10-Q 1 vera-20240331.htm 10-Q 10-Q
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

 

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

 

For the quarterly period ended March 31, 2024

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: 001-40407

Vera Therapeutics, Inc.

(Exact name of registrant as specified in its charter)

Delaware

81-2744449

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

 

8000 Marina Boulevard, Suite 120

Brisbane, California

94005

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: (650) 770-0077

 

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

Title of each class

 

Trading

Symbol(s)

Name of each exchange

on which registered

Class A common stock, $0.001 par value per
share

VERA

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, 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 May 3, 2024, the registrant had 54,701,217 shares of common stock, $0.001 par value per share, outstanding, consisting solely of Class A common stock, $0.001 par value per share.

 

 


 

Table of Contents

 

Page

Number

 

 

SUMMARY OF RISKS ASSOCIATED WITH OUR BUSINESS

2

 

 

PART I. FINANCIAL INFORMATION

4

Item 1. Condensed Financial Statements (Unaudited)

4

Condensed Balance Sheets

4

Condensed Statements of Operations and Comprehensive Loss

5

Condensed Statements of Stockholders’ Equity

6

Condensed Statements of Cash Flows

7

Notes to Condensed Financial Statements

8

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

19

Item 3. Quantitative and Qualitative Disclosures About Market Risk

26

Item 4. Controls and Procedures

26

PART II. OTHER INFORMATION

27

Item 1. Legal Proceedings

27

Item 1A. Risk Factors

27

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

78

Item 3. Defaults Upon Senior Securities

78

Item 4. Mine Safety Disclosures

78

Item 5. Other Information

78

Item 6. Exhibits

80

SIGNATURES

81

In this Quarterly Report on Form 10-Q, unless otherwise stated or as the context otherwise requires, references to “Vera,” “the Company,” “we,” “us,” “our” and similar references refer to Vera Therapeutics, Inc.

This Quarterly Report on Form 10-Q also contains registered marks, trademarks and trade names of other companies. All other trademarks, registered marks and trade names appearing in this report are the property of their respective holders. We do not intend our use or display of other companies’ trade names, trademarks or service marks to imply a relationship with, or endorsement or sponsorship of us by, these other companies.

 

 

 

1


 

SUMMARY OF RISKS ASSOCIATED WITH OUR BUSINESS

An investment in shares of our Class A common stock involves a high degree of risk. Below is a list of some of the material risks associated with our business. This summary does not address all of the risks that we face. Additional discussion of the risks listed in this summary, as well as other risks that we face, are set forth under Part II, Item 1A, “Risk Factors” in this Quarterly Report on Form 10-Q:

We have completed a limited number of clinical trials for our lead product candidate, atacicept, and have no products approved for commercial sale, which may make it difficult to evaluate our current business and predict our future success and viability.
We will require substantial additional capital to finance our operations. If we are unable to raise such capital when needed, or on acceptable terms, we may be forced to delay, reduce and/or eliminate one or more of our research and drug development programs of our product candidates or future commercialization efforts.
We have incurred net losses since inception, and we expect to continue to incur net losses for the foreseeable future. In addition, we may be unable to continue as a going concern over the long-term.
The terms of our loan agreement place restrictions on our operating and financial flexibility. If we raise additional capital through debt financing, the terms of any new debt could further restrict our ability to operate our business.
We are substantially dependent on the success of our product candidates, atacicept and MAU868, which are currently in the clinical development stage. If we are unable to complete development of, obtain regulatory approval for and commercialize our product candidates in one or more indications and in a timely manner, our business, financial condition, results of operations and prospects will be significantly harmed.
Enrollment and retention of participants in clinical trials is an expensive and time-consuming process and could be made more difficult or rendered impossible by multiple factors outside our control, including difficulties in identifying patients with immunoglobulin A nephropathy (IgAN), the availability of competitive products, and significant competition for recruiting participants in clinical trials.
The incidence and prevalence for target patient populations of our product candidates in specific indications are based on estimates and third-party sources. If the market opportunities for atacicept, MAU868 or any future product candidate we may develop, if and when approved, are smaller than we estimate or if any approval that we obtain is based on a narrower definition of the patient population, our revenue and ability to achieve profitability might be materially and adversely affected.
Interim, initial, “top-line” and preliminary data from our clinical trials that we announce or publish from time to time may change as more participant data become available and are subject to audit and verification procedures that could result in material changes in the final data.
We face significant competition, which may result in others discovering, developing or commercializing products before or more successfully than us.
Changes in methods of manufacturing or formulation of our product candidates may result in additional costs or delays.
Our product candidates may cause significant adverse events, toxicities or other undesirable side effects when used alone or in combination with other approved products or investigational new drugs that may result in a safety profile that could inhibit regulatory approval, prevent market acceptance, limit their commercial potential or result in significant negative consequences.
Even if any product candidate we develop receives regulatory approval, it could be subject to significant post-marketing regulatory requirements and will be subject to continued regulatory oversight.
Biosimilars to our product candidates may provide competition sooner than anticipated.
Unfavorable geopolitical and global economic conditions could adversely affect our business, financial condition and results of operations.
Our success is highly dependent on our ability to attract and retain highly skilled executive officers and employees and key consultants.
We have never commercialized a product candidate before and may lack the necessary expertise, personnel and resources to successfully commercialize any products on our own or together with suitable collaborators.
Our success depends on our ability to protect our intellectual property and our proprietary technologies.

