☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
OR
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Spring Bank Pharmaceuticals, Inc.
|
| |
Delaware | 52-2386345 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |
Eddeva B920 Babraham Research Campus Cambridge, United Kingdom CB22 3AT |
| N/A |
(Address of principal executive offices) | (Zip Code) |
Title of Each Class | Trading Symbol | Name of each exchange on which registered | ||
Common Stock, $0.0001 par value per share | FSTX | The Nasdaq Stock Market (Nasdaq Capital Market) |
Large accelerated filer |
| ☐ | Accelerated filer | ☐ | ||
Non-accelerated filer |
| ☒ | Smaller reporting company | ☒ | ||
Emerging growth company | ☒ |
As
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Page | ||||||
2 | ||||||
Item 1. | 3 | |||||
3 | ||||||
4 | ||||||
5 | ||||||
6 | ||||||
| 7 | |||||
Item 2. |
| 27 | ||||
Item 3. |
| 40 | ||||
Item 4. |
| 40 | ||||
PART II. OTHER INFORMATION | ||||||
Item 1. |
| 41 | ||||
Item 1A. |
| 41 | ||||
Item | 41 | |||||
Item 3 | 41 | |||||
Item 4 | 41 | |||||
Item 5 |
| 41 | ||||
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Item 6. | 41 | |||||
| 42 | |||||
| 43 |
the timing of and our ability to obtain and maintain regulatory approvals for our product candidates;
our plans to seek and enter into clinical trial collaborations and other broader collaborations;
the direct and indirect impact of the
We
|
|
| September 30, |
|
| December 31, |
| ||
|
| 2017 |
|
| 2016 |
| ||
ASSETS |
| (unaudited) |
|
|
|
|
| |
Current assets: |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
| $ | 17,539 |
|
| $ | 10,684 |
|
Marketable securities |
|
| 34,640 |
|
|
| 14,046 |
|
Prepaid expenses and other current assets |
|
| 850 |
|
|
| 840 |
|
Total current assets |
|
| 53,029 |
|
|
| 25,570 |
|
Marketable securities, long-term |
|
| — |
|
|
| 752 |
|
Property and equipment, net |
|
| 534 |
|
|
| 522 |
|
Restricted cash |
|
| 250 |
|
|
| — |
|
Other assets |
|
| 35 |
|
|
| 35 |
|
Total |
| $ | 53,848 |
|
| $ | 26,879 |
|
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
Accounts payable |
| $ | 1,773 |
|
| $ | 1,519 |
|
Accrued expenses and other current liabilities |
|
| 2,312 |
|
|
| 1,982 |
|
Total current liabilities |
|
| 4,085 |
|
|
| 3,501 |
|
Warrant liabilities |
|
| 17,807 |
|
|
| 6,333 |
|
Other long-term liabilities |
|
| 32 |
|
|
| 27 |
|
Total liabilities |
|
| 21,924 |
|
|
| 9,861 |
|
Commitments and contingencies (Note 8) |
|
|
|
|
|
|
|
|
Stockholders’ equity: |
|
|
|
|
|
|
|
|
Preferred stock, $0.0001 par value—authorized, 10,000,000 shares at September 30, 2017 and December 31, 2016; no shares issued or outstanding at September 30, 2017 and December 31, 2016 |
|
| — |
|
|
| — |
|
Common stock, $0.0001 par value—authorized, 200,000,000 shares at September 30, 2017 and December 31, 2016; 12,697,038 and 9,416,238 shares issued and outstanding at September 30, 2017 and December 31, 2016, respectively |
|
| 1 |
|
|
| 1 |
|
Additional paid-in capital |
|
| 109,682 |
|
|
| 68,559 |
|
Accumulated deficit |
|
| (77,752 | ) |
|
| (51,535 | ) |
Other comprehensive loss |
|
| (7 | ) |
|
| (7 | ) |
Total stockholders’ equity |
|
| 31,924 |
|
|
| 17,018 |
|
Total |
| $ | 53,848 |
|
| $ | 26,879 |
|
March 31, | December 31 | |||||||
2021 | 2020 | |||||||
Unaudited | ||||||||
Assets | ||||||||
Current Assets: | ||||||||
Cash and cash equivalents | $ | 3,680 | $ | 18,526 | ||||
Accounts receivable | 2,799 | 0 | ||||||
Prepaid expenses and other current assets | 3,308 | 3,976 | ||||||
Tax incentive receivable | 4,017 | 3,563 | ||||||
Total current assets | 13,804 | 26,065 | ||||||
Property and equipment, net | 1,063 | 789 | ||||||
Right of use asset | 3,978 | 2,782 | ||||||
Goodwill | 14,980 | 14,926 | ||||||
In-process research and development | 19,157 | 18,986 | ||||||
Other long-term assets | 454 | 61 | ||||||
Total assets | $ | 53,436 | $ | 63,609 | ||||
Liabilities and Stockholders’ Equity | ||||||||
Current Liabilities: | ||||||||
Accounts payable | $ | 4,084 | $ | 4,597 | ||||
Accrued expenses and other current liabilities | 7,062 | 9,461 | ||||||
Contingent value rights | 2,200 | 2,080 | ||||||
Lease obligations, current | 969 | 539 | ||||||
Deferred revenue | 0 | 300 | ||||||
Total current liabilities | 14,315 | 16,977 | ||||||
Lease obligations | 3,385 | 2,622 | ||||||
Contingent value rights | 320 | 440 | ||||||
Deferred tax liability | 576 | 576 | ||||||
Total liabilities | 18,596 | 20,615 | ||||||
Commitments and contingencies | 0 | 0 | ||||||
Stockholders’ equity: | ||||||||
Preferred stock, $0.0001 par value; authorized, 10,000,000 shares at March 31, 2021 and December 31, 2020; 0 shares issued or outstanding at March 31, 2021 and December 31, 2020 | 0 | 0 | ||||||
Common Stock, $0.0001 par value; authorized 200,000,000 shares at March 31, 2021 and December 31, 2020; 9,100,320 and 9,100,117 shares issued and outstanding at March 31, 2021 and December 31, 2020 | 1 | 1 | ||||||
Additional paid-in capital | 93,418 | 91,238 | ||||||
Accumulated other comprehensive loss | (1,542 | ) | (1,077 | ) | ||||
Accumulated deficit | (57,037 | ) | (47,168 | ) | ||||
Total stockholders’ equity | 34,840 | 42,994 | ||||||
Total liabilities and stockholders’ equity | $ | 53,436 | $ | 63,609 | ||||
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
|
| For the Three Months Ended September 30, |
|
| For the Nine Months Ended September 30, |
| ||||||||||
|
| 2017 |
|
| 2016 |
|
| 2017 |
|
| 2016 |
| ||||
Grant revenue |
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | 352 |
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development |
|
| 3,221 |
|
|
| 2,723 |
|
|
| 9,152 |
|
|
| 11,247 |
|
General and administrative |
|
| 1,968 |
|
|
| 1,452 |
|
|
| 5,811 |
|
|
| 4,136 |
|
Total operating expenses |
|
| 5,189 |
|
|
| 4,175 |
|
|
| 14,963 |
|
|
| 15,383 |
|
Loss from operations |
|
| (5,189 | ) |
|
| (4,175 | ) |
|
| (14,963 | ) |
|
| (15,031 | ) |
Other income (expense): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income |
|
| 141 |
|
|
| 27 |
|
|
| 220 |
|
|
| 65 |
|
Change in fair value of warrant liabilities |
|
| (5,780 | ) |
|
| — |
|
|
| (11,474 | ) |
|
| — |
|
Net loss |
|
| (10,828 | ) |
|
| (4,148 | ) |
|
| (26,217 | ) |
|
| (14,966 | ) |
Unrealized (loss) gain on marketable securities |
|
| (10 | ) |
|
| (3 | ) |
|
| (7 | ) |
|
| 18 |
|
Comprehensive loss |
| $ | (10,838 | ) |
| $ | (4,151 | ) |
| $ | (26,224 | ) |
| $ | (14,948 | ) |
Net loss per common share – basic and diluted |
| $ | (0.85 | ) |
| $ | (0.53 | ) |
| $ | (2.48 | ) |
| $ | (2.18 | ) |
Weighted-average number of shares outstanding – basic and diluted |
|
| 12,696,986 |
|
|
| 7,759,630 |
|
|
| 10,555,461 |
|
|
| 6,856,876 |
|
For the Three Months Ended March 31, | ||||||||
2021 | 2020 | |||||||
License revenue | $ | 2,917 | 1,355 | |||||
Operating expenses: | ||||||||
Research and development | 7,267 | 3,400 | ||||||
General and administrative | 6,429 | 3,189 | ||||||
Total operating expenses | 13,696 | 6,589 | ||||||
Loss from operations | (10,779 | ) | (5,234 | ) | ||||
Other non-operating (expense) income : | ||||||||
Other inc (expense)ome | 1,018 | (1,527 | ) | |||||
Change in fair-value of convertible debt | 0 | (386 | ) | |||||
Loss before income taxes | (9,761 | ) | (7,147 | ) | ||||
Income tax expense | (108 | ) | (12 | ) | ||||
Net loss | $ | (9,869 | ) | $ | (7,159 | ) | ||
Net loss attributable to common stockholders | $ | (9,869 | ) | $ | (7,159 | ) | ||
Basic and diluted adjusted net loss per common shares | $ | (1.08 | ) | $ | (3.92 | ) | ||
Weighted-average number of shares outstanding, basic and diluted | 9,100,273 | 1,826,070 | ||||||
Other comprehensive loss: | ||||||||
Net loss | $ | (9,869 | ) | (7,159 | ) | |||
Other comprehensive gain (loss): | ||||||||
Foreign currency translation | (465 | ) | 23 | |||||
Total comprehensive loss | $ | (10,334 | ) | $ | (7,136 | ) | ||
|
| For the Nine Months Ended September 30, |
| |||||
|
| 2017 |
|
| 2016 |
| ||
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
Net loss |
| $ | (26,217 | ) |
| $ | (14,966 | ) |
Adjustments for: |
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
| 115 |
|
|
| 87 |
|
Change in fair value of warrant liabilities |
|
| 11,474 |
|
|
| — |
|
Non-cash investment income (losses) |
|
| (50 | ) |
|
| 28 |
|
Non-cash stock-based compensation |
|
| 1,483 |
|
|
| 1,015 |
|
Non-cash issuance of common stock and warrants connected to license agreement |
|
| — |
|
|
| 2,780 |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
Prepaid expenses and other current assets |
|
| (10 | ) |
|
| (746 | ) |
Other assets |
|
| — |
|
|
| (35 | ) |
Accounts payable |
|
| 254 |
|
|
| 148 |
|
Accrued expenses and other liabilities |
|
| 311 |
|
|
| (19 | ) |
Net cash used in operating activities |
|
| (12,640 | ) |
|
| (11,708 | ) |
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
Purchases of marketable securities |
|
| (34,397 | ) |
|
| (6,693 | ) |
Proceeds from sale of marketable securities |
|
| 14,605 |
|
|
| 4,894 |
|
Purchases of property and equipment |
|
| (127 | ) |
|
| (156 | ) |
Net cash used in investing activities |
|
| (19,919 | ) |
|
| (1,955 | ) |
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
Proceeds from issuance of common stock |
|
| 42,500 |
|
|
| 11,339 |
|
Payment of finance costs related to issuance of common stock |
|
| (2,928 | ) |
|
| (2,128 | ) |
Proceeds from exercise of warrants |
|
| — |
|
|
| 5,342 |
|
Proceeds from exercise of stock options |
|
| 92 |
|
|
| 95 |
|
Cash provided by financing activities |
|
| 39,664 |
|
|
| 14,648 |
|
Net increase in cash, cash equivalents and restricted cash |
|
| 7,105 |
|
|
| 985 |
|
Cash and cash equivalents, beginning of period |
|
| 10,684 |
|
|
| 4,347 |
|
Cash, cash equivalents and restricted cash, end of period |
| $ | 17,789 |
|
| $ | 5,332 |
|
Supplemental disclosures of cash flow information: |
|
|
|
|
|
|
|
|
Cash paid for taxes |
| $ | 1 |
|
| $ | 1 |
|
Cash paid for interest |
| $ | — |
|
| $ | — |
|
Supplemental disclosures of noncash financing activities: |
|
|
|
|
|
|
|
|
Issuance of common stock warrants in connection with initial public offering |
| $ | — |
|
| $ | 218 |
|
For the Three Months Ended March 31, | ||||||||
2021 | 2020 | |||||||
Cash flows from operating activities: | ||||||||
Net loss | $ | (9,869 | ) | (7,159 | ) | |||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
Share based compensation expense | 2,180 | 534 | ||||||
Foreign currency loss (gain) | (670 | ) | 1,294 | |||||
Loss on disposal of fixed assets | (9 | ) | (1 | ) | ||||
Depreciation | 144 | 180 | ||||||
Interest expense | 77 | 256 | ||||||
Fair-value adjustment of convertible term loan | 386 | |||||||
Operating right of use asset expense | 278 | 136 | ||||||
Changes in operating assets and liabilities: | ||||||||
Trade receivables | (2,805 | ) | 0 | |||||
Prepaid expenses and other current assets | 701 | 1,389 | ||||||
Tax incentive receivable | (413 | ) | 1,184 | |||||
Accounts payable | (548 | ) | 1,497 | |||||
Accrued expenses and other current liabilities | (2,473 | ) | (1,427 | ) | ||||
Deferred revenue | (304 | ) | 368 | |||||
Operating lease liability | (272 | ) | (161 | ) | ||||
Other long-term asset | (395 | ) | 0 | |||||
Net cash used in by operating activities | (14,378 | ) | (1,524 | ) | ||||
Cash flows from investing activities: | ||||||||
Purchase of property, plant and equipment | (267 | ) | 0 | |||||
Proceeds from sale of property, plant and equipment | 15 | 0 | ||||||
Purchase of intangible assets | 0 | (62 | ) | |||||
Net cash used in investing activities | (252 | ) | (62 | ) | ||||
Cash flows from financing activities: | ||||||||
Proceeds from issuance of convertible notes | 0 | 500 | ||||||
Net cash provided by financing activities | 0 | 500 | ||||||
Net decrease in cash and cash equivalents | (14,630 | ) | (1,086 | ) | ||||
Effect of exchange rate changes on cash | (216 | ) | (267 | ) | ||||
Cash and cash equivalents at beginning of period | 18,526 | 4,901 | ||||||
Cash and cash equivalents at end of period | $ | 3,680 | $ | 3,548 | ||||
Supplemental disclosure of cash flow information | ||||||||
Cash paid for income taxes | $ | 0 | $ | 17 | ||||
Purchases of property and equipment included in accounts payable and accrued expenses | $ | 97 | $ | 0 | ||||
Non-cash investing and financing activities: | ||||||||
Additions to ROU assets obtained from new operating lease liabilities | $ | 1,468 | $ | 0 |
Shareholders’ Equity | ||||||||||||||||||||||||
For the Three Months E n ded | Common Shares | Capital in Excess of par Value | Accumulated Other Comprehensive Loss | Accumulated deficit | Total Stockholders’ Equity | |||||||||||||||||||
March 31, 2021 | Number | Value | ||||||||||||||||||||||
