10-Q 1 idya-20220331.htm 10-Q 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 AND 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 AND EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-38915

 

IDEAYA Biosciences, Inc.

(Exact name of registrant as specified in its charter)

 

 

Delaware

 

47-4268251

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

 

7000 Shoreline Court, Suite 350

South San Francisco, California

 

94080

(Address of principal executive offices)

 

(Zip Code)

 

(650) 443-6209

(telephone number, including area code)

 

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

 

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange on which registered

Common Stock, $0.0001 par value per share

 

IDYA

 

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, 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 May 5, 2022, the registrant had 38,639,922 shares of common stock, $0.0001 par value per share, outstanding.

 

 


 

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements. We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements other than statements of historical facts contained in this Form 10-Q, including statements regarding our future results of operations and financial position, business strategy, prospective products, product approvals, research and development costs, timing and likelihood of success, plans and objectives of management for future operations and future results of anticipated products, are forward-looking statements. These statements involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements.

In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “expect,” “plan,” “anticipate,” “could,” “intend,” “target,” “project,” “contemplate,” “believe,” “estimate,” “predict,” “potential” or “continue” or the negative of these terms or other similar expressions. The forward-looking statements in this Quarterly Report on Form 10-Q are only predictions. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition and results of operations. These forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q and are subject to a number of risks, uncertainties and assumptions described under the sections in this Quarterly Report on Form 10-Q entitled “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. These forward-looking statements are subject to numerous risks, including, without limitation, the following:

the scope, progress, results and costs of developing our product candidates or any other future product candidates, and conducting preclinical studies and clinical trials, including our IDE397 Phase 1 and IDE196 Phase 1/2 clinical trials;
our clinical and regulatory development plans;
the scope, progress, results and costs related to the research and development of our precision medicine target and biomarker discovery platform, including costs related to the development of our proprietary libraries and database of tumor genetic information and specific cancer-target dependency networks;
our expectations about the impact of the COVID-19 pandemic on our business, and operations, including clinical trials, manufacturing suppliers and collaborators, and on our results of operations and financial condition;
the availability of companion diagnostics for biomarkers associated with our product candidates and any future product candidates, or the cost of coordinating and/or collaborating with certain diagnostic companies for the manufacture and supply of companion diagnostics;
the timing of and costs involved in obtaining and maintaining regulatory approval for any of current or future product candidates and companion diagnostics, and any related restrictions, limitations, and/or warnings in the label of an approved product candidate;
our expectations regarding the potential market size and size of the potential patient populations for IDE397, IDE196, our other product candidates and any future product candidates, if approved for commercial use;
the timing and amount of any option exercised, milestone, royalty or other payments we may or may not receive pursuant to any current or future collaboration or license agreement, including under the Collaboration, Option and License Agreement with GSK;
our ability to maintain existing, and establish new, strategic collaborations, licensing or other arrangements and the financial terms of any such agreements, including our Collaboration, Option and License Agreement with GSK, our Clinical Trial Collaboration and Supply Agreements with Pfizer Inc., our License Agreement with Novartis and our Option and License Agreement with Cancer Research United Kingdom, or Cancer Research UK, and University of Manchester;

1


 

the timing of commencement of future nonclinical studies and clinical trials and research and development programs;
our ability to acquire, discover, develop and advance product candidates into, and successfully complete, clinical trials;
our intentions and our ability to establish collaborations and/or partnerships;
the timing or likelihood of regulatory filings and approvals for our product candidates;
our commercialization, marketing and manufacturing capabilities and expectations;
our intentions with respect to the commercialization of our product candidates;
the pricing and reimbursement of our product candidates, if approved;
the implementation of our business model and strategic plans for our business, product candidates and technology platforms, including additional indications for which we may pursue;
the scope of protection we are able to establish and maintain for intellectual property rights covering our product candidates, including the projected terms of patent protection;
our potential involvement in lawsuits in connection with enforcing our intellectual property rights;
our potential involvement in third party interference, opposition, derivation or similar proceedings with respect to our patent rights and other challenges to our patent rights and patent infringement claims;
estimates of our expenses, future revenue, capital requirements, our needs for additional financing and our ability to obtain additional capital;
our future financial performance; and
developments and projections relating to our competitors and our industry, including competing therapies and procedures.

Moreover, we operate in an evolving environment. New risk factors and uncertainties may emerge from time to time, and it is not possible for management to predict all risk factors and uncertainties.

