pstx-10q_20210331.htm

 

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, 2021

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)

(858) 779-3100

(Registrant’s telephone number, including area code)

 

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 May 6, 2021, the registrant had 62,154,711 shares of common stock, $0.0001 par value per share, outstanding.

 

 

 

 

 


 

POSEIDA THERAPEUTICS, INC.

Index

 

PART I. FINANCIAL INFORMATION

Page

 

Item 1. Financial Statements (Unaudited)

4

 

Condensed Consolidated Balance Sheets as of March 31, 2021 and December 31, 2020

4

 

Condensed Consolidated Statements of Operations and Comprehensive Loss for the three months ended March 31, 2021 and 2020

5

 

Condensed Consolidated Statements of Changes in Convertible Preferred Stock and Stockholders’ Equity (Deficit) for the three months ended March 31, 2021 and 2020.

6

 

Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2021 and 2020

7

 

Notes to Condensed Consolidated Financial Statements

8

 

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

19

 

Item 3. Quantitative and Qualitative Disclosures about Market Risk

27

 

Item 4. Controls and Procedures

28

PART II. OTHER INFORMATION

 

 

Item 1. Legal Proceedings

29

 

Item 1A. Risk Factors

29

 

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

74

 

Item 3. Defaults Upon Senior Securities

75

 

Item 4. Mine Safety Disclosures

75

 

Item 5. Other Information

75

 

Item 6. Exhibits

75

 

Signatures

77

 

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, 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.

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 Quarterly Report on Form 10-Q to the terms “Poseida”, “the Company,” “we,” “our” and “us” refer to Poseida Therapeutics, Inc. and its subsidiaries.

2


We regularly make material business and financial information available to our investors using our investor relations website (https://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

(In thousands, except share and per share amounts)

(Unaudited)

 

 

 

March 31,

2021

 

 

December 31,

2020

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

169,795

 

 

$

83,966

 

Short-term investments

 

 

100,165

 

 

 

225,186

 

Prepaid expenses and other current assets

 

 

4,036

 

 

 

4,844

 

Total current assets

 

 

273,996

 

 

 

313,996

 

Property and equipment, net

 

 

23,236

 

 

 

23,336

 

Operating lease right-of-use assets

 

 

26,939

 

 

 

24,986

 

Intangible assets

 

 

1,320

 

 

 

1,320

 

Goodwill

 

 

4,228

 

 

 

4,228

 

Other long-term assets

 

 

3,618

 

 

 

3,618

 

Total assets

 

$

333,337

 

 

$

371,484

 

Liabilities and Stockholders' Equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

2,487

 

 

$

763

 

Accrued expenses and other liabilities

 

 

16,455

 

 

 

24,454

 

Operating lease liabilities, current

 

 

5,847

 

 

 

4,808

 

Current portion of term debt

 

 

3,000

 

 

 

 

Total current liabilities

 

 

27,789

 

 

 

30,025

 

Operating lease liabilities, non-current

 

 

26,777

 

 

 

25,374

 

Term debt, net of current portion

 

 

26,208

 

 

 

29,133

 

Deferred CIRM grant liability

 

 

23,755

 

 

 

23,755

 

Deferred tax liability

 

 

55

 

 

 

55

 

Other long-term liabilities

 

 

1,267

 

 

 

1,174

 

Total liabilities

 

 

105,851

 

 

 

109,516

 

Commitments and contingencies (Note 10)

 

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

 

 

Common stock, $0.0001 par value: 250,000,000 shares authorized at March 31, 2021 and December 31, 2020; 62,126,736 and 61,860,897 shares issued and outstanding as of March 31, 2021 and December 31, 2020, respectively

 

 

6

 

 

 

6

 

Additional paid-in capital

 

 

547,664

 

 

 

543,842

 

Accumulated other comprehensive income

 

 

15

 

 

 

5

 

Accumulated deficit

 

 

(320,199

)

 

 

(281,885

)

Total stockholders’ equity

 

 

227,486

 

 

 

261,968

 

Total liabilities and stockholders’ equity

 

$

333,337

 

 

$

371,484

 

 

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

4


POSEIDA THERAPEUTICS, INC.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(In thousands, except share and per share amounts)

(Unaudited)

 

 

 

 

Three Months Ended March 31,

 

 

 

2021

 

 

2020

 

Operating expenses:

 

 

 

 

 

 

 

 

Research and development

 

$

29,095

 

 

$

23,414

 

General and administrative

 

 

8,369

 

 

 

4,854

 

Total operating expenses

 

 

37,464

 

 

 

28,268

 

Loss from operations

 

 

(37,464

)

 

 

(28,268

)

Other income (expense):

 

 

 

 

 

 

 

 

Interest expense

 

 

(838

)

 

 

(914

)

Other income (expense), net

 

