Verastem, Inc. [VSTM] Filings

10-Q 1 vstm-20220930x10q.htm 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 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.

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TABLE OF CONTENTS

PART I—FINANCIAL INFORMATION
Item 1.	Condensed Consolidated Financial Statements (unaudited)	4
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	23
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	36
Item 4.	Controls and Procedures	37
PART II—OTHER INFORMATION
Item 1.	Legal Proceedings	38
Item 1A.	Risk Factors	38
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	38
Item 3.	Defaults Upon Senior Securities	38
Item 4.	Mine Safety Disclosures	38
Item 5.	Other Information	39
Item 6.	Exhibits	39
EXHIBIT INDEX		40
SIGNATURES		41

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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, 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.

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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)



	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.

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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.

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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.

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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.

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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 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

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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 2. Significant 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.

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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 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.

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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.

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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

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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:

$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.