10-Q 1 rptx-20220331.htm 10-Q 10-Q
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

(Mark One)

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

For the quarterly period ended March 31, 2022

OR

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

For the transition period from _________________ to ___________________

Commission File Number: 001-39335

 

Repare Therapeutics Inc.

(Exact Name of Registrant as Specified in its Charter)

 

 

Québec

Not applicable

(State or other jurisdiction of

incorporation or organization)

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

7210 Frederick-Banting, Suite 100

St-Laurent, Québec, Canada

H4S 2A1

(Address of principal executive offices)

(Zip Code)

 

Registrant’s telephone number, including area code: (857) 412-7018

 

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 shares, no par value

 

RPTX

 

The Nasdaq Stock Market LLC

 

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

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

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

 

Large accelerated filer

 

 

Accelerated filer

 

 

 

 

 

Non-accelerated filer

 

 

Smaller reporting company

 

 

 

 

 

 

 

 

 

 

 

 

Emerging growth company

 

 

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

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

As of May 5, 2022, there were 41,894,235 shares of the registrant’s common stock, no par value per share, outstanding.

 

 


 

Table of Contents

 

 

 

Page

SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS

1

SUMMARY RISK FACTORS

2

PART I.

FINANCIAL INFORMATION

3

Item 1.

Financial Statements (Unaudited)

3

 

Condensed Consolidated Balance Sheets

3

 

Condensed Consolidated Statements of Operations and Comprehensive Loss

4

 

Condensed Consolidated Statements of Shareholders’ Equity

5

 

Condensed Consolidated Statements of Cash Flows

6

 

Notes to Unaudited Condensed Consolidated Financial Statements

7

Item 2.

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

14

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

24

Item 4.

Controls and Procedures

25

PART II.

OTHER INFORMATION

26

Item 1.

Legal Proceedings

26

Item 1A.

Risk Factors

26

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

73

Item 3.

Defaults Upon Senior Securities

74

Item 4.

Mine Safety Disclosures

74

Item 5.

Other Information

74

Item 6.

Exhibits

75

Signatures

 

 

i


 

SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements about us and our industry that involve substantial risks and uncertainties. All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q, including statements regarding our strategy, future financial condition, future operations, research and development costs, plans and objectives of management, are forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “aim,” “anticipate,” “assume,” “believe,” “contemplate,” “continue,” “could,” “design,” “due,” “estimate,” “expect,” “goal,” “intend,” “may,” “objective,” “plan,” “predict,” “positioned,” “potential,” “seek,” “should,” “target,” “will,” “would” and other similar expressions that are predictions of or indicate future events and future trends, or the negative of these terms or other comparable terminology. Although we believe that we have a reasonable basis for each forward-looking statement contained in this Quarterly Report on Form 10-Q, we caution you that these statements are based on a combination of facts and factors currently known by us and our expectations of the future, about which we cannot be certain.

The forward-looking statements in this Quarterly Report on Form 10-Q include, among other things, statements about:

the initiation, timing, progress and results of our current and future preclinical studies and clinical trials and related preparatory work and the period during which the results of the trials will become available, as well as our research and development programs;
our estimates regarding expenses, future revenue, capital requirements and needs for additional financing;
our ability to obtain regulatory approval of RP-3500 (also known as camonsertib), RP-6306 and any of our current and future product candidates that we develop;
our ability to identify and develop additional product candidates using our SNIPRx platform;
business disruptions affecting the initiation, patient enrollment, development and operation of our clinical trials, including a public health emergency or pandemic, such as the coronavirus disease, or COVID-19 pandemic;
the evolving impact of the COVID-19 pandemic and any variants on our operations, the continuity of our business, including our preclinical studies and clinical trials, supply chains, general economic conditions and our ability to raise additional capital;
our ability to enroll patients in clinical trials, to timely and successfully complete those trials and to receive necessary regulatory approvals;
the timing of completion of enrollment and availability of data from our current preclinical studies and clinical trials, including our Phase 1/2 clinical trial of RP-3500 and our Phase 1 clinical trial of RP-6306;
the expected timing of filings with regulatory authorities for any product candidates that we develop;
our expectations regarding the potential market size and the rate and degree of market acceptance for any product candidates that we develop;
the effects of competition with respect to RP-3500, RP-6306 or any of our other current or future product candidates, as well as innovations by current and future competitors in our industry;
our ability to fund our working capital requirements;
our intellectual property position, including the scope of protection we are able to establish, maintain and enforce for intellectual property rights covering our product candidates;
our financial performance and our ability to effectively manage our anticipated growth;
our ability to obtain additional funding for our operations; and
other risks and uncertainties, including those listed under the section titled “Risk Factors” in this Quarterly Report.