 

Because forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified and some of which are beyond our control, you should not rely on these forward-looking statements as predictions of future events. The events and circumstances reflected in our forward-looking statements may not occur or be achieved, and actual results could differ materially from those projected in the forward-looking statements. We qualify all of our forward-looking statements by these cautionary statements. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained herein, whether as a result of any new information, future events, changed circumstances or otherwise.

2


 

IDEAYA Biosciences, Inc.

Form 10-Q for Quarterly Period Ended March 31, 2022

Table of Contents

 

PART I—FINANCIAL INFORMATION

4

Item 1. Financial Statements (Unaudited)

4

Condensed Balance Sheets

4

Condensed Statements of Operations and Comprehensive Loss

5

Condensed Statement of Stockholders’ Equity

6

Condensed Statements of Cash Flows

7

Notes to Condensed Financial Statements (Unaudited)

8

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

25

Item 3. Quantitative and Qualitative Disclosures About Market Risk

39

Item 4. Controls and Procedures

39

PART II—OTHER INFORMATION

40

Item 1. Legal Proceedings

40

Item 1A. Risk Factors

40

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

101

Item 3. Defaults Upon Senior Securities

101

Item 4. Mine Safety Disclosures

101

Item 5. Other information

101

Item 6. Exhibits

102

SIGNATURES

103

 

3


 

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements (UNAUDITED).

IDEAYA Biosciences, Inc.

Condensed Balance Sheets

(in thousands, except share and per share amounts)

(Unaudited)

 

 

 

March 31,

 

 

December 31,

 

 

 

2022

 

 

2021

 

Assets

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

Cash and cash equivalents

 

$

55,291

 

 

$

92,046

 

Short-term marketable securities

 

 

197,308

 

 

 

154,724

 

Accounts receivable

 

 

697

 

 

 

1,103

 

Prepaid expenses and other current assets

 

 

2,753

 

 

 

3,123

 

Total current assets

 

 

256,049

 

 

 

250,996

 

Restricted cash

 

 

106

 

 

 

106

 

Long-term marketable securities

 

 

93,628

 

 

 

121,293

 

Property and equipment, net

 

 

5,274

 

 

 

4,763

 

Right-of-use assets

 

 

3,554

 

 

 

3,898

 

Other non-current assets

 

 

256

 

 

 

291

 

Total assets

 

$

358,867

 

 

$

381,347

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

Accounts payable

 

$

3,364

 

 

$

2,100

 

Accrued liabilities

 

 

12,628

 

 

 

12,320

 

Contract liability

 

 

39,224

 

 

 

29,040

 

Operating lease liabilities - current

 

 

1,741

 

 

 

1,699

 

Total current liabilities

 

 

56,957

 

 

 

45,159

 

Long-term contract liability

 

 

10,212

 

 

 

31,192

 

Long-term operating lease liabilities

 

 

3,031

 

 

 

3,482

 

Total liabilities

 

 

70,200

 

 

 

79,833

 

Commitments and contingencies (Note 5)

 

 

 

 

 

 

Stockholders’ equity

 

 

 

 

 

 

Preferred stock, $0.0001 par value, 10,000,000 shares authorized as of
   March 31, 2022 and December 31, 2021;
no shares issued and
   outstanding as of March 31, 2022 and December 31, 2021

 

 

 

 

 

 

Common stock, $0.0001 par value, 300,000,000 shares authorized as of
   March 31, 2022 and December 31, 2021;
38,639,922 and 38,533,045 
   shares issued and outstanding as of March 31, 2022 and
   December 31, 2021

 

 

4

 

 

 

4

 

Additional paid-in capital

 

 

482,228

 

 

 

478,970

 

Accumulated other comprehensive loss

 

 

(2,804

)

 

 

(712

)

Accumulated deficit

 

 

(190,761

)

 

 

(176,748

)

Total stockholders’ equity

 

 

288,667

 

 

 

301,514

 

Total liabilities and stockholders’ equity

 

$

358,867

 

 

$

381,347

 

 

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

4


 

IDEAYA Biosciences, Inc.