Balance at December 31, 2020 | 9,100,117 | $ | 1 | $ | 91,238 | $ | (1,077 | ) | $ | (47,168 | ) | $ | 42,994 | |||||||||||
Equity adjustment from foreign currency | (465 | ) | (465 | ) | ||||||||||||||||||||
Stock option exercises | 203 | — | — | — | ||||||||||||||||||||
Share-based compensation | 2,180 | 2,180 | ||||||||||||||||||||||
Net loss | (9,869 | ) | (9,869 | ) | ||||||||||||||||||||
Balance at March 31, 2021 | 9,100,320 | $ | 1 | $ | 93,418 | $ | (1,542 | ) | $ | (57,037 | ) | $ | 34,840 | |||||||||||
Shareholders’ Equity | ||||||||||||||||||||||||||||||||
For the Three Months Ended | Seed preferred shares | Series A preferred shares | Common Shares | Capital in Excess of par Value | Accumulated Other Comprehensive Loss | Accumulated deficit | Total Stockholders’ Equity | |||||||||||||||||||||||||
March 31, 2020 | Number | Number | Number | Value | ||||||||||||||||||||||||||||
Balance at December 31, 2019 | 103,611 | 1,441,418 | 4,128,441 | $ | 1 | $ | 31,718 | $ | (1,634 | ) | $ | (21,549 | ) | $ | 8,536 | |||||||||||||||||
Issuance of common stock for services rendered | 6,720 | — | ||||||||||||||||||||||||||||||
Issuance of common stock in connection with at-the-market issuance costs | 10,450 | — | ||||||||||||||||||||||||||||||
Equity adjustment from foreign currency translation | 23 | 23 | ||||||||||||||||||||||||||||||
Share-based compensation | 534 | 534 | ||||||||||||||||||||||||||||||
Net loss | (7,159 | ) | (7,159 | ) | ||||||||||||||||||||||||||||
Balance at March 31, 2020 | 103,611 | 1,441,418 | 4,145,611 | $ | 1 | $ | 32,252 | $ | (1,611 | ) | $ | (28,708 | ) | $ | 1,934 | |||||||||||||||||
Nature of Business
Spring Bank Pharmaceuticals, and Summary of Significant Accounting Policies
raising additional working capital, or if it is able to raise additional working capital, it may be unable to do so on commercially favorable terms. The Company’s success is dependent uponfailure to raise future capital or enter into other such arrangements if and when needed would have a negative impact on its business, results of operations and financial condition and its ability to successfully complete clinical development and obtain regulatory approval ofdevelop its product candidates, successfully commercialize approved products, generate revenue, and, ultimately, attain profitable operations. The Company’s operations to date have been limited to financing and staffing the Company and the developmentcandidates.
Prior to and in connection with the Company completing its IPO in May 2016, the Company effected a 1-for-4 reverse stock split of its common stock on March 8, 2016. All share and per share amounts and the number of shares of common stock set forth in the financial statements and notes thereto have been retroactively adjusted for all periods presented to give effect to the reverse stock split, including reclassifying an amount equal to the reduction in par value of common stock to additional paid-in capital.
As
The Company expectsconformity with U.S. GAAP. Any reference in these notes to continueapplicable guidance is meant to incur significant and increasing losses for the foreseeable future. The Company anticipates that its expenses will increase significantly as it continues to develop inarigivir, SB 11285 and its other product candidates. The Company does not have any committed external source of funds. As a result, the Company will need additional financing to support its continuing operations. Adequate additional funds may not be availablerefer to the Company on acceptable terms, or at all. Toauthoritative U.S. GAAP as found in the extent thatASC and Accounting Standards Updates (“ASU”) of the Company raises additional capital through the sale of equity or convertible debt securities, stockholders’ ownership interests will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect common stockholder rights. If the Company raises additional funds through collaborations, strategic alliances or licensing arrangements with third parties, the Company may have to relinquish valuable rights to its technologies, future revenue streams, research programs, or product candidates or grant licenses on terms that may not be favorable to the Company.
FASB. The accompanying consolidated financial statements include the accounts of the CompanyF-star Therapeutics Inc. and its wholly owned subsidiaries, Sperovie Biosciences, Inc. and SBP Securities Corporation. Sperovie Biosciences, Inc. had operations consisting mainly of legal fees associated with intellectual property activities as of September 30, 2017. SBP Securities Corporation had assets primarily related to investments in marketable securities and operations consisting primarily of interest income as of September 30, 2017.subsidiaries. All intercompany balances and transactions between the consolidated companies have been eliminated in consolidation.
Cash, Cash Equivalentsthose estimates or assumptions.
Cash equivalents are stated at fair value and include short-term, highly liquid investments with remaining maturities of 90 days or less at the date of purchase.
Restricted cash consists of $250,000 and is held as collateral for the Company’s credit card program. There were no restricted cash as of December 31, 2016.
Included in cash and cash equivalents as of September 30, 2017 and December 31, 2016 are money market fund investments of $15,164,000 and $9,507,000, respectively, which are reported at fair value (Note 5).
Concentration of Credit Risk
significant suppliers
The Company’s one source of revenue during the three and nine months ended September 30, 2016 was grants from the NIH, representing 100% of total revenue for such periods.government-insured limits. The Company diddoes not have any sources of revenue for the three and nine months ended September 30, 2017.
Investments in Marketable Securities
believe it is subject to additional credit risks beyond those normally associated with commercial banking relationships.
and Equipment, NetPropertyplant and equipment are recordedstated at cost. Costs associated with maintenance and repairs are expensed as incurred.cost, less accumulated depreciation. Depreciation and amortization are providedexpense is recognized using the straight-line method over the estimated useful lives:
|
| |
|
Estimated Useful Economic Life | |
Leasehold property improvements, right of use assets | Lesser of lease term or useful life | |
Laboratory equipment | 5 years | |
Furniture and |
3 years | |
|
|
Deferred Rent
been recorded.
Revenue Recognition
The CompanyMerck KGaA, Darmstadt, Germany) which were determined to be within the scope of ASC 606.
(i) | the scope of the contract increases because of the addition of promised goods or services that are distinct; and |
(ii) | the price of the contract increases by an amount of consideration that reflects standalone selling prices of the additional promised goods or services and any appropriate adjustments to that price to reflect the circumstances of the particular contract. |
sales.
ResearchServices: The promises under the Company’s collaboration agreements may include research and development expenses consist primarilyservices to be performed by the Company on behalf of costs incurred for the Company’s research activities, including discovery efforts, and the development of product candidates, which include:
expenses incurred under agreements with third parties, including contract research organizations,partner. Payments or CROs, that conduct research, preclinical activities and clinical trials on the Company’s behalf as well as contract manufacturing organizations, or CMOs, that manufacture drug products for use in the Company’s preclinical and clinical trials;
salaries, benefits and other related costs, including stock-based compensation expense, for personnel inreimbursements resulting from the Company’s research and development functions;
clinical trials as well as the cost of laboratory supplieslicensing technology. Typically, upfront payments and acquiring, developing and manufacturing preclinical study and clinical trial materials;
costs related to compliance with regulatory requirements; and
facility-related expenses, which include direct depreciation costs and allocated expensesmilestone payments made for rent and maintenancethe licensing of facilities and other operating costs.
The Company expensestechnology are expensed as research and development costsin the period in which they are incurred, except for payments relating for intellectual property rights with future alternative use which will be expensed when the intellectual property is in use. Nonrefundable advance payments for goods or services to be received in the future for use in research and development activities are recorded as incurred. prepaid expenses. The prepaid amounts are expensed as the related goods are delivered or the services are performed.
The Company reviewsevaluation in these standards are met, the terms of all warrants issued and classifies the warrantsare classified as a component of permanentstockholders’ equity if they are freestanding financial instruments that are legally detachable and separately exercisable, contingently exercisable, do not embody an obligation for the Company to repurchase its own shares, and permit the holders to receive a fixed number of shares of common stock upon exercise. In addition, the warrants must require physical settlement and may not provide any guarantee of value or return. Warrants that meet these criteria are initially recorded at their grant date fair value and are not subsequently remeasured.without subsequent remeasurement. Warrants that do not meet thisthe criteria are classified as liabilities and remeasured to their fair value at the end of each reporting period.
Financial Instruments
classified or in which the award recipient’s service payments are classified.
the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC Topic 820,
The Company is required to disclose information on all assets and liabilities reported at fair value that enables an assessment of the inputs used in determining the reported fair values. Accounting Standards Codification (“ASC”) 820, Fair Value Measurements and Disclosures (“Measurement
following:
liabilities.
can be corroborated by observable market data.
similar techniques.
Income Taxes
Company’s tax returns. Deferred tax assets and liabilities are determined based uponon the basis of the differences between the consolidated financial statement carrying amountsstatements and the tax basis of existing assets and liabilities and for loss and credit carryforwards using enacted tax rates expected to be in effect infor the yearsyear in which the differences are expected to reverse. DeferredChanges in deferred tax assets and liabilities are reduced by a valuation allowance ifrecorded in the provision for income taxes. The Company assesses the likelihood that its deferred tax assets will be recovered from future taxable income and, to the extent it believes, based upon the weight of available evidence, that it is more likely than not that someall or a portion or all of the deferred tax assetassets will not be realized.
realized, a valuation allowance is established through a charge to income tax expense. Potential for recovery of deferred tax assets is evaluated by estimating the future taxable profits expected and considering prudent and feasible tax planning strategies.
Guarantees and Indemnifications
As permitted under Delaware law, the Company indemnifies its officers and directors for certain events or occurrences while the officer or director is, or was, serving at the Company’s request in such capacity.
The Company leases office space in Hopkinton, Massachusetts andreduction to research and development spaceexpenses. The U.K. research and development tax credit is payable to the Company after surrendering tax losses and is not dependent on current or future taxable income. As a result, it is not reflected as part of the income tax provision If, in Milford, Massachusetts,the future, any UK research and development tax credits generated are utilized to offset a corporate income tax liability in the United Kingdom, that portion would be recorded as a benefit within the income tax provision and any refundable portion not dependent on taxable income would continue to be recorded as a reduction to research and development expenses.
Through September 30, 2017, the Company had not experienced any losses related to these indemnification obligationsconsolidated statements of operations and no material claims were outstanding. The Company does not expect significant claims related to these indemnification obligations, and consequently, concluded that the fair valuecomprehensive loss.
