pstx-10q_20200630.htm

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 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 June 30, 2020

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: 001-39376

 

Poseida Therapeutics, Inc.

(Exact Name of Registrant as Specified in its Charter)

 

 

Delaware

47-2846548

(State or Other Jurisdiction of

Incorporation or Organization)

(I.R.S. Employer
Identification No.)

9390 Towne Centre Drive, Suite 200

San Diego, California

92121

(Address of Principal Executive Offices)

(Zip Code)

Registrant’s telephone number, including area code: (858) 779-3100

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.0001 per share

PSTX

Nasdaq Global Select 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, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

 

Accelerated filer

 

 

 

 

 

Non-accelerated filer

 

 

Smaller reporting company

 

 

 

 

 

 

 

 

 

 

 

 

Emerging growth company

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No

As of August 15, 2020, the registrant had 61,819,509 shares of common stock, $0.0001 par value per share, outstanding.

 

 

 


 

TABLE OF CONTENTS

 

PART I. FINANCIAL INFORMATION

Page

 

Item 1. Financial Statements (Unaudited)

4

 

Condensed Consolidated Balance Sheets as of June 30, 2020 and December 31, 2019

4

 

Condensed Consolidated Statements of Operations and Comprehensive Loss for the three and six months ended June 30, 2020 and 2019

5

 

Condensed Consolidated Statements of Changes in Convertible Preferred Stock and Stockholders’ Deficit

6

 

Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2020 and 2019

7

 

Notes to Condensed Consolidated Financial Statements

8

 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

24

 

Item 3. Quantitative and Qualitative Disclosures about Market Risk

40

 

Item 4. Controls and Procedures

41

PART II. OTHER INFORMATION

 

 

Item 1. Legal Proceedings

42

 

Item 1A. Risk Factors

42

 

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

96

 

Item 3. Defaults Upon Senior Securities

96

 

Item 4. Mine Safety Disclosures

97

 

Item 5. Other Information

97

 

Item 6. Exhibits

97

 

Signatures

98

 

1


 

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements about us and our industry that involve substantial risks and uncertainties.  All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q including statements regarding our future results of operations or financial condition, business strategy and plans and objectives of management for future operations, are forward-looking statements.  In some cases, you can identify forward-looking statements because they contain words such as “anticipate,” “believe,” “contemplate,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “should,” “target,” “will” or “would” or the negative of these words or other similar terms or expressions.  These forward-looking statements include, but are not limited to, statements concerning the following:

 

our expectations regarding the timing, scope and results of our development activities, including our ongoing and planned clinical trials;

 

the timing of and plans for regulatory filings;

 

our plans to obtain and maintain regulatory approvals of our product candidates in any of the indications for which we plan to develop them, and any related restrictions, limitations, and/or warnings in the label of an approved product candidate;

 

the potential benefits of our product candidates and technologies;

 

our expectations regarding the use of our platform technologies to generate novel product candidates;

 

the market opportunities for our product candidates and our ability to maximize those opportunities;

 

our business strategies and goals;

 

estimates of our expenses, capital requirements, any future revenue, and need for additional financing;

 

our expectations regarding establishing manufacturing capabilities;

 

the performance of our third-party suppliers and manufacturers;

 

our expectations regarding our ability to obtain and maintain intellectual property protection for our platform technologies and product candidates and our ability to operate our business without infringing on the intellectual property rights of others;

 

our expectations regarding developments and projections relating to our competitors, competing therapies that are or become available, and our industry;

 

our expectations regarding the impact of the COVID-19 pandemic on our business, our industry and the economy;

 

future changes in or impact of law and regulations in the United States and foreign countries; and

 

the sufficiency of our existing cash, cash equivalents and short-term investments to fund our operations.

We have based these forward-looking statements on our current expectations and projections about future events and trends that we believe may affect our financial condition, results of operations, strategy, short- and long-term business operations and objectives and financial needs.

These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those described in the section titled “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q.  Moreover, we operate in a very competitive and rapidly changing environment.  New risks emerge from time to time.  It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make.  In light of these risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this Quarterly Report on Form 10-Q may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.

