TRACON Pharmaceuticals (TCON) 10-Q 4 Nov 15 2015 Q3 Quarterly report Financial data

Document and Entity Information

Document and Entity Information - shares	9 Months Ended
	Sep. 30, 2015	Oct. 30, 2015
Document and Entity Information
Entity Registrant Name	Tracon Pharmaceuticals, Inc.
Entity Central Index Key	1,394,319
Document Type	10-Q
Document Period End Date	Sep. 30, 2015
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Current Reporting Status	Yes
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		12,175,942
Document Fiscal Year Focus	2,015
Document Fiscal Period Focus	Q3

Condensed Consolidated Balance

Condensed Consolidated Balance Sheets - USD ($) $ in Thousands	Sep. 30, 2015	Dec. 31, 2014
Current Assets:
Cash and cash equivalents	$ 47,152	$ 35,000
Short-term investments	10,503
Prepaid and other assets	2,204	728
Total current assets	59,859	35,728
Property and equipment, net	141	97
Other assets	40	2,346
Total assets	60,040	38,171
Current liabilities:
Accounts payable and accrued expenses	6,990	3,974
Current portion of deferred revenue	4,320	4,357
Preferred stock warrant liabilities		246
Long-term debt, current portion	321	4,676
Total current liabilities	11,631	13,253
Deferred revenue		2,546
Other long-term liabilities	748	408
Long-term debt, less current portion	$ 6,601	4,258
Redeemable convertible preferred stock, $0.001 par value; authorized shares—none and 24,900,000 at September 30, 2015 and December 31, 2014, respectively; issued and outstanding shares—none and 24,650,273 at September 30, 2015 and December 31, 2014, respectively; liquidation preference of $0 and $51,700 at September 30, 2015 and December 31, 2014, respectively		$ 49,880
Stockholders’ equity (deficit):
Preferred stock, $0.001 par value, authorized shares—10,000,000 and none at September 30, 2015 and December 31, 2014, respectively; issued and outstanding shares—none
Common stock, $0.001 par value; authorized shares—200,000,000 at September 30, 2015 and 40,000,000 at December 31, 2014; issued and outstanding—12,160,933 and 1,633,854 at September 30, 2015 and December 31, 2014, respectively	$ 12	$ 2
Additional paid-in capital	88,591	2,004
Accumulated deficit	(47,543)	(34,180)
Total stockholders’ equity (deficit)	41,060	(32,174)
Total liabilities, redeemable convertible preferred stock and stockholders’ equity (deficit)	$ 60,040	$ 38,171

Condensed Consolidated Balance3

Condensed Consolidated Balance Sheets (Parenthetical) - USD ($)	Sep. 30, 2015	Dec. 31, 2014
Condensed Balance Sheets
Redeemable convertible preferred stock, par value (in dollars per share)	$ 0.001	$ 0.001
Redeemable convertible preferred stock, shares authorized	0	24,900,000
Redeemable convertible preferred stock, shares issued	0	24,650,273
Redeemable convertible preferred stock, shares outstanding	0	24,650,273
Liquidation preference	$ 0	$ 51,700
Preferred Stock, Par or Stated Value Per Share	$ 0.001	$ 0.001
Preferred Stock, Shares Authorized	10,000,000	0
Preferred Stock, Shares Issued	0	0
Preferred Stock, Shares Outstanding	0	0
Common stock, par value (in dollars per share)	$ 0.001	$ 0.001
Common stock, shares authorized	200,000,000	40,000,000
Common stock, shares issued	12,160,933	1,633,854
Common stock, shares outstanding	12,160,933	1,633,854

Condensed Consolidated Statemen

Condensed Consolidated Statements of Operations - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014
Condensed Statements of Operations
Collaborative revenue	$ 1,180	$ 1,133	$ 6,509	$ 2,558
Operating expenses:
Research and development	5,885	2,269	15,121	5,090
General and administrative	1,530	567	4,019	1,394
Total operating expenses	7,415	2,836	19,140	6,484
Loss from operations	(6,235)	(1,703)	(12,631)	(3,926)
Other income (expense):
Interest expense, net	(221)	(224)	(701)	(382)
Other (expense) income	9	8	(31)	48
Total other income (expense)	(212)	(216)	(732)	(334)
Net loss	(6,447)	(1,919)	(13,363)	(4,260)
Accretion to redemption value of redeemable convertible preferred stock		(70)	(31)	(202)
Net loss attributable to common stockholders	$ (6,447)	$ (1,989)	$ (13,394)	$ (4,462)
Net loss per share attributable to common stockholders, basic and diluted	$ (0.53)	$ (1.23)	$ (1.24)	$ (2.76)
Weighted-average shares outstanding, basic and diluted	12,117,988	1,615,006	10,761,383	1,614,903

