idya-10q_20200331.htm

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

(Mark One)

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

For the quarterly period ended March 31, 2020

OR

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

For the transition period from                      to                     

Commission File Number: 001-38915

 

IDEAYA Biosciences, Inc.

(Exact name of registrant as specified in its charter)

 

 

Delaware

 

47-4268251

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

 

7000 Shoreline Court, Suite 350

South San Francisco, California

 

94080

(Address of principal executive offices)

 

(Zip Code)

 

(650) 443-6209

(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, $0.0001 par value per share

 

IDYA

 

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, 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 5, 2020, the registrant had 20,399,490 shares of common stock, $0.0001 par value per share, outstanding.

 

 

 

 

 


 

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements. We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements other than statements of historical facts contained in this Form 10-Q, including statements regarding our future results of operations and financial position, business strategy, prospective products, product approvals, research and development costs, timing and likelihood of success, plans and objectives of management for future operations and future results of anticipated products, are forward-looking statements. These statements involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements.

In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “expect,” “plan,” “anticipate,” “could,” “intend,” “target,” “project,” “contemplate,” “believe,” “estimate,” “predict,” “potential” or “continue” or the negative of these terms or other similar expressions. The forward-looking statements in this Quarterly Report on Form 10-Q are only predictions. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition and results of operations. These forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q and are subject to a number of risks, uncertainties and assumptions described under the sections in this Quarterly Report on Form 10-Q entitled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this Quarterly Report on Form 10-Q. These forward-looking statements are subject to numerous risks, including, without limitation, the following:

our status as a development-stage company and our expectation to incur losses in the future;

our future capital needs and our need to raise additional funds;

our ability to build a pipeline of product candidates and develop and commercialize drugs;

our unproven approach to therapeutic intervention;

our ability to enroll patients and volunteers in clinical trials, timely and successfully complete those trials and receive necessary regulatory approvals;

our ability to establish our own manufacturing facilities and to receive or manufacture sufficient quantities of our product candidates;

our expectations about the impact of natural disasters and public health epidemics, such as the COVID-19 pandemic, on our business, results of operations and financial condition;

our ability to protect and enforce our intellectual property rights;

federal, state, and foreign regulatory requirements, including FDA regulation of our product candidates;

the timing of clinical trials and the likelihood of regulatory filings and approvals;

our ability to obtain and retain key executives and attract and retain qualified personnel; and

our ability to successfully manage our growth.

Moreover, we operate in an evolving environment. New risk factors and uncertainties may emerge from time to time, and it is not possible for management to predict all risk factors and uncertainties.

Because forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified and some of which are beyond our control, you should not rely on these forward-looking statements as predictions of future events. The events and circumstances reflected in our forward-looking statements may not occur or be achieved, and actual results could differ materially from those projected in the forward-looking statements. We qualify all of our forward-looking statements by these cautionary statements. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained herein, whether as a result of any new information, future events, changed circumstances or otherwise.

1


 

IDEAYA Biosciences, Inc.

Form 10-Q for Quarterly Period Ended March 31, 2020

Table of Contents

 

PART I—FINANCIAL INFORMATION

3

Item 1. Financial Statements (Unaudited)

3

Condensed Balance Sheets

3

Condensed Statements of Operations and Comprehensive Loss

4

Condensed Statements of Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit)

5

Condensed Statements of Cash Flows

6

Notes to Condensed Financial Statements (Unaudited)

7

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

18

Item 3. Quantitative and Qualitative Disclosures About Market Risk

27

Item 4. Controls and Procedures

27

PART II—OTHER INFORMATION

28

Item 1. Legal Proceedings

28

Item 1A. Risk Factors

28

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

84

Item 3. Defaults Upon Senior Securities

85

Item 4. Mine Safety Disclosures

85

Item 5. Other information

85

Item 6. Exhibits

86

SIGNATURES

87

 

2


 

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements (UNAUDITED).

IDEAYA Biosciences, Inc.

Condensed Balance Sheets

(in thousands, except share and per share amounts)

(Unaudited)

 

 

 

March 31,

 

 

December 31,

 

 

 

2020

 

 

2019

 

Assets

 

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

35,462

 

 

$

34,067

 

Short-term marketable securities

 

 

52,401

 

 

 

64,889

 

Prepaid expenses and other current assets

 

 

1,601

 

 

 

2,698

 

Total current assets

 

 

89,464

 

 

 

101,654

 

Restricted cash

 

 

106

 

 

 

106

 

Long-term marketable securities

 

 

3,040

 

 

 

1,526

 

Property and equipment, net

 

 

4,337

 

 

 

4,642

 

Right-of-use assets

 

 

4,828

 

 

 

5,057

 

Other non-current assets

 

 

16

 

 

 

16

 

Total assets

 

$

101,791

 

 

$

113,001

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

Accounts payable

 

$

684

 

 

$

709

 

Accrued liabilities

 

 

5,429

 

 

 

5,023

 

Lease liabilities

 

 

1,176

 

 

 

1,145

 

Other current liabilities

 

 

57

 

 

 

63

 

Total current liabilities

 

 

7,346

 

 

 

6,940

 

Long-term lease liabilities

 

 

5,321

 

 

 

5,627

 

Other non-current liabilities

 

 

21

 

 

