UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One) | |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
For the quarterly period ended | |
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:
(Exact name of registrant as specified in its charter)
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(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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 ☐ | 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
As of May 6, 2022 there were
TABLE OF CONTENTS
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Management’s Discussion and Analysis of Financial Condition and Results of Operations | 24 | |
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FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements that involve substantial risks and uncertainties. All statements, other than statements related to present facts or current conditions or historical facts, contained in this Quarterly Report on Form 10-Q, including statements regarding our strategy, future operations, future financial position, future revenues, projected costs, prospects, plans and objectives of management, are forward-looking statements. Such statements relate to, among other things, the development and activity of our programs and product candidates, VS-6766 (rapidly accelerated fibrosarcoma (“RAF”)/ mitogen-activated protein kinase kinase (“MEK”) program) and defactinib (focal adhesion kinase (“FAK”) program), the structure of our planned and pending clinical trials, and the timeline and indications for clinical development, regulatory submissions and commercialization of activities. The words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “plan,” “predict,” “project,” “target,” “potential,” “will,” “would,” “could,” “should,” “continue” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words.
Forward-looking statements are not guarantees of future performance and our actual results could differ materially from the results discussed in the forward-looking statements we make. Applicable risks and uncertainties include the risks and uncertainties, among other things, regarding: the uncertainties inherent in research and development of VS-6766 and defactinib, such as negative or unexpected results of clinical trials; whether and when any applications for VS-6766 and defactinib may be filed with regulatory authorities in any jurisdictions; whether and when regulatory authorities in any jurisdictions may approve any such other applications that may be filed for VS-6766 and defactinib, which will depend on the assessment by such regulatory authorities of the benefit-risk profile suggested by the totality of the efficacy and safety information submitted and, if approved, whether VS-6766 or defactinib will be commercially successful in such jurisdictions; our ability to obtain, maintain and enforce patent and other intellectual property protection for VS-6766 and defactinib; the scope, timing, and outcome of any legal proceedings; decisions by regulatory authorities regarding labeling and other matters that could affect the availability or commercial potential of VS-6766 and defactinib; whether preclinical testing of our product candidates and preliminary or interim data from clinical trials will be predictive of the results or success of ongoing or later clinical trials; that the timing, scope and rate of reimbursement for our product candidates is uncertain; that there may be competitive developments affecting our product candidates; that data may not be available when expected; that enrollment of clinical trials may take longer than expected; that VS-6766 or defactinib will cause unexpected safety events, experience manufacturing or supply interruptions or failures, or result in unmanageable safety profiles as compared to their levels of efficacy; that any of our third party contract research organizations, contract manufacturing organizations, clinical sites, or contractors, among others, who we rely on fail to fully perform; that we face substantial competition, which may result in others developing or commercializing products before or more successfully than we do which could result in reduced market share or market potential for VS-6766 or defactinib; that we will be unable to in-license additional compounds or successfully initiate or complete the clinical development and eventual commercialization of our product candidates; that the development and commercialization of our product candidates will take longer or cost more than planned; that we may not have sufficient cash to fund our contemplated operations; that we may not attract and retain high quality personnel; that we or Chugai Pharmaceutical, Co. Ltd., will fail to fully perform under the license agreement; that our target market for our product candidates might be smaller than we are presently estimating; that we or Secura Bio, Inc. will fail to fully perform under the asset purchase agreement; that we may be unable to obtain adequate financing in the future through product licensing, co-promotional arrangements, public or private equity, debt financing or otherwise; that we will not pursue or submit regulatory filings for our product candidates, that our product candidates will not receive regulatory approval, become commercially successful products, or result in new treatment options being offered to patients; and that the duration and impact of COVID-19 may affect, precipitate or exacerbate one or more of the foregoing risks and uncertainties. Other risks and uncertainties include those identified in our Annual Report on Form 10-K for the year ended December 31, 2021 as filed with Securities and Exchange Commission (SEC) on March 28, 2022, and in any subsequent filings with the SEC.
As a result of these and other factors, we may not achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments we may make. The forward-looking statements contained in this Quarterly Report on Form 10-Q reflect our views as of the date hereof. We do not assume and specifically disclaim any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.
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PART I—FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements (unaudited).