2


 

If we breach our license agreement (Ares Agreement) with Ares Trading S.A. (Ares), an affiliate of Merck KGaA, Darmstadt, Germany, related to atacicept, or the license agreement with Novartis International Pharmaceutical AG (Novartis) related to MAU868, we could lose the ability to continue the development and commercialization of atacicept or MAU868, respectively.
We may be required to make significant payments under our license agreements related to atacicept and MAU868.
If the scope of any patent protection we obtain is not sufficiently broad, or if we lose any of our patent protection, our ability to prevent our competitors from commercializing similar or identical product candidates would be adversely affected.
Patent terms may be inadequate to protect our competitive position on atacicept, MAU868 or any future product candidates we may develop for an adequate amount of time.
We rely, and expect to continue to rely, on third parties, including independent clinical investigators and CROs, to conduct certain aspects of our nonclinical studies and clinical trials. If these third parties do not successfully carry out their contractual duties, comply with applicable regulatory requirements or meet expected deadlines, we may not be able to obtain regulatory approval for or commercialize atacicept, MAU868 or future product candidates we may develop and our business, financial condition, results of operations and prospects could be significantly harmed.
The manufacture of drugs is complex and our third-party manufacturers may encounter difficulties in production. If any of our third-party manufacturers encounter such difficulties, our ability to provide adequate supply of our product candidates for clinical trials or our product for patients, if approved, could be delayed or prevented.
If we engage in future acquisitions or strategic partnerships, this may increase our capital requirements, dilute our stockholders, cause us to incur debt or assume contingent liabilities, and subject us to other risks.
The price of our common stock may be volatile, and you could lose all or part of your investment.
If we experience material weaknesses in internal control over financial reporting in the future or otherwise fail to maintain an effective system of internal controls in the future, we may not be able to accurately or timely report our financial condition or results of operations, which may adversely affect investor confidence in us and, as a result, the value of our common stock.
Our principal stockholders and management own a significant percentage of our outstanding voting stock and will be able to exert significant control over matters subject to stockholder approval.
Provisions in our amended and restated certificate of incorporation and amended and restated bylaws and Delaware law could make an acquisition of us, which may be beneficial to our stockholders, more difficult and may prevent attempts by our stockholders to replace or remove our current management.
We may be subject to securities litigation, which is expensive and could divert management attention.

 

3


 

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

VERA THERAPEUTICS, INC.

Condensed Balance Sheets

(in thousands, except share amounts)

 

 

 

March 31,

 

 

December 31,

 

 

 

2024

 

 

2023

 

 

 

(unaudited)

 

 

 

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

69,105

 

 

$

45,681

 

Marketable securities

 

 

334,559

 

 

 

115,035

 

Prepaid expenses and other assets, current

 

 

12,706

 

 

 

11,307

 

Total current assets

 

 

416,370

 

 

 

172,023

 

Property and equipment, net

 

 

81

 

 

 

92

 

Operating lease right-of-use assets

 

 

2,432

 

 

 

2,949

 

Prepaid expenses and other assets, noncurrent

 

 

473

 

 

 

482

 

Total assets

 

$

419,356

 

 

$

175,546

 

Liabilities and stockholders’ equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

5,209

 

 

$

11,118

 

Operating lease liabilities

 

 

2,275

 

 

 

2,436

 

Accrued expenses and other liabilities, current

 

 

7,059

 

 

 

8,749

 

Total current liabilities

 

 

14,543

 

 

 

22,303

 

Long-term debt

 

 

50,066

 

 

 

49,877

 

Operating lease liabilities, noncurrent

 

 

919

 

 

 

1,395

 

Accrued expenses and other liabilities, noncurrent

 

 

286

 

 

 

286

 

Total liabilities

 

 

65,814

 

 

 

73,861

 

Stockholders’ equity

 

 

 

 

 

 

Preferred stock, $0.001 par value; 10,000,000 authorized
   as of March 31, 2024 and December 31, 2023;
no shares issued
   and outstanding as of March 31, 2024 and December 31, 2023

 

 

 

 

 

 

Class A common stock, $0.001 par value; 500,000,000 shares
  authorized as of March 31, 2024 and December 31, 2023;
  
54,457,371 and 44,452,161 shares issued and outstanding as of
  March 31, 2024 and December 31, 2023, respectively

 

 

54

 

 

 

44

 

Additional paid-in capital

 

 

691,146

 

 

 

410,492

 

Accumulated other comprehensive income (loss)

 

 

(173

)

 

 

251

 

Accumulated deficit

 

 

(337,485

)

 

 

(309,102

)

Total stockholders’ equity

 

 

353,542

 

 

 

101,685

 

Total liabilities and stockholders’ equity

 

$

419,356

 

 

$

175,546

 

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

4


 

VERA THERAPEUTICS, INC.