Condensed Consolidated Stateme5

Condensed Consolidated Statements of Cash Flows - USD ($)	9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014
Cash flows from operating activities
Net loss	$ (13,363,000)	$ (4,260,000)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Share-based compensation	1,346,000	155,000
Depreciation and amortization	33,000	8,000
Amortization of debt discount	78,000	61,000
Amortization of premium/discount on short-term investments	2,000
Noncash interest	323,000	161,000
Change in fair value of preferred stock warrant liability	65,000	(48,000)
Deferred rent	(4,000)	26,000
Deferred revenue	(2,582,000)	7,671,000
Changes in assets and liabilities:
Prepaid expenses and other assets	(1,487,000)	(1,100,000)
Accounts payable and accrued expenses	3,944,000	2,251,000
Net cash (used in) provided by operating activities	(11,645,000)	4,925,000
Cash flows from investing activities
Purchase of property and equipment	(77,000)	(41,000)
Purchases of short-term investments	(10,505,000)
Net cash used in investing activities	(10,582,000)	(41,000)
Cash flows from financing activities
Proceeds from long-term debt	8,000,000	7,500,000
Repayment of long-term debt, including final payment	(9,930,000)	(352,000)
Proceeds from sale of preferred stock, net of offering costa		25,670,000
Proceeds from sale of common stock, net of offering costs paid in the current period	36,260,000	(823,000)
Proceeds from exercise of common stock options	49,000	52,000
Net cash provided by financing activities	34,379,000	32,047,000
Net increase in cash	12,152,000	36,931,000
Cash and cash equivalents at beginning of period	35,000,000	2,276,000
Cash and cash equivalents at end of period	$ 47,152,000	$ 39,207,000