Verastem, Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except per share amounts)
March 31, | December 31, | ||||||
| 2022 |
| 2021 |
| |||
Assets | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | | $ | | |||
Short-term investments |
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Accounts receivable, net | | | |||||
Prepaid expenses and other current assets |
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Total current assets |
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Property and equipment, net |
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Right-of-use asset, net | | | |||||
Restricted cash | | | |||||
Other assets |
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Total assets | $ | | $ | | |||
Liabilities and stockholders’ equity | |||||||
Current liabilities: | |||||||
Accounts payable | $ | | $ | | |||
Accrued expenses |
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Lease liability, short-term |
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Total current liabilities |
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Non-current liabilities: |
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Convertible senior notes | | | |||||
Long-term debt | | — | |||||
Lease liability, long-term | | | |||||
Total liabilities |
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Stockholders’ equity: | |||||||
Preferred stock, $ |
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Common stock, $ |
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Additional paid-in capital |
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Accumulated other comprehensive income/(loss) |
| ( |
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Accumulated deficit | ( | ( | |||||
Total stockholders’ equity |
| |
| | |||
Total liabilities and stockholders’ equity | $ | | $ | |
See accompanying notes to the condensed consolidated financial statements.
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Verastem, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(unaudited)
(in thousands, except per share amounts)
Three months ended March 31, | |||||||
| 2022 |
| 2021 |
| |||
Revenue: | |||||||
Sale of COPIKTRA license and related assets | | | |||||
Transition services revenue | — | | |||||
Total revenue |
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Operating expenses: | |||||||
Research and development | | | |||||
Selling, general and administrative |
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Total operating expenses |
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Loss from operations |
| ( |
| ( | |||
Other income | | — | |||||
Interest income |
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Interest expense |
| ( |
| ( | |||
Net loss | $ | ( | $ | ( | |||
Net loss per share—basic and diluted | ( | ( | |||||
Weighted average common shares outstanding used in computing net loss per share—basic and diluted | | | |||||
Net loss | $ | ( | $ | ( | |||
Unrealized loss on available-for-sale securities |
| ( |
| ( | |||
Comprehensive loss | $ | ( | $ | ( |
See accompanying notes to the condensed consolidated financial statements.
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Verastem, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(unaudited)
(in thousands, except share data)
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Accumulated |
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Additional | other | Total |
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Common stock | paid-in | comprehensive | Accumulated | stockholders' |
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| Shares |
| Amount |
| capital |
| income/ (loss) |
| deficit |
| equity |
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Balance at December 31, 2021 |
| | $ | | $ | | $ | | $ | ( | $ | | ||||||
Net loss | — | — | — | — | ( |
| ( | |||||||||||
Unrealized (loss) on available-for-sale marketable securities | — | — | — | ( | — |
| ( | |||||||||||
Issuance of common stock resulting from at-the-market transactions, net | | — | | — | — |
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Issuance of common stock resulting from vesting of restricted stock units | | — | — | — | — | — | ||||||||||||
Stock-based compensation expense | — | — | | — | — |
| | |||||||||||
Issuance of common stock under Employee Stock Purchase Plan | | — | | — | — | | ||||||||||||
Balance at March 31, 2022 |
| | $ | | $ | | $ | ( | $ | ( | $ | |
Balance at December 31, 2020 |
| | $ | | $ | | $ | | $ | ( | $ | | ||||||
Net loss | — | — | — | — | ( |
| ( | |||||||||||
Unrealized (loss) on available-for-sale marketable securities | — | — | — | ( | — |
| ( | |||||||||||
Issuance of common stock resulting from exercise of stock options | | — | | — | — |
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Issuance of common stock resulting from vesting of restricted stock units | | — | ( | — | — | ( | ||||||||||||
Stock-based compensation expense | — | — | | — | — |
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Issuance of common stock under Employee Stock Purchase Plan | | — | | — | — | | ||||||||||||
Balance at March 31, 2021 |
| | $ | | $ | | $ | | $ | ( | $ | |
See accompanying notes to the condensed consolidated financial statements.