 

Although we believe that the expectations reflected in these forward-looking statements are reasonable, these statements relate to our strategy, future operations, future financial position, future revenue, projected costs, prospects, plans, objectives of management and expected market growth, and involve known and unknown risks, uncertainties and other factors including, without limitation, risks, uncertainties and assumptions regarding the impact of the COVID-19 pandemic on our business, operations, strategy, goals and anticipated timelines, our ongoing and planned preclinical activities, our ability to initiate, enroll, conduct or complete ongoing and planned clinical trials, our timelines for regulatory submissions and our financial position that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. You are urged to carefully review the disclosures we make concerning these risks and other factors that may affect our business and operating results in this Quarterly Report on Form 10-Q. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this document. Except as required by law, we do not intend, and undertake no obligation, to update any forward-looking information to reflect events or circumstances.

1


 

SUMMARY RISK FACTORS

Investing in our common shares involves numerous risks, including the risks described in “Part II—Item 1A. Risk Factors” of this Quarterly Report on Form 10-Q. Below are some of our principal risks, any one of which could materially adversely affect our business, financial condition, results of operations, and prospects:

Our limited operating history may make it difficult for you to evaluate the success of our business to date and to assess our future viability.
We will require substantial additional funding to finance our operations. If we are unable to raise capital when needed, we could be forced to delay, reduce, or terminate certain of our product development programs or other operations.
We are very early in our development efforts. If we are unable to advance RP-3500, RP-6306 or any of our other product candidates into and through clinical development, obtain regulatory approval and ultimately commercialize RP-3500, RP-6306 or any of our other product candidates, or experience significant delays in doing so, our business will be materially harmed.
Our business substantially depends upon the successful development of product candidates generated through the application of our SNIPRx platform, and in particular, our lead product candidate, RP-3500. If we are unable to obtain regulatory approval for, and successfully commercialize, products developed through the application of our SNIPRx platform, our business may be materially harmed.
The effects of health epidemics, including the ongoing COVID-19 pandemic, in regions where we, or the third parties on which we rely, have business operations could adversely impact our business, including our preclinical studies and clinical trials. The COVID-19 pandemic could materially affect our operations, including at our offices in Montréal and in the Boston Metro Area, and at our clinical trial sites, as well as the business or operations of our CROs or other third parties with whom we conduct business.
The successful development of targeted therapeutics, including our portfolio of synthetic lethality small molecule inhibitors, as well as any related diagnostics, is highly uncertain.
The regulatory approval processes of the FDA and comparable foreign regulatory authorities are lengthy, time consuming and inherently unpredictable, and if we are ultimately unable to obtain regulatory approval for our product candidates, on a timely basis or at all, our business will be substantially harmed.
Synthetic lethality represents an emerging class of precision medicine targets, and negative perceptions of the efficacy, safety, or tolerability of this class of targets, including any that we develop, could adversely affect our ability to conduct our business, advance our product candidates or obtain regulatory approvals.
We may not be successful in applying our SNIPRx platform to discover synthetic lethality targets with therapeutic and commercial potential or in the discovery and development of commercially viable product candidates for us or our collaborators.
Difficulty in enrolling patients could delay or prevent clinical trials of our product candidates. We may find it difficult to enroll patients in our ongoing trials with the genomic alterations that these trials are designed to target.
We face substantial competition, which may result in others developing or commercializing drugs before or more successfully than us.
We rely on third parties to supply and manufacture our product candidates, and we expect to continue to rely on third parties to manufacture our products, if approved. The development of such product candidates and the commercialization of any products, if approved, could be stopped, delayed, or made less profitable if any such third party fails to provide us with sufficient quantities of product candidates or products, or fails to do so at acceptable quality levels or prices, or fails to maintain or achieve satisfactory regulatory compliance.
Our success depends in part on our ability to obtain intellectual property rights for our proprietary technologies and product candidates, as well as our ability to protect our intellectual property. It is difficult and costly to protect our proprietary rights and technology, and we may not be able to ensure their protection.
Our future success depends on our ability to retain key executives and to attract, retain and motivate qualified personnel.
The trading price of our common shares has been and is likely to continue to be volatile and fluctuate substantially.