Organization and Summary of Sig

Organization and Summary of Significant Accounting Polocies	9 Months Ended
	Sep. 30, 2015
Organization and Summary of Significant Accounting Policies
Organization and Summary of Significant Accounting Policies	1. Organization and Summary of Significant Accounting Policies Organization and Business TRACON Pharmaceuticals, Inc. (formerly Lexington Pharmaceuticals, Inc.) (TRACON or the Company) was incorporated in the state of Delaware on October 28, 2004. TRACON is a clinical stage biopharmaceutical company focused on the development and commercialization of novel targeted therapeutics for cancer, wet age-related macular degeneration and fibrotic diseases. The Company’s research focuses on antibodies that bind to the endoglin receptor, which is essential to angiogenesis (the process of new blood vessel formation) and a key contributor to fibrosis (tissue scarring). In February 2015, the Company completed its initial public offering in which it sold 3,600,000 shares of common stock at an initial public offering price of $10.00 per share. In addition, a concurrent private placement to an existing stockholder was completed in which the Company sold 500,000 shares of common stock, also at $10.00 per share. Proceeds from the initial public offering and concurrent private placement, net of underwriting discounts, commissions and offering costs paid by the Company of approximately $6.1 million, were approximately $34.9 million. In addition, in connection with the completion of the Company’s initial public offering on February 4, 2015, all outstanding shares of redeemable convertible preferred stock were converted into 6,369,567 shares of the Company’s common stock; outstanding warrants to purchase 150,000 shares of Series A redeemable convertible preferred stock were converted into warrants to purchase 38,758 shares of the Company’s common stock; and the Company’s certificate of incorporation was amended and restated to authorize 200,000,000 shares of common stock and 10,000,000 shares of undesignated preferred stock. The unaudited consolidated financial stateme nts include the accounts of the Company and its wholly-owned subsidiary, TRACON Pharma Limited, which was formed in September 2015 and is currently inactive. All significant intercompany accounts and transactions have been eliminated. Unaudited Interim Financial Information The unaudited consolidated financial statements at September 30, 2015, and for the three and nine months ended September 30, 2015 and 2014, have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission, (SEC), and with accounting principles generally accepted in the United States applicable to interim financial statements. These unaudited consolidated financial statements have been prepared on the same basis as the audited financial statements and include all adjustments, consisting of only normal recurring accruals, which in the opinion of management are necessary to present fairly the Company’s financial position as of the interim date and results of operations for the interim periods presented. Interim results are not necessarily indicative of results for a full year or future periods. The preparation of financial statements 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 expenses during the reporting period. Actual results could differ materially from those estimates. These unaudited consolidated financial statements should be read in conjunction with the Company’s audited financial statements for the year ended December 31, 2014, included in its Annual Report on Form 10-K filed with the SEC on March 10, 2015. Use of Estimates The Company’s financial statements are prepared in accordance with accounting principles generally accepted in the United States (GAAP). The preparation of the Company’s financial statements requires management to make estimates and assumptions that impact the reported amounts of assets, liabilities, revenue and expenses and the disclosure of contingent assets and liabilities in the Company’s financial statements and accompanying notes. The most significant estimates in the Company’s financial statements relate to revenue recognition and the valuation of equity awards. Although these estimates are based on the Company’s knowledge of current events and actions it may undertake in the future, actual results may ultimately materially differ from these estimates and assumptions. Reverse Stock Split On January 16, 2015, the Company effected a one-for- 3.87 reverse stock split of its common stock (the Reverse Stock Split). The par value and the authorized shares of the common stock were not adjusted as a result of the Reverse Stock Split. All issued and outstanding common stock and the conversion ratio of the redeemable convertible preferred stock have been retroactively adjusted to reflect this Reverse Stock Split for all periods presented. Cash and Cash Equivalents The Company considers all highly liquid investments that have maturities of three months or less when purchased to be cash equivalents. Concentration of Credit Risk Financial instruments that potentially subject the Company to significant concentration of credit risk consist primarily of cash and cash equivalents. The Company maintains deposits in federally insured financial institutions in excess of federally insured limits. The Company has not experienced any losses in such accounts and 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. Preferred Stock Warrant Liabilities Prior to the completion of the Company’s initial public offering in February 2015, the Company had outstanding freestanding warrants to purchase shares of its Series A redeemable convertible preferred stock. Since the underlying Series A redeemable convertible preferred stock was classified outside of permanent equity, these preferred stock warrants were classified as liabilities in the December 31, 2014 balance sheet. The Company adjusted the carrying value of such preferred stock warrants to their estimated fair value at each reporting date, with any related increases or decreases in the fair value recorded as an increase or decrease to other income (expense) in the statements of operations. Upon the completion of the Company’s initial public offering, the warrants no longer require liability accounting and the then fair value of the warrant liability was reclassified into stockholders’ equity. The Company performed the final remeasurement of the warrant liability as of the initial public offering date and recorded the $65,000 change in fair value into other income (expense) for the nine months ended September 30, 2015. Revenue Recognition The Company’s revenue is derived from its license agreement with Santen Pharmaceutical Co., Ltd. (Santen) as described in Note 7. The Company recognizes revenue when all four of the following criteria are met: (1) there is persuasive evidence that an arrangement exists; (2) delivery of the products and/or services has occurred; (3) the selling price is fixed or determinable; and (4) collectability is reasonably assured. Amounts received prior to satisfying the revenue recognition criteria are recorded as deferred revenue. Amounts not expected to be recognized as revenue within the 12 months following the balance sheet date are classified as long-term deferred revenue. The Company evaluates multiple-element arrangements to determine: (1) the deliverables included in the arrangement and (2) whether the individual deliverables represent separate units of accounting or whether they must be accounted for as a combined unit of accounting. Deliverables are considered separate units of accounting provided that: (a) the delivered items have value to the customer on a standalone basis and (b) if the arrangement includes a general right of return relative to the delivered items, delivery or performance of the undelivered items is considered probable and substantially in the Company’s control. In assessing whether an item has standalone value, the Company considers factors such as the research, manufacturing and commercialization capabilities of the partner and the availability of the associated expertise in the general marketplace. In addition, the Company considers whether the partner can use the other deliverables for their intended purpose without the receipt of the remaining elements, whether the value of the deliverable is dependent on the undelivered items and whether there are other vendors that can provide the undelivered elements. Arrangement consideration that is fixed or determinable is allocated among the separate units of accounting using the relative selling price method. The Company uses the following hierarchy of values to estimate the selling price of each deliverable: (1) vendor-specific objective evidence of fair value; (2) third party evidence of selling price; and (3) best estimate of selling price (BESP). The BESP reflects the Company’s best estimate of what the selling price would be if the Company regularly sold the deliverable on a standalone basis. In developing the BESP for a unit of accounting, the Company considers applicable market conditions and relevant entity-specific factors, including factors that are contemplated in negotiating an arrangement and estimated costs. The Company validates the BESP for units of accounting by evaluating whether changes in the key assumptions used to determine the BESP will have a significant effect on the allocation of arrangement consideration between multiple units of accounting. The Company then applies the applicable revenue recognition criteria to each of the separate units of accounting in determining the appropriate period and pattern of recognition. If there is no discernible pattern of performance and/or objectively measurable performance measures do not exist, then the Company recognizes revenue under the arrangement on a straight-line basis over the period the Company expects to complete its performance obligations. With respect to revenue derived from reimbursement of direct, out-of-pocket expenses for research and development costs associated with collaborations, where the Company acts as a principal with discretion to choose suppliers, bear credit risk, and perform part of the services required in the transaction, the Company records revenue for the gross amount of the reimbursement. The costs associated with these reimbursements are reflected as a component of research and development expense in the statements of operations. Milestones The Company uses the milestone method of accounting and revenue is recognized when earned, as evidenced by written acknowledgement from the collaborator or other persuasive evidence that the milestone has been achieved and the payment is non-refundable, provided that the milestone event is substantive. A milestone event is defined as an event: (1) that can only be achieved based in whole or in part on either the Company’s performance or on the occurrence of a specific outcome resulting from the Company’s performance; (2) for which there is substantive uncertainty at the inception of the arrangement that the event will be achieved; and (3) that would result in additional payments being due to the Company. Events for which the occurrence is either contingent solely upon the passage of time or the result of a counterparty’s performance are not considered to be milestone events. A milestone event is substantive if all of the following conditions are met: (a) the consideration is commensurate with either the Company’s performance to achieve the milestone, or the enhancement of the value to the delivered item(s) as a result of a specific outcome resulting from the Company’s performance to achieve the milestone; (b) the consideration relates solely to past performance; and (c) the consideration is reasonable relative to all the deliverables and payment terms (including other potential milestone consideration) within the arrangement. The Company assesses whether a milestone is substantive at the inception of each arrangement. If a milestone is deemed non-substantive, the Company will account for that milestone payment in accordance with the multiple element arrangements guidance and recognize it consistent with the related units of accounting for the arrangement over the related performance period. Stock-Based Compensation Stock-based compensation expense represents the grant date fair value of employee stock option grants recognized as expense over the requisite service period of the awards (usually the vesting period) on a straight-line basis, net of estimated forfeitures. The Company estimates the fair value of stock option grants using the Black-Scholes option pricing model. The Company accounts for stock options granted to non-employees using the fair value approach. These option grants are subject to periodic revaluation over their vesting terms. Comprehensive Loss Comprehensive loss is defined as a change in equity during a period from transactions and other events and circumstances from non-owner sources. Net loss and comprehensive loss were the same for all periods presented. Net Loss Per Share Basic net loss per share is calculated by dividing the net loss by the weighted-average shares of common stock outstanding for the period, without consideration for common stock equivalents and adjusted for the weighted-average number of common shares outstanding that are subject to repurchase. The Company has excluded 6,301 and 6,818 weighted-average shares subject to repurchase from the weighted-average number of common shares outstanding for the three and nine months ended September 30, 2015, respectively, and 3,583 and 1,207 common shares subject to repurchase for the three and nine months ended September 30, 2014, respectively. Diluted net loss per share is calculated by dividing the net loss by the weighted-average number of common stock equivalents outstanding for the period determined using the treasury-stock method. Dilutive common stock equivalents are comprised of redeemable convertible preferred stock, warrants for the purchase of common stock and redeemable convertible preferred stock, options outstanding under the Company’s stock option plan s , and shares issuable under the Company’s Employee Stock Purchase Plan (ESPP). For all periods presented, there is no difference in the number of shares used to calculate basic and diluted shares outstanding due to the Company’s net loss position. Outstanding potentially dilutive securities not included in the calculation of diluted net loss per share because to do so would be anti-dilutive were as follows (in common stock equivalent shares): September 30, 2015 2014 Redeemable convertible preferred stock outstanding — Warrants to purchase redeemable convertible preferred stock — Warrants to purchase common stock — Common stock options ESPP shares — Recent Accounting Pronouncements In May 2014, the FASB issued Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers , which converges the FASB and the International Accounting Standards Board standard on revenue recognition. Areas of revenue recognition that will be affected include, but are not limited to, transfer of control, variable consideration, allocation of transfer pricing, licenses, time value of money, contract costs and disclosures. This guidance is effective for the fiscal years and interim reporting periods beginning after December 15, 2017. The Company has not yet selected a transition method and is currently evaluating the impact that the adoption of ASU 2014-09 will have on its financial statements and related disclosures. In August 2014, the FASB issued ASU 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern . ASU 2014-15 requires management to evaluate relevant conditions, events and certain management plans that are known or reasonably knowable that when, considered in the aggregate, raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date that the financial statements are issued, for both annual and interim periods. ASU 2014-15 also requires certain disclosures around management’s plans and evaluation, as well as the plans, if any, that are intended to mitigate those conditions or events that will alleviate the substantial doubt. ASU 2014-15 is effective for fiscal years ending after December 15, 2016. The Company is currently evaluating the impact that the adoption of ASU 2014-15 will have on its financial statements and related disclosures. In April 2015, the FASB issued ASU 2015-03, “Interest – Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs ”. ASU 2015-03 requires debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying value of that debt liability, consistent with debt discounts. The recognition and measurement guidance for debt issuance costs are not affected by ASU 2015-03. ASU 2015-03 is effective for interim and annual periods beginning on January 1, 2016, and is required to be retrospectively adopted. The Company is currently evaluating the impact that the adoption of ASU 2015-03 will have on its financial statements and related disclosures .