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Verastem, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(in thousands)
Three months ended March 31, | |||||||
| 2022 |
| 2021 | ||||
Operating activities | |||||||
Net loss | $ | ( | $ | ( | |||
Adjustments to reconcile net loss to net cash used in operating activities: | |||||||
Depreciation |
| | | ||||
Amortization of right-of-use asset and lease liability | ( | ( | |||||
Stock-based compensation expense |
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Amortization of deferred financing costs, debt discounts and premiums and discounts on available-for-sale marketable securities | | | |||||
Changes in operating assets and liabilities: | |||||||
Accounts receivable, net | ( | ( | |||||
Prepaid expenses, other current assets and other assets |
| |
| ( | |||
Accounts payable |
| |
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Accrued expenses and other liabilities |
| ( |
| ( | |||
Net cash used in operating activities |
| ( |
| ( | |||
Investing activities | |||||||
Purchases of property and equipment |
| — | ( | ||||
Purchases of investments |
| ( |
| ( | |||
Maturities of investments |
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Net cash provided by (used in) investing activities |
| |
| ( | |||
Financing activities | |||||||
Proceeds from long-term debt, net | | — | |||||
Proceeds from the exercise of stock options and employee stock purchase program | | | |||||
Settlement of restricted stock for tax withholdings | — | ( | |||||
Proceeds from the issuance of common stock, net | | — | |||||
Net cash provided by (used in) financing activities |
| |
| ( | |||
Increase (decrease) in cash, cash equivalents and restricted cash |
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| ( | |||
Cash, cash equivalents and restricted cash at beginning of period |
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Cash, cash equivalents and restricted cash at end of period | $ | | $ | | |||
Supplemental disclosure of non-cash investing and financing activities | |||||||
Common stock issuance costs included in accounts payable and accrued expenses | $ | — | $ | | |||
Settlement of restricted stock units for tax withholdings included in accrued expenses | $ | — | $ | | |||
Receivables related to stock option exercises in prepaid expenses and other current assets | $ | — | $ | | |||
Deferred financing costs included in accounts payable and accrued expenses | $ | | $ | — |
See accompanying notes to the condensed consolidated financial statements.
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Verastem, Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. Nature of business
Verastem, Inc. (the “Company”) is a late stage development biopharmaceutical company, with ongoing registration directed trials, committed to advancing new medicines for patients battling cancer. The Company’s pipeline is focused on novel anticancer agents that inhibit critical signaling pathways in cancer that promote cancer cell survival and tumor growth, particularly rapidly accelerated fibrosarcoma (“RAF”)/ mitogen-activated protein kinase kinase (“MEK”) inhibition and focal adhesion kinase (“FAK”) inhibition.
The Company’s most advanced product candidates, VS-6766 and defactinib, are being investigated in both preclinical and clinical studies for the treatment of various solid tumors, including, low-grade serous ovarian cancer (“LGSOC”), non-small cell lung cancer (“NSCLC”), colorectal cancer (“CRC”), pancreatic cancer, uveal melanoma, and endometrial cancer. The Company believes that VS-6766 may be beneficial as a therapeutic as a single agent or when used together in combination with defactinib, other agents, other pathway inhibitors or other current and emerging standard of care treatments in cancers that do not adequately respond to currently available therapies.
On September 24, 2018, the Company’s first commercial product, COPIKTRA® (duvelisib), was approved by the U.S. Food and Drug Administration (the “FDA”) for the treatment of adult patients with certain hematologic cancers including relapsed or refractory chronic lymphocytic leukemia/ small lymphocytic lymphoma (“CLL/SLL”) after at least two prior therapies and relapsed or refractory follicular lymphoma (“FL”) after at least two prior systemic therapies. On August 10, 2020, the Company and Secura Bio, Inc. (“Secura”) entered into an asset purchase agreement (“Secura APA”). Pursuant to the Secura APA, the Company sold to Secura its exclusive worldwide license, including certain related assets for the research, development, commercialization, and manufacture in oncology indications of products containing COPIKTRA (duvelisib). The transaction closed on September 30, 2020. Refer to Note 13. License, collaboration, and commercial agreements for a detailed discussion of the Secura APA.
The condensed consolidated financial statements include the accounts of Verastem Securities Company and Verastem Europe GmbH, wholly-owned subsidiaries of the Company. All financial information presented has been consolidated and includes the accounts of the Company and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.