2


 

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

Repare Therapeutics Inc.

Condensed Consolidated Balance Sheets

(Unaudited)

(Amounts in thousands of U.S. dollars, except share data)

 

 

 

As of
March 31,

 

 

As of
December 31,

 

 

 

2022

 

 

2021

 

ASSETS

 

 

 

 

 

 

CURRENT ASSETS:

 

 

 

 

 

 

Cash and cash equivalents

 

$

305,136

 

 

$

334,427

 

Marketable securities

 

 

6,528

 

 

 

7,439

 

Research and development tax credits receivable

 

 

2,986

 

 

 

2,580

 

Other receivables

 

 

663

 

 

 

654

 

Prepaid expenses

 

 

3,915

 

 

 

6,314

 

Total current assets

 

 

319,228

 

 

 

351,414

 

Property and equipment, net

 

 

5,397

 

 

 

5,604

 

Operating lease right-of-use assets

 

 

7,003

 

 

 

7,491

 

Other assets

 

 

586

 

 

 

586

 

Deferred tax assets

 

 

4,935

 

 

 

3,620

 

TOTAL ASSETS

 

$

337,149

 

 

$

368,715

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

CURRENT LIABILITIES:

 

 

 

 

 

 

Accounts payable

 

$

1,546

 

 

$

2,302

 

Accrued expenses and other current liabilities

 

 

16,936

 

 

 

18,622

 

Operating lease liability, current portion

 

 

1,857

 

 

 

1,721

 

Deferred revenue, current portion

 

 

11,874

 

 

 

11,921

 

Income tax payable

 

 

1,870

 

 

 

523

 

Total current liabilities

 

 

34,083

 

 

 

35,089

 

Operating lease liability, net of current portion

 

 

5,154

 

 

 

5,592

 

Deferred revenue, net of current portion

 

 

39,252

 

 

 

39,613

 

TOTAL LIABILITIES

 

 

78,489

 

 

 

80,294

 

SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

Preferred shares, no par value per share; unlimited shares authorized
   as of March 31, 2022 and December 31, 2021, respectively;
0 shares issued
   and outstanding as of March 31, 2022, and December 31, 2021, respectively

 

 

 

 

 

 

Common shares, no par value per share; unlimited shares authorized as of
   March 31, 2022 and December 31, 2021;
41,879,204 and 41,850,162 shares
   issued and outstanding as of March 31, 2022 and December 31, 2021, respectively

 

 

481,048

 

 

 

480,699

 

Additional paid-in capital

 

 

22,635

 

 

 

17,988

 

Accumulated deficit

 

 

(245,023

)

 

 

(210,266

)

Total shareholders’ equity

 

 

258,660

 

 

 

288,421

 

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY

 

$

337,149

 

 

$

368,715

 

 

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

3


 

Repare Therapeutics Inc.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(Unaudited)

(Amounts in thousands of U.S. dollars, except share and per share data)

 

 

 

Three Months Ended
March 31,

 

 

 

2022

 

 

2021

 

Revenue:

 

 

 

 

 

 

Collaboration agreements

 

$

408

 

 

$

166

 

Operating expenses:

 

 

 

 

 

 

Research and development, net of tax credits

 

 

26,458

 

 

 

16,509

 

General and administrative

 

 

8,779

 

 

 

5,237

 

Total operating expenses

 

 

35,237

 

 

 

21,746

 

Loss from operations

 

 

(34,829

)

 

 

(21,580

)

Other income, net

 

 

 

 

 

 

Realized and unrealized loss on foreign exchange

 

 

(17

)

 

 

(31

)

Interest income

 

 

129

 

 

 

64

 

Other expense

 

 

(8

)

 

 

(7

)

Total other income, net

 

 

104

 

 

 

26

 

Loss before income taxes

 

 

(34,725

)

 

 

(21,554

)

Income tax recovery (expense)

 

 

(32

)

 

 

137

 

Net loss and comprehensive loss

 

$

(34,757

)

 

$

(21,417

)

Net loss attributable to common shareholders—basic
   and diluted

 

$

(34,757

)

 

$

(21,417

)

Net loss per share attributable to common
   shareholders—basic and diluted

 

$

(0.83

)

 

$

(0.58

)

Weighted-average common shares outstanding—basic
  and diluted

 

 

41,861,613

 

 

 

36,916,734

 

 

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

4


 

Repare Therapeutics Inc.