In MarchJune 2016, the FASB issued ASU 2016-09, Compensation – Stock CompensationNo.718)326), Derivatives and Hedging (Topic 815), and Leases (Topic 842): ImprovementsEffective DatesEmployee Share-Based Payment Accounting (“amend the effective date of ASU 2016-09”)require changesbe “smaller reporting companies,” as defined by the SEC, to several areas of employee stock-based compensation payment accounting in an effort to simplify stock-based compensation reporting. The update revises requirements in the following areas: minimum statutory withholding, accounting for income taxes, forfeitures, and intrinsic value accounting for private entities. ASU 2016-09 isbe effective for annual reporting periodsfiscal years beginning after December 15, 2016,2022, including interim reporting periods within each annual reporting period.those fiscal years. Early adoption is permitted. The Company adopted this standard on January 1, 2017. The update revises requirements in the following areas: minimum statutory withholding, accounting for income taxes, and forfeitures. Priorhas not elected to adoption, the Company applied a 0% forfeiture rate to stock-based compensation, resulting in no cumulative effect adjustment to the opening period. Upon adoption of this standard, the Company’s accounting policy is to recognize forfeitures as they occur.
The update requires the Company to recognize the income tax effect of awards in the income statement when the awards vest or are settled. It also allows the Company to repurchase more of an employee’s shares than it could prior to the update for tax withholding purposes without triggering a liability. The income tax related items had no effect on the current period presentation and the Company maintains a full valuation allowance against its deferred tax assets.
In May 2014, the FASB issuedearly adopt ASU
In January 2016, the FASB issued ASU 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities, which amends ASC Subtopic 825-10, Financial Instruments - Overall, and includes updates on certain aspects of recognition, measurement, presentation and disclosure of financial instruments and applies to all entities that hold financial assets or owe financial liabilities. The new standard is effective for the Company for the annual period beginning after December 15, 2017, with early adoption permitted. 2016-13.
In February 2016,position and results of operations.
Number of shares of common stock | 4,449,559 | |||
Multiplied by fair value per share of common stock | $ | 4.84 | ||
Purchase price | $ | 21,536 | ||
Cash and cash equivalents | $ | 9,779 | ||
Marketable securities | 5,000 | |||
Prepaid expenses and other assets | 935 | |||
Operating lease right of use asset | 2,784 | |||
Intangible assets | 4,720 | |||
Goodwill | 10,451 | |||
Accounts payable, accrued expenses and other liabilities | (5,453 | ) | ||
CVRs | (2,520 | ) | ||
Liability and equity based warrants | (422 | ) | ||
Deferred tax liability | (576 | ) | ||
Operating lease liability | (3,162 | ) | ||
Fair value of net assets acquired | $ | 21,536 |
In September 2016, the FASB issued ASU 2016-15, Classification of Certain Cash Receipts and Cash Payments, which amends ASC Topic 230, Statement of Cash Flows, and includes provisions intended to reduce diversity in practice and provides guidance on eight specific statements of cash flows classification issues. The new standard is effective for the Company for the annual period ending after December 15, 2017, and for annual and interim periods thereafter, with early adoption permitted. The Company is currently evaluating the impact that the adoption of this standard may have on its consolidated financial statements.
In July 2017, the FASB issued ASU 2017-11, Earnings Per Share (Topic 260), Distinguishing Liabilities from Equity (Topic 480), Derivatives and Hedging (Topic 815): I. Accounting for Certain Financial Instruments with Down Round Features and II. Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception. Part I applies to entities that issue financial instruments such as warrants, convertible debt or convertible preferred stock that contain down round features. Part II simply replaces the indefinite deferral for certain mandatorily redeemable noncontrolling interests and mandatorily redeemable financial instruments of nonpublic entities contained within Accounting Standards Codification (ASC) Topic 480 with a scope exception and does not impact the accounting for these mandatorily redeemable instruments. This ASU is effective for public companies for the annual reporting periods beginning after December 15, 2018, and interim periods within those annual periods. Early adoption is permitted. The Company is currently evaluating the impact that the adoption of this standard may have on its consolidated financial statements.
2. NET LOSS PER SHARE
|
| For the Three Months Ended September 30, |
|
| For the Nine Months Ended September 30, |
| ||||||||||
|
| 2017 |
|
| 2016 |
|
| 2017 |
|
| 2016 |
| ||||
Net loss |
| $ | (10,828 | ) |
| $ | (4,148 | ) |
| $ | (26,217 | ) |
| $ | (14,966 | ) |
Weighted-average number of common shares-basic and diluted |
|
| 12,696,986 |
|
|
| 7,759,630 |
|
|
| 10,555,461 |
|
|
| 6,856,876 |
|
Net loss per common share-basic and diluted |
| $ | (0.85 | ) |
| $ | (0.53 | ) |
| $ | (2.48 | ) |
| $ | (2.18 | ) |
For the Three Months Ended March 31, | ||||||||
2021 | 2020 | |||||||
Net loss | $ | (9,869 | ) | $ | (7,159 | ) | ||
Weighted average number shares outstanding, basic and diluted | 9,100,273 | 1,826,070 | ||||||
Net loss income per common, basic and diluted | $ | (1.08 | ) | $ | (3.92 | ) |
|
| For the Three and Nine Months Ended September 30, |
| |||||
|
| 2017 |
|
| 2016 |
| ||
Common stock warrants |
|
| 1,798,084 |
|
|
| 153,347 |
|
Stock options |
|
| 977,565 |
|
|
| 718,065 |
|
For the Three Months Ended March 31, | ||||||||
2021 | 2020 | |||||||
Convertible debt | — | 179,404 | ||||||
Common stock warrants | 93,330 | — | ||||||
Stock options, and RSUs | 1,241,435 | 257,599 |
Cash in excess of the Company’s immediate requirements is invested in accordance with the Company’s investment policy that primarily seeks to maintain adequate liquidityProperty, plant and preserve capital.
The following table summarizes the Company’s investments, by category, as of September 30, 2017equipment, net
|
| September 30, |
|
| December 31, |
| ||
Investments - Current: |
| 2017 |
|
| 2016 |
| ||
Debt securities - available for sale |
| $ | 34,640 |
|
| $ | 14,046 |
|
Total |
| $ | 34,640 |
|
| $ | 14,046 |
|
|
|
|
| �� |
|
|
|
|
Investments - Noncurrent: |
|
|
|
|
|
|
|
|
Debt securities - available for sale |
| $ | — |
|
| $ | 752 |
|
Total |
| $ | — |
|
| $ | 752 |
|
A summary of the Company’s available-for-sale classified investmentsequipment, net consisted of the following (in thousands):
|
| At September 30, 2017 |
| |||||||||||||
|
| Cost Basis |
|
| Unrealized Gains |
|
| Unrealized Losses |
|
| Fair Value |
| ||||
Investments - Current: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial paper |
| $ | 14,345 |
|
| $ | — |
|
| $ | — |
|
| $ | 14,345 |
|
Corporate bonds |
|
| 18,309 |
|
|
| — |
|
|
| (7 | ) |
|
| 18,302 |
|
United States treasury securities |
|
| 1,993 |
|
|
| — |
|
|
| — |
|
|
| 1,993 |
|
Total |
| $ | 34,647 |
|
| $ | — |
|
| $ | (7 | ) |
| $ | 34,640 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| At December 31, 2016 |
| |||||||||||||
|
| Cost Basis |
|
| Unrealized Gains |
|
| Unrealized Losses |
|
| Fair Value |
| ||||
Investments - Current: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Agency bonds |
| $ | 452 |
|
| $ | — |
|
| $ | — |
|
| $ | 452 |
|
Commercial paper |
|
| 2,947 |
|
|
| — |
|
|
| — |
|
|
| 2,947 |
|
Corporate bonds |
|
| 8,499 |
|
|
| — |
|
|
| (7 | ) |
|
| 8,492 |
|
United States treasury securities |
|
| 2,155 |
|
|
| — |
|
|
| — |
|
|
| 2,155 |
|
Total |
| $ | 14,053 |
|
| $ | — |
|
| $ | (7 | ) |
| $ | 14,046 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments - Noncurrent: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate bonds |
|
| 752 |
|
|
| — |
|
|
| — |
|
|
| 752 |
|
Total |
| $ | 752 |
|
| $ | — |
|
| $ | — |
|
| $ | 752 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, | December 31 | |||||||
2021 | 2020 | |||||||
Leasehold improvements | $ | 160 | $ | 15 | ||||
Laboratory equipment | 1,865 | 1,788 | ||||||
Furniture and office equipment | 165 | 169 | ||||||
2,190 | 1,972 | |||||||
Less: Accumulated depreciation | 1,127 | 1,183 | ||||||
$ | 1,063 | $ | 789 | |||||
Fair Value Measurements as of March 31, 2021 Using: | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Liabilities: | ||||||||||||||||
Contingent value rights | $ | — | $ | — | $ | 2,520 | $ | 2,520 | ||||||||
Warrants | — | — | 11 | 11 | ||||||||||||
$ | — | $ | — | $ | 2,531 | $ | 2,531 | |||||||||
Fair Value Measurements as of December 31, 2020 Using: | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Liabilities: | ||||||||||||||||
Contingent value rights | $ | — | $ | — | $ | 2,520 | $ | 2,520 | ||||||||
Warrants | — | — | 37 | 37 | ||||||||||||
$ | — | $ | — | $ | 2,557 | $ | 2,557 | |||||||||
|
| Amortized Cost |
|
| Fair Value |
| ||
Due in one year or less |
| $ | 34,647 |
|
| $ | 34,640 |
|
Due after one year through two years |
|
| — |
|
|
| — |
|
Total |
| $ | 34,647 |
|
| $ | 34,640 |
|
4. PROPERTY AND EQUIPMENT, NET
Property and equipment as of September 30, 2017 and December 31, 2016 consisted of the following (in thousands):
|
| September 30, |
|
| December 31, |
| ||
|
| 2017 |
|
| 2016 |
| ||
Equipment |
| $ | 683 |
|
| $ | 576 |
|
Furniture and fixtures |
|
| 144 |
|
|
| 140 |
|
Leasehold improvements |
|
| 149 |
|
|
| 133 |
|
Total property and equipment |
|
| 976 |
|
|
| 849 |
|
Less: accumulated depreciation and amortization |
|
| (442 | ) |
|
| (327 | ) |
Property and equipment, net |
| $ | 534 |
|
| $ | 522 |
|
Depreciation and amortization expensecontingent value rights for the three and nine months ended September 30, 2017 was $39,000 and $115,000, respectively. Depreciation and amortization expense for the three and nine months ended September 30, 2016 was $30,000 and $87,000, respectively.
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 on the measurement date. Valuation techniques used to measure fair value are performed in a manner to maximize the use of observable inputs and minimize the use of unobservable inputs.
The Company classified its money market funds within Level 1 because their fair values are based on their quoted market prices. The Company classified its commercial paper and fixed income securities within Level 2 because their fair values are determined using alternative pricing sources or models that utilized market observable inputs.
A summary of the assets and liabilities that are measured at fair value as of September 30, 2017 and DecemberMarch 31, 2016 is as follows (in thousands):
|
|
|
|
|
| Fair Value Measurement at September 30, 2017 |
| |||||||||
|
| Carrying Value |
|
| Quoted Prices in Active Markets for Identical Assets (Level 1) |
|
| Significant other Observable Inputs (Level 2) |
|
| Significant Unobservable Inputs (Level 3) |
| ||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Money market funds (1) |
| $ | 15,164 |
|
| $ | 15,164 |
|
| $ | — |
|
| $ | — |
|
Fixed income securities |
|
| 34,640 |
|
|
| — |
|
|
| 34,640 |
|
|
| — |
|
Total |
| $ | 49,804 |
|
| $ | 15,164 |
|
| $ | 34,640 |
|
| $ | — |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrant liabilities |
| $ | 17,807 |
|
| $ | — |
|
| $ | — |
|
| $ | 17,807 |
|
Total |
| $ | 17,807 |
|
| $ | — |
|
| $ | — |
|
| $ | 17,807 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Fair Value Measurement at December 31, 2016 |
| |||||||||
Assets: |
| Carrying Value |
|
| Quoted Prices in Active Markets for Identical Assets (Level 1) |
|
| Significant other Observable Inputs (Level 2) |
|
| Significant Unobservable Inputs (Level 3) |
| ||||
Money market funds (1) |
| $ | 9,507 |
|
| $ | 9,507 |
|
| $ | — |
|
| $ | — |
|
Fixed income securities |
|
| 14,798 |
|
|
| — |
|
|
| 14,798 |
|
|
| — |
|
Total |
| $ | 24,305 |
|
| $ | 9,507 |
|
| $ | 14,798 |
|
| $ | — |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrant liabilities |
| $ | 6,333 |
|
| $ | — |
|
| $ | — |
|
| $ | 6,333 |
|
Total |
| $ | 6,333 |
|
| $ | — |
|
| $ | — |
|
| $ | 6,333 |
|
|
|
2021. The following table reflects the change in the Company’s Level 3 liabilities, which consists of the warrants, issued in a private placement in November 2016 (see Note 7), for the period ended September 30, 2017March 31, 2021 (in thousands):
|
| November Private Placement Warrants |
| |
Balance at December 31, 2015 |
| $ | — |
|
Issuance of warrants |
|
| 8,275 |
|
Change in fair value |
|
| (1,942 | ) |
Balance at December 31, 2016 |
|
| 6,333 |
|
Change in fair value |
|
| 11,474 |
|
Balance at September 30, 2017 |
| $ | 17,807 |
|
November 2016 Private | ||||
Placement Warrants | ||||
Balance at December 31, 2020 | $ | 37 | ||
Warrants exercised | 26 | |||
Balance at March 31, 2021 | $ | 11 |
|
| September 30, |
|
| December 31, |
| ||
|
| 2017 |
|
| 2016 |
| ||
Clinical |
| $ | 1,159 |
|
| $ | 738 |
|
Compensation and benefits |
|
| 750 |
|
|
| 901 |
|
Accounting and legal |
|
| 281 |
|
|
| 279 |
|
Other |
|
| 122 |
|
|
| 64 |
|
Total accrued expenses |
| $ | 2,312 |
|
| $ | 1,982 |
|
7. STOCKHOLDERS’ EQUITY
Common and Preferred Stock
Effective February 1, 2016, the Company amended and restated its license agreement with BioHEP Technologies Ltd. (“BioHEP”).