2


 

You should not rely upon forward-looking statements as predictions of future events. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee that the future results, advancements, discoveries, levels of activity, performance or events and circumstances reflected in the forward-looking statements will be achieved or occur. Moreover, except as required by law, neither we nor any other person assumes responsibility for the accuracy and completeness of the forward-looking statements. We undertake no obligation to update publicly any forward-looking statements for any reason after the date of this Quarterly Report on Form 10-Q to conform these statements to actual results or to changes in our expectations.

Unless the context otherwise indicates, references in this report to the terms “Poseida”, “the Company,” “we,” “our” and “us” refer to Poseida Therapeutics, Inc. and its subsidiaries.

We may announce material business and financial information to our investors using our investor relations website (investors.poseida.com).  We therefore encourage investors and others interested in Poseida to review the information that we make available on our website, in addition to following our filings with the Securities and Exchange Commission, or the SEC, press releases and conference calls.

3


 

PART I.  FINANCIAL INFORMATION

Item 1.Financial Statements

Poseida Therapeutics, Inc.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)
(In thousands, except share amounts)

 

 

 

June 30,

2020

 

 

December 31,

2019

 

ASSETS

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

147,133

 

 

$

87,784

 

Short-term investments

 

 

19,998

 

 

 

37,534

 

Prepaid expenses and other current assets

 

 

6,015

 

 

 

1,861

 

Total current assets

 

 

173,146

 

 

 

127,179

 

Property and equipment, net

 

 

22,085

 

 

 

10,858

 

Operating lease right-of-use assets

 

 

20,145

 

 

 

 

Intangible assets

 

 

1,320

 

 

 

1,320

 

Goodwill

 

 

4,228

 

 

 

4,228

 

Other long-term assets

 

 

3,548

 

 

 

3,411

 

Deferred offering costs

 

 

1,880

 

 

 

 

Total assets

 

$

226,352

 

 

$

146,996

 

LIABILITIES, CONVERTIBLE PREFERRED STOCK AND

   STOCKHOLDERS’ DEFICIT

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

1,562

 

 

$

4,929

 

Accrued and other liabilities

 

 

23,152

 

 

 

13,926

 

Operating lease liabilities, current

 

 

4,178

 

 

 

 

Term debt - short-term

 

 

 

 

 

3,000

 

Total current liabilities

 

 

28,892

 

 

 

21,855

 

Term debt - long-term

 

 

28,990

 

 

 

26,140

 

Deferred CIRM grant liability

 

 

23,755

 

 

 

19,592

 

Warrant liability

 

 

1,470

 

 

 

1,271

 

Deferred tax liability

 

 

55

 

 

 

55

 

Operating lease liability, non-current

 

 

21,188

 

 

 

 

Other long-term liabilities

 

 

992

 

 

 

5,421

 

Total liabilities

 

 

105,342

 

 

 

74,334

 

Commitments and contingencies (Note 11)

 

 

 

 

 

 

 

 

Convertible preferred stock (Series A, A-1, B, C and D), $0.0001 par value 46,809,523

   and 33,085,827 shares authorized at June 30, 2020 and December 31, 2019, respectively;

   42,953,085 and 32,934,785 shares issued and outstanding at June 30, 2020 and

   December 31, 2019, respectively; liquidation preference of $326,313 at June 30, 2020

 

 

326,313

 

 

 

222,173

 

Stockholders’ equity:

 

 

 

 

 

 

 

 

Common stock, $0.0001 par value: 73,000,000 and 57,013,463 shares authorized at June 30,

   2020 and December 31, 2019, respectively; 13,370,778 and 13,196,419 shares issued and

   outstanding at June 30, 2020 and December 31, 2019, respectively

 

 

2

 

 

 

2

 

Additional paid-in capital

 

 

5,997

 

 

 

2,689

 

Accumulated other comprehensive income

 

 

20

 

 

 

19

 

Accumulated deficit

 

 

(211,322

)

 

 

(152,221

)

Total stockholders’ deficit

 

 

(205,303

)

 

 

(149,511

)

Total liabilities, convertible preferred stock and stockholders’

   deficit

 

$

226,352

 

 

$

146,996

 

 

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

 

4


 

Poseida Therapeutics, Inc.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(Unaudited)

(In thousands, except share amounts)

 

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

$

25,210

 

 

$

16,881

 

 

$

48,625

 

 

$

25,493

 

General and administrative

 

 

4,236

 

 

 

4,042

 

 

 

9,090

 

 

 

10,442

 