Condensed Statements of Operations and Comprehensive Loss

(unaudited)

(in thousands, except share and per share amounts)

 

 

 

Three Months Ended
March 31,

 

 

 

2024

 

 

2023

 

Operating expenses:

 

 

 

 

 

 

Research and development

 

$

23,200

 

 

$

25,108

 

General and administrative

 

 

7,912

 

 

 

6,150

 

Total operating expenses

 

 

31,112

 

 

 

31,258

 

Loss from operations

 

 

(31,112

)

 

 

(31,258

)

Other income (expense):

 

 

 

 

 

 

Interest income

 

 

4,186

 

 

 

1,623

 

Interest expense

 

 

(1,906

)

 

 

(874

)

Other income

 

 

453

 

 

 

441

 

Change in fair value of non-marketable equity securities

 

 

(4

)

 

 

(1

)

Total other income

 

 

2,729

 

 

 

1,189

 

Net loss

 

$

(28,383

)

 

$

(30,069

)

Other comprehensive income (loss):

 

 

 

 

 

 

Change in unrealized (loss) gain on marketable securities

 

 

(424

)

 

 

220

 

Comprehensive loss

 

$

(28,807

)

 

$

(29,849

)

Net loss per share attributable to common stockholders, basic and diluted

 

$

(0.56

)

 

$

(0.80

)

Weighted-average shares used in computing net loss per share
   attributable to common stockholders, basic and diluted

 

 

50,971,933

 

 

 

37,667,566

 

 

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

 

5


 

VERA THERAPEUTICS, INC.

Condensed Statements of Stockholders’ Equity

(unaudited)

(in thousands, except share amounts)

 

 

 

Class A Common Stock

 

 

Additional
Paid-in

 

 

Accumulated Other

 

 

Accumulated

 

 

Total
Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Comprehensive Income (Loss)

 

 

Deficit

 

 

Equity

 

Balance as of December 31, 2023

 

 

44,452,161

 

 

$

44

 

 

$

410,492

 

 

$

251

 

 

$

(309,102

)

 

$

101,685

 

Issuance of common stock from underwritten follow-on offering, net of offering costs

 

 

9,274,194

 

 

 

9

 

 

 

269,583

 

 

 

 

 

 

 

 

 

269,592

 

Issuance of common stock pursuant to exercise of options

 

 

708,897

 

 

 

1

 

 

 

6,612

 

 

 

 

 

 

 

 

 

6,613

 

Issuance of common stock upon vesting of restricted stock units

 

 

938

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock pursuant to employee stock purchase plan

 

 

21,181

 

 

 

 

 

 

298

 

 

 

 

 

 

 

 

 

298

 

Proceeds from short swing settlement

 

 

 

 

 

 

 

 

37

 

 

 

 

 

 

 

 

 

37

 

Stock-based compensation

 

 

 

 

 

 

 

 

4,124

 

 

 

 

 

 

 

 

 

4,124

 

Unrealized loss on marketable securities

 

 

 

 

 

 

 

 

 

 

 

(424

)

 

 

 

 

 

(424

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(28,383

)

 

 

(28,383

)

Balances as of March 31, 2024

 

 

54,457,371

 

 

$

54

 

 

$

691,146

 

 

$

(173

)

 

$

(337,485

)

 

$

353,542

 

 

 

 

Class A Common Stock

 

 

Additional
Paid-in

 

 

Accumulated Other

 

 

Accumulated

 

 

Total
Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Comprehensive Income (Loss)

 

 

Deficit

 

 

Equity

 

Balance as of December 31, 2022

 

 

27,800,861

 

 

$

28

 

 

$

290,216

 

 

$

(224

)

 

$

(213,112

)

 

$

76,908

 

Issuance of common stock from underwritten follow-on offering, net of offering costs

 

 

16,428,572

 

 

 

16

 

 

 

107,727

 

 

 

 

 

 

 

 

 

107,743

 

Issuance of common stock pursuant to exercise of options

 

 

3,750

 

 

 

 

 

 

65

 

 

 

 

 

 

 

 

 

65

 

Issuance of common stock pursuant to employee stock purchase plan

 

 

27,926

 

 

 

 

 

 

175

 

 

 

 

 

 

 

 

 

175

 

Stock-based compensation

 

 

 

 

 

 

 

 

2,667

 

 

 

 

 

 

 

 

 

2,667

 

Unrealized loss on marketable securities

 

 

 

 

 

 

 

 

 

 

 

220

 

 

 

 

 

 

220

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(30,069

)

 

 

(30,069

)

Balances as of March 31, 2023

 

 

44,261,109

 

 

$

44

 

 

$

400,850

 

 

$

(4

)

 

$

(243,181

)

 

$

157,709

 

 

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

6


 

VERA THERAPEUTICS, INC.