Condensed Statements of Operations and Comprehensive Loss

(in thousands, except share and per share amounts)

(Unaudited)

 

 

 

Three Months Ended
March 31,

 

 

 

2022

 

 

2021

 

Collaboration revenue

 

$

11,359

 

 

$

7,247

 

Total revenue

 

 

11,359

 

 

 

7,247

 

Operating expenses

 

 

 

 

 

 

Research and development

 

 

19,656

 

 

 

11,566

 

General and administrative

 

 

5,923

 

 

 

4,816

 

Total operating expenses

 

 

25,579

 

 

 

16,382

 

Loss from operations

 

 

(14,220

)

 

 

(9,135

)

Other income

 

 

 

 

 

 

Interest income and other income, net

 

 

207

 

 

 

114

 

Net loss

 

$

(14,013

)

 

$

(9,021

)

Unrealized losses on marketable securities

 

 

(2,092

)

 

 

(7

)

Comprehensive loss

 

$

(16,105

)

 

$

(9,028

)

Net loss per common share, basic and diluted

 

$

(0.36

)

 

$

(0.28

)

Weighted average number of common shares
     outstanding used in computing net loss per
     share, basic and diluted

 

 

38,591,966

 

 

 

31,761,207

 

 

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

5


 

IDEAYA Biosciences, Inc.

Condensed Statements of Stockholders’ Equity

(in thousands, except share amounts)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

Other

 

 

 

 

 

Total

 

 

 

Common Stock

 

 

Paid-In

 

 

Comprehensive

 

 

Accumulated

 

 

Stockholders'

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Income (Loss)

 

 

Deficit

 

 

Equity

 

Balances as of December 31, 2021

 

 

38,533,045

 

 

$

4

 

 

$

478,970

 

 

$

(712

)

 

$

(176,748

)

 

$

301,514

 

Issuance of common stock related to at-the-market offering program,
     net of issuance costs

 

 

2,173

 

 

 

 

 

 

(9

)

 

 

 

 

 

 

 

 

(9

)

Issuance of common stock upon exercise of stock options

 

 

104,704

 

 

 

 

 

 

662

 

 

 

 

 

 

 

 

 

662

 

Stock-based compensation

 

 

 

 

 

 

 

 

2,605

 

 

 

 

 

 

 

 

 

2,605

 

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

(2,092

)

 

 

 

 

 

(2,092

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(14,013

)

 

 

(14,013

)

Balances as of March 31, 2022

 

 

38,639,922

 

 

$

4

 

 

$

482,228

 

 

$

(2,804

)

 

$

(190,761

)

 

$

288,667

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances as of December 31, 2020

 

 

29,537,216

 

 

$

3

 

 

$

325,250

 

 

$

7

 

 

$

(126,986

)

 

$

198,274

 

Issuance of common stock related to at-the-market offering program,
     net of issuance costs

 

 

2,712,654

 

 

 

 

 

 

41,832

 

 

 

 

 

 

 

 

 

41,832

 

Issuance of common stock upon exercise of stock options

 

 

20,668

 

 

 

 

 

 

112

 

 

 

 

 

 

 

 

 

112

 

Vesting of early exercised common stock options and
     restricted stock

 

 

 

 

 

 

 

 

18

 

 

 

 

 

 

 

 

 

18

 

Stock-based compensation

 

 

 

 

 

 

 

 

1,918

 

 

 

 

 

 

 

 

 

1,918

 

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

(7

)

 

 

 

 

 

(7

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(9,021

)

 

 

(9,021

)

Balances as of March 31, 2021

 

 

32,270,538

 

 

$

3

 

 

$

369,130

 

 

$

 

 

$

(136,007

)

 

$

233,126

 

 

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

 

6


 

IDEAYA Biosciences, Inc.

Condensed Statements of Cash Flows

(in thousands)

(Unaudited)

 

 

 

Three Months Ended March 31,

 

 

 

2022

 

 

2021

 

Cash flows from operating activities

 

 

 

 

 

 

Net loss

 

$

(14,013

)

 

$

(9,021

)

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

 

 

 

 

 

 

Depreciation and amortization

 

 

464

 

 

 

382

 

Net amortization (accretion) of premiums (discounts) on marketable securities

 

 

349

 

 

 

454

 

Stock-based compensation

 

 

2,605

 

 

 

1,918

 

Changes in assets and liabilities

 

 

 

 

 

 

Accounts receivable

 

 

406

 

 

 

(1,045

)

Prepaid expenses and other assets

 

 

400

 

 

 

199

 

Right-of-use assets

 

 

344

 

 

 

318

 

Accounts payable

 

 

863

 

 

 

260

 

Accrued and other liabilities

 

 

140

 

 

 

(615

)

Contract liabilities

 

 

(10,796

)

 

 

(6,202

)

Lease liabilities

 

 

(409

)

 

 

(372

)

Net cash used in operating activities

 

 

(19,647

)

 

 

(13,724

)

Cash flows from investing activities

 

 

 

 

 

 

Purchases of property and equipment, net

 

 

(401

)

 

 

(1,003

)

Purchases of marketable securities

 

 

(64,300

)

 

 

(38,738

)

Maturities of marketable securities

 