 

34

 

Total liabilities

 

 

12,688

 

 

 

12,601

 

Commitments and contingencies (Note 5)

 

 

 

 

 

 

 

 

Stockholders’ equity

 

 

 

 

 

 

 

 

Preferred stock, $0.0001 par value, 10,000,000 shares authorized as of March 31,

   2020 and December 31, 2019; no shares issued and outstanding as of

   March 31, 2020 and December 31, 2019

 

 

 

 

 

 

Common stock, $0.0001 par value, 300,000,000 shares authorized as of

   March 31, 2020 and December 31, 2019; 20,347,539 and 20,339,461 shares

   issued and outstanding as of March 31, 2020 and December 31, 2019

 

 

2

 

 

 

2

 

Additional paid-in capital

 

 

193,635

 

 

 

192,824

 

Accumulated other comprehensive income

 

 

 

 

 

65

 

Accumulated deficit

 

 

(104,534

)

 

 

(92,491

)

Total stockholders’ equity

 

 

89,103

 

 

 

100,400

 

Total liabilities and stockholders’ equity

 

$

101,791

 

 

$

113,001

 

 

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

3


 

IDEAYA Biosciences, Inc.

Condensed Statements of Operations and Comprehensive Loss

(in thousands, except share and per share amounts)

(Unaudited)

 

 

 

Three Months Ended

March 31,

 

 

 

2020

 

 

2019

 

Operating expenses

 

 

 

 

 

 

 

 

Research and development

 

$

9,026

 

 

$

7,996

 

General and administrative

 

 

3,452

 

 

 

2,098

 

Total operating expenses

 

 

12,478

 

 

 

10,094

 

Loss from operations

 

 

(12,478

)

 

 

(10,094

)

Interest income and other income (expense), net

 

 

435

 

 

 

525

 

Net loss

 

$

(12,043

)

 

$

(9,569

)

Change in unrealized (losses) gains on marketable securities

 

 

(65

)

 

 

39

 

Comprehensive loss

 

$

(12,108

)

 

$

(9,530

)

Net loss per common share, basic and diluted

 

$

(0.59

)

 

$

(8.69

)

Weighted average number of common shares outstanding used in computing

    net loss per share, basic and diluted

 

 

20,250,549

 

 

 

1,101,107

 

 

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

 

4


 

IDEAYA Biosciences, Inc.

Condensed Statements of Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit)

(in thousands, except share amounts)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

Total

 

 

 

Redeemable Convertible

 

 

 

 

 

 

 

 

 

 

Additional

 

 

Other

 

 

 

 

 

 

Stockholders'

 

 

 

Preferred Stock

 

 

Common Stock

 

 

Paid-In

 

 

Comprehensive

 

 

Accumulated

 

 

Equity

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Income (Loss)

 

 

Deficit

 

 

(Deficit)

 

Balances as of December 31, 2019

 

 

 

 

$

 

 

 

20,339,461

 

 

$

2

 

 

$

192,824

 

 

$

65

 

 

$

(92,491

)

 

$

100,400

 

Issuance of common stock upon exercise of stock options

 

 

 

 

 

 

 

 

10,889

 

 

 

 

 

 

37

 

 

 

 

 

 

 

 

 

37

 

Repurchase of early exercised shares

 

 

 

 

 

 

 

 

(2,811

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Vesting of early exercised common stock options

 

 

 

 

 

 

 

 

 

 

 

 

 

 

16

 

 

 

 

 

 

 

 

 

16

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

758

 

 

 

 

 

 

 

 

 

758

 

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(65

)

 

 

 

 

 

(65

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(12,043

)

 

 

(12,043

)

Balances as of March 31, 2020

 

 

 

 

$

 

 

 

20,347,539

 

 

$

2

 

 

$

193,635

 

 

$

 

 

$

(104,534

)

 

$

89,103

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances as of December 31, 2018

 

 

13,139,794

 

 

$

138,391

 

 

 

1,335,690

 

 

$

 

 

$

1,599

 

 

$

(31

)

 

$

(50,516

)

 

$

(48,948

)

Issuance of common stock upon exercise of stock options

 

 

 

 

 

 

 

 

3,170

 

 

 

 

 

 

1

 

 

 

 

 

 

 

 

 

1

 

Vesting of early exercised common stock options and restricted stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

32

 

 

 

 

 

 

 

 

 

32

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

383

 

 

 

 

 

 

 

 

 

383

 

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

39

 

 

 

 

 

 

39

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(9,569

)

 

 

(9,569

)

Balances as of March 31, 2019

 

 

13,139,794

 

 

$

138,391

 

 

 

1,338,860

 

 

$

 

 

$

2,015

 

 

$

8

 

 

$

(60,085

)

 

$

(58,062

)

 

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

 

5


 

IDEAYA Biosciences, Inc.

