Madrigal Pharmaceuticals (MDGL) 10-Q 7 May 20 2020 Q1 Quarterly report Financial data

Cover Page

Cover Page - shares	3 Months Ended
	Mar. 31, 2020	May 04, 2020
Cover [Abstract]
Document Type	10-Q
Document Quarterly Report	true
Document Transition Report	false
Entity Interactive Data Current	Yes
Amendment Flag	false
Document Fiscal Year Focus	2020
Document Period End Date	Mar. 31, 2020
Document Fiscal Period Focus	Q1
Entity Registrant Name	MADRIGAL PHARMACEUTICALS, INC.
Entity Central Index Key	0001157601
Entity File Number	001-33277
Current Fiscal Year End Date	--12-31
Entity Tax Identification Number	04-3508648
Entity Incorporation, State or Country Code	DE
Entity Current Reporting Status	Yes
Entity Filer Category	Large Accelerated Filer
Entity Emerging Growth Company	false
Entity Small Business	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		15,429,154
City Area Code	267
Local Phone Number	824-2827
Trading Symbol	MDGL
Security Exchange Name	NASDAQ
Title of 12(b) Security	Common Stock, $0.0001 Par Value Per Share
Entity Address, Address Line One	Four Tower Bridge
Entity Address, Address Line Two	200 Barr Harbor Drive, Suite 200
Entity Address, City or Town	West Conshohocken
Entity Address, Postal Zip Code	19428
Entity Address, State or Province	PA

Condensed Consolidated Balance

Condensed Consolidated Balance Sheets - USD ($) $ in Thousands	Mar. 31, 2020	Dec. 31, 2019
Current assets:
Cash and cash equivalents	$ 66,651	$ 46,697
Marketable securities	341,859	392,348
Prepaid expenses and other current assets	976	1,152
Total current assets	409,486	440,197
Property and equipment, net	1,373	1,184
Right-of-use asset	598	675
Total assets	411,457	442,056
Current liabilities:
Accounts payable	1,115	1,178
Accrued expenses	24,269	23,637
Lease liability	319	315
Total current liabilities	25,703	25,130
Long-term liabilities:
Lease liability	279	361
Total long term liabilities	279	361
Total liabilities	25,982	25,491
Stockholders' equity:
Preferred stock, par value $0.0001 per share authorized: 5,000,000 shares at March 31, 2020 and December 31, 2019; 1,969,797 shares issued and outstanding at March 31, 2020 and December 31, 2019
Common stock, par value $0.0001 per share authorized: 200,000,000 at March 31, 2020 and December 31, 2019; 15,429,154 shares issued and outstanding at March 31, 2020 and December 31, 2019	2	2
Additional paid-in-capital	644,413	639,567
Accumulated other comprehensive gain (loss)	415	216
Accumulated deficit	(259,355)	(223,220)
Total stockholders' equity	385,475	416,565
Total liabilities and stockholders' equity	$ 411,457	$ 442,056

Condensed Consolidated Balanc_2

Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares	Mar. 31, 2020	Dec. 31, 2019
Statement of Financial Position [Abstract]
Preferred stock, par value (in dollars per share)	$ 0.0001	$ 0.0001
Preferred stock, shares authorized	5,000,000	5,000,000
Preferred stock, shares issued	1,969,797	1,969,797
Preferred stock, shares outstanding	1,969,797	1,969,797
Common stock, par value (in dollars per share)	$ 0.0001	$ 0.0001
Common stock, shares authorized	200,000,000	200,000,000
Common stock, shares issued	15,429,154	15,429,154
Common stock, shares outstanding	15,429,154	15,429,154

Condensed Consolidated Statemen

Condensed Consolidated Statements of Operations - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Operating expenses:
Research and development	$ 33,400	$ 12,373
General and administrative	4,605	5,746
Total operating expenses	38,005	18,119
Loss from operations	(38,005)	(18,119)
Interest income	1,870	3,039
Net loss	$ (36,135)	$ (15,080)
Net loss per common share:
Basic and diluted net loss per common share (in dollars per share)	$ (2.34)	$ (0.98)
Basic and diluted weighted average number of common shares outstanding	15,429,154	15,364,465

Condensed Consolidated Statem_2

Condensed Consolidated Statements of Comprehensive Loss - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Statement of Comprehensive Income [Abstract]
Net Loss	$ (36,135)	$ (15,080)
Other comprehensive income (loss):
Unrealized gain on available-for-sale securities	199	497
Comprehensive loss	$ (35,936)	$ (14,583)

Condensed Consolidated Statem_3

Condensed Consolidated Statements of Stockholders' Equity - USD ($) $ in Thousands	Total	Preferred Stock	Common stock	Additional paid-in Capital	Accumulated other comprehensive income (loss)	Accumulated deficit
Balance at Dec. 31, 2018	$ 476,984		$ 2	$ 616,573	$ (319)	$ (139,272)
Balance (in shares) at Dec. 31, 2018		1,969,797	15,409,023
Increase (Decrease) in Stockholders' Equity
Exercise of common stock options (in shares)	83		8,041	83
Compensation expense related to stock options for services	$ 6,022			$ 6,022
Unrealized gain (loss) on marketable securities	497				497
Net loss	(15,080)					(15,080)
Balance at Mar. 31, 2019	468,506		$ 2	622,678	178	(154,352)
Balance (in shares) at Mar. 31, 2019		1,969,797	15,417,064
Balance at Dec. 31, 2019	$ 416,565		$ 2	639,567	216	(223,220)
Balance (in shares) at Dec. 31, 2019	15,429,154	1,969,797	15,429,154
Increase (Decrease) in Stockholders' Equity
Compensation expense related to stock options for services	$ 4,846			4,846
Unrealized gain (loss) on marketable securities	199				199
Net loss	(36,135)					(36,135)
Balance at Mar. 31, 2020	$ 385,475		$ 2	$ 644,413	$ 415	$ (259,355)
Balance (in shares) at Mar. 31, 2020	15,429,154	1,969,797	15,429,154

