10-Q 1 rna-10q_20220331.htm 10-Q rna-10q_20220331.htm
false Q1 --12-31 0001599901 1 1 P5Y P4Y 0 0 http://fasb.org/us-gaap/2021-01-31#LicenseAndServiceMember http://fasb.org/us-gaap/2021-01-31#LicenseAndServiceMember P6Y P5Y9M18D 0.015 0.005 0.019 0.011 P6Y1M6D P6Y1M6D 0.00 0.00 0001599901 2022-01-01 2022-03-31 xbrli:shares 0001599901 2022-04-21 iso4217:USD 0001599901 2022-03-31 0001599901 2021-12-31 iso4217:USD xbrli:shares 0001599901 2021-01-01 2021-03-31 0001599901 us-gaap:CommonStockMember 2021-12-31 0001599901 us-gaap:AdditionalPaidInCapitalMember 2021-12-31 0001599901 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2021-12-31 0001599901 us-gaap:RetainedEarningsMember 2021-12-31 0001599901 us-gaap:CommonStockMember 2022-01-01 2022-03-31 0001599901 us-gaap:AdditionalPaidInCapitalMember 2022-01-01 2022-03-31 0001599901 us-gaap:CommonStockMember us-gaap:IPOMember 2022-01-01 2022-03-31 0001599901 us-gaap:AdditionalPaidInCapitalMember us-gaap:IPOMember 2022-01-01 2022-03-31 0001599901 us-gaap:IPOMember 2022-01-01 2022-03-31 0001599901 us-gaap:RetainedEarningsMember 2022-01-01 2022-03-31 0001599901 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2022-01-01 2022-03-31 0001599901 us-gaap:CommonStockMember 2022-03-31 0001599901 us-gaap:AdditionalPaidInCapitalMember 2022-03-31 0001599901 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2022-03-31 0001599901 us-gaap:RetainedEarningsMember 2022-03-31 0001599901 us-gaap:CommonStockMember 2020-12-31 0001599901 us-gaap:AdditionalPaidInCapitalMember 2020-12-31 0001599901 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2020-12-31 0001599901 us-gaap:RetainedEarningsMember 2020-12-31 0001599901 2020-12-31 0001599901 us-gaap:CommonStockMember 2021-01-01 2021-03-31 0001599901 us-gaap:AdditionalPaidInCapitalMember 2021-01-01 2021-03-31 0001599901 us-gaap:RetainedEarningsMember 2021-01-01 2021-03-31 0001599901 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2021-01-01 2021-03-31 0001599901 us-gaap:CommonStockMember 2021-03-31 0001599901 us-gaap:AdditionalPaidInCapitalMember 2021-03-31 0001599901 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2021-03-31 0001599901 us-gaap:RetainedEarningsMember 2021-03-31 0001599901 2021-03-31 0001599901 us-gaap:IPOMember 2020-06-16 2020-06-16 0001599901 rna:FollowOnPublicOfferingMember us-gaap:CommonStockMember 2021-08-06 2021-08-06 0001599901 us-gaap:IPOMember 2020-06-16 0001599901 rna:FollowOnPublicOfferingMember us-gaap:CommonStockMember 2021-08-06 0001599901 us-gaap:IPOMember 2021-07-02 2021-07-02 0001599901 srt:MinimumMember 2022-01-01 2022-03-31 0001599901 srt:MaximumMember 2022-01-01 2022-03-31 rna:Segment 0001599901 us-gaap:EmployeeStockOptionMember 2022-01-01 2022-03-31 0001599901 us-gaap:EmployeeStockOptionMember 2021-01-01 2021-03-31 0001599901 rna:CommonStockSubjectToRepurchaseOrForfeitureMember 2022-01-01 2022-03-31 0001599901 rna:CommonStockSubjectToRepurchaseOrForfeitureMember 2021-01-01 2021-03-31 0001599901 rna:EmployeeStockPurchasePlanSharesPendingIssuanceMember 2022-01-01 2022-03-31 0001599901 rna:EmployeeStockPurchasePlanSharesPendingIssuanceMember 2021-01-01 2021-03-31 0001599901 us-gaap:FairValueMeasurementsRecurringMember us-gaap:USTreasurySecuritiesMember 2022-03-31 0001599901 us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueInputsLevel1Member us-gaap:USTreasurySecuritiesMember 2022-03-31 0001599901 us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueInputsLevel2Member us-gaap:USTreasurySecuritiesMember 2022-03-31 0001599901 us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueInputsLevel3Member us-gaap:USTreasurySecuritiesMember 2022-03-31 0001599901 us-gaap:FairValueMeasurementsRecurringMember us-gaap:USGovernmentAgenciesDebtSecuritiesMember 2022-03-31 0001599901 us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueInputsLevel1Member us-gaap:USGovernmentAgenciesDebtSecuritiesMember 2022-03-31 0001599901 us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueInputsLevel2Member us-gaap:USGovernmentAgenciesDebtSecuritiesMember 2022-03-31 0001599901 us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueInputsLevel3Member us-gaap:USGovernmentAgenciesDebtSecuritiesMember 2022-03-31 0001599901 us-gaap:FairValueMeasurementsRecurringMember us-gaap:CertificatesOfDepositMember 2022-03-31 0001599901 us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueInputsLevel1Member us-gaap:CertificatesOfDepositMember 2022-03-31 0001599901 us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueInputsLevel2Member us-gaap:CertificatesOfDepositMember 2022-03-31 0001599901 us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueInputsLevel3Member us-gaap:CertificatesOfDepositMember 2022-03-31 0001599901 us-gaap:FairValueMeasurementsRecurringMember us-gaap:CorporateDebtSecuritiesMember 2022-03-31 0001599901 us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueInputsLevel1Member us-gaap:CorporateDebtSecuritiesMember 2022-03-31 0001599901 us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueInputsLevel2Member us-gaap:CorporateDebtSecuritiesMember 2022-03-31 0001599901 us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueInputsLevel3Member us-gaap:CorporateDebtSecuritiesMember 2022-03-31 0001599901 us-gaap:FairValueMeasurementsRecurringMember 2022-03-31 0001599901 us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueInputsLevel1Member 2022-03-31 0001599901 us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueInputsLevel2Member 2022-03-31 0001599901 us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueInputsLevel3Member 2022-03-31 0001599901 us-gaap:FairValueMeasurementsRecurringMember us-gaap:USTreasurySecuritiesMember 2021-12-31 0001599901 us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueInputsLevel1Member us-gaap:USTreasurySecuritiesMember 2021-12-31 0001599901 