Condensed Consolidated Statements of Shareholders’ Equity

(Unaudited)

(Amounts in thousands of U.S. dollars, except share data)

 

 

 

Common Shares

 

 

Additional
Paid-in
Capital

 

 

Accumulated
Deficit

 

 

Total
Shareholders’
Equity

 

 

 

Shares

 

 

Amount

 

 

 

 

 

 

 

 

 

 

Balance, December 31, 2020

 

 

36,902,924

 

 

$

384,313

 

 

$

5,875

 

 

$

(103,358

)

 

$

286,830

 

Exercise of stock options

 

 

87,786

 

 

 

297

 

 

 

(114

)

 

 

 

 

 

183

 

Share-based compensation expense

 

 

 

 

 

 

 

 

2,057

 

 

 

 

 

 

2,057

 

Net loss and comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

(21,417

)

 

 

(21,417

)

Balance, March 31, 2021

 

 

36,990,710

 

 

$

384,610

 

 

$

7,818

 

 

$

(124,775

)

 

$

267,653

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, December 31, 2021

 

 

41,850,162

 

 

$

480,699

 

 

$

17,988

 

 

$

(210,266

)

 

$

288,421

 

Exercise of stock options

 

 

12,235

 

 

 

46

 

 

 

(18

)

 

 

 

 

 

28

 

Share-based compensation expense

 

 

 

 

 

 

 

 

4,755

 

 

 

 

 

 

4,755

 

Issuance of common shares under the
   2020 Employee Share Purchase Plan

 

 

16,807

 

 

 

303

 

 

 

(90

)

 

 

 

 

 

213

 

Net loss and comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

(34,757

)

 

 

(34,757

)

Balance, March 31, 2022

 

 

41,879,204

 

 

$

481,048

 

 

$

22,635

 

 

$

(245,023

)

 

$

258,660

 

 

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

 

5


 

Repare Therapeutics Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(Amounts in thousands of U.S. dollars)

 

 

 

Three Months Ended
March 31,

 

 

 

2022

 

 

2021

 

Cash Flows From Operating Activities:

 

 

 

 

 

 

Net loss and comprehensive loss for the period

 

$

(34,757

)

 

$

(21,417

)

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

 

 

 

 

 

 

Share-based compensation expense

 

 

4,755

 

 

 

2,057

 

Depreciation expense

 

 

516

 

 

 

322

 

Non-cash lease expense

 

 

544

 

 

 

371

 

Foreign exchange gain

 

 

(40

)

 

 

(41

)

Amortization of premiums on marketable securities

 

 

21

 

 

 

29

 

Deferred tax

 

 

(1,315

)

 

 

(174

)

Changes in operating assets and liabilities:

 

 

 

 

 

 

Prepaid expenses

 

 

2,399

 

 

 

2,796

 

Research and development tax credits receivable

 

 

(399

)

 

 

(238

)

Other receivables

 

 

(5

)

 

 

1,017

 

Accounts payable

 

 

(772

)

 

 

1,201

 

Accrued expenses and other current liabilities

 

 

(1,487

)

 

 

253

 

Operating lease liability, current portion

 

 

153

 

 

 

(135

)

Income tax payable

 

 

1,347

 

 

 

12

 

Operating lease liability, net of current portion

 

 

(558

)

 

 

(114

)

Deferred revenue

 

 

(408

)

 

 

(166

)

Net cash used in operating activities

 

 

(30,006

)

 

 

(14,227

)

Cash Flows From Investing Activities:

 

 

 

 

 

 

Purchases of property and equipment

 

 

(487

)

 

 

(772

)

Proceeds from maturities of marketable securities

 

 

2,650

 

 

 

 

Purchase of marketable securities

 

 

(1,760

)

 

 

 

Net cash provided by (used in) investing activities

 

 

403

 

 

 

(772

)