Increase in contingent consideration (inclusive of

   related party amounts of zero, $2,968, zero and

   $2,249, respectively)

 

 

 

 

 

7,420

 

 

 

 

 

 

5,623

 

Total operating expenses

 

 

29,446

 

 

 

28,343

 

 

 

57,715

 

 

 

41,558

 

Loss from operations

 

 

(29,446

)

 

 

(28,343

)

 

 

(57,715

)

 

 

(41,558

)

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

(892

)

 

 

(903

)

 

 

(1,806

)

 

 

(1,698

)

Other income (expense), net

 

 

(90

)

 

 

619

 

 

 

309

 

 

 

1,295

 

Net loss before income tax

 

 

(30,428

)

 

 

(28,627

)

 

 

(59,212

)

 

 

(41,961

)

Income tax benefit

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

$

(30,428

)

 

$

(28,627

)

 

$

(59,212

)

 

$

(41,961

)

Other comprehensive income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive income (expense) (net of tax expense

   of zero for each of the periods ending

   June 30, 2020 and 2019)

 

$

(110

)

 

$

5

 

 

$

1

 

 

$

5

 

Total other comprehensive income (expense)

 

$

(110

)

 

$

5

 

 

$

1

 

 

$

5

 

Comprehensive loss

 

$

(30,538

)

 

$

(28,622

)

 

$

(59,211

)

 

$

(41,956

)

Net loss per share attributable to common stockholders,

   basic and diluted

 

$

(2.28

)

 

$

(2.32

)

 

$

(4.44

)

 

$

(3.41

)

Weighted-average shares of common stock, basic and

   diluted

 

 

13,370,763

 

 

 

12,320,960

 

 

 

13,346,672

 

 

 

12,305,874

 

 

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

5


 

Poseida Therapeutics, Inc.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ DEFICIT

(Unaudited)

(In thousands, except share amounts)

 

 

 

Convertible

Preferred Stock

 

 

 

Common Stock

 

 

Additional

Paid-in

 

 

Accumulated

Other

Comprehensive

 

 

Accumulated

 

 

Total

Stockholders’

 

 

 

Shares

 

 

Amount

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Income

 

 

Deficit

 

 

Deficit

 

Balance at January 1, 2019

 

 

18,200,011

 

 

$

72,460

 

 

 

 

12,275,579

 

 

$

2

 

 

$

(11,026

)

 

$

 

 

$

(65,694

)

 

$

(76,718

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(13,334

)

 

 

(13,334

)

Issuance of common stock under

   employee stock compensation

   plans

 

 

 

 

 

 

 

 

 

16,594

 

 

 

 

 

 

18

 

 

 

 

 

 

 

 

 

18

 

Issuance of Series C preferred

   stock for cash net of

   issuance costs $146

 

 

8,457,758

 

 

 

85,954

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation

   expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

454

 

 

 

 

 

 

 

 

 

454

 

Balance at March 31, 2019

 

 

26,657,769

 

 

$

158,414

 

 

 

 

12,292,173

 

 

$

2

 

 

$

(10,554

)

 

$

 

 

$

(79,027

)

 

$

(89,580

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(28,627

)

 

 

(28,627

)

Issuance of common stock under

   employee stock compensation

   plans

 

 

 

 

 

 

 

 

 

34,800

 

 

 

 

 

 

37

 

 

 

 

 

 

 

 

 

37

 

Issuance of Series C preferred

   stock for cash net of issuance

   costs $133

 

 

5,502,950

 

 

 

55,896

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

607

 

 

 

 

 

 

 

 

 

607

 

Unrealized gain on marketable

   securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

5

 

 

 

 

 

 

5

 

Balance at June 30, 2019

 

 

32,160,719

 

 

$

214,310

 

 

 

 

12,326,973

 

 

$

2

 

 

$

(9,910

)

 

$

5

 

 

$

(107,654

)

 

$

(117,558

)

Balance at January 1, 2020

 

 

32,934,785

 

 

$

222,173

 

 

 

 

13,196,419

 

 

$

2

 

 

$

2,689

 

 

$

19

 

 

$

(152,221

)

 

$

(149,511

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(28,784

)

 

 

(28,784

)

Transition adjustment from adoption

   of ASC 842 (Note 2)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

111

 

 

 

111

 

Issuance of common stock under

   employee stock compensation

   plans

 

 