us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueInputsLevel2Member us-gaap:USTreasurySecuritiesMember 2021-12-31 0001599901 us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueInputsLevel3Member us-gaap:USTreasurySecuritiesMember 2021-12-31 0001599901 us-gaap:FairValueMeasurementsRecurringMember us-gaap:CertificatesOfDepositMember 2021-12-31 0001599901 us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueInputsLevel1Member us-gaap:CertificatesOfDepositMember 2021-12-31 0001599901 us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueInputsLevel2Member us-gaap:CertificatesOfDepositMember 2021-12-31 0001599901 us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueInputsLevel3Member us-gaap:CertificatesOfDepositMember 2021-12-31 0001599901 us-gaap:FairValueMeasurementsRecurringMember us-gaap:CorporateDebtSecuritiesMember 2021-12-31 0001599901 us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueInputsLevel1Member us-gaap:CorporateDebtSecuritiesMember 2021-12-31 0001599901 us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueInputsLevel2Member us-gaap:CorporateDebtSecuritiesMember 2021-12-31 0001599901 us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueInputsLevel3Member us-gaap:CorporateDebtSecuritiesMember 2021-12-31 0001599901 us-gaap:FairValueMeasurementsRecurringMember 2021-12-31 0001599901 us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueInputsLevel1Member 2021-12-31 0001599901 us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueInputsLevel2Member 2021-12-31 0001599901 us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueInputsLevel3Member 2021-12-31 0001599901 rna:USTreasurySecuritiesOneYearOrLessMaturityMember 2022-03-31 0001599901 rna:USGovernmentAgencySecuritiesOneYearOrLessMaturityMember 2022-03-31 0001599901 rna:NegotiableCertificatesOfDepositOneYearOrLessMaturityMember 2022-03-31 0001599901 rna:CorporateDebtSecuritiesOneYearOrLessMaturityMember 2022-03-31 0001599901 rna:USTreasurySecuritiesWithOneToTwoYearsMaturityMember 2022-03-31 0001599901 rna:USGovernmentAgencySecuritiesWithOneToTwoYearsMaturityMember 2022-03-31 0001599901 rna:NegotiableCertificatesOfDepositWithOneToTwoYearsMaturityMember 2022-03-31 0001599901 rna:CorporateDebtSecuritiesWithOneToTwoYearsMaturityMember 2022-03-31 0001599901 rna:USTreasurySecuritiesOneYearOrLessMaturityMember 2021-12-31 0001599901 rna:NegotiableCertificatesOfDepositOneYearOrLessMaturityMember 2021-12-31 0001599901 rna:USTreasurySecuritiesWithOneToTwoYearsMaturityMember 2021-12-31 0001599901 rna:NegotiableCertificatesOfDepositWithOneToTwoYearsMaturityMember 2021-12-31 0001599901 rna:CorporateDebtSecuritiesWithOneToTwoYearsMaturityMember 2021-12-31 rna:Product 0001599901 srt:MaximumMember rna:ResearchCollaborationAndLicenseAgreementWithEliLillyAndCompanyMember 2019-04-01 2019-04-30 0001599901 rna:ResearchCollaborationAndLicenseAgreementWithEliLillyAndCompanyMember 2019-04-01 2019-04-30 rna:Obligation 0001599901 rna:ResearchCollaborationAndLicenseAgreementWithEliLillyAndCompanyMember 2022-01-01 2022-03-31 0001599901 rna:ResearchCollaborationAndLicenseAgreementWithEliLillyAndCompanyMember 2021-01-01 2021-03-31 0001599901 rna:ResearchCollaborationAndLicenseAgreementWithEliLillyAndCompanyMember 2022-03-31 0001599901 rna:ResearchCollaborationAndLicenseAgreementWithEliLillyAndCompanyMember 2021-12-31 0001599901 rna:ResearchCollaborationAndLicenseAgreementWithEliLillyAndCompanyMember us-gaap:PrepaidExpensesAndOtherCurrentAssetsMember 2022-03-31 0001599901 rna:ResearchCollaborationAndLicenseAgreementWithEliLillyAndCompanyMember us-gaap:PrepaidExpensesAndOtherCurrentAssetsMember 2021-12-31 0001599901 rna:ResearchCollaborationWithMyoKardiaIncMember 2022-01-01 2022-03-31 0001599901 rna:ResearchCollaborationWithMyoKardiaIncMember 2021-01-01 2021-03-31 0001599901 rna:LaboratoryEquipmentMember 2022-03-31 0001599901 rna:LaboratoryEquipmentMember 2021-12-31 0001599901 us-gaap:ComputerEquipmentMember 2022-03-31 0001599901 us-gaap:ComputerEquipmentMember 2021-12-31 0001599901 rna:OfficeFurnitureAndEquipmentMember 2022-03-31 0001599901 rna:OfficeFurnitureAndEquipmentMember 2021-12-31 0001599901 us-gaap:LeaseholdImprovementsMember 2022-03-31 0001599901 us-gaap:LeaseholdImprovementsMember 2021-12-31 xbrli:pure 0001599901 2020-06-16 0001599901 2021-07-02 2021-07-02 0001599901 2021-07-02 2022-03-31 0001599901 rna:TwoThousandThirteenEquityIncentivePlanMember 2013-01-31 0001599901 rna:TwoThousandThirteenEquityIncentivePlanMember 2019-12-31 0001599901 rna:TwoThousandTwentyIncentiveAwardPlanMember 2020-06-30 0001599901 rna:TwoThousandTwentyIncentiveAwardPlanMember 2022-03-31 0001599901 rna:TwoThousandThirteenEquityIncentivePlanMember srt:MaximumMember 2022-01-01 2022-03-31 0001599901 rna:TwoThousandTwentyIncentiveAwardPlanMember srt:MaximumMember 2022-01-01 2022-03-31 0001599901 rna:EmployeeStockPurchasePlanMember 2020-06-30 0001599901 rna:EmployeeStockPurchasePlanMember 2020-06-01 2020-06-30 0001599901 rna:EmployeeStockPurchasePlanMember 2022-03-31 0001599901 rna:EmployeeStockPurchasePlanMember 2022-01-01 2022-03-31 0001599901 rna:EmployeeStockPurchasePlanMember 2021-01-01 2021-03-31 0001599901 rna:EmployeeStockPurchasePlanMember us-gaap:AccountsPayableAndAccruedLiabilitiesMember 2022-03-31 0001599901 srt:MinimumMember 2021-01-01 2021-03-31 0001599901 srt:MaximumMember 2021-01-01 2021-03-31 0001599901 us-gaap:ResearchAndDevelopmentExpenseMember 2022-01-01 2022-03-31 0001599901 us-gaap:ResearchAndDevelopmentExpenseMember 2021-01-01 2021-03-31 0001599901 us-gaap:GeneralAndAdministrativeExpenseMember 2022-01-01 2022-03-31 0001599901 us-gaap:GeneralAndAdministrativeExpenseMember 2021-01-01 2021-03-31 0001599901 rna:TimeBasedOptionsMember 2022-03-31 0001599901 rna:TimeBasedOptionsMember 2022-01-01 2022-03-31 0001599901 us-gaap:SubsequentEventMember 2022-04-01 2022-05-10

