10-Q 1 icpt-20220331x10q.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 March 31, 2022

OR

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

For the transition period from                          to                         

Commission file number: 001-35668

INTERCEPT PHARMACEUTICALS, INC.

(Exact Name of Registrant as Specified in Its Charter)

Delaware

    

22-3868459

(State or Other Jurisdiction of
Incorporation or Organization)

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

305 Madison Avenue,

Morristown, NJ 07960

(Address of Principal Executive Offices and Zip Code)

(646) 747-1000

(Registrant’s Telephone Number, Including Area Code)

10 Hudson Yards, 37th Floor, New York, NY 10001

(Former address, if changed since last report)

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

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.001 per share

ICPT

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  

The number of shares of the registrant’s common stock outstanding as of March 31, 2022 was 29,708,846.

Intercept Pharmaceuticals, Inc.

INDEX

PART I
FINANCIAL INFORMATION

   

Item 1.

Financial Statements

Condensed Consolidated Balance Sheets at March 31, 2022 (Unaudited) and December 31, 2021 (Audited)

6

Condensed Consolidated Statements of Operations for the three-month periods ended March 31, 2022 and 2021 (Unaudited)

7

Condensed Consolidated Statements of Comprehensive Loss for the three-month periods ended March 31, 2022 and 2021 (Unaudited)

8

Condensed Consolidated Statements of Changes in Stockholders’ Deficit for the three-month periods ended March 31, 2022 and 2021 (Unaudited)

9

Condensed Consolidated Statements of Cash Flows for the three-month periods ended March 31, 2022 and 2021 (Unaudited)

10

Notes to Condensed Consolidated Financial Statements (Unaudited)

11

Item 2.

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

28

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

34

Item 4.

Controls and Procedures

34

PART II

OTHER INFORMATION

Item 1.

Legal Proceedings

35

Item 1A.

Risk Factors

35

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

35

Item 6.

Exhibits

35

Exhibit Index

36

Signatures

37

Unless the context otherwise requires, references in this Quarterly Report on Form 10-Q to “we,” “our,” “us” and the “Company” refer, collectively, to Intercept Pharmaceuticals, Inc., a Delaware corporation, and its consolidated subsidiaries.

2

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements, including, but not limited to, statements regarding the progress, timing and results of our clinical trials, including our clinical trials for the treatment of nonalcoholic steatohepatitis (“NASH”), the safety and efficacy of our approved product, Ocaliva (obeticholic acid or “OCA”) for primary biliary cholangitis (“PBC”), and our product candidates, including OCA for liver fibrosis due to NASH, the timing and acceptance of our regulatory filings and the potential approval of OCA for liver fibrosis due to NASH, the review of our New Drug Application for OCA for the treatment of liver fibrosis due to NASH by the U.S. Food and Drug Administration (the “FDA”), our intent to work with the FDA to address the issues raised in a complete response letter (“CRL”), the potential commercial success of OCA, as well as our strategy, future operations, future financial position, future revenue, projected costs, financial guidance, prospects, plans and objectives.

These statements constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “plan,” “predict,” “project,” “target,” “potential,” “will,” “would,” “could,” “should,” “possible,” “continue” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of their dates, and we undertake no obligation to update any forward-looking statement except as required by law. These forward-looking statements are based on estimates and assumptions by our management that, although believed to be reasonable, are inherently uncertain and subject to a number of risks.

The following represent some, but not necessarily all, of the factors that could cause actual results to differ materially from historical results or those anticipated or predicted by our forward-looking statements:

our ability to successfully commercialize Ocaliva for PBC;
our ability to maintain our regulatory approval of Ocaliva for PBC in the United States, Europe, Canada, Israel, Australia and other jurisdictions in which we have or may receive marketing authorization;
our ability to timely and cost-effectively file for and obtain regulatory approval of our product candidates on an accelerated basis or at all, including OCA for liver fibrosis due to NASH following the issuance of the CRL by the FDA; any advisory committee recommendation or dispute resolution determination that our product candidates, including OCA for liver fibrosis due to NASH, should not be approved or approved only under certain conditions; or any future determination that the regulatory applications and subsequent information we submit for our product candidates, including OCA for liver fibrosis due to NASH, do not contain adequate clinical or other data or meet applicable regulatory requirements for approval;
conditions that may be imposed by regulatory authorities on our marketing approvals for our products and product candidates, including OCA for liver fibrosis due to NASH, such as the need for clinical outcomes data (and not just results based on achievement of a surrogate endpoint), any risk mitigation programs such as a Risk Evaluation and Mitigation Strategies (“REMS”) program, and any related restrictions, limitations and/or warnings contained in the label of any of our products or product candidates;
any potential side effects associated with Ocaliva for PBC, OCA for liver fibrosis due to NASH or our other product candidates that could delay or prevent approval, require that an approved product be taken off the market, require the inclusion of safety warnings or precautions, or otherwise limit the sale of such product or product candidate, including in connection with our update to the Ocaliva prescribing information in May 2021 contraindicating Ocaliva for patients with PBC and decompensated cirrhosis, a prior decompensation event, or compensated cirrhosis with evidence of portal hypertension;
the initiation, timing, cost, conduct, progress and results of our research and development activities, preclinical studies and clinical trials, including any issues, delays or failures in identifying patients, enrolling patients, treating patients, retaining patients, meeting specific endpoints in the jurisdictions in which we intend to seek approval or completing and timely reporting the results of our NASH or PBC clinical trials;
the outcomes of interactions with regulators (e.g., the FDA and the European Medicines Agency ("EMA")) regarding our clinical trials;

3

our ability to establish and maintain relationships with, and the performance of, third-party manufacturers, contract research organizations and other vendors upon whom we are substantially dependent for, among other things, the manufacture and supply of our products, including Ocaliva for PBC and, if approved, OCA for liver fibrosis due to NASH, and our clinical trial activities;
our ability to identify, develop and successfully commercialize our products and product candidates, including our ability to successfully launch OCA for liver fibrosis due to NASH, if approved;
our ability to obtain and maintain intellectual property protection for our products and product candidates, including our ability to cost-effectively file, prosecute, defend and enforce any patent claims or other intellectual property rights;
the size and growth of the markets for our products and product candidates and our ability to serve those markets;
the degree of market acceptance of Ocaliva for PBC and, if approved, OCA for liver fibrosis due to NASH or our other product candidates among physicians, patients and healthcare payors;
the availability of adequate coverage and reimbursement from governmental and private healthcare payors for our products, including Ocaliva for PBC and, if approved, OCA for liver fibrosis due to NASH, and our ability to obtain adequate pricing for such products;
our ability to establish and maintain effective sales, marketing and distribution capabilities, either directly or through collaborations with third parties;
competition from existing drugs or new drugs that become available;
our ability to attract and retain key personnel to manage our business effectively;
our ability to prevent or defend against system failures or security or data breaches due to cyber-attacks, or cyber intrusions, including ransomware, phishing attacks and other malicious intrusions;
our ability to comply with data protection laws;
costs and outcomes relating to any disputes, governmental inquiries or investigations, regulatory proceedings, legal proceedings or litigation, including any securities, intellectual property, employment, product liability or other litigation;
our collaborators’ election to pursue research, development and commercialization activities;
our ability to establish and maintain relationships with collaborators with development, regulatory and commercialization expertise;
our need for and ability to generate or obtain additional financing;
our estimates regarding future expenses, revenues and capital requirements and the accuracy thereof;
our use of cash, cash equivalents and short-term investments;
our ability to acquire, license and invest in businesses, technologies, product candidates and products;
our ability to manage the growth of our operations, infrastructure, personnel, systems and controls;
our ability to obtain and maintain adequate insurance coverage;
continuing threats from COVID-19, including additional waves of infections, and their impacts including quarantines and other government actions; delays relating to our regulatory applications; disruptions relating to our ongoing clinical trials or involving our contract research organizations, study sites or other clinical partners; disruptions relating to our supply chain or involving our third-party manufacturers, distributors or other distribution partners; and facility closures or other restrictions; and the impact of the foregoing on our results of operations and financial position;
the impact of general U.S. and foreign economic, industry, market, regulatory or political conditions, including the impact of Brexit;
the transaction with Advanz Pharma could fail to close timely or at all, including due to failure to receive required regulatory approvals, or we could not receive the earn-out or royalties provided for by the transaction agreements, or we could be unsuccessful in using the funds received to implement our business strategies, or the transaction could lead to operational or other business problems, or to unexpected tax, litigation, or other liabilities; and
the other risks and uncertainties identified under the captions “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this Quarterly Report on Form 10-Q and

4

in our other periodic filings filed with the U.S. Securities and Exchange Commission (the “SEC”), including our most recent Annual Report.