Short-Term Investments and Fair

Short-Term Investments and Fair Value Measurements	9 Months Ended
	Sep. 30, 2015
Short-Term Investments and Fair Value Measurements
Short-Term Investments and Fair Value Measurements	2. Short-Term Investments and Fair Value Measurements At September 30, 2015, short-term investments consist of certificates of deposit. The Company classifies all investments as available-for-sale, as the sale of such investments may be required prior to maturity to implement management strategies. These investments are carried at fair value, with the unrealized gains and losses reported as a component of other comprehensive income in equity until realized. A decline in the market value of any short-term investment below cost that is determined to be other-than-temporary will result in a revaluation of its carrying amount to fair value. The impairment is charged to earnings and a new cost basis for the security is established. No such impairment charges were recorded for any period presented. Realized gains and losses from the sale of short-term investments, if any, are determined on a specific identification basis. Realized gains and losses and declines in value judged to be other-than-temporary, if any, on available-for-sale securities are included in other income or expense on the consolidated statements of operations. Realized and unrealized gains and losses during the periods presented were immaterial. Premiums and discounts are amortized or accreted over the life of the related security as an adjustment to yield using the straight-line method and are included in interest income on the consolidated statements of operations. Interest and dividends on securities classified as available-for-sale are included in interest income on the consolidated statements of operations. At September 30, 2015, the remaining contractual maturities of all available-for-sale investments were less than one year. The accounting guidance defines fair value, establishes a consistent framework for measuring fair value and expands disclosure for each major asset and liability category measured at fair value on either a recurring or nonrecurring basis. Fair value is defined as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, the accounting guidance establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows: Level 1: Observable inputs such as quoted prices in active markets. Level 2: Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly. Level 3: Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions. Assets and liabilities are classified based on the lowest level of input that is significant to the fair value measurements. No transfers between levels have occurred during the periods presented. The fair values of the Company’s assets and liabilities, which are measured at fair value on a recurring basis, were determined using the following inputs ( in thousands ): Fair Value Measurements at Reporting Date Using Quoted Prices in Significant Active Markets Other Significant for Identical Observable Unobservable Assets Inputs Inputs Total (Level 1) (Level 2) (Level 3) Assets: At September 30, 2015 Certificates of deposit, included in Cash equivalents and Short-term investments $ $ — $ $ — Liabilities: At December 31, 2014 Preferred stock warrant liabilities $ $ — $ — $ All preferred stock warrants were recorded at fair value utilizing the Black-Scholes option pricing model using significant unobservable inputs consistent with the inputs used for the Company’s stock-based compensation expense adjusted for the preferred stock warrants’ expected life. The following table provides a reconciliation of all liabilities measured at fair value using Level 3 significant unobservable inputs (in thousands): Preferred Stock Warrant Liabilities Balance at December 31, 2013 $ Issuance of preferred stock warrants Change in fair value Balance at December 31, 2014 Change in fair value Reclassification of warrants Balance at September 30, 2015 $ — The carrying amounts of cash, cash equivalents and short-term investments, prepaid and other assets, accounts payable and accrued liabilities are considered to be representative of their respective fair values because of the short-term nature of those instruments. Based on the borrowing rates currently available to the Company for loans with similar terms, which is considered a Level 2 input, the Company believes that the fair value of long-term debt approximates its carrying value. Preferred stock warrant liabilities are recorded at fair value.