Cash Flows From Financing Activities:

 

 

 

 

 

 

Proceeds from exercise of stock options

 

 

28

 

 

 

183

 

Proceeds from issuance of common stock under the 2020 Employee Share Purchase Plan

 

 

213

 

 

 

 

Net cash provided by financing activities

 

 

241

 

 

 

183

 

Effect of exchange rate fluctuations on cash held

 

 

71

 

 

 

34

 

Net Decrease In Cash And Cash Equivalents And Restricted Cash

 

 

(29,291

)

 

 

(14,782

)

Cash and cash equivalents and restricted cash at beginning of period

 

 

334,427

 

 

 

326,396

 

Cash and cash equivalents and restricted cash at end of period

 

$

305,136

 

 

$

311,614

 

 

 

 

 

 

 

 

Reconciliation Of Cash And Cash Equivalents And Restricted Cash

 

 

 

 

 

 

Cash and cash equivalents

 

$

305,136

 

 

$

311,399

 

Restricted cash

 

 

 

 

 

215

 

Total cash and cash equivalents and restricted cash

 

$

305,136

 

 

$

311,614

 

 

 

 

 

 

 

 

Supplemental Disclosure Of Cash Flow Information:

 

 

 

 

 

 

Property and equipment purchases incurred but not yet paid

 

$

1,541

 

 

$

286

 

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

 

$

56

 

 

$

 

 

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

6


 

REPARE THERAPEUTICS INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in U.S. dollars, unless otherwise specified)

1. Organization and Nature of Business

Repare Therapeutics Inc. (“Repare” or the “Company”) is a precision medicine oncology company focused on the development of synthetic lethality-based therapies to patients with cancer. The Company was incorporated under the Canada Business Corporations Act on September 6, 2016. On June 23, 2020, immediately prior to the completion of its initial public offering (the “IPO”), the Company was continued as a corporation under the Business Corporations Act (Québec). The Company’s shares are listed on the Nasdaq Global Select Market under the ticker symbol “RPTX”.

2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in conformity with generally accepted accounting principles in the United States of America (“U.S. GAAP”). Any reference in these notes to applicable guidance is meant to refer to the authoritative U.S. GAAP as found in the Accounting Standards Codification (“ASC”) and as amended by Accounting Standards Updates (“ASU”) of the Financial Accounting Standards Board (“FASB”).

The unaudited condensed consolidated financial statements have been prepared on the same basis as the audited annual consolidated financial statements as of and for the year ended December 31, 2021, and, in the opinion of management, reflect all adjustments, consisting of normal recurring adjustments, necessary for the fair presentation of the Company’s consolidated financial position as of March 31, 2022, the consolidated results of its operations for the three months ended March 31, 2022 and 2021, its statements of shareholders’ equity for the three months ended March 31, 2022 and 2021 and its consolidated cash flows for the three months ended March 31, 2022 and 2021.

These unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and the accompanying notes for the year ended December 31, 2021 included in the Company’s Annual Report on Form 10-K, filed with the Securities and Exchange Commission (the “SEC”) on March 1, 2022 (the “Annual Report”). The condensed consolidated balance sheet data as of December 31, 2021 presented for comparative purposes was derived from the Company’s audited consolidated financial statements but does not include all disclosures required by U.S. GAAP. The results for the three months ended March 31, 2022 are not necessarily indicative of the operating results to be expected for the full year or for any other subsequent interim period.

The Company’s significant accounting policies are disclosed in the audited consolidated financial statements for the year ended December 31, 2021 included in the Annual Report. Since the date of the audited consolidated financial statements for the year ended December 31, 2021 included in the Annual Report, there have been no changes to its significant accounting policies.

Principles of Consolidation

These unaudited condensed consolidated financial statements of the Company include the accounts of the Company and its wholly-owned subsidiary, Repare Therapeutics USA Inc. (“Repare USA”), which was incorporated under the laws of Delaware on June 1, 2017. The financial statements of Repare USA are prepared for the same reporting period as the parent company, using consistent accounting policies. All intra-group transactions, balances, income, and expenses are eliminated in full upon consolidation.