Condensed Statements of Cash Flows

(unaudited)

(in thousands)

 

 

Three Months Ended
March 31,

 

 

 

2024

 

 

2023

 

Cash flows from operating activities

 

 

 

 

 

 

Net loss

 

$

(28,383

)

 

$

(30,069

)

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

 

 

 

 

 

 

Depreciation, amortization and accretion

 

 

(1,469

)

 

 

(506

)

Reduction in the carrying amount of operating lease right-of-use assets

 

 

517

 

 

 

579

 

Stock-based compensation

 

 

4,124

 

 

 

2,667

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

Prepaid expense and other current assets

 

 

(392

)

 

 

3,749

 

Other assets

 

 

9

 

 

 

(4

)

Accounts payable

 

 

(5,909

)

 

 

(6,665

)

Accrued and other current liabilities

 

 

(1,690

)

 

 

4,637

 

Operating lease liabilities

 

 

(637

)

 

 

(680

)

Net cash used in operating activities

 

 

(33,830

)

 

 

(26,292

)

Cash flows from investing activities

 

 

 

 

 

 

Purchase of marketable securities

 

 

(254,967

)

 

 

(34,209

)

Proceeds from maturities of marketable securities

 

 

31,681

 

 

 

36,900

 

Proceeds from sale of marketable securities

 

 

4,000

 

 

 

9,543

 

Net cash (used in) provided by investing activities

 

 

(219,286

)

 

 

12,234

 

Cash flows from financing activities

 

 

 

 

 

 

Proceeds from exercise of stock options and employee stock purchase plan

 

 

6,911

 

 

 

240

 

Proceeds from short swing settlement

 

 

37

 

 

 

 

Proceeds from issuance of common stock in follow-on offering

 

 

287,500

 

 

 

115,000

 

Payment of costs and underwriting discounts and commissions related to follow-on offering

 

 

(17,908

)

 

 

(7,256

)

Net cash provided by financing activities

 

 

276,540

 

 

 

107,984

 

Net increase in cash and cash equivalents and restricted cash

 

 

23,424

 

 

 

93,926

 

Cash, cash equivalents and restricted cash, beginning of period

 

 

45,681

 

 

 

43,752

 

Cash, cash equivalents and restricted cash, end of period

 

$

69,105

 

 

$

137,678

 

Reconciliation of cash and cash equivalents and restricted cash to the balance sheets

 

 

 

 

 

 

Cash and cash equivalents

 

$

69,105

 

 

$

137,385

 

Restricted cash

 

 

 

 

 

293

 

Total cash and cash equivalents and restricted cash

 

$

69,105

 

 

$

137,678

 

Supplemental disclosure of cash flow information

 

 

 

 

 

 

Cash paid for interest expense

 

$

1,520

 

 

$

3,253

 

Cash paid for operating leases

 

$

764

 

 

$

746

 

Receivable on exercise of stock options

 

$

13

 

 

$

 

 

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

7


 

VERA THERAPEUTICS, INC.

Notes to Unaudited Condensed Financial Statements

 

1. ORGANIZATION AND DESCRIPTION OF THE BUSINESS

Description of Business

Vera Therapeutics, Inc. (the Company) is a clinical stage biotechnology company focused on developing and commercializing treatments for patients with serious immunological diseases. The Company was incorporated in May 2016 in Delaware. The Company’s headquarters and operations are located in Brisbane, California. The Company operates in one segment.

Initial Public Offering

On May 13, 2021, the Company’s registration statement on Form S-1 for its initial public offering (the IPO) was declared effective by the Securities and Exchange Commission (the SEC), and the shares of its Class A common stock commenced trading on the Nasdaq Global Select Market on May 14, 2021. The IPO closed on May 18, 2021. Prior to the completion of the IPO, all shares of redeemable convertible preferred stock then outstanding were converted into shares of Class A and Class B common stock.

 

Liquidity

Since inception, the Company devoted substantially all of its resources to its research and development efforts, pre-clinical studies and clinical trials, establishing and maintaining its intellectual property portfolio, hiring personnel, raising capital, and providing general and administrative support for these operations. The Company has incurred recurring net operating losses and has not generated positive cash flow from operations since its inception and had an accumulated deficit of $337.5 million as of March 31, 2024. The Company had cash, cash equivalents and marketable securities of $403.7 million as of March 31, 2024. The Company has funded its operations primarily through the issuance of common stock, redeemable convertible preferred stock, debt financing and convertible notes. Management expects to continue to incur losses and negative cash flows from operations for at least the next several years.

Management believes that the Company’s cash, cash equivalents and marketable securities as of March 31, 2024 will be sufficient to fund its operating expenses and capital expenditure requirements for at least 12 months subsequent to the issuance date of these financial statements. The Company intends to raise additional capital through public or private equity offerings or debt financing or other capital sources, which may include strategic collaborations or other arrangements with third parties in order to achieve its long-term business objectives. If the Company fails to obtain necessary capital when needed on acceptable terms, or at all, it could force the Company to delay, limit, reduce or terminate its product development programs, commercialization efforts or other operations.

2. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying unaudited condensed financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (GAAP) and applicable rules and regulations of the SEC regarding interim financial reporting. The U.S. dollar is the Company’s functional and reporting currency.

Unaudited Condensed Financial Statements

In the opinion of management, the unaudited condensed financial statements reflect all adjustments of a normal recurring nature that are necessary for a fair presentation of the results for the period presented. Interim results are not necessarily indicative of results for a full year. The information included in this Form 10-Q should be read in conjunction with the audited financial statements and related notes in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on March 27, 2024.

Emerging Growth Company Status

The Company is an emerging growth company as defined in the Jumpstart Our Business Startups Act of 2012 (JOBS Act). Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies. The Company has elected to use this extended transition period for complying with certain new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date that it (1) is no longer an emerging growth company or (2) affirmatively and

8


 

irrevocably opts out of the extended transition period provided in the JOBS Act. As a result, these financial statements may not be comparable to companies that comply with the new or revised accounting pronouncements as of public company effective dates.