Property and Equipment

Property and Equipment	9 Months Ended
	Sep. 30, 2015
Property and Equipment
Property and Equipment	3. Property and Equipment Property and equipment consist of the following (in thousands): September 30, December 31, 2015 2014 Computer and office equipment $ $ Furniture and fixtures Leasehold improvements Less accumulated depreciation and amortization $ $ Depreciation expense related to property and equipment totaled approximately $15,000 and $3,000 for the three months ended September 30, 2015 and 2014, respectively. Depreciation expense related to property and equipment totaled approximately $33,000 and $8,000 for the nine months ended September 30, 2015 and 2014, respectively.

Long-Term Debt

Long-Term Debt	9 Months Ended
	Sep. 30, 2015
Long-Term Debt
Long-Term Debt	4. Long-Term Debt Long-term debt and unamortized debt discount balances are as follows (in thousands): September 30, December 31, 2015 2014 Long-term debt $ $ Less debt discount, net of current portion Long-term debt, net of debt discount Less current portion of long-term debt Long-term debt, net of current portion $ $ Current portion of long-term debt $ $ Current portion of debt discount Current portion of long-term debt, net $ $ In May 2015, the Company entered into an Amended and Restated Loan and Security Agreement with Silicon Valley Bank (the 2015 Amended SVB Loan) under which the Company may borrow up to $10.0 million. Borrowings of approximately $8.0 million under the 2015 Amended SVB Loan were used to refinance amounts outstanding under the prior loan and security agreements, which was first entered into in November 2013 (SVB Loan Agreement) and amended and restated in June 2014 (Amended SVB Loan Agreement). The $2 million remaining under the agreement is available for borrowing through December 31, 2015. In connection with the 2015 Amended SVB Loan, the Company issued a warrant to purchase up to 14,732 shares of common stock at an exercise price of $10.86 . The warrant is fully exercisable and expires on May 13, 2022. If the Company borrows additional amounts available under the 2015 Amended SVB Loan, the number of shares subject to the warrant will be automatically increased by an amount equal to 2% of the additional borrowings divided by $10.86 . The transaction was accounted for as a debt modification. The 2015 Amended SVB Loan provides for interest to be paid at a rate of 6.5% per annum. Interest-only payments are due monthly through June 2016, which will be extended through September 2016, in the event certain conditions are met. Thereafter, in addition to interest accrued during such period, the monthly payments will include an amount equal to the outstanding principal at July 1, 2016 (or October 1, 2016) divided by 30 months. At maturity (or earlier prepayment), the Company is also required to make a final payment equal to 8.5% of the original principal amount of the amounts borrowed. The 2015 Amended SVB Loan provides for prepayment fees of 3% of the outstanding balance of the loan if the loan is repaid prior to May 13, 2016, 2.0% of the amount prepaid if the prepayment occurs after May 13, 2016 but prior to May 13, 2017 and 1.0% of the amount prepaid if the prepayment occurs thereafter. The fair value of the warrants and the final payment related to the 2015 Amended SVB Loan were recorded as debt discounts and are being amortized to interest expense using the effective interest method over the term of the debt, in addition to the remaining unamortized discounts related to the SVB Loan and the Amended SVB Loan Agreements. Consistent with the terms of the SVB Loan and the Amended SVB Loan Agreements, the 2015 Amended SVB Loan is collateralized by substantially all of the Company’s assets, other than the Company’s intellectual property, and contains customary conditions of borrowing, events of default and covenants, including covenants that restrict the Company’s ability to dispose of assets, merge with or acquire other entities, incur indebtedness and make distributions to holders of the Company’s capital stock. Should an event of default occur, including the occurrence of a material adverse change, the Company could be liable for immediate repayment of all obligations under the 2015 Amended SVB Loan. In November 2013, the Company borrowed $2.5 million under a loan and security agreement with Silicon Valley Bank (the SVB Loan). The Company was obligated to make interest-only payments through May 2014 and, beginning in June 2014, equal payments of principal and interest through the maturity date of August 1, 2016. The interest rate was a per annum fixed rate of 5.0% . The final payment due included an additional fee of 7.0% of the loan amount, or $0.2 million, which was being accreted over the term of the debt using the effective interest method and is included in interest expense. In June 2014, the Company entered into an amended loan and security agreement with SVB (the Amended SVB Loan). The amendment did not modify the repayment terms of the $2.5 million previously borrowed under the SVB Loan. The Amended SVB Loan provided the Company with a new $7.5 million growth capital loan facility, available to the Company in two advances at a per annum fixed interest rate of 4.5% . The first advance of $5.0 million was drawn in conjunction with securing the Amended SVB Loan in June 2014. The second advance of $2.5 million was drawn in September 2014. The Company was obligated to make interest-only payments on all outstanding advances under the Amended SVB Loan through November 30, 2014, and was subsequently obligated to make monthly principal and interest payments to fully amortize the outstanding balance through the November 1, 2016 maturity date. The final payment due included an additional fee of 9.0% of all growth capital advances, or $0.7 million, which was being accreted over the term of the debt using the effective interest method and is included in interest expense. In connection with the SVB Loan and the Amended SVB Loan, the Company issued a warrant to purchase 37,500 and 112,500 shares of Series A redeemable convertible preferred stock, respectively, at an exercise price of $2.00 per share. The warrants are fully exercisable and expire on November 14, 2023 and June 4, 2024, respectively. The initial fair value of the warrants as of the November 2013 and June 2014 issuance dates was estimated to be $0.1 million and $0.2 million, respectively, based on the application of the Black-Scholes option pricing model, and these discounts are being amortized to interest expense using the effective interest method over the term of the debt. Upon completion of the Company’s initial public offering in February 2015, the warrants became exercisable for an aggregate of 38,758 shares of common stock at an exercise price of $7.74 per share. Future minimum principal and interest payments under the 2015 Amended SVB Loan, including the final payment, as of September 30, 2015 are as follows (in thousands): 2015 $ 2016 2017 2018 Less interest and final payment Long-term debt $