NOTE REGARDING TRADEMARKS

The Intercept Pharmaceuticals® name and logo and the Ocaliva® name and logo are either registered or unregistered trademarks or trade names of the Company in the United States and/or other countries. All other trademarks, trade names and service marks appearing in this Quarterly Report on Form 10-Q are the property of their respective owners. Solely for convenience, trademarks and trade names referred to in this Quarterly Report on Form 10-Q may appear without the ® and ™ symbols, but those references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights or that the applicable owner will not assert its rights to these trademarks and trade names.

5

PART I

Item 1. Financial Statements.

INTERCEPT PHARMACEUTICALS, INC.

Condensed Consolidated Balance Sheets

(In thousands, except share and per share data)

March 31, 

December 31, 

2022

2021

    

(Unaudited)

    

(Audited)

Assets

 

  

 

  

Current assets:

 

  

 

  

Cash and cash equivalents

$

48,320

$

84,709

Restricted cash

11,153

9,700

Investment debt securities, available-for-sale

 

347,382

 

334,980

Accounts receivable, net of allowance for credit losses of $255 and $296, respectively

 

46,144

 

47,617

Prepaid expenses and other current assets

 

24,354

 

25,286

Total current assets

 

477,353

 

502,292

Fixed assets, net

 

3,059

 

3,377

Inventory

 

8,257

 

8,619

Security deposits

 

6,926

 

6,616

Other assets

 

7,762

 

6,119

Total assets

$

503,357

$

527,023

Liabilities and Stockholders’ Deficit

 

  

 

  

Current liabilities:

 

 

  

Accounts payable, accrued expenses and other liabilities

$

147,060

$

158,216

Short-term interest payable

 

3,976

 

8,601

Total current liabilities

 

151,036

 

166,817

Long-term liabilities:

 

 

  

Long-term debt

 

716,885

 

539,782

Long-term other liabilities

 

7,197

 

4,386

Total liabilities

$

875,118

$

710,985

Commitments and contingencies (Note 14)

Stockholders’ deficit:

 

  

 

  

Common stock par value $0.001 per share; 90,000,000 shares authorized; 29,708,846 and 29,572,953 shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively

 

30

 

30

Additional paid-in capital

 

2,007,684

 

2,308,653

Accumulated other comprehensive loss, net

 

(3,487)

 

(2,873)

Accumulated deficit

 

(2,375,988)

 

(2,489,772)

Total stockholders’ deficit

 

(371,761)

 

(183,962)

Total liabilities and stockholders’ deficit

$

503,357

$

527,023

See accompanying notes to the condensed consolidated financial statements.

6

INTERCEPT PHARMACEUTICALS, INC.

Condensed Consolidated Statements of Operations

(Unaudited)

(In thousands, except per share data)

Three Months Ended

March 31, 

    

2022

    

2021

Revenue:

  

 

Product revenue, net

$

88,582

$

81,661

Total revenue

 

88,582

 

81,661

Operating expenses:

 

  

 

  

Cost of sales

 

758

 

810

Selling, general and administrative

 

50,007

 

59,271

Research and development

 

48,089

 

50,766

Restructuring

161

Total operating expenses

 

98,854

 

111,008

Operating loss

 

(10,272)

 

(29,347)

Other (expense) income:

 

  

 

  

Interest expense

 

(6,673)

 

(12,419)

Other (expense) income, net

 

(339)

 

1,346

Total other (expense), net

 

(7,012)

 

(11,073)

Net loss

$

(17,284)

$

(40,420)

Net loss per common and potential common share:

 

  

 

  

Basic and diluted

$

(0.58)

$

(1.22)

Weighted average common and potential common shares outstanding:

 

 

  

Basic and diluted

 

29,696

 

33,139

See accompanying notes to the condensed consolidated financial statements.