 

46,940

 

 

 

76,176

 

Net cash (used in) provided by investing activities

 

 

(17,761

)

 

 

36,435

 

Cash flows from financing activities

 

 

 

 

 

 

Proceeds from issuance of common stock related to at-the-market offering program,
    net of issuance costs

 

 

(9

)

 

 

41,892

 

Proceeds from exercise of common stock options, net of repurchases

 

 

662

 

 

 

112

 

Net cash provided by financing activities

 

 

653

 

 

 

42,004

 

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

 

 

(36,755

)

 

 

64,715

 

Cash, cash equivalents and restricted cash

 

 

 

 

 

 

Cash, cash equivalents and restricted cash, at beginning of period

 

 

92,152

 

 

 

72,143

 

Cash, cash equivalents and restricted cash, at end of period

 

$

55,397

 

 

$

136,858

 

 

 

 

 

 

 

 

Reconciliation of cash, cash equivalents and restricted cash

 

 

 

 

 

 

Cash and cash equivalents

 

$

55,291

 

 

$

136,752

 

Restricted cash

 

$

106

 

 

$

106

 

Cash, cash equivalents and restricted cash

 

$

55,397

 

 

$

136,858

 

 

 

 

 

 

 

 

Supplemental disclosure of cash flow information:

 

 

 

 

 

 

Cash paid for interest

 

$

16

 

 

$

19

 

Supplemental non-cash investing and financing activities:

 

 

 

 

 

 

Purchases of property and equipment in accounts payable and accrued liabilities

 

$

550

 

 

$

383

 

Unpaid offering costs

 

$

 

 

$

60

 

Vesting of early exercised options and restricted stock

 

$

 

 

$

18

 

 

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

7


 

IDEAYA Biosciences, Inc.

Notes to Condensed Financial Statements (Unaudited)

1. Organization

Description of the Business

IDEAYA Biosciences, Inc. (the “Company”) is a synthetic lethality-focused precision medicine oncology company committed to the discovery and development of targeted therapeutics for patient populations selected using molecular diagnostics. The Company is headquartered in South San Francisco, California and was incorporated in the State of Delaware in June 2015. To date, the Company has been primarily engaged in business planning, research, development, recruiting and raising capital.

At-the-Market Offering

On August 12, 2020, the Company filed a prospectus supplement to the prospectus dated June 10, 2020, activating its at-the-market facility by entering into an open market sale agreement (the “August 2020 Sales Agreement) with Jefferies LLC (“Jefferies”), pursuant to which the Company could offer and sell shares of its common stock with an aggregate offering price of up to $50.0 million under an “at the market” offering program. As of January 15, 2021, the Company exhausted all sales under the August 2020 Sales Agreement. On January 20, 2021, the Company entered into a new open market sale agreement (the “January 2021 Sales Agreement”) with Jefferies, pursuant to which the Company may offer and sell shares of its common stock with an aggregate offering price of up to $90.0 million under an “at the market” offering program. For the three months ended March 31, 2022, the Company sold an aggregate of 2,173 shares for gross proceeds of $0.05 million under the January 2021 Sales Agreement.

Liquidity

The Company has incurred significant losses and negative cash flows from operations in all periods since inception and had an accumulated deficit of $190.8 million as of March 31, 2022. The Company has historically financed its operations primarily through the sale of convertible notes, redeemable convertible preferred stock and common stock, and payments received from its collaboration arrangement. To date, none of the Company’s product candidates have been approved for sale, and the Company has not generated any revenue from commercial products since inception. Management expects operating losses to continue and increase for the foreseeable future, as the Company progresses into clinical development activities for its lead product candidates. The Company’s prospects are subject to risks, expenses and uncertainties frequently encountered by companies in the biotechnology industry as discussed under Risks and Uncertainties in Note 2. While the Company has been able to raise multiple rounds of financing, there can be no assurance that in the event the Company requires additional financing, such financing will be available on terms which are favorable or at all. Failure to generate sufficient cash flows from operations, raise additional capital or reduce certain discretionary spending would have a material adverse effect on the Company’s ability to achieve its intended business objectives.

As of March 31, 2022, the Company had cash, cash equivalents and marketable securities of $346.2 million. Management believes that the Company’s current cash, cash equivalents and marketable securities will be sufficient to fund its planned operations for at least 12 months from the date of the issuance of these financial statements.

2. Summary of Significant Accounting Policies

 

Basis of Presentation

These condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and the rules and regulations of the United States Securities and Exchange Commission (“SEC”) for interim reporting.