 

 

 

 

 

 

 

174,359

 

 

 

 

 

 

183

 

 

 

 

 

 

 

 

 

183

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,509

 

 

 

 

 

 

 

 

 

1,509

 

Unrealized gain on marketable

   securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

111

 

 

 

 

 

 

111

 

Balance at March 31, 2020

 

 

32,934,785

 

 

$

222,173

 

 

 

 

13,370,778

 

 

$

2

 

 

$

4,381

 

 

$

130

 

 

$

(180,894

)

 

$

(176,381

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(30,428

)

 

 

(30,428

)

Issuance of Series D preferred

   stock for cash, net of issuance

   costs of $5,359

 

 

10,018,300

 

 

 

104,140

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,616

 

 

 

 

 

 

 

 

 

1,616

 

Change in unrealized gain on

   marketable securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(110

)

 

 

 

 

 

(110

)

Balance at June 30, 2020

 

 

42,953,085

 

 

$

326,313

 

 

 

 

13,370,778

 

 

$

2

 

 

$

5,997

 

 

$

20

 

 

$

(211,322

)

 

$

(205,303

)

 

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

6


 

Poseida Therapeutics, Inc.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited) (In thousands)

 

 

 

Six Months Ended June 30,

 

 

 

2020

 

 

2019

 

OPERATING ACTIVITIES

 

 

 

 

 

 

 

 

Net loss

 

$

(59,212

)

 

$

(41,961

)

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

 

 

 

 

 

 

 

 

Depreciation & amortization expense

 

 

859

 

 

 

460

 

Loss on disposal of assets

 

 

 

 

 

450

 

Stock-based compensation

 

 

3,125

 

 

 

1,061

 

Change in fair value of contingent liabilities

 

 

 

 

 

5,623

 

Change in preferred stock warrant liability

 

 

199

 

 

 

(492

)

Accretion of discount on issued term debt

 

 

476

 

 

 

384

 

Write-off of deferred financing costs

 

 

 

 

 

855

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Prepaid expenses and other current assets

 

 

(1,817

)

 

 

(298

)

Operating lease right-of-use assets

 

 

2,201

 

 

 

 

Other long-term assets

 

 

(137

)

 

 

(930

)

Accounts payable

 

 

(3,654

)

 

 

1,413

 

Accrued liabilities

 

 

6,233

 

 

 

4,490

 

Operating lease liabilities

 

 

(1,959

)

 

 

 

Other long-term liabilities

 

 

 

 

 

161

 

Net cash used in operating activities

 

 

(53,686

)

 

 

(28,784

)

INVESTING ACTIVITIES

 

 

 

 

 

 

 

 

Purchases of property and equipment

 

 

(11,955

)

 

 

(1,952

)

Purchases of short-term investments

 

 

(19,884

)

 

 

(18,652

)

Proceeds from maturities of short-term investments

 

 

37,500

 

 

 

 

Net cash provided by (used in) investing activities

 

 

5,661

 

 

 

(20,604

)

FINANCING ACTIVITIES

 

 

 

 

 

 

 

 

Net proceeds from stock option exercises

 

 

183

 

 

 

55

 

Issuance of Series C financing, net of issuance costs

 

 

 

 

 

141,850

 

Issuance of Series D financing, net of issuance costs

 

 

104,140

 

 

 

 

Payment of deferred offering costs

 

 

(787

)

 

 

 

Net proceeds from CIRM grant

 

 

4,163

 

 

 

4,642

 

Proceeds from term debt

 

 

 

 

 

10,000

 

Payment of debt issuance costs

 

 

(325

)

 

 

(53

)

Net cash provided by financing activities

 

 

107,374

 

 

 

156,494

 

Net increase in cash and cash equivalents

 

 

59,349

 

 

 

107,106

 

Cash and cash equivalents at beginning of period

 

 

87,784

 

 

 

30,395

 

Cash and cash equivalents at end of period

 

$

147,133

 

 

$

137,501

 

Non-cash operating, investing and financing activities:

 

 

 

 

 

 

 

 

Purchases of property and equipment included in accounts payable and

   accrued liabilities

 

$

2,186

 

 

$

1,039

 

Tenant improvement receivable from landlord

 

$

1,314

 

 

$

 

Deferred offering costs incurred but not yet paid

 

$

1,092

 

 

$

 

Supplemental disclosure of cash flow information:

 

 

 

 

 

 

 

 

Interest paid

 

$

1,660

 

 

$

1,192

 

 

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

 

7


Poseida Therapeutics, Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

NOTE 1—NATURE OF BUSINESS AND BASIS OF PRESENTATION

Nature of Operations

Poseida Therapeutics, Inc. (the “Company” or “Poseida”) is a clinical-stage biopharmaceutical company dedicated to utilizing its proprietary gene engineering platform technologies to create next generation cell and gene therapeutics with the capacity to cure.