7

INTERCEPT PHARMACEUTICALS, INC.

Condensed Consolidated Statements of Comprehensive Loss

(Unaudited)

(In thousands)

Three Months Ended

March 31, 

    

2022

    

2021

Net loss

$

(17,284)

$

(40,420)

Other comprehensive (loss) income:

 

  

 

  

Net changes related to available-for-sale investment debt securities:

Unrealized losses on investment debt securities

 

(1,020)

 

(344)

Reclassification adjustment for realized losses on investment debt securities included in other income, net

 

 

2

Net unrealized losses on investment debt securities

$

(1,020)

$

(342)

Foreign currency translation gains

 

406

 

281

Other comprehensive loss

$

(614)

$

(61)

Comprehensive loss

$

(17,898)

$

(40,481)

See accompanying notes to the condensed consolidated financial statements.

8

INTERCEPT PHARMACEUTICALS, INC.

Condensed Consolidated Statements of Changes in Stockholders’ Deficit

(Unaudited)

(In thousands)

Accumulated

Additional

Other

Total

Common Stock

Paid-in

Comprehensive

Accumulated

Stockholders’

Shares

    

Amount

    

Capital

    

Loss, Net

    

Deficit

    

Deficit

Balance - December 31, 2021

29,573

$

30

$

2,308,653

$

(2,873)

$

(2,489,772)

$

(183,962)

Stock-based compensation

 

 

 

6,720

 

 

 

6,720

Issuance of common stock under equity plan

156

Employee withholding taxes related to stock-based awards

(20)

(318)

(318)

Reclassification of the equity components of the Convertible Notes to liability upon adoption of ASU 2020-06

(307,371)

131,068

(176,303)

Other comprehensive loss

 

 

 

(614)

 

 

(614)

Net loss

 

 

 

 

 

(17,284)

 

(17,284)

Balance - March 31, 2022

 

29,709

$

30

$

2,007,684

$

(3,487)

$

(2,375,988)

$

(371,761)

Accumulated

Additional

Other

Total

Common Stock

Paid-in

Comprehensive

Accumulated

Stockholders’

Shares

    

Amount

    

Capital

    

Loss, Net

    

Deficit

    

Deficit

Balance - December 31, 2020

33,016

$

33

$

2,233,937

$

(2,477)

$

(2,398,346)

$

(166,853)

Stock-based compensation

8,419

8,419

Net proceeds from exercise of stock options

141

Employee withholding taxes related to stock-based awards

 

(3)

(1,083)

(1,083)

Other comprehensive loss

 

 

 

 

(61)

 

 

(61)

Net loss

(40,420)

(40,420)

Balance - March 31, 2021

33,154

$

33

$

2,241,273

$

(2,538)

$

(2,438,766)

$

(199,998)

See accompanying notes to the condensed consolidated financial statements.

9

INTERCEPT PHARMACEUTICALS, INC.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(In thousands)

Three Months Ended March 31, 

    

2022

    

2021

Cash flows from operating activities:

 

  

 

  

Net loss

$

(17,284)

$

(40,420)

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

 

  

 

  

Stock-based compensation

 

6,720

 

8,419

Amortization of premium on investment debt securities

 

791

 

1,220

Amortization of deferred financing costs

 

797

 

671

Depreciation

 

375

 

870

Non-cash operating lease cost

1,304

1,509

Accretion of debt discount

 

 

6,861

Provision for allowance of credit losses, net of write-offs

(41)

198

Changes in operating assets:

 

 

  

Accounts receivable

 

1,124

 

(1,408)

Prepaid expenses and other current assets

 

808

 

547

Inventory

 

142

 

86

Security deposits

(357)

95

Changes in operating liabilities:

 

 

  

Accounts payable, accrued expenses and other current liabilities

 

(8,188)

 

(29,286)

Operating lease liabilities

(1,690)

(1,425)

Interest payable

(4,625)

(2,587)

