UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
For the quarterly period ended
OR
For the transition period from ___ to ___
Commission File Number
(Exact Name of Registrant as Specified in its Charter)
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(I.R.S. Employer Identification No.) |
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(Address of principal executive offices) |
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(Registrant’s telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year, 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 |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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.
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Accelerated filer |
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Non-accelerated filer |
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Smaller reporting company |
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Emerging growth company |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
As of July 25, 2024, there were
REGENXBIO INC.
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2024
TABLE OF CONTENTS
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Item 1. |
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3 |
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Consolidated Balance Sheets as of June 30, 2024 and December 31, 2023 |
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3 |
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4 |
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5 |
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Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2024 and 2023 |
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8 |
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Item 2. |
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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Item 3. |
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35 |
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Item 4. |
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35 |
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Item 1. |
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36 |
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Item 1A. |
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36 |
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Item 2. |
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Unregistered Sales of Equity Securities, Use of Proceeds and Issuer Purchases of Equity Securities |
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36 |
Item 3. |
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36 |
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Item 4. |
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36 |
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Item 5. |
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36 |
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Item 6. |
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37 |
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38 |
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INFORMATION REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the Securities Act), and Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act). These statements express a belief, expectation or intention and are generally accompanied by words that convey projected future events or outcomes such as “anticipate,” “assume,” “believe,” “continue,” “could,” “design,” “estimate,” “expect,” “forecast,” “goal,” “intend,” “may,” “objective,” “plan,” “position,” “potential,” “predict,” “project,” “seek,” “should,” “will,” “would” or variations of such words or by similar expressions. We have based these forward-looking statements on our current expectations, estimates and assumptions and analyses in light of our experience and our perception of historical trends, current conditions and expected future developments, as well as other factors we believe are appropriate under the circumstances. However, whether actual results and developments will conform with our expectations and predictions is subject to a number of risks, uncertainties, assumptions and other important factors, including, but not limited to:
1
You should carefully read the factors discussed in the sections titled “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and the factors discussed elsewhere in this Quarterly Report on Form 10-Q, our Annual Report on Form 10-K for the year ended December 31, 2023 and in our other filings with the U.S. Securities and Exchange Commission (the SEC) for additional discussion of the risks, uncertainties, assumptions and other important factors that could cause our actual results or developments to differ materially and adversely from those projected in the forward-looking statements. The actual results or developments anticipated may not be realized or, even if substantially realized, they may not have the expected consequences to or effects on us or our businesses or operations. Such statements are not guarantees of future performance, and actual results or developments may differ materially and adversely from those projected in the forward-looking statements. These forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q. Except as required by law, we disclaim any duty to update any forward-looking statements, whether as a result of new information, future events or otherwise.
Available Information
Our principal offices are located at 9804 Medical Center Drive, Rockville, MD 20850, and our telephone number is (240) 552-8181. Our website address is www.regenxbio.com. The information contained in, or that can be accessed through, our website is not a part of, or incorporated by reference in, this Quarterly Report on Form 10-Q. We file annual, quarterly, and current reports, proxy statements, and other documents with the SEC under the Exchange Act. You may obtain any reports, proxy and information statements, and other information that we file electronically with the SEC at www.sec.gov.
You also may view and download copies of our SEC filings free of charge at our website as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. The information contained on, or that can be accessed through, our website will not be deemed to be incorporated by reference in, and is not considered part of, this Quarterly Report on Form 10-Q. Investors should also note that we use our website, as well as SEC filings, press releases, public conference calls and webcasts, to announce financial information and other material developments regarding our business. We use these channels, as well as any social media channels listed on our website, to communicate with investors and members of the public about our business. It is possible that the information that we post on our social media channels could be deemed material information. Therefore, we encourage investors, the media and others interested in our company to review the information that we post on our social media channels.
As used in this Quarterly Report on Form 10-Q, the terms “REGENXBIO,” “we,” “us,” “our” or the “Company” mean REGENXBIO Inc. and its subsidiaries, on a consolidated basis, unless the context indicates otherwise.
AAVIATE, AFFINITY BEYOND, AFFINITY DUCHENNE, ALTITUDE, ATMOSPHERE, CAMPSIITE, NAV, NAVXCELL, REGENXBIO and the REGENXBIO logos are our registered trademarks. Any other trademarks appearing in this Quarterly Report on Form 10-Q are the property of their respective holders.
2
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements.
REGENXBIO INC.
CONSOLIDATED BALANCE SHEETS
(unaudited)
(in thousands, except per share data)
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June 30, 2024 |
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December 31, 2023 |
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Assets |
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Current assets |
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Cash and cash equivalents |
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$ |
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$ |
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Marketable securities |
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Accounts receivable, net |
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Prepaid expenses |
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Other current assets |
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Total current assets |
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Marketable securities |
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Accounts receivable |
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Property and equipment, net |
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Operating lease right-of-use assets |
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Restricted cash |
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Other assets |
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Total assets |
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$ |
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$ |
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Liabilities and Stockholders’ Equity |
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Current liabilities |
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Accounts payable |
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$ |
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$ |
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Accrued expenses and other current liabilities |
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Deferred revenue |
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Operating lease liabilities |
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Liability related to sale of future royalties |
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Total current liabilities |
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Operating lease liabilities |
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Liability related to sale of future royalties |
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Other liabilities |
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Total liabilities |
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Stockholders’ equity |
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Preferred stock; $ |
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Common stock; $ |
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Additional paid-in capital |
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Accumulated other comprehensive loss |
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( |
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( |
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Accumulated deficit |
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( |
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Total stockholders’ equity |
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Total liabilities and stockholders’ equity |
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$ |
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$ |
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The accompanying notes are an integral part of these unaudited consolidated financial statements.
3
REGENXBIO INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(unaudited)
(in thousands, except per share data)
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Three Months Ended June 30, |
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Six Months Ended June 30, |
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2024 |
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2023 |
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2024 |
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2023 |
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Revenues |
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License and royalty revenue |
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$ |
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$ |
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$ |
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$ |
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Total revenues |
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Operating Expenses |
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Cost of revenues |
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Research and development |
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General and administrative |
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Impairment of long-lived assets |
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— |
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— |
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— |
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Other operating expenses (income) |
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( |
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Total operating expenses |
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Loss from operations |
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( |
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Other Income (Expense) |
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Interest income from licensing |
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Investment income |
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Interest expense |
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Total other income |
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Net loss |
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$ |
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$ |
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$ |
( |
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$ |
( |
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Other Comprehensive Income |
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Unrealized gain on available-for-sale securities, net |
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Total other comprehensive income |
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Comprehensive loss |
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$ |
( |
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$ |
( |
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$ |
( |
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$ |
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Net loss per share, basic and diluted |
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$ |
( |
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$ |
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$ |
( |
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$ |
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Weighted-average common shares outstanding, basic and diluted |
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The accompanying notes are an integral part of these unaudited consolidated financial statements.
4
REGENXBIO INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(unaudited)
(in thousands)
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Three Months Ended June 30, 2024 |
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Accumulated |
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Additional |
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Other |
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Total |
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Common Stock |
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Paid-in |
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Comprehensive |
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Accumulated |
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Stockholders’ |
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Shares |
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Amount |
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Capital |
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Loss |
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Deficit |
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Equity |
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Balances at March 31, 2024 |
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$ |
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$ |
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$ |
( |
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$ |
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$ |
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Vesting of restricted stock units, net of tax |
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— |
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— |
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— |
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— |
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— |
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Exercise of stock options, net of tax |
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— |
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— |
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— |
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Exercise of pre-funded warrants |
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— |
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— |
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— |
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— |
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— |
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Stock-based compensation expense |
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— |
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— |
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— |
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— |
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Unrealized gain on available-for-sale securities, net |
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— |
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— |
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— |
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— |
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Net loss |
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— |
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— |
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— |
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— |
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( |
) |
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( |
) |
Balances at June 30, 2024 |
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$ |
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$ |
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$ |
( |
) |
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$ |
( |
) |
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$ |
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Three Months Ended June 30, 2023 |
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Accumulated |
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Additional |
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Other |
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Total |
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Common Stock |
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Paid-in |
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Comprehensive |
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Accumulated |
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Stockholders’ |
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Shares |
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Amount |
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Capital |
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Loss |
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Deficit |
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Equity |
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Balances at March 31, 2023 |
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$ |
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$ |
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$ |
( |
) |
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$ |
( |
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$ |
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Vesting of restricted stock units, net of tax |
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— |
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— |
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— |
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— |
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— |
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Exercise of stock options, net of tax |
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— |
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— |
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— |
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Stock-based compensation expense |
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— |
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— |
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— |
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— |
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Unrealized gain on available-for-sale securities, net |
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— |
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— |
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— |
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— |
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Net loss |
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— |
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— |
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— |
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— |
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( |
) |
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( |
) |
Balances at June 30, 2023 |
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$ |
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$ |
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$ |
( |
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$ |
( |
) |
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$ |
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The accompanying notes are an integral part of these unaudited consolidated financial statements.
5
REGENXBIO INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(unaudited)
(in thousands)
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Six Months Ended June 30, 2024 |
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Accumulated |
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Additional |
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Other |
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Total |
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Common Stock |
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Paid-in |
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Comprehensive |
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Accumulated |
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Stockholders’ |
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Shares |
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Amount |
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Capital |
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Loss |
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Deficit |
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Equity |
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Balances at December 31, 2023 |
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$ |
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$ |
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$ |
( |
) |
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$ |
( |
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$ |
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Vesting of restricted stock units, net of tax |
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— |
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( |
) |
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— |
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— |
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( |
) |
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Exercise of stock options, net of tax |
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— |
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— |
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— |
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Issuance of common stock under employee |
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— |
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— |
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— |
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Issuance of common stock and pre-funded warrants |
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— |
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— |
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Exercise of pre-funded warrants |
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— |
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— |
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— |
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— |
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— |
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Stock-based compensation expense |
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— |
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— |
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— |
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— |
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Unrealized gain on available-for-sale securities, net |
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— |
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— |
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— |
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— |
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Net loss |
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— |
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— |
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— |
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— |
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( |
) |
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( |
) |
Balances at June 30, 2024 |
|
|
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$ |
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$ |
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$ |
( |
) |
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$ |
( |
) |
|
$ |
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||||
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Six Months Ended June 30, 2023 |
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Accumulated |
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||||||
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Additional |
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Other |
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Total |
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||||||
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Common Stock |
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Paid-in |
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Comprehensive |
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Accumulated |
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Stockholders’ |
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|||||||||
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Shares |
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Amount |
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Capital |
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Loss |
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Deficit |
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Equity |
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||||||
Balances at December 31, 2022 |
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$ |
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$ |
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|
$ |
( |
) |
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$ |
( |
) |
|
$ |
|
||||
Vesting of restricted stock units, net of tax |
|
|
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
Exercise of stock options, net of tax |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|||
Issuance of common stock under employee |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|||
Stock-based compensation expense |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Unrealized gain on available-for-sale securities, net |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Balances at June 30, 2023 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
6
REGENXBIO INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(in thousands)
|
|
Six Months Ended June 30, |
|
|||||
|
|
2024 |
|
|
2023 |
|
||
Cash flows from operating activities |
|
|
|
|
|
|
||
Net loss |
|
$ |
( |
) |
|
$ |
( |
) |
Adjustments to reconcile net loss to net cash used in operating activities |
|
|
|
|
|
|
||
Stock-based compensation expense |
|
|
|
|
|
|
||
Depreciation and amortization |
|
|
|
|
|
|
||
Net amortization of premiums (accretion of discounts) on marketable debt securities |
|
|
( |
) |
|
|
|
|
Impairment of long-lived assets |
|
|
|
|
|
|
||
Non-cash interest expense |
|
|
( |
) |
|
|
( |
) |
Other non-cash adjustments |
|
|
( |
) |
|
|
( |
) |
Changes in operating assets and liabilities |
|
|
|
|
|
|
||
Accounts receivable |
|
|
|
|
|
|
||
Prepaid expenses |
|
|
|
|
|
( |
) |
|
Other current assets |
|
|
( |
) |
|
|
( |
) |
Operating lease right-of-use assets |
|
|
|
|
|
|
||
Other assets |
|
|
|
|
|
|
||
Accounts payable |
|
|
( |
) |
|
|
( |
) |
Accrued expenses and other current liabilities |
|
|
( |
) |
|
|
|
|
Deferred revenue |
|
|
( |
) |
|
|
( |
) |
Operating lease liabilities |
|
|
( |
) |
|
|
( |
) |
Other liabilities |
|
|
( |
) |
|
|
( |
) |
Net cash used in operating activities |
|
|
( |
) |
|
|
( |
) |
Cash flows from investing activities |
|
|
|
|
|
|
||
Purchases of marketable debt securities |
|
|
( |
) |
|
|
( |
) |
Maturities of marketable debt securities |
|
|
|
|
|
|
||
Purchases of property and equipment |
|
|
( |
) |
|
|
( |
) |
Net cash provided by investing activities |
|
|
|
|
|
|
||
Cash flows from financing activities |
|
|
|
|
|
|
||
Proceeds from exercise of stock options |
|
|
|
|
|
|
||
Taxes paid related to net settlement of stock-based awards |
|
|
( |
) |
|
|
( |
) |
Proceeds from issuance of common stock under employee stock purchase plan |
|
|
|
|
|
|
||
Proceeds from public offering of common stock and pre-funded warrants, |
|
|
|
|
|
|
||
Issuance costs for public offering of common stock and pre-funded warrants |
|
|
( |
) |
|
|
|
|
Offering expenses related to at-the-market offering program |
|
|
( |
) |
|
|
|
|
Repayments under liability related to sale of future royalties, net of imputed interest |
|
|
( |
) |
|
|
( |
) |
Net cash provided by (used in) financing activities |
|
|
|
|
|
( |
) |
|
Net increase (decrease) in cash and cash equivalents and restricted cash |
|
|
|
|
|
( |
) |
|
Cash and cash equivalents and restricted cash |
|
|
|
|
|
|
||
Beginning of period |
|
|
|
|
|
|
||
End of period |
|
$ |
|
|
$ |
|
||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
7
REGENXBIO INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. Nature of Business
REGENXBIO Inc. (the Company) is a clinical-stage biotechnology company seeking to improve lives through the curative potential of gene therapy. The Company's investigational gene therapies use adeno-associated virus (AAV) vectors from its proprietary gene delivery platform (NAV Technology Platform). The NAV® Technology Platform consists of exclusive rights to a large portfolio of AAV vectors, including commonly used AAV8 and AAV9. The Company has developed a broad pipeline of gene therapy product candidates using the NAV Technology Platform as a one-time treatment to address an array of diseases. In addition to its internal product development efforts, the Company also selectively licenses the NAV Technology Platform to other leading biotechnology and pharmaceutical companies (NAV Technology Licensees). As of June 30, 2024, the NAV Technology Platform was being applied by NAV Technology Licensees in one commercial product, Zolgensma®, and in the preclinical and clinical development of a number of other licensed products. Additionally, the Company has licensed intellectual property rights to collaborators for the joint development and commercialization of certain product candidates. The Company was formed in 2008 in the State of Delaware and is headquartered in Rockville, Maryland.
The Company has incurred cumulative losses since inception and as of June 30, 2024, had generated an accumulated deficit of $
2. Summary of Significant Accounting Policies
Basis of Presentation and Principles of Consolidation
The accompanying consolidated financial statements are unaudited and have been prepared in conformity with accounting principles generally accepted in the United States of America (GAAP). The interim unaudited consolidated financial statements have been prepared on the same basis as the annual audited consolidated financial statements as of and for the year ended December 31, 2023 included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, which was filed with the SEC on February 27, 2024. Certain information and footnote disclosures required by GAAP, which are normally included in the Company’s annual consolidated financial statements, have been omitted pursuant to SEC rules and regulations for interim reporting. In the opinion of management, the accompanying consolidated financial statements reflect all adjustments, which are normal and recurring in nature, necessary for a fair statement of the results of operations for the periods presented.
The results of operations for the interim periods are not necessarily indicative of the results of operations to be expected for the full year, any other interim periods, or any future year or period. These interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements as of and for the year ended December 31, 2023, and the notes thereto, which are included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.
Use of Estimates
The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosure of contingent assets and liabilities for the periods presented. Management bases its estimates on historical experience and various other factors that it believes are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities, and other reported amounts, that are not readily apparent from other sources. Actual results may differ materially from these estimates. Significant estimates are used in the following areas, among others: license and royalty revenue, the allowance for credit losses, accrued research and development expenses and other accrued liabilities, stock-based compensation expense, interest expense under the liability related to the sale of future royalties, income taxes and fair value measurements.
8
Reclassifications
Certain amounts reported in prior periods have been reclassified to conform to current period financial statement presentation. These reclassifications are not material and have no effect on previously reported financial position, results of operations and cash flows.
Restricted Cash
Restricted cash consists of deposits held at financial institutions that are used to collateralize irrevocable letters of credit required under the Company’s lease agreements and certain other agreements with third parties.
|
|
As of June 30, |
|
|||||
|
|
2024 |
|
|
2023 |
|
||
Cash and cash equivalents |
|
$ |
|
|
$ |
|
||
Restricted cash |
|
|
|
|
|
|
||
Total cash and cash equivalents and restricted cash |
|
$ |
|
|
$ |
|
||
Accounts Receivable
Accounts receivable primarily consist of consideration due to the Company resulting from its license agreements with customers. Accounts receivable include amounts invoiced to licensees as well as rights to consideration which have not yet been invoiced, including unbilled royalties, and for which payment is conditional solely upon the passage of time. If a licensee elects to terminate a license prior to the end of the license term, the licensed intellectual property is returned to the Company and any accounts receivable from the licensee which are not contractually payable to the Company are charged off as a reduction of license revenue in the period of the termination. Accounts receivable which are not expected to be received by the Company within 12 months from the reporting date are stated net of a discount to present value and recorded as non-current assets on the consolidated balance sheets. The present value discount is recognized as a reduction of revenue in the period in which the accounts receivable are initially recorded and is accreted as interest income from licensing over the term of the receivables.
Accounts receivable are stated net of an allowance for credit losses, if deemed necessary based on the Company’s evaluation of collectability and potential credit losses. Management assesses the collectability of its accounts receivable using the specific identification of account balances, and considers the credit quality and financial condition of its significant customers, historical information regarding credit losses and the Company’s evaluation of current and expected future economic conditions. If necessary, an allowance for credit losses is recorded against accounts receivable such that the carrying value of accounts receivable reflects the net amount expected to be collected. Accounts receivable balances are written off against the allowance for credit losses when the potential for collectability is considered remote. Please refer to Note 9 for further information regarding the allowance for credit losses related to accounts receivable.
Leases
The Company accounts for its lease arrangements in accordance with Accounting Standards Codification (ASC) 842, Leases (ASC 842). Under ASC 842, the Company classifies its leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase by the Company. Lease classification is evaluated at the inception of the lease agreement. Regardless of classification, the Company records a right-of-use asset and a lease liability for all leases with a term greater than 12 months. All of the Company’s leases have been classified as operating leases. Operating lease expense is recognized on a straight-line basis over the term of the lease, with the exception of variable lease expenses which are recognized as incurred.
The Company identifies leases in its contracts if the contract conveys the right to control the use of identified property, plant or equipment for a period of time in exchange for consideration. The Company does not allocate lease consideration between lease and nonlease components and records a lease liability equal to the present value of the remaining fixed consideration under the lease. The interest rates implicit in the Company’s leases are generally not readily determinable. Accordingly, the Company uses its estimated incremental borrowing rate at the commencement date of the lease to determine the present value discount of the lease liability. The Company estimates its incremental borrowing rate for each lease based on an evaluation of its expected credit rating and the prevailing market rates for collateralized debt in a similar economic environment with similar payment terms and maturity dates commensurate with the term of the lease. The right-of-use asset for each lease is equal to the lease liability, adjusted for unamortized initial direct costs and lease incentives and prepaid or accrued rent. Initial direct costs of entering into a lease are included in the right-of-use asset and amortized as lease expense over the term of the lease. Lease incentives, such as tenant improvement allowances, are recorded as a
9
reduction of the right-of-use asset and amortized as a reduction of lease expense over the term of the lease. The Company excludes options to extend or terminate leases from the calculation of the lease liability unless it is reasonably certain the option will be exercised.
The Company evaluates its right-of-use assets for impairment in accordance with its policy for long-lived assets. To the extent an impairment of a right-of-use asset is recognized, the remaining carrying value of the asset is subsequently amortized as lease expense on a straight-line basis from the date of impairment to the earlier of the end of the right-of-use asset’s useful life or the end of the lease term.
The Company determines the classification of subleases at the inception of the sublease, as well as whether the Company has been relieved of its primary obligation under the original lease. All of the Company's subleases have been classified as operating leases and, in each case, the Company has not been relieved of its primary obligation under the original lease and continues to account for the original lease as it did prior to the commencement of the sublease. Sublease income is recognized on a straight-line basis over the term of the sublease as a reduction of the related lease expense of the original lease. Initial direct costs of entering into a sublease are deferred and amortized on a straight-line basis over the term of the sublease as a reduction of sublease income.
Impairment of Long-lived Assets
The Company's long-lived assets consist primarily of property and equipment and operating lease right-of-use assets. The Company evaluates its long-lived assets for impairment when events or changes in circumstances indicate the carrying value of the assets may not be recoverable. Recoverability is measured by comparison of the book values of the assets to estimated future net undiscounted cash flows that the assets are expected to generate. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the book value of the assets exceed their fair value, which is measured based on the projected discounted future net cash flows arising from the assets. Please refer to Note 5 and Note 6 for further information on impairment of long-lived assets.
Fair Value Measurements
The Company is required to disclose information on all assets and liabilities reported at fair value that enables an assessment of the inputs used in determining the reported fair values. ASC 820, Fair Value Measurements and Disclosures, establishes a hierarchy of inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the observable inputs be used when available. Observable inputs are inputs that market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the inputs that market participants would use in pricing the asset or liability, and are developed based on the best information available in the circumstances. The fair value hierarchy applies only to the valuation inputs used in determining the reported fair value of the investments and is not a measure of the investment credit quality. The three levels of the fair value hierarchy are described below:
To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised by the Company in determining fair value is greatest for assets and liabilities categorized in Level 3. The level within the fair value hierarchy of an asset or liability measured at fair value is based on the lowest level of any input that is significant to the fair value measurement. The fair values of the Company’s Level 2 financial instruments are based on quoted market prices or broker or dealer quotations for similar assets. These investments are initially valued at the transaction price and subsequently valued utilizing third-party pricing providers or other market observable data. Please refer to Note 4 for further information on the Company's fair value measurements.
10
Pre-funded Warrants
Warrants are accounted for based on the specific terms of the warrant agreements. The Company's pre-funded warrants are indexed to the Company's common stock and meet the criteria to be classified as equity. Proceeds from the issuance of pre-funded warrants are recorded within additional paid-in capital and are not subject to remeasurement. Please refer to Note 8 for further information regarding pre-funded warrants issued by the Company.
Net Loss Per Share
Basic net loss per share is calculated by dividing net loss applicable to common stockholders by the weighted-average common shares outstanding during the period, without consideration for common stock equivalents. Diluted net loss per share is calculated by adjusting the weighted-average common shares outstanding for the dilutive effect of common stock equivalents outstanding for the period, determined using the treasury-stock method. For purposes of computing both basic and diluted net loss per share, pre-funded warrants are considered outstanding shares upon issuance because the shares may be issued for nominal consideration and are exercisable after the original issuance date. Contingently convertible shares in which conversion is based on non-market-priced contingencies are excluded from the calculations of both basic and diluted net loss per share until the contingency has been fully met. For purposes of the diluted net loss per share calculation, common stock equivalents are excluded from the calculation of diluted net loss per share if their effect would be anti-dilutive.
Recent Accounting Pronouncements
Recently Adopted Accounting Pronouncements
The Company did not adopt any new accounting standards during the three and six months ended June 30, 2024 and 2023 which had a material impact on the consolidated financial statements.
Recent Accounting Pronouncements Not Yet Adopted
In November 2023, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which enhances certain interim and annual disclosure requirements of reportable segment information, including information about significant segment expenses. Additionally, the standard requires entities with a single reportable segment to provide all disclosures required by ASC 280, Segment Reporting. The standard is effective for the Company for annual periods beginning January 1, 2024 and interim periods beginning January 1, 2025, with early adoption permitted. The Company does not believe the adoption of this standard will have a material impact on its financial statement disclosures.
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which enhances the disclosure of an entity's effective tax rate reconciliation and requires the disclosure of income taxes paid to be disaggregated by jurisdiction. The standard is effective for the Company beginning January 1, 2025, with early adoption permitted. The Company does not believe the adoption of this standard will have a material impact on its financial statement disclosures.
3. Marketable Securities
The following tables present a summary of the Company’s marketable securities, which consist solely of available-for-sale debt securities (in thousands):
|
|
Amortized Cost |
|
|
Unrealized |
|
|
Unrealized |
|
|
Fair Value |
|
||||
June 30, 2024 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
U.S. government and agency securities |
|
$ |
|
|
$ |
— |
|
|
$ |
( |
) |
|
$ |
|
||
Certificates of deposit |
|
|
|
|
|
— |
|
|
|
( |
) |
|
|
|
||
Corporate bonds |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
11
|
|
Amortized Cost |
|
|
Unrealized |
|
|
Unrealized |
|
|
Fair Value |
|
||||
December 31, 2023 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
U.S. government and agency securities |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
Certificates of deposit |
|
|
|
|
|
— |
|
|
|
( |
) |
|
|
|
||
Corporate bonds |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
As of June 30, 2024 and December 31, 2023,
As of June 30, 2024 and December 31, 2023, the balance in accumulated other comprehensive loss consisted solely of unrealized gains and losses on available-for-sale debt securities, net of reclassification adjustments for realized gains and losses and income tax effects. The Company uses the aggregate portfolio approach to release the tax effects of unrealized gains and losses on available-for-sale debt securities in accumulated other comprehensive loss. Realized gains and losses from the sale or maturity of marketable securities are based on the specific identification method and are included in results of operations as investment income. The Company did
The following tables present the fair values and unrealized losses of available-for-sale debt securities held by the Company in an unrealized loss position for less than 12 months and 12 months or greater (in thousands):
|
|
Less than 12 Months |
|
|
12 Months or Greater |
|
|
Total |
|
|||||||||||||||
|
|
Fair Value |
|
|
Unrealized |
|
|
Fair Value |
|
|
Unrealized |
|
|
Fair Value |
|
|
Unrealized |
|
||||||
June 30, 2024 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
U.S. government and agency securities |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
||||||||