Commitments and Contingencies

Commitments and Contingencies	9 Months Ended
	Sep. 30, 2015
Commitments and Contingencies
Commitments and Contingencies	5. Commitments and Contingencies License Agreements The Company has entered into various license agreements pursuant to which the Company acquired licenses to certain intellectual property. The agreements generally required an upfront license fee and, in some cases, reimbursement of patent costs. Additionally, under each agreement, the Company may be required to pay annual maintenance fees, royalties, milestone payments and sublicensing fees. Each of the license agreements is generally cancelable by the Company, given appropriate prior written notice. Potential future milestone payments under these agreements total an aggregate of approximately $22.1 million.

Redeemable Convertible Preferre

Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit)	9 Months Ended
	Sep. 30, 2015
Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit)
Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit)	6. Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit) Initial Public Offering and Related Transactions In February 2015, the Company completed its initial public offering in which it sold 3,600,000 shares of common stock at an initial public offering price of $10.00 per share. In addition, a concurrent private placement to an existing stockholder was completed in which the Company sold 500,000 shares of common stock, also at $10.00 per share. Proceeds from the initial public offering and concurrent private placement, net of underwriting discounts, commissions and offering costs paid by us of approximately $6.1 million, were approximately $34.9 million. In addition, in connection with the completion of the Company’s initial public offering on February 4, 2015, all of the outstanding shares of redeemable convertible preferred stock were converted into 6,369,567 shares of the Company’s common stock; outstanding warrants to purchase 150,000 shares of Series A redeemable convertible preferred stock were converted into warrants to purchase 38,758 shares of the Company’s common stock, and the Company’s certificate of incorporation was amended and restated to authorize 200,000,000 shares of common stock and 10,000,000 shares of undesignated preferred stock. Redeemable Convertible Preferred Stock Prior to its automatic conversion in the initial public offering, the Company classified its redeemable convertible preferred stock outside of permanent equity since such stock was contractually redeemable outside of the Company’s control. As a result, the carrying value was increased to its redemption value by periodic accretion charges over the estimated redemption period. In the absence of retained earnings, these accretion charges were recorded against additional paid-in capital. Stock Option Plans On August 10, 2011, the Company adopted the TRACON Pharmaceuticals, Inc. 2011 Equity Incentive Plan (the 2011 Plan), and, as amended, reserved 1,070,976 shares of common stock for issuance pursuant to the 2011 Plan. In January 2015, the Company adopted the 2015 Equity Incentive Plan (the 2015 Plan), under which 801,033 shares of common stock were reserved for issuance. The 2015 Plan provides for the grant of incentive stock options, non-statutory stock options, stock appreciation rights (SARs), restricted stock grants and restricted stock units to eligible recipients. Recipients of incentive stock options are eligible to purchase shares of the Company’s common stock at an exercise price equal to no less than the estimated fair market value of such stock on the date of grant. The maximum term of options granted under the 2015 Plan is no more than ten years. Grants generally vest at 25% one year from the vesting commencement date and ratably each month thereafter for a period of 36 months . The Company received $49,000 and $52,000 in proceeds from the exercise of stock options during the nine months ended September 30, 2015 and 2014, respectively. During October 2014, the Board of Directors granted stock options to purchase an aggregate 119,642 shares of common stock, with an aggregate grant date fair value of $0.6 million, to employees and a non-employee director for which the vesting was contingent upon the completion of an initial public offering prior to March 31, 2015. The achievement of this condition was not determined to be probable as of December 31, 2014, however, upon the completion of the initial public offering in February 2015, expense recognition commenced and $36,000 and $142,000 of stock based compensation related to these options was recorded in the three and nine months ended September 30, 2015, respectively. Employee Stock Purchase Pla n On January 1, 2015, the Company’s board of directors adopted the Employee Stock Purchase Plan (the ESPP), which became effective upon the pricing of the Company’s initial public offering on January 29, 2015. The ESPP permits participants to purchase common stock through payroll deductions of up to 15% of their eligible compensation. Initially, a total of 183,462 shares of common stock was reserved for issuance under the ESPP. Stock compensation expense for the three and nine month period ended September 30, 2015 was immaterial. Stock-Based Compensation Expense The weighted-average assumptions used in the Black-Scholes option pricing model to determine the fair value of the employee stock option grants were as follows: Three Months Ended Nine Months Ended September 30, September 30, 2015 2014 2015 2014 Risk-free interest rate % % % % Expected volatility % % % % Expected term (in years) Expected dividend yield — % — % — % — % The allocation of stock-based compensation is as follows (in thousands): Three Months Ended Nine Months Ended September 30, September 30, 2015 2014 2015 2014 Research and development $ $ $ $ General and administrative $ $ $ $

