Significant Accounting Policies | 12 Months Ended |
Dec. 31, 2014 |
Accounting Policies [Abstract] | |
Significant Accounting Policies | Significant Accounting Policies |
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Use of Estimates |
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The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. |
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Reverse Stock Split |
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On February 6, 2014, the Company effected a 1-for-6.5 reverse stock split of its issued and outstanding shares of common stock and a proportional adjustment to the conversion ratio for the Company’s outstanding Series A Preferred Stock. Accordingly, all share and per share amounts for all periods presented in these financial statements and notes thereto have been adjusted retroactively, where applicable, to reflect the reverse stock split and adjustment of the preferred share conversion ratios. |
Initial Public Offering |
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On February 14, 2014, the Company completed its initial public offering of common stock (the “IPO”) pursuant to a registration statement that was declared effective on February 10, 2014. The Company sold 3,100,000 shares of its common stock, at a price of $12.00. The Company received a total of $33.4 million in net proceeds after deducting underwriting discounts and commissions and offering expenses of approximately $3.8 million. As of December 31, 2013, costs directly associated with the IPO were capitalized and recorded as deferred costs. Upon closing of the IPO, these costs were recorded as a reduction of the proceeds received in arriving at the amount to be recorded as additional paid-in capital. |
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In connection with the IPO, 3,644,354 shares of common stock were issued for the conversion of all outstanding shares of Series A Preferred stock, 1,197,289 shares of common stock were issued for the conversion of outstanding convertible notes and accrued interest and 593,589 aggregate shares of common stock were issued in connection with the settlement of the Company’s outstanding preferred stock warrant liability. |
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Warrant Liability |
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Certain warrants to purchase the Company’s capital stock had historically been classified as liabilities and were recorded at estimated fair value. At each reporting period, any change in fair value of the freestanding warrants was recorded as other (expense) income. The preferred stock warrant liability was settled upon the closing of the IPO. |
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Segment Reporting |
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Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision maker in making decisions regarding resource allocation and assessing performance. The Company views its operations and manages its business in one operating segment. |
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Cash and Cash Equivalents |
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The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents. |
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Investments |
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The Company invests in money market funds and certificates of deposits and considers all investments purchased with original maturity dates greater than three months and less than one year to be short-term investments. Those investments with original maturity dates greater than one year at each balance sheet date are considered to be long-term investments. As of December 31, 2014, all investments were classified as available-for-sale and had original maturity dates less than one year. These investments are carried at estimated fair value with unrealized gains and losses included in stockholders' equity (deficit). The amortized cost of debt securities is adjusted for amortization of premiums and accretion of discounts to maturity, which is included in interest income. |
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Concentration of Credit Risk |
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The Company invests its available cash balances in bank deposits, money market funds and certificates of deposit. The Company maintains deposits in federally insured financial institutions in excess of federally insured limits. Management believes that the Company is not exposed to significant credit risk due to the financial position of the depository institutions in which those deposits are held. Additionally, the Company has established guidelines regarding approved investments and maturities of investments, which are designed to maintain safety and liquidity. |
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Property and Equipment |
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Property and equipment, including leasehold improvements, are stated at cost. Depreciation is calculated using the straight-line method over the estimated useful lives of the assets or the shorter of the lease term or the estimated useful life for leasehold improvements. Useful lives generally range from three to seven years. |
Fair Value of Financial Instruments |
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As of December 31, 2014, financial instruments consist of cash and cash equivalents, short-term investments, a note payable, accounts receivable and accounts payable. |
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The Company defines fair value (“FV”) as the price that would be received to sell an asset or paid to transfer a liability ("the exit price") in an orderly transaction between market participants at the measurement date. The FV hierarchy for inputs maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. The Company uses the following hierarchy of inputs to measure FV: |
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•Level 1: Quoted prices in active markets for identical assets or liabilities; |
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• | Level 2: Inputs, other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities in active markets; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities; and | | | | | | | | | | | |
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• | Level 3: Unobservable inputs that are supported by little or no market activity, which require the reporting entity to develop its own assumptions. | | | | | | | | | | | |
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The Company values investments using the most observable inputs available that are current as of the measurement date and classifies them according to the lowest level of inputs used. Observable inputs are inputs that market participants would use in pricing the asset or liability developed from market data obtained from independent sources. Unobservable inputs are those which reflect the Company’s judgment concerning the assumptions that market participants would use in pricing the asset or liability developed from the best information available under the circumstances. |
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The Company targets investments principally in Level 1 and Level 2 cash equivalents and financial instruments and records them at FV. The Company did not rely on Level 3 inputs for the valuation of any investments at December 31, 2014. The Company expects that the carrying values of cash equivalents will approximate FV because of their short maturities. |
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The Company classifies as Level 2 investments in certificates of deposits and values them using the market approach based on significant other observable inputs including quoted prices in active markets for instruments that are similar or quoted prices in markets that are not traded on a daily basis for identical or similar instruments. |
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The following table sets forth our financial instruments carried at FV within the ASC 820 hierarchy and using the lowest level of input as of December 31, 2014: |
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| | Quoted Prices | | |
| | in Active | Significant | |
(in thousands) | | Markets | Other | Significant |
| Balance | For Identical Assets | Observable Inputs | Unobservable Inputs |
Assets: | 31-Dec-14 | Level 1 | Level 2 | Level 3 |
Money Market Funds | $ | 4,807 | | $ | 4,807 | | $ | — | | $ | — | |
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Certificates of Deposit | 16,765 | | — | | 16,765 | | — | |
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Total Assets | $ | 21,572 | | $ | 4,807 | | $ | 16,765 | | $ | — | |
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Assets and liabilities measured at fair value on a recurring basis as of December 31, 2013 were as follows: |
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| | Quoted Prices | | |
| | in Active | Significant | |
(in thousands) | | Markets | Other | Significant |
| Balance | For Identical Assets | Observable Inputs | Unobservable Inputs |
Assets: | 31-Dec-13 | Level 1 | Level 2 | Level 3 |
Money Market Funds | $ | 2,119 | | $ | 2,119 | | $ | — | | $ | — | |
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Total Assets | $ | 2,119 | | $ | 2,119 | | $ | — | | $ | — | |
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Liabilities: | | | | |
Preferred stock warrant liability | $ | 6,983 | | $ | — | | $ | — | | $ | 6,983 | |
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Total liabilities | $ | 6,983 | | $ | — | | $ | — | | $ | 6,983 | |
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At December 31, 2013, certain warrants to purchase the Company’s capital stock were classified as liabilities and were recorded at estimated FV. The Company measured its warrant liability using significant unobservable inputs that were based on little or no verifiable market data, which is Level 3 in the FV hierarchy. At each reporting period, any change in fair value of the freestanding warrants was recorded as other (expense) income. The Company recorded a $140,000 and $3.4 million as other expense as as a result of the change in fair value of the preferred stock warrant liability for the years ended December 31, 2014 and 2013, respectively. The preferred stock warrant liability was settled upon closing of the IPO. As of December 31, 2014, the Company has no financial instruments that are valued using Level 3 inputs. |
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Debt Issuance Costs |
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Debt issuance costs represent legal and other direct costs related to the Company's outstanding loan. These costs are recorded as an asset on the accompanying balance sheets and are being amortized to interest expense utilizing the effective interest method through the earliest date at which the Company can be required to repay the notes. At December 31, 2014, the balance of debt issuance costs was $48,000. |
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Research and Development Costs |
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Research and development costs are expensed as incurred. Research and development expenses include personnel costs associated with research and development activities including non-cash share-based compensation, costs for third-party contractors to perform research, conduct clinical trials and manufacture drug supplies and materials. The Company accrues for costs incurred by external service providers, including contract research organizations and clinical investigators, based on its estimates of service performed and costs incurred. These estimates include the level of services performed by the third parties, patient enrollment in clinical trials, administrative costs incurred by the third parties, and other indicators of the services completed. Based on the timing of amounts invoiced by service providers, the Company may also record payments made to those providers as prepaid expenses that will be recognized as expense in future periods as the related services are rendered. |
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Stock-Based Compensation |
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The Company estimates the FV of stock options and stock purchase rights using a Black-Scholes option valuation model which requires the input of highly subjective assumptions, including the option’s expected life and the price volatility of the underlying stock. The Company uses the simplified method for estimating the expected term as provided by the Securities and Exchange Commission's Staff Accounting Bulletin No. 107. The simplified method calculates the expected term as the average time-to-vesting and the contractual life of the options. The expected stock price volatility assumption was determined by examining the historical volatilities of a group of industry peers. The FV of each option grant is estimated on the date of grant using the Black-Scholes option valuation model, and the resulting FV is expensed using the straight-line attribution method over the vesting period, which is the same as the requisite service period. Restricted stock units are measured at the FV of the Company's common stock on the date of grant and expensed over the period of vesting, which is the same as the requisite service period using the straight-line attribution method. |
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Recent Accounting Pronouncements |
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Occasionally, new accounting standards are issued or proposed by the Financial Accounting Standards Board (the “FASB”), or other standards-setting bodies that the Company adopts by the effective date specified within the standard. Unless otherwise discussed, standards that do not require adoption until a future date are not expected to have a material impact on the Company’s financial statements upon adoption. |
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In July 2013, the FASB issued Accounting Standards Update, or ASU, No. 2013-11, Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists. ASU 2013-11 provides explicit guidance on the financial statement presentation of an unrecognized tax benefit when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists. The guidance is effective prospectively for fiscal years, and interim periods within those years, beginning after December 15, 2013, with an option for early adoption. The Company adopted this guidance on January 1, 2014. The adoption did not impact the Company’s financial position or results of operations. |
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In July 2014, the FASB issued ASU No. 2014-10, Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements, Including an Amendment to Variable Interest Entities Guidance in Topic 810, Consolidation. The amendments in this ASU remove all incremental financial reporting requirements from U.S. GAAP for development stage entities, including the removal of Topic 915, Development Stage Entities, from the FASB Accounting Standards Codification™. A development stage entity is one that devotes substantially all of its efforts to establishing a new business and for which: (a) planned principal operations have not commenced; or (b) planned principal operations have commenced, but have produced no significant revenue. Current U.S. GAAP requires a development stage entity to present the same basic financial statements and apply the same recognition and measurement rules as established companies. In addition, U.S. GAAP requires a development stage entity to present inception-to-date information about income statement line items, cash flows, and equity transactions. For public business entities, the presentation and disclosure requirements in Topic 915 will no longer be required for the first annual period beginning after December 15, 2014. The revised consolidation standards are effective one year later, in annual periods beginning after December 15, 2015. Early adoption is permitted. The Company adopted the guidance for the quarterly periods ended June 30, 2014. The adoption did not impact the Company’s financial position or results of operations. |
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In August 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-15, “Presentation of Financial Statements - Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern” (“ASU 2014-15”). ASU 2014-15 is intended to define management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern and to provide related footnote disclosures. Specifically, ASU 2014-15 provides a definition of the term substantial doubt and requires an assessment for a period of one year after the date that the financial statements are issued (or available to be issued). It also requires certain disclosures when substantial doubt is alleviated as a result of consideration of management’s plans and requires an express statement and other disclosures when substantial doubt is not alleviated. The new standard will be effective for reporting periods beginning after December 15, 2016, with early adoption permitted. Management is currently evaluating the impact of the adoption of ASU 2014-14 on the Company's financial statements and disclosures. |