 

Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with GAAP have been condensed or omitted. Accordingly, the unaudited condensed financial statements should be read in conjunction with the audited financial statements and the related notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 filed with the SEC.

 

8


 

Unaudited Condensed Financial Statements

The accompanying financial information for the three months ended March 31, 2022 and 2021 are unaudited. The unaudited condensed financial statements have been prepared on the same basis as the annual audited financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary to present fairly the Company’s financial position as of March 31, 2022 and its results of operations for the three months ended March 31, 2022 and 2021 and cash flows for the three months ended March 31, 2022 and 2021. The results for interim periods are not necessarily indicative of the results expected for the full fiscal year or any other periods.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Such estimates include useful lives of property and equipment, determination of the discount rate for operating leases, accruals for research and development activities, revenue recognition, stock-based compensation, and income taxes. On an ongoing basis, management reviews these estimates and assumptions. Changes in facts and circumstances may alter such estimates and actual results could differ from those estimates.

Risks and Uncertainties

 

The Company operates in a dynamic and highly competitive industry and is subject to risks and uncertainties common to early-stage companies in the biotechnology industry, including, but not limited to, development by competitors of new technological innovations, protection of proprietary technology, dependence on key personnel, contract manufacturers, contract research organizations and collaboration partners, compliance with government regulations and the need to obtain additional financing to fund operations. Product candidates currently under development will require significant additional research and development efforts, including extensive preclinical studies and clinical trials and regulatory approval, prior to commercialization. These efforts require significant amounts of additional capital, adequate personnel infrastructure and extensive compliance and reporting. The Company believes that changes in any of the following areas could have a material adverse effect on the Company’s future financial position, results of operations, or cash flows: ability to obtain future financing; advances and trends in new technologies and industry standards; results of clinical trials and collaboration activities; regulatory approval and market acceptance of the Company’s products; development of sales channels; certain strategic relationships; litigation or claims against the Company based on intellectual property, patent, product, regulatory, or other factors; and the Company’s ability to attract and retain employees necessary to support its growth.

 

Products developed by the Company require approvals from the U.S. Food and Drug Administration (“FDA”) or other international regulatory agencies prior to commercial sales. There can be no assurance that the Company’s research and development will be successfully completed, that adequate protection for the Company’s intellectual property will be obtained or maintained, that the products will receive the necessary approvals, or that any approved products will be commercially viable. If the Company was denied approval, approval was delayed or the Company was unable to maintain approval, it could have a materially adverse impact on the Company. Even if the Company’s product development efforts are successful, it is uncertain when, if ever, the Company will generate revenue from product sales. The Company operates in an environment of rapid change in technology and substantial competition from other pharmaceutical and biotechnology companies. In addition, the Company is dependent upon the services of its employees, consultants and other third parties.

 

Beginning in late 2019, the outbreak of a novel strain of virus named SARS-CoV-2 (severe acute respiratory syndrome coronavirus 2), or coronavirus, which causes coronavirus disease 2019, or COVID-19, has evolved into a global pandemic. The extent of the impact of the coronavirus outbreak on the Company’s business will depend on certain developments, including the duration and spread of the outbreak and the extent and severity of the impact on the Company’s clinical trial activities, research activities and suppliers, all of which are uncertain and cannot be predicted. At this point, the extent to which the coronavirus outbreak may materially impact the Company’s financial condition, liquidity or results of operations is uncertain.

 

The Company has expended and will continue to expend substantial funds to complete the research, development and clinical testing of product candidates. The Company also will be required to expend additional funds to establish commercial-scale manufacturing arrangements and to provide for the marketing and distribution of products that receive regulatory approval. The Company may require additional funds to commercialize its products. The

9


 

Company is unable to entirely fund these efforts with its current financial resources. If adequate funds are unavailable on a timely basis from operations or additional sources of financing, the Company may have to delay, reduce the scope of or eliminate one or more of its research or development programs which would materially and adversely affect its business, financial condition and operations.

Concentration of Credit Risk

 

Financial instruments that potentially subject the Company to a concentration of credit risk consist of cash, cash equivalents, marketable securities and accounts receivable. Substantially all the Company’s cash is held by two financial institutions that management believes are of high credit quality. Such deposits may, at times, exceed federally insured limits.

 

The Company’s investment policy addresses credit ratings, diversification, and maturity dates. The Company invests its cash equivalents and marketable securities in money market funds, U.S. government securities, commercial paper, and corporate bonds. The Company limits its credit risk associated with cash equivalents and marketable securities by placing them with banks and institutions it believes are creditworthy and in highly rated investments and, by policy, limits the amount of credit exposure with any one commercial issuer. The Company has not experienced any credit losses on its deposits of cash, cash equivalents or marketable securities.