Use of Estimates

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in consolidated financial statements and accompanying notes. Significant estimates and assumptions reflected in these unaudited condensed consolidated financial statements include, but are not limited to, estimates related to revenue recognition, accrued research and development expenses, share-based compensation, right-of-use assets and lease liabilities and income taxes. Estimates are periodically reviewed in light of changes in circumstances, facts and experience. The Company bases its estimates on historical experience and other market specific or other relevant assumptions that it believes to be reasonable under the circumstances. Actual results could materially differ from those estimates. Changes in estimates are recorded in the period in which they become known.

7


 

COVID-19 Pandemic

With the continued spread of the ongoing COVID-19 pandemic, including variants of COVID-19, the Company established a cross-functional task force and has implemented business continuity plans designed to address and mitigate the impact of the COVID-19 pandemic on its employees and its business, including its preclinical studies and its ongoing and planned clinical trials. The Company has taken measures to secure its research and development activities, while work in its laboratories and facilities has been re-organized to reduce risk of COVID-19 transmission. While the Company is experiencing limited financial impacts at this time, given the global economic slowdown, the overall disruption of global healthcare systems and the other risks and uncertainties associated with the COVID-19 pandemic, the Company’s business, financial condition, and results of operations could be materially adversely affected. The Company cannot predict the ultimate impact, if any, of the COVID-19 pandemic related to both known and unknown risks, including future quarantines, closures and other restrictions resulting from the pandemic. The Company continues to monitor the COVID-19 pandemic as it evolves its business continuity plans, clinical development plans and response strategy. As of the date of these financial statements, the Company is not aware of any specific event or circumstance that would require the Company to update its estimates, assumptions and judgments or revise the carrying value of its assets or liabilities. Actual results could differ from these estimates, and any such differences may be material to the Company’s consolidated financial statements.

3. Fair Value Measurements

The following table presents information about the Company’s financial assets measured at fair value on a recurring basis and indicates the level of the fair value hierarchy utilized to determine such fair values as of March 31, 2022 and December 31, 2021:

Description

 

Financial Assets

 

 

Quoted
Prices in
Active
Markets
for Identical
Assets
(Level 1)

 

 

Significant
Other
Observable
Inputs
(Level 2)

 

 

Significant
Other
Observable
Inputs
(Level 3)

 

 

 

(in thousands)

 

As of March 31, 2022

 

 

 

 

 

 

 

 

 

 

 

 

 Assets

 

 

 

 

 

 

 

 

 

 

 

 

 Cash equivalents

 

 

 

 

 

 

 

 

 

 

 

 

 Money market funds

 

$

3,456

 

 

$

3,456

 

 

$

 

 

$

 

 Marketable securities

 

 

 

 

 

 

 

 

 

 

 

 

 U.S. Treasury notes

 

 

6,528

 

 

 

6,528

 

 

 

 

 

 

 

 Total financial assets

 

$

9,984

 

 

$

9,984

 

 

$

 

 

$

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of December 31, 2021

 

 

 

 

 

 

 

 

 

 

 

 

 Assets

 

 

 

 

 

 

 

 

 

 

 

 

 Cash equivalents

 

 

 

 

 

 

 

 

 

 

 

 

 Money market funds

 

$

2,535

 

 

$

2,535

 

 

$

 

 

$

 

 Marketable securities

 

 

 

 

 

 

 

 

 

 

 

 

 U.S. Treasury notes

 

 

7,439

 

 

 

7,439

 

 

 

 

 

 

 

 Total financial assets

 

$

9,974

 

 

$

9,974

 

 

$

 

 

$

 

When developing fair value estimates, the Company maximizes the use of observable inputs and minimizes the use of unobservable inputs. When available, the Company uses quoted market prices to measure the fair value. The valuation technique used to measure fair value for the Company’s Level 1 assets is a market approach, using prices and other relevant information generated by market transactions involving identical or comparable assets. If market prices are not available, the fair value measurement is based on models that use primarily market-based parameters including yield curves, volatilities, credit ratings and currency rates. In certain cases where market rate assumptions are not available, the Company is required to make judgements about assumptions market participants would use to estimate the fair value of a financial instrument.

During the three months ended March 31, 2022, there were no transfers between fair value measure levels.