Net cash used in operating activities

 

(20,124)

 

(54,650)

Cash flows from investing activities:

 

  

 

  

Purchases of investment debt securities

 

(142,789)

 

(50,533)

Sales and maturities of investment debt securities

 

128,576

 

142,250

Purchases of equipment, leasehold improvements, and furniture and fixtures

 

(7)

 

(377)

Net cash (used in) provided by investing activities

 

(14,220)

 

91,340

Cash flows from financing activities:

 

  

 

  

Payments of employee withholding taxes related to stock-based awards

(318)

(1,083)

Net cash used in financing activities

 

(318)

 

(1,083)

Effect of exchange rate changes on cash, cash equivalents and restricted cash

 

(274)

 

(882)

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

 

(34,936)

 

34,725

Cash, cash equivalents and restricted cash at beginning of period

 

94,409

 

65,654

Cash, cash equivalents and restricted cash at end of period

$

59,473

$

100,379

Supplemental disclosure of non-cash transactions:

Right-of-use asset obtained in exchange for new operating lease obligations

$

(3,173)

$

Non-cash investing and financing activities

Net increase in accrued fixed assets

$

(52)

$

(348)

Reconciliation of cash, cash equivalents and restricted cash included in the condensed consolidated balance sheets:

Cash and cash equivalents

$

48,320

$

92,946

Restricted cash

11,153

7,433

Total cash, cash equivalents and restricted cash

$

59,473

$

100,379

See accompanying notes to the condensed consolidated financial statements.

10

INTERCEPT PHARMACEUTICALS, INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

1.    Overview of Business

Intercept Pharmaceuticals, Inc. (the “Company”) is a biopharmaceutical company focused on the development and commercialization of novel therapeutics to treat progressive non-viral liver diseases, including primary biliary cholangitis (“PBC”) and nonalcoholic steatohepatitis (“NASH”). The Company currently has one marketed product, Ocaliva (obeticholic acid or “OCA”). Founded in 2002, the Company has operations in the United States, Europe and Canada.

2.    Basis of Presentation

The Company’s financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”). All intercompany balances and transactions have been eliminated in consolidation. Certain information that is normally required by U.S. GAAP has been condensed or omitted in accordance with rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). Operating results for the three months ended March 31, 2022 are not necessarily indicative of the results that may be expected for any future period or for the year ending December 31, 2022. In the opinion of management, these unaudited condensed consolidated financial statements include all normal and recurring adjustments considered necessary for a fair presentation of these interim unaudited condensed consolidated financial statements.

These unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and the notes thereto for the year ended December 31, 2021, included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 filed with the SEC.

Use of Estimates

The preparation of these unaudited condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and judgments that affect the reported amounts of assets and liabilities, the disclosure of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results may differ from these estimates.

3.    Summary of Significant Accounting Policies

The Company’s significant accounting policies are described in Note 2 of Notes to Consolidated Financial Statements included in its Annual Report on 10-K for the year ended December 31, 2021. There have been no material changes in the Company’s significant accounting policies as compared to the significant accounting policies described in the Annual Report, other than the adoption of accounting pronouncement below.

Recent Accounting Pronouncements

Recently Adopted Accounting Pronouncements

In August 2020, the FASB issued ASU No. 2020-06, “Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”), which simplifies the accounting for convertible instruments by eliminating the requirement to separately account for embedded conversion features as an equity component in certain circumstances. A convertible debt instrument will be reported as a single liability instrument with no separate accounting for an embedded conversion feature unless separate accounting is required for an embedded conversion feature as a derivative or under the substantial premium model. The ASU simplifies the diluted earnings per share calculation by requiring that an entity use the if-converted method and that the effect of potential share settlement be included in diluted earnings per share calculations. Further, the ASU requires enhanced disclosures about convertible

11

instruments. The Company adopted ASU 2020-06 on January 1, 2022 using the modified retrospective method. Upon adoption at January 1, 2022, the Company made certain adjustments in its condensed consolidated balance sheets which consisted of an increase of $176.3 million in Long-term debt, a net decrease of $307.4 million in Additional paid-in capital and a net decrease of $131.1 million in Accumulated deficit resulting from the reversal of previously recognized non-cash interest expense.

