Vera Therapeutics, Inc. [VERA] Filings

10-Q 1 vera-20230331.htm 10-Q 10-Q

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, 2023


☐		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 5, 2023, the registrant had 44,261,109 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	1

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	22

Item 3. Quantitative and Qualitative Disclosures About Market Risk	30

Item 4. Controls and Procedures	30

PART II. OTHER INFORMATION	31

Item 1. Legal Proceedings	31

Item 1A. Risk Factors	32

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	82

Item 3. Defaults Upon Senior Securities	82

Item 4. Mine Safety Disclosures	82

Item 5. Other Information	82

Item 6. Exhibits	83

SIGNATURES	84

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.

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 not completed any 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.

•

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 patients 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 patients in clinical trials.

•

The incidence and prevalence for target patient populations of atacicept in specific indications are based on estimates and third-party sources. If the market opportunities for atacicept, 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 patient 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 global, geopolitical and macroeconomic conditions could adversely affect our business, financial condition and results of operations.

•

Our success depends on our ability to protect our intellectual property and our proprietary technologies. If we or our potential licensors, licensees, or collaborators are unable to obtain or maintain patent protection with respect to our product candidates, proprietary technologies and their uses, our business, financial condition, results of operations and prospects could be significantly harmed.

•

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.

•

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.

•

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 Class A common stock may be volatile, and you could lose all or part of your investment.

•

If we experience material weaknesses 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 Class A 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.

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

VERA THERAPEUTICS, INC.

Condensed Balance Sheets

(in thousands, except share amounts)


	March 31,			December 31,
	2023			2022
	(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	137,385		$	43,459
Marketable securities		59,768			71,194
Prepaid expenses and other current assets		7,296			11,045
Total current assets		204,449			125,698
Restricted cash		293			293
Property and equipment, net		45			51
Operating lease right-of-use assets		4,594			5,173
Prepaid expenses and other noncurrent assets		166			162
Non-marketable equity securities		57			58
Total assets	$	209,604		$	131,435
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	5,326		$	11,991
Operating lease liabilities, current		2,602			2,645
Accrued expenses and other current liabilities		15,601			10,964
Total current liabilities		23,529			25,600
Long-term debt		24,886			24,810
Operating lease liabilities, noncurrent		3,194			3,831
Accrued and other noncurrent liabilities		286			286
Total liabilities		51,895			54,527
Stockholders’ equity
Preferred stock, $0.001 par value; 10,000,000 authorized as of March 31, 2023 and December 31, 2022; no shares issued and outstanding as of March 31, 2023 and December 31, 2022		—			—
Class A common stock, $0.001 par value; 500,000,000 shares authorized as of March 31, 2023 and December 31, 2022; 44,261,109 and 27,800,861 shares issued and outstanding as of March 31, 2023 and December 31, 2022, respectively		44			28
Additional paid-in capital		400,850			290,216
Accumulated other comprehensive loss		(4	)		(224	)
Accumulated deficit		(243,181	)		(213,112	)
Total stockholders’ equity		157,709			76,908
Total liabilities and stockholders’ equity	$	209,604		$	131,435

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

VERA THERAPEUTICS, INC.

Condensed Statements of Operations and Comprehensive Loss

(unaudited)

(in thousands, except share and per share amounts)


	Three Months Ended March 31,
	2023			2022
Operating expenses:
Research and development	$	25,108		$	12,549
General and administrative		6,150			4,472
Total operating expenses		31,258			17,021
Loss from operations		(31,258	)		(17,021	)
Other income (expense):
Interest income		1,623			26
Interest expense		(874	)		(118	)
Other income		441			315
Change in fair value of non-marketable equity securities		(1	)		(287	)
Total other income (expense), net		1,189			(64	)
Net loss	$	(30,069	)	$	(17,085	)
Other comprehensive income (loss):
Change in unrealized gain (loss) on marketable securities		220			(12	)
Comprehensive loss	$	(29,849	)	$	(17,097	)
Net loss per share attributable to common stockholders, basic and diluted	$	(0.80	)	$	(0.71	)
Weighted-average shares used in computing net loss per share attributable to common stockholders, basic and diluted		37,667,566			24,227,282