Condensed Consolidated Statem_4

Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Cash flows from operating activities:
Net loss	$ (36,135)	$ (15,080)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation expense	4,846	6,022
Depreciation and amortization expense	125	28
Changes in operating assets and liabilities:
Prepaid expenses and other current assets	175	888
Accounts payable	(63)	1,889
Accrued expense	632	(179)
Accrued interest, net of interest received on maturity of investments	(86)	(46)
Net cash used in operating activities	(30,506)	(6,478)
Cash flows from investing activities:
Purchases of marketable securities	(58,647)	(173,837)
Sales and maturities of marketable securities	109,421	170,387
Purchases of property and equipment, net of disposals	(314)	(41)
Net cash provided by (used in) investing activities	50,460	(3,491)
Cash flows from financing activities:
Proceeds from the sale of related party stock and exercise of common stock options, net of transaction costs	0	83
Net cash provided by financing activities	0	83
Net increase (decrease) in cash and cash equivalents	19,954	(9,886)
Cash and cash equivalents at beginning of period	46,697	57,379
Cash and cash equivalents at end of period	66,651	47,493
Supplemental disclosure of cash flow information:
Obtaining a right-of-use asset in exchange for a lease liability	$ 0	$ 900

Organization, Business and Basi

Organization, Business and Basis of Presentation	3 Months Ended
	Mar. 31, 2020
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Organization, Business and Basis of Presentation	1. Organization, Business, and Basis of Presentation Organization and Business Madrigal Pharmaceuticals, Inc. (the “Company” or “Madrigal”) is a clinical-stage pharmaceutical company developing novel, high-quality, small-molecule drugs addressing major unmet needs in cardiovascular, metabolic, and liver diseases. The Company’s lead compound, MGL-3196 non-alcoholic non-alcoholic Madrigal was originally incorporated as a private company (“Private Madrigal”) on August 19, 2011 and operations commenced in September 2011. On July 22, 2016, Private Madrigal completed a reverse merger (the “Merger”) into Synta Pharmaceuticals Corp. (“Synta”). Upon the consummation of the Merger, the historical financial statements of Private Madrigal became the Company’s historical financial statements. Basis of Presentation Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) have been condensed or omitted. Accordingly, the unaudited condensed consolidated financial statements do not include all information and footnotes required by GAAP for complete annual financial statements. However, we believe that the disclosures included in these financial statements are adequate to make the information presented not misleading. The unaudited condensed financial statements, in the opinion of management, reflect all adjustments, which include normal recurring adjustments, necessary for a fair statement of such interim results. The interim results are not necessarily indicative of the results that we will have for the full year ending December 31, 2020 or any subsequent period. These unaudited condensed financial statements should be read in conjunction with the audited consolidated financial statements and the notes to those statements for the year ended December 31, 2019.