Condensed Statements of Cash Flows

(in thousands)

(Unaudited)

 

 

 

Three Months Ended March 31,

 

 

 

2020

 

 

2019

 

Cash flows from operating activities

 

 

 

 

 

 

 

 

Net loss

 

$

(12,043

)

 

$

(9,569

)

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

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

336

 

 

 

293

 

Net amortization of premiums and discounts on marketable securities

 

 

5

 

 

 

(236

)

Stock-based compensation

 

 

758

 

 

 

383

 

Loss on sale of property and equipment

 

 

2

 

 

 

3

 

Gain on sales of marketable securities

 

 

(2

)

 

 

(1

)

Changes in assets and liabilities

 

 

 

 

 

 

 

 

Prepaid expenses and other assets

 

 

1,097

 

 

 

(151

)

Right-of-use assets

 

 

229

 

 

 

256

 

Accounts payable

 

 

(36

)

 

 

242

 

Accrued and other liabilities

 

 

384

 

 

 

(727

)

Lease liabilities

 

 

(275

)

 

 

(278

)

Net cash used in operating activities

 

 

(9,545

)

 

 

(9,785

)

Cash flows from investing activities

 

 

 

 

 

 

 

 

Purchases of property and equipment, net

 

 

 

 

 

(606

)

Purchases of marketable securities

 

 

(11,253

)

 

 

(19,326

)

Maturities of marketable securities

 

 

22,159

 

 

 

39,340

 

Sales of marketable securities

 

 

 

 

 

6,000

 

Net cash provided by investing activities

 

 

10,906

 

 

 

25,408

 

Cash flows from financing activities

 

 

 

 

 

 

 

 

Proceeds from exercise of common stock options

 

 

34

 

 

 

1

 

Payments of deferred offering costs

 

 

 

 

 

(827

)

Net cash provided by (used in) financing activities

 

 

34

 

 

 

(826

)

Net increase in cash, cash equivalents and restricted cash

 

 

1,395

 

 

 

14,797

 

Cash, cash equivalents and restricted cash

 

 

 

 

 

 

 

 

Cash, cash equivalents and restricted cash, at beginning of period

 

 

34,173

 

 

 

20,611

 

Cash, cash equivalents and restricted cash, at end of period

 

$

35,568

 

 

$

35,408

 

 

 

 

 

 

 

 

 

 

Reconciliation of cash, cash equivalents and restricted cash

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

35,462

 

 

$

35,302

 

Restricted cash

 

$

106

 

 

$

106

 

Cash, cash equivalents and restricted cash

 

$

35,568

 

 

$

35,408

 

 

 

 

 

 

 

 

 

 

Supplemental disclosure of cash flow information:

 

 

 

 

 

 

 

 

Cash paid for income taxes

 

$

1

 

 

$

1

 

Cash paid for interest

 

$

21

 

 

$

24

 

Supplemental non-cash investing and financing activities:

 

 

 

 

 

 

 

 

Unpaid deferred offering costs

 

$

 

 

$

375

 

Vesting of early exercised options and restricted stock

 

$

16

 

 

$

74

 

Purchases of property and equipment in accounts payable and accrued liabilities

 

$

33

 

 

$

481

 

 

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

6


 

IDEAYA Biosciences, Inc.

Notes to Condensed Financial Statements (Unaudited)

1. Organization

Description of the Business

IDEAYA Biosciences, Inc. (the “Company”) is an oncology-focused precision medicine company committed to the discovery and development of targeted therapeutics for patient populations selected using molecular diagnostics. The Company is headquartered in South San Francisco, California and was incorporated in the State of Delaware in June 2015. To date, the Company has been primarily engaged in business planning, research, development, recruiting and raising capital.

Liquidity

The Company has incurred significant losses and negative cash flows from operations in all periods since inception and had an accumulated deficit of $104.5 million as of March 31, 2020. The Company has historically financed its operations primarily through the sale of convertible notes, redeemable convertible preferred stock and common stock. To date, none of the Company’s product candidates have been approved for sale, and the Company has not generated any revenue since inception. Management expects operating losses to continue and increase for the foreseeable future, as the Company progresses into clinical development activities for its lead product candidates. The Company’s prospects are subject to risks, expenses and uncertainties frequently encountered by companies in the biotechnology industry as discussed under Risks and Uncertainties in Note 2. While the Company has been able to raise multiple rounds of financing, there can be no assurance that in the event the Company requires additional financing, such financing will be available on terms which are favorable or at all. Failure to generate sufficient cash flows from operations, raise additional capital or reduce certain discretionary spending would have a material adverse effect on the Company’s ability to achieve its intended business objectives.

As of March 31, 2020, the Company had cash, cash equivalents and marketable securities of $90.9 million. Management believes that the Company’s current cash, cash equivalents and marketable securities will be sufficient to fund its planned operations for at least 12 months from the date of the issuance of these financial statements.

2. Summary of Significant Accounting Policies

Basis of Presentation

The unaudited condensed financial statements and accompanying notes have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”). Certain footnotes or other financial information that are normally required by GAAP have been condensed or omitted, and accordingly the balance sheet as of December 31, 2019 has been derived from the audited financial statements at that date but does not include all of the information required by GAAP for complete financial statements. The accompanying balance sheet as of March 31, 2020, the statements of operations and comprehensive loss, of redeemable convertible preferred stock and stockholders’ equity (deficit) and of cash flows for the three months ended March 31, 2020 and March 31, 2019 are unaudited. In the opinion of management, the unaudited data reflect all adjustments, which include only normal recurring adjustments, necessary for the fair statement of the Company’s financial position as of March 31, 2020, the results of its operations and comprehensive loss and its cash flows for the three months ended March 31, 2020 and March 31, 2019. The financial data and other information disclosed in these notes related to the three months ended March 31, 2020 and March 31, 2019 are also unaudited. The results for the three months ended March 31, 2020 are not necessarily indicative of results to be expected for the year ending December 31, 2020, any other interim periods or any future year or period.