Disclosure - Collaboration

Disclosure - Collaboration	9 Months Ended
	Sep. 30, 2015
Collaboration
Collaboration	7. Collaboration In March 2014, the Company entered into a license agreement with Santen, under which the Company granted Santen an exclusive, worldwide license to certain patents, information and know-how related to TRC105. Under the agreement, Santen is permitted to use, develop, manufacture and commercialize TRC105 products for ophthalmology indications, excluding systemic treatment of ocular tumors. Santen also has the right to grant sublicenses to affiliates and third party collaborators. In the event Santen sublicenses any of its rights under the agreement, Santen will be obligated to pay the Company a portion of any upfront and certain milestone payments received under such sublicense. Santen has sole responsibility for funding, developing, seeking regulatory approval for and commercializing TRC105 products in the field of ophthalmology. In the event that Santen fails to meet certain commercial diligence obligations, the Company will have the option to co-promote TRC105 products in the field of ophthalmology in the United States with Santen. If the Company exercises this option, the Company will pay Santen a percentage of certain development expenses, and the Company will receive a percentage of profits from sales of the licensed products in the ophthalmology field in the United States, but will not receive royalties on such sales. In consideration of the rights granted to Santen under the agreement, the Company received a one-time upfront fee of $10.0 million. The license agreement provides for various types of payments, including the upfront payment, payment for various technical and regulatory support, payments for delivery of drug substance, reimbursement of certain development costs, milestone payments, and royalties on net product sales. The Company has identified multiple deliverables, which include at inception: (1) a license to patents, information and know-how related to TRC105, (2) technology transfer, (3) collaboration, including technical and regulatory support provided by the Company, (4) manufacturing and supply obligations, and (5) shared chemistry, manufacturing and controls (CMC) development activities. Deliverables 1 and 2 above were substantially delivered at the inception of the agreement, and deliverables 3 through 5 are expected to be delivered during the estimated 31 -month period over which the Company will provide technical and regulatory support to Santen. At inception and through September 30, 2015, the Company has identified one single unit of accounting for all the deliverables under the agreement since the delivered elements do not have standalone value. The Company’s technical and regulatory expertise, including manufacturing and CMC activities, in the development of biologic therapeutics, specifically TRC105, is a significant component of Santen’s ability to utilize the license and know-how related to TRC105. Given the early stage of development of TRC105 for ophthalmology, the Company is the only party capable of performing the level and type of technical and regulatory collaboration services required by Santen under the agreement. As a result, the Company has determined that the license, including the ability to sublicense, and know-how related to TRC105 do not have standalone value to a licensee. As such, the Company is recognizing revenue for the fixed or determinable collaboration consideration on a straight-line basis over the estimated 31 -month period over which it will deliver its technical and regulatory support. In addition, the Company is eligible to receive up to a total of $155.0 million in milestone payments upon the achievement of certain milestones, of which $20.0 million relates to the initiation of certain development activities, $52.5 million relates to the submission of certain regulatory filings and receipt of certain regulatory approvals and $82.5 million relates to commercialization activities and the achievement of specified levels of product sales. The Company has determined that $10.0 million related to the initiation of certain clinical development activities will be based upon its efforts and meet the criteria of substantive milestones and therefore will be recognized as revenue upon achievement of the milestone in accordance with the milestone method of accounting. The remaining $145.0 million of potential milestone payments are not substantive milestones as they do not require the efforts of the Company. During the three months ended June 30, 2015, a development milestone that was deemed a substantive milestone at the inception of the arrangement, was achieved and accordingly, the milestone payment of $3.0 million was recognized as revenue. If TRC105 products are successfully commercialized in the field of ophthalmology, Santen will be required to pay the Company tiered royalties on net sales ranging from high single digits to low teens, depending on the volume of sales, subject to adjustments in certain circumstances. In addition, Santen will reimburse the Company for all royalties due by the Company under certain third party agreements with respect to the use, manufacture or commercialization of TRC105 products in the field of ophthalmology by Santen and its affiliates and sublicensees. Royalties will continue on a country-by-country basis through the later of the expiration of the Company’s patent rights applicable to the TRC105 products in a given country or 12 years after the first commercial sale of the first TRC105 product commercially launched in such country. Santen may unilaterally terminate this agreement in its entirety, or on a country-by-country basis, upon written notice to the Company. Either party may terminate the agreement in the event of the other party’s bankruptcy or dissolution or for the other party’s material breach of the agreement that remains uncured 90 days (or 30 days with respect to a payment breach) after receiving notice from the non-breaching party. Unless earlier terminated, the agreement continues in effect until the termination of Santen’s payment obligations. In connection with the collaboration with Santen, the Company recognized revenue of $1.2 million and $1.1 million for the three months ended September 30, 2015 and 2014, respectively, and $6.5 million and $2.6 million for the nine months ended September 30, 2015 and 2014, respectively. At September 30, 2015, deferred revenue totaled $4.3 million.

