10-Q 1 vstm-20220930x10q.htm 10-Q
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended September 30, 2022

OR

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

For the transition period from              to              

Commission file number: 001-35403

Verastem, Inc.

(Exact name of registrant as specified in its charter)

Delaware
(State or other jurisdiction of
incorporation or organization)

27-3269467
(I.R.S. Employer
Identification Number)

117 Kendrick Street, Suite 500
Needham, MA
(Address of principal executive offices)

02494
(Zip Code)

(781) 292-4200

(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

Common Stock, $0.0001 par value per share

VSTM

The Nasdaq Global Market

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

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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 November 2, 2022 there were 210,090,850 shares of Common Stock outstanding.

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, avutometinib (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 avutometinib (VS-6766) and defactinib, such as negative or unexpected results of clinical trials; whether and when any applications for avutometinib (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 avutometinib (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 avutometinib (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 avutometinib (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 avutometinib (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 avutometinib (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 avutometinib (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, in our Quarterly Report on Form 10-Q for the quarter ended June 30, 2022, as filed with the SEC on August 8, 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.

3

PART I—FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements (unaudited).

Verastem, Inc.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except per share amounts)

September 30,

December 31,

    

2022

    

2021

 

Assets

Current assets:

Cash and cash equivalents

$

78,166

$

21,252

Short-term investments

 

25,810

 

79,004

Accounts receivable, net

74

516

Prepaid expenses and other current assets

 

4,709

 

4,968

Total current assets

 

108,759

 

105,740

Property and equipment, net

 

121

 

210

Right-of-use asset, net

1,927

2,302

Restricted cash

241

241

Other assets

 

47

 

169

Total assets

$

111,095

$

108,662

Liabilities and stockholders’ equity

Current liabilities:

Accounts payable

$

5,359

$

2,302

Accrued expenses

 

14,788

 

15,621

Deferred liabilities

965

Lease liability, short-term

 

761

 

667

Total current liabilities

 

21,873

 

18,590

Non-current liabilities:

 

 

Convertible senior notes

268

249

Long-term debt

24,399

Lease liability, long-term

1,682

2,264

Total liabilities

 

48,222

 

21,103

Stockholders’ equity:

Preferred stock, $0.0001 par value; 5,000 shares authorized, no shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively

 

 

Common stock, $0.0001 par value; 300,000 shares authorized, 210,084 and 185,286 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively

 

21

 

19

Additional paid-in capital

 

783,606

 

751,217

Accumulated other comprehensive income/(loss)

 

(39)

 

34

Accumulated deficit

(720,715)

(663,711)

Total stockholders’ equity

 

62,873

 

87,559

Total liabilities and stockholders’ equity

$

111,095

$

108,662

See accompanying notes to the condensed consolidated financial statements.

4

Verastem, Inc.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(unaudited)

(in thousands, except per share amounts)

Three months ended September 30,

Nine months ended September 30,

    

2022

    

2021

    

2022

    

2021

 

Revenue:

Sale of COPIKTRA license and related assets

$

2,596

$

902

Transition services revenue

2

606

Total revenue

 

 

2

 

2,596

 

1,508

Operating expenses:

Research and development

11,288

9,325

39,818

27,951

Selling, general and administrative

 

6,421

 

5,523

 

18,869

 

18,455

Total operating expenses

 

17,709

 

14,848

 

58,687

 

46,406

Loss from operations

 

(17,709)

 

(14,846)

 

(56,091)

 

(44,898)

Other income

20

54

Interest income

 

316

 

40

 

446

 

141

Interest expense

 

(717)

 

(7,980)

 

(1,413)

 

(9,962)

Net loss

$

(18,090)

$

(22,786)

$

(57,004)

$

(54,719)

Net loss per share—basic and diluted

$

(0.09)

$

(0.13)

$

(0.30)

$

(0.31)

Weighted average common shares outstanding used in computing net loss per share—basic and diluted

197,151

179,861

189,999

174,524

Net loss

$

(18,090)

$

(22,786)

$

(57,004)

$

(54,719)

Unrealized gain (loss) on available-for-sale securities

 

91

 

(12)

 

(73)

 

(26)

Comprehensive loss

$

(17,999)

$

(22,798)

$

(57,077)

$

(54,745)

See accompanying notes to the condensed consolidated financial statements.

