Summary of Significant Accounting Policies (Policies) | 3 Months Ended |
Mar. 31, 2014 |
Accounting Policies [Abstract] | ' |
Basis of Presentation | ' |
Basis of Presentation |
The accompanying interim condensed consolidated financial statements are unaudited. These unaudited financial statements have been prepared in accordance with the rules and regulations of the United States Securities and Exchange Commission (“SEC”) for interim financial information. Accordingly, they do not include all of the information and footnotes required by United States generally accepted accounting principles (“GAAP”) for complete financial statements. These unaudited interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the accompanying notes for the year ended December 31, 2013 contained in the Company’s annual report on Form 10-K filed with the SEC on March 6, 2014 pursuant to Rule 424(b)(4) under the Securities Act of 1933, as amended. The unaudited interim condensed consolidated financial statements have been prepared on the same basis as the annual consolidated financial statements and, in the opinion of management, reflect all adjustments (consisting of normal recurring adjustments) necessary to state fairly the Company’s financial position as of March 31, 2014, the results of operations and comprehensive loss and cash flows for the three months ended March 31, 2014 and 2013, and the period from July 7, 2006 (inception) to March 31, 2014. Interim operating results for the three months ended March 31, 2014 are not necessarily indicative of the results that may be expected for future interim periods or for the fiscal year ending December 31, 2014. |
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The December 31, 2013 condensed consolidated balance sheet included herein was derived from audited consolidated financial statements, but does not include all disclosures including notes required by GAAP for complete financial statements. |
Segment Information | ' |
Segment Information |
Operating segments are defined as components of an enterprise about which separate discrete information is available for evaluation by the chief operating decision maker, or decision-making group, in deciding how to allocate resources and in assessing performance. The Company views its operations and manages its business in one operating segment, which is the business of developing and commercializing its proprietary chemistry technology to create novel antibiotics for serious and life-threatening multidrug-resistant infections. |
Use of Estimates | ' |
Use of Estimates |
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses and related disclosures. On an ongoing basis, the Company’s management evaluates its estimates, including estimates related to clinical trial accruals, stock-based compensation expense, contract and grant revenues, and expenses. The Company bases its estimates on historical experience and other market-specific or other relevant assumptions that it believes to be reasonable under the circumstances. Actual results may differ from those estimates or assumptions. |
Concentrations of Credit Risk and Off-Balance Sheet Risk | ' |
Concentrations of Credit Risk and Off-Balance Sheet Risk |
Financial instruments that potentially subject the Company to concentrations of credit risk are primarily cash, cash equivalents and restricted cash. The Company maintains its cash and cash equivalent balances in the form of cash and money market accounts with financial institutions that management believes are creditworthy. The Company’s investment policy includes guidelines on the quality of the institutions and financial instruments and defines allowable investments that the Company believes minimize its exposure to concentration of credit risk. The Company has no financial instruments with off-balance-sheet risk of loss. |
Principles of Consolidation | ' |
Principles of Consolidation |
The condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiary, Tetraphase Securities Corporation, a Massachusetts Securities Corporation. All significant intercompany balances and transactions have been eliminated in consolidation. |
Cash and Cash Equivalents | ' |
Cash and Cash Equivalents |
The Company considers all highly liquid investments with maturities of three months or less from the date of purchase to be cash equivalents. Cash and cash equivalents at March 31, 2014 and December 31, 2013 consisted of cash and money market funds. |
Fair Value Measurements | ' |
Fair Value Measurements |
The Company’s financial instruments consist principally of cash and cash equivalents, accounts receivable, accounts payable, accrued liabilities, and term loan payable. Fair value measurements are classified and disclosed in one of the following three categories: |
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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; 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. | | | | | | | | | | |
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| | Level 3 | | — | | Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. | | | | | | | | | | |
Financial instruments measured at fair value as of March 31, 2014 and December 31, 2013 are classified below based on the three fair value hierarchy tiers described above (in thousands): |
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| | | | | Fair Value Measurements at | |