After adoption, the Company accounts for the Convertible Notes as single liabilities measured at amortized cost. The Company did not elect the fair value option. Additionally, the Company will no longer incur non-cash interest expense for the amortization of debt discount related to the previously separated equity components. The Company will apply the if-converted methodology in computing diluted earnings per share if and when profitability is achieved.

The following table summarizes the adjustments made to the Company’s condensed consolidated balance sheet as of January 1, 2022 as a result of applying the modified retrospective method in adopting ASU 2020-06: 

    

As Reported

    

ASU 2020-06

As Adjusted

December 31, 2021

Adjustments

January 1, 2022

 

(in thousands)

Convertible Notes

$

539,782

$

176,303

$

716,085

Additional paid-in capital

$

2,308,653

$

(307,371)

$

2,001,282

Accumulated deficit

$

(2,489,772)

$

131,068

$

(2,358,704)

Under the modified retrospective method, comparative prior periods are not adjusted. The adoption did not impact previously reported amounts in the Company’s condensed consolidated statements of operations, cash flows and the basic and diluted net loss per share amounts.

4.    Cash, Cash Equivalents and Investment Debt Securities

The following table summarizes the Company’s cash, cash equivalents and investment debt securities as of March 31, 2022 and December 31, 2021:

As of March 31, 2022

Allowance

Gross

Gross

for Credit

Unrealized

Unrealized

    

Amortized Cost

Losses

    

Gains

    

Losses

    

Fair Value

(in thousands)

Cash and cash equivalents:

 

  

 

  

 

  

 

  

Cash and money market funds

$

48,320

$

$

$

$

48,320

Total cash and cash equivalents

48,320

48,320

Investment debt securities:

 

  

 

  

 

  

 

  

 

  

Commercial paper

 

116,832

 

 

1

 

(282)

 

116,551

Corporate debt securities

 

190,218

 

4

 

(941)

 

189,281

Municipal bonds

5,000

5,000

U.S. government agency bonds

3,500

(41)

3,459

U.S Treasury securities

33,132

(41)

33,091

Total investment debt securities

 

348,682

 

 

5

 

(1,305)

 

347,382

Total cash, cash equivalents and investment debt securities

$

397,002

$

$

5

$

(1,305)

$

395,702

12

As of December 31, 2021

Allowance

Gross

Gross

for Credit

Unrealized

Unrealized

    

Amortized Cost

Losses

    

Gains

    

Losses

Fair Value

(in thousands)

Cash and cash equivalents:

 

  

 

  

 

  

 

  

Cash and money market funds

$

76,709

$

$

$

$

76,709

Commercial paper

8,000

8,000

Total cash and cash equivalents

84,709

84,709

Investment debt securities:

 

  

 

  

 

  

 

  

 

  

Commercial paper

 

84,513

 

 

 

(49)

 

84,464

Corporate debt securities

 

232,721

 

16

 

(245)

 

232,492

Municipal bonds

5,028

(1)

5,027

U.S Treasury securities

12,998

(1)

12,997

Total investment debt securities

 

335,260

 

 

16

 

(296)

 

334,980

Total cash, cash equivalents and investment debt securities

$

419,969

$

$

16

$

(296)

$

419,689

The aggregate fair value of the Company’s available-for-sale investment debt securities that have been in a continuous unrealized loss position for less than twelve months or twelve months or longer is as follows:

As of March 31, 2022

Less than 12 months

12 months or longer

Total

(in thousands)

Gross

Gross

Gross

Unrealized

Unrealized

Unrealized

    

Fair Value

    

Losses

    

Fair Value

    

Losses

    

Fair Value

    

Losses

Commercial paper

$

111,565

$

(282)

$

$

$

111,565

$

(282)

Corporate debt securities

171,713

(941)

171,713

(941)

U.S. government agency bonds

3,459

(41)

3,459

(41)

U.S. Treasury securities

33,091

(41)

33,091

(41)

Total

$

319,828

$

(1,305)

$

$

$

319,828

$

(1,305)

As of December 31, 2021

Less than 12 months

12 months or longer

Total

(in thousands)