 

Accounts receivable represents amounts due from GlaxoSmithKline. The Company monitors economic conditions to identify facts or circumstances that may indicate that any of its accounts receivable are at risk of collection.

Summary of Significant Accounting Policies

There have been no material changes in the accounting policies from those disclosed in the financial statements and the related notes included in the Form 10-K.

Revenue Recognition

 

The Company follows Accounting Standards Codification Topic 606, Revenue from Contracts with Customers (“ASC 606”). Under ASC 606, the Company recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration which the Company expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements that the Company determines are within the scope of ASC 606, the Company performs the following five steps: (i) identify the contract(s) 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 in the contract; and (v) recognize revenue when (or as) the Company satisfies a performance obligation.

 

The Company applies the five-step model to contracts when (1) parties have approved the contract and are committed to performing respective obligations, (2) the Company can identify each party’s rights regarding the goods or services to be transferred, (3) the Company can identify the payment terms for the goods or services to be transferred, (4) the contract has commercial substance, and (5) it is probable that the Company will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer. At contract inception, the Company assesses the goods or services promised within each contract and determines the performance obligations by assessing whether each promised good or service is distinct. Goods or services that are not distinct are bundled with other goods or services in the contract until a bundle of goods or services that is distinct is created. The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligations when (or as) the performance obligations are satisfied. The Company constrains its estimate of the transaction price up to the amount (the “variable consideration constraint”) that a significant reversal of recognized revenue is not probable.

Licenses of intellectual property: If a license to the Company’s intellectual property is determined to be distinct from the other promised goods or services identified in an arrangement, the Company recognizes revenue from non-refundable, upfront fees allocated to the license at the point in time when the license is transferred to the customer and the customer is able to use and benefit from the license. For licenses that are bundled with other goods or services, the Company applies judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress toward satisfying the performance obligation for purposes of recognizing revenue from non-refundable, upfront fees. The Company evaluates the measure of progress each reporting period and, if necessary, adjusts the measure of progress and related revenue recognition.

10


 

Customer options for additional goods or services: If a contract contains customer options that allow the customer to acquire additional goods or services, including a license to the Company’s intellectual property, the goods and services underlying the customer options are evaluated to determine whether they are deemed to represent a material right. In determining whether the customer option has a material right, the Company assesses whether there is an option to acquire additional goods or services at a discount. If the customer option is determined not to represent a material right, the option is not considered to be a performance obligation. If the customer option is determined to represent a material right, the material right is recognized as a separate performance obligation. The Company allocates the transaction price to material rights based on the relative standalone selling price, which is determined based on the identified discount and the probability that the customer will exercise the option. Amounts allocated to a material right are not recognized as revenue until the option is exercised.

 

Milestone payments: At the inception of each arrangement or amendment that includes development, regulatory or commercial milestone payments, the Company evaluates whether the milestones are considered probable of being reached and estimates the amount to be included in the transaction price. ASC 606 prescribes two methods to use when estimating the amount of variable consideration: the expected value method and the most likely amount method. It is not necessary for the Company to use the same approach for all contracts. Under the expected value method, an entity considers the sum of probability-weighted amounts in a range of possible consideration amounts. Under the most likely amount method, an entity considers the single most likely amount in a range of possible consideration amounts. The Company uses the expected value method to estimate the amount of variable consideration related to the reimbursement of PolQ and WRN program costs which is consistently applied throughout the life of the contract. If it is probable that a significant revenue reversal would not occur when the uncertainty associated with the milestone is resolved, the associated milestone value is included in the transaction price. Milestone payments that are highly susceptible to factors outside the Company’s influence, such as regulatory approvals, are not considered probable of being achieved until those approvals are received. If there is more than one performance obligation, the transaction price is then allocated to each performance obligation on a relative stand-alone selling price basis. The Company recognizes revenue as or when the performance obligations under the contract are satisfied. At the end of each subsequent reporting period, the Company re-evaluates the probability or achievement of each milestone and any related constraint, and if necessary, adjusts its estimates of the overall transaction price. Any such adjustments are recorded on a cumulative catch-up basis, which would affect revenues and earnings in the period of adjustment.

 

Royalties: For arrangements that include sales-based royalties, including milestone payments based on the level of sales, and the license deemed to be the predominant item to which the royalties relate, the Company recognizes revenue at the later of (i) when the related sales occur, or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied).