The Company is subject to risks and uncertainties common to development-stage companies in the biotechnology industry, including, but not limited to, development by competitors of new technological innovations, dependence on key personnel, protection of proprietary technology, compliance with government regulations and the ability to secure additional capital to fund operations. Product candidates currently under development will require significant additional research and development efforts, including extensive preclinical and clinical testing and regulatory approval prior to commercialization. These efforts require significant amounts of additional capital, adequate personnel and infrastructure and extensive compliance-reporting capabilities. Even if the Company’s therapeutic development efforts are successful, it is uncertain when, if ever, the Company will realize significant revenue from product sales.

Reverse Stock Split

These condensed consolidated financial statements reflect a 1-for-1.247 reverse stock split of the Company’s common stock, which became effective on July 2, 2020. All share and per share data for all periods presented in the accompanying condensed consolidated financial statements and notes thereto have been adjusted retrospectively, where applicable, to reflect the reverse stock split.

Initial Public Offering

On July 14, 2020, the Company completed its initial public offering (“IPO”), in which the Company issued and sold 14,000,000 shares of its common stock, at a public offering price of $16.00 per share, for an aggregate gross proceeds of $224.0 million. The Company received approximately $204.8 million in net proceeds after deducting underwriting discounts and estimated offering expenses payable by the Company. At the closing of the IPO, 34,445,108 shares of outstanding Convertible Preferred Stock were automatically converted into 34,445,108 shares of common stock, and outstanding warrants to purchase an aggregate of 121,122 shares of Convertible Preferred Stock became exercisable for an equal number of shares of common stock and were reclassified into permanent equity.

The condensed consolidated financial statements as of June 30, 2020, including share and per share amounts, do not give effect to the IPO, the conversion of the Convertible Preferred Stock into common stock, or the outstanding warrants becoming exercisable for common stock and the related reclassification into permanent equity, as the IPO and such conversions and reclassification into permanent equity were completed subsequent to June 30, 2020.

Liquidity and capital resources

The Company has experienced net losses and negative cash flows from operations since its inception and has relied on its ability to fund its operations primarily through equity financings. The Company has incurred net losses for the year ended December 31, 2019 and six months ended June 30, 2020 of $86.5 million and $59.2 million, respectively, and negative cash flows from operations for these same periods of $64.4 million and $53.7 million, respectively. The Company expects to continue to incur net losses and negative cash flows from operations for at least the next several years. As of June 30, 2020, the Company had an accumulated deficit of $211.3 million.

The Company expects that its cash, cash equivalents and marketable securities as of June 30, 2020 of $167.1 million, along with $204.8 million in net IPO proceeds raised on July 14, 2020, will be sufficient to fund its operations for at least the next twelve months from the date of issuance of these financial statements. In the long term the Company will need additional financing to support its continuing operations and pursue its growth strategy. Until such time as the Company can generate significant revenue from product sales, if ever, it expects to finance its

8


Poseida Therapeutics, Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

 

operations through a combination of equity offerings, debt financings, collaborations, strategic alliances and licensing arrangements. The Company may be unable to raise additional funds or enter into such other agreements when needed on favorable terms or at all. The inability to raise capital as and when needed would have a negative impact on the Company’s financial condition and its ability to pursue its business strategy. The Company will need to generate significant revenue to achieve profitability, and it may never do so.

Basis of Preparation and Consolidation

The accompanying condensed consolidated financial statements reflect the Company’s financial position, results of operations and cash flows, in conformity with generally accepted accounting principles in the United States (“GAAP”) and include the accounts of Poseida Therapeutics, Inc. and its wholly owned subsidiaries. All intercompany transactions and balances have been eliminated.