March 31, | December 31 | |||||||
2021 | 2020 | |||||||
Clinical Trial Costs | $ | 2,482 | $ | 3,394 | ||||
Severance | 1,692 | 1,953 | ||||||
Compensation and Benefits | 1,147 | 1,361 | ||||||
Professional Fees | 1,418 | 1,593 | ||||||
Other | 323 | 1,160 | ||||||
$ | 7,062 | $ | 9,461 | |||||
In Mayconcluded that they should be equity-classified. At March 31, 2021 there were 7,087 warrants outstanding.
Upon the closing of the Company’s IPO, all outstanding shares of the Company’s preferred stock automatically converted into 250,000 shares of the Company’s common stock.
In November 2016, the CompanySpring Bank entered into a definitive agreement with respect to the private placement of 1,644,737411,184 shares of common stock and warrants to purchase 1,644,737411,184 shares of common stock (the “November 2016 Private Placement Warrants”) to a group of accredited investors (the “November Private Placement”). These investors paid $9.12 for each share of common stock and warrant to purchase one share of common stock.investors. The November 2016 Private Placement Warrants are exercisable at an exercise price of $10.79 per share and expire on November 23, 2021. The Company completed the November Private Placement on November 23, 2016, resulting in $13.7 million in net proceeds to the Company, after deducting placement agent fees and other offering expenses payable by the Company.
In June 2017, the Company issued and sold in an underwritten public offering an aggregate of 3,269,219 shares of its common stock at $13.00 per share, which included 384,604 shares pursuant to the exercise of an option to purchase additional shares granted to the underwriters in connection with the offering. The offering resulted in $39.6 million of net proceeds to the Company, after deducting underwriting discounts and commissions and other offering expenses payable by the Company.
In August 2017, the Company entered into a Controlled Equity OfferingSales Agreement (the “Sales Agreement”) with Cantor Fitzgerald & Co. (“Cantor”), pursuant to which the Company may offer and sell, from time to time through Cantor, shares of the Company’s common stock having an aggregate offering price of up to $50.0 million. The Company will pay Cantor a commission rate equal to 3.0% of the aggregate gross proceeds from each sale.
Warrants
In connection with the amendment and restatement of a license agreement with BioHEP, the Company issued a warrant to purchase 125,000 shares of the Company’s common stock to BioHEP (the “BioHEP Warrant”), effective February 1, 2016. The Company evaluated the terms of the warrant and concluded that it should be equity-classified. The fair value of the warrant, $0.8 million, was estimated on the issuance date using a Black Scholes pricing model based on the following assumptions: an expected term of two and a half years, expected stock price volatility of 71%, a risk free rate of 1.01%, and a dividend yield of 0%. The fair value was expensed as research and development costs.
In connection with the Company’s IPO, the Company issued to the sole book-running manager for the IPO a warrant to purchase 27,600 shares of common stock in May 2016 and a warrant to purchase 747 shares of common stock in June 2016 (together, the “IPO Warrants”). The IPO Warrants are exercisable at an exercise price of $15.00 per share and expire on May 5, 2021. The Company evaluated the terms of the IPO Warrants and concluded that they should be equity-classified. The fair value of the May 2016 IPO Warrants was estimated on the applicable issuance dates using a Black Scholes pricing model based on the following assumptions: an expected term of 4.99 years; expected stock price volatility of 87%; a risk free rate of 1.20%; and a dividend yield of 0%. The fair value of the June 2016 IPO Warrants was estimated on the applicable issuance dates using a Black Scholes pricing model based on the following assumptions: an expected term of 4.92 years; expected stock price volatility of 87%; a risk free rate of 1.23%; and a dividend yield of 0%. The aggregate fair value of the IPO Warrants was $0.2 million.
The Company received approximately $5.3 million in proceeds upon the exercise of warrants to purchase 641,743 shares of its common stock of the Company, which were exercised in connection with the closing of the IPO. Upon the closing of the Company’s IPO, all of the outstanding warrants that were not exercised, except the BioHEP warrant and the IPO Warrants, terminated in accordance with their original terms.
In connection with the November Private Placement, the Company issued the November Private Placement Warrants to purchase 1,644,737 shares of common stock in November 2016 to a group of accredited investors. The November Private Placement Warrants are exercisable at an exercise price of $10.79$43.16 per share and expire on November 23, 2021. The Company evaluated the terms of these warrants and concluded that they are liability-classified. In November 2016, the Company recorded the fair value of these warrants of approximately $8.3 million using a Black Scholes pricing model. The Company must recognize any change in the value of the warrant liability each reporting period in the statement of operations.operations and comprehensive loss. As of DecemberMarch 31, 2016 and September 30, 2017,2021, the fair value of the November 2016 Private Placement Warrants was approximately $6.3 million$11,000 and $17.8 million, respectively (see Note 5).
A summary388,451 warrants have been exercised to date. At March 31, 2021, there were 19,993 warrants outstanding.
|
| September 30, 2017 |
|
| December 31, 2016 |
| ||
Risk-free interest rate |
|
| 1.8 | % |
|
| 1.9 | % |
Expected term (in years) |
|
| 4.1 |
|
|
| 4.9 |
|
Expected volatility |
|
| 70.0 | % |
|
| 65.5 | % |
Expected dividend yield |
|
| 0 | % |
|
| 0 | % |
| ||||
Warrants | ||||
Outstanding at December 31, |
| |||
Exercises |
| ) | ||
|
|
| ||
Outstanding at March 31, 2021 |
|
| ||
|
| |||
|
| |||
|
| |||
|
| |||
|
|
2014
7. | Stock Option Plans |
The 2015 Plan provides for the issuance of common stock, stock options and other stock-based awards to employees, officers, directors, consultants and advisors of the Company. The number of shares reserved for issuance under the 2015 Plan is the sum of 750,000 shares of common stock, plus the number of shares equal to the sum of (i) 116,863 shares of common stock, which was the number of shares reserved for issuance under the 2014 Plan that remained available for grant under the 2014 Plan immediately prior to the closing of the Company’s IPO, and (ii) theauthorized number of shares of common stock subjectreserved for issuance by 800,000 shares. Pursuant to the Amended and Restated 2015 Plan, there are 1,666,863 shares authorized for issuance. In addition, to the extent any outstanding awards under the 2014 Plan that expire, terminate, or are otherwise surrendered, cancelled or forfeited.forfeited after the closing of Spring Bank’s IPO, those shares are added to the authorized shares under the Amended and Restated 2015 Plan. The total number of shares authorized for issuance under both the 2014 Plan and the Amended and Restated 2015 Plan is 2,300,000.
The following table summarizes the
|
| Options |
|
| Weighted-Average Exercise Price Per Share |
|
| Aggregate Intrinsic Value |
| |||
Options outstanding at December 31, 2015 |
|
| 610,481 |
|
| $ | 11.99 |
|
| $ | — |
|
Granted |
|
| 128,334 |
|
|
| 10.41 |
|
|
| — |
|
Exercised |
|
| (10,247 | ) |
|
| 9.28 |
|
|
| 29,550 |
|
Cancelled |
|
| (24,253 | ) |
|
| 9.89 |
|
|
| — |
|
Outstanding at December 31, 2016 |
|
| 704,315 |
|
| $ | 11.82 |
|
|
| — |
|
Granted |
|
| 286,500 |
|
|
| 8.20 |
|
|
| — |
|
Exercised |
|
| (10,000 | ) |
|
| 9.28 |
|
|
| 11,228 |
|
Cancelled |
|
| (3,250 | ) |
|
| 12.44 |
|
|
| — |
|
Options outstanding at September 30, 2017 |
|
| 977,565 |
|
| $ | 10.78 |
|
| $ | 5,923,320 |
|
Options exercisable at September 30, 2017 |
|
| 390,417 |
|
| $ | 11.67 |
|
| $ | 2,019,924 |
|
As of September 30, 2017, all options granted are expected to vest and the weighted-average remaining contractual life of all options is 8.4 years.
March 31, | December 31 | |||||
2021 | 2020 | |||||
Risk-free interest rate | 0.36 | % | 0.17%-0.42% | |||
Expected volatility | 87.8 | % | 82.8%-98.3% | |||
Expected dividend yield | 0 | % | 0% | |||
Expected life (in years) | 5.1 | 5.1 |
PriorCommon Stock is used to the Company’s IPO on May 11, 2016, the Board determined the estimated fair valuedetermine volatility of the Company’s common stock on the date ofshare-based awards at grant based on a number of objective and subjective factors, including third party valuations. Since the IPO, the fair value of the Company’s common stock on the date of the grant is based on the closing price per share of the common stock on the NASDAQ Capital Market on the date of grant. date.
There were no stock options granted prior to 2015. The assumptions the Company used to determineTransaction, the fair value of stockthe Company’s Common Stock is used to estimate the fair value of the share-based awards at grant date.
Number of Shares | Weighted Average Exercise Price | Weighted Average Contractual Term | Aggregate Intrinsic Value | |||||||||||||
(in years) | (in thousands) | |||||||||||||||
Outstanding as of December 31, 2020 | 533,559 | $ | 3.33 | 9.30 | $ | 8,494 | ||||||||||
Granted | 444,186 | 7.93 | — | — | ||||||||||||
Exercised | (203 | ) | 0.12 | — | — | |||||||||||
Forfeited | (14,188 | ) | 0.12 | — | — | |||||||||||
Outstanding as of March 31, 2021 | 963,354 | $ | 5.50 | 9.19 | $ | 6,863 | ||||||||||
Options exercisable at March 31, 2021 | 139,916 | $ | 8.29 | 7.35 | $ | 1,648 | ||||||||||
|
| Nine Months Ended September 30, |
| |||||
|
| 2017 |
|
| 2016 |
| ||
Risk-free interest rate |
|
| 2.0 | % |
|
| 1.4 | % |
Expected term (in years) |
|
| 6.0 |
|
|
| 6.1 |
|
Expected volatility |
|
| 79.8 | % |
|
| 77.6 | % |
Expected dividend yield |
|
| 0 | % |
|
| 0 | % |
summarizesis a rollforward of all RSU activity under the stock-based compensation expenseStock Incentive Plans for the three and nine months ended September 30, 2017March 31, 2020:
Weighted- Average | ||||||||
Restricted | Grant Date | |||||||
Stock Units | Fair Value | |||||||
Total nonvested units at December 31, 2020 | 69,749 | $ | 11.73 | |||||
Granted | 310,385 | 8.57 | ||||||
Total nonvested units at March 31, 2021 | 380,134 | $ | 9.27 | |||||
|
| For the Three Months Ended September 30, |
|
| For the Nine Months Ended September 30, |
| ||||||||||
|
| 2017 |
|
| 2016 |
|
| 2017 |
|
| 2016 |
| ||||
Stock-based compensation: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development |
| $ | 121 |
|
| $ | 104 |
|
| $ | 402 |
|
| $ | 286 |
|
General and administrative |
|
| 389 |
|
|
| 274 |
|
|
| 1,081 |
|
|
| 729 |
|
Total Stock-based compensation |
| $ | 510 |
|
| $ | 378 |
|
| $ | 1,483 |
|
| $ | 1,015 |
|
The fair value of stock options vested during the nine months ended September 30, 2017 was $1,275,000.