 

Upfront payments and fees are recorded as contract liabilities upon receipt or when due and may require deferral of revenue recognition to a future period until the Company performs its obligations under these arrangements. Amounts payable to the Company are recorded as accounts receivable when the Company’s right to consideration is unconditional. The Company does not assess whether a contract has a significant financing component if the expectation at contract inception is such that the period between payment by the customer and the transfer of the promised goods or services to the customer will be one year or less.

 

Contractual cost sharing payments received from a customer or collaboration partner are accounted for as variable consideration. The Company includes an expected value in the transaction price. Contractual cost sharing payments made to a customer or collaboration partner are accounted for as a reduction to the transaction price if such payments are not related to distinct goods or services received from the customer or collaboration partner.

 

Contracts may be amended to account for changes in contract specifications and requirements. Contract modifications exist when the amendment either creates new, or changes existing, enforceable rights and obligations. When contract modifications create new performance obligations and the increase in consideration approximates the standalone selling price for goods and services related to such new performance obligations as adjusted for specific facts and circumstances of the contract, the modification is accounted for as a separate contract. If a contract modification is not accounted for as a separate contract, the Company accounts for the promised goods or services not yet transferred at the date of the contract modification (the remaining promised goods or services) prospectively, as if it were a termination of the existing contract and the creation of a new contract, if the remaining goods or services are distinct from the goods or services transferred on or before the date of the contract modification. The Company accounts for a contract modification as if it were a part of the existing contract if the remaining goods or services are not distinct and, therefore, form part of a single performance obligation that is partially satisfied at the date of the contract modification. In such case, the effect that the contract modification has on the transaction price, and on the entity’s measure of progress toward complete satisfaction of the performance obligation, is recognized as

11


 

an adjustment to revenue (either as an increase in or a reduction of revenue) at the date of the contract modification (the adjustment to revenue is made on a cumulative catch-up basis).

 

Upfront payment contract liabilities resulting from the Company’s license and collaboration agreements do not represent a financing component as the payment is not financing the transfer of goods and services, and the technology underlying the licenses granted reflects research and development expenses already incurred by the Company. As such, the Company does not adjust its revenues for the effects of a significant financing component. Amounts received prior to satisfying the revenue recognition criteria are recorded as contract liability in the Company’s balance sheets. If the related performance obligation is expected to be satisfied within the next twelve (12) months, this will be classified and included within current contract liability.

Net Loss per Share Attributable to Common Stockholders

 

Basic net loss per common share is calculated by dividing the net loss attributable to common stockholders by the weighted-average number of common stock outstanding during the period, without consideration of potentially dilutive securities. Diluted net loss per share is computed by dividing the net loss attributable to common stockholders by the weighted-average number of common stock and potentially dilutive securities outstanding for the period. For purposes of the diluted net loss per share calculation, stock options, restricted stock and restricted stock that is subject to repurchase at the original purchase price are considered to be potentially dilutive securities. The Company considers the shares issued upon the early exercise of stock options subject to repurchase to be participating securities, because holders of such shares have non-forfeitable dividend rights in the event a dividend is paid on common stock. The holders of early exercised shares subject to repurchase do not have a contractual obligation to share in the Company’s losses. As such, the net loss was attributed entirely to common stockholders. Because the Company has reported a net loss for all periods presented, diluted net loss per common share is the same as basic net loss per common share for those periods.

Recent Accounting Pronouncements

From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (“FASB”) under its accounting standard codifications (“ASC”) or other standard setting bodies and adopted by the Company as of the specified effective date, unless otherwise discussed below.

New Accounting Pronouncements Not Yet Adopted

In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which requires the measurement and recognition of expected credit losses for financial assets held at amortized cost. ASU 2016-13 replaces the existing incurred loss impairment model with an expected loss model. It also eliminates the concept of other-than-temporary impairment and requires credit losses related to available-for-sale debt securities to be recorded through an allowance for credit losses rather than as a reduction in the amortized cost basis of the securities. These changes will result in earlier recognition of credit losses. For public business entities, this ASU is effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. The FASB subsequently issued supplemental guidance to ASC 326 within ASU 2019-05, Financial Instruments—Credit Losses (Topic 326): Targeted Transition Relief, ASU 2019-10, Financial Instruments—Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842) and ASU 2019-11, Codification Improvements to Topic 326, Financial Instruments—Credit Losses. ASU 2019-05 provides an option to irrevocably elect the fair value option for certain financial assets previously measured at amortized cost basis. ASU 2019-10 extended the effectiveness of Topic 326 for smaller reporting companies until fiscal years beginning after December 15, 2022. ASU 2019-10 requires entities to make a one-time determination of whether an entity is eligible to be a smaller reporting company as of November 15, 2019 for the purpose of determining the effective date of ASU 2016-13. The Company determined that it was eligible to be a smaller reporting company as of November 15, 2019. Early adoption is permitted. The Company is currently evaluating the impact the adoption of these ASUs will have on its condensed financial statements and related disclosures.