The Company is subject to the risks associated with other life science companies, including, but not limited to, possible failure of preclinical testing or clinical trials, competitors developing new technological innovations, inability to obtain marketing approval of the Company’s product candidates, VS-6766 and defactinib, market acceptance and commercial success of the Company’s product candidates, VS-6766 and defactinib, following receipt of regulatory approval, and, protection of proprietary technology and the continued ability to obtain adequate financing to fund the Company’s future operations. If the Company does not obtain marketing approval and successfully commercialize its product candidates, VS-6766 and defactinib, following regulatory approval, it will be unable to generate product revenue or achieve profitability and may need to raise additional capital.
The Company has historical losses from operations and anticipates that it may continue to incur operating losses as it continues the research and development of its product candidates. As of March 31, 2022 the Company had cash, cash equivalents, and investments of $
The Company expects to finance the future development costs of its clinical product portfolio with its existing cash, cash equivalents, and investments, through future milestones and royalties received pursuant to the Secura APA, through our loan and security agreement with Oxford Finance LLC (“Oxford”), or through other strategic financing opportunities that could include, but are not limited to collaboration agreements, future offerings of its equity, or the
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incurrence of debt. However, there is no guarantee that any of these strategic or financing opportunities will be executed or executed on favorable terms, and some could be dilutive to existing stockholders. If the Company fails to obtain additional future capital, it may be unable to complete its planned preclinical studies and clinical trials and obtain approval of certain investigational product candidates from the FDA or foreign regulatory authorities.
2. Summary of significant accounting policies
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) for interim financial reporting and as required by Regulation S-X, Rule 10-01 under the assumption that the Company will continue as a going concern for the next twelve months. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements, or any adjustments that might result from the uncertainty related to the Company’s ability to continue as a going concern. In the opinion of management, all adjustments (including those which are normal and recurring) considered necessary for a fair presentation of the interim financial information have been included. When preparing financial statements in conformity with GAAP, the Company must make estimates and assumptions that affect the reported amounts and related disclosures at the date of the financial statements. Actual results could differ from those estimates. Additionally, operating results for the three months ended March 31, 2022 are not necessarily indicative of the results that may be expected for any other interim period or for the year ending December 31, 2022. For further information, refer to the financial statements and footnotes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, as filed with the Securities and Exchange Commission (“SEC”) on March 28, 2022.
Significant Accounting Policies
The significant accounting policies are described in Note 2. Significant accounting policies in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021. During the three months ended March 31, 2022, the Company did not adopt any additional significant accounting policies.
Recently Issued Accounting Standards Updates
In June 2016, the FASB issued ASU No. 2016-13, Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). ASU 2016-13 will replace the incurred loss impairment methodology under current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. In November 2019, the FASB issued ASU 2019-10, Financial Instruments – Credit Losses (Topic 326), Derivatives (Topic 815), and Leases (Topic 842). This ASU delayed the required adoption for SEC filers that are smaller reporting companies as of their determination on November 15, 2019, until annual and interim periods beginning after December 15, 2022, with early adoption permitted. The Company has determined that as of November 15, 2019, it is a smaller reporting company and has not elected to early adopt this standard. The Company is currently evaluating the impact the adoption of the standard will have on its condensed consolidated financial statements and related disclosures.
In August 2020, the FASB issued No. ASU 2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815 – 40) (“ASU 2020-06”). ASU 2020-06 simplifies the complexity associated with applying U.S. GAAP for certain financial instruments with characteristics of liabilities and equity. More specifically, the amendments focus on the guidance for convertible instruments and derivative scope exception for contracts in an entity’s own equity. The ASU also simplifies the diluted earnings per share calculation in certain areas. For smaller reporting companies, ASU 2020-06 is effective for fiscal years beginning after December 15, 2023, and interim periods within those fiscal years. The Company is currently evaluating the impact ASU 2020-06 will have on its condensed consolidated financial statements and related disclosures.
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Concentrations of credit risk and off-balance sheet risk
Cash, cash equivalents, investments and trade accounts receivable are financial instruments that potentially subject the Company to concentrations of credit risk. The Company mitigates this risk by maintaining its cash and cash equivalents and investments with high quality, accredited financial institutions. The management of the Company’s investments is not discretionary on the part of these financial institutions.