March 31, | March 31, | |||||||
2021 | 2020 | |||||||
Research and development expenses | $ | 414 | $ | 124 | ||||
General and administrative expenses | 1,766 | 410 | ||||||
$ | 2,180 | $ | 534 | |||||
Reserved Shares
Three Months Ended March 31, | ||||||||
2021 | 2020 | |||||||
Revenue by collaboration partner | ||||||||
Ares | $ | 2,800 | $ | 895 | ||||
Denali | 117 | 460 | ||||||
Total | $ | 2,917 | $ | 1,355 | ||||
Three Months Ended March 31, 2021 | Balance at December | Recognized | Impact of exchange rates | Balance at March | ||||||||||||
Contract liabilities: | ||||||||||||||||
Ares collaboration | $ | 37 | $ | (37 | ) | $ | 0 | $ | 0 | |||||||
Denali collaboration | 263 | (117 | ) | (146 | ) | 0 | ||||||||||
Total deferred revenue | $ | 300 | $ | (154 | ) | $ | (146 | ) | $ | 0 | ||||||
Periods | ||||
For the period April 1, 2021 to December 31, 2021 | $ | 801 | ||
2022 | 843 | |||
2023 | 854 | |||
2024 | 474 | |||
2025 | 486 | |||
Thereafter | 1,444 | |||
Total lease payments | $ | 4,902 | ||
Period | ||||
For the period April 1, 2021 to December 31, 2021 | $ | 56 | ||
2022 | 462 | |||
2023 | 474 | |||
2024 | 486 | |||
2025 | 498 | |||
Thereafter | 1,481 | |||
Total sublease receipts | $ | 3,457 | ||
|
| September 30, |
| |||||
|
| 2017 |
|
| 2016 |
| ||
2016 BioHEP warrants |
|
| 125,000 |
|
|
| 125,000 |
|
2016 IPO warrants |
|
| 28,347 |
|
|
| 28,347 |
|
November Private Placement warrants |
|
| 1,644,737 |
|
|
| — |
|
2014 and 2015 Stock incentive plans |
|
| 1,449,652 |
|
|
| 1,475,000 |
|
Total |
|
| 3,247,736 |
|
|
| 1,628,347 |
|
8. COMMITMENTS AND CONTINGENCIES
Leases
In April 2015,
In March 2016, the Company entered into a new operating lease for its headquarters in Hopkinton, Massachusetts with a lease term through May 31, 2021. The total payments due during the termunderwriters, relating to an underwritten public offering of approximately 9.3 million shares of the lease are approximately $771,000.
Rent paid for the three and nine months ended September 30, 2017 was $59,000 and $174,000, respectively. Rent paid for the three and nine months ended September 30, 2016 was $56,000 and $110,000, respectively.
Future minimum commitments due under all leases at September 30, 2017 are as follows (in thousands):
Year |
|
|
|
|
2017 |
| $ | 59 |
|
2018 |
|
| 174 |
|
2019 |
|
| 157 |
|
2020 |
|
| 164 |
|
Thereafter |
|
| 70 |
|
Total minimum lease payments |
| $ | 624 |
|
See subsequent events (Note 10) regarding a new lease commitment that the Company entered into after September 30, 2017.Company’s common stock, par value $0.0001 per share. The commitments under the new lease agreement are not includedunderwritten public offering resulted in the table above.
BioHEP Technologies Ltd. License Agreement
In January 2016, the Company entered into an amended and restated license agreement with BioHEP, which became effective on February 1, 2016.
Under the amended and restated license agreement, the Company agreed to pay BioHEP up to $3.5 million in development and regulatory milestone payments for disease(s) caused by each distinct virus for which the Company develops licensed product(s). BioHEP is also eligible to receive tiered royalties in the low-to-mid single-digits on net product salesgross proceeds of licensed products by the Company and its affiliates and sub licensees, and a specified share of non-royalty sublicensing revenues the Company and its affiliates receive from sub licensees, which share of sublicensing revenues is capped at a maximum aggregate of $2.0 million under all such sublicenses.
Contingencies
The Company accrues for contingent liabilities to the extent that the liability is probable and estimable. There are no accruals for contingent liabilities in these consolidated financial statements.
During May 2015, the Company entered into a transition agreement with the Company’s former President and Chief Executive Officer. Under the transition agreement, he continued to serve as the Company’s president and chief executive officer for a transition period that ended on August 17, 2015. Following the transition period, the Company made 18 monthly payments totaling $464,000 and also provided benefits consistent with the coverage that was provided prior to the execution of the transition agreement. There was no remaining unpaid balance relating to this obligation at September 30, 2017.
9. RELATED PARTY TRANSACTIONS
During the nine months ended September 30, 2016, the Company reimbursed BioHEP, a greater than five percent stockholder as of September 30, 2016, $14,000 for legal expenses that BioHEP incurred in connection with entering into the amended and restated license agreement.$65.0 million. The Company incurred no such payments during$3.9 million in issuance costs associated with the nine months ended September 30, 2017.
10. SUBSEQUENT EVENTS
underwritten public offering, resulting in net proceeds to the Company of $61.1 million.
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations. |
On October 4, 2017, the Company entered into a lease agreement (the “New Lease”) in Hopkinton, Massachusetts. The premises covered by the New Lease will serve as the Company’s new principal office and laboratory space. The initial term of the New Lease is 125 months beginning on the date on which the landlord substantially completes certain renovations to the premises covered by the New Lease. The Company has the option to extend the New Lease one time for an additional 5-year period. Following an eleven-month rent abatement period, the Company will be obligated to make monthly rent payments in the amount of $34,533, which is subject to increase by approximately 3% annuallynotes thereto for the first five yearsyear ended December 31, 2020, and the related Management’s Discussion and Analysis of Financial Condition and Results of Operations, contained in our Annual Report on Form 10-K filed with the New LeaseSEC on March 30, 2021.
You should read the following discussion and analysis of financial condition and results of operations together with Part I, Item 1“Financial“Forward-Looking Statements” and related notes included elsewhere in this Quarterly Report on Form 10-Q.
Overview
We are a clinical-stage biopharmaceutical company engaged
RIG-I Product Candidates
We are currently developing inarigivir for the treatment of chronic hepatitis B virus, or HBV. We are conducting Part AI, Item 1A of our Phase 2 ACHIEVE multi-center clinical trial of inarigivir in Canada, Hong Kong, Korea and Taiwan. Part A of the Phase 2 ACHIEVE trial is a randomized, placebo-controlled, multiple ascending dose trial in up to 80 non-cirrhotic patients infected with chronic HBV using doses of 25 mg, 50 mg, 100 mg and 200 mg of inarigivir as a monotherapy administered daily for 12 weeks. Following this treatment, all patients will receive treatment with the oral antiviral agent tenofovir disoproxil fumarate (marketed by Gilead Sciences, Inc., or Gilead, as Viread®), which we refer to as Viread, as a monotherapy for 12 weeks. Patients will be sequentially enrolled into one of the four dose cohorts and randomized between the inarigivir dose group or placeboAnnual Report on a 4:1 basis. Patients are stratified based on HBeAg positive (+) or negative (–) status. HBeAg is a non-structural protein which is secreted by the virus and whose presence in blood, or HBeAg–positive, is indicative of wild type or non-mutated virus with high levels of viral replication. The loss of HBeAg occurs secondary to mutations in the virus and results in a patient becoming HBeAg negative with a resulting lower level of actively replicating virus. The primary endpoints of Part A of the Phase 2 ACHIEVE clinical trial are safety and antiviral activity, as measured by the change in HBV DNA at week 12 from baseline. Multiple exploratory secondary endpoints include reduction or loss of hepatitis B surface antigen, or HBsAg, and HBeAg, quantitative HBV RNA as a marker for control of virus production and studies of immune activity.
In May 2017, we reported top-line results from the first inarigivir monotherapy dosing cohort of Part A of the Phase 2 ACHIEVE clinical trial indicating that a low dose (25mg) of inarigivir alone showed a favorable safety profile and antiviral activity against HBV DNA and HBsAg. The first inarigivir monotherapy dosing cohort consisted of 11 HBeAg-positive and 9 HBeAg–negative patients, of which 80% were genotype B/C, the most common Asian genotypes. Administration of inarigivir resulted in a statistically significant reduction in HBV DNA at week 12 (unpaired t-test 2.85, p=0.01) compared to placebo, with a mean reduction of 0.6 log10 (range 0 to 1.87 log10) in the inarigivir treatment group. For the secondary endpoint of reduction or loss of HBsAg, 5 of 16 patients (31%) in the inarigivir treatment group had a greater than 0.5 log10 reduction at any time point (range 0.52 to 1.01 log10), compared to none in the placebo group. The 7 HBeAg–negative patients in the inarigivir treatment group had the greatest mean reduction in HBV DNA at 0.9 log10, and 3 of these 7 patients also had a greater than 0.5 log10 reduction in HBsAg. The overall safety profile of inarigivir was favorable with no serious adverse events observed during the 12 week study. Treatment-emergent adverse events ranged from mild to moderate in severity with no interferon-like side effects and were comparable to patients on placebo.
In October 2017, we reported additional results from the first cohort of Part A of the Phase 2 ACHIEVE clinical trial consisting of patient data from 12 weeks of Viread monotherapy treatment that followed 12 weeks of inarigivir (25mg) monotherapy treatment. Treatment with Viread monotherapy during weeks 12-24 of the first cohort induced potent suppression of HBV DNA in all patients including placebo, and 6 of 16 patients (38%) in the inarigivir treatment group had a greater than 0.5 log10 reduction in HBsAg at week 24, which included 3 HBeAg-positive patients. An associated greater than 0.75 log10 reduction in HBeAg was seen in 4 of 9 (44%) HBeAg-positive patients in the inarigivir treatment group, compared to zero of four (0%) in the placebo group. We believe this data suggests an enhanced effect of Viread in the inarigivir treated patients and is supportive of the proposed combination strategy that will be evaluated in Part B of the Phase 2 ACHIEVE trial, as discussed below.
We expect to report top-line results from the second inarigivir monotherapy dosing cohort (50mg) of Part A of the Phase 2 ACHIEVE clinical trial in the fourth quarter of 2017, and to report top-line monotherapy results for all patients treated with inarigivir alone in the second half of 2018.
Part B of the Phase 2 ACHIEVE clinical trial, which we expect to initiate in the second half of 2018, will consist of 12 weeks of combination treatment with inarigivir (100mg) and Viread. Following this treatment, all patients will receive treatment with Viread as a monotherapy for 12 weeks. We expect to initiate Part B of this clinical trial in the second half of 2018. Both Parts A and B of the Phase 2 ACHIEVE clinical trial are being conducted under our clinical trial supply and collaboration agreement with Gilead.
We have entered into multiple collaborations and seek to enter into additional collaborations with third parties that are investigating and/or developing compounds for the treatment of chronic HBV with different pharmacological mechanisms of action than inarigivir. Pursuant to this strategy, in 2016, we entered into an agreement with Arrowhead Pharmaceuticals, Inc., or Arrowhead, to collaborate on the study of the combined use of inarigivir and Arrowhead’s small interfering ribonucleic acid, or siRNA, product pipeline for the treatment of chronic HBV. Under this collaboration with Arrowhead, we agreed first to study the co-administration of both agents in preclinical models, with the potential to be added to a clinical study. We have also entered into a material transfer agreement with a third party to conduct preclinical experiments examining the co-administration of inarigivir with a capsid inhibitor for the potential treatment of patients infected with chronic HBV. Additionally, in July 2017, we entered into a clinical trial collaboration with Gilead under which Gilead will fund and conduct a Phase 2 trial examining the co-administration of inarigivir and tenofovir alafenamide (marketed by Gilead as Vemlidy®) in patients infected with chronic HBV. The protocol for this Phase 2 clinical trial provides that treatment will consist of 12 weeks of combination therapy with inarigivir (50mg) and Vemlidy. Following this treatment, all patients will receive treatment with Vemlidy as a monotherapy for 12 weeks. We anticipate that Gilead will initiate this clinical trial in the first quarter of 2018.
We are also pursuing the development of the co-formulation of inarigivir with Viread and with entecavir (marketed as Baraclude®), which we refer to as Baraclude, as potential fixed-dose combination products for the treatment of patients with chronic HBV who may benefit from the combined use of inarigivir as a potential immunomodulatory agent, and Baraclude or Viread, as the antiviral agent. We anticipate that the fixed-dose combination product(s) could result in enhanced patient compliance and potentially allow for a more favorable safety profile. We have conducted early development work on a co-formulation of inarigivir with Viread and believe that inarigivir with Viread is compatible in the same formulation. We believe that the immunomodulatory activity provided by inarigivir could become a key component of a future combinatorial treatment of patients infected with chronic HBV, which could increase the percentage of chronic HBV patients who achieve a functional cure.
STING Agonist Product Candidates
We are developing SB 11285, a novel proprietary STING agonist, as a potential immunotherapeutic agent for the treatment of selected cancers. Recent published scientific literature indicates that the activation of the STING pathway can result in the induction of cellular interferons and cytokines and promote an aggressive and strong anti-tumor response through the induction of innate and adaptive immune response. In our preclinical studies performed in in vitro systems, SB 11285 has been observed to cause the induction of interferon and other cytokines, as well as cell death, or apoptosis, of multiple tumor-derived cell lines.