8


 

4. Cash and Cash Equivalents and Marketable Securities

As of March 31, 2022 and December 31, 2021, cash and cash equivalents and marketable securities were comprised of the following:

 

 

Amortized Cost

 

 

Unrealized Gains

 

 

Unrealized Losses

 

 

Fair Value

 

 

 

(in thousands)

 

As of March 31, 2022

 

 

 

 

 

 

 

 

 

 

 

 

 Money market funds included in cash and
    cash equivalents

 

$

3,456

 

 

$

 

 

$

 

 

$

3,456

 

 Marketable securities:

 

 

 

 

 

 

 

 

 

 

 

 

 U.S. Treasury notes

 

 

6,528

 

 

 

 

 

 

 

 

 

6,528

 

 Total

 

$

9,984

 

 

$

 

 

$

 

 

$

9,984

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of December 31, 2021

 

 

 

 

 

 

 

 

 

 

 

 

 Money market funds included in cash and
    cash equivalents

 

$

2,535

 

 

$

 

 

$

 

 

$

2,535

 

 Marketable securities:

 

 

 

 

 

 

 

 

 

 

 

 

 U.S. Treasury notes

 

 

7,439

 

 

 

 

 

 

 

 

 

7,439

 

 Total

 

$

9,974

 

 

$

 

 

$

 

 

$

9,974

 

The amortized cost of marketable securities at March 31, 2022 is equal to their fair value. Accordingly, no unrealized gains or losses were recognized in the three months ended March 31, 2022 and 2021.

The maturities of the Company’s money market funds included in cash and cash equivalents, and marketable securities is less than one year.

5. Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities as of March 31, 2022 and December 31, 2021 consisted of the following:

 

 

March 31,
2022

 

 

December 31,
2021

 

 

 

(in thousands)

 

Accrued compensation and benefits

 

$

2,068

 

 

$

4,867

 

Accrued research and development expense

 

 

11,784

 

 

 

11,272

 

Accrued professional services

 

 

1,236

 

 

 

387

 

Accrued property and equipment purchases

 

 

1,520

 

 

 

1,719

 

Other

 

 

328

 

 

 

377

 

Total accrued expenses and other current liabilities

 

$

16,936

 

 

$

18,622

 

 

6. Collaboration and License Agreement

In May 2020, the Company entered into a collaboration and license agreement with Bristol-Myers Squibb Company (“Bristol Myers Squibb”), pursuant to which the Company and Bristol Myers Squibb have agreed to collaborate in the research and development of potential new product candidates for the treatment of cancer (the “BMS Agreement”). The Company is providing Bristol Myers Squibb access to a selected number of its existing screening campaigns and novel campaigns. The Company is responsible for carrying out early-stage research activities directed to identifying potential targets for potential licensing by Bristol Myers Squibb, in accordance with a mutually agreed upon research plan, and will be solely responsible for such costs. The collaboration consists of programs directed to both druggable targets and to targets commonly considered undruggable to traditional small molecule approaches. Upon Bristol Myers Squibb’s election to exercise its option to obtain exclusive worldwide licenses for the subsequent development, manufacturing and commercialization of a program, Bristol Myers Squibb will then be solely responsible for all such worldwide activities and costs.

The collaboration term will expire 42 months after the effective date of the BMS Agreement. The BMS Agreement will expire, assuming that Bristol Myers Squibb has exercised at least one option for a program, on a licensed product-by-licensed product and country-by-country basis on expiration of the applicable royalty term and in its entirety upon expiration of the last royalty term. Either party may terminate earlier upon an uncured material breach of the agreement by the other party, or the insolvency of the other party. Additionally, Bristol Myers Squibb may terminate the BMS Agreement for any or no reason on a program-by-program basis upon specified written notice.

9


 

Under the terms of the BMS Agreement, Bristol Myers Squibb paid the Company an initial nonrefundable upfront fee of $50.0 million in June 2020. The Company is also entitled to receive up to $301.0 million in total milestones on a program-by-program basis, consisting of $176.0 million in the aggregate for certain specified research, development and regulatory milestones and $125.0 million in the aggregate for certain specified commercial milestones. The Company is further entitled to a tiered percentage royalty on annual net sales ranging from high-single digits to low-double digits, subject to certain specified reductions.