Unaudited Interim Condensed Financial Statements

In the opinion of Company’s management, the accompanying unaudited condensed financial statements have been prepared in accordance with GAAP for interim financial information. These unaudited condensed consolidated financial statements include all adjustments necessary to fairly state the financial position and the results of its operations and cash flows for interim periods in accordance with GAAP. Interim-period results are not necessarily indicative of results of operations or cash flows for a full year or any subsequent interim period.

The accompanying condensed financial statements should be read in conjunction with our audited financial statements and notes included in the prospectus dated July 09, 2020 filed with the Securities and Exchange Commission (“SEC”) on July 10, 2020 in connection with the IPO (“Prospectus”).

NOTE 2—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Use of Estimates

The preparation of consolidated financial statements in conformity with GAAP requires the Company to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. On an ongoing basis, the Company evaluates its estimates, which include, but are not limited to, estimates related to accrued expenses, contingent consideration, warrant liability, stock-based compensation expense, deferred tax valuation allowances and, prior to the Company’s IPO, the fair value of common stock. The Company bases its estimates on historical experience and other market-specific or relevant assumptions that it believes to be reasonable under the circumstances. Actual results may differ from those estimates or assumptions.

Prior to the IPO, the Company utilized significant estimates and assumptions in determining the fair value of its common stock. The Company has utilized various valuation methodologies in accordance with the framework of the 2004 American Institute of Certified Public Accountants Technical Practice Aid, Valuation of Privately-Held Company Equity Securities Issued as Compensation, to estimate the fair value of its common stock. Each valuation methodology includes estimates and assumptions that require the Company’s judgment. These estimates and assumptions include a number of objective and subjective factors, including the prices at which the Company sold shares of preferred stock and the superior rights, preferences and privileges of the preferred stock relative to the common stock; the Company’s stage of development and material risks related to its business; the progress of the Company’s research and development programs, including the status and results of preclinical studies for its product candidates and progress of its development of manufacturing processes; external market conditions affecting the biopharmaceutical industry and trends within the biopharmaceutical industry; the Company’s results of operations and financial position, including its levels of available capital resources, outstanding debt and its historical and forecasted performance and operating results; the lack of an active public market for the Company’s common stock and preferred stock; the likelihood of achieving a liquidity event, such as an IPO or sale of the Company in light of prevailing market conditions; the hiring of key personnel; and the analysis of IPOs and the market performance of publicly traded companies in the biopharmaceutical industry, as well as recently completed mergers and acquisitions of peer companies. Significant changes to the key assumptions used in the valuations could result in different fair values of common stock at each valuation date.

9


Poseida Therapeutics, Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

 

Fair Value Measurements

Certain financial instruments are required to be recorded at fair value. Other financial instruments, like cash are recorded at cost, which approximates fair value. Cash equivalents and short-term investments are comprised of available-for-sale securities, which are carried at fair value. Additionally, carrying amounts of accounts payable and accrued liabilities approximate fair value because of the short maturity of those instruments. The carrying value of the Company’s term debt approximates its fair value due to its variable interest rate, which approximates a market interest rate.

Concentration of Business Risk

The Company relies, and expects to continue to rely, on a small number of vendors to manufacture supplies and materials for its development programs. These programs could be adversely affected by a significant interruption in these manufacturing services.

Leases

The Company accounts for leases in accordance with Accounting Standards Codification Topic 842, Leases, (“ASC 842”). The Company determines if an arrangement is a lease at contract inception. A lease exists when a contract conveys the right to control the use of identified property, plant, or equipment for a period of time in exchange for consideration. The definition of a lease embodies two conditions: (1) there is an identified asset in the contract that is land or a depreciable asset (i.e., property, plant, and equipment), and (2) the Company has the right to control the use of the identified asset.

Operating leases where the Company is the lessee are included in lease receivables, operating lease right-of-use (“ROU”) assets, operating lease liabilities, current and operating lease liabilities, non-current on its condensed consolidated balance sheets. The lease liabilities are initially and subsequently measured at the present value of the unpaid lease payments at the lease commencement date.

Lease receivables, included within prepaid and other currents assets within the condensed consolidated balance sheets, are comprised of the expected tenant improvement reimbursement from the landlord and the rent abatement period to be recognized over the following twelve months.