The accompanying interim unaudited condensed financial statements should be read in conjunction with the audited financial statements and the related notes thereto for the year ended December 31, 2019, which are included in the Company’s Annual Report on Form 10-K, filed with the SEC on March 24, 2020 (the “Form 10-K”).

7


 

Reverse Stock Split

In May 2019, the Company’s board of directors approved a 1-for-10.2564 reverse stock split of the Company’s common stock and redeemable convertible preferred stock, which was effected on May 21, 2019. The par value and authorized shares of the common stock and redeemable convertible preferred stock were not adjusted as a result of the reverse stock split. All issued and outstanding common stock, options to purchase common stock and per share amounts contained in these financial statements have been retroactively adjusted to give effect to the reverse stock split for all periods presented.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of expenses during the reporting period. Such estimates include useful lives of property and equipment, determination of the discount rate for operating leases, accruals for research and development activities, stock-based compensation, and income taxes. Actual results could differ from those estimates.

Risks and Uncertainties

The Company operates in a dynamic and highly competitive industry and is subject to risks and uncertainties common to early-stage companies in the biotechnology industry, including, but not limited to, development by competitors of new technological innovations, protection of proprietary technology, dependence on key personnel, contract manufacturer and contract research organizations, compliance with government regulations and the need to obtain additional financing to fund operations. Product candidates currently under development will require significant additional research and development efforts, including extensive preclinical studies and clinical trials and regulatory approval, prior to commercialization. These efforts require significant amounts of additional capital, adequate personnel infrastructure and extensive compliance and reporting. The Company believes that changes in any of the following areas could have a material adverse effect on the Company’s future financial position, results of operations, or cash flows; ability to obtain future financing; advances and trends in new technologies and industry standards; results of clinical trials; regulatory approval and market acceptance of the Company’s products; development of sales channels; certain strategic relationships; litigation or claims against the Company based on intellectual property, patent, product, regulatory, or other factors; and the Company’s ability to attract and retain employees necessary to support its growth.

Products developed by the Company require approvals from the U.S. Food and Drug Administration (“FDA”) or other international regulatory agencies prior to commercial sales. There can be no assurance that the Company’s research and development will be successfully completed, that adequate protection for the Company’s intellectual property will be obtained or maintained, that the products will receive the necessary approvals, or that any approved products will be commercially viable. If the Company was denied approval, approval was delayed or the Company was unable to maintain approval, it could have a materially adverse impact on the Company. Even if the Company’s product development efforts are successful, it is uncertain when, if ever, the Company will generate revenue from product sales. The Company operates in an environment of rapid change in technology and substantial competition from other pharmaceutical and biotechnology companies. In addition, the Company is dependent upon the services of its employees, consultants and other third parties.

Beginning in late 2019, the outbreak of a novel strain of virus named SARS-CoV-2 (severe acute respiratory syndrome coronavirus 2), or coronavirus, which causes coronavirus disease 2019, or COVID-19, has evolved into a global pandemic. The extent of the impact of the coronavirus outbreak on the Company’s business will depend on certain developments, including the duration and spread of the outbreak and the extent and severity of the impact on the Company’s clinical trial activities, research activities and suppliers, all of which are uncertain and cannot be predicted. At this point, the extent to which the coronavirus outbreak may materially impact the Company’s financial condition, liquidity or results of operations is uncertain.

8


 

The Company has expended and will continue to expend substantial funds to complete the research, development and clinical testing of product candidates. The Company also will be required to expend additional funds to establish commercial-scale manufacturing arrangements and to provide for the marketing and distribution of products that receive regulatory approval. The Company may require additional funds to commercialize its products. The Company is unable to entirely fund these efforts with its current financial resources. If adequate funds are unavailable on a timely basis from operations or additional sources of financing, the Company may have to delay, reduce the scope of or eliminate one or more of its research or development programs which would materially and adversely affect its business, financial condition and operations.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to a concentration of credit risk consist of cash, cash equivalents and marketable securities. Substantially all the Company’s cash is held by one financial institution that management believes is of high credit quality. Such deposits may, at times, exceed federally insured limits. The Company’s investment policy addresses credit ratings, diversification, and maturity dates. The Company invests its cash equivalents and marketable securities in money market funds, U.S. government securities, commercial paper, and corporate bonds. The Company limits its credit risk associated with cash equivalents and marketable securities by placing them with banks and institutions it believes are highly creditworthy and in highly rated investments and, by policy, limits the amount of credit exposure with any one commercial issuer. The Company has not experienced any credit losses on its deposits of cash, cash equivalents or marketable securities.

Summary of Significant Accounting Policies

There have been no material changes in the accounting policies from those disclosed in the financial statements and the related notes included in the Form 10-K.