We continue to conduct preclinical studies of SB 11285 in multiple in vivo cancer models. In 2017, we have presented data from in vivo studies in the A20 lymphoma, CT26 colon carcinoma, B16 melanoma and orthotopic4T1 breast cancer syngeneic mouse models at various industry conferences, including the March 2017 Cancer Immunology and Immunotherapy Keystone Symposia, the June 2017 American Society of Clinical Oncology (ASCO) Annual Meeting and the October 2017 American Association for Cancer Research (AACR) Conference on Tumor Immunology and Immunotherapy.SB 11285 was evaluated for tumor growth inhibition and tumor growth delay and has shown that it is highly potent and has a durable anti-tumor response when administered intravenously, intratumorally and intraperitoneally across different tumor models. The induction of immune-memory, tumor growth inhibition and abscopal anti-tumor activity upon intra-tumoral administration of SB 11285 has been observed in the A20 lymphoma model. In addition, in the CT26 colon cancer syngeneic mouse model, SB 11285 has exhibited dose-dependent, potent tumor growth inhibition and durable anti-tumor response upon intra-tumoral, intraperitoneal and intravenous routes of administration. In the B16 melanoma model, intravenous and intraperitoneal administration of SB 11285 showed significant inhibition of tumor growth. In the orthotopic 4T1 breast cancer model, intraperitoneal administration of SB 11285 resulted in significant inhibition of primary tumor growth, as well as inhibition of tumor metastasis. In the rat orthotopic bladder cancer model, intravenous administration of SB 11285 resulted in potent, dose-dependent inhibition of tumor growth in bladder. As part of the mechanism of action, immuno-histochemistry combined with flow cytometric analysis of tissues and blood from SB 11285-treated groups were conducted which revealed the presence of activated immune cells, including CD8+ T cells, natural killer (NK) cells and macrophages critical for anti-tumor activity. We believe these preclinical studies demonstrate the potential for both intra-tumoral and systemic administration of SB 11285 to target a variety of tumors, which could potentially be used in combination with other therapeutic modalities.
We intend to continue the development of SB 11285 as a potentially important addition to the current standard of care in the treatment of various cancers that we believe could increase the treatment responses in patients. We intend to continue to advance the SB 11285 program with preclinical, toxicology, and process development efforts. Subject to the results of these preclinical studies, we hope to submit an investigational new drug application, or IND, and/or a clinical trial application, or CTA, for SB 11285 in mid-2018, and, if cleared, commence Phase Ib/II clinical trials in liver cancer in the second half of 2018.
In August 2017, we entered into a preclinical research collaboration with a third party to examine the potential for the conjugation of selected compounds from our STING agonist platform with selected proprietary antibodies from the third-party’s immune-oncology portfolio.
Recent Developments
On October 4, 2017, we entered into a lease agreement, or the New Lease, in Hopkinton, Massachusetts. The premises covered by the New Lease will serve as our new principal office and laboratory space. The initial term of the New Lease is 125 months beginning on the date on which the landlord substantially completes certain renovations to the premises covered by the New Lease. We have the option to extend the New Lease one time for an additional 5-year period. The total lease payments due during the term of the lease are approximately $4.4 million.
Financial Operations Overview
To date, we have devoted substantially all of our resources to research and development efforts, including conducting clinical trials for our product candidates, protecting our intellectual property and providing general and administrative support for these operations. We have not generated any revenue to date other than from grants from the National Institutes of Health, or NIH. We have incurred significant annual net operating losses in every year since our inception and expect to continue to incur significant expenses and net operating losses for the foreseeable future. Our net losses were $10.8 million and $26.2 million for the three and nine months ended September 30, 2017, respectively, and $17.4 million for the year ended December 31, 2016. As2020 filed with the SEC on March 30, 2021, as may be updated by Part II, Item 1A, Risk Factors of September 30, 2017,our subsequently filed Quarterly Reports on Form
As of September 30, 2017, we had $52.2 million in cash, cash equivalents and marketable securities.collaborations. We expect that our cash, cash equivalentsany revenue we generate will fluctuate from period to period as a result of the timing and marketable securities asamount of September 30, 2017 will enable us to fund our operating expenses and capital expenditure requirements through the end of 2019. However, we anticipate that our existing cash, cash equivalents, restricted cash and marketable securities will not be sufficient to fund additional development of inarigivir beyond our Phase 2 ACHIEVE clinical trial. See “—Liquidity and Capital Resources.”
Grant revenue
Historically, we have generated revenue from grants from the NIH for the development of inarigivir. The NIH grants provided funding of $6.8 million between October 2003 and April 2016. As of September 30, 2017, no additional funding remains available to us under any grant for the development of any of our product candidates.
Operating expenses
Our operating expenses since inception have consisted primarily oflicense, research and development expenseservices, and generalmilestone and administrative costs.
costs
Those expenses associated with R&D and clinical costs primarily include:
salaries, benefitsmanufacturing
costs of outside consultants, including their fees, stock-based compensation and related travel expenses;
the cost of laboratory supplies and acquiring developing and manufacturing preclinical study and clinical trial materials;
costs related to compliance with regulatory requirements; and
facility-related
We expense research and development costs as incurred. We recognize
Our primary focus of research and development since inception has been on the development of inarigivir. Our direct research and development expenses consist primarily of external costs, such as fees paid to investigators, consultants and CROs in connection with our preclinical studies and clinical trial and regulatory fees. We do not allocate employee-related costs and other indirect costs to specific research and development programs because our primary focus has been on the discovery and development of inarigivir. Our direct research and development expenses are not currently tracked on a program-by-program basis.
The successful development of our product candidates is highly uncertain. Accordingly, at this time, we cannot reasonably estimate the nature, timing and costs of the efforts that will be necessary to complete the remainder of the development of these product candidates. We are also unable to predict when, if ever, we will generate revenues from inarigivir or any of our other current or potential product candidates. This is due to the numerous risks and uncertainties associated with developing medicines, including the uncertainties of:
establishing an appropriate safety profile with IND-enabling toxicology studies;
successful enrollment in and completion of clinical trials;
receipt of marketing approvals from applicable regulatory authorities;
establishing commercial manufacturing capabilities or making arrangements with third-party manufacturers;
obtaining and maintaining patent and trade secret protection and regulatory exclusivity for our product candidates;
launching commercial sales of the products, if and when approved, whether alone or in collaboration with others; and
a continued acceptable safety profile of the products following approval.
A change in the outcome of any of these variables with respect to any of our product candidates would significantly change the costs and timing associated with the development of that product candidate.
Research and development activities are central to ourthe Company’s business model.models. Product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stagelater stage clinical trials. We expectAs a result, the Company expects that our research and development expenses will continueincrease over the next several years as the Company increases personnel costs, initiate and conduct additional clinical trials and prepare regulatory filings related to increase in the foreseeable future as we continuevarious product candidates.
timing associated with the development of that product candidate. For example, the U.S. Food and Drug Administration, European Medicines Agency or another regulatory authority may require us to conduct clinical trials beyond those that we anticipate will be required for the completion of clinical development of a product candidate, or we may experience significant trial delays due to patient enrolment or other reasons, in which case we would be required to expend significant additional financial resources and time on the completion of clinical development. In addition, we may obtain unexpected results from our clinical trials and we may elect to discontinue, delay or modify clinical trials of some product candidates or focus on others. Identifying potential product candidates and conducting preclinical testing and clinical trials is a time-consuming, expensive and uncertain process that takes years to complete, and we may never generate the necessary data or results required to obtain marketing approval and achieve product sales. In addition, our product candidates, if approved, may not achieve commercial success.
expenses
We anticipateassociated with being a public company. Other expense also includes foreign currency transaction losses. The Company expects that our general and administrative expenses will increase in the future as we increase our headcount to support the expected growth in our research and developmentCompany expands its operating activities and the potential commercializationincurs costs of our product candidates. We also expect to continue to incur significant expenses associated with being a US public company, including increased costscompany.
and expenses, net
Critical Accounting Policiesfair value adjustment of the convertible notes as measured using level 3 inputs which was converted on November 20, 2020 with the transaction with Spring Bank.
Our consolidated financial statements are prepared in accordance with generally accepted accounting principles2020, the Company was subject to corporate taxation in the United States, United Kingdom and Austria.
is payable to the Austrian tax authority. Similarly, VAT paid on purchase invoices is generally reclaimable from the Austrian tax authority.
Equity-Classified WarrantsIn connection with entering into the amended and restated license agreement with BioHEP effective February 1, 2016, we issued to BioHEP a warrant to purchase 125,000 shares of our common stock at a purchase price of $16.00 per share. We evaluated the termswarrant and concludedCVR liability represents the future payments that it should be equity-classified.are contingent upon the achievement of sale or licensing for the STING product candidates. The fair value of the warrant, $0.8 millioncontingent value rights is based on the Company’s probability-weighted discounted cash flow assessment that considers probability and was expensed as research and development costs.In connection with our initial public offering, or IPO, we issued the sole book-running manager for the IPO warrants to purchase 28,347 sharestiming of common stock at an exercise price of $15.00 per share, which we refer to collectivelyfuture payments. The fair value measurement is based on significant Level 3 unobservable inputs such as the IPO warrants. We evaluated the termsprobability of the IPO warrantsachieving a sale or licensing agreement, anticipated timelines, and concluded that they should be equity-classified. The aggregate fair value of the IPO warrants was $0.2 million. See Note 7 of the notes to the unaudited financial statements included elsewherediscount rate. Changes in this Quarterly Report on Form 10-Q.Liability-Classified WarrantsIn connection with our private placement offering in November 2016, or the November private placement, we issued warrants to purchase 1,644,737 shares of common stock to a group of accredited investors. The warrants will be exercisable beginning May 24, 2017 at an exercise price of $10.79 per share. We evaluated the terms of the warrants and concluded that they should be liability-classified. We recognize any change in the value of the warrant liability each reporting period in the statement of operations. As of September 30, 2017, the fair value of the warrants was approximately $17.8 million, which is an increaseliability will be recognized in the consolidated statement of $11.5 million fromoperations and comprehensive loss until settlement.approximately $6.3 million as of December 31, 2016. See Note 7 of the notes to the unaudited financial statements included elsewhere in this Quarterly Report on Form 10-Q.Stock-Based CompensationWe measure stock options and other stock-basedequity-based payment awards granted to employees and directors based on the fair value on the date of grantgrant. The value of the portion of the award that is ultimately expected to vest is recognized as an expense over the requisite service period in the Company’s consolidated statements of operations and recognizecomprehensive loss.correspondingexpense for option awards using a graded vesting method. The Company accounts for forfeitures as they occur. For share-based awards granted toof those awards, net of estimated forfeitures,is then recognized over the requisite service period, which is generally the vesting period of the respective award. Generally, we issueand restricted stock awards with only service-based vesting conditions and record(“options”) on the expense for these awardsgrant date is estimated using the straight-line method.We measureBlack-Scholes option-pricing model using the single-option approach. The Black-Scholes option pricing model requires the use of highly subjective and complex assumptions, including an option’s expected term and the price volatility of the underlying stock, options and other stock-based awards granted to consultants and nonemployees based ondetermine the fair value of the award onaward.date at whichabsence of an active market for the related service is complete. We recognize this compensation expense overordinary shares ofperiod during which services are rendered by such consultants and nonemployees until completed. Atboard of directors determined the end of each financial reporting period prior to completion of the service, we remeasure theestimated fair value of these awards using the then-current fairCompany’s equity instruments based on input from management, which utilized the most recently available independent third-party valuation, and considering a number of objective and subjective factors, including external market conditions affecting the biotechnology industry sector. Each valuation methodology includes estimates and assumptions that require judgment. These estimates and assumptions include a number of objective and subjective factors in determining the value of our common stock and updated assumption inputs in the Black-Scholes option-pricing model.stock option grant using the Black-Scholes option-pricing model. Use of this model requires that we make assumptions as to the fair value of our common stock, thedate. The expected volatility of our common stock, the expected term of our stock options, the risk-free interest ratefor F star Ltd was calculated based on reported volatility data for a period that approximates the expected term of our stock options and our expected dividend yield. Because we lack company-specific historical and implied volatility information due in part to the limited time in which we have operated as a publicly traded company, we estimate our expected volatility based on the historical volatility of arepresentative group of publicly traded peer companies. We expect to continue to do so until suchcompanies for which historical information was available. The historical volatility is calculated based on a period of time as we have adequate historical data regardingcommensurate with the volatility of our traded stock price. We use the simplified method prescribed by the SEC’s Staff Accounting Bulletin No. 107, Share-Based Payment, to calculateassumption used for the expected term of options granted to employees and directors. We base the expected term of options granted to consultants and nonemployees on the contractual term of the options. We determine theterm. The risk-free interest rate by referencetois based on the United StatesU.S. Treasury yield curve in effect at the time of grant of the award for time periods approximately equal tocommensurate with the expected term assumption.award. Expectedcontractual term.
There were no stock options granted prior to 2015. We recognize forfeitures as they occur and thedividends.
In 2015, we began issuing stock options to employees, directors and consultants. During the periods ended September 30, 2017 and 2016, we issued common stock to consultants and advisors as compensation for services and recognized expense equal to the fair value of the shares issued. The following table summarizes the classification of our stock-based compensation expenses recognized in ourits consolidated statements of operations and comprehensive loss (in thousands):
|
| For the Three Months Ended September 30, |
|
| For the Nine Months Ended September 30, |
| ||||||||||
|
| 2017 |
|
| 2016 |
|
| 2017 |
|
| 2016 |
| ||||
Research and development |
| $ | 121 |
|
| $ | 104 |
|
| $ | 402 |
|
| $ | 286 |
|
General and administrative |
|
| 389 |
|
|
| 274 |
|
|
| 1,081 |
|
|
| 729 |
|
|
| $ | 510 |
|
| $ | 378 |
|
| $ | 1,483 |
|
| $ | 1,015 |
|
JOBS Act
In April 2012,Income in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act, was enacted. Section 107 of the JOBS Act provides that an “emerging growth company,” or EGC, can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. Thus, an EGC can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have irrevocably elected not to avail ourselves of this extended transition period and, as a result, we will adopt new or revised accounting standards on the relevant dates on which adoption of such standards is required for other public companies.