ASC 842 requires a lessee to discount its unpaid lease payments using the interest rate implicit in the lease or, if that rate cannot be readily determined, its incremental borrowing rate. The rates implicit in the Company’s leases are not known, therefore, the incremental borrowing rate is used based on the information available at commencement date in determining the present value of lease payments. The Company’s incremental borrowing rate for a lease is the rate of interest it would have to pay on a collateralized basis to borrow an amount equal to the lease payments under similar terms.

The lease term for all of the Company’s leases includes the noncancelable period of the lease. When applicable, the Company’s lease term is impacted by options to extend or terminate the lease when it is reasonably certain that it will exercise such option Lease payments included in the measurement of the lease asset or liability are comprised of its fixed payments.

The Company has elected not to recognize ROU assets and lease liabilities for all short-term leases that have a lease term of 12 months or less. The Company recognizes the lease payments associated with its short-term leases as an expense on a straight-line basis over the lease term. There are no variable lease payments associated with these leases. Additionally, the Company has elected to account for the lease and non-lease components together as a single lease component for its real estate asset class.

10


Poseida Therapeutics, Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

 

Risk and Uncertainties

In December 2019, SARS-CoV-2, a novel strain of coronavirus, was first reported in Wuhan, China and has since become a global pandemic, generally referred to as COVID-19. The virus continues to spread globally, has been declared a pandemic by the World Health Organization and has spread to over 100 countries, including the United States. The impact of this pandemic has been and will likely continue to be extensive in many aspects of society, which has resulted in and will likely continue to result in significant disruptions to the global economy, as well as businesses and capital markets around the world.

Impacts to the Company’s business, some of which the Company has already experienced, include, but are not limited to, temporary closures of its facilities or those of its vendors, disruptions or restrictions on its employees’ ability to travel, disruptions to or delays in ongoing laboratory experiments, preclinical studies, clinical trials, third-party manufacturing supply and other operations, the potential diversion of healthcare resources away from the conduct of clinical trials to focus on pandemic concerns, interruptions or delays in the operations of the U.S. Food and Drug Administration or other regulatory authorities, and the Company’s ability to raise capital and conduct business development activities.

Deferred Offering Costs

The Company capitalizes certain legal, professional accounting and other third-party fees that are directly associated with in-process equity financings as deferred offering costs until such financings are consummated. After consummation of an equity financing, these costs are recorded as a reduction of additional paid-in capital generated as a result of the offering. Should the in-process equity financing be abandoned, the deferred offering costs will be expensed immediately as a charge to operating expenses in the consolidated statements of operations and comprehensive loss. During the six-months ended June 30, 2019, the Company expensed $1.8 million of costs, within general and administrative expenses, previously capitalized and associated with the Company’s abandoned efforts to complete an IPO in early 2019. Deferred offering costs of $1.9 million, incurred in connection with the Company’s July 2020 IPO, are capitalized and classified within deferred offering costs on the condensed balance sheet as of June 30, 2020.

Recently Adopted Accounting Pronouncements

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). The FASB subsequently issued ASU 2018-10 Codification Improvements to Topic 842, Leases, ASU 2018-11, Leases (Topic 842): Targeted Improvements, and ASU 2019-01, Leases (Topic 842): Codification Improvements, to further amend ASU 2016-02. ASU 2016-02, as amended, provides revised guidance related to the accounting and reporting of leases, including a requirement for lessees to recognize most leases on the balance sheet. The recognition, measurement and presentation of expenses and cash flows arising from a lease by a lessee depends on its classification as a finance or operating lease. For public entities, the guidance is effective for fiscal years beginning after December 15, 2018, and for non-public entities, the guidance was effective for fiscal years beginning after December 15, 2020, with early adoption permitted. Companies may adopt retrospectively as of the earliest period presented or retrospectively at the beginning of the period of adoption through a cumulative-effect adjustment, in each case with a number of practical expedients that entities may elect to apply. The Company adopted this standard on January 1, 2020, early adopting ASC 842 using a modified retrospective transition approach as of the effective date, as permitted by the amendments in ASU 2018-11, which provides an alternative modified retrospective transition method. As a result, the Company was not required to adjust its comparative period financial information for effects of the standard or make the new required lease disclosures for periods before the date of adoption. The Company has elected to adopt the package of transition practical expedients and, therefore, it has not reassessed (1) whether existing or expired contracts contain a lease, (2) lease classification for existing or expired leases or (3) the accounting for initial direct costs that were previously capitalized. The Company did not elect the practical expedient to use hindsight for leases existing at the adoption date. See Note 11 for the adoption impact.