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

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 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


	Class A Common Stock				Class B Common Stock				Additional Paid-in		Accumulated Other			Accumulated			Total Stockholders’
	Shares		Amount		Shares		Amount		Capital		Comprehensive Loss			Deficit			Equity
Balance as of December 31, 2021		20,968,376	$	21		309,238	$	—	$	193,627	$	—		$	(124,056	)	$	69,592
Issuance of common stock from underwritten follow-on offering, net of offering costs		5,742,026		6		—		—		80,028		—			—			80,034
Issuance of common stock pursuant to exercise of options		17,946		—		—		—		65		—			—			65
Issuance of common stock pursuant to employee stock purchase plan		8,458		—		—		—		169		—			—			169
Issuance of common stock upon vesting of restricted stock units		19,429		—		—		—		—		—			—			—
Stock-based compensation		—		—		—		—		1,662		—			—			1,662
Unrealized loss on marketable securities		—		—		—		—		—		(12	)		—			(12	)
Net loss		—		—		—		—		—					(17,085	)		(17,085	)
Balances as of March 31, 2022		26,756,235	$	27		309,238	$	—	$	275,551	$	(12	)	$	(141,141	)	$	134,425

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

VERA THERAPEUTICS, INC.

Condensed Statements of Cash Flows

(unaudited)

(in thousands)


	Three Months Ended March 31,
	2023			2022
Cash flows from operating activities
Net loss	$	(30,069	)	$	(17,085	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation, amortization and accretion		(506	)		9
Reduction in the carrying amount of operating lease right-of-use assets		579			564
Stock-based compensation		2,667			1,662
Change in fair value of non-marketable equity securities		1			—
Changes in operating assets and liabilities:
Prepaid expense and other current assets		3,749			(3,942	)
Other assets		(5	)		271
Accounts payable		(6,665	)		5,943
Accrued and other current liabilities		4,637			4,223
Operating lease liabilities		(680	)		(626	)
Net cash used in operating activities		(26,292	)		(8,981	)
Cash flows from investing activities
Purchase of property and equipment		—			(18	)
Purchase of marketable securities		(34,209	)		(39,437	)
Proceeds from maturities of marketable securities		36,900			—
Proceeds from sale of marketable securities		9,543			—
Net cash provided by (used in) investing activities		12,234			(39,455	)
Cash flows from financing activities
Proceeds from exercise of stock options and employee stock purchase plan		240			234
Proceeds from issuance of Class A common stock in follow-on offering		115,000			86,130
Payment of costs and underwriting discounts and commissions related to follow-on offering		(7,256	)		(6,096	)
Net cash provided by financing activities		107,984			80,268
Net increase in cash and cash equivalents and restricted cash		93,926			31,832
Cash, cash equivalents and restricted cash, beginning of period		43,752			79,967
Cash, cash equivalents and restricted cash, end of period	$	137,678		$	111,799
Reconciliation of cash and cash equivalents and restricted cash to the balance sheets
Cash and cash equivalents	$	137,385		$	111,506
Restricted cash		293			293
Total cash and cash equivalents and restricted cash	$	137,678		$	111,799
Supplemental disclosure of cash flow information
Cash paid for interest expense	$	3,253		$	104
Cash paid for operating leases	$	746		$	656

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

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, pursuant to which the Company issued and sold 4,350,000 shares of its Class A common stock at a public offering price of $11.00 per share. On May 20, 2021, the Company issued 652,500 shares of its Class A common stock to the underwriters of the IPO pursuant to the exercise of the underwriters’ option to purchase additional shares. The Company received total net proceeds of $48.4 million from the IPO, after deducting underwriting discounts and commissions of $3.9 million, and offering costs of $2.8 million. Prior to the completion of the IPO, all shares of redeemable convertible preferred stock then outstanding were converted into 15,464,776 shares of Class A common stock and 309,238 shares of Class B common stock.