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

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

FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2022

or

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

Commission File Number 001-39321

 

Avidity Biosciences, Inc.

(Exact name of registrant as specified in its charter)

 

 

Delaware

 

46-1336960

(State or other jurisdiction of

incorporation or organization)

 

(IRS Employer

Identification No.)

 

 

 

10578 Science Center Drive, Suite 125

San Diego, California

 

92121

(Address of principal executive offices)

 

(Zip Code)

 

(858401-7900

(Registrant’s telephone number, including area code)

 

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

 

Title of each class

Trading

Symbol(s)

Name of each exchange on which registered

Common Stock, $0.0001 par value

RNA

The Nasdaq Global Market

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

Accelerated filer

Non-accelerated filer

 

Smaller reporting company

 

 

 

Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).      Yes     No 

As of April 21, 2022, the registrant had 49,763,363 shares of common stock outstanding.

 

 

 


 

Avidity Biosciences, Inc.

FORM 10-Q

TABLE OF CONTENTS

 

PART I – FINANCIAL INFORMATION

 

 

 

 

Item 1.

Condensed Financial Statements (unaudited)

3

 

Condensed Balance Sheets (unaudited)

3

 

Condensed Statements of Operations and Comprehensive Loss (unaudited)

4

 

Condensed Statements of Stockholders' Equity (unaudited)

5

 

Condensed Statements of Cash Flows (unaudited)

6

 

Notes to Condensed Financial Statements (unaudited)

7

Item 2.

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

17

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

24

Item 4.

Controls and Procedures

24

 

 

 

PART II – OTHER INFORMATION

 

 

 

 

Item 1.

Legal Proceedings

25

Item 1A.

Risk Factors

25

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

25

Item 3.

Defaults Upon Senior Securities

25

Item 4.

Mine Safety Disclosures

25

Item 5.

Other Information

25

Item 6.

Exhibits

26

 

 

 

SIGNATURES

27

 

2


 

PART I - FINANCIAL INFORMATION

Item 1.  Condensed Financial Statements (unaudited)

Avidity Biosciences, Inc.

Condensed Balance Sheets

(in thousands, except par value)

 

 

 

March 31,

2022

 

 

December 31,

2021

 

 

 

(unaudited)

 

 

 

 

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

139,262

 

 

$

320,448

 

Marketable securities

 

 

257,809

 

 

 

85,095

 

Prepaid and other assets

 

 

7,729

 

 

 

5,598

 

Total current assets

 

 

404,800

 

 

 

411,141

 

Property and equipment, net

 

 

5,029

 

 

 

4,805

 

Restricted cash

 

 

501

 

 

 

251

 

Right-of-use asset

 

 

10,257

 

 

 

10,784

 

Other assets

 

 

548

 

 

 

599

 

Total assets

 

$

421,135

 

 

$

427,580

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable and accrued liabilities

 

$

18,821

 

 

$

14,085

 

Accrued compensation

 

 

4,241

 

 

 

8,940

 

Lease liabilities, current portion

 

 

2,544

 

 

 

1,769

 

Deferred revenue, current portion

 

 

5,314

 

 

 

4,864

 

Total current liabilities

 

 

30,920

 

 

 

29,658

 

Lease liabilities, net of current portion

 

 

9,347

 

 

 

9,960

 

Deferred revenue, net of current portion

 

 

5,160

 

 

 

6,532

 

Total liabilities

 

 

45,427

 

 

 

46,150

 

Commitments and contingencies (Note 7)

 

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

 

 

Preferred stock, $0.0001 par value; authorized shares – 40,000; issued and

   outstanding shares – none

 

 

 

 

 

 

Common stock, $0.0001 par value; authorized shares – 400,000; issued and

   outstanding shares – 49,281 and 47,754 at March 31, 2022 and

   December 31, 2021, respectively

 

 

5

 

 

 

5

 

Additional paid-in capital

 

 

596,513

 

 

 

566,161

 

Accumulated other comprehensive loss

 

 

(2,026

)

 

 

(187

)

Accumulated deficit

 

 

(218,784

)

 

 

(184,549

)

Total stockholders’ equity

 

 

375,708

 

 

 

381,430

 

Total liabilities and stockholders’ equity

 

$

421,135

 

 

$

427,580

 

 

See accompanying notes.