3. Fair Value Measurement and Marketable Securities

 

The Company applies fair value accounting for all financial assets and liabilities and non-financial assets and liabilities that are recognized or disclosed at fair value in the financial statements on a recurring basis. Fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be

12


 

determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, a three-tier fair value hierarchy has been established, which prioritizes the inputs used in measuring fair value as follows:

 

Level 1—Observable inputs, such as quoted prices in active markets for identical assets or liabilities at the measurement date.

 

Level 2—Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

 

Level 3—Unobservable inputs which reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date. Consideration is given to the risk inherent in the valuation technique and the risk inherent in the inputs to the model.

 

In determining fair value, the Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible as well as considers counterparty credit risk in its assessment of fair value.

As of March 31, 2022, financial assets measured and recognized at fair value are as follows (in thousands):

 

 

 

 

March 31, 2022

 

 

 

 

Amortized
Cost

 

 

Gross
Unrealized
Gains

 

 

Gross
Unrealized
Losses

 

 

Estimated
Fair Value

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. government securities

Level 1

 

$

154,600

 

 

$

3

 

 

$

(2,319

)

 

$

152,284

 

Corporate bonds

Level 2

 

 

74,346

 

 

 

1

 

 

 

(487

)

 

 

73,860

 

Commercial paper

Level 2

 

 

64,795

 

 

 

 

 

 

(2

)

 

 

64,793

 

Marketable securities

 

 

 

293,741

 

 

 

4

 

 

 

(2,808

)

 

 

290,937

 

Money market funds(1)

Level 1

 

 

54,815

 

 

 

 

 

 

 

 

 

54,815

 

Total fair value of assets

 

 

$

348,556

 

 

$

4

 

 

$

(2,808

)

 

$

345,752

 

 

(1)
Included in cash and cash equivalents on the balance sheet

As of December 31, 2021, financial assets measured and recognized at fair value are as follows (in thousands):

 

 

 

 

December 31, 2021

 

 

 

 

Amortized
Cost

 

 

Gross
Unrealized
Gains

 

 

Gross
Unrealized
Losses

 

 

Estimated
Fair Value

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. government securities

Level 1

 

$

122,657

 

 

$

 

 

$

(592

)

 

$

122,065

 

Corporate bonds

Level 2

 

 

76,628

 

 

 

8

 

 

 

(127

)

 

 

76,509

 

Commercial paper

Level 2

 

 

77,444

 

 

 

 

 

(1

)

 

 

77,443

 

Marketable securities

 

 

 

276,729

 

 

 

8

 

 

 

(720

)

 

 

276,017

 

Money market funds(1)

Level 1

 

 

91,825

 

 

 

 

 

 

 

 

 

91,825

 

Total fair value of assets

 

 

$

368,554

 

 

$

8

 

 

$

(720

)

 

$

367,842

 

 

(1)
Included in cash and cash equivalents on the balance sheet

13


 

As of March 31, 2022 and December 31, 2021, all marketable securities had a remaining maturity of less than two years. There were no financial liabilities measured and recognized at fair value as of March 31, 2022 and December 31, 2021.

4. Balance Sheet Components

Property and Equipment, Net

Property and equipment, net consisted of the following (in thousands):

 

 

Useful Life

 

March 31,

 

 

December 31,

 

 

(In Years)

 

2022

 

 

2021

 

Laboratory equipment

5

 

$

7,222

 

 

$

6,440

 

Computer equipment

3

 

 

261

 

 

 

117

 

Software

3

 

 

205

 

 

 

204

 

Leasehold improvements

Shorter of useful life or lease term

 

 

3,176

 

 

 

3,133

 

Furniture and fixtures

5

 

 

465

 

 

 

466

 

Total property and equipment

 

 

 

11,329

 

 

 

10,360

 

Less: Accumulated depreciation and amortization

 

 

 

(6,055

)

 

 

(5,597

)

Property and equipment, net

 

 

$

5,274

 

 

$

4,763

 

 

Depreciation and amortization expense was $0.5 million and $0.4 million for the three months ended March 31, 2022 and March 31, 2021, respectively.

Accrued Liabilities

Accrued liabilities consisted of the following (in thousands):

 

 

 

March 31,

 

 

December 31,