Net Loss per Share Attributable to Common Stockholders

Basic net loss per common share is calculated by dividing the net loss attributable to common stockholders by the weighted-average number of common stock outstanding during the period, without consideration of potentially dilutive securities. Diluted net loss per share is computed by dividing the net loss attributable to common stockholders by the weighted-average number of common stock and potentially dilutive securities outstanding for the period. For purposes of the diluted net loss per share calculation, redeemable convertible preferred stock, stock options and restricted stock that is subject to repurchase at the original purchase price are considered to be potentially dilutive securities. Basic and diluted net loss attributable to common stockholders per share is presented in conformity with the two-class method required for participating securities. The Company considers the shares issued upon the early exercise of stock options subject to repurchase to be participating securities, because holders of such shares have non-forfeitable dividend rights in the event a dividend is paid on common stock. The holders of early exercised shares subject to repurchase do not have a contractual obligation to share in the Company’s losses. As such, the net loss was attributed entirely to common stockholders. Because the Company has reported a net loss for all periods presented, diluted net loss per common share is the same as basic net loss per common share for those periods.

Recent Accounting Pronouncements

From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (“FASB”) under its accounting standard codifications (“ASC”) or other standard setting bodies and adopted by the Company as of the specified effective date, unless otherwise discussed below.

9


 

Recently Adopted Accounting Pronouncements

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, which modifies the disclosure requirements on fair value measurements. ASU 2018-13 removes the requirement to disclose: the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy; the policy for timing of transfers between levels; and the valuation processes for Level 3 fair value measurements. For public business entities, this ASU is effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Early adoption is permitted. The Company adopted this ASU on January 1, 2020. The adoption did not result in a material impact on the Company’s financial statements and related disclosures.

In August 2018, the FASB issued ASU 2018-15, Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract. ASU 2018-15 requires that certain implementation costs incurred in a cloud computing arrangement be deferred and recognized over the term of the arrangement. For public business entities, this ASU is effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Early adoption is permitted. The Company adopted this ASU on January 1, 2020, using the prospective transition method. The adoption did not result in a material impact on the Company’s financial statements and related disclosures.

In November 2018, the FASB issued ASU 2018-18, Collaborative arrangements (Topic 808)—Clarifying the interaction between Topic 808 and Topic 606. ASU 2018-18 (i) clarifies that certain transactions between collaborative arrangement participants should be accounted for as revenue under Topic 606 when the collaborative arrangement participant is a customer in the context of a unit of account, (ii) adds unit-of-account guidance in Topic 808 to align with the guidance in Topic 606 (that is, a distinct good or service) when an entity is assessing whether the collaborative arrangement or a part of the arrangement is within the scope of Topic 606, and (iii) requires that in a transaction with a collaborative arrangement participant that is not directly related to sales to third parties, presenting the transaction together with revenue recognized under Topic 606 is precluded if the collaborative arrangement participant is not a customer. For public business entities, the amendments in this ASU are effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Early adoption is permitted. The Company adopted this ASU on January 1, 2020. The adoption did not result in a material impact on the Company’s financial statements and related disclosures.

New Accounting Pronouncements Not Yet Adopted

In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which requires the measurement and recognition of expected credit losses for financial assets held at amortized cost. ASU 2016-13 replaces the existing incurred loss impairment model with an expected loss model. It also eliminates the concept of other-than-temporary impairment and requires credit losses related to available-for-sale debt securities to be recorded through an allowance for credit losses rather than as a reduction in the amortized cost basis of the securities. These changes will result in earlier recognition of credit losses. For public business entities, this ASU is effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. The FASB subsequently issued supplemental guidance to ASC 326 within ASU 2019-05, Financial Instruments—Credit Losses (Topic 326): Targeted Transition Relief, ASU 2019-10, Financial Instruments—Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842) and ASU 2019-11, Codification Improvements to Topic 326, Financial Instruments—Credit Losses. ASU 2019-05 provides an option to irrevocably elect the fair value option for certain financial assets previously measured at amortized cost basis. ASU 2019-10 extended the effectiveness of Topic 326 for smaller reporting companies until fiscal years beginning after December 31, 2020. Early adoption is permitted. The Company is currently evaluating the impact the adoption of these ASUs will have on its financial statements and related disclosures.

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. ASU 2019-12 simplifies the accounting for income taxes by removing certain exceptions to the general principles in Topic 740 and improves consistent application of and simplifies GAAP for other areas of Topic 740 by clarifying existing guidance. For public business entities, this ASU is effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the impact the adoption of this ASU will have on its financial statements and related disclosures.

10


 

3. Fair Value Measurement and Marketable Securities

The Company applies fair value accounting for all financial assets and liabilities and non-financial assets and liabilities that are recognized or disclosed at fair value in the financial statements on a recurring basis. Fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, a three-tier fair value hierarchy has been established, which prioritizes the inputs used in measuring fair value as follows:

Level 1—Observable inputs, such as quoted prices in active markets for identical assets or liabilities at the measurement date.

Level 2—Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3—Unobservable inputs which reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date. Consideration is given to the risk inherent in the valuation technique and the risk inherent in the inputs to the model.

In determining fair value, the Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible as well as considers counterparty credit risk in its assessment of fair value.