3


Avidity Biosciences, Inc.

Condensed Statements of Operations and Comprehensive Loss

(in thousands, except per share data)

(unaudited)

 

 

 

Three Months Ended March 31,

 

 

 

2022

 

 

2021

 

Collaboration revenue

 

$

1,795

 

 

$

2,704

 

Operating expenses:

 

 

 

 

 

 

 

 

Research and development

 

 

27,688

 

 

 

20,677

 

General and administrative

 

 

8,567

 

 

 

5,884

 

Total operating expenses

 

 

36,255

 

 

 

26,561

 

Loss from operations

 

 

(34,460

)

 

 

(23,857

)

Other income (expense):

 

 

 

 

 

 

 

 

Interest income

 

 

250

 

 

 

16

 

Other expense

 

 

(25

)

 

 

(3

)

Total other income

 

 

225

 

 

 

13

 

Net loss

 

 

(34,235

)

 

 

(23,844

)

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

Net unrealized (losses) gains on marketable

   securities

 

 

(1,839

)

 

 

2

 

Comprehensive loss

 

$

(36,074

)

 

$

(23,842

)

Net loss per share, basic and diluted

 

$

(0.71

)

 

$

(0.64

)

Weighted-average shares outstanding, basic and

   diluted

 

 

48,246

 

 

 

37,521

 

 

See accompanying notes.

 

 

4


 

Avidity Biosciences, Inc.

Condensed Statements of Stockholders' Equity

(in thousands)

(unaudited)

 

 

 

Common Stock

 

 

Additional

Paid-in

 

 

Accumulated

Other

Comprehensive

 

 

Accumulated

 

 

Total

Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Loss

 

 

Deficit

 

 

Equity

 

Balance at December 31, 2021

 

 

47,754

 

 

$

5

 

 

$

566,161

 

 

$

(187

)

 

$

(184,549

)

 

$

381,430

 

Issuance of common stock upon exercise

   of stock options

 

 

7

 

 

 

 

 

 

10

 

 

 

 

 

 

 

 

 

10

 

Vesting of early exercise options

 

 

 

 

 

 

 

 

1

 

 

 

 

 

 

 

 

 

1

 

Issuance of common stock in public offerings,

   net of issuance costs of $745

 

 

1,520

 

 

 

 

 

 

24,103

 

 

 

 

 

 

 

 

 

24,103

 

Stock-based compensation

 

 

 

 

 

 

 

 

6,238

 

 

 

 

 

 

 

 

 

6,238

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(34,235

)

 

 

(34,235

)

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

(1,839

)

 

 

 

 

 

(1,839

)

Balance at March 31, 2022

 

 

49,281

 

 

$

5

 

 

$

596,513

 

 

$

(2,026

)

 

$

(218,784

)

 

$

375,708

 

 

 

 

 

 

Common Stock

 

 

Additional

Paid-in

 

 

Accumulated

Other

Comprehensive

 

 

Accumulated

 

 

Total

Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Loss

 

 

Deficit

 

 

Equity

 

Balance at December 31, 2020

 

 

37,569

 

 

$

4

 

 

$

372,764

 

 

$

(5

)

 

$

(66,540

)

 

$

306,223

 

Issuance of common stock upon exercise

   of stock options

 

 

31

 

 

 

 

 

 

24

 

 

 

 

 

 

 

 

 

24

 

Vesting of early exercise options

 

 

 

 

 

 

 

 

10

 

 

 

 

 

 

 

 

 

10

 

Stock-based compensation

 

 

 

 

 

 

 

 

3,701

 

 

 

 

 

 

 

 

 

3,701

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(23,844

)

 

 

(23,844

)

Other comprehensive gain

 

 

 

 

 

 

 

 

 

 

 

2

 

 

 

 

 

 

2

 

Balance at March 31, 2021

 

 

37,600

 

 

$

4

 

 

$

376,499

 

 

$

(3

)

 

$

(90,384

)

 

$

286,116

 

 

See accompanying notes.

 

 

 

5


 

Avidity Biosciences, Inc.

Condensed Statements of Cash Flows

(in thousands)

(unaudited)

 

 

 

Three Months Ended March 31,

 

 

 

2022

 

 

2021

 

Cash flows from operating activities

 

 

 

 

 

 

 

 

Net loss

 

$

(34,235

)

 

$

(23,844

)

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

 

 

 

 

 

 

 

 

Depreciation

 

 

314

 

 

 

108

 

Stock-based compensation expense

 

 

6,238

 

 

 

3,701

 

Amortization of premiums and discounts on marketable securities, net

 

 

164

 

 

 

40

 

Gain on disposal of property and equipment

 

 

 

 

 

(16

)

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Prepaid and other assets

 

 

(2,080

)

 

 

(491

)

Accounts payable and accrued liabilities

 

 

4,957

 

 

 

2,390

 

Accrued compensation

 

 

(4,699

)

 

 

(407

)

Operating lease right-of-use assets and liabilities, net

 

 

689

 

 

 

150

 

Deferred revenue

 

 

(922

)

 

 

(1,312

)

Net cash used in operating activities

 

 

(29,574

)

 

 

(19,681

)

Cash flows from investing activities

 

 

 

 

 

 

 

 

Purchases of marketable securities

 

 

(174,717

)

 

 