11


Poseida Therapeutics, Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

 

In August 2018, the FASB issued ASU 2018-15, Intangibles—Goodwill and Other—Internal-Use Software (Topic 350): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract. This standard requires capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). The Company adopted this standard on January 1, 2020 using the prospective method. The adoption of this standard did not have a material impact on our consolidated financial statements and disclosures.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement. The new standard removes certain disclosures, modifies certain disclosures and adds additional disclosures related to fair value measurement. The Company adopted this standard on January 1, 2020 using the prospective method. The adoption of this standard did not have a material impact on our consolidated financial statements and disclosures.

Recently Issued Accounting Pronouncements

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”), which is intended to simplify the accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. The new standard will be effective beginning January 1, 2021. The Company is currently evaluating the potential impact ASU 2019-12 may have on its financial position and results of operations upon adoption.

NOTE 3—COMPOSITION OF CERTAIN BALANCE SHEET COMPONENTS

Property and equipment, net

Property and equipment, net consist of the following as of (in thousands):

 

 

 

June 30,

2020

 

 

December 31,

2019

 

Lab equipment

 

$

9,439

 

 

$

6,957

 

Leasehold improvements

 

 

351

 

 

 

165

 

Computer equipment and software

 

 

1,224

 

 

 

456

 

Furniture and fixtures

 

 

580

 

 

 

560

 

Construction in progress

 

 

13,359

 

 

 

4,729

 

Total property and equipment

 

 

24,953

 

 

 

12,867

 

Less: Accumulated depreciation and amortization

 

 

(2,868

)

 

 

(2,009

)

Total property and equipment, net

 

$

22,085

 

 

$

10,858

 

 

Depreciation expense associated with property and equipment was $0.9 million and $0.5 million for the six months ended June 30, 2020 and 2019, respectively.

Accrued and other liabilities

Accrued and other liabilities consist of the following as of (in thousands):

 

 

 

June 30,

2020

 

 

December 31,

2019

 

Contract research services

 

$

14,939

 

 

$

7,993

 

Payroll and related expense

 

 

3,139

 

 

 

3,283

 

Lease cancellation fee

 

 

516

 

 

 

979

 

Other

 

 

4,558

 

 

 

1,671

 

Total accrued and other liabilities

 

$

23,152

 

 

$

13,926

 

 

12


Poseida Therapeutics, Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

 

NOTE 4—FINANCIAL INSTRUMENTS

The following table summarizes the amortized cost and fair value of securities available-for-sale at December 31, 2019 and June 30, 2020 (in thousands):

 

 

 

Amortized

Cost/Cost

 

 

Unrealized

Gains

 

 

Unrealized

Losses

 

 

Fair Value

 

At June 30, 2020:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money market fund

 

$

125,856

 

 

$

 

 

$

 

 

$

125,856

 

U.S. government agency securities and treasuries

 

 

19,978

 

 

 

20

 

 

 

 

 

 

19,998

 

Total

 

$

145,834

 

 

$

20

 

 

$

 

 

$

145,854

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At December 31, 2019:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money market fund

 

$

63,744

 

 

$

 

 

$

 

 

$

63,744

 

U.S. government agency securities and treasuries

 

 

42,503

 

 

 

19

 

 

 

 

 

$

42,522

 

Total

 

$

106,247

 

 

$

19

 

 

$

 

 

$

106,266

 

 

No available-for-sale debt securities held as of June 30, 2020 and December 31, 2019 had remaining maturities greater than one year.

NOTE 5—FAIR VALUE MEASUREMENT

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants as of the measurement date. Applicable accounting guidance provides an established hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs that market participants would use in valuing the asset or liability and are developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the factors that market participants would use in valuing the asset or liability. There are three levels of inputs that may be used to measure fair value:

 

Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities

 

Level 2: Significant other observable inputs other than Level 1 prices such as quoted prices in markets that are not active, or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability

 

Level 3: Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported by little or no market activity)

13


Poseida Therapeutics, Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

 

The Company has classified assets and liabilities measured at fair value on a recurring basis as follows (in thousands):

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

At June 30, 2020:

 

 

 

 

 

 

 

 

 

 

 

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents

 

$

125,856

 

 

$

 

 

$