As of March 31, 2020, financial assets measured and recognized at fair value are as follows (in thousands):

 

 

 

 

March 31, 2020

 

 

 

 

Amortized

Cost

 

 

Gross

Unrealized

Gains

 

 

Gross

Unrealized

Losses

 

 

Estimated

Fair Value

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. government securities

Level 1

 

$

19,995

 

 

$

59

 

 

$

 

 

$

20,054

 

Corporate bonds

Level 2

 

 

30,213

 

 

 

11

 

 

 

(70

)

 

 

30,154

 

Commercial paper

Level 2

 

 

5,233

 

 

 

 

 

 

 

 

 

5,233

 

Marketable securities

 

 

 

55,441

 

 

 

70

 

 

 

(70

)

 

 

55,441

 

Money market funds(1)

Level 1

 

 

35,461

 

 

 

 

 

 

 

 

 

35,461

 

Total fair value of assets

 

 

$

90,902

 

 

$

70

 

 

$

(70

)

 

$

90,902

 

 

(1)

Included in cash and cash equivalents on the balance sheet

As of December 31, 2019, financial assets measured and recognized at fair value are as follows (in thousands):

 

 

 

 

December 31, 2019

 

 

 

 

Amortized

Cost

 

 

Gross

Unrealized

Gains

 

 

Gross

Unrealized

Losses

 

 

Estimated

Fair Value

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. government securities

Level 1

 

$

24,973

 

 

$

32

 

 

$

 

 

$

25,005

 

Corporate bonds

Level 2

 

 

39,185

 

 

 

37

 

 

 

(4

)

 

 

39,218

 

Commercial paper

Level 2

 

 

2,192

 

 

 

 

 

 

 

 

 

2,192

 

Marketable securities

 

 

 

66,350

 

 

 

69

 

 

 

(4

)

 

 

66,415

 

Money market funds(1)

Level 1

 

 

34,008

 

 

 

 

 

 

 

 

 

34,008

 

Total fair value of assets

 

 

$

100,358

 

 

$

69

 

 

$

(4

)

 

$

100,423

 

 

(1)

Included in cash and cash equivalents on the balance sheet

11


 

As of March 31, 2020 and December 31, 2019, marketable securities had a remaining maturity of two years or less. There were no financial liabilities measured and recognized at fair value as of March 31, 2020 and December 31, 2019.

4. Balance Sheet Components

Property and Equipment, Net

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

 

 

Useful Life

 

March 31,

 

 

December 31,

 

 

(In Years)

 

2020

 

 

2019

 

Laboratory equipment

5

 

$

4,062

 

 

$

4,034

 

Computer equipment

3

 

 

117

 

 

 

117

 

Software

3

 

 

118

 

 

 

118

 

Leasehold improvements

Shorter of useful life or lease term

 

 

2,581

 

 

 

2,581

 

Furniture and fixtures

5

 

 

308

 

 

 

308

 

Total property and equipment

 

 

 

7,186

 

 

 

7,158

 

Less: Accumulated depreciation and amortization

 

 

 

(2,849

)

 

 

(2,516

)

Property and equipment, net

 

 

$

4,337

 

 

$

4,642

 

 

Depreciation and amortization expense was $0.3 million and $0.3 million for the three months ended March 31, 2020 and March 31, 2019, respectively.

Accrued Liabilities

Accrued liabilities consisted of the following (in thousands):

 

 

 

March 31,

 

 

December 31,

 

 

 

2020

 

 

2019

 

Accrued salaries and benefits

 

$

1,234

 

 

$

1,733

 

Accrued research and development expenses

 

 

3,517

 

 

 

2,787

 

Legal and professional fees

 

 

621

 

 

 

457

 

Other

 

 

57

 

 

 

46

 

Accrued liabilities

 

$

5,429

 

 

$

5,023

 

 

5. Commitments and Contingencies

Contingencies

From time to time, the Company may be involved in litigation related to claims that arise in the ordinary course of its business activities. The Company accrues for these matters when it is probable that future expenditures will be made and these expenditures can be reasonably estimated. As of March 31, 2020, the Company does not believe that any such matters, individually or in the aggregate, will have a material adverse effect on the Company’s financial position, results of operations or cash flows.

Indemnification

The Company enters into standard indemnification arrangements in the ordinary course of business with vendors and other parties. Pursuant to these arrangements, the Company indemnifies, holds harmless and agrees to reimburse the indemnified parties for losses suffered or incurred by the indemnified party. The term of these indemnification agreements is generally perpetual any time after the execution of the agreement. The maximum potential amount of future payments the Company could be required to make under these arrangements is not determinable. The Company has never incurred costs to defend lawsuits or settle claims related to these indemnification agreements. As a result, the Company believes the fair value of these agreements is not material.

12


 

6. Income Taxes

The Company did not record a federal or state income tax provision or benefit for the three months ended March 31, 2020 and March 31, 2019 as it has incurred net losses since inception. In addition, the net deferred tax assets generated from net operating losses are fully offset by a valuation allowance as the Company believes it is not more likely than not that the benefit will be realized.

On March 27, 2020, the Coronavirus Aid, Relief and Economic Security (“CARES”) Act was enacted and signed into law and GAAP requires recognition of the tax effects of new legislation during the reporting period that includes the enactment date. The CARES Act includes changes to the tax provisions that benefits business entities, and makes certain technical corrections to the 2017 Tax Cuts and Jobs Act. The tax relief measures for businesses in the CARES Act include a five-year net operating loss carryback for certain net operating losses, suspension of the annual deduction limitation of 80% of taxable income for certain net operating losses, changes in the deductibility of interest, acceleration of alternative minimum tax credit refunds, payroll tax relief, and a technical correction to allow accelerated deductions for qualified improvement property. The CARES Act also provides other non-tax benefits to assist those impacted by the pandemic. The Company evaluated the impact of the CARES Act and determined that there is no material impact to the income tax provision for the quarter.