Subject to certain conditions, as an EGC, we intend to rely on certain exemptions afforded by the JOBS Act, including the exemption from: certain requirements related to the disclosure of executive compensation in our periodic reports and proxy statements, and the requirement that we hold a nonbinding advisory vote on executive compensation and any golden parachute payments; the requirement that the auditors provide an attestation report on our system of internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act; and complying with any requirement that may be adopted by the Public Company Accounting Oversight Board, or PCAOB, regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements, known as the auditor discussion and analysis. We will remain an EGC until the earliest of the last day of the fiscal yearsame manner in which we have total annual gross revenues of approximately $1.07 billionthe award recipient’s payroll costs are classified or more;in which the last day of the fiscal year following the fifth anniversary of the date of the completion of the closing of an IPO; the date on which we have issued more than $1 billion in nonconvertible debt during the previous three years; or the date on which weaward recipient’s service payments are deemed to be a large accelerated filer under the rules of the Securities and Exchange Commission, or the SEC.
classified.
2020
|
| For the Three Months Ended September 30, |
|
| Increase |
|
| For the Nine Months Ended September 30, |
|
| Increase |
| ||||||||||||
|
| 2017 |
|
| 2016 |
|
| (Decrease) |
|
| 2017 |
|
| 2016 |
|
| (Decrease) |
| ||||||
Grant revenue |
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | 352 |
|
| $ | (352 | ) |
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development |
|
| 3,221 |
|
|
| 2,723 |
|
|
| 498 |
|
|
| 9,152 |
|
|
| 11,247 |
|
|
| (2,095 | ) |
General and administrative |
|
| 1,968 |
|
|
| 1,452 |
|
|
| 516 |
|
|
| 5,811 |
|
|
| 4,136 |
|
|
| 1,675 |
|
Total operating expenses |
|
| 5,189 |
|
|
| 4,175 |
|
|
| 1,014 |
|
|
| 14,963 |
|
|
| 15,383 |
|
|
| (420 | ) |
Loss from operations |
|
| (5,189 | ) |
|
| (4,175 | ) |
|
| (1,014 | ) |
|
| (14,963 | ) |
|
| (15,031 | ) |
|
| 68 |
|
Other income |
|
| 141 |
|
|
| 27 |
|
|
| 114 |
|
|
| 220 |
|
|
| 65 |
|
|
| 155 |
|
Change in fair value of warrant liabilities |
|
| (5,780 | ) |
|
| — |
|
|
| (5,780 | ) |
|
| (11,474 | ) |
|
| — |
|
|
| (11,474 | ) |
Net loss |
| $ | (10,828 | ) |
| $ | (4,148 | ) |
| $ | (6,680 | ) |
| $ | (26,217 | ) |
| $ | (14,966 | ) |
| $ | (11,251 | ) |
Three Months Ended March 31, | ||||||||||||
2021 | 2020 | Change | ||||||||||
(in thousands) | ||||||||||||
Statements of Comprehensive Loss | ||||||||||||
License revenue | $ | 2,917 | $ | 1,355 | $ | 1,562 | ||||||
Operating expenses: | ||||||||||||
Research and development | 7,267 | 3,400 | 3,867 | |||||||||
General and administrative | 6,429 | 3,189 | 3,240 | |||||||||
Total operating expenses | 13,696 | 6,589 | 7,107 | |||||||||
Loss from operations | (10,779 | ) | (5,234 | ) | (5,545 | ) | ||||||
Other non-operating income (expense): | ||||||||||||
Other income (expense) | 1,018 | (1,527 | ) | 2,545 | ||||||||
Change in fair value of convertible notes | — | (386 | ) | 386 | ||||||||
Loss before income taxes | (9,761 | ) | (7,147 | ) | (2,614 | ) | ||||||
Provision for income taxes | (108 | ) | (12 | ) | (96 | ) | ||||||
Net loss | $ | (9,869 | ) | $ | (7,159 | ) | $ | (2,710 | ) | |||
Research and development expenses.
Research and development expenses were $3.2with $1.4 million for the three months ended September 30, 2017, comparedMarch 31, 2020, a decrease of approximately $1.6 million.
Research and development expenses were $9.1 million for the nine months ended September 30, 2017, compared to $11.2 million for the nine months ended September 30, 2016. The decrease of $2.1 million was due primarily to $2.7 million in non-cash charges primarily in connection with our amended and restated license agreement with BioHEP;U.K. R&D tax incentive, which is allocated across all programs, offset by an increase ofa $0.4 million in spending on preclinical studies and clinical trial related activities for inarigivir and SB 11285 in the nine months ended September 30, 2017 and an increase in additional salaries and benefitsR&D staff costs.
expense
General and administrative expenses were $5.8of rental income. In addition, there was a charge of $0.4 million for the nine months ended September 30, 2017, compared to $4.1 million for the nine months ended September 30, 2016. This increase of $1.7 million was primarily due to an increase in non-cash charges for stock based compensation of $0.4 million, additional salaries and benefits of $0.7 million associated with higher headcount of non-research and development employees in the nine months ended September 30, 2017, $0.6 million for public company related expenses incurred during the nine months ended September 30, 2017 and $0.1 million for additional rent expense for the nine months ended September 30, 2017; offset by a decrease of $0.1 million for legal and consulting related costs during the nine months ended September 30, 2017.
Other income. Other income for the three and nine months ended September 30, 2017 and 2016 is solely comprised of interest income. Interest income for the three and nine months ended September 30, 2017 was $141,000 and $220,000, respectively, and was primarily related to the interest earned on marketable securities. Interest income for the nine months ended September 30, 2016 was $27,000 and $65,000, respectively, and was primarily related to the interest earned on marketable securities.
Changechange in fair value of warrant liabilities. Change in fair value of warrant liabilitiesconvertible debt, for the for three and nine months ended September 30, 2017 was $5.8 million and $11.5 million, respectively, and was solely related to an increase in the fair value of the warrants from the November private placement, primarily due to the increase in the Company’s stock price. There were no warrant liabilities during the three and nine months ended September 30, 2016.
March 31, 2020.
liquidity
In August 2017, weCompany entered into a Controlled Equity Offering Sales Agreement, or2021 Sales Agreement with Cantor Fitzgerald & Co., or Cantor, pursuantSVB Leerink with respect to anwe maythe Company could offer and sell, from time to time through Cantor,in its sole discretion, shares of ourits common stock, par value $0.0001 per share, having an aggregate offering price of up to $50.0 million. We will pay Cantor a commission rate equal to 3.0%million through SVB Leerink as its sales agent. As of May 6, 2021, the aggregate gross proceeds from each sale. Shares sold under the Sales Agreement will be offered and sold pursuant to our Registration Statement on Form S-3 (Registration No. 333-218399) that was declared effective by the SEC on June 12, 2017, or the Registration Statement, and a prospectus supplement and accompanying base prospectus that we filed with the SEC on August 18, 2017.
In June 2017, weCompany had issued and sold 979,843 shares, for gross proceeds of $9.5 million, resulting in net proceeds of $9.2 million after deducting sales commissions. On May 6, 2021, the Company terminated the 2021 Sales Agreement.
In November 2016, weto the Company of $61.1 million.
In May 2016, we completed our IPO and sold an aggregate of 944,900 shares of common stock at a priceconditions to the publicfunding of $12.00 per share, which included 24,900 shares pursuantthe Term Loans, each Term Loan would be delivered by Horizon to the exercise of an optionCompany in the following manner: (i) Loan A was to purchase additional shares grantedbe delivered by Horizon to the underwriters in connection withCompany prior to April 1, 2021, (ii) Loan B was required to be delivered by Horizon to the IPO.Company prior to April 1, 2021, (iii) Loan C is required to be delivered by Horizon to the Company prior to June 30, 2021, and (iv) Loan D is required to be delivered by Horizon to the Company prior to June 30, 2021. The offering resulted in $8.2 million of netCompany may only use the proceeds after deducting underwriting discounts and commissions and other offering expenses payable by us. In connection with the closing of the IPO, we received approximately $5.3Term Loans for working capital or general corporate purposes as contemplated by the Loan and Security Agreement. The Company drew down $5 million in proceeds upon the exercise of previously issued warrants to purchase 641,743 shares of common stock.
on April 1, 2021.
|
| For the Nine Months Ended September 30, |
| |||||
|
| 2017 |
|
| 2016 |
| ||
Net cash used in operating activities |
| $ | (12,640 | ) |
| $ | (11,708 | ) |
Net cash used in investing activities |
|
| (19,919 | ) |
|
| (1,955 | ) |
Net cash provided by financing activities |
|
| 39,664 |
|
|
| 14,648 |
|
Net increase in cash, cash equivalents and restricted cash |
| $ | 7,105 |
|
| $ | 985 |
|
Three Months Ended March 31, | ||||||||||||
2021 | 2020 | Change | ||||||||||
(in thousands) | ||||||||||||
Net cash used in operating activities | $ | (14,378 | ) | $ | (1,524 | ) | $ | (12,854 | ) | |||
Net cash used in investing activities | (252 | ) | (62 | ) | 190 | |||||||
Net cash provided by financing activities | — | 500 | (500 | ) | ||||||||
Effect of exchange rate changes on cash | (216 | ) | (267 | ) | 51 | |||||||
Net increase in cash | $ | (14,846 | ) | $ | (1,353 | ) | $ | (13,493 | ) | |||
Net cash used in investing activities. NetMarch 31, 2021 and 2020, net cash used in investing activities was $19.9$0.3 million for the nine months ended September 30, 2017 compared to $2.0and $0.1 million, for the nine months ended September 30, 2016. The cash used in investing activitiesrespectively. Company acquired capital equipment of $19.9$0.3 million in the ninethree months ended September 30, 2017 was primarily the result of $14.6 million in proceeds from the sale of marketable securities, offset by $34.4 million for the purchase of marketable securitiesMarch 31, 2021 and $0.1 million forin the purchase of property and equipment. The cash used in investing activities of $2.0 million for the ninethree months ended September 30, 2016 was mainly due to proceeds of $4.9 million fromMarch, 31, 2020.
Net cash provided by financing activities. NetMarch 31, 2021, net cash provided by financing activities was $39.7 million and $14.6 million during$0. For the ninethree months ended September 30, 2017 and 2016, respectively. TheMarch 31, 2020, net cash provided by financing activities was $0.5 million, which was due to the issuance of convertible notes.
financing activities in the nine months ended September 30, 2016 was primarily the result of $11.3 million of gross proceeds received from our IPO,Company’s cash of $5.3approximately $76.3 million will be sufficient to fund its current operating plan and planned capital expenditures for at least the next 12 months.
Funding Requirements
We expect to continue to incur significant and increasing losses for the foreseeable future. We anticipate these losses to increase as our expenses increase, and we expect that our expenses will increase if and as we:
continue to develop and conduct clinical trials of inarigivir, including the ongoing Part A of our Phase 2 ACHIEVE trial of inarigivir for chronic HBV;
continue preclinical development
initiate and continue research and preclinical and clinical development efforts for our other product candidates;
seek to identify and develop additional product candidates;
seek regulatory andsubmitting marketing approvals for any of our product candidates that successfully complete clinical trials, if any;
establish sales,and the costs of maintaining marketing distributionauthorization and other commercial infrastructure in the future to commercialize variousrelated regulatory compliance for any products for which we may obtain marketing approval, if any;
require
maintain, expandprosecuting patent applications, maintaining and protectenforcing our intellectual property portfolio;
hire and retain additional personnel, including clinical, quality control and scientific personnel;
add operational, financial and management information systems and personnel, including personnel to support our product development and help us continue to comply with our obligations as a public company; and
add equipment and physical infrastructure to support our research and development programs.