Reporting Date Using |
| | Balance | | | Level 1 | | | Level 2 | | | Level 3 | |
March 31, 2014 | | | | | | | | | | | | | | | | |
Cash | | $ | 3,449 | | | $ | 3,449 | | | $ | — | | | $ | — | |
Money market funds, included in cash equivalents | | $ | 85,562 | | | $ | 85,562 | | | $ | — | | | $ | — | |
December 31, 2013 | | | | | | | | | | | | | | | | |
Cash | | $ | 2,704 | | | $ | 2,704 | | | $ | — | | | $ | — | |
Money market funds, included in cash equivalents | | $ | 100,008 | | | $ | 100,008 | | | $ | — | | | $ | — | |
The Company measures cash equivalents at fair value on a recurring basis. The fair value of cash equivalents is determined based on “Level 1” inputs, which consist of quoted prices in active markets for identical assets. |
The fair value of the Company’s term loan payable is determined using current applicable rates for similar instruments as of the balance sheet date. The Company’s term loan payable is a Level 3 liability within the fair value hierarchy. The fair value of the Company’s term loan payable at March 31, 2014, computed pursuant to a discounted cash flow technique using the effective interest rate under the loan, is $9.7 million. The effective interest rate considers the fair value of the warrant issued in connection with the loan, loan issuance costs and the deferred charge. |
The fair value of the preferred stock warrant liability as of March 25, 2013 was determined based on “Level 3” inputs utilizing the Black-Scholes option pricing model (Note 6). On March 25, 2013, upon completion of the Company’s initial public offering (“IPO”), the warrants to purchase preferred stock converted into warrants to purchase common stock and the Company reclassified the fair value of the warrants as of March 25, 2013 to additional paid-in capital. The following table presents activity in the preferred stock warrant liability during the three months ended March 31, 2013 (in thousands): |
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| | Balance | | | | | | | | | | | | | |
Fair value at December 31, 2012 | | $ | 610 | | | | | | | | | | | | | |
Value of warrants issued in 2013 | | | 115 | | | | | | | | | | | | | |
Decrease in fair value recognized in net loss | | | (263 | ) | | | | | | | | | | | | |
Reclassification of fair value to additional paid-in capital | | | (462 | ) | | | | | | | | | | | | |
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Fair value at March 31, 2013 | | $ | — | | | | | | | | | | | | | |
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Accounts Receivable | ' |
Accounts Receivable |
In September 2011, the National Institutes of Health’s (“NIH”) National Institute of Allergy and Infectious Diseases (“NIAID”) division awarded a contract of up to $35.8 million over a five-year term for the development of TP-271, a preclinical compound, for respiratory disease caused by bacterial biothreat pathogens (“NIAID Contract”) (Note 3). The Company is collaborating with CUBRC Inc. (“CUBRC”), an independent, not for profit, research corporation that specializes in U.S. government-based contracts, on this NIAID Contract and has entered into a subcontract with CUBRC that could potentially provide funding to the Company of up to approximately $13.3 million over the five-year term, including committed funding of $7.6 million from the initial contract date through September 30, 2016, of which $5.1 million had been received by the Company through March 31, 2014. In addition during 2011, the Company was a subawardee under a separate grant from the NIAID (“NIAID Grant”) (Note 3). |
In January 2012 the Biomedical Advanced Research and Development Authority (“BARDA”), an agency of the U.S. Department of Health and Human Services, awarded a contract of up to $67.0 million for the development of eravacycline as a potential countermeasure for the treatment of disease caused by bacterial biothreat pathogens (“BARDA Contract”). The Company is also collaborating with CUBRC on the BARDA Contract and has entered into a subcontract with CUBRC that could potentially provide funding to the Company of up to approximately $39.8 million including committed funding of $15.7 million from the initial contract date through April 30, 2015, of which $13.0 million had been received by the Company through March 31, 2014 (Note 3). |
Accounts receivable at March 31, 2014 and December 31, 2013 represent amounts due from CUBRC under the Company’s subcontracts under the NIAID Contract and the BARDA Contract and under the Company’s subaward under the NIAID Grant. The Company’s practice is to bill the prime contractor, CUBRC, amounts for which the Company has been invoiced by third parties in the case of contract research or subcontractor costs or for internal costs incurred. Expenses directly associated with the Company’s NIAID and BARDA Contracts and NIAID Grant that have been accrued at the end of the reporting period are not billed to the prime contractor until third party invoices have been received or until internal costs have been paid. Unbilled accounts receivable was $0.1 million and $0.8 million at March 31, 2014 and December 31, 2013, respectively. |
Property and Equipment, Net | ' |
Property and Equipment, Net |
Property and equipment are stated at cost, less accumulated depreciation and amortization. Depreciation and amortization are provided using the straight-line method over the estimated useful lives of the respective assets, which is generally three to five years. Leasehold improvements are amortized over the shorter of the lease term or the estimated useful economic lives of the related assets. |