Use of Estimates

The preparation of the Company’s financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the unaudited condensed financial statements and the reported amounts of expenses during the reporting period. Management estimates that affect the reported amounts of assets and liabilities include the accrual of research and development expenses, stock-based compensation expense, determination of incremental borrowing rate for operating leases, the valuation allowance for deferred tax assets, and fair value of marketable and non-marketable securities. The Company evaluates and adjusts its estimates and assumptions on an ongoing basis using historical experience and other factors. Actual results could differ materially from those estimates.

Concentrations of Credit Risk and Other Risks and Uncertainties

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 bank deposits in a federally insured financial institution and these deposits may exceed federally insured limits. The Company is exposed to credit risk in the event of default by the financial institution holding its cash, cash equivalents, and marketable securities to the extent recorded in the balance sheet. The Company has not experienced any losses to date related to these concentrations.

The Company’s future results of operations involve a number of other risks and uncertainties. Factors that could affect the Company’s future operating results and cause actual results to vary materially from expectations include, but are not limited to, uncertainty of results of clinical trials and reaching milestones, uncertainty of regulatory approval of the Company’s current and potential future product candidates, uncertainty of market acceptance of the Company’s product candidates, competition from substitute products and larger companies, securing and protecting proprietary technology, strategic relationships and dependence on key individuals or sole-source suppliers. The Company relies on one supply chain for each of its product candidates. If any of the single source suppliers in any of the supply chains fails to satisfy the Company’s requirements on a timely basis, it could suffer delays in its clinical development programs and activities, which could adversely affect operating results.

The Company’s product candidates require approvals from the U.S. Food and Drug Administration and comparable foreign regulatory authorities prior to commercial sales in their respective jurisdictions. There can be no assurance that any product candidates will receive the necessary approvals. If the Company was denied approval, approval was delayed, or the Company was unable to maintain approval for any product candidate, it could have a materially adverse impact on the Company.

Significant Accounting Policies

There have been no material changes to the Company’s significant accounting policies from the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.

Recently Adopted Accounting Pronouncements

In June 2022, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2022-03, Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions. This standard update clarifies the guidance in Topic 210, related to measuring the fair value of an equity security subject to contractual sale restrictions that prohibit the sale of an equity security and introduces new disclosure requirements for equity securities subject to contractual sale restrictions that are measured at fair value in accordance with Topic 820. The guidance is effective for annual periods beginning after December 15, 2023, with early adoption permitted. The Company adopted this standard on January 1, 2024, and it did not have a material impact on the Company’s condensed financial statements or related disclosures.

Recently Issued Accounting Pronouncements

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. This update improves reportable segment disclosure requirements and requires enhanced disclosures related to significant segment expenses regularly provided to chief operating decision maker (CODM) and included within each reported measure of segment profit or loss, an amount and description of its composition for other segment items, and interim disclosures of a reportable segment’s profit or loss and assets. Amendments in this update are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. This ASU will result in the required additional disclosures being included in the Company’s financial statements upon adoption.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The ASU requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as additional information on

9


 

income taxes paid. The ASU is effective on a prospective basis for annual periods beginning after December 15, 2024. Early adoption is also permitted for annual financial statements that have not yet been issued or made available for issuance. This ASU will result in the required additional disclosures being included in the Company’s financial statements upon adoption.

3. OTHER FINANCIAL STATEMENT INFORMATION

Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consist of the following (in thousands):

 

 

March 31,
2024

 

 

December 31,
2023

 

Prepaid clinical trial costs

 

$

4,837

 

 

$

5,273

 

Prepaid drug manufacturing costs

 

 

3,610

 

 

 

2,578

 

Interest income receivable

 

 

1,631

 

 

 

512

 

Prepaid commercial planning

 

 

1,044

 

 

 

789

 

Prepaid rent

 

 

277

 

 

 

257

 

Prepaid insurance

 

 

268

 

 

 

597

 

Prepaid professional services fees

 

 

250

 

 

 

198

 

Prepaid software license fees

 

 

221

 

 

 

237

 

Other

 

 

568

 

 

 

866

 

Total prepaid expenses and other current assets

 

$

12,706

 

 

$

11,307

 

 

Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consist of the following (in thousands):

 

 

March 31,
2024

 

 

December 31,
2023

 

Accrued payroll

 

$

1,280

 

 

$

3,932

 

Accrued clinical and drug manufacturing expenses

 

 

3,470

 

 

 

2,213

 

Accrued professional services fees

 

 

739

 

 

 

59

 

Related party payable

 

 

464

 

 

 

1,926

 

Other accrued expenses

 

 

1,106

 

 

 

619

 

Total accrued expenses and other current liabilities

 

$

7,059

 

 

$

8,749

 

 

Related party payable represents amounts due to Ares Trading S.A. (Ares), an affiliate of Merck KGaA, Darmstadt, Germany, related to manufacturing technology and know-how transfer services performed for atacicept pursuant to the license agreement between the Company and Ares (see Note 10).

10


 

4. CASH EQUIVALENTS AND MARKETABLE SECURITIES

The Company’s cash equivalents and available-for-sale investment securities are classified within the fair value hierarchy as defined by authoritative guidance. Level 1 securities consist of highly liquid money market funds for which the carrying amount approximates the fair value of identical assets as quoted in the active markets. Level 2 securities, consisting of U.S. Treasuries, U.S. agency securities and corporate debt securities, are measured based on other observable inputs, including broker or dealer quotations or other valuations using observable market data. The Company’s debt securities are accounted for as available-for-sale securities.

Unrealized gains and losses are reported as a component of other comprehensive income (loss). Fair value of the debt securities was $351.5 million and $115.0 million as of March 31, 2024 and December 31, 2023, respectively.

The following table presents the Company’s financial assets measured at fair value on a recurring basis by level within the fair value hierarchy (in thousands):

 

 

March 31, 2024

 

 

 

Fair Value Hierarchy Level

 

Amortized Cost

 

 

Unrealized Gains

 

 

Unrealized Losses

 

 

Estimated Fair Value

 

 

Cash and Cash Equivalents

 

 

Marketable Securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

Level 1

 

$

48,782

 

 

$

-

 

 

$

-

 

 

$

48,782

 

 

$

48,782

 

 

$

-

 

U.S. Government bonds

 

Level 2

 

 

230,349

 

 

 

10

 

 

 

(129

)

 

 

230,230

 

 

 

16,935

 

 

 

213,295

 

U.S. Government agency securities

 

Level 2

 

 

15,988

 

 

 

2

 

 

 

(9

)

 

 

15,981

 

 

 

-

 

 

 

15,981

 

Corporate debt securities

 

Level 2

 

 

105,330

 

 

 

84

 

 

 

(131

)

 

 

105,283

 

 

 

-

 

 

 

105,283

 

Total cash equivalents and marketable securities

 

 

 

 

400,449

 

 

 

96

 

 

 

(269

)

 

 

400,276

 

 

 

65,717

 

 

 

334,559

 

Cash

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3,388

 

 

 

 

Total

 

 

 

$

400,449

 

 

$

96

 

 

$

(269

)

 

$

400,276

 

 

$

69,105

 

 

$

334,559

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2023

 

 

 

Fair Value Hierarchy Level

 

Amortized Cost

 

 

Unrealized Gains

 

 

Unrealized Losses

 

 

Estimated Fair Value

 

 

Cash and Cash Equivalents

 

 

Marketable Securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

Level 1

 

$

44,650

 

 

$

-

 

 

$

-

 

 

$

44,650

 

 

$

44,650

 

 

$

-

 

U.S. Government bonds

 

Level 2

 

 

63,619

 

 

 

70

 

 

 

(6

)

 

 

63,683

 

 

 

-

 

 

 

63,683

 

U.S. Government agency securities

 

Level 2

 

 

19,665

 

 

 

7

 

 

 

(14

)

 

 

19,658

 

 

 

-

 

 

 

19,658

 

Corporate debt securities

 

Level 2

 

 

31,500

 

 

 

194

 

 

 

-

 

 

 

31,694

 

 

 

-

 

 

 

31,694

 

Total cash equivalents and marketable securities

 

 

 

 

159,434

 

 

 

271

 

 

 

(20

)

 

 

159,685

 

 

 

44,650

 

 

 

115,035

 

Cash

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,031

 

 

 

 

Total

 

 

 

$

159,434

 

 

$

271

 

 

$

(20

)

 

$

159,685

 

 

$

45,681

 

 

$

115,035

 

 

Marketable debt securities that had been in unrealized loss positions as of March 31, 2024 and December 31, 2023 were in an unrealized loss position for less than 12 months. Unrealized losses from marketable debt securities are primarily attributable to changes in interest rates. Management does not believe any remaining unrealized losses represent impairments based on evaluation of available evidence.

The following table classifies the estimated fair value of investments in available-for-sale marketable debt securities by effective contractual maturity dates (in thousands):

 

 

 

March 31, 2024

 

Due within one year

 

$

226,517

 

Due after one year to two years

 

 

108,042

 

Total marketable securities

 

$

334,559

 

 

5. LEASES

11


 

Net lease cost recognized is as follows (in thousands):

 

 

 

Three Months Ended
March 31,

 

 

 

2024

 

 

2023

 

Operating lease cost

 

$

644

 

 

$

644

 

Sublease income

 

 

(482

)

 

 

(482

)

Net lease cost

 

$

162

 

 

$

162

 

As of March 31, 2024, the maturities of the lease liabilities based on minimum lease commitment amount are as follows (in thousands):

 

2024 (remaining)

 

 

2,258

 

2025

 

 

1,880

 

2026

 

 

-

 

2027

 

 

-

 

Total minimum lease payments

 

 

4,138

 

Less: Imputed interest

 

 

(944

)

Present value of operating lease liabilities

 

 

3,194

 

Less: Current portion of operating lease liabilities

 

 

(2,275

)

Non-current operating lease liabilities

 

$

919

 

In November 2020, the Company entered into a non-cancellable sublease agreement for the leased facilities in South San Francisco, California, which ends concurrently with the original lease in September 2025.

As of March 31, 2024, under the terms of the sublease agreement, the Company is entitled to receive future annual sublease payments as follows (in thousands):

 

2024 (remaining)

 

 

1,466

 

2025

 

 

1,496

 

Total sublease payments

 

$

2,962

 

 

The subtenant of the leased facilities in South San Francisco, California, has disclosed in public filings that there is substantial doubt regarding its ability to continue as a going concern. As tenant, the Company remains responsible for minimum lease commitments of $3.7 million as of March 31, 2024, on the South San Francisco facilities.

In November 2021, the Company entered into a lease agreement that was amended in July 2022 for its headquarters office space in Brisbane, California. The lease term is through November 2024 with renewal options for the Company.

As of March 31, 2024, the Company had not executed any finance leases that were yet to commence. As of March 31, 2024, the weighted-average remaining operating lease term was 1.3 years and the weighted-average discount rate was 9.1% for operating leases recognized in the condensed financial statements.

6. NOTE PAYABLE

Note payable consists of the following ($ in thousands):

12


 

 

 

 

March 31, 2024

 

 

December 31, 2023

 

 

 

Maturity

 

Effective
Interest Rate

 

Amount

 

 

Effective Interest Rate

 

Amount

 

Collateralized note 2021-12

 

2027

 

14.71%

 

$

5,000

 

 

14.73%

 

$

5,000

 

Collateralized note 2022-11

 

2027

 

14.85%

 

 

20,000

 

 

14.87%

 

 

20,000

 

Collateralized note 2023-12

 

2027

 

15.36%

 

 

25,000

 

 

15.37%

 

 

25,000

 

Total borrowings

 

 

 

 

 

 

50,000

 

 

 

 

 

50,000

 

Unamortized premium and debt issuance costs

 

 

 

 

 

 

66

 

 

 

 

 

(123

)

Net carrying amount of debt

 

 

 

 

 

$

50,066

 

 

 

 

$

49,877

 

The carrying amount of debt approximates fair value due to its variable interest rate.

 

In December 2021, the Company entered into a non-revolving loan and security agreement (the Loan Agreement) with Oxford Finance. The Loan Agreement has a borrowing capacity of up to $50.0 million, which was scheduled to expire in December 2022. In November 2022, the Company entered into an amendment of the Loan Agreement. Among other changes, the amendment extended the scheduled expiration of the Loan Agreement to December 2023 and modified the reference rate from the London Interbank Offered Rate (LIBOR) to the Secured Overnight Financial Rate (SOFR). In conjunction with the amendment, the Company borrowed an additional $20.0 million from the Loan Agreement. In December 2023, the Company borrowed the remaining $25.0 million from the Loan Agreement. As of March 31, 2024, the Company’s outstanding borrowing under the Loan Agreement was $50.0 million.

 

In March 2023, upon achievement of a clinical data milestone, the Company elected to exercise a borrower option to extend the maturity of the outstanding loan by 12 months, from December 2026 to December 2027. The end date of the interest-only payment period was also extended by 12 months, from December 2025 to December 2026. The Company is permitted to prepay the loan, subject to certain conditions. Upon the maturity date or prepayment of the loan, the Company is required to pay an exit fee equal to 7% of the aggregate principal amount of the loan.

 

The variable interest rate on the drawn amount is adjusted SOFR plus 825 basis points, subject to a per annum floor rate of 8.25%. The Loan Agreement contains a subjective acceleration clause in the case of an event of default. If such a matter occurs and is continuing, the lender may legally demand the outstanding principal and interest immediately due and payable. There are no financial covenants associated with the Loan Agreement and the loan is secured by the Company’s assets. The Loan Agreement is available for working capital, capital expenditures, and other general corporate purposes.

 

Principal installments due on the notes are as follows (in thousands):

Remainder of 2024

 

 

 

2025

 

 

 

2026

 

 

 

2027

 

 

50,000

 

Total long-term debt

 

$

50,000

 

 

7. COMMON STOCK

As of March 31, 2024, the Company’s amended and restated certificate of incorporation authorized the Company to issue 500,000,000 shares of Class A common stock and 14,600,000 shares of Class B common stock, each with a par value of $0.001 per share. Each share of Class A common stock entitles the holder to one vote on all matters submitted to a vote of the Company’s stockholders. Class B common stock is non-voting. There are no shares of Class B common stock outstanding as of March 31, 2024. Common stockholders are entitled to receive dividends, as may be declared by the board of directors. Through March 31, 2024, no cash dividends have been declared or paid.

In June 2022, the Company filed a shelf registration statement on Form S-3 (File No. 333-265408) with the Securities and Exchange Commission, which permits the offering, issuance, and sale of up to a maximum aggregate offering price of $400.0 million of the Company’s common stock, preferred stock, debt securities and warrants. Up to a maximum of $150.0 million of the maximum aggregate offering price of $400.0 million may be issued and sold pursuant to an at-the-market financing facility under a sales agreement dated June 3, 2022, between the Company and Cowen and Company, LLC (Sales Agreement). In January 2024, the Company suspended and terminated the prospectus (the ATM Prospectus) related to the sale of its Class A common stock in an “at-the-market” offering pursuant to the terms of the Sales Agreement. As a result, the Company will not make any sales of its Common Stock pursuant to the Sales Agreement unless and until a new prospectus, prospectus supplement or registration statement is filed. Deferred costs of $0.3 million were recognized as general and administrative expense upon termination of the ATM Prospectus.

13


 

In February 2023, the Company completed a follow-on public offering pursuant to which the Company issued and sold 16,428,572 shares of its Class A common stock at a public offering price of $7.00 per share, including 2,142,857 shares of Class A common stock pursuant to the full exercise of the underwriters’ option to purchase additional shares.

In February 2024, the Company completed a follow-on public offering pursuant to which the Company issued and sold 9,274,194 shares of its Class A common stock at a public offering price of $31.00 per share, including 1,209,677 shares of Class A common stock pursuant to the full exercise of the underwriters’ option to purchase additional shares.

 

8. STOCK COMPENSATION

In April 2021, the Company adopted the 2021 Employee Stock Purchase Plan (ESPP) and the 2021 Equity Incentive Plan (2021 EIP), each of which became effective in connection with the IPO. The Company has reserved 1,152,463 and 6,873,404 shares of Class A common stock for issuance under the ESPP and 2021 EIP, respectively.

The Company may not grant any additional awards under the 2017 Equity Incentive Plan (2017 EIP). The 2017 EIP will continue to govern outstanding equity awards granted thereunder. As of March 31, 2024, there were 747,367 shares available for issuance under the 2021 EIP.

2017 EIP and 2021 EIP

Stock option activity under the 2017 EIP and 2021 EIP was as follows:

 

 

NUMBER OF
OPTIONS

 

 

WEIGHTED-
AVERAGE
EXERCISE
PRICE PER
SHARE

 

 

WEIGHTED-
AVERAGE
REMAINING
CONTRACTUAL
LIFE (YEARS)

 

 

AGGREGATE
INTRINSIC
VALUE (000s)

 

Outstanding as of December 31, 2023

 

 

5,762,236

 

 

$

9.42

 

 

 

7.66

 

 

$

39,197

 

Granted

 

 

1,782,000

 

 

 

 

 

 

 

 

 

 

Exercised

 

 

(708,897

)

 

 

 

 

 

 

 

 

 

Cancelled and forfeited

 

 

(359,568

)

 

 

 

 

 

 

 

 

 

Outstanding as of March 31, 2024

 

 

6,475,771

 

 

$

11.51

 

 

 

8.43

 

 

$

204,699

 

Options exercisable as of March 31, 2024

 

 

2,183,086

 

 

$

8.50

 

 

 

7.33

 

 

$

75,573

 

Vested and expected to vest as of March 31, 2024

 

 

6,475,771

 

 

$

11.51

 

 

 

8.43

 

 

$

204,699

 

 

The aggregate intrinsic value of stock options exercised during the three months ended March 31, 2024, was approximately $20.5 million. The weighted-average grant date fair value of options granted during the three months ended March 31, 2024 was $11.85 per share.

ESPP

The ESPP enables eligible employees to purchase shares of the Company’s common stock at the end of each offering period at a price equal to 85% of the fair market value of the shares on the first trading day or the last trading day of the offering period, whichever is lower. Eligible employees generally include all employees. Share purchases are funded through payroll deductions of at least 1% and up to 15% of an employee’s eligible compensation for each payroll period. The number of shares reserved for issuance under the ESPP increase automatically on the first day of each fiscal year, beginning on January 1, 2022, by a number equal to the lesser of 440,502 shares, 1% of the total number of shares of the Company’s capital stock (including all classes of the Company’s common stock) outstanding on the last day of the calendar month prior to the date of the increase, or such lower number of shares (including no shares) approved by the Company’s board of directors. As of March 31, 2024, 80,989 shares have been issued pursuant to the ESPP. The ESPP generally provides for six-month consecutive offering periods beginning on September 14, 2021. The ESPP is a compensatory plan as defined by the authoritative guidance for stock compensation. Stock-based compensation expense related to the ESPP for the three months ended March 31, 2024, was $0.1 million.

Stock-Based Compensation Expense

The following tables summarize the stock-based compensation expense for stock options, restricted stock awards, and restricted stock units granted to employees and nonemployees and for ESPP stock-based compensation that was recorded in the Company’s condensed statements of operations and comprehensive loss for the three months ended March 31, 2024 and 2023.

14


 

 

 

Three Months Ended
March 31,

 

 

 

2024

 

 

2023

 

Research and development

 

$

1,728

 

 

$

1,134

 

General and administrative

 

 

2,396

 

 

 

1,533

 

Total stock-based compensation expense

 

$

4,124

 

 

$

2,667

 

 

 

 

Three Months Ended
March 31,

 

 

 

2024

 

 

2023

 

Employees

 

$

3,871

 

 

$

2,324

 

Nonemployees

 

 

253

 

 

 

343

 

Total stock-based compensation expense

 

$

4,124

 

 

$

2,667

 

 

As of March 31, 2024, the Company had $35.7 million of unrecognized stock-based compensation expense related to unvested stock options, which is expected to be recognized over a weighted-average period of approximately 2.9 years.

The fair value of stock options granted during the three months ended March 31, 2024 and 2023, was estimated using the Black-Scholes option pricing model based on the following weighted-average assumptions.

 

 

 

Three Months Ended
March 31,

 

 

2024

2023

Expected term (in years)

 

6.0 – 6.1

6.0 – 6.1

Expected volatility

 

67.7% – 67.8%

79.5% – 80.1%

Risk-free rate

 

3.8% – 4.0%

3.9% – 4.0%

Dividend yield