 

Purchases of property and equipment

 

 

(758

)

 

 

(525

)

Net cash used in investing activities

 

 

(175,475

)

 

 

(525

)

Cash flows from financing activities

 

 

 

 

 

 

 

 

Proceeds from issuance of common stock in public offerings, gross

 

 

24,848

 

 

 

 

Payment of issuance costs related to public offerings

 

 

(745

)

 

 

 

Proceeds from exercise of stock options

 

 

10

 

 

 

17

 

Net cash provided by financing activities

 

 

24,113

 

 

 

17

 

Net decrease in cash, cash equivalents and restricted cash

 

 

(180,936

)

 

 

(20,189

)

Cash, cash equivalents and restricted cash at beginning of period

 

 

320,699

 

 

 

321,713

 

Cash, cash equivalents and restricted cash at end of period

 

$

139,763

 

 

$

301,524

 

 

 

 

 

 

 

 

 

 

Supplemental schedule of noncash investing and financing activities:

 

 

 

 

 

 

 

 

Costs incurred, but not paid, in connection with purchases of property

   and equipment included in accounts payable and accrued liabilities

 

$

 

 

$

286

 

Receivables from stock option exercises included in prepaid and

   other assets

 

$

 

 

$

7

 

 

See accompanying notes.

6


Avidity Biosciences, Inc.

Notes to Unaudited Condensed Financial Statements

 

1.

Description of Business and Basis of Presentation

Description of Business

Avidity Biosciences, Inc. (the Company or Avidity) is a biopharmaceutical company committed to delivering a new class of RNA therapeutics called Antibody Oligonucleotide Conjugates (AOCs). The Company’s proprietary AOC platform is designed to combine the specificity of monoclonal antibodies with the precision of RNA therapeutics to target the root cause of diseases previously untreatable with such therapeutics.

Liquidity

On June 16, 2020, the Company completed its initial public offering (IPO) in which it sold 16,560,000 shares of common stock at an offering price of $18.00 per share. Proceeds from the IPO, net of underwriting discounts, commissions and offering costs, were $274.1 million. On August 6, 2021, the Company completed a public offering of 9,200,000 shares of its common stock at a public offering price of $18.00 per share. The net proceeds from the offering were $155.1 million, after deducting underwriting discounts, commissions and offering costs. On July 2, 2021, the Company entered into a sales agreement (the Sales Agreement) with Cowen and Company, LLC (the Sales Agent), under which the Company may, from time to time, sell shares of its common stock having an aggregate offering price of up to $150.0 million through the Sales Agent. Through March 31, 2022, the Company has sold 2,300,490 shares of its common stock pursuant to the Sales Agreement and received net proceeds of $43.7 million, after deducting offering-related transaction costs and commissions. See Note 8 (Stockholders Equity) for more information on the Company’s equity offerings.

To date, the Company has devoted substantially all of its resources to organizing and staffing the company, business planning, raising capital, developing its proprietary AOC platform, identifying potential product candidates, establishing its intellectual property portfolio, conducting research, preclinical and clinical studies, and providing other general and administrative support for these operations. In addition, the Company has a limited operating history, has incurred operating losses since inception and expects that it will continue to incur net losses into the foreseeable future as it continues the development of its product candidates and development programs. As of March 31, 2022, the Company had an accumulated deficit of $218.8 million and cash, cash equivalents and marketable securities of $397.1 million.

The Company believes that existing cash, cash equivalents and marketable securities will be sufficient to fund the Company’s operations for at least 12 months from the date of the filing of this Form 10-Q. The Company plans to finance its future cash needs through equity offerings, debt financings or other capital sources, including potential collaborations, licenses and other similar arrangements. If the Company is not able to secure adequate additional funding, it may be forced to make reductions in spending, extend payment terms with suppliers, liquidate assets where possible, and/or delay or reduce the scope of its planned development programs. Any of these actions could materially harm the Company’s business, results of operations and future prospects.

Basis of Presentation

The accompanying unaudited interim condensed financial statements have been prepared in accordance with U.S. generally accepted accounting principles (GAAP) and the rules and regulations of the Securities and Exchange Commission (SEC) related to a quarterly report on Form 10-Q. Certain information and note disclosures normally included in annual financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to those rules and regulations. The unaudited interim condensed financial statements reflect all adjustments which, in the opinion of management, are necessary for a fair statement of the results for the periods presented. All such adjustments are of a normal and recurring nature. The operating results presented in these unaudited interim condensed financial statements are not necessarily indicative of the results that may be expected for any future periods. These unaudited interim condensed financial statements should be read in conjunction with the audited financial statements and the notes thereto for the year ended December 31, 2021 included in the Company’s annual report on Form 10-K filed with the SEC on March 1, 2022.

 

2.

Summary of Significant Accounting Policies

Use of Estimates

The Company’s condensed financial statements are prepared in accordance with GAAP, which requires the Company to make estimates and assumptions that impact the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities in the financial statements and accompanying

7


notes. The most significant estimates in the Company’s condensed financial statements relate to revenue recognition, stock-based compensation, and accrued research and development costs. Although these estimates are based on the Company’s knowledge of current events and actions it may undertake in the future, actual results may ultimately materially differ from these estimates and assumptions.

Cash, Cash Equivalents and Restricted Cash

The Company considers all highly liquid investments with original maturities of three months or less from the date of purchase to be cash equivalents. Cash and cash equivalents include cash in readily available checking and money market accounts. Restricted cash represents cash held as collateral for the letter of credit required under the Company’s facility lease and is reported as a long-term asset in the accompanying condensed balance sheets.