7. Common Stock

As of March 31, 2020 and December 31, 2019, the Company’s certificate of incorporation authorized the Company to issue 300,000,000 shares of common stock at a par value of $0.0001 per share. 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 Board of Directors. As of March 31, 2020 and December 31, 2019, no dividends have been declared to date.

The Company had reserved common stock for future issuance as follows:

 

 

 

March 31,

 

 

December 31,

 

 

 

2020

 

 

2019

 

Exercise of outstanding options under the 2015 and 2019 Plans

 

 

2,645,509

 

 

 

1,962,332

 

Issuance of common stock options under the 2019 Plan

 

 

1,159,069

 

 

 

1,036,746

 

Issuance of common stock options under the Employee Stock Purchase Plan

 

 

398,394

 

 

 

195,000

 

Total

 

 

4,202,972

 

 

 

3,194,078

 

 

8. Stock-Based Compensation

2019 Incentive Award Plan

In May 2019, the Company’s board of directors adopted and the Company’s stockholders approved the 2019 Incentive Award Plan (the “2019 Plan”), under which the Company may grant cash and equity-based incentive awards to the Company’s employees, consultants and directors. Following the effectiveness of the 2019 Plan, the Company will not make any further grants under the 2015 Equity Incentive Plan (the “2015 Plan”). However, the 2015 Plan continues to govern the terms and conditions of the outstanding awards granted under it. Shares of common stock subject to awards granted under the 2015 Plan that are forfeited or lapse unexercised and which following the effective date of the 2019 Plan are not issued under the 2015 Plan will be available for issuance under the 2019 Plan.

Options granted under the 2019 Plan may be either incentive stock options (“ISOs”) or nonqualified stock options (“NSOs”). ISOs may be granted only to Company employees (including officers and directors who are also employees). NSOs may be granted to Company employees and consultants.

The exercise price of an ISO and NSO shall not be less than 100% of the estimated fair value of the shares on the date of grant. The exercise price of an ISO granted to an employee who, at the time of grant, owns stock representing more than 10% of the voting power of all classes of stock of the Company (a “10% stockholder”) shall be no less than 110% of the estimated fair value of the shares on the date of grant. Options granted under the 2019 Plan have a term of 10 years (or five years if granted to a 10% stockholder) and generally vest over a 4-year period with 1-year cliff vesting.

13


 

2015 Equity Incentive Plan

In 2015, the Company established its 2015 Plan which provides for the granting of stock options to employees and consultants of the Company. Options granted under the 2015 Plan may be either ISOs or NSOs.

2019 Employee Stock Purchase Plan

In May 2019, the Company’s board of directors adopted and the Company’s stockholders approved the 2019 Employee Stock Purchase Plan (the “ESPP”). The ESPP provides eligible employees with the opportunity to acquire an ownership interest in the Company through periodic payroll deductions up to 15% of eligible compensation. The offering period is determined by the Company in its discretion but may not exceed 27 months. The per-share purchase price on the applicable exercise date for an offering period is equal to the lesser of 85% of the fair market value of the common stock at either the first business day or last business day of such an offering period, provided that no more than 4,000 shares of common stock may be purchased by any one employee during each offering period. The ESPP is intended to constitute an “employee stock purchase plan” under Section 423(b) of the Internal Revenue Code of 1986, as amended. A total of 195,000 shares of common stock were initially reserved for issuance under the ESPP, subject to an annual increase on January 1 of each year, beginning on January 1, 2020. For the three months ended March 31, 2020, the Company recorded less than $0.1 million of compensation expense related to participation in the ESPP.

Stock-Based Compensation Expense

Total stock-based compensation expense recorded related to awards granted to employees and non-employees was as follows (in thousands):

 

 

 

Three Months Ended March 31,

 

 

 

2020

 

 

2019

 

Research and development

 

$

314

 

 

$

195

 

General and administrative

 

 

444

 

 

 

188

 

Total stock-based compensation expense

 

$

758

 

 

$

383

 

Stock Options

Activity under the Company’s 2015 and 2019 Plans is set forth below:

 

 

 

 

 

 

 

Outstanding Options

 

 

 

 

 

 

 

Shares

available

for Grant

 

 

Shares

 

 

Weighted-

Average

Exercise

Price

 

 

Weighted-

Average

Remaining

Contractual

Term (Years)

 

Balance, January 1, 2020

 

 

1,036,746

 

 

 

1,962,332

 

 

$

6.03

 

 

 

8.63

 

Additional shares authorized

 

 

813,578

 

 

 

 

 

 

 

 

 

 

 

 

Options granted

 

 

(810,050

)

 

 

810,050

 

 

$

7.02

 

 

 

 

 

Options exercised

 

 

 

 

 

(10,889

)

 

$

3.39

 

 

 

 

 

Options repurchased

 

 

2,811

 

 

 

 

 

$

1.01

 

 

 

 

 

Options canceled

 

 

115,984

 

 

 

(115,984

)

 

$

6.98

 