Restricted Cash | ' |
Restricted Cash |
At March 31, 2014 and December 31, 2013 the Company had $199,000 in restricted cash deposits with a bank, of which $159,000 is collateral for a letter of credit issued to the landlord of the Company’s leased facility. If the Company defaults on its rental obligations, $159,000 will be payable to the lessor of the leased facility. In addition, the Company has $40,000 in restricted cash to secure the Company’s corporate credit card issued through the same bank. |
Revenue Recognition | ' |
Revenue Recognition |
The Company’s revenue is derived from its subcontracts with CUBRC under the BARDA Contract and the NIAID Contract and its subaward under the NIAID Grant (Note 3). The Company recognizes revenue under these best-efforts, cost-reimbursable and cost-plus-fixed-fee subcontracts and subaward as the Company performs services under the subcontracts and subaward so long as a subcontract and subaward has been executed and the fees for these services are fixed or determinable, legally billable and reasonably assured of collection. Recognized amounts reflect the Company’s partial performance under the subcontracts and subaward and equal direct and indirect costs incurred plus fixed fees, where applicable. The Company does not recognize revenue under these arrangements for amounts related to contract periods where funding is not yet committed as amounts above committed funding thresholds would not be considered fixed or determinable or reasonably assured of collection. Revenues and expenses under these arrangements are presented gross on the condensed consolidated statements of operations and comprehensive loss as the Company has determined it is the primary obligor under these arrangements relative to the research and development services it performs as lead technical expert. |
Revenue under the Company’s subcontract with respect to the BARDA Contract is earned under a cost-reimbursable contract through which the Company is reimbursed for direct costs incurred plus allowable indirect costs. Billings under the Company’s subcontract under the BARDA Contract are based on approved provisional indirect billing rates that permit recovery of allowable fringe benefits, overhead and general and administrative expenses. During the three months ended March 31, 2014 and 2013, and the period from July 7, 2006 (inception) to March 31, 2014, the Company recognized revenue of $1.8 million, $1.8 million, and $14.4 million, respectively, from the Company’s subcontract under the BARDA Contract. |
Revenue under the Company’s subcontract with respect to the NIAID Contract is earned under a cost-plus-fixed-fee contract through which the Company is reimbursed for direct costs incurred plus allowable indirect costs and a fixed-fee earned. Billings under the Company’s subcontract under the NIAID Contract are based on approved provisional indirect billing rates that permit recovery of allowable fringe benefits, overhead and general and administrative expenses and a fixed fee. During the three months ended March 31, 2014 and 2013, and the period from July 7, 2006 (inception) to March 31, 2014, the Company recognized revenue of $0.6 million, $0.7 million, and $5.8 million, respectively, from the Company’s subcontract under the NIAID Contract. |
Revenue under the Company’s subaward with respect to the NIAID Grant is earned under a cost-reimbursable contract through which the Company is reimbursed for direct costs incurred plus allowable indirect costs. Billings under the Company’s subaward under the NIAID Grant are based on approved provisional indirect billing rates that permit recovery of allowable fringe benefits and general and administrative expenses. During the three months ended March 31, 2014 and 2013, and the period from July 7, 2006 (inception) to March 31, 2014, the Company recognized revenue of $57,000, $153,000 and $0.6 million, respectively, from the Company’s subaward under the NIAID Grant. |
Organizational Costs | ' |
Organizational Costs |
All organizational costs are expensed as incurred. |
Research and Development Expenses | ' |
Research and Development Expenses |
Research and development costs are charged to expense as incurred and include, but are not limited to: |
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| • | | personnel-related expenses, including salaries, benefits, and stock-based compensation expense; | | | | | | | | | | | | | |
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| • | | expenses incurred under agreements with contract research organizations, contract manufacturing organizations and consultants that conduct clinical trials and preclinical studies; | | | | | | | | | | | | | |
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| • | | payments made under the Company’s license agreement with Harvard University; | | | | | | | | | | | | | |
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| • | | the cost of acquiring, developing and manufacturing clinical trial materials and lab supplies; | | | | | | | | | | | | | |
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| • | | facility, depreciation and other expenses, which include direct and allocated expenses for rent and maintenance of facilities, insurance and other supplies; and | | | | | | | | | | | | | |