 

(12

)

 

 

398

 

Net loss before income tax

 

 

(38,314

)

 

 

(28,784

)

Income tax expense

 

 

 

 

 

 

Net loss

 

$

(38,314

)

 

$

(28,784

)

 

 

 

 

 

 

 

 

 

Other comprehensive income (expense):

 

 

 

 

 

 

 

 

Unrealized gain on short-term investments

 

 

10

 

 

 

111

 

Comprehensive loss

 

$

(38,304

)

 

$

(28,673

)

 

 

 

 

 

 

 

 

 

Net loss per share, basic and diluted

 

$

(0.62

)

 

$

(2.16

)

Weighted-average number of shares outstanding, basic and diluted

 

 

61,981,081

 

 

 

13,322,581

 

 

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

5


POSEIDA THERAPEUTICS, INC.

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

(In thousands, except share amounts)

(Unaudited)

 

 

 

 

 

 

 

Common Stock

 

 

Additional

Paid-in

 

 

Accumulated

Other

Comprehensive

 

 

Accumulated

 

 

Total

Stockholders’

 

 

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Income

 

 

Deficit

 

 

Equity

 

Balance at January 1, 2021

 

 

 

61,860,897

 

 

$

6

 

 

$

543,842

 

 

$

5

 

 

$

(281,885

)

 

$

261,968

 

Issuance of common stock under employee stock compensation plans

 

 

 

265,839

 

 

 

 

 

 

360

 

 

 

 

 

 

 

 

 

360

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

3,462

 

 

 

 

 

 

 

 

 

3,462

 

Unrealized gain on available-for-sale investments

 

 

 

 

 

 

 

 

 

 

 

 

10

 

 

 

 

 

 

10

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(38,314

)

 

 

(38,314

)

Balance at March 31, 2021

 

 

 

62,126,736

 

 

$

6

 

 

$

547,664

 

 

$

15

 

 

$

(320,199

)

 

$

227,486

 

 

 

 

 

 

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, 2020

 

 

32,934,785

 

 

$

222,173

 

 

 

 

13,196,419

 

 

$

2

 

 

$

2,689

 

 

$

19

 

 

$

(152,221

)

 

$

(149,511

)

Transition adjustment from

   adoption of ASC 842 (Note 10)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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 available-

   for-sale investments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

111

 

 

 

 

 

 

111

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(28,784

)

 

 

(28,784

)

Balance at March 31, 2020

 

 

32,934,785

 

 

$

222,173

 

 

 

 

13,370,778

 

 

$

2

 

 

$

4,381

 

 

$

130

 

 

$

(180,894

)

 

$

(176,381

)

 

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

 

6


 

POSEIDA THERAPEUTICS, INC.

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

 

 

 

 

Three Months Ended

March 31,

 

 

 

2021

 

 

2020

 

Operating Activities:

 

 

 

 

 

 

 

 

Net loss

 

$

(38,314

)

 

$

(28,784

)

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

 

 

 

 

 

 

 

 

Depreciation and amortization expense

 

 

1,072

 

 

 

416

 

Loss on disposal of property and equipment

 

 

4

 

 

 

 

Stock-based compensation

 

 

3,462

 

 

 

1,509

 

Change in preferred stock warrant liability

 

 

 

 

 

(20

)

Accretion of discount on issued term debt

 

 

168

 

 

 

245

 

Accretion of investment discount, net

 

 

46

 

 

 

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Prepaid expenses and other current assets

 

 

793

 

 

 

(838

)

Operating lease right-of-use assets

 

 

947

 

 

 

1,064

 

Other long-term assets

 

 

 

 

 

(137

)

Accounts payable

 

 

1,720

 

 

 

(98

)

Accrued expenses and other liabilities

 

 

(8,495

)

 

 

4,600

 

Operating lease liabilities

 

 

(459

)

 

 

(842

)

Net cash used in operating activities

 

 

(39,056

)

 

 

(22,885

)

Investing Activities:

 

 

 

 

 

 

 

 

Purchases of property and equipment

 

 

(475

)

 

 

(3,516

)

Purchases of short-term investments

 

 

 

 

 

(19,957

)

Proceeds from maturities of short-term investments

 

 

125,000

 

 

 

17,500

 

Net cash provided by (used in) investing activities

 

 

124,525

 

 

 

(5,973

)

Financing Activities:

 

 

 

 

 

 

 

 

Net proceeds from stock option exercises

 

 

360

 

 

 

183

 

Net proceeds from CIRM grant awards

 

 

 

 

 

4,163

 

Net cash provided by financing activities

 

 

360

 

 

 

4,346

 

Net increase (decrease) in cash and cash equivalents

 

 

85,829

 

 

 

(24,512

)

Cash and cash equivalents at beginning of period

 

 

83,966

 

 

 

87,784

 

Cash and cash equivalents at end of period

 

$

169,795

 

 

$

63,272

 

 

 

 

 

 

 

 

 

 

Non-cash operating, investing and financing activities:

 

 

 

 

 

 

 

 

Purchases of property and equipment in accounts payable and accrued liabilities

 

$

502

 

 

$

5,413

 

Tenant improvement receivable from landlord

 

 

 

 

 

312

 

Deferred offering costs incurred but not yet paid

 

 

 

 

 

118

 

 

 

 

 

 

 

 

 

 

Supplemental disclosure of cash flow information:

 

 

 

 

 

 

 

 

Interest paid

 

$

671

 

 

$

671

 

 

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

 

7


 

 

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 has discovered and is developing a broad portfolio of product candidates in a variety of indications based on its core proprietary platform, including our non-viral piggyBac DNA Delivery System, Cas-CLOVER Site-specific Gene Editing System and nanoparticle and AAV-based gene delivery technologies.

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 will 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 generate significant revenue from product sales.

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. For the three months ended March 31, 2021, the Company incurred a net loss of $38.3 million and negative cash flows from operations of $39.1 million. The Company expects to continue to incur net losses and negative cash flows from operations for at least the next several years. As of March 31, 2021, the Company had an accumulated deficit of $320.2 million.

The Company expects that its cash, cash equivalents and short-term investments as of March 31, 2021 of $270.0 million will be sufficient to fund its operations for at least the next twelve months from the date of issuance of these condensed consolidated financial statements. In the long term, the Company will need additional financing to support its continuing operations and pursue its business strategy. Until such time as the Company can generate significant revenue from product sales, if ever, it expects to finance its 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 Presentation and Consolidation

The accompanying condensed consolidated financial statements reflect the Company’s financial position, results of operations and cash flows, in conformity with US generally accepted accounting principles (“GAAP”), for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. The accompanying condensed consolidated financial statements include the accounts of Poseida Therapeutics, Inc. and its wholly owned subsidiaries. All intercompany transactions and balances have been eliminated. The condensed consolidated balance sheet as of December 31, 2020 has been derived from the Company’s audited financial statements at that date. These unaudited condensed consolidated financial statements reflect all adjustments that are, in the opinion of management, necessary to fairly state the financial position and the results of its operations and cash flows for interim periods presented. 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 consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, as filed with the Securities and Exchange Commission (“SEC”) on March 11, 2021 from which the Company derived its condensed consolidated balance sheet as of December 31, 2020.

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.

8


 

Risk and Uncertainties

In March 2020, the World Health Organization made the assessment that a novel strain of coronavirus, SARS-CoV-2, a novel strain of coronavirus, commonly referred to as COVID-19 had become a global pandemic. 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 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 (“FDA”) or other regulatory authorities, and the Company’s ability to raise capital and conduct business development activities.

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, research and development expenses, stock-based compensation expense, deferred tax valuation allowances and, prior to the Company’s initial public offering (“IPO”) completed in July 2020, the fair value of common stock and warrant liability. 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.

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.

Short-Term Investments

Investments with a remaining maturity when purchased of greater than three months are classified as short-term investments on the balance sheet and consist primarily of U.S. Treasury and government agency obligations. As the Company’s entire investment

9


 

portfolio is considered available for use in current operations, the Company classifies all investment as available-for-sale and as current assets. Debt securities are carried at fair value with the unrealized gains and losses included in other comprehensive income (loss) as a component of stockholders’ equity until realized. Any premium or discount arising at purchase is amortized and/or accreted to interest income and/or expense over the remaining term of the instrument. If any adjustment to fair value reflects a decline in the value of the investment that the Company considers to be “other than temporary,” the Company reduces the investment to fair value through a charge to the statement of operations and comprehensive loss. No such adjustments were recorded during the periods presented.

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. Where 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, then the lease payments are included in the measurement of the lease asset or liability.

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.

Emerging Growth Company Status

The Company is an emerging growth company (“EGC”), as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies. The Company has elected to use this extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date that it (i) is no longer an emerging growth company or (ii) affirmatively and irrevocably opts out of the extended transition period provided in the JOBS Act. As a result, these condensed consolidated financial statements may not be comparable to companies that comply with the new or revised accounting pronouncements as of public company effective dates.

Recently Adopted Accounting Pronouncements

In December 2019, the Financial Accounting Standards Board (“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 Company adopted this standard on January 1, 2021. The adoption of this standard did not have a material impact on the Company’s consolidated financial statements and disclosures.

10


 

In January 2017, the FASB issued ASU No. 2017-04, Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. The new standard simplifies the measurement of goodwill by eliminating step two of the two-step impairment test. Step two measures a goodwill impairment loss by comparing the implied fair value of a reporting unit’s goodwill with the carrying amount of that goodwill. The new guidance requires an entity to compare the fair value of a reporting unit with its carrying amount and recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value. Additionally, an entity is required to consider income tax effects from any tax-deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss, if applicable. The Company adopted this standard on January 1, 2021. The adoption of this standard did not have a material impact on the Company’s consolidated financial statements and disclosures.

Recently Issued Accounting Pronouncements

In June 2016, the FASB issued ASU 2016-13, Measurement of Credit Losses on Financial Instruments, which established ASC 326, Financial Instruments - Credit Losses. This ASU, along with subsequent amendments, improves financial reporting by requiring timely recording of credit losses on loans and other financial instruments held by financial institutions and other organizations. ASU 2016-13 requires the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions and reasonable and supportable forecasts. This guidance will become effective for the Company beginning January 1, 2023, with early adoption permitted. The Company is currently evaluating the potential impact ASU 2016-13 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 consisted of the following (in thousands):

 

 

 

March 31,

2021

 

 

December 31,

2020

 

Laboratory equipment

 

$

12,277

 

 

$

11,420

 

Leasehold improvements

 

 

13,826

 

 

 

13,826

 

Computer equipment and software

 

 

1,508

 

 

 

1,381

 

Furniture and fixtures

 

 

928

 

 

 

928

 

Construction in progress

 

 

362

 

 

 

376

 

Total property and equipment

 

 

28,901

 

 

 

27,931

 

Less: Accumulated depreciation and amortization

 

 

(5,665

)

 

 

(4,595

)

Total property and equipment, net

 

$

23,236

 

 

$

23,336

 

 

Depreciation and amortization expense associated with property and equipment was $1.1 million and $0.4 million for the three months ended March 31, 2021 and 2020, respectively.

Accrued expenses and other liabilities

Accrued expenses and other liabilities consisted of the following (in thousands):

 

 

 

March 31,

2021

 

 

December 31,

2020

 

Contract research services

 

$

11,204

 

 

$

15,822

 

Payroll and related expense

 

 

3,319

 

 

 

6,793

 

Other

 

 

1,932

 

 

 

1,839

 

Total accrued expenses and other liabilities

 

$

16,455

 

 

$

24,454

 

 

11


 

 

Note 4. Financial Instruments

The following table summarizes the amortized cost and fair value of securities available-for-sale (in thousands):

 

 

 

Amortized

Cost/Cost

 

 

Unrealized

Gains

 

 

Unrealized

Losses

 

 

Fair Value

 

March 31, 2021:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money market fund

 

$

155,889

 

 

$

 

 

$

 

 

$

155,889

 

U.S. government agency securities and treasuries

 

 

100,150

 

 

 

51

 

 

 

(36

)

 

 

100,165

 

Total

 

$

256,039

 

 

$

51

 

 

$

(36

)

 

$

256,054

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2020:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money market fund

 

$

70,713

 

 

$

 

 

$

 

 

$

70,713

 

U.S. government agency securities and treasuries

 

 

225,181

 

 

 

5

 

 

 

 

 

$

225,186

 

Total

 

$

295,894

 

 

$

5

 

 

$

 

 

$

295,899

 

 

No available-for-sale debt securities held as of March 31, 2021 and December 31, 2020 had remaining maturities greater than one year. Unrealized gains and losses on available-for-sale securities are included as a component of comprehensive loss. At March 31, 2021, the Company did not have any securities in material unrealized loss positions.

The Company reviews its investment portfolio to identify and evaluate investments that have an indication of possible other-than-temporary impairment. Factors considered in determining whether a loss is other-than-temporary include the length of time and extent to which fair value has been less than the cost basis, the financial condition and near-term prospects of the investee, and the Company’s intent and ability to hold the investment for a period of time sufficient to allow for any anticipated recovery in market value. The Company does not intend to sell any investments prior to recovery of their amortized cost basis for any investments in an unrealized loss position.

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)

 

The Company classifies its money market funds and U.S. treasury securities, which are valued based on quoted market prices in active markets with no valuation adjustment, as Level 1 assets within the fair value hierarchy.

12


 

The following table summarizes the Company’s valuation hierarchy for its financial assets and liabilities measured at fair value on a recurring basis (in thousands):

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

March 31, 2021:

 

 

 

 

 

 

 

 

 

 

 

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds(1)

 

$

155,889

 

 

$

 

 

$

 

Short-term investments

 

 

100,165

 

 

 

 

 

 

 

Total

 

$

256,054

 

 

$

 

 

$

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2020:

 

 

 

 

 

 

 

 

 

 

 

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds(1)

 

$

70,713

 

 

$

 

 

$

 

Short-term investments

 

 

225,186

 

 

 

 

 

 

 

Total

 

$

295,899

 

 

$

 

 

$

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1) Included in cash and cash equivalents in the accompanying condensed consolidated balance sheets.

 

 

Note 6. California Institute of Regenerative Medicine Awards

The Company has been awarded funding from California Institute of Regenerative Medicine (“CIRM”) to develop certain internal programs. Under the terms of the funding both CIRM and the Company co-fund specified programs, under which funding is provided in developmental milestones determined as a part of the award. The Company is obligated to share potential future revenues for the related programs with CIRM. The percentage of revenues due to CIRM in the future is dependent on the amount of the award received and whether revenue is generated from product sales or through license fees. The maximum revenue sharing amount the Company may be required to pay to CIRM is equal to nine times the total amount awarded and paid to the Company. The Company has the option to decline any and all future grant amounts awarded by CIRM. As an alternative to revenue sharing, the Company has an option to convert any award to a loan, which such option the Company must exercise on or before ten business days after the FDA notifies the Company that it has accepted the Company’s application for marketing authorization. In the event the Company exercises its right to convert any award to a loan, it would be obligated to repay the loan within ten business days of making such election. Repayment amounts due to CIRM vary dependent on when the award is converted to a loan, ranging from 60% of the award granted to the full amount received including interest at the rate of the three-month LIBOR rate plus 10% per annum. Since the Company may be required to repay some or all of the amounts awarded by CIRM, the Company accounted for these awards as a liability as the Company’s intention is to convert the award into a loan. Given the uncertainty in amounts due upon repayment, the Company has recorded amounts received without any discount or interest recorded, upon determination of amounts that would become due, the Company will adjust the amount of the liability accordingly.

In December 2017, the Company was granted an award in the amount of $19.8 million from CIRM to support the Company’s P-BCMA-101 Phase 1 clinical trial. The award is paid based on developmental milestones, of which $19.7 million had been received as of March 31, 2021 with up to an aggregate of $0.1 million in future milestone payments.

In September 2018, the Company was granted an award in the amount of $4.0 million from CIRM to support the Company’s preclinical studies for its P-PSMA-101 program. The award is paid based on developmental milestones, of which the full $4.0 million had been received as of March 31, 2021.

Note 7. Term Debt

In July 2017, the Company entered into a loan and security agreement (the “Original Loan Agreement”) with Oxford Finance LLC (“Oxford”), pursuant to which the Company borrowed $10.0 million (the “Original Term A Loan”). Balances under the Original Loan were due in monthly principal and interest payments, with a maturity date of August 2021.

In August 2018, the Company entered into an Amended and Restated Loan and Security Agreement (“Amended Loan Agreement”) with Oxford, pursuant to which the borrowing capacity was increased to $30.0 million, consisting of three separate term loans including the Original Term A Loan, a $10.0 million term loan referred to as the New Term A Loan (collectively, “Term A Loan”), and an additional $10.0 million term loan referred to as the Term B Loan (collectively with the Term A Loan, the “Term Loans”). The Company received $10.0 million in proceeds from the New Term A Loan, net of debt issuance costs and accrued interest

13


 

of $0.9 million in August 2018. Pursuant to the terms of the Amended Loan Agreement, the Company was permitted, at its sole discretion, to borrow $10.0 million under the Term B Loan upon the achievement of a defined development milestone event. The Company drew the remaining $10.0 million in February 2019.

In June 2020, the Company entered into an amendment to the Amended and Restated Loan and Security Agreement (“2020 Amended Loan Agreement”) with Oxford. Pursuant to the terms of the 2020 Amended Loan Agreement, the interest-only period on the Term Loans and the final maturity date were extended by 15 months. The 2020 Amended Loan Agreement also included a facility fee of $0.3 million due on the amendment effective date, June 24, 2020. All other terms under the Amended Loan Agreement remained unchanged.

The Company accounted for these amendments as debt modifications in accordance with ASC Topic 470 Debt because the modifications were not considered substantial.

All amounts outstanding under the Term Loans will mature on June 1, 2024 (the “Maturity Date”) and have interest-only payments through December 31, 2021, followed by 30 equal monthly payments of principal and unpaid accrued interest. The Term Loans bear interest at a floating per annum rate equal to (i) 6.94% plus (ii) the greater of (a) the 30-day U.S. Dollar LIBOR rate and (b) 2.0%. The interest rate for the Term Loans as of March 31, 2021 was 8.94% per annum. The Company is required to make a final payment of 7.5% of the principal balance outstanding, payable on the earlier of (i) the Maturity Date, (ii) acceleration of any Term Loan, or (iii) the prepayment of the Term Loans.

The Company has an option to prepay all, but not less than all, of the borrowed amounts, provided that the Company will be obligated to pay a prepayment fee equal to 1.0% of the applicable Term Loan prepaid after the second anniversary of the funding date and prior to the Maturity Date.

The Company may use the proceeds from the Term Loans solely for its working capital requirements and to fund its general business operations. The Company’s obligations under the 2020 Amended Loan Agreement are secured by a first priority security interest in substantially all of its current and future assets, other than its intellectual property. In addition, the Company has also agreed not to encumber its intellectual property assets, except as permitted by the 2020 Amended Loan Agreement. While any amounts are outstanding under the 2020 Amended Loan Agreement, the Company is subject to a number of affirmative and restrictive covenants, including covenants regarding dispositions of property, business combinations or acquisitions, among other customary covenants. The Company is also restricted from declaring dividends or making other distributions or payments on its capital stock in excess of $0.3 million per calendar year, subject to limited exceptions. As of March 31, 2021, the Company was in compliance with all covenants under the 2020 Amended Loan Agreement.

Pursuant to the Original Loan Agreement, in July 2017, the Company issued to Oxford warrants to purchase an aggregate of up to 116,618 shares of the Company’s Series A-1 Preferred Stock (“Series A-1 Warrants”) at an exercise price of $3.43 per share. The warrants were immediately exercisable and will expire ten years from the date of the grant unless earlier exercised. The Company determined the fair value of the Series A-1 Warrants on the date of issuance was $0.3 million. Upon the closing of the IPO these became exercisable for 93,518 shares of common stock at an exercise price of $4.28 per share. The fair value of the warrant liability at the date of the IPO was reclassified to additional paid-in-capital.

Pursuant to the Amended Loan Agreement, in August 2018, the Company issued to Oxford warrants to purchase an aggregate of up to 17,212 shares of the Company’s Series B Preferred Stock with an exercise price of $5.81 per share (“August 2018 Series B Warrants”). In February 2019, in conjunction with drawing the remaining $10.0 million in principal, the Company issued to Oxford warrants to purchase an aggregate of up to an additional 17,212 shares of the Company’s Series B Preferred Stock, with an exercise price of $5.81 per share (“February 2019 Series B Warrants”). The August 2018 Series B Warrants and February 2019 Series B Warrants (collectively “Series B Warrants”) were immediately exercisable upon issuance and will expire ten years from the date of the grant unless earlier exercised. The Company determined the fair value of the August 2018 Series B Warrants and the February 2019 Series B Warrants on the date of issuance was $0.1 million and $0.2 million, respectively. Upon the closing of the IPO these became exercisable for 27,604 shares of common stock at an exercise price of $7.25 per share. The fair value of the warrant liability at the date of the IPO was reclassified to additional paid-in-capital.

The fair value of the warrants was treated as a debt discount and recorded as a preferred stock warrant liability. The debt discount was amortized over the term of the Term Loans to interest expense.

As of March 31, 2021, there was $20.0 million outstanding under the Term A Loan and $10.0 million outstanding under the Term B Loan. In connection with the Term A Loan and the Term B Loan, the Company incurred debt issuance costs of $1.0 million and $0.3 million, respectively, which have been recorded as a debt discount and are being accreted to interest expense over the term of the Term A Loan and the Term B Loan, respectively. Interest on the Term A Loan and the Term B Loan, consisting of the stated

14


 

interest rate, final payment fee and amortization of the discount, is being recognized under the effective interest method using a rate of 11.27% and 11.02%, respectively. As of March 31, 2021, the balance of the unamortized debt discount was $0.8 million. The balance of the accrued final payment fee was $1.3 million as of March 31, 2021 and is presented as other long-term liability in the accompanying condensed consolidated balance sheet.

Note 8. Stockholders’ Equity

 

Authorized Shares

In connection with the completion of the Company’s IPO in July 2020, the Company amended its Certificate of Incorporation to authorize 250,000,000 shares of common stock, par value $0.0001 per share, and 10,000,000 shares of undesignated preferred stock, par value $0.0001 per share, that may be issued from time to time by the Company’s board of directors in one or more series. Each share of common stock is entitled to one vote. The holders of common stock are also entitled to receive dividends whenever funds are legally available and when declared by the Company’s board of directors. Since the Company’s inception, there have been no dividends declared.

Public Offering and Related Transaction

In July 2020, the Company completed its IPO selling 14,000,000 shares of its common stock at a public offering price of $16.00 per share. Proceeds from the Company’s IPO, net of underwriting discounts and other offering costs, were $205.7 million. In connection with the IPO, all 42,953,085 shares of outstanding Convertible Preferred Stock were automatically converted into 34,445,108 shares of the Company’s common stock. Additionally, the outstanding warrants to purchase an aggregate of 151,042 shares of Convertible Preferred Stock became exercisable for 121,122 shares of common stock and were reclassified into permanent equity.

Convertible Preferred Stock

Prior to its conversion to common stock, the Company’s Convertible Preferred Stock was classified as temporary equity on the Company’s balance sheets in accordance with authoritative guidance for the classification and measurement of potentially redeemable securities whose redemption is based upon certain change in control events outside of the Company’s control, including liquidation, sale or transfer of control of the Company. The Company had determined not to adjust the carrying values of the convertible preferred stock to the liquidation preferences of such shares because of the uncertainty of whether or when such events would occur.

In June 2020, the Company issued and sold 10,018,300 shares of Series D Preferred Stock, at a price of $10.93 per share, for aggregate gross proceeds of $109.5 million.

Convertible preferred stock immediately prior to the closing of the IPO consisted of the following (in thousands, except share amounts):

 

 

 

July 14, 2020

 

 

 

Preferred

Stock

Authorized

 

 

Preferred

Stock

Issued and

Outstanding

 

 

Carrying

Value

 

 

Liquidation

Preference

 

 

Common

Stock

Issuable

Upon

Conversion

 

Series A Preferred Stock

 

 

9,696,798

 

 

 

9,696,798

 

 

$

31,063

 

 

$

31,063

 

 

 

7,776,095

 

Series A-1 Preferred Stock

 

 

3,370,263

 

 

 

3,253,645

 

 

 

11,083

 

 

 

11,083

 

 

 

2,609,176

 

Series B Preferred Stock

 

 

5,283,992

 

 

 

5,249,568

 

 

 

30,314

 

 

 

30,314

 

 

 

4,209,754

 

Series C Preferred Stock

 

 

14,734,774

 

 

 

14,734,774

 

 

 

149,713

 

 

 

149,713

 

 

 

11,816,169

 

Series D Preferred Stock

 

 

13,723,696

 

 

 

10,018,300

 

 

 

104,140

 

 

 

104,140

 

 

 

8,033,914

 

Total

 

 

46,809,523

 

 

 

42,953,085

 

 

$

326,313

 

 

$

326,313

 

 

 

34,445,108

 

 

Note 9. Stock-Based Compensation

In July 2020, the Company’s board of directors and stockholders approved and adopted the 2020 Equity Incentive Plan (the “2020 Plan”). Under the 2020 Plan, the Company may grant stock options, stock appreciation rights, restricted stock, restricted stock units and other stock or cash-based awards to individuals who are current employees, officers, directors or consultants of the Company. A total of 11,183,476 shares of common stock were approved to be initially reserved for issuance under the 2020 Plan. The number of shares that remained available for issuance under the Company’s previous equity incentive plan as of the effective date of

15


 

the 2020 Plan and shares subject to outstanding awards under the Company’s previous equity incentive plan as of the effective date of the 2020 Plan that are subsequently canceled, forfeited or repurchased by the Company are added to the shares reserved under the 2020 Plan. The number of shares of common stock available for issuance under the 2020 Plan is automatically increased on the first day of each calendar year during the ten-year term of the 2020 Plan, beginning with January 1, 2021 and ending with January 1, 2030, by an amount equal to 5% of the outstanding number of shares of the Company’s common stock on December 31 of the preceding calendar year or such lesser amount as determined by the Company’s board of directors.

Following is a summary of the Company’s stock option activity for the three months ended March 31, 2021:

 

 

 

Shares

 

 

Weighted

Average

Exercise

Price

 

 

Weighted

Average

Remaining

Contractual

Term (Years)

 

 

Intrinsic

Value

(thousands)

 

Balance at January 1, 2021

 

 

4,738,607

 

 

$

10.34

 

 

 

 

 

 

 

 

 

Granted

 

 

4,604,523

 

 

 

9.19

 

 

 

 

 

 

 

 

 

Exercised

 

 

(265,839

)

 

 

1.35

 

 

 

 

 

 

 

 

 

Forfeited/Cancelled

 

 

(182,711

)

 

 

10.70

 

 

 

 

 

 

 

 

 

Balance at March 31, 2021

 

 

8,894,580

 

 

$

10.01

 

 

 

8.93

 

 

$

7,854

 

Options vested and expected to vest as of March 31, 2021

 

 

8,894,580

 

 

$

10.01

 

 

 

8.93

 

 

$

7,854

 

Options vested and exercisable as of March 31, 2021

 

 

1,956,376

 

 

$

9.21

 

 

 

7.37

 

 

$

5,051

 

 

The aggregate intrinsic value of options exercised during the three months ended March 31, 2021 and 2020 was $2.4 million and $2.0 million, respectively, determined as of the date of exercise. The Company received $0.4 million and $0.2 million in cash from options exercised during the three months ended March 31, 2021 and 2020, respectively.

The Company recorded stock-based compensation expense in the following expense categories of the accompanying condensed consolidated statements of operations and comprehensive loss (in thousands):

 

 

 

Three Months Ended March 31,

 

 

 

2021

 

 

2020

 

Research and development

 

$

1,705

 

 

$

823

 

General and administrative

 

 

1,757

 

 

 

686

 

Total stock-based compensation expense

 

$

3,462

 

 

$

1,509

 

 

As of March 31, 2021, total unrecognized compensation cost related to stock options was $47.1 million, and the weighted-average period over which this cost is expected to be recognized is approximately 3.4 years.

The Company uses the Black-Scholes option pricing model to estimate the fair value of each option grant on the date of grant or any other measurement date. The assumptions that the Company used to determine the fair value of options granted to employees, non-employees and directors were as follows:

 

 

 

Three Months Ended March 31,

 

 

 

2021

 

 

2020

 

Risk-free interest rate

 

0.5%-0.7%

 

 

0.7%-1.4%

 

Expected volatility

 

 

82.0

%

 

 

79.0

%

Expected term (years)

 

 

6.0

 

 

 

6.0

 

Dividend yield

 

 

 

 

 

 

 

Note 10. Commitments and Contingencies

Operating Leases

As of March 31, 2021, the Company had operating leases for manufacturing, laboratory and office space in San Diego, California consisting of approximately 83,000 square feet with remaining lease terms of 8.75 years. The manufacturing, laboratory and office space lease agreements include two options to extend the term for a period of 5 years each. Additionally, the Company had operating leases for dedicated manufacturing suites at its contract manufacturers with remaining lease terms of up to 3 years.

16


 

In October 2018, the Company entered into a lease agreement for a facility in San Diego, California to be used for research, development and administrative activities. The lease term commenced on April 1, 2019 and will expire on December 31, 2029. The lease provided for tenant improvements of $4.2 million and as costs were incurred, the Company performed an analysis to determine treatment based on the type of leasehold improvement. Assets determined to be lessee assets were not material and were recorded on the consolidated balance sheet as an asset with a corresponding liability within the lease liability. All costs were incurred, and construction was completed in 2019.

In October 2019, the Company entered into a lease amendment to expand the existing premises.  The lease term for the additional premises commenced on July 29, 2020 and will expire on December 31, 2029. The lease amendment provided for additional tenant reimbursements of $1.5 million and as costs were incurred, the Company performed additional analysis to determine treatment based on the type of leasehold improvement.  All costs were incurred, and construction was completed in 2020. Both the original lease and amendment provides for rent abatements and scheduled increases in base rent. In connection with the lease and its amendment, the Company made cash security deposits in the amount of $0.3 million, included in other long-term assets in the Company’s consolidated balance sheet.

In July 2019, the Company entered into a lease agreement for a facility in San Diego, California to be retrofitted to Good Manufacturing Practice standards and plans to use the facility for manufacturing in its early-stage clinical trials.  The lease term commenced on June 26, 2020 and will expire on December 31, 2029.  The lease provided for tenant improvements of $2.9 million and as costs were incurred, the Company performed analysis to determine treatment based on the type of leasehold improvement.  All costs were incurred, and construction was completed in 2020. The lease provides for rent abatements and scheduled increases in base rent. In connection with the lease, the Company made a one-time cash security deposit in the amount of $0.1 million, included in other long-term assets in the Company’s consolidated balance sheet.

On January 1, 2020, on the adoption of ASC 842, the Company recognized initial lease receivables of $2.7 million, right-of-use (“ROU”) lease assets of $22.3 million, which was adjusted for the deferred rent balance of $2.3 million and an initial lease liability of $27.3 million, with respect to the existing leases and recorded a cumulative adjustment to the opening balance of accumulated deficit of $0.1 million. The leases in San Diego include an option to extend, which was not recognized as part of the lease liability and ROU lease assets as the Company was not reasonably certain it would exercise the extension right.

Upon adoption of ASC 842, the Company determined the lease would be accounted for as an operating lease. Further, upon adoption of ASC 842, the Company determined it was the owner of the tenant improvements but did not control the construction project and therefore the fair value of the building was derecognized and costs incurred by the Company related to the tenant improvements of $13.3 million were recorded as leasehold improvements and furniture and fixtures included in property and equipment, net in the accompanying condensed consolidated balance sheets and are depreciated over the remaining lease term.

During the three months ended March 31, 2021 and 2020, the Company recognized $1.6 million and $1.5 million, respectively of operating lease expense. During the three months ended March 31, 2021, the Company paid $1.4 million for its operating leases. As of March 31, 2021, the weighted-average remaining lease term and weighted-average discount rate for operating leases were 8.1 years and 8.9%, respectively.

As of March 31, 2021, maturities of lease liabilities were as follows (in thousands):

 

Year ending December 31,

 

 

 

 

2021 (remaining 9 months)

 

$

4,738

 

2022

 

 

5,425

 

2023