The Company assessed the BMS Agreement in accordance with ASC 606, Revenue from Contracts with Customers, and concluded that Bristol Myers Squibb is a customer based on the agreement structure. At inception, the Company identified several performance obligations under the BMS Agreement, being (i) research activities for each campaign over the collaboration term, as well as (ii) a selected number of material rights associated with options to obtain exclusive development, manufacturing, and commercial licenses to targets identified. The Company determined that the options to obtain the exclusive development, manufacturing and commercialization licenses were material rights under ASC 606 because there are minimal amounts to be paid to the Company upon exercise of such options.

The Company determined that the transaction price at the onset of the BMS agreement is the total non-refundable upfront payment received of $50.0 million. Additional consideration is to be paid to the Company upon the exercise of options to license targets and future milestone payments. The Company utilized the most likely method approach and concluded that these amounts were constrained as they represent option fees and milestone payments that can only be achieved subsequent to option exercises. As such, the Company excluded this additional consideration from the transaction price.

The Company has allocated the transaction price of $50.0 million to each performance obligation based on the relative stand-alone selling price of each performance obligation at inception, which was determined based on each performance obligation’s estimated stand-alone selling price. The Company has determined the estimated stand-alone selling price at contract inception of the research activities based on internal estimates of the costs to perform the services, inclusive of a reasonable profit margin. Significant inputs used to determine the total costs to perform the research activities included the length of time required, the internal hours expected to be incurred on the services and the number and costs of various studies that will be performed to complete the research plan. The Company determined the estimated stand-alone selling price at contract inception of the material rights associated with options to obtain exclusive licenses to druggable targets and undruggable targets based on the fees Bristol Myers Squibb would pay to exercise these options, the probability-weighted value of expected future cash flows associated with each license related to each target and the probability that these options would be exercised by Bristol Myers Squibb. In developing such estimates, the Company also considered applicable market conditions and relevant entity-specific factors, including those factors contemplated in negotiating the agreement, probability of success and the time needed to commercialize a product candidate pursuant to the associated license. Based on the relative stand-alone selling price, the allocation of the transaction price to the separate performance obligations was as follows:

Performance obligation

 

Transaction price

 

 

 

(in thousands)

 

Research services

 

$

6,405

 

Options to license druggable target lesions

 

 

31,148

 

Options to license undruggable targets

 

 

12,447

 

Total transaction price

 

$

50,000

 

Revenue associated with the options has been deferred and will be recognized at the point in time when options to license are exercised by Bristol Myers Squibb or upon expiry of such options. Revenue associated with the research activities has been deferred and will be recognized on a proportional performance basis over the period of service for research activities, being the collaboration term, using input-based measurements of total costs of research incurred to estimated proportion performed. Progress towards completion is remeasured at the end of each reporting period.

The Company recognized $0.4 million and $0.2 million for the three months ended March 31, 2022 and 2021, respectively, as revenue associated with the BMS Agreement in relation to research activities performed.

In October 2021, the Company received notification from Bristol Myers Squibb of their option exercise for two druggable targets directed at a single synthetic lethal lesion, pursuant to the terms of the BMS Agreement. As a result, the Company recognized $6.5 million as revenue in the fourth quarter of 2021 with regards to the achievement of the performance obligation from Bristol Myers Squibb and the related option fees received. No amounts were recognized in the three months ended March 31, 2022 and 2021.

As of March 31, 2022, there was $42.2 million (December 31, 2021 - $42.5 million) of deferred revenue related to the BMS Agreement, of which $2.9 million (December 31, 2021 - $2.9 million) was classified as current and $39.3 million (December 31, 2021 - $39.6 million) was classified as non-current in the condensed consolidated balance sheet based on the period the services are expected to be performed and the expected timing of potential option exercises.

10


 

7. Leases

The Company has historically entered into lease arrangements for its facilities. As of March 31, 2022, the Company had four operating leases with required future minimum payments. The Company’s leases generally do not include termination or purchase options.

Operating Leases

 

The following table contains a summary of the lease costs recognized under ASC 842 and other information pertaining to the Company’s operating leases for the three months ended March 31, 2022 and 2021:

 

 

Three Months Ended
March 31,

 

 

 

2022

 

 

2021

 

 

 

(in thousands)

 

Operating Leases

 

 

 

 

 

 

Lease Costs

 

 

 

 

 

 

Operating lease costs

 

$

615

 

 

$

419

 

Short-term lease costs

 

 

8

 

 

 

3

 

Variable lease costs

 

 

67