5

Verastem, Inc.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(unaudited)

(in thousands, except share data)

 

Accumulated

 

Additional

other

Total

 

Common stock

paid-in

comprehensive

Accumulated

stockholders'

 

    

Shares

    

Amount

    

capital

    

income/ (loss)

    

deficit

    

equity

 

Balance at December 31, 2021

 

185,286,480

$

19

$

751,217

$

34

$

(663,711)

$

87,559

Net loss

(16,962)

 

(16,962)

Unrealized (loss) on available-for-sale marketable securities

(147)

 

(147)

Issuance of common stock resulting from at-the-market transactions, net

285,900

575

 

575

Issuance of common stock resulting from vesting of restricted stock units

699,635

Stock-based compensation expense

1,646

 

1,646

Issuance of common stock under Employee Stock Purchase Plan

57,636

100

100

Balance at March 31, 2022

 

186,329,651

$

19

$

753,538

$

(113)

$

(680,673)

$

72,771

Net loss

 

 

 

 

(21,952)

 

(21,952)

Unrealized (loss) on available-for-sale marketable securities

 

 

 

(17)

 

 

(17)

Issuance of common stock resulting from at-the-market transactions, net

1,006,444

1,240

1,240

Issuance of common stock resulting from exercise of stock options

76,539

92

92

Issuance of common stock resulting from vesting of restricted stock units

200,813

Stock-based compensation expense

1,758

 

 

 

1,758

Balance at June 30, 2022

 

187,613,447

$

19

$

756,628

$

(130)

$

(702,625)

$

53,892

Net loss

 

 

 

 

(18,090)

 

(18,090)

Unrealized gain on available-for-sale marketable securities

91

 

 

91

Issuance of common stock resulting from at-the-market transactions, net

22,281,059

2

25,532

25,534

Issuance of common stock resulting from vesting of restricted stock units

102,985

 

 

Issuance of common stock resulting from exercise of stock options

21,637

26

 

 

26

Stock-based compensation expense

1,356

 

 

1,356

Issuance of common stock under Employee Stock Purchase Plan

64,696

64

 

 

64

Balance at September 30, 2022

 

210,083,824

$

21

$

783,606

$

(39)

$

(720,715)

$

62,873

Balance at December 31, 2020

 

170,456,179

$

17

$

707,715

$

53

$

(592,511)

$

115,274

Net loss

(15,031)

 

(15,031)

Unrealized (loss) on available-for-sale marketable securities

(19)

 

(19)

Issuance of common stock resulting from exercise of stock options

173,890

381

 

381

Issuance of common stock resulting from vesting of restricted stock units

1,047,271

(52)

(52)

Stock-based compensation expense

1,980

 

1,980

Issuance of common stock under Employee Stock Purchase Plan

53,372

76

76

Balance at March 31, 2021

 

171,730,712

$

17

$

710,100

$

34

$

(607,542)

$

102,609

Net loss

(16,902)

 

(16,902)

Unrealized gain on available-for-sale marketable securities

5

 

5

Issuance of common stock resulting from exercise of stock options

330,758

361

 

361

Issuance of common stock resulting from vesting of restricted stock units

15,896

(38)

 

(38)

Stock-based compensation expense

 

 

2,170

 

 

 

2,170

Balance at June 30, 2021

 

172,077,366

$

17

$

712,593

$

39

$

(624,444)

$

88,205

Net loss

 

 

 

 

(22,786)

 

(22,786)

Unrealized (loss) on available-for-sale marketable securities

(12)

(12)

Issuance of common stock under Employee Stock Purchase Plan

56,688

 

 

106

 

 

 

106

Issuance of common stock resulting from vesting of restricted stock units

1,327,445

 

 

 

 

 

Issuance of common stock resulting from exercise of stock options

78,375

155

155

Stock-based compensation expense

 

 

1,987

 

 

 

1,987

Conversion of 2020 Notes into common stock

8,615,384

1

27,999

28,000

Balance at September 30, 2021

 

182,155,258

$

18

$

742,840

$

27

$

(647,230)

$

95,655

See accompanying notes to the condensed consolidated financial statements.

6

Verastem, Inc.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

(in thousands)

Nine months ended September 30,

    

2022

    

2021

Operating activities

Net loss

$

(57,004)

$

(54,719)

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

Depreciation

 

89

176

Amortization of right-of-use asset and lease liability

(113)

(98)

Stock-based compensation expense

 

4,760

 

6,137

Amortization of deferred financing costs, debt discounts and premiums and discounts on available-for-sale marketable securities

231

9,287

Changes in operating assets and liabilities:

Accounts receivable, net

442

134

Prepaid expenses, other current assets and other assets

 

1,349

 

(1,834)

Accounts payable

 

3,057

 

(1,038)

Accrued expenses and other liabilities

 

(833)

 

(1,614)

Deferred liabilities

 

965

 

Net cash used in operating activities

 

(47,057)

 

(43,569)

Investing activities

Purchases of property and equipment

 

(196)

Purchases of investments

 

(15,340)

 

(53,258)

Maturities of investments

 

68,500

 

53,475

Net cash provided by investing activities

 

53,160

 

21

Financing activities

Proceeds from long-term debt, net

24,148

Proceeds from the exercise of stock options and employee stock purchase program

282

1,079

Payment of deferred offering costs

(73)

Settlement of restricted stock for tax withholdings

(926)

Proceeds from the issuance of common stock, net

27,354

Net cash provided by financing activities

 

51,784

 

80

Increase (decrease) in cash, cash equivalents and restricted cash

 

57,887

 

(43,468)

Cash, cash equivalents and restricted cash at beginning of period

 

21,493

 

68,023

Cash, cash equivalents and restricted cash at end of period

$

79,380

$

24,555

Supplemental disclosure of non-cash investing and financing activities

Conversion of 2020 Notes into common stock

$

$

28,000

Deferred offering costs included in accounts payable and accrued expenses

$

$

46

See accompanying notes to the condensed consolidated financial statements.

7

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 an ongoing registration directed trial, 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, avutometinib (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 avutometinib (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 after at least two prior therapies and relapsed or refractory follicular lymphoma 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, avutometinib (VS-6766) and defactinib, market acceptance and commercial success of the Company’s product candidates, avutometinib (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, avutometinib (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 September 30, 2022 the Company had cash, cash equivalents, and investments of $104.0 million, and an accumulated deficit of $720.7 million. The Company expects its existing cash resources will be sufficient to fund its planned operations through at least 12 months from the date of issuance of these condensed consolidated financial statements.

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

8

opportunities that could include, but are not limited to collaboration agreements, future offerings of its equity, or the 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 and nine months ended September 30, 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 2Significant accounting policies in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021. During the nine months ended September 30, 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.

9

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 September 30, 2022 the Company’s cash, cash equivalents and investments were deposited at three financial institutions and it has no significant off-balance sheet concentrations of credit risk, such as foreign currency exchange contracts, option contracts or other hedging arrangements.

As of September 30, 2022, there was one customer, Secura, that made up more than 60% of the Company’s accounts receivable balance. The Company assesses the creditworthiness of all its customers and sets and reassesses customer credit limits to ensure collectability of any accounts receivable balances are assured.

For the nine months ended September 30, 2022, there was one customer, Secura, who individually accounted for all of the Company’s revenue. Refer to Note 13. License, collaboration, and commercial agreements for a detailed discussion of the Secura APA.

Proceeds from Grants

During the nine months ended September 30, 2022, the Company was awarded the “Therapeutic Accelerator Award” grant from Pancreatic Cancer Network (“PanCAN”) for up to $3.8 million (the “PanCAN Grant”). The grant is expected to support a Phase 1b/2 clinical trial of avutometinib (VS-6766) in combination with defactinib entitled RAMP 205. The trial will evaluate whether blockade of KRAS signaling which is mutated in more than 90% of pancreatic tumors, along with chemotherapy and reduction of stromal density will improve outcomes for patients with pancreatic cancer. In August 2022, PanCAN agreed to provide the Company with an additional $0.5 million for the collection and analysis of patient samples. The Company received $1.0 million of cash proceeds in July 2022 which was initially recorded as deferred liabilities on the condensed balance sheet. The Company recorded less than $0.1 million of the proceeds as a reduction of research and development expense during the three months ended September 30, 2022. As of September 30, 2022, the Company recorded $1.0 million as deferred liabilities in the condensed consolidated balance sheet related to the PanCAN Grant.

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):

    

September 30, 2022

    

December 31, 2021

Cash and cash equivalents

$

78,166

$

21,252

Restricted cash

 

1,214

 

241

Total cash, cash equivalents and restricted cash

$

79,380

$

21,493

Amounts included in restricted cash as of September 30, 2022 represent (i) cash received pursuant to the PanCAN Grant restricted for future expenditures for specific research and development activities and (ii) 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 amounts of $1.0 million and $0.2 million, respectively. Amounts included in restricted cash as of 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 $0.2 million. Cash received pursuant to the PanCAN Grant is included in prepaid expenses and other current assets on the condensed consolidated balance sheet as of September 30, 2022. The letters of credit are included in non-current restricted cash on the condensed consolidated balance sheets as of September 30, 2022 and December 31, 2021.

10

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.

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):

    

    

    

    

 

 

September 30, 2022

 

Description

    

Total

    

Level 1

    

Level 2

    

Level 3

 

Financial assets

Cash equivalents

$

77,187

$

54,314

$

22,873

$

Short-term investments

25,810

25,810

Total financial assets

$

102,997

$

54,314

$

48,683

$

    

    

 

 

December 31, 2021

 

Description

Total

    

Level 1

    

Level 2

    

Level 3

 

Financial assets

Cash equivalents

$

19,302

$

19,302

$

$

Short-term investments

 

79,004

 

 

79,004

 

Total financial assets

$

98,306

$

19,302

$

79,004

$

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 September 30, 2022 and December 31, 2021.

11

Fair Value of Financial Instruments

The fair value of the Company’s 2018 issued 5.00% Convertible Senior Notes due 2048 (the “2018 Notes”) was approximately $0.3 million as of September 30, 2022, which equals the carrying value of the 2018 Notes as of September 30, 2022. The fair value of the 2018 Notes was approximately $0.3 million as of December 31, 2021, which differed from the carrying value of the 2018 Notes of $0.2 million as of December 31, 2021. The fair value of the 2018 Notes is influenced by the Company’s stock price, stock price volatility, and current market yields and was determined using Level 3 inputs.

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 September 30, 2022, was approximately $24.4 million. The Company estimates that the fair value of its long-term debt was approximately $25.6 million as of September 30, 2022. There was no long-term debt outstanding as of December 31, 2021. The fair value of the Company’s long-term debt was determined using Level 3 inputs.

5. Investments

Cash, cash equivalents, restricted cash and investments consist of the following (in thousands):

    

September 30, 2022

 

    

    

Gross

    

Gross

    

 

Amortized

Unrealized

Unrealized

Fair

 

    

Cost

    

Gains

    

Losses

    

Value

 

Cash, cash equivalents & restricted cash:

Cash and money market accounts

$

56,508

$

$

$

56,508

Corporate bonds, agency bonds and commercial paper (due within 90 days)

22,865

8

(1)

22,872

Total cash, cash equivalents & restricted cash:

$

79,373

$

8

$

(1)

$

79,380

Investments:

Corporate bonds, agency bonds and commercial paper (due within 1 year)

$

25,856

$

15

$

(61)

$

25,810

Total investments

$

25,856

$

15

$

(61)

$

25,810

Total cash, cash equivalents, restricted cash and investments

$

105,229

$

23

$

(62)

$

105,190

    

December 31, 2021

    

    

Gross

    

Gross

    

 

Amortized

 

Unrealized

 

Unrealized

 

Fair

    

Cost

    

Gains

    

Losses

    

Value

 

Cash, cash equivalents & restricted cash:

Cash and money market accounts

$

21,493

$

$

$

21,493

Total cash, cash equivalents & restricted cash:

$

21,493

$

$

$

21,493

Investments:

Corporate bonds and commercial paper (due within 1 year)

$

78,970

$

48

$

(14)

$

79,004

Total investments

$

78,970

$

48

$

(14)

$

79,004

Total cash, cash equivalents, restricted cash and investments

$

100,463

$

48

$

(14)

$

100,497

There were no realized gains or losses on investments for the three and nine months ended September 30, 2022 or 2021. There was one debt security in an unrealized loss position for more than 12 months as of September 30, 2022, with a fair value of $5.0 million, and unrealized loss of less than $0.1 million. There were no investments in an unrealized loss position for more than 12 months as of December 31, 2021. There were six debt securities in an unrealized loss position for less than 12 months as of September 30, 2022, with a fair value of $16.4 million and

12

unrealized loss of less than $0.1 million. There were three debt securities in an unrealized loss position for less than 12 months as of December 31, 2021, with a fair value of $15.8 million and unrealized loss of less than $0.1 million. The Company considered the decline in the market value for these securities to be primarily attributable to current economic conditions. As it was not more likely than not that the Company would be required to sell these securities before the recovery of their amortized cost basis, which may be at maturity, the Company did not consider these investments to be other-than-temporarily impaired as of September 30, 2022 and December 31, 2021, respectively.

6. Accrued expenses

Accrued expenses consist of the following (in thousands):

    

September 30, 2022

    

December 31, 2021

 

Research and development expenses

$

8,163

$

9,311

Compensation and related benefits

 

3,393

 

3,892

Professional fees

 

678

 

785

Consulting fees

 

956

 

544

Interest

198

3

Commercialization costs

 

479

 

187

Other

 

921

 

899

Total accrued expenses

$

14,788

$

15,621

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 $150.0 million in a series of term loans (the “Term Loans”).

Pursuant to the Loan Agreement, the Company received an initial Term Loan of $25.0 million on the Closing Date and may borrow an additional $125.0 million of Term Loans at its option upon the satisfaction of certain conditions as follows:

i.$15.0 million (the “Term B Loan”), when the Company has either (a) received the Regulatory Milestone Payment (as defined in the Secura APA) from Secura of $35.0 million which is due upon receipt of regulatory approval of COPIKTRA in the United States for the treatment of peripheral T-cell lymphoma (“PTCL”) or (b) received at least $50.0 million in unrestricted cash proceeds from the sale or issuance of equity securities after the Closing Date (the “Term B Milestones”). The Company may draw the Term B Loan within 60 days after the occurrence of one of the Term B Milestones, but no later than March 31, 2023.
ii.$