    

Gross

    

    

Gross

    

    

Gross

Unrealized

Unrealized

Unrealized

    

Fair Value

    

Losses

    

Fair Value

    

Losses

    

Fair Value

    

Losses

Commercial paper

$

81,464

$

(49)

$

$

$

81,464

$

(49)

Corporate debt securities

196,120

(245)

 

196,120

 

(245)

Municipal bonds

5,027

(1)

5,027

(1)

U.S Treasury securities

12,997

(1)

12,997

(1)

Total

$

295,608

$

(296)

$

$

$

277,584

$

(294)

At March 31, 2022 and December 31, 2021, respectively the Company had 101 and 97 available-for-sale investment debt securities in an unrealized loss position without an allowance for credit losses. Unrealized losses on corporate debt securities have not been recognized into income because the issuers’ bonds are of high credit quality (rated A3/A- or higher) and the decline in fair value is largely due to market conditions and/or changes in interest rates. Management does not intend to sell and it is likely that management will not be required to sell the securities prior to the anticipated recovery of their amortized cost basis. The issuers continue to make timely interest payments on the bonds. The fair value is expected to recover as the bonds approach maturity.

Accrued interest receivable on available-for-sale investment debt securities totaled $1.0 million and $1.3 million at March 31, 2022 and December 31, 2021, respectively, is excluded from the estimate of credit losses and is included in Prepaid expenses and other current assets.

13

5.    Fair Value Measurements

The carrying amounts of the Company’s receivables and payables approximate their fair value due to their short maturities.

Accounting principles provide guidance for using fair value to measure assets and liabilities. The guidance includes a three-level hierarchy of valuation techniques used to measure fair value, defined as follows:

Unadjusted Quoted Prices — The fair value of an asset or liability is based on unadjusted quoted prices in active markets for identical assets or liabilities (Level 1).
Pricing Models with Significant Observable Inputs — The fair value of an asset or liability is based on information derived from either an active market quoted price, which may require further adjustment based on the attributes of the financial asset or liability being measured, or an inactive market transaction (Level 2).
Pricing Models with Significant Unobservable Inputs — The fair value of an asset or liability is primarily based on internally derived assumptions surrounding the timing and amount of expected cash flows for the financial instrument. Therefore, these assumptions are unobservable in either an active or inactive market (Level 3).

The Company considers an active market as one in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis. Conversely, the Company views an inactive market as one in which there are few transactions for the asset or liability, the prices are not current, or price quotations vary substantially either over time or among market makers. Where appropriate, non-performance risk, or that of a counterparty, is considered in determining the fair values of liabilities and assets, respectively.

The Company’s cash deposits, money market funds and U.S. Treasury securities are classified within Level 1 of the fair value hierarchy because they are valued using bank balances or quoted prices from active markets. Commercial paper, corporate debt securities, municipal bonds and U.S. government agency bonds are classified as Level 2 instruments based on market pricing and other observable inputs.

14

Financial assets carried at fair value are classified in the tables below in one of the three categories described above:

Fair Value Measurements Using

    

Total

    

Level 1

    

Level 2

    

Level 3

(in thousands)

March 31, 2022

 

  

 

  

 

  

 

  

Assets

 

  

 

  

 

  

 

  

Cash and cash equivalents:

Money market funds

$

10,411

$

10,411

$

$

Available-for-sale investment debt securities:

 

 

 

 

  

Commercial paper

 

116,551

 

 

116,551

 

Corporate debt securities

 

189,281

 

 

189,281

 

Municipal bonds

 

5,000

 

5,000

U.S. government agency bonds

3,459

3,459

U.S. Treasury securities

33,091

33,091

Total financial assets

$

357,793

$

43,502

$

314,291

$

December 31, 2021

 

  

 

  

 

  

 

  

Assets

 

  

 

  

 

  

 

  

Cash and cash equivalents:

Money market funds

$

39,287

$

39,287

$

$

Commercial paper

8,000

8,000

Available-for-sale investment debt securities:

 

 

 

 

  

Commercial paper

 

84,464

 

 

84,464

 

Corporate debt securities

 

232,492

 

 

232,492