As of March 31, 2022, there was
For the three months ended March 31, 2022, there was
3. Cash, cash equivalents and restricted cash
The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the condensed consolidated balance sheets that sum to the total of the same such amounts shown in the condensed consolidated statements of cash flows (in thousands):
| March 31, 2022 |
| December 31, 2021 | |||
Cash and cash equivalents | $ | | $ | | ||
Restricted cash |
| |
| | ||
Total cash, cash equivalents and restricted cash | $ | | $ | |
Amounts included in restricted cash as of March 31, 2022 and December 31, 2021 represent cash held to collateralize outstanding letters of credit provided as a security deposit for the Company’s office space located in Needham, Massachusetts in the amount of approximately $
4. Fair value of financial instruments
The Company determines the fair value of its financial instruments based upon the fair value hierarchy, which prioritizes valuation inputs based on the observable nature of those inputs. The fair value hierarchy applies only to the valuation inputs used in determining the reported fair value of the investments and is not a measure of the investment credit quality. The hierarchy defines three levels of valuation inputs:
Level 1 inputs | Quoted prices in active markets for identical assets or liabilities that the Company can access at the measurement date. |
Level 2 inputs | Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. |
Level 3 inputs | Unobservable inputs that reflect the Company’s own assumptions about the assumptions market participants would use in pricing the asset or liability. |
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Items Measured at Fair Value on a Recurring Basis
The following table presents information about the Company’s financial instruments that are measured at fair value on a recurring basis (in thousands):
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March 31, 2022 |
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Description |
| Total |
| Level 1 |
| Level 2 |
| Level 3 |
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Financial assets |
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Cash equivalents | $ | | $ | | $ | | $ | — | |||||
Short-term investments | | — | | — | |||||||||
Total financial assets | $ | | $ | | $ | | $ | — |
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December 31, 2021 |
| ||||||||||||
Description | Total |
| Level 1 |
| Level 2 |
| Level 3 |
| |||||
Financial assets |
| ||||||||||||
Cash equivalents | $ | | $ | | $ | — | $ | — | |||||
Short-term investments |
| |
| — |
| |
| — | |||||
Total financial assets | $ | | $ | | $ | | $ | — |
The Company’s cash equivalents and short-term investments consist of U.S. Government money market funds, corporate bonds, agency bonds and commercial paper of publicly traded companies. The investments and cash equivalents have been initially valued at the transaction price and subsequently valued, at the end of each reporting period, utilizing third party pricing services or other market observable data. The pricing services utilize industry standard valuation models, including both income and market-based approaches and observable market inputs to determine value. These observable market inputs include reportable trades, benchmark yields, credit spreads, broker/dealer quotes, bids, offers, current spot rates and other industry and economic events. The Company validates the prices provided by third party pricing services by reviewing their pricing methods and matrices, obtaining market values from other pricing sources, analyzing pricing data in certain instances and confirming that the relevant markets are active. After completing its validation procedures, the Company did not adjust or override any fair value measurements provided by the pricing services as of March 31, 2022 and December 31, 2021.
Fair Value of Financial Instruments
The fair value of the Company’s 2018 issued
The fair value of the Company’s long-term debt is determined using a discounted cash flow analysis with current applicable rates for similar instruments as of the condensed consolidated balance sheet date. The carrying value of the Company’s long-term debt as of March 31, 2022, was approximately $
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5. Investments
Cash, cash equivalents, restricted cash and investments consist of the following (in thousands):
| March 31, 2022 |
| |||||||||||
|
| Gross |
| Gross |
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| |||||||
Amortized | Unrealized | Unrealized | Fair |
| |||||||||
| Cost |
| Gains |
| Losses |
| Value |
| |||||
Cash, cash equivalents & restricted cash: | |||||||||||||
Cash and money market accounts | $ | | $ | — | $ | — | $ | | |||||
Corporate bonds, agency bonds and commercial paper (due within | | — | — | | |||||||||
Total cash, cash equivalents & restricted cash: | $ | | $ | — | $ | — | $ | | |||||
Investments: | |||||||||||||