We expect that our existing cash, cash equivalents and marketable securities as of September 30, 2017 will enable us to fund our operating expenses and capital expenditure requirements through the end of 2019. However, we anticipate that our existing cash, cash equivalents and marketable securities will not be sufficient to fund additional development of inarigivir beyond our Phase 2 ACHIEVE clinical trial in patients with chronic HBV. We have based this estimate on assumptions that may prove to be wrong, and we may use our available capital resources sooner than we currently expect. Because of the numerous risks and uncertainties associated with the development of inarigivir and SB 11285, we are unable to estimate the amounts of increased capital outlays and operating expenses associated with completing the research and development of our product candidates. Our future capital requirements both near and long-term, will depend on many factors, including, but not limited to:
initiation, progress, timing, costs and results of preclinical studies and clinical trials of inarigivir, including Part A of our Phase 2 ACHIEVE clinical trial in patients with chronic HBV;
initiation, progress, timing, costs and results of preclinical studies of SB 11285;
initiation, progress, timing, costs and results of preclinical studies and clinical trials of our other product candidates;
our obligation to make royalty and non-royalty sublicense payments to third-party licensors, if any, under our licensing agreements;
the timing, receipt, and amount of milestone payments or royalties, if any, from inarigivir, SB 11285, or any of our other product candidates;
the outcome, timing and cost of seeking regulatory review by the FDA and comparable foreign regulatory authorities, including the potential for the FDA or comparable foreign regulatory authorities to require that we perform more studies than those that we currently expect;
the costs of filing, prosecuting, defendingfuture activities, including product sales, medical affairs, marketing, manufacturing, and enforcing any patent claims and maintaining and enforcing other intellectual property rights;
subject to receipt of marketing approval, revenue, if any, received from commercial sales of inarigivir and any other products;
the costs and timing of the implementation of commercial-scale manufacturing activities;
the costs and timing of establishing sales, marketing and distribution, capabilities for any product candidates for which we may receive regulatorymarketing approval; and
the terms of our current and any future license agreements and collaborations; and the extent to which we acquire or
Identifying
Adequate additional funds may not be available to us on acceptable terms, or at all. We do not currently have any committed external source of funds. We have an effective shelf registration statementthe Company’s critical accounting policies and estimates as discussed in the Company’s Annual Report on Form S-3 (File No. 333-218399), which we refer to asRegistration Statement. In August 2017, we entered into the Sales Agreement with Cantor pursuant to which we may offer and sell, from time to time through Cantor, shares of our common stock having an aggregate offering price of up to $50.0 million. Shares sold under the Sales Agreement will be offered and sold pursuant to the Registration Statement and a prospectus supplement and accompanying base prospectus that weyear ended December 31, 2020, filed with the SEC on August 18, 2017. As of SeptemberMarch 30, 2017, we had up to $107.5 million in securities available for future issuance under the Registration Statement, which includes $50.0 million in shares issuable pursuant to the Sales Agreement with Cantor. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interests of our stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our common stockholders. Additional debt financing and equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends and may require the issuance of warrants, which could potentially dilute the ownership interests of our stockholders.
If we raise additional funds through collaborations, strategic alliances or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs, or product candidates or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our product development programs or any future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.
2021.
The following table summarizes our contractual obligations at September 30, 2017, and the effect such obligations are expected to have on our liquidity and cash flow in future periods (in thousands):
|
| Payments Due by Period |
| |||||||||||||||||
|
| Total |
|
| Less Than 1 Year |
|
| 1 – 3 Years |
|
| 3 – 5 Years |
|
| More than 5 Years |
| |||||
Operating lease commitments |
| $ | 624 |
|
| $ | 194 |
|
| $ | 430 |
|
| $ | 0 |
|
| $ | — |
|
Total |
| $ | 624 |
|
| $ | 194 |
|
| $ | 430 |
|
| $ | 0 |
|
| $ | — |
|
In addition to the amounts shown in the above table, we have contractual obligations pursuant to our amended and restated license agreement with BioHEP. Under this agreement, we have agreed to pay up to $3.5 million in development and regulatory milestone payments to BioHEP for each distinct viral indication for which we develop licensed product(s). BioHEP is also eligible to
receive tiered royalties in the low-to-mid single-digits on net product sales of licensed products by us and our affiliates and sub licensees, and a specified share of non-royalty sublicensing revenues we and our affiliates receive from sub licensees, which share of sublicensing revenues is capped at a maximum aggregate of $2.0 million under all such sublicenses. Milestone and royalty payments associated with our amended and restated license agreement with BioHEP have not been included in the above table of contractual obligations as we cannot reasonably estimate if or when they will occur.
On October 4, 2017, we entered into a New Lease. The premises covered by the New Lease will serve as our new principal office and laboratory space. The initial term of the New Lease is 125 months beginning on the date on which the landlord substantially completes certain renovations to the premises covered by the New Lease, which we expect to occur in approximately April 2018. Following an eleven-month rent abatement period, we will be obligated to make monthly rent payments in the amount of $34,533, which is subject to increase by approximately 3% annually for the first five years of the New Lease and by approximately 2.5% annually thereafter. The total lease payments due during the term of the lease are approximately $4.4 million. In addition, we are responsible under the New Lease for specified costs and charges, including certain operating expenses, utilities, taxes and insurance.
We enter into contracts in the normal course of business with third partythird-party service providers for clinical trials, preclinical research studies and testing, manufacturing and other services and products for operating purposes. We have not included our payment obligations under these contracts in the table as these contracts generally provide for termination upon notice, and therefore, we believe that our
In MarchJune 2016, the FASB issued ASU 2016-09, Compensation – Stock CompensationNo.718)326), Derivatives and Hedging (Topic 815), and Leases (Topic 842): ImprovementsEffective DatesEmployee Share-Based Payment Accounting (“amend the effective date of ASU 2016-09”)
The update requires us to recognize the income tax effect of awards in the income statement when the awards vest or are settled. It also allows us to repurchase more of an employee’s shares than we could prior to the update for tax withholding purposes without triggering a liability. The income tax related items had no effect on the current period presentation and we maintain a full valuation allowance against our deferred tax assets.
In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606), or ASC 606, which amends the guidance for revenue recognition to replace numerous industry-specific requirements. ASC 606 implements a five-step process for customer contract revenue recognition that focuses on transfer of control, as opposed to transfer of risk and rewards. ASC 606 also requires enhanced disclosures regarding the nature, amount, timing, and uncertainty of revenues and cash flows from contracts with customers. Other major provisions include ensuring the time value of money is considered in the transaction price, and allowing estimates of variable consideration to be recognized before contingencies are resolved in certain circumstances. The amendments in ASC 606 are effective for reporting periods beginning after December 15, 2016, and earlythose fiscal years. Early adoption is permitted. The Company has not permitted. In July 2015, FASB approved the deferral of adoption by one year. Entities can transitionelected to the standard either retrospectively or as a cumulative-effect adjustment as of the date of adoption. Until we expect material revenue to be recognized, the adoption of this standardearly adopt ASU not expected to have an impact on our consolidated financial statements.
In January 2016, the FASB issued ASU 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities, which amends Accounting Standards Codification, or ASC, Subtopic 825-10, Financial Instruments - Overall, and includes updates on certain aspects of recognition, measurement, presentation and disclosure of financial instruments and applies to all entities that hold financial assets or owe financial liabilities. The new standard is effective for our annual period beginning after December 15, 2017, with early adoption permitted. We are currently evaluating the potential impact that the adoption of this standard mayASU
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which supersedes the current leasing guidanceposition and upon adoption, will require lessees to recognize right-of-use assets and lease liabilities on the balance sheet for all leases with terms longer than 12 months. The new standard is effective for our annual period beginning after December 15, 2018, and can be early adopted by applying a modified retrospective approach for leases existing at, and entered into after, the beginning of the earliest comparable period presented in the financial statements. We are currently evaluating the impact that the adoption of this standard may have on our consolidated financial statements.
In September 2016, the FASB issued ASU 2016-15, Classification of Certain Cash Receipts and Cash Payments, which amends ASC Topic 230, Statement of Cash Flows, and includes provisions intended to reduce diversity in practice and provides guidance on eight specific statements of cash flows classification issues. The new standard is effective for our annual period ending after December 15, 2017, and for annual and interim periods thereafter, with early adoption permitted. We are currently evaluating the impact that the adoption of this standard may have on our consolidated financial statements.
In July 2017, the FASB issued ASU 2017-11, Earnings Per Share (Topic 260), Distinguishing Liabilities from Equity (Topic 480), Derivatives and Hedging (Topic 815): I. Accounting for Certain Financial Instruments with Down Round Features and II. Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception. Part I applies to entities that issue financial instruments such as warrants, convertible debt or convertible preferred stock that contain down round features. Part II simply replaces the indefinite deferral for certain mandatorily redeemable noncontrolling interests and mandatorily redeemable financial instruments of nonpublic entities contained within Accounting Standards Codification (ASC) Topic 480 with a scope exception and does not impact the accounting for these mandatorily redeemable instruments. This ASU is effective for public companies for the annual reporting periods beginning after December 15, 2018, and interim periods within those annual periods. Early adoption is permitted. We are currently evaluating the impact that the adoption of this standard may have on our consolidated financial statements
Other accounting standards that have been issued or proposed by the FASB or other standards-setting bodies that do not require adoption until a future date are not expected to have a material impact on our consolidated financial statements upon adoption.
We are exposed to market risk related to changes in interest rates. Our cash, cash equivalents and marketable securities of $52.2 million as of September 30, 2017, consisted of cash, money market accounts and short-term marketable debt securities. Our primary exposure to market risk is interest income sensitivity, which is affected by changes in the general level of U.S. interest rates. However, because of the short-term nature of the instruments in our portfolio, an immediate 10% change in market interest rates would not be expected to have a material impact on the fair market value of our investment portfolio or on our financial condition or results of operations.
Evaluation of Disclosure Controls
Our management, with the participation of our principal executive officer and our principal financial officer, evaluated, as of the end of the period covered by this Quarterly Report on Form 10-Q, the effectiveness of our disclosure controls and procedures. Based on that evaluation of our disclosure controls and procedures as of September 30, 2017, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures as of such dateSmaller Reporting Company Status
Item 3. | Quantitative and Qualitative Disclosures About Market Risk. |
Item 4. | Controls and Procedures. |
Inherent Limitationsspreadsheets.
deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of a company’s annual or interim financial statements will not be prevented or detected on a timely basis.
Item 1. | Legal Proceedings. |
Item 1A. | Risk Factors. |
On October 26, 2017, our Board of Directors, or Board, elected Christiana Bardon, M.D., to the Board as a class II director with a term expiring at the 2020 annual meeting of stockholders. The Board also appointed Dr. Bardon to the Compensation Committee of the Board.
In accordance with our current non-employee director compensation policy, Dr. Bardon will receive a $35,000 annual cash retainer for service on the Board and a $5,000 annual cash retainer for service on the Compensation Committee. These cash retainers are payable quarterly in arrears. The non-employee director compensation policy includes a stock-for-fees policy, under which Dr. Bardon has elected to receive shares of our common stock in lieu of cash fees.
In addition, in accordance with the non-employee director compensation policy, Dr. Bardon received an option to purchase 11,000 shares of common stock upon her election to the Board, at an exercise price of $15.17, the closing share price of the common stock on the NASDAQ Capital Market on October 26, 2017. This option becomes exercisable on a monthly basis over the course of three years, subject to Dr. Bardon’s continued service as a director and, in the event of a change in control of the company, the vesting schedule of the option will accelerate in full. Dr. Bardon is also entitled to receive an option to purchase 5,500 shares of common stock on the date of each annual meeting of stockholders with an exercise price equal to the closing share price of the common stock on the NASDAQ Stock Market on the date of grant. Such option shall vest in 12 equal monthly installments while Dr. Bardon is serving as a director and, in the event of a change in control of the company, the vesting schedule of the option will accelerate in full.
Also, in connection with her election to the Board, we and Dr. Bardon entered into an indemnification agreement. The indemnification agreement is substantially the same as the form of indemnification agreement that we have entered into with our other directors, a copy of which was filed as Exhibit 10.1 to our Registration Statement on Form S-1 (File No. 333-208875) filed with the SEC on January 5, 2016 and is hereby incorporated by reference. The indemnification agreement provides that we will indemnify Dr. Bardon for certain expenses, including attorneys’ fees, judgments, fines and settlement amounts incurred by her in any action or proceeding arising out of her service as a director.
In November 2016, we entered into a definitive agreement with respect to the private placement of 1,644,737 shares of common stock and warrants to purchase 1,644,737 shares of our common stock to a group of accredited investors. All investors paid $9.12 for each share of common stock and warrant to purchase one share of common stock. The warrants are currently exercisable at an exercise price of $10.79 per share. Burrage Capital Healthcare Fund I, L.P. (“Burrage Capital”), of which Dr. Bardon serves as the Portfolio Manager, purchased 54,824 shares of common stock and warrants to purchase 54,824 shares of common stock in the private placement. UBS Oncology Impact Fund L.P. (“Oncology Impact Fund”) purchased 603,070 shares of common stock and warrants to purchase 603,070 shares of common stock in the private placement. Dr. Bardon’s spouse, Ansbert Gadicke, M.D., serves as the Managing Member of MPM Oncology Impact Management GP LLC, an indirect General Partner of Oncology Impact Fund. Additionally, in June 2017, we completed a public offering of 3,269,219 shares of our common stock at $13.00 per share. Oncology Impact Fund purchased 230,769 shares of common stock at the public offering price in this public offering. Dr. Bardon may be deemed to have a beneficial ownership interest in the shares purchased by the entities identified above.
There are no arrangements or understandings between Dr. Bardon and any other person pursuant to which Dr. Bardon was elected as a director.
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds. |
Item 3. | Defaults Upon Senior Securities |
Item 4. | Mine Safety Disclosures. |
Item 5. | Other Information. |
Item 6. | Exhibits. |
* | Filed herewith. |
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F-star Therapeutics, Inc. | ||||||
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Date: May 17, 2021 |
| By: | /s/ Eliot R. Forster | |||
Eliot R. Forster, Ph.D. | ||||||
President and Chief
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