 

 

 

 

Balance, March 31, 2020

 

 

1,159,069

 

 

 

2,645,509

 

 

$

6.30

 

 

 

8.69

 

Exercisable as of March 31, 2020

 

 

 

 

 

 

754,325

 

 

$

5.18

 

 

 

7.65

 

Vested and expected to vest as of

   March 31, 2020

 

 

 

 

 

 

2,645,509

 

 

$

6.30

 

 

 

8.69

 

 

14


 

The weighted-average grant-date fair value of options granted during the three months ended March 31, 2020 and March 31, 2019 was $5.03 and $7.50 per share, respectively. The aggregate intrinsic value of options exercised for the three months ended March 31, 2020 and March 31, 2019 was less than $0.1 million in each period. Intrinsic values are calculated as the difference between the exercise price of the underlying options and the fair value of the common stock on the date of exercise.

As of March 31, 2020 and December 31, 2019, total unrecognized stock-based compensation expense for stock options was $8.7 million and $5.9 million, respectively, which is expected to be recognized over a weighted-average period of 2.86 years and 2.81 years, respectively.

Early Exercise of Stock Options

The terms of the 2015 Plan permit the exercise of options granted under the 2015 Plan prior to vesting, subject to required approvals. The shares so acquired prior to vesting are subject to a lapsing repurchase right in favor of the Company, exercisable upon a termination of the holder’s service with the Company prior to full vesting at the original purchase price of such shares. The proceeds are initially recorded in other liabilities from the early exercise of stock options and are reclassified to additional paid-in capital as the Company’s repurchase right lapses.

During the three months ended March 31, 2020 and March 31, 2019, the Company repurchased 2,811 and 0 shares of common stock, respectively. As of March 31, 2020 and December 31, 2019, shares that were subject to repurchase were 62,904 and 84,964, respectively. The aggregate exercise price of early exercised shares as of March 31, 2020 and December 31, 2019 was $0.1 million and $0.1 million, respectively, which were recorded in other current liabilities and other non-current liabilities.

Black-Scholes Assumptions

The fair values of options were calculated using the assumptions set forth below:

 

 

 

Three Months

Ended

March 31, 2020

 

 

Three Months

Ended

March 31, 2019

 

Expected term

 

6.1 years

 

 

6.1 years

 

Expected volatility

 

84.9% - 86.7%

 

 

79.7% - 82.2%

 

Risk-free interest rate

 

0.6% - 1.5%

 

 

2.3% - 2.5%

 

Dividend yield

 

0%

 

 

0%

 

 

Expected term. The expected term represents the weighted-average period the stock options are expected to remain outstanding and is based on the options’ vesting terms, contractual terms and industry peers, as the Company does not have sufficient historical information to develop reasonable expectations about future exercise patterns and post-vesting employment termination behavior.

Expected Volatility. The Company uses an average historical stock price volatility of a peer group of publicly traded companies to be representative of its expected future stock price volatility, as the Company does not have sufficient trading history for its common stock. For purposes of identifying these peer companies, the Company considers the industry, stage of development, size and financial leverage of potential comparable companies. For each grant, the Company measures historical volatility over a period equivalent to the expected term. The Company will continue to apply this process until a sufficient amount of historical information regarding the volatility of its own stock price becomes available.

Risk-Free Interest Rate. The risk-free rate assumption is based on U.S. Treasury instruments whose term was consistent with the expected term of the Company’s stock options.

Expected Dividend Rate. The Company has not paid and does not anticipate paying any dividends in the near future. Accordingly, the Company has estimated the dividend yield to be zero.

The Company accounts for forfeitures as they occur.

15


 

Fair Value of Common Stock

The fair value of the Company’s common stock is determined based on its closing market price on the date of grant.

Restricted Stock

Restricted stock activity was as follows:

 

 

 

Number of

Shares

Underlying

Outstanding

Restricted

Stock Awards

 

 

Weighted

Average

Grant Date

Fair Value

 

Unvested, December 31, 2019

 

 

14,625

 

 

$

0.82

 

Vested

 

 

 

 

 

 

 

Unvested, March 31, 2020

 

 

14,625

 

 

$

0.82

 

 

As of March 31, 2020 and December 31, 2019, 14,625 shares of restricted stock were outstanding with an aggregate purchase price of less than $0.1 million, which is recorded in other non-current liabilities on the balance sheets. The restricted stock vests upon the achievement of pre-defined research milestones. Holder of restricted stock has voting and dividend rights with respect to such shares held without regard to vesting. Shares of restricted stock are subject to a right of repurchase at the original purchase price held by the Company. As the restricted stock was purchased by an employee at a price equal to its fair value at the time of issuance, there was no stock-based compensation expense related to these awards. The total fair value of restricted stock vested during the three months ended March 31, 2020 and March 31, 2019 was zero and less than $0.1 million, respectively.

9. Net Loss Per Share Attributable to Common Stockholders

The following table sets forth the computation of basic and diluted net loss per share attributable to common stockholders (in thousands, except share and per share data):

 

 

 

Three Months Ended

March 31,

 

 

 

2020

 

 

2019

 

Numerator:

 

 

 

 

 

 

 

 

Net loss attributable to common stockholders

 

$

(12,043

)

 

$

(9,569

)

Denominator: