10-Q 1 vstm-20220331x10q.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 March 31, 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 May 6, 2022 there were 186,361,206 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, 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.

3

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

$

46,687

$

21,252

Short-term investments

 

59,591

 

79,004

Accounts receivable, net

2,644

516

Prepaid expenses and other current assets

 

4,517

 

4,968

Total current assets

 

113,439

 

105,740

Property and equipment, net

 

180

 

210

Right-of-use asset, net

2,183

2,302

Restricted cash

241

241

Other assets

 

105

 

169

Total assets

$

116,148

$

108,662

Liabilities and stockholders’ equity

Current liabilities:

Accounts payable

$

2,896

$

2,302

Accrued expenses

 

13,294

 

15,621

Lease liability, short-term

 

696

 

667

Total current liabilities

 

16,886

 

18,590

Non-current liabilities:

 

 

Convertible senior notes

255

249

Long-term debt

24,157

Lease liability, long-term

2,079

2,264

Total liabilities

 

43,377

 

21,103

Stockholders’ equity:

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

 

 

Common stock, $0.0001 par value; 300,000 shares authorized, 186,330 and 185,286 shares issued and outstanding at March 31, 2022 and December 31, 2021, respectively

 

19

 

19

Additional paid-in capital

 

753,538

 

751,217

Accumulated other comprehensive income/(loss)

 

(113)

 

34

Accumulated deficit

(680,673)

(663,711)

Total stockholders’ equity

 

72,771

 

87,559

Total liabilities and stockholders’ equity

$

116,148

$

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 March 31,

    

2022

    

2021

 

Revenue:

Sale of COPIKTRA license and related assets

2,596

850

Transition services revenue

156

Total revenue

 

2,596

 

1,006

Operating expenses:

Research and development

13,642

8,896

Selling, general and administrative

 

5,934

 

6,218

Total operating expenses

 

19,576

 

15,114

Loss from operations

 

(16,980)

 

(14,108)

Other income

28

Interest income

 

46

 

52

Interest expense

 

(56)

 

(975)

Net loss

$

(16,962)

$

(15,031)

Net loss per share—basic and diluted

$

(0.09)

$

(0.09)

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

186,264

171,586

Net loss

$

(16,962)

$

(15,031)

Unrealized loss on available-for-sale securities

 

(147)

 

(19)

Comprehensive loss

$

(17,109)

$

(15,050)

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

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

See accompanying notes to the condensed consolidated financial statements.

6

Verastem, Inc.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

(in thousands)

Three months ended March 31,

    

2022

    

2021

Operating activities

Net loss

$

(16,962)

$

(15,031)

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

Depreciation

 

30

81

Amortization of right-of-use asset and lease liability

(37)

(32)

Stock-based compensation expense

 

1,646

 

1,980

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

17

636

Changes in operating assets and liabilities:

Accounts receivable, net

(2,128)

(886)

Prepaid expenses, other current assets and other assets

 

510

 

(1,814)

Accounts payable

 

92

 

774

Accrued expenses and other liabilities

 

(2,449)

 

(5,026)

Net cash used in operating activities

 

(19,281)

 

(19,318)

Investing activities

Purchases of property and equipment

 

(196)

Purchases of investments

 

(4,986)

 

(17,551)

Maturities of investments

 

24,250

 

5,375

Net cash provided by (used in) investing activities

 

19,264

 

(12,372)

Financing activities

Proceeds from long-term debt, net

24,772

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

100

300

Settlement of restricted stock for tax withholdings

(878)

Proceeds from the issuance of common stock, net

580

Net cash provided by (used in) financing activities

 

25,452

 

(578)

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

 

25,435

 

(32,268)

Cash, cash equivalents and restricted cash at beginning of period

 

21,493

 

68,023

Cash, cash equivalents and restricted cash at end of period

$

46,928

$

35,755

Supplemental disclosure of non-cash investing and financing activities

Common stock issuance costs included in accounts payable and accrued expenses

$

$

15

Settlement of restricted stock units for tax withholdings included in accrued expenses

$

$

9

Receivables related to stock option exercises in prepaid expenses and other current assets

$

$

157

Deferred financing costs included in accounts payable and accrued expenses

$

624

$

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 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 $106.3 million, and an accumulated deficit of $680.7 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 opportunities that could include, but are not limited to collaboration agreements, future offerings of its equity, or the

8

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 2Significant 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.

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 March 31, 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 March 31, 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 three months ended March 31, 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.

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

$

46,687

$

21,252

Restricted cash

 

241

 

241

Total cash, cash equivalents and restricted cash

$

46,928

$

21,493

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 $0.2 million. The letters of credit are included in non-current restricted cash on the condensed consolidated balance sheets as of March 31, 2022 and December 31, 2021.

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.

10

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):

    

    

    

    

 

 

March 31, 2022

 

Description

    

Total

    

Level 1

    

Level 2

    

Level 3

 

Financial assets

Cash equivalents

$

44,750

$

42,751

$

1,999

$

Short-term investments

59,591

59,591

Total financial assets

$

104,341

$

42,751

$

61,590

$

    

    

 

 

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 March 31, 2022 and December 31, 2021.

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 March 31, 2022, which equals the carrying value of the 2018 Notes of $0.3 million as of March 31, 2022. The fair value of the 2018 Notes was approximately $0.3 million as of December 31, 2021, which differs 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 March 31, 2022, was approximately $24.2 million. The Company estimates that the fair value of its long-term debt was approximately $26.2 million as of March 31, 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.

11

5. Investments

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

    

March 31, 2022

 

    

    

Gross

    

Gross

    

 

Amortized

Unrealized

Unrealized

Fair

 

    

Cost

    

Gains

    

Losses

    

Value

 

Cash, cash equivalents & restricted cash:

Cash and money market accounts

$

44,928

$

$

$

44,928

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

2,000

2,000

Total cash, cash equivalents & restricted cash:

$

46,928

$

$

$

46,928

Investments:

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

$

59,704

$

$

(113)

$

59,591

Total investments

$

59,704

$

$

(113)

$

59,591

Total cash, cash equivalents, restricted cash and investments

$

106,632

$

$

(113)

$

106,519

    

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 months ended March 31, 2022 or 2021. There was one debt security in an unrealized loss position for more than 12 months as of March 31, 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 than 12 months as of December 31, 2021. There were 19 debt securities in an unrealized loss position for less than 12 months as of March 31, 2022, with a fair value of $50.9 million and unrealized loss of $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 March 31, 2022 and December 31, 2021, respectively.

12

6. Accrued expenses

Accrued expenses consist of the following (in thousands):

    

March 31, 2022

    

December 31, 2021

 

Research and development expenses

$

9,374

$

9,311

Compensation and related benefits

 

1,443

 

3,892

Professional fees

 

907

 

785

Consulting fees

 

438

 

544

Interest

6

3

Commercialization costs

 

212

 

187

Other

 

914

 

899

Total accrued expenses

$

13,294

$

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.$25.0 million (the “Term C Loan”), when the Company has received accelerated or full approval from the FDA of VS-6766 for the treatment of LGSOC (the “Term C Milestone”). The Company may draw the Term C Loan within 60 days after the occurrence the Term C Milestone, but no later than March 31, 2024.
iii.$35.0 million (the “Term D Loan”), when the Company has achieved at least $50.0 million in gross product revenue calculated on a trailing six-month basis (the “Term D Milestone”). The Company may draw the Term D Loan within 30 days after the occurrence of the Term D Milestone, but no later than March 31, 2025.
iv.$50.0 million (the “Term E Loan”), at the sole discretion of the Lenders.

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) 0.13% plus (b) 7.37%, which is subject to an overall floor and cap. Interest is payable monthly in arrears on the first calendar day of each calendar month. Beginning (i) April 1, 2024, if the Term B Loan is not made, (ii) April 1, 2025, if the Term B Loan is made, or (iii) April 1, 2026, if the Term B Loan is made and either (A) VS-6766 has received FDA approval for the treatment of LGSOC or (B) COPIKTRA has received FDA approval for the treatment of PTCL, the Company shall repay the Term Loans in consecutive equal monthly payments of principal, together with applicable interest, in arrears. All unpaid principal and accrued and unpaid interest with respect to each Term Loan is due and payable in full on March 1, 2027.

The Company is required to make a final payment of 5.0% of the original principal amount of the Term Loans that are drawn, payable at maturity or upon any earlier acceleration or prepayment of the Term Loans (the “Final Payment Fee”). The Company may prepay all, but not less than all, of the Term Loans, subject to a prepayment fee equal to (i) 3.0% of the principal amount of the applicable Term Loan if prepaid on or before the first anniversary date of the

13

funding date of such Term Loan, (ii) 2.0% of the principal amount of the applicable Term Loan if prepaid after the first anniversary and on or before the second anniversary of the funding date of such Term Loan, and (iii) 1.0% of the principal amount of the applicable Term Loan if prepaid after the second anniversary of the applicable funding date of such Term Loan. All Term Loans are subject to a facility fee of 0.5% of the principal amount.

The Loan Agreement contains no financial covenants. The Loan Agreement includes customary events of default, including, among others, payment defaults, breach of representations and warrants, covenant defaults, judgment defaults, insolvency and bankruptcy defaults, and a material adverse change. The occurrence of an event of default could result in the acceleration of the obligations under the Loan Agreement, termination of the Term Loan commitments and the right to foreclose on the collateral securing the obligations. During the existence of an event of default, the Term Loans will accrue interest at a rate per annum equal to 5.0% above the otherwise applicable interest rate.

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

$

25,000

$

Final Payment Fee

5

Debt issuance costs, net of accretion

(848)

Long-term debt, net of discount

$

24,157

$

As of March 31, 2022, future principal payments due are as follows (in thousands):

2022

$

2023

2024

6,250

2025

8,333

2026

8,333

2027

2,084

Total principal payments

$

25,000

14

8. Leases

On April 15, 2014, the Company entered into a lease agreement for approximately 15,197 square feet of office and laboratory space in Needham, Massachusetts. Effective February 15, 2018, the Company amended its lease agreement to relocate within the facility to another location consisting of 27,810 square feet of office space (the “Amended Lease Agreement”). The Amended Lease Agreement extends the expiration date of the lease from September 2019 through June 2025. Pursuant to the Amended Lease Agreement, the initial annual base rent amount is approximately $0.7 million, which increases during the lease term to $1.1 million for the last twelve-month period.

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.

15

As of March 31, 2022, a right-of-use asset of $2.2 million and lease liability of $2.8 million are reflected on the condensed consolidated balance sheets. The elements of lease expense were as follows (dollar amounts in thousands):

Three months ended March 31,

2022

2021

Lease Expense

Operating lease expense

$

221

$

221

Total Lease Expense

$

221

$

221

Other Information - Operating Leases

Operating cash flows paid for amounts included in measurement of lease liabilities

$

257

$

252

March 31, 2022

Other Balance Sheet Information - Operating Leases

Weighted average remaining lease term (in years)

3.3

Weighted average discount rate

14.6%

Maturity Analysis

2022

782

2023

1,060

2024

1,081

2025

546

Total

$

3,469

Less: Present value discount

(694)

Lease Liability

$

2,775

9. Convertible Senior Notes

2018 Notes

On October 17, 2018, the Company closed a registered direct public offering of $150.0 million aggregate principal amount of 2018 Notes for net proceeds of approximately $145.3 million. The 2018 Notes are governed by the terms of a base indenture for senior debt securities (the “2018 Base Indenture”), as supplemented by the first supplemental indenture thereto (the “2018 Notes Supplemental Indenture” and together with the 2018 Base Indenture, the “2018 Indenture”), each dated October 17, 2018, by and between the Company and Wilmington Trust, National Association (“Wilmington”), as trustee. The 2018 Notes are senior unsecured obligations of the Company and bear interest at a rate of 5.00% per annum, payable semi-annually in arrears on May 1 and November 1 of each year, beginning on May 1, 2019. The 2018 Notes will mature on November 1, 2048, unless earlier repurchased, redeemed or converted in accordance with their terms.

The 2018 Notes are convertible into shares of the Company’s common stock, par value $0.0001 per share, together, if applicable, with cash in lieu of any fractional share, at an initial conversion rate of 139.5771 shares of common stock per $1,000 principal amount of the 2018 Notes, which corresponds to an initial conversion price of approximately $7.16 per share of common stock. Upon conversion, converting noteholders will be entitled to receive accrued interest on their converted 2018 Notes.

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 130% of the conversion price on each of at least 20 VWAP Trading Days (as defined in the 2018 Indenture), whether or not consecutive, during any 30 consecutive VWAP Trading Day period commencing on or after the date the Company first issued the 2018 Notes.

16

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 $121.7 million aggregate principal amount of the 2018 Notes for (i) approximately $66.9 million aggregate principal amount of 5.00% Convertible Senior Second Lien Notes due 2048 (the “2019 Notes”), (ii) an aggregate of approximately $12.1 million in 2018 Notes principal repayment and (iii) accrued interest on the 2018 Notes through the exchange date. As of March 31, 2020, all 2019 Notes have converted into shares of common stock and are no longer outstanding.

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 $28.0 million aggregate principal amount of 2018 Notes for approximately $28.0 million aggregate principal amount of newly issued 5.00% Convertible Senior Notes due 2048 (the “2020 Notes”). The issuance of the 2020 Notes closed on November 13, 2020. The 2020 Notes were governed pursuant to the Base Indenture between the Company and Wilmington, as trustee and collateral agent, dated as of October 17, 2018 as supplemented by the second supplemental indenture thereto, dated as of November 13, 2020, (the “2020 Notes Supplemental Indenture” and together with the Base Indenture, the “2020 Indenture”).

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 123.08% of the conversion price on each of at least 20 “VWAP Trading Days” (as defined in the 2020 Indenture), whether or not consecutive, during any 30 consecutive VWAP Trading Day period commencing on or after the date the Company first issued the 2020 Notes (the “2020 Notes Mandatory Conversion Option”).

On July 1, 2021, the Company exercised the Company’s 2020 Notes Mandatory Conversion Option for the aggregate principal amount of $28.0 million of the Company’s 2020 Notes. On July 16, 2021, the aggregate principal of $28.0 million of 2020 Notes was converted into 8,615,384 shares of common stock. As a result, all 2020 Notes have converted into shares of common stock.

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 $100.0 million of its common stock at the current market prices from time to time through Cantor as sales agent (the “August 2021 ATM”). During the three months ended March 31, 2022, the Company sold 285,900 shares under the August 2021 ATM for net proceeds of approximately $0.6 million (after deducting commissions and other offering expenses).

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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

 

16,264,098

$

3.56

 

6.7

$

2,601

Granted

 

9,125

1.43

Forfeited/cancelled

 

(330,163)

3.02

Outstanding at March 31, 2022

 

15,943,060

$

3.57

 

6.4

$

247

Vested at March 31, 2022

 

9,582,681

$

4.31

 

4.8

$

214

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

 

2.18

%  

0.55

%  

Volatility

 

87

%  

97

%  

Dividend yield

 

Expected term (years)

 

5.6

6.1

18

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

 

2,805,004

$

2.44

Granted

 

813

$

2.10

Vested

 

(113,218)

$

2.32

Forfeited/cancelled

(93,394)

$

2.25

Outstanding at March 31, 2022

 

2,599,205

$

2.45

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 85% of the lesser of the fair market value of the common stock on (a) the date the option is granted, which is the first day of the purchase period, and (b) the exercise date, which is the last business day of the purchase period. The Amended and Restated 2018 ESPP generally allows for two six-month purchase periods per year beginning in January and July, or such other periods as determined by the compensation committee of the Company’s board of directors. The Company has reserved 2,000,000 shares of common stock for the administration of the Amended and Restated 2018 ESPP. The fair value of shares expected to be purchased under the Amended and Restated 2018 ESPP was calculated using the following weighted-average assumptions:

Three months ended March 31,

2022

2021

Risk-free interest rate

0.22

%  

0.09

%  

Volatility

50

%  

65

%  

Dividend yield

Expected term (years)

0.5

0.5

For the three months ended March 31, 2022 and 2021, the Company has recognized less than $0.1 million in each period of stock-based compensation expense under the Amended and Restated 2018 ESPP. During the three months ended March 31, 2022 the Company issued 57,636 shares of common stock for proceeds of $0.1 million under the Amended and Restated 2018 ESPP.

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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

15,943,060

 

12,519,758

Outstanding restricted stock units

2,599,205

2,850,955

2018 Notes

41,873

41,873

2020 Notes

8,615,384

Employee stock purchase plan

51,050

33,034

Total potentially dilutive securities

18,635,188

 

24,061,004

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 $70.0 million in September 2020 and has agreed to pay the Company (i) regulatory milestone payments up to $45.0 million, consisting of a payment of $35.0 million upon receipt of regulatory approval of COPIKTRA in the United States for the treatment of PTCL and a payment of $10.0 million upon receipt of the first regulatory approval for the commercial sale of COPIKTRA in the European Union for the treatment of PTCL, (ii) sales milestone payments of up to $50.0 million, consisting of $10.0 million when total worldwide net sales of COPIKTRA exceed $100.0 million, $15.0 million when total worldwide net sales of COPIKTRA exceed $200.0 million and $25.0 million when total worldwide net sales of COPIKTRA exceed $300.0 million, (iii) low double-digit royalties on the annual aggregate net sales above $100.0 million in the United States, European Union, and the United Kingdom of Great Britain and Northern Ireland and (iv) 50% of all royalty, milestone and sublicense revenue payments payable to Secura under the Company’s existing license agreements with Sanofi, Yakult, and CSPC, and 50% of all royalty and milestone payments payable to Secura under any license or sublicense agreement entered into by Secura in certain jurisdictions.

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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 one year from the date of execution (“Secura TSA Services”). Services performed were paid at a mutually agreed upon rate.

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 $70.0 million, future potential milestone payments and royalties including from Secura’s sublicensees should be allocated to the delivery of the Bundled Secura Performance Obligation. The Company has the right to consideration for TSA services in an amount that corresponds directly with the value to Secura of the Company’s performance to date. Consideration allocated to the Secura TSA Services will be recognized as such services are provided over the performance period using an output method based on the amount to which the Company has a right to invoice.

The Company determined $0.2 million of future potential royalties the Company expects to receive pursuant to the Secura APA were not constrained as of March 31, 2022. When estimating the amount of royalties to be received that were not constrained, the Company used the expected value method as there are a range of possible outcomes. When estimating royalties to be received, the Company used a combination of internal projections and forecasts and data from external sources. The Company determined that all other future potential royalties were constrained under the guidance as of March 31, 2022. As part of the Company’s evaluation of the constraint on future royalties, the Company considered a number of factors in determining whether there is significant uncertainty associated with the future events that would result in royalty payments. Those factors include: the likelihood and magnitude of revenue reversals related to future royalties, the amount of variable consideration is highly susceptible to factors outside of the Company’s influence, the amount of time to resolve the uncertainty, and lack of significant history of selling COPIKTRA outside of the United States.

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):