Pursuant to the Collaboration and Marketing Agreement, the Company earns commission payments based on sales of Radius products resulting from the Company’s marketing and promotion efforts. These sales commissions were immaterial for the three months ended September 30, 2023. In connection with the Collaboration and Marketing Agreement, the Company entered into a convertible promissory note (Convertible Promissory Note) pursuant to which the Company agreed to fund Radius up to $5.0 million, based upon the occurrence of certain potential future events. The Convertible Promissory Note bears interest on the outstanding principal at the rate of 5.0% per annum, and the outstanding principal and interest is convertible into preferred stock or capital stock in Radius under certain circumstances. As of September 30, 2023, $0.5 million is outstanding under the Convertible Promissory Note.

Note 2.  Summary of Significant Accounting Policies

The Company accounts for a variable interest entity (VIE) when: (a) the equity investment at risk in the entity is not sufficient to permit the entity to finance its activities without additional subordinated financial support provided by other parties, including the equity holders; (b) the entity’s equity holders as a group (i) lack the direct or indirect ability to make decisions about the entity, (ii) are not obligated to absorb expected losses of the entity or (iii) do not have the right to receive expected residual returns of the entity; or (c) the entity’s equity holders have voting rights that are not proportionate to their economic interests, and the activities of the entity involve, or are conducted on behalf of, the equity holder with disproportionately few voting rights. If an entity is deemed to be a VIE, the enterprise that has both (a) the power to direct the activities of a VIE that most significantly impact the entity’s economic performance and (b) the obligation to absorb the expected losses of the entity or right to receive benefits from the entity that could be potentially significant to the VIE is considered the primary beneficiary and must consolidate the VIE.

Through the Collaboration and Marketing Agreement, Radius was determined to be a VIE that the Company does not consolidate as the Company lacks the power to direct the activities that significantly impact the economic success of the VIE. As of September 30, 2023, the Company’s carrying value of the investment in the VIE totaled $0.5 million. The maximum exposure to loss related to the VIE is limited to the carrying value of the Company’s investment. The Company has provided no financing to the VIE other than the contractually required amount.

Other than the aforementioned VIE accounting policy, there have been no significant changes in the Company’s significant accounting policies during the three and nine months ended September 30, 2023, as compared with those disclosed in its Annual Report on Form 10-K for the year ended December 31, 2022 filed with the SEC on February 24, 2023.

Use of Estimates

The preparation of the condensed consolidated financial statements in conformity with GAAP requires management to make estimates, judgments and assumptions that affect the reported amounts in the condensed consolidated financial statements and accompanying notes. Actual results could differ materially from those estimates and assumptions used in the preparation of the accompanying condensed consolidated financial statements.

The Company’s condensed consolidated financial statements as of and for the three and nine months ended September 30, 2023 reflect the Company’s estimates of the impact of the macroeconomic and geopolitical environment, including the impact of inflation, higher interest rates and foreign exchange rate fluctuations. The duration and scope of these conditions cannot be predicted; therefore, the extent to which these conditions will directly or indirectly impact the Company’s business, results of operations and financial condition is uncertain.

Cash, Cash Equivalents and Restricted Cash

The following table provides a reconciliation of cash and cash equivalents and restricted cash reported within the condensed consolidated balance sheets that equate to the amount reported in the condensed consolidated statements of cash flows as of the beginning and end of the three months ended September 30, 2023 (in thousands):

10

September 30, 

December 31, 

2023

2022

Cash and cash equivalents

$

108,929

$

119,525

Restricted cash

5,856

7,078

Cash, cash equivalents and restricted cash

$

114,785

$

126,603

The Company’s cash and cash equivalents include cash in readily available checking and money market accounts, as well as certificates of deposit. The Company maintains balances of cash and cash equivalents at one or more financial institutions that are in excess of federally insured limits.

Recently Adopted Accounting Pronouncements

The Company has not adopted any recent accounting pronouncements that had a material impact on its condensed consolidated financial statements.

Recently Issued Accounting Pronouncements Not Yet Adopted

The Company reviewed recently issued accounting pronouncements and concluded that they were either not applicable or not expected to have a significant impact to the condensed consolidated financial statements.

Note 3.  Balance Sheet Details

Short-term Investments

Short-term investments consisted of the following (in thousands):

At September 30, 2023

 

Maturity

Amortized cost

Unrealized

Unrealized

Estimated

 

    

(in years)

    

or cost

    

gains

    

losses

    

fair value

  

U.S. government agency bonds

less than 3

$

47,989

$

-

(658)

$

47,331

U.S. treasury securities

less than 2

95,929

-

(320)

95,609

Bank certificates of deposit

less than 2

11,300

1

(1)

11,300

Corporate notes

less than 3

 

22,104

 

11

 

(403)

 

21,712

Asset-backed securities

less than 2

 

8,613

 

-

 

(226)

 

8,387

Municipal bonds

less than 3

7,634

-

(45)

7,589

Total

$

193,569

$

12

$

(1,653)

$

191,928

At December 31, 2022

 

Maturity

Amortized cost

Unrealized

Unrealized

Estimated

 

    

(in years)

    

or cost

    

gains

    

losses

    

fair value

 

U.S. government agency bonds

less than 3

$

88,478

$

-

$

(2,413)

$

86,065

U.S. treasury securities

less than 1

52,991

-

(384)

52,607

Bank certificates of deposit

less than 1

17,500

3

(11)

17,492

Corporate notes

less than 3

 

41,464

 

-

 

(978)

 

40,486

Asset-backed securities

less than 2

 

21,656

 

-

 

(360)

 

21,296

Municipal bonds

less than 3

15,635

-

(411)

15,224

Total

$

237,724

$

3

$

(4,557)

$

233,170

At each reporting date, the Company performs an evaluation of impairment to determine if any unrealized losses are the result of credit losses. Impairment is assessed at the individual security level. Factors considered in determining whether a loss resulted from a credit loss or other factors include the Company’s intent and ability to hold the investment until the recovery of its amortized cost basis, the extent to which the fair value is less than the amortized cost basis, the length of time and extent to which fair value has been less than the cost basis, the financial condition of the issuer, any historical failure of the issuer to make scheduled interest or principal payments, any changes to the rating of the security by a rating agency, any adverse legal or regulatory events affecting the issuer or issuer’s industry, and any significant deterioration in economic conditions.

11

The credit-related portion of unrealized losses, and any subsequent improvements, are recorded in interest expense in the condensed consolidated statements of operations through an allowance for credit losses. Unrealized gains and losses that are not credit-related are included in accumulated other comprehensive loss. Unrealized losses on available-for-sale debt securities as of September 30, 2023 and December 31, 2022 were not significant and were primarily due to changes in interest rates, including market credit spreads, and not due to increased credit risks associated with specific securities. Further, the Company does not intend to sell these investments prior to maturity and it is not more likely than not that the Company will be required to sell these investments before recovery of their amortized cost basis. Accordingly, the Company did not record an allowance for credit losses with respect to these investments as of September 30, 2023 and December 31, 2022.