Follow-on Public Offering

On February 14, 2022, the Company completed a follow-on public offering pursuant to which the Company issued and sold 5,742,026 shares of its Class A common stock at a public offering price of $15.00 per share, including 748,959 shares of Class A common stock pursuant to the full exercise of the underwriters’ option to purchase additional shares. The Company received total net proceeds of approximately $80.0 million, after deducting underwriting discounts and commissions of $5.2 million, and offering costs of approximately $0.9 million.

On February 6, 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 an offering price of $7.00 per share, including the exercise in full by the underwriters of their option to purchase an additional 2,142,857 shares of Class A common stock. The Company received total net proceeds of approximately $107.7 million, after deducting underwriting discounts and commissions of $6.9 million, and offering costs of approximately $0.4 million.

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 $243.2 million as of March 31, 2023. The Company had cash, cash equivalents and marketable securities of $197.2 million as of March 31, 2023 and has access to additional debt financing under a credit facility (see Note 8). 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, 2023 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 Interim Condensed Financial Statements

The accompanying unaudited interim condensed financial statements have been prepared in accordance with generally accepted accounting principles in the United States (GAAP), and in the opinion of management, include all adjustments of a normal recurring nature necessary for fair financial statement presentation. Interim results are not necessarily indicative of the results to be expected for the full year ending December 31, 2023, or any other period.

The condensed balance sheet as of December 31, 2022 included herein was derived from the audited financial statements as of that date, but may not include all disclosures notes required by GAAP.

These unaudited condensed financial statements and other information presented in this Form 10-Q should be read in conjunction with the Company’s audited financial statements and the notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC on March 28, 2023.

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 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, fair value of common stock and 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 agencies 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.

Cash and Cash Equivalents

The Company considers all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents. Cash equivalents consist of money market funds and are stated at fair value.

Restricted Cash

Restricted cash represents cash held by a financial institution as collateral for a letter of credit securing its operating lease for office and laboratory space, which is classified as a non-current asset on the balance sheets based on the maturity of the lease.

Marketable Securities

The Company holds investments in marketable securities, consisting of U.S. government securities. Marketable securities with stated maturities of three months or less from the date of purchase are classified as cash equivalents and those with stated maturities of greater than three months as marketable securities on the balance sheet. The Company determines the appropriate classification of marketable securities at the time of purchase. The Company has the ability, if necessary, to liquidate its investments to meet its liquidity needs in the next 12 months, without significant penalty. Accordingly, those investments with contractual maturities greater than one year from the date of purchase are classified as current assets on the accompanying balance sheets. All marketable securities are classified as available-for-sale and are reported at estimated fair value, with unrealized gains and losses recorded in accumulated other comprehensive loss within stockholders’ equity. Interest, amortization and accretion of purchase premiums and discounts on marketable debt securities are included in other income (expense), net, in the condensed statements of operations and comprehensive loss.

The cost of available-for-sale marketable securities sold is based on the specific identification method. Realized gains and losses on the sale of available-for-sale marketable securities are recorded in other income, net in the statements of operations and comprehensive loss.

The Company regularly reviews all of the marketable securities for decline in fair value to determine whether unrealized losses have resulted from credit loss or other factors. The review includes considerations for the cause of the impairment but is not limited to (i) the consideration of the cause of the decline, (ii) any currently recorded expected credit losses and (iii) the creditworthiness of the respective security issuers. A decline of fair value below cost basis is considered an other-than-temporary impairment if the Company has the intent to sell the security or it is more likely than not that the company will be required to sell the security before recovery of the entire cost basis. Regardless of the Company’s intent or requirement to sell the security, an impairment is considered other-than-temporary if the Company does not expect to recover the entire cost basis. In those instances, an impairment charge equal to the difference between fair value and the cost basis is recorded in other income (expense), on the condensed statements of operations and comprehensive loss. No impairment loss was recognized for the three months ended March 31, 2023 and 2022.

Deferred Offering Costs

Deferred offering costs consisting of legal, accounting and filing fees attributable to equity offerings. Deferred offering costs are included in other long-term assets on the Company's condensed balance sheets. Upon completion of an offering, these amounts are offset against the proceeds of the offering.