Summary of Significant Accounti

Summary of Significant Accounting Policies	3 Months Ended
	Mar. 31, 2020
Accounting Policies [Abstract]
Summary of Significant Accounting Policies	2. Summary of Significant Accounting Policies Principle of Consolidation The consolidated financial statements include the financial statements of the Company and its wholly owned subsidiaries. All significant intercompany balances have been eliminated in consolidation. Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect certain reported amounts of assets and liabilities, and the reported amounts of revenues and expenses during the reporting periods. The Company bases its estimates on historical experience and various other assumptions that management believes to be reasonable under the circumstances. Changes in estimates are recorded in the period in which they become known. Actual results could differ from those estimates. Cash and Cash Equivalents The Company considers all highly liquid investments with original maturities of three months or less at the date of purchase to be cash equivalents. The Company maintains its cash in bank accounts, the balance of which, at times, exceeds Federal Deposit Insurance Corporation insured limits. The primary objective of the Company’s investment activities is to preserve its capital for the purpose of funding operations and the Company does not enter into investments for trading or speculative purposes. The Company’s cash is deposited in highly rated financial institutions in the United States. The Company invests in money market funds and high-grade, commercial paper and corporate bonds, which management believes are subject to minimal credit and market risk. Marketable Securities Marketable securities consist of investments in high-grade corporate obligations and government and government agency obligations that are classified as available-for-sale. Since these securities are available to fund current operations, they are classified as current assets on the consolidated balance sheets. The Company adjusts the cost of available-for-sale available-for-sale Marketable securities are stated at fair value, including accrued interest, with their unrealized gains and losses included as a component of accumulated other comprehensive income or loss, which is a separate component of stockholders’ equity. The fair value of these securities is based on quoted prices and observable inputs on a recurring basis. Realized gains and losses are determined on the specific identification method. During the three months ended March 31, 2020 and 2019, the Company did not have any realized gains or losses on marketable securities. Fair Value of Financial Instruments The carrying amounts of the Company’s financial instruments, which include cash equivalents, and marketable securities, approximate their fair values. The fair value of the Company’s financial instruments reflects the amounts that would be received upon sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value hierarchy has the following three levels: Level 1—quoted prices in active markets for identical assets and liabilities. Level 2—observable inputs other than Level 1 inputs. Examples of Level 2 inputs include quoted prices in active markets for similar assets or liabilities and quoted prices for identical assets or liabilities in markets that are not active. Level 3—unobservable inputs that reflect the Company’s own assumptions about the assumptions market participants would use in pricing the asset or liability. Financial assets and liabilities are classified in their entirety within the fair value hierarchy based on the lowest level of input that is significant to the fair value measurement. The Company measures the fair value of its marketable securities by taking into consideration valuations obtained from third-party pricing sources. The pricing services utilize industry standard valuation models, including both income and market based approaches, for which all significant inputs are observable, either directly or indirectly, to estimate fair value. These inputs include reported trades of and broker-dealer quotes on the same or similar securities, issuer credit spreads, benchmark securities and other observable inputs. As of March 31, 2020, the Company’s financial assets valued based on Level 1 inputs consisted of cash and cash equivalents in a money market fund and its financial assets valued based on Level 2 inputs consisted of high-grade corporate bonds and commercial paper. During the three months ended March 31, 2020 and 2019, the Company did not have any transfers of financial assets between Levels 1 and 2. As of March 31, 2020 and December 31, 2019, the Company did not have any financial liabilities that were recorded at fair value on a recurring basis on the balance sheet. Research and Development Costs Research and development costs are expensed as incurred. Research and development costs are comprised of costs incurred in performing research and development activities, including internal costs (including stock-based compensation), costs for consultants, milestone payments under licensing agreements, and other costs associated with the Company’s preclinical and clinical programs. In particular, the Company has conducted safety studies in animals, optimized and implemented the manufacturing of our drug, and conducted Phase 1-3 Patents Costs to secure and defend patents are expensed as incurred and are classified as general and administrative expense in the Company’s consolidated statements of operations. Stock-Based Compensation The Company recognizes stock-based compensation expense based on the grant date fair value of stock options granted to employees, officers, and directors. The Company uses the Black-Scholes option pricing model to determine the grant date fair value as management believes it is the most appropriate valuation method for its option grants. The Black-Scholes model requires inputs for risk-free interest rate, dividend yield, volatility and expected lives of the options. The expected lives for options granted represent the period of time that options granted are expected to be outstanding. The Company uses the simplified method for determining the expected lives of options. Expected volatility is based upon an industry estimate or blended rate including the Company’s historical trading activity. The risk-free rate for periods within the expected life of the option is based on the U.S. Treasury yield curve in effect at the time of the grant. The Company estimates the forfeiture rate based on historical data. This analysis is re-evaluated Certain of the employee stock options granted by the Company are structured to qualify as incentive stock options (“ISOs”). Under current tax regulations, the Company does not receive a tax deduction for the issuance, exercise or disposition of ISOs if the employee meets certain holding requirements. If the employee does not meet the holding requirements, a disqualifying disposition occurs, at which time the Company may receive a tax deduction. The Company does not record tax benefits related to ISOs unless and until a disqualifying disposition is reported. In the event of a disqualifying disposition, the entire tax benefit is recorded as a reduction of income tax expense. The Company has not recognized any income tax benefit for its share-based compensation arrangements due to the fact that the Company does not believe it is more likely than not it will realize the related deferred tax assets. Income Taxes The Company uses the asset and liability method to account for income taxes. Deferred tax assets and liabilities are determined based on the expected future tax consequences of temporary differences between the Company’s financial statement carrying amounts and the tax basis of assets and liabilities using enacted tax rates expected to be in effect in the years in which the differences are expected to reverse. The Company currently maintains a 100% valuation allowance on its deferred tax assets. Comprehensive Loss Comprehensive loss is defined as the change in equity of a business enterprise during a period from transactions and other events and circumstances from non-owner Basic and Diluted Loss Per Common Share Basic net loss per share is computed using the weighted average number of common shares outstanding during the period, excluding restricted stock that has been issued but is not yet vested. Diluted net loss per common share is computed using the weighted average number of common shares outstanding and the weighted average dilutive potential common shares outstanding using the treasury stock method. However, for the three months ended March 31, 2020 and 2019, diluted net loss per share is the same as basic net loss per share because the inclusion of weighted average shares of unvested restricted common stock, common stock issuable upon the exercise of stock options, and common stock issuable upon the conversion of preferred stock would be anti-dilutive. The following table summarizes outstanding securities not included in the computation of diluted net loss per common share, as their inclusion would be anti-dilutive: Three Months Ended March 31, 2020 2019 Common stock options 1,728,112 1,367,077 Unvested restricted common stock — 52,063 Preferred stock 1,969,797 1,969,797 Recent Accounting Pronouncements In June 2016, the FASB issued ASU 2016-13, f 2016-13 2016-13

Liquidity and Uncertainties

Liquidity and Uncertainties	3 Months Ended
	Mar. 31, 2020
Liquidity and Uncertainties
Liquidity and Uncertainties	3. Liquidity and Uncertainties The Company is subject to risks common to development stage companies in the biopharmaceutical industry including, but not limited to, uncertainty of product development and commercialization, dependence on key personnel, uncertainty of market acceptance of products and product reimbursement, product liability, uncertain protection of proprietary technology, potential inability to raise additional financing necessary for development and commercialization, and compliance with the U.S. Food and Drug Administration and other government regulations. The Company has incurred losses since inception, including approximately $36.1 million for the three months ended March 31, 2020, resulting in an accumulated deficit of approximately $259.4 million as of March 31, 2020. Management expects to incur losses for the foreseeable future. To date, the Company has funded its operations primarily through the issuance of convertible debt, the proceeds from the Merger on July 22, 2016, and proceeds from sales of the Company’s common and Series A Convertible Preferred Stock. The Company believes that its cash, cash equivalents and marketable securities at March 31, 2020 will be sufficient to fund operations past one year from the issuance of these financial statements. To meet its future capital needs, the Company intends to raise additional capital through debt or equity financings, collaborations, partnerships or other strategic transactions. However, there can be no assurance that the Company will be able to complete any such transactions on acceptable terms or otherwise. The inability of the Company to obtain sufficient funds on acceptable terms when needed could have a material adverse effect on the Company’s business, results of operations and financial condition. The Company has the ability to delay certain research activities and related clinical expenses if necessary due to liquidity concerns until a date when those concerns are relieved.

Cash, Cash Equivalents and Mark

Cash, Cash Equivalents and Marketable Securities	3 Months Ended
	Mar. 31, 2020
Cash and Cash Equivalents [Abstract]
Cash, Cash Equivalents and Marketable Securities	4. Cash, Cash Equivalents and Marketable Securities A summary of cash, cash equivalents and available-for-sale March 31, 2020 Cost Unrealized Unrealized Fair gains losses value Cash and cash equivalents: Cash (Level 1) $ 1,668 $ — $ — $ 1,668 Money market funds (Level 1) 63,532 — — 63,532 Corporate debt securities due within 3 months of date of purchase (Level 2) 1,451 — — 1,451 Total cash and cash equivalents 66,651 — — 66,651 Marketable securities: Corporate debt securities due within 1 year of date of purchase (Level 2) 320,478 680 (261 ) 320,897 Corporate debt securities due within 1 to 2 years of date of purchase 20,966 39 (43 ) 20,962 Total cash, cash equivalents and marketable securities $ $ 719 $ (304 ) $ December 31, 2019 Cost Unrealized Unrealized Fair gains losses value Cash and cash equivalents: Cash (Level 1) $ 1,772 $ — $ — $ 1,772 Money market funds (Level 1) 44,925 — — 44,925 Corporate debt securities due within 3 months of date of purchase (Level 2) — — — — Total cash and cash equivalents 46,697 — — 46,697 Marketable securities: Corporate debt securities due within 1 year of date of purchase (Level 2) 309,365 220 (40 ) 309,545 Corporate debt securities due within 1 to 2 years of date of purchase 82,767 39 (3 ) 82,803 Total cash, cash equivalents and marketable securities $ $ 259 $ (43 ) $ 439,045

Accrued Liabilities

Accrued Liabilities	3 Months Ended
	Mar. 31, 2020
Accrued Liabilities, Current [Abstract]
Accrued Liabilities	5. Accrued Liabilities Accrued liabilities as of March 31, 2020 and December 31, 2019 consisted of the following (in thousands) : March 31, December 31, 2020 2019 Accrued contract research costs $ 18,105 $ 13,775 Compensation and benefits 1,124 2,779 Professional fees 816 1,177 Other 4,224 5,906 $ 24,269 $ 23,637

Stockholders' Equity

Stockholders' Equity	3 Months Ended
	Mar. 31, 2020
Stockholders' Equity Note [Abstract]
Stockholders' Equity	6. Stockholders’ Equity Common Stock Each common stockholder is entitled to one vote for each share of common stock held. Each share of common stock is entitled to receive dividends, as and when declared by the Company’s board of directors. The Company has never declared cash dividends on its common stock and does not expect to do so in the foreseeable future. Preferred Stock The Series A Preferred Stock has a par value of $0.0001 per share and is convertible into shares of the common stock at a one-to-one certain limitations and provisions winding-up as-if-converted-to Stock will generally have no voting rights, except as required by law. Shares of the Series A Preferred Stock will be entitled to receive dividends before shares of any other class or series of capital stock of the Company (other than dividends in the form of the Common Stock) generally equal to the dividend payable on each share of the Common Stock, on an as-converted basis.

Stock-based Compensation

Stock-based Compensation	3 Months Ended
	Mar. 31, 2020
Share-based Payment Arrangement [Abstract]
Stock-based Compensation	7. Stock-based Compensation T non-statutory The following table summarizes stock option activity during the three months ended March 31, 2020: Shares Weighted Outstanding at January 1, 2020 1,461,987 $ 64.67 Options granted 266,125 90.75 Outstanding at March 31, 2020 1,728,112 $ 68.69 Exercisable at March 31, 2020 1,025,465 $ 45.81 The total cash received by the Company as a result of stock option exercises was $0 and $0.1 million, respectively, for the three months ended March 31, 2020 and 2019. The weighted-average grant date fair values, based on the Black-Scholes option model, of options granted during the three months ended March 31, 2020 and 2019 were $68.71 and $101.08, respectively. Stock-Based Compensation Expense Stock-based compensation expense during the three months ended March 31, 2020 and 2019 was as follows (in thousands): Three Months Ended March 31, 2020 2019 Stock-based compensation expense by type of award: Stock options $ 4,846 $ 5,901 Restricted stock — 121 Total stock-based compensation expense $ 4,846 $ 6,022 Effect of stock-based compensation expense by line item: Research and development $ 2,078 $ 1,877 General and administrative 2,768 4,145 Total stock-based compensation expense included in net loss $ 4,846 $ 6,022 Unrecognized stock-based compensation expense on stock options as of March 31, 2020 was $44.2 million with a weighted average remaining period of 3.0 years.

Commitments and Contingencies

Commitments and Contingencies	3 Months Ended
	Mar. 31, 2020
Commitments and Contingencies Disclosure [Abstract]
Commitments and Contingencies	8 The Company has a Research, Development and Commercialization Agreement with Hoffmann-La The agreement requires future milestone payments to Roche. Remaining milestones under the agreement total $8 million and are earned by achieving specified objectives related to future regulatory approval in the United States and Europe of a product developed from resmetirom. A single-digit royalty payment range is based on net sales of products developed from resmetirom, subject to certain reductions. Except as described above, the Company has not achieved any additional product development or regulatory milestones and had no Licensed Product sales for the three months ended March 31, 2020 and 2019. The Company has entered into customary contractual arrangements and letters of intent in support of its

Summary of Significant Accoun_2

Summary of Significant Accounting Policies (Policies)	3 Months Ended
	Mar. 31, 2020
Accounting Policies [Abstract]
Principle of Consolidation	Principle of Consolidation The consolidated financial statements include the financial statements of the Company and its wholly owned subsidiaries. All significant intercompany balances have been eliminated in consolidation.
Use of Estimates	Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect certain reported amounts of assets and liabilities, and the reported amounts of revenues and expenses during the reporting periods. The Company bases its estimates on historical experience and various other assumptions that management believes to be reasonable under the circumstances. Changes in estimates are recorded in the period in which they become known. Actual results could differ from those estimates.
Cash and Cash Equivalents	Cash and Cash Equivalents The Company considers all highly liquid investments with original maturities of three months or less at the date of purchase to be cash equivalents. The Company maintains its cash in bank accounts, the balance of which, at times, exceeds Federal Deposit Insurance Corporation insured limits. The primary objective of the Company’s investment activities is to preserve its capital for the purpose of funding operations and the Company does not enter into investments for trading or speculative purposes. The Company’s cash is deposited in highly rated financial institutions in the United States. The Company invests in money market funds and high-grade, commercial paper and corporate bonds, which management believes are subject to minimal credit and market risk.
Marketable Securities	Marketable Securities Marketable securities consist of investments in high-grade corporate obligations and government and government agency obligations that are classified as available-for-sale. Since these securities are available to fund current operations, they are classified as current assets on the consolidated balance sheets. The Company adjusts the cost of available-for-sale available-for-sale Marketable securities are stated at fair value, including accrued interest, with their unrealized gains and losses included as a component of accumulated other comprehensive income or loss, which is a separate component of stockholders’ equity. The fair value of these securities is based on quoted prices and observable inputs on a recurring basis. Realized gains and losses are determined on the specific identification method. During the three months ended March 31, 2020 and 2019, the Company did not have any realized gains or losses on marketable securities.
Fair Value of Financial Instruments	Fair Value of Financial Instruments The carrying amounts of the Company’s financial instruments, which include cash equivalents, and marketable securities, approximate their fair values. The fair value of the Company’s financial instruments reflects the amounts that would be received upon sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value hierarchy has the following three levels: Level 1—quoted prices in active markets for identical assets and liabilities. Level 2—observable inputs other than Level 1 inputs. Examples of Level 2 inputs include quoted prices in active markets for similar assets or liabilities and quoted prices for identical assets or liabilities in markets that are not active. Level 3—unobservable inputs that reflect the Company’s own assumptions about the assumptions market participants would use in pricing the asset or liability. Financial assets and liabilities are classified in their entirety within the fair value hierarchy based on the lowest level of input that is significant to the fair value measurement. The Company measures the fair value of its marketable securities by taking into consideration valuations obtained from third-party pricing sources. The pricing services utilize industry standard valuation models, including both income and market based approaches, for which all significant inputs are observable, either directly or indirectly, to estimate fair value. These inputs include reported trades of and broker-dealer quotes on the same or similar securities, issuer credit spreads, benchmark securities and other observable inputs. As of March 31, 2020, the Company’s financial assets valued based on Level 1 inputs consisted of cash and cash equivalents in a money market fund and its financial assets valued based on Level 2 inputs consisted of high-grade corporate bonds and commercial paper. During the three months ended March 31, 2020 and 2019, the Company did not have any transfers of financial assets between Levels 1 and 2. As of March 31, 2020 and December 31, 2019, the Company did not have any financial liabilities that were recorded at fair value on a recurring basis on the balance sheet.
Research and Development Costs	Research and Development Costs Research and development costs are expensed as incurred. Research and development costs are comprised of costs incurred in performing research and development activities, including internal costs (including stock-based compensation), costs for consultants, milestone payments under licensing agreements, and other costs associated with the Company’s preclinical and clinical programs. In particular, the Company has conducted safety studies in animals, optimized and implemented the manufacturing of our drug, and conducted Phase 1-3
Patents	Patents Costs to secure and defend patents are expensed as incurred and are classified as general and administrative expense in the Company’s consolidated statements of operations.
Stock-Based Compensation	Stock-Based Compensation The Company recognizes stock-based compensation expense based on the grant date fair value of stock options granted to employees, officers, and directors. The Company uses the Black-Scholes option pricing model to determine the grant date fair value as management believes it is the most appropriate valuation method for its option grants. The Black-Scholes model requires inputs for risk-free interest rate, dividend yield, volatility and expected lives of the options. The expected lives for options granted represent the period of time that options granted are expected to be outstanding. The Company uses the simplified method for determining the expected lives of options. Expected volatility is based upon an industry estimate or blended rate including the Company’s historical trading activity. The risk-free rate for periods within the expected life of the option is based on the U.S. Treasury yield curve in effect at the time of the grant. The Company estimates the forfeiture rate based on historical data. This analysis is re-evaluated Certain of the employee stock options granted by the Company are structured to qualify as incentive stock options (“ISOs”). Under current tax regulations, the Company does not receive a tax deduction for the issuance, exercise or disposition of ISOs if the employee meets certain holding requirements. If the employee does not meet the holding requirements, a disqualifying disposition occurs, at which time the Company may receive a tax deduction. The Company does not record tax benefits related to ISOs unless and until a disqualifying disposition is reported. In the event of a disqualifying disposition, the entire tax benefit is recorded as a reduction of income tax expense. The Company has not recognized any income tax benefit for its share-based compensation arrangements due to the fact that the Company does not believe it is more likely than not it will realize the related deferred tax assets.
Income Taxes	Income Taxes The Company uses the asset and liability method to account for income taxes. Deferred tax assets and liabilities are determined based on the expected future tax consequences of temporary differences between the Company’s financial statement carrying amounts and the tax basis of assets and liabilities using enacted tax rates expected to be in effect in the years in which the differences are expected to reverse. The Company currently maintains a 100% valuation allowance on its deferred tax assets.
Comprehensive Loss	Comprehensive Loss Comprehensive loss is defined as the change in equity of a business enterprise during a period from transactions and other events and circumstances from non-owner
Basic and Diluted Loss Per Common Share	Basic and Diluted Loss Per Common Share Basic net loss per share is computed using the weighted average number of common shares outstanding during the period, excluding restricted stock that has been issued but is not yet vested. Diluted net loss per common share is computed using the weighted average number of common shares outstanding and the weighted average dilutive potential common shares outstanding using the treasury stock method. However, for the three months ended March 31, 2020 and 2019, diluted net loss per share is the same as basic net loss per share because the inclusion of weighted average shares of unvested restricted common stock, common stock issuable upon the exercise of stock options, and common stock issuable upon the conversion of preferred stock would be anti-dilutive. The following table summarizes outstanding securities not included in the computation of diluted net loss per common share, as their inclusion would be anti-dilutive: Three Months Ended March 31, 2020 2019 Common stock options 1,728,112 1,367,077 Unvested restricted common stock — 52,063 Preferred stock 1,969,797 1,969,797
Recent Accounting Pronouncements	Recent Accounting Pronouncements In June 2016, the FASB issued ASU 2016-13, f 2016-13 2016-13

Summary of Significant Accoun_3

Summary of Significant Accounting Policies (Tables)	3 Months Ended
	Mar. 31, 2020
Accounting Policies [Abstract]
Summary of the outstanding securities not included in the computation of diluted net loss per common share as their inclusion would be anti-dilutive	The following table summarizes outstanding securities not included in the computation of diluted net loss per common share, as their inclusion would be anti-dilutive: Three Months Ended March 31, 2020 2019 Common stock options 1,728,112 1,367,077 Unvested restricted common stock — 52,063 Preferred stock 1,969,797 1,969,797

Cash, Cash Equivalents and Ma_2

Cash, Cash Equivalents and Marketable Securities (Tables)	3 Months Ended
	Mar. 31, 2020
Cash and Cash Equivalents [Abstract]
Summary of cash, cash equivalents and available-for-sale marketable securities	A summary of cash, cash equivalents and available-for-sale March 31, 2020 Cost Unrealized Unrealized Fair gains losses value Cash and cash equivalents: Cash (Level 1) $ 1,668 $ — $ — $ 1,668 Money market funds (Level 1) 63,532 — — 63,532 Corporate debt securities due within 3 months of date of purchase (Level 2) 1,451 — — 1,451 Total cash and cash equivalents 66,651 — — 66,651 Marketable securities: Corporate debt securities due within 1 year of date of purchase (Level 2) 320,478 680 (261 ) 320,897 Corporate debt securities due within 1 to 2 years of date of purchase 20,966 39 (43 ) 20,962 Total cash, cash equivalents and marketable securities $ $ 719 $ (304 ) $ December 31, 2019 Cost Unrealized Unrealized Fair gains losses value Cash and cash equivalents: Cash (Level 1) $ 1,772 $ — $ — $ 1,772 Money market funds (Level 1) 44,925 — — 44,925 Corporate debt securities due within 3 months of date of purchase (Level 2) — — — — Total cash and cash equivalents 46,697 — — 46,697 Marketable securities: Corporate debt securities due within 1 year of date of purchase (Level 2) 309,365 220 (40 ) 309,545 Corporate debt securities due within 1 to 2 years of date of purchase 82,767 39 (3 ) 82,803 Total cash, cash equivalents and marketable securities $ $ 259 $ (43 ) $ 439,045

Accrued Liabilities (Tables)

Accrued Liabilities (Tables)	3 Months Ended
	Mar. 31, 2020
Accrued Liabilities, Current [Abstract]
Schedule of Accrued Liabilities	Accrued liabilities as of March 31, 2020 and December 31, 2019 consisted of the following (in thousands) : March 31, December 31, 2020 2019 Accrued contract research costs $ 18,105 $ 13,775 Compensation and benefits 1,124 2,779 Professional fees 816 1,177 Other 4,224 5,906 $ 24,269 $ 23,637

Stock-based Compensation (Table

Stock-based Compensation (Tables)	3 Months Ended
	Mar. 31, 2020
Share-based Payment Arrangement [Abstract]
Summary of stock option activity	The following table summarizes stock option activity during the three months ended March 31, 2020: Shares Weighted Outstanding at January 1, 2020 1,461,987 $ 64.67 Options granted 266,125 90.75 Outstanding at March 31, 2020 1,728,112 $ 68.69 Exercisable at March 31, 2020 1,025,465 $ 45.81
Schedule of stock-based compensation expense	Stock-based compensation expense during the three months ended March 31, 2020 and 2019 was as follows (in thousands): Three Months Ended March 31, 2020 2019 Stock-based compensation expense by type of award: Stock options $ 4,846 $ 5,901 Restricted stock — 121 Total stock-based compensation expense $ 4,846 $ 6,022 Effect of stock-based compensation expense by line item: Research and development $ 2,078 $ 1,877 General and administrative 2,768 4,145 Total stock-based compensation expense included in net loss $ 4,846 $ 6,022

Summary of Significant Accoun_4

Summary of Significant Accounting Policies - Income Taxes (Details)	3 Months Ended
	Mar. 31, 2020
Income Taxes
Valuation allowance on deferred tax assets (as a percent)	100.00%

Summary of Significant Accoun_5

Summary of Significant Accounting Policies - Basic and Diluted Loss Per Common Share (Details) - shares	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Stock options
Anti-dilutive securities
Outstanding securities not included in the computation of diluted net loss per common share as their inclusion would be anti-dilutive (in shares)	1,728,112	1,367,077
Unvested restricted common stock
Anti-dilutive securities
Outstanding securities not included in the computation of diluted net loss per common share as their inclusion would be anti-dilutive (in shares)		52,063
Preferred Stock
Anti-dilutive securities
Outstanding securities not included in the computation of diluted net loss per common share as their inclusion would be anti-dilutive (in shares)	1,969,797	1,969,797

Liquidity and Uncertainties (De

Liquidity and Uncertainties (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019	Dec. 31, 2019
Liquidity and Uncertainties
Net loss	$ 36,135	$ 15,080
Accumulated deficit	$ 259,355		$ 223,220

Cash, Cash Equivalents and Ma_3

Cash, Cash Equivalents and Marketable Securities (Details) - USD ($) $ in Thousands	3 Months Ended	12 Months Ended
	Mar. 31, 2020	Dec. 31, 2019
Cash, Cash Equivalents and Marketable Securities
Total cash, cash equivalents and marketable securities, Unrealized gains	$ 719	$ 259
Total cash, cash equivalents and marketable securities, Unrealized losses	(304)	(43)
Carrying value
Cash, Cash Equivalents and Marketable Securities
Cash and cash equivalents	66,651	46,697
Total cash, cash equivalents and marketable securities, Cost	408,095	438,829
Fair value
Cash, Cash Equivalents and Marketable Securities
Cash and cash equivalents	66,651	46,697
Total cash, cash equivalents and marketable securities, Fair value	$ 408,510	$ 439,045
Corporate debt securities due within 3 months of date of purchase
Cash, Cash Equivalents and Marketable Securities
Maturity period from date of purchase to classify an investment as marketable securities	3 months	3 months
Corporate debt securities due within 3 months of date of purchase | Carrying value | Level 2
Cash, Cash Equivalents and Marketable Securities
Cash and cash equivalents	$ 1,451
Corporate debt securities due within 3 months of date of purchase | Fair value | Level 2
Cash, Cash Equivalents and Marketable Securities
Cash and cash equivalents	$ 1,451
Corporate debt securities due within 1 year of date of purchase
Cash, Cash Equivalents and Marketable Securities
Maturity period from date of purchase to classify an investment as marketable securities	1 year	1 year
Corporate debt securities due within 1 year of date of purchase | Level 2
Cash, Cash Equivalents and Marketable Securities
Marketable securities, unrealized gains	$ 680	$ 220
Marketable securities, unrealized losses	(261)	(40)
Corporate debt securities due within 1 year of date of purchase | Carrying value | Level 2
Cash, Cash Equivalents and Marketable Securities
Marketable securities, cost	320,478	309,365
Corporate debt securities due within 1 year of date of purchase | Fair value | Level 2
Cash, Cash Equivalents and Marketable Securities
Marketable securities, fair value	$ 320,897	$ 309,545
Corporate debt securities due within 1 to 2 years of date of purchase | Maximum [Member]
Cash, Cash Equivalents and Marketable Securities
Maturity period from date of purchase to classify an investment as marketable securities	2 years	2 years
Corporate debt securities due within 1 to 2 years of date of purchase | Minimum [Member]
Cash, Cash Equivalents and Marketable Securities
Maturity period from date of purchase to classify an investment as marketable securities	1 year	1 year
Corporate debt securities due within 1 to 2 years of date of purchase | Level 2
Cash, Cash Equivalents and Marketable Securities
Marketable securities, unrealized gains	$ 39	$ 39
Marketable securities, unrealized losses	(43)	(3)
Corporate debt securities due within 1 to 2 years of date of purchase | Carrying value | Level 2
Cash, Cash Equivalents and Marketable Securities
Marketable securities, cost	20,966	82,767
Corporate debt securities due within 1 to 2 years of date of purchase | Fair value | Level 2
Cash, Cash Equivalents and Marketable Securities
Marketable securities, fair value	20,962	82,803
Cash | Carrying value | Level 1
Cash, Cash Equivalents and Marketable Securities
Cash and cash equivalents	1,668	1,772
Cash | Fair value | Level 1
Cash, Cash Equivalents and Marketable Securities
Cash and cash equivalents	1,668	1,772
Money market funds | Carrying value | Level 1
Cash, Cash Equivalents and Marketable Securities
Cash and cash equivalents	63,532	44,925
Money market funds | Fair value | Level 1
Cash, Cash Equivalents and Marketable Securities
Cash and cash equivalents	$ 63,532	$ 44,925

Accrued Liabilities (Details)

Accrued Liabilities (Details) - USD ($) $ in Thousands	Mar. 31, 2020	Dec. 31, 2019
Accrued Liabilities, Current [Abstract]
Accrued contract research costs	$ 18,105	$ 13,775
Compensation and benefits	1,124	2,779
Professional fees	816	1,177
Other	4,224	5,906
Total	$ 24,269	$ 23,637

Stockholders' Equity - Common S

Stockholders' Equity - Common Stock (Details)	3 Months Ended
	Mar. 31, 2020Vote
Stockholders' Equity Note [Abstract]
Number of votes per share that common stockholders are entitled to receive	1

Stockholders' Equity - Preferre

Stockholders' Equity - Preferred Stock (Details)	1 Months Ended
	Jun. 30, 2017Vote$ / sharesshares	Mar. 31, 2020$ / shares	Dec. 31, 2019$ / shares
Stockholders' Equity (Deficit)
Preferred stock, par value (in dollars per share)		$ 0.0001	$ 0.0001
Series A Convertible Preferred Stock
Stockholders' Equity (Deficit)
Preferred stock, par value (in dollars per share)	$ 0.0001
Preferred stock conversion ratio | shares	1
Preferred shares number voting rights | Vote	0

Stock-based Compensation - Stoc

Stock-based Compensation - Stock Option (Details) - USD ($) $ / shares in Units, $ in Millions	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019	Mar. 31, 2020
Maximum
Stock-based compensation expense
Expiration period	10 years
Stock options
Stock-based compensation expense
Options outstanding to purchase of common stock	1,461,987		1,728,112
Shares available for future issuance			1,085,220
Shares
Outstanding at the beginning of the year (in shares)	1,461,987
Options granted (in shares)	266,125
Outstanding at the end of the year (in shares)	1,728,112
Exercisable at the end of the year (in shares)			1,025,465
Weighted average exercise price
Outstanding at the beginning of the year (in dollars per share)	$ 64.67
Options granted (in dollars per share)	90.75
Outstanding at the end of the year (in dollars per share)	$ 68.69
Exercisable at the end of the year (in dollars per share)			$ 45.81
Additional disclosures
Proceeds resulting from exercise of stock options	$ 0	$ 0.1
Weighted-average grant date fair value of options (in dollars per share)	$ 68.71	$ 101.08

Stock-based Compensation - Expe

Stock-based Compensation - Expense (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Stock-based compensation expense
Stock-based compensation expense	$ 4,846	$ 6,022
Research and development
Stock-based compensation expense
Stock-based compensation expense	2,078	1,877
General and administrative
Stock-based compensation expense
Stock-based compensation expense	2,768	4,145
Stock options
Stock-based compensation expense
Stock-based compensation expense	4,846	5,901
Unvested restricted common stock
Stock-based compensation expense
Stock-based compensation expense	$ 0	$ 121

Stock-based Compensation - Unre

Stock-based Compensation - Unrecognized Expense (Details) - Stock options $ in Millions	3 Months Ended
	Mar. 31, 2020USD ($)
Unrecognized stock-based compensation expense
Unrecognized stock compensation expense	$ 44.2
Weighted average remaining period (in years)	3 years

Commitments and Contingencies (

Commitments and Contingencies (Details) - USD ($)	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Commitments and Contingencies
Licensed product sales	$ 0	$ 0
Research, Development and Commercialization Agreement | Hoffmann-La Roche ("Roche")
Commitments and Contingencies
Remainder of future milestone payments	$ 8,000,000