Corporate bonds, agency bonds and commercial paper (due within | $ | | $ | — | $ | ( | $ | | |||||
Total investments | $ | | $ | — | $ | ( | $ | | |||||
Total cash, cash equivalents, restricted cash and investments | $ | | $ | — | $ | ( | $ | |
| December 31, 2021 | ||||||||||||
|
| Gross |
| Gross |
| ||||||||
| Amortized |
| Unrealized |
| Unrealized |
| Fair | ||||||
| Cost |
| Gains |
| Losses |
| Value |
| |||||
Cash, cash equivalents & restricted cash: | |||||||||||||
Cash and money market accounts | $ | | $ | — | $ | — | $ | | |||||
Total cash, cash equivalents & restricted cash: | $ | | $ | — | $ | — | $ | | |||||
Investments: | |||||||||||||
Corporate bonds and commercial paper (due within | $ | | $ | | $ | ( | $ | | |||||
Total investments | $ | | $ | | $ | ( | $ | | |||||
Total cash, cash equivalents, restricted cash and investments | $ | | $ | | $ | ( | $ | |
There were
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6. Accrued expenses
Accrued expenses consist of the following (in thousands):
| March 31, 2022 |
| December 31, 2021 |
| |||
Research and development expenses | $ | | $ | | |||
Compensation and related benefits |
| |
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Professional fees |
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Consulting fees |
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Interest | | | |||||
Commercialization costs |
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Other |
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Total accrued expenses | $ | | $ | |
7. Debt
On March 25, 2022 (the “Closing Date”), the Company entered into a loan and security agreement (the “Loan Agreement”) with Oxford, as collateral agent and a lender, and Oxford Finance Credit Fund III LP, as a lender (“OFCF III” and together with Oxford, the “Lenders”), pursuant to which the Lenders have agreed to lend the Company up to an aggregate principal amount of $
Pursuant to the Loan Agreement, the Company received an initial Term Loan of $
i. | $ |
ii. | $ |
iii. | $ |
iv. | $ |
The Term Loans bear interest at a floating rate equal to (a) the greater of (i) the one-month CME Secured Overnight Financing Rate and (ii)
The Company is required to make a final payment of
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funding date of such Term Loan, (ii)
The Loan Agreement contains
In connection with the Loan Agreement, the Company granted Oxford a security interest in all of the Company’s personal property now owned or hereafter acquired, excluding intellectual property (but including the right to payments and proceeds of intellectual property), and a negative pledge on intellectual property.
The Company assessed all terms and features of the Loan Agreement in order to identify any potential embedded features that would require bifurcation. As part of this analysis, the Company assessed the economic characteristics and risks of the Loan Agreement, including put and call features. The Company determined that all features of the Loan Agreement were clearly and closely associated with a debt host and did not require bifurcation as a derivative liability, or the fair value of the feature was immaterial to the Company's financial statements. The Company reassesses the features on a quarterly basis to determine if they require separate accounting. There have been no changes to the Company’s assessment through March 31, 2022.
The debt issuance costs and the Final Payment Fee have been recorded as a debt discount which are being accreted to interest expense through the maturity date of the Term Loan using the effective interest method. The components of the carrying value of the debt as of March 31, 2022 and December 31, 2021 are detailed below (in thousands):
March 31, 2022 |
| December 31, 2021 | ||||
Principal loan balance | $ | | $ | — | ||
Final Payment Fee | | — | ||||
Debt issuance costs, net of accretion | ( | — | ||||
Long-term debt, net of discount | $ | | $ | — |
As of March 31, 2022, future principal payments due are as follows (in thousands):
2022 | $ | — | |
2023 | — | ||
2024 | | ||
2025 | | ||
2026 | | ||
2027 | | ||
Total principal payments | $ | |
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8. Leases
On April 15, 2014, the Company entered into a lease agreement for approximately
The Company has accounted for its Needham, Massachusetts office space as an operating lease. The Company’s lease contains an option to renew and extend the lease terms and an option to terminate the lease prior to the expiration date. The Company has not included the lease extension or the termination options within the right-of-use asset and lease liability on the condensed consolidated balance sheets as neither option is reasonably certain to be exercised. The Company’s lease includes variable non-lease components (e.g., common area maintenance, maintenance, consumables, etc.) that are not included in the right-of-use asset and lease liability and are reflected as an expense in the period incurred. The Company does not have any other operating or finance leases.
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As of March 31, 2022, a right-of-use asset of $
Three months ended March 31, | |||||||
2022 | 2021 | ||||||
Lease Expense | |||||||
Operating lease expense | $ | | $ | | |||
Total Lease Expense | $ | | $ | | |||
Other Information - Operating Leases | |||||||
Operating cash flows paid for amounts included in measurement of lease liabilities | $ | | $ | |
March 31, 2022 | |||||||
Other Balance Sheet Information - Operating Leases | |||||||
Weighted average remaining lease term (in years) | |||||||
Weighted average discount rate | |||||||
Maturity Analysis | |||||||
2022 | | ||||||
2023 | | ||||||
2024 | | ||||||
2025 | | ||||||
Total | $ | | |||||
Less: Present value discount | ( | ||||||
Lease Liability | $ | |
9. Convertible Senior Notes
2018 Notes
On October 17, 2018, the Company closed a registered direct public offering of $
The 2018 Notes are convertible into shares of the Company’s common stock, par value $
The Company has the right, exercisable at its option, to cause all 2018 Notes then outstanding to be converted automatically if the “Daily VWAP” (as defined in the 2018 Indenture) per share of the Company’s common stock equals or exceeds
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The Company assessed all terms and features of the 2018 Notes in order to identify any potential embedded features that would require bifurcation. As part of this analysis, the Company assessed the economic characteristics and risks of the 2018 Notes, including the conversion, put and call features. The conversion feature was initially bifurcated as an embedded derivative but subsequently qualified for a scope exception to derivative accounting upon the Company’s stockholders approving an increase in the number of authorized shares of Common Stock in December 2018. The Company determined that all other features of the 2018 Notes were clearly and closely associated with the debt host and did not require bifurcation as a derivative liability, or the fair value of the feature was immaterial to the Company’s condensed consolidated financial statements. The Company reassesses the features on a quarterly basis to determine if they require separate accounting. There have been no changes to the Company’s original assessment through March 31, 2022.
2019 Notes
In the fourth quarter of 2019, the Company entered into privately negotiated agreements to exchange approximately $
2020 Notes
On November 6, 2020, the Company entered into a privately negotiated agreement with an investor who was a holder of the Company’s 2018 Notes to exchange approximately $
The Company had the right, exercisable at its option, to cause all 2020 Notes then outstanding to be converted automatically if the “Daily VWAP” (as defined in the 2020 Indenture) per share of the Company’s common stock equaled or exceeded
On July 1, 2021, the Company exercised the Company’s 2020 Notes Mandatory Conversion Option for the aggregate principal amount of $
10. Common stock
At-the-market equity offering programs
In August 2021, the Company entered into a sales agreement with Cantor Fitzgerald & Co. (“Cantor”) pursuant to which the Company can offer and sell up to $
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11. Stock-based compensation
Stock options
A summary of the Company’s stock option activity and related information for the three months ended March 31, 2022 is as follows:
| Shares |
| Weighted-average exercise price per share |
| Weighted-average remaining contractual term (years) |
| Aggregate intrinsic value (in thousands) |
| |||
Outstanding at December 31, 2021 |
| | $ | |
| $ | | ||||
Granted |
| | | ||||||||
Forfeited/cancelled |
| ( | | ||||||||
Outstanding at March 31, 2022 |
| | $ | |
| $ | | ||||
Vested at March 31, 2022 |
| | $ | |
| $ | |
The fair value of each stock option granted during the three months ended March 31, 2022 and 2021 was estimated on the grant date using the Black-Scholes option-pricing model using the following weighted-average assumptions:
March 31, | ||||||
2022 | 2021 | |||||
Risk-free interest rate |
| | % | | % | |
Volatility |
| | % | | % | |
Dividend yield |
| | | |||
Expected term (years) |
|
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Restricted stock units
A summary of the Company’s restricted stock unit activity and related information for the three months ended March 31, 2022 is as follows:
| Shares |
| Weighted-average grant date fair value per share |
| |||
Outstanding at December 31, 2021 |
| | $ | | |||
Granted |
| | $ | | |||
Vested |
| ( | $ | | |||
Forfeited/cancelled | ( | $ | | ||||
Outstanding at March 31, 2022 |
| | $ | |
Employee stock purchase plan
At the Special Meeting of Stockholders, held on December 18, 2018, the stockholders approved the 2018 Employee Stock Purchase Plan (“2018 ESPP”). On June 21, 2019, the board of directors of the Company amended and restated the 2018 ESPP, to account for certain non-material changes to the plan’s administration (the “Amended and Restated 2018 ESPP”). The Amended and Restated 2018 ESPP provides eligible employees with the opportunity, through regular payroll deductions, to purchase shares of the Company’s common stock at
Three months ended March 31, | |||||
2022 | 2021 | ||||
Risk-free interest rate | | % | | % | |
Volatility | | % | | % | |
Dividend yield | | | |||
Expected term (years) |
For the three months ended March 31, 2022 and 2021, the Company has recognized less than $
19
12. Net loss per share
Basic loss per common share is calculated by dividing net loss applicable to common stockholders by the weighted-average number of common shares outstanding during the period. Diluted net loss per common share is calculated by increasing the denominator by the weighted-average number of additional shares that could have been outstanding from securities convertible into common stock, such as stock options, restricted stock units, and employee stock purchase plan shares (using the “treasury stock” method), and the 2018 Notes and 2020 Notes (using the “if-converted” method), unless their effect on net loss per share is anti-dilutive.
The following potentially dilutive securities were excluded from the calculation of diluted net loss per share for the periods indicated because including them would have had an anti-dilutive effect:
Three months ended March 31, | |||||
| 2022 |
| 2021 |
| |
Outstanding stock options | |
| | ||
Outstanding restricted stock units | | | |||
2018 Notes | | | |||
2020 Notes | — | | |||
Employee stock purchase plan | | | |||
Total potentially dilutive securities | |
| |
13. License, collaboration and commercial agreements
Secura
On August 10, 2020, the Company and Secura signed the Secura APA and on September 30, 2020, the transaction closed.
Pursuant to the Secura APA, the Company sold to Secura its exclusive worldwide license, including related assets, for the research, development, commercialization, and manufacture in oncology indications of products containing duvelisib. The sale included certain intellectual property related to duvelisib in oncology indications, certain existing duvelisib inventory, claims and rights under certain contracts pertaining to duvelisib. Pursuant to the Secura APA, Secura assumed all operational and financial responsibility for activities that were part of the Company’s duvelisib oncology program, including all commercialization efforts related to duvelisib in the United States and Europe, as well as the Company’s ongoing duvelisib clinical trials. Further, Secura assumed all obligations with existing collaboration partners developing and commercializing duvelisib, which include Yakult Honsha Co., Ltd. (“Yakult”), CSPC Pharmaceutical Group Limited (“CSPC”), and Sanofi. Additionally, Secura assumed all royalty payment obligations due under the amended and restated license agreement with Infinity Pharmaceuticals, Inc.
Pursuant to the terms of the Secura APA, Secura has paid the Company an up-front payment of $
20
In connection with the Secura APA, the Company and Secura entered into a transition services agreement (“Secura TSA”). Under the terms of the Secura TSA, the Company has provided certain support functions at Secura’s direction for a term of less than
The Company evaluated the Secura APA and Secura TSA in accordance with ASC 606 as the Company concluded that the counterparty, Secura, is a customer. The Company identified the following performance obligations under the Secura APA and Secura TSA:
● | a bundled performance obligation consisting of delivery of the duvelisib global license and intellectual property, certain existing duvelisib inventory, certain duvelisib contracts and clinical trials, certain regulatory approvals, and certain regulatory documentation and books and records (the “Bundled Secura Performance Obligation”); and |
● | Secura TSA Services. |
The Company concluded that the duvelisib global license and intellectual property were not distinct within the context of the contract (i.e. separately identifiable) because the other assets including certain existing duvelisib inventory, certain duvelisib contracts and clinical trials, certain regulatory approval, and certain regulatory documentation and books and records do not have stand-alone value from other duvelisib global license and intellectual property and Secura could not benefit from them without the duvelisib global license and intellectual property. Consistent with the guidance under ASC 606-10-25-16A, the Company disregarded immaterial promised goods and services when determining performance obligations.
The Company has determined that the upfront payment of $
The Company determined $
21
As the consideration for future royalties is conditional, the Company recorded a corresponding contract asset for the expected royalties. Portions of the contract asset are reclassified to accounts receivable when the right to consideration becomes unconditional. As of March 31, 2022, the contract asset has been recorded within prepaid and other current assets on the condensed consolidated balance sheets.
The following table presents changes in the Company’s contract asset for the three months ended March 31, 2022 (in thousands):