Leases

The Company leases office and laboratory space under operating leases and determines if the arrangement is a lease at inception. These leases contain lease and non-lease components. Non-lease components include payments for maintenance, utilities, real estate taxes, and management fees. The lease and non-lease components are combined and accounted as a single lease component. Payments made under operating leases (net of any incentive received from the lessors) are recorded on a straight-line basis over the term of the lease.

These leases do not provide an implicit rate, the Company uses an incremental borrowing rate based on information available at commencement date in determining the present value of lease payments. The incremental borrowing rate is a hypothetical rate based on the Company’s understanding of what the credit rating would be in a similar economic environment. Operating leases are included in operating lease right-of-use assets and operating lease liabilities, current and non-current, on the balance sheets.

Leases may include one or more options to renew. The Company does not assume renewals in determination of the lease term unless the renewals are deemed to be reasonably assured. The lease agreements generally do not contain any material residual value guarantees or material restrictive covenants.

Foreign Currency Translations

Transactions denominated in foreign currencies are initially measured in U.S. dollars using the exchange rate on the date of the transaction. Foreign currency denominated monetary assets and liabilities are subsequently re-measured at the end of each reporting

period using the exchange rate at that date, with the corresponding foreign currency transaction gain or loss recorded in the statements of operations and statements of cash flows. Nonmonetary assets and liabilities are not subsequently re-measured.

Fair Value Measurements

Fair value is defined as the exchange price to sell an asset or transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. Fair value should be based on the assumptions market participants would use when pricing the asset or liability. The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date.

Fair value measurements are classified and disclosed in one of the following three categories:

Level 1 – Quoted unadjusted prices for identical instruments in active markets.

Level 2 – Quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-derived valuations in which all observable inputs and significant value drivers are observable in active markets.

Level 3 – Model derived valuations in which one or more significant inputs or significant value drivers are unobservable, including assumptions developed by the Company.

Fair value accounting is applied to all financial assets and liabilities that are recognized or disclosed in the condensed financial statements on a recurring basis. The Company’s financial instruments include cash equivalents, marketable securities, prepaid expenses, other current assets, accounts payable and accrued expenses. Cash equivalents and marketable securities are reported at their respective fair values on the Company’s condensed balance sheets. The remaining financial instruments are reported on the Company’s condensed balance sheets at cost, which approximate their fair value due to their short-term nature.

The Company’s non-marketable equity securities (Note 6) are measured at fair value using an option pricing valuation methodology. The option pricing methodology relies on risk-neutral valuation which calculates the value of an asset by discounting the expected value of its future payoffs at the risk-free rate of return. The fair value of the non-marketable equity securities is derived from quoted prices for similar instruments and observable inputs in active markets. This approach results in the classification of these securities as Level 2 of the fair value hierarchy.

There were no transfers between Levels 1, 2, or 3 for any of the periods presented.

Comprehensive Loss

Comprehensive loss consists of two components: net loss and other comprehensive loss. Other comprehensive loss refers to unrealized gains and losses that are recorded as an element of stockholders’ equity and are excluded from net loss. For the three months ended March 31, 2023, other comprehensive loss consists of unrealized gains and losses on marketable securities.

Research and Development Costs

Research and development costs are expensed as incurred and consist primarily of employees’ salaries and related benefits, including stock-based compensation and termination expenses for employees engaged in research and development efforts, allocated overhead including rent, depreciation, information technology and utilities, contracted services, license fees, and external expenses to conduct and support the Company’s operations that are directly attributable to the Company’s research and development efforts. Payments made to third parties under these arrangements in advance of the performance of the related services by the third parties are recorded as prepaid expenses until the services are rendered.

Costs incurred in obtaining technology licenses including upfront and milestone payments incurred under the Company’s licensing agreements are recorded as expense in the period in which they are incurred, provided that the licensed technology, method or process has no alternative future uses other than for the Company’s research and development activities. Where contingent milestone payments are due to third parties under license or other agreements, the milestone payment obligations are recognized as expense when achievement of the contingent milestone is probable, which is generally upon achievement of the milestone.

Research Contract Costs and Accruals

The Company enters into various research and development and other agreements with commercial firms, researchers, and others for provisions of goods and services from time to time. These agreements are generally cancellable, and the related costs are recorded as research and development expenses as incurred. The Company records accruals for estimated ongoing research and development costs. When evaluating the adequacy of the accrued liabilities, the Company analyzes progress of the studies or clinical

trials, including the phase or completion of events, invoices received and contracted costs. Significant judgments and estimates are made in determining the accrued balances at the end of any reporting period. Actual results could differ materially from the Company’s estimates.

Stock-Based Compensation

The Company recognizes compensation expense based on estimated fair values for all stock-based payment awards made to the Company’s employees, nonemployee directors and consultants that are expected to vest. The valuation of stock option awards is determined at the date of grant using the Black-Scholes option pricing model. The Black-Scholes option pricing model requires the Company to make assumptions and judgements about the inputs used in the calculations, such as the fair value of the common stock, expected term, expected volatility of the Company’s common stock, risk-free interest rate and expected dividend yield. The valuation of restricted stock awards is measured by the fair value of the Company’s Class A common stock on the date of the grant.

For all stock options granted, the Company calculated the expected term using the simplified method (derived from the average midpoint between the weighted average vesting period and the contractual term of the award) for “plain vanilla” stock option awards, as the Company has limited historical information to develop expectations about future exercise patterns and post vesting employment termination behavior. The estimate of expected volatility is based on comparative companies’ volatility. The risk-free rate is based on the yield available on United States Treasury zero-coupon issues corresponding to the expected term of the award. The Company records forfeitures when they occur.

Prior to the IPO, the fair value of the shares of common stock underlying the stock options was determined by the board of directors with the assistance of management and input from an independent third-party valuation firm, as there was no public market for the common stock. The board of directors determined the fair value of the Company’s common stock by considering a number of objective and subjective factors, including the valuation of comparable companies, sales of redeemable convertible preferred stock, the Company’s operating and financial performance, the lack of liquidity of common stock, and general and industry specific economic outlook, amongst other factors. Subsequent to the IPO, the Company determines the fair value using the market closing price of its Class A common stock on the date of grant.

The Company records compensation expense for service-based awards on a straight-line basis over the requisite service period, which is generally the vesting period of the award. The amount of stock-based compensation expense recognized during a period is based on the value of the portion of the awards that are ultimately expected to vest.

Income Taxes

Income taxes are accounted for under the asset and liability method. Deferred income taxes are recorded for temporary differences between financial statement carrying amounts and the tax basis of assets and liabilities. Deferred tax assets and liabilities reflect tax rates expected to be in effect for the years in which the differences are expected to be reversed. A valuation allowance is provided if it is more likely than not that some or all of the deferred tax assets will not be realized.

Net Loss Per Share Attributable to Common Stockholders

Net loss per share of common stock is computed using the two-class method required for multiple classes of common stock and participating securities based upon their respective rights to receive dividends as if all income for the period has been distributed. The rights, including the liquidation and dividend rights and sharing of losses, of the Class A and Class B common stock are identical, other than voting rights. As the liquidation and dividend rights and sharing of losses are identical, the undistributed earnings are allocated on a proportionate basis and the resulting net loss per share attributed to common stockholders is therefore the same for Class A and Class B common stock on an individual or combined basis.

Prior to the IPO, the Company’s participating securities included the Company’s redeemable convertible preferred stock, as the holders were entitled to receive noncumulative dividends on a pari passu basis in the event that a dividend is paid on common stock. The Company also considers any shares issued on the early exercise of stock options subject to repurchase to be participating securities because holders of such shares have non-forfeitable dividend rights in the event a dividend is paid on common stock. The holders of redeemable convertible preferred stock, as well as the holders of early exercised shares subject to repurchase, did not and do not have a contractual obligation to share in losses of the Company, and therefore during periods of loss there is no allocation required under the two-class method.

Basic net loss per share attributable to common stockholders is calculated by dividing the net loss attributable to common stockholders by the weighted-average number of shares of common stock outstanding during the period, adjusted for outstanding shares that are subject to repurchase.

Diluted net loss per share is computed by giving effect to all potentially dilutive securities outstanding for the period using the treasury stock method or the if-converted method based on the nature of such securities. For periods in which the Company reports net losses, diluted net loss per share attributable to common stockholders is the same as basic net loss per share attributable to common stockholders, because potentially dilutive shares are not assumed to have been issued if their effect is anti-dilutive.

Recently Adopted Accounting Pronouncements

In February 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standard Update (ASU) No. 2016-02, Leases (Topic 842), subsequently amended by ASU 2018-10, ASU 2018-11, ASU 2018-20, ASU 2019-01 and ASU 2019-10, which sets out the principles for the recognition, measurement, presentation and disclosure of leases for both lessors and lessees of a contract. The new standard requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase by the lessee. A lessee is also required to record a right-of-use asset and a lease liability for all leases with a term of greater than 12 months regardless of their classification on the balance sheets. Leases with a term of 12 months or less may be accounted for similar to historical guidance for operating leases. The Company adopted the ASUs on January 1, 2022, using the optional transition method, which allows for the prospective application of the standard. In addition, the Company elected the package of practical expedients permitted under the transition guidance within the standard, which allowed the Company to carry forward historical lease classification, to not reassess prior conclusions related to initial direct costs, and to not reassess whether any expired or existing contracts are or contain leases. The Company also elected the practical expedient to not separate lease and non-lease components for all leases. In connection with the adoption of the new guidance, the Company recognized $6.8 million of operating lease right-of-use assets and $8.5 million of operating lease liabilities and derecognized $1.6 million of restructuring lease liability, with immaterial impact on the Company’s financial statements.

In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. In response to concerns about structural risks of the cessation of London Interbank Offered Rate (LIBOR), the amendments in this ASU provide optional guidance for a limited time to ease the potential burden in accounting for (or recognizing the effect of) reference rate reform on financial reporting. The amendments in this ASU provide optional expedients and exceptions for applying GAAP to contracts, hedging relationships and other transactions affected by reference rate reform if certain criteria are met. The expedients and exceptions provided by this amendment do not apply to contract modifications made and hedge relationships entered into or evaluated after December 31, 2022. The amendments in this ASU are elective and are effective for all entities as of March 12, 2020 through December 31, 2022. The Company amended its Loan Agreement with Oxford in November 2022, which among other things, changed the interest rate index that the Company uses to accrue interest on outstanding borrowings from LIBOR to the Secured Overnight Financing Rate (“SOFR”) as published by the Chicago Mercantile Exchange (“CME”) Term SOFR Administrator. The Company no longer has any contracts that reference LIBOR as of December 31, 2022. The Company adjusted the effective interest rate on outstanding borrowings on a prospective basis, which did not have a material impact on the financial statements.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The objective of the standard is to provide information about expected credit losses on financial instruments at each reporting date and to change how other-than temporary impairments on investment securities are recorded. Further, the FASB issued ASU No. 2018-19, ASU No. 2019-04, ASU No. 2019-05, ASU 2019-10, ASU 2019-11, ASU 2020-02 and ASU 2020-03 to provide additional guidance on the credit losses standard. The guidance is effective for the annual period beginning after December 15, 2022, with early adoption permitted. The Company adopted the ASUs on January 1, 2023. The ASUs did not have a material impact on the Company’s financial statements.

Recently Issued Accounting Pronouncements

In June 2022, the FASB issued ASU 2022-03, Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions. The standard clarifies the guidance in Topic 210, when measuring the fair value of an equity security subject to contractual 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 the annual period beginning after December 15, 2023, with early adoption permitted. The Company is currently evaluating the impact the standard may have on its financial statements and related disclosures.

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, 2023		December 31, 2022
Prepaid clinical trial and drug manufacturing expenses	$	5,375	$