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| • | | costs associated with preclinical activities and regulatory operations. | | | | | | | | | | | | | |
Costs for certain development activities, such as clinical trials, are recognized based on an evaluation of the progress to completion of specific tasks using data such as patient enrollment, clinical site activations, or information provided to the Company by its vendors on their actual costs incurred. Payments for these activities are based on the terms of the individual arrangements, which may differ from the pattern of costs incurred, and are reflected in the financial statements as prepaid or accrued research and development. |
Comprehensive Loss | ' |
Comprehensive Loss |
Comprehensive loss consists of net income or loss and changes in equity during a period from transactions and other events and circumstances generated from non-owner sources. The Company’s net loss equals comprehensive loss for all periods presented. |
Income Taxes | ' |
Income Taxes |
The Company uses the liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial reporting and the tax reporting basis of assets and liabilities and are measured using the enacted tax rates and laws that are expected to be in effect when the differences are expected to reverse. The Company provides a valuation allowance against net deferred tax assets unless, based upon the available evidence, it is more likely than not that the deferred tax assets will be realized. The Company has evaluated available evidence and concluded that the Company may not realize the benefit of its deferred tax assets; therefore a valuation allowance has been established for the full amount of the deferred tax assets. The Company’s practice is to recognize interest and/or penalties related to income tax matters in income tax expense. |
Stock-Based Compensation | ' |
Stock-Based Compensation |
The Company applies the provisions of ASC 718, Compensation-Stock Compensation to stock-based awards. Under ASC 718, the Company determines equity-based compensation at the grant date using the Black-Scholes option pricing model to estimate fair value. The Company recognizes the value of the award that is ultimately expected to vest as an expense on a straight-line basis over the requisite service period using the estimated fair market value of the stock. Any changes to the estimated forfeiture rates are accounted for prospectively. |
Subsequent Events | ' |
Subsequent Events |
The Company considers events or transactions that occur after the balance sheet date but prior to the issuance of the financial statements to provide additional evidence relative to certain estimates or to identify matters that require additional disclosure. |
Net Loss per Common Share | ' |
Net Loss per Common Share |
Basic net loss per share is calculated by dividing the net loss applicable to common stockholders by the weighted average number of shares of Common Stock outstanding for the period, without consideration for common stock equivalents. Diluted net loss per share is computed by dividing the net loss applicable to common stockholders by the weighted average number of common share equivalents outstanding for the period determined using the treasury-stock method. For purposes of this calculation, preferred stock, stock options and warrants are considered to be common stock equivalents and are only included in the calculation of diluted net loss per share when their effect is dilutive. |
On February 28, 2013, the Company’s board of directors approved an amendment to the Company’s certificate of incorporation to effect a 1-for-29 reverse split of its Common Stock. The Company effected this amendment to its certificate of incorporation on March 5, 2013. Following the Company’s reverse split, and effective as of the completion of the Company’s IPO on March 25, 2014, all of the Company’s preferred stock was converted to common stock at a 1-for-29 ratio. For purposes of calculating net loss per common share for the three months ended March 31, 2013 and the period from July 7, 2006 (inception) to March 31, 2014, the preferred stock that converted to common stock was included in the net loss per common share calculation on a post-conversion basis as of March 25, 2013, the effective date of conversion, and the corresponding converted shares were included on a pro-rata basis for each applicable reporting period. As a result, the weighted-average common shares outstanding during the three months ended March 31, 2013 and the period from July 7, 2006 (inception) to March 31, 2014, were 1.8 million and 3.2 million, respectively, as compared to 25.8 million and 19.9 million shares outstanding as of March 31, 2014 and 2013, respectively. |
The amounts in the table below were excluded from the calculation of diluted weighted-average shares outstanding, prior to the use of the treasury stock method, due to their anti-dilutive effect: |
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| | March 31, | | | The Period from | | | | | |
July 7, 2006 | | | | |
(inception) to | | | | |
March 31, | | | | |
2014 | | | | |
| | 2014 | | | 2013 | | | | | | | | |
Warrants | | | 104,107 | | | | 104,107 | | | | 104,107 | | | | | |
Outstanding stock options | | | 3,544,365 | | | | 1,535,948 | | | | 3,554,365 | | | | | |