Marketable Securities

The Company’s marketable securities primarily consist of U.S. Government and corporate debt securities. The Company classifies its marketable securities as available-for-sale and records such assets at estimated fair value in the condensed balance sheets, with unrealized gains and losses, if any, reported as a component of other comprehensive income (loss) within the condensed statements of operations and comprehensive loss and as a separate component of stockholders’ equity. The Company classifies marketable securities with remaining maturities greater than one year as current assets because such marketable securities are available to fund the Company’s current operations. Realized gains and losses are calculated on the specific identification method and recorded as interest income. There were no realized gains and losses during any of the periods presented.

At each balance sheet date, the Company assesses available-for-sale securities in an unrealized loss position to determine whether the unrealized loss is other-than-temporary. When the Company determines that a decline in the fair value below its cost basis is other-than-temporary, the Company recognizes an impairment loss in the period in which the other-than-temporary decline occurred. There have been no other-than-temporary impairments recognized during any of the periods presented.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash, cash equivalents and marketable securities. The Company maintains deposits in federally insured financial institutions in excess of federally insured limits. The Company has not experienced any losses in such accounts and believes it is not exposed to significant risk on its cash balances due to the financial position of the depository institutions in which those deposits are held. Additionally, the Company has established guidelines regarding approved investments, credit quality, diversification, liquidity and maturities of investments, which are designed to maintain safety and liquidity.

Fair Value of Financial Instruments

Certain assets and liabilities are carried at fair value under GAAP. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. Financial assets and liabilities carried at fair value are to be classified and disclosed in one of the following three levels of the fair value hierarchy, of which the first two are considered observable and the last is considered unobservable:

 

Level 1—Quoted prices in active markets for identical assets or liabilities.

 

Level 2—Observable inputs, such as quoted prices in active markets for similar assets or liabilities, quoted prices in markets that are not active for identical or similar assets or liabilities, or other inputs that are observable or can be corroborated by observable market data.

 

Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to determining the fair value of the assets or liabilities, including pricing models, discounted cash flow methodologies and similar techniques.

The asset’s or liability’s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.

8


None of the Company’s non-financial assets are recorded at fair value on a non-recurring basis. The carrying amounts reflected in the Company’s condensed balance sheets for prepaid and other assets and accounts payable and accrued liabilities approximate their fair values due to their short-term nature. The Company recognizes transfers between levels of the fair value hierarchy on the date of the event or change in circumstances that caused the transfer. No transfers between levels have occurred during the periods presented.

See Note 3 (Fair Value Measurements) for information on assets measured at fair value.

Property and Equipment

Property and equipment, including leasehold improvements, are stated at cost less accumulated depreciation and amortization. Depreciation and amortization are recorded using the straight-line method over the estimated useful lives of the related assets, which ranges from three to five years. Leasehold improvements are amortized on a straight-line basis over the shorter of the estimated useful lives of the assets or the remaining lease term. Repairs and maintenance charges that do not increase the useful life of the assets are charged to operating expenses as incurred.

Impairment of Long-Lived Assets

Long-lived assets consist of property and equipment. An impairment loss is recorded if and when events and circumstances indicate that assets might be impaired and the undiscounted cash flows estimated to be generated by those assets are less than the carrying amount of those assets. The Company has not recognized any impairment losses in any of the periods presented in these financial statements.

Segment Information

Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by management in making decisions regarding resource allocation and assessing performance. The Company manages its operations as a single operating segment in the United States for the purposes of assessing performance and making operating decisions.

Revenue Recognition

To date, all the Company’s revenue has been derived from collaboration and research agreements. The terms of these arrangements include the following types of payments to the Company: non-refundable, upfront license fees; development, regulatory and commercial milestone payments; payments for research and development services provided by the Company or for manufacturing supply services the Company provides through its contract manufacturers; and royalties on net sales of licensed products.  

9


The Company performs the following steps in determining the appropriate amount of revenue to be recognized as it fulfills its obligations under each of these agreements: (i) identification of the promised goods or services in the contract; (ii) determination of whether the promised goods or services are performance obligations, including whether they are distinct in the context of the contract; (iii) measurement of the transaction price, including the constraint on variable consideration; (iv) allocation of the transaction price to the performance obligations; and (v) recognition of revenue when, or as, the Company satisfies each performance obligation.

The Company receives payments from its collaborators based on billing schedules established in each contract. Upfront and other payments may require deferral of revenue recognition to a future period until the Company performs its obligations under its research and collaboration arrangements. Amounts are recorded as accounts receivable when the Company’s right to consideration is unconditional.

See Note 5 (Collaboration, License and Research Agreements) for further information.

Research and Development Costs

Research and development costs are expensed as incurred and include salaries, benefits and stock-based compensation associated with research and development personnel, third-party research and development expenses, license fees, laboratory supplies, facilities, overhead costs, and consultants. Nonrefundable advance payments for goods and services that will be used in future research and development activities are capitalized and recorded as expense in the period that the Company receives the goods or when services are performed.

Upfront and milestone payments to acquire contractual rights to licensed technology are recorded when incurred if there is uncertainty in the Company receiving future economic benefit from the acquired contractual rights.

Patent Costs

Costs related to filing and pursuing patent applications are recorded as general and administrative expense and expensed as incurred since recoverability of such expenditures is uncertain.

Income Taxes

The Company accounts for income taxes in accordance with Accounting Standards Codification (ASC) 740, Income Taxes, which provides for deferred taxes using the asset and liability method. The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Deferred tax assets and liabilities are determined based on the differences between the financial statements and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Valuation allowances are provided, if based upon the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date.

When uncertain tax positions exist, the Company recognizes the tax benefit of tax positions to the extent that the benefit would more likely than not be realized assuming examination by the taxing authority. The determination as to whether the tax benefit will more likely than not be realized is based upon the technical merits of the tax position as well as consideration of the available facts and circumstances.

The Company is subject to taxation in the United States and various state jurisdictions. As of December 31, 2021, the Company’s tax years since conversion to a corporation in 2019 are subject to examination by taxing authorities.

Stock-Based Compensation

Stock-based compensation expense for employee and non-employee stock option grants is recorded at the estimated fair value of the award as of the grant date and is recognized as expense on a straight-line basis over the requisite service period (usually the vesting period) of the stock-based award, and forfeitures are recognized as incurred. Stock-based compensation expense for employee stock purchases under the Company’s Employee Stock Purchase Plan (the ESPP) is recorded at the estimated fair value of the purchase as of the plan enrollment date and is recognized as expense on a straight-line basis over the applicable six-month ESPP offering period. The estimation of fair value for stock-based compensation requires management to make estimates and judgments about, among other things, the estimated life of options and volatility of the Company’s common stock. The judgments directly affect the amount of compensation expense that will be recognized.

10


Comprehensive Loss

Comprehensive loss is defined as the change in equity during a period from transactions and other events and circumstances from non-owner sources, including unrealized gains and losses on marketable securities. Comprehensive gains (losses) have been reflected in the statements of operations and comprehensive loss for all periods presented.

Net Loss Per Share

Basic net loss per share is computed by dividing the net loss by the weighted-average number of common shares outstanding for the period, adjusted for the weighted-average number of common shares outstanding that are subject to repurchase or forfeiture. The Company has excluded 13,976 and 58,154 weighted-average shares subject to repurchase or forfeiture from the weighted-average number of common shares outstanding for the three months ended March 31, 2022 and 2021, respectively. Diluted net loss per share is computed by dividing the net loss by the weighted-average number of common shares and dilutive common stock equivalents outstanding for the period determined using the treasury-stock and if-converted methods. For all periods presented, there is no difference in the number of shares used to calculate basic and diluted shares outstanding as inclusion of the potentially dilutive securities would be anti-dilutive.

Potentially dilutive securities not included in the calculation of diluted net loss per share, because to do so would be anti-dilutive, are as follows (in common stock equivalent shares; in thousands):

 

 

 

March 31,

 

 

 

2022

 

 

2021

 

Common stock options issued and outstanding

 

 

8,284

 

 

 

5,523

 

Common stock subject to repurchase or forfeiture

 

 

13

 

 

 

48

 

ESPP shares pending issuance

 

 

23

 

 

 

13

 

Total

 

 

8,320

 

 

 

5,584

 

Recently Issued Accounting Pronouncements

From time to time, new accounting pronouncements are issued by the FASB or other standard setting bodies that are adopted by the Company as of the specified effective date. The Company believes that the impact of recently issued standards that are not yet effective will not have a material impact on its financial position or results of operations upon adoption.

 

3.

Fair Value Measurements

The Company determines the fair value of its cash equivalents and marketable securities based on one or more valuations from its investment accounting and reporting service provider. The investment service provider values the securities using a hierarchical security pricing model that relies primarily on valuations provided by an industry-recognized valuation service. Such valuations may be based on trade prices in active markets for identical assets (Level 1 inputs) or valuation models using inputs that are observable either directly or indirectly (Level 2 inputs), such as quoted prices for similar assets, yield curves, volatility factors, credit spreads, default rates, loss severity, current market and contractual prices for the underlying instruments or debt, and broker and dealer quotes, as well as other relevant economic measures.

 

The following tables summarize the Company’s cash equivalents and marketable securities measured at fair value (in thousands):

 

 

 

 

 

 

 

Fair Value Measurements Using

 

As of March 31, 2022

 

Total

 

 

Quoted Prices in

Active Markets

for Identical

Assets (Level 1)

 

 

Significant

Other

Observable

Inputs (Level 2)

 

 

Significant

Unobservable

Inputs

(Level 3)

 

Marketable securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury securities

 

$

231,256

 

 

$

231,256

 

 

$

 

 

$

 

U.S. Government agency securities

 

 

4,949

 

 

 

 

 

 

4,949

 

 

 

 

Negotiable certificates of deposit

 

 

3,830

 

 

 

 

 

 

3,830

 

 

 

 

Corporate debt securities

 

 

17,774

 

 

 

 

 

 

17,774

 

 

 

 

Total

 

$

257,809

 

 

$

231,256

 

 

$

26,553

 

 

$

 

11


 

 

 

 

 

 

 

 

Fair Value Measurements Using

 

As of December 31, 2021

 

Total

 

 

Quoted Prices in

Active Markets

for Identical

Assets (Level 1)

 

 

Significant

Other

Observable

Inputs (Level 2)

 

 

Significant

Unobservable

Inputs

(Level 3)

 

Marketable securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury securities

 

$

65,372

 

 

$

65,372

 

 

$

 

 

$

 

Negotiable certificates of deposit

 

 

3,873

 

 

 

 

 

 

3,873

 

 

 

 

Corporate debt securities

 

 

15,850

 

 

 

 

 

 

15,850

 

 

 

 

Total

 

$

85,095

 

 

$

65,372

 

 

$

19,723

 

 

$

 

 

4.

Marketable Securities

The Company’s marketable securities, which consist of highly liquid marketable debt securities, are classified as available-for-sale and are stated at fair value. The following tables summarize the Company’s marketable securities (in thousands):

 

As of March 31, 2022

 

Maturity

(in years)

 

Amortized

Cost

 

 

Unrealized

Gains

 

 

Unrealized

Losses

 

 

Estimated

Fair Value

 

U.S. Treasury securities

 

1 or less

 

$

185,203

 

 

$

1

 

 

$

(641

)

 

$

184,563

 

U.S. Government agency securities

 

1 or less

 

 

2,500

 

 

 

 

 

 

(21

)

 

 

2,479

 

Negotiable certificates of deposit

 

1 or less

 

 

1,676

 

 

 

 

 

 

(8

)

 

 

1,668

 

Corporate debt securities

 

1 or less

 

 

3,056

 

 

 

 

 

 

(35

)

 

 

3,021

 

U.S. Treasury securities

 

1 - 2

 

 

47,689

 

 

 

 

 

 

(996

)

 

 

46,693

 

U.S. Government agency securities

 

1 - 2

 

 

2,500

 

 

 

 

 

 

(30

)

 

 

2,470

 

Negotiable certificates of deposit

 

1 - 2

 

 

2,197

 

 

 

 

 

 

(35

)

 

 

2,162

 

Corporate debt securities

 

1 - 2

 

 

15,014

 

 

 

 

 

 

(261

)

 

 

14,753

 

Total

 

 

 

$

259,835

 

 

$

1

 

 

$

(2,027

)

 

$

257,809

 

 

As of December 31, 2021

 

Maturity

(in years)

 

Amortized

Cost

 

 

Unrealized

Gains

 

 

Unrealized

Losses

 

 

Estimated

Fair Value

 

U.S. Treasury securities

 

1 or less

 

$

2,492

 

 

$

 

 

$

(1

)

 

$

2,491

 

Negotiable certificates of deposit

 

1 or less

 

 

1,190

 

 

 

 

 

 

(1

)

 

 

1,189

 

U.S. Treasury securities

 

1 - 2

 

 

63,034

 

 

 

 

 

 

(153

)

 

 

62,881

 

Negotiable certificates of deposit

 

1 - 2

 

 

2,687

 

 

 

 

 

 

(3

)

 

 

2,684

 

Corporate debt securities

 

1 - 2

 

 

15,879

 

 

 

 

 

 

(29

)

 

 

15,850

 

Total

 

 

 

$

85,282

 

 

$

 

 

$

(187

)

 

$

85,095

 

 

5.

Collaboration, License and Research Agreements

Research Collaboration and License Agreement with Eli Lilly and Company

In April 2019, the Company entered into a Research Collaboration and License Agreement (the Lilly Agreement) with Eli Lilly and Company (Lilly) for the discovery, development and commercialization of AOC products directed against certain targets in immunology and other select indications on a worldwide basis. Under the Lilly Agreement, the Company granted Lilly an exclusive, worldwide, royalty-bearing license, with the right to sublicense (subject to certain conditions), under the Company’s technology to research, develop, manufacture and sell products containing AOCs that are directed to up to six mRNA targets. The Company retains the right to use its technology to perform its obligations under the Lilly Agreement and for all purposes not granted to Lilly. The Company agreed that it will not, itself or with a third party, research, develop, manufacture or commercialize or otherwise exploit any compound or product directed against targets subject to the Lilly Agreement.

In consideration of the rights granted to Lilly under the Lilly Agreement, the Company received a one-time upfront fee of $20.0 million and is eligible to receive up to $60.0 million in development milestone payments, up to $140.0 million in regulatory milestone payments and up to $205.0 million in commercialization milestone payments per target. In addition, Lilly is obligated to reimburse the Company for research expenses, as defined in and incurred under the Lilly Agreement. Lilly is obligated to pay the Company a tiered royalty ranging from the mid-single to low-double digits on worldwide annual net sales of licensed products, subject to specified and capped reductions for the market entry of biosimilar products, loss of patent coverage of licensed products and for payments owed to third parties for additional rights necessary to

12


commercialize licensed products in the territory. Lilly’s royalty obligations and the Lilly Agreement will expire on a licensed product-by-licensed product and country-by-country basis on the later of ten years from the date of the first commercial sale or when there is no longer a valid patent claim covering such licensed product in such country.

The Company has identified multiple promises to deliver goods and services, which include at inception of the agreement: (i) a license to technology and patents, information and know-how; and (ii) collaboration, including research services, technical and regulatory support provided by the Company. At inception and through March 31, 2022, the Company has identified one performance obligation for all the deliverables under the Lilly Agreement since the delivered elements are either not capable of being distinct or are not distinct within the context of the contract. Accordingly, the Company will recognize revenue for the fixed or determinable collaboration in an amount proportional to the collaboration expenses incurred and the total estimated collaboration expenses over the five-year period over which it expects to deliver its performance obligations. The Company periodically reviews and updates the estimated collaboration expenses, when appropriate, which adjusts the percentage of revenue that is recognized for the period. In connection with the Lilly Agreement, the Company recognized revenue of $1.7 million and $2.6 million for the three months ended March 31, 2022 and 2021, respectively, and had deferred revenue of $10.3 million and $11.1 million as of March 31, 2022 and December 31, 2021, respectively. Collaboration receivables related to the Lilly Agreement were $0.9 million and $0.9 million as of March 31, 2022 and December 31, 2021, respectively, which are included in prepaid and other assets on the condensed balance sheets.

A reconciliation of the closing balance of deferred revenue related to the Lilly Agreement is as follows (in thousands):

 

Balance at December 31, 2021

 

$

11,108

 

Revenue recognized

 

 

(831

)

Balance at March 31, 2022

 

$

10,277

 

Research Agreement with MyoKardia, Inc.

In December 2020, the Company entered into a research collaboration (the MyoKardia Agreement) with MyoKardia, Inc. (MyoKardia), a wholly-owned subsidiary of Bristol Myers Squibb, to demonstrate the potential utility of AOCs in cardiac tissue by leveraging MyoKardia’s genetic cardiomyopathy platform including, among other aspects, its novel target discovery engine and proprietary cardiac disease models. In connection with the MyoKardia Agreement, the Company recognized revenue of $0.1 million and $0.1 million for the three months ended March 31, 2022 and 2021, respectively.

6.

Property and Equipment

Property and equipment consist of the following (in thousands):

 

 

 

March 31,

2022

 

 

December 31,

2021

 

Laboratory equipment

 

$

4,987

 

 

$

4,775

 

Computers and software

 

 

116

 

 

 

116

 

Office furniture and equipment

 

 

1,724

 

 

 

1,398

 

Leasehold improvements

 

 

249

 

 

 

249

 

Property and equipment, gross

 

 

7,076