Organization and Summary of S13

Organization and Summary of Significant Accounting Policies (Policies)	9 Months Ended
	Sep. 30, 2015
Organization and Summary of Significant Accounting Policies
Organization and Business	Organization and Business TRACON Pharmaceuticals, Inc. (formerly Lexington Pharmaceuticals, Inc.) (TRACON or the Company) was incorporated in the state of Delaware on October 28, 2004. TRACON is a clinical stage biopharmaceutical company focused on the development and commercialization of novel targeted therapeutics for cancer, wet age-related macular degeneration and fibrotic diseases. The Company’s research focuses on antibodies that bind to the endoglin receptor, which is essential to angiogenesis (the process of new blood vessel formation) and a key contributor to fibrosis (tissue scarring). In February 2015, the Company completed its initial public offering in which it sold 3,600,000 shares of common stock at an initial public offering price of $10.00 per share. In addition, a concurrent private placement to an existing stockholder was completed in which the Company sold 500,000 shares of common stock, also at $10.00 per share. Proceeds from the initial public offering and concurrent private placement, net of underwriting discounts, commissions and offering costs paid by the Company of approximately $6.1 million, were approximately $34.9 million. In addition, in connection with the completion of the Company’s initial public offering on February 4, 2015, all outstanding shares of redeemable convertible preferred stock were converted into 6,369,567 shares of the Company’s common stock; outstanding warrants to purchase 150,000 shares of Series A redeemable convertible preferred stock were converted into warrants to purchase 38,758 shares of the Company’s common stock; and the Company’s certificate of incorporation was amended and restated to authorize 200,000,000 shares of common stock and 10,000,000 shares of undesignated preferred stock. The unaudited consolidated financial stateme nts include the accounts of the Company and its wholly-owned subsidiary, TRACON Pharma Limited, which was formed in September 2015 and is currently inactive. All significant intercompany accounts and transactions have been eliminated.
Unaudited Interim Financial Information	Unaudited Interim Financial Information The unaudited consolidated financial statements at September 30, 2015, and for the three and nine months ended September 30, 2015 and 2014, have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission, (SEC), and with accounting principles generally accepted in the United States applicable to interim financial statements. These unaudited consolidated financial statements have been prepared on the same basis as the audited financial statements and include all adjustments, consisting of only normal recurring accruals, which in the opinion of management are necessary to present fairly the Company’s financial position as of the interim date and results of operations for the interim periods presented. Interim results are not necessarily indicative of results for a full year or future periods. The preparation of financial statements 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 expenses during the reporting period. Actual results could differ materially from those estimates. These unaudited consolidated financial statements should be read in conjunction with the Company’s audited financial statements for the year ended December 31, 2014, included in its Annual Report on Form 10-K filed with the SEC on March 10, 2015.
Use of Estimates	Use of Estimates The Company’s financial statements are prepared in accordance with accounting principles generally accepted in the United States (GAAP). The preparation of the Company’s financial statements requires management to make estimates and assumptions that impact the reported amounts of assets, liabilities, revenue and expenses and the disclosure of contingent assets and liabilities in the Company’s financial statements and accompanying notes. The most significant estimates in the Company’s financial statements relate to revenue recognition and the valuation of equity awards. Although these estimates are based on the Company’s knowledge of current events and actions it may undertake in the future, actual results may ultimately materially differ from these estimates and assumptions.
Reverse Stock Split	Reverse Stock Split On January 16, 2015, the Company effected a one-for- 3.87 reverse stock split of its common stock (the Reverse Stock Split). The par value and the authorized shares of the common stock were not adjusted as a result of the Reverse Stock Split. All issued and outstanding common stock and the conversion ratio of the redeemable convertible preferred stock have been retroactively adjusted to reflect this Reverse Stock Split for all periods presented.
Cash and Cash Equivalents	Cash and Cash Equivalents The Company considers all highly liquid investments that have maturities of three months or less when purchased to be cash equivalents.
Concentration of Credit Risk	Concentration of Credit Risk Financial instruments that potentially subject the Company to significant concentration of credit risk consist primarily of cash and cash equivalents. The Company maintains deposits in federally insured financial institutions in excess of federally insured limits. The Company has not experienced any losses in such accounts and 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.
Preferred Stock Warrant Liabilities	Preferred Stock Warrant Liabilities Prior to the completion of the Company’s initial public offering in February 2015, the Company had outstanding freestanding warrants to purchase shares of its Series A redeemable convertible preferred stock. Since the underlying Series A redeemable convertible preferred stock was classified outside of permanent equity, these preferred stock warrants were classified as liabilities in the December 31, 2014 balance sheet. The Company adjusted the carrying value of such preferred stock warrants to their estimated fair value at each reporting date, with any related increases or decreases in the fair value recorded as an increase or decrease to other income (expense) in the statements of operations. Upon the completion of the Company’s initial public offering, the warrants no longer require liability accounting and the then fair value of the warrant liability was reclassified into stockholders’ equity. The Company performed the final remeasurement of the warrant liability as of the initial public offering date and recorded the $65,000 change in fair value into other income (expense) for the nine months ended September 30, 2015.
Revenue Recognition	Revenue Recognition The Company’s revenue is derived from its license agreement with Santen Pharmaceutical Co., Ltd. (Santen) as described in Note 7. The Company recognizes revenue when all four of the following criteria are met: (1) there is persuasive evidence that an arrangement exists; (2) delivery of the products and/or services has occurred; (3) the selling price is fixed or determinable; and (4) collectability is reasonably assured. Amounts received prior to satisfying the revenue recognition criteria are recorded as deferred revenue. Amounts not expected to be recognized as revenue within the 12 months following the balance sheet date are classified as long-term deferred revenue. The Company evaluates multiple-element arrangements to determine: (1) the deliverables included in the arrangement and (2) whether the individual deliverables represent separate units of accounting or whether they must be accounted for as a combined unit of accounting. Deliverables are considered separate units of accounting provided that: (a) the delivered items have value to the customer on a standalone basis and (b) if the arrangement includes a general right of return relative to the delivered items, delivery or performance of the undelivered items is considered probable and substantially in the Company’s control. In assessing whether an item has standalone value, the Company considers factors such as the research, manufacturing and commercialization capabilities of the partner and the availability of the associated expertise in the general marketplace. In addition, the Company considers whether the partner can use the other deliverables for their intended purpose without the receipt of the remaining elements, whether the value of the deliverable is dependent on the undelivered items and whether there are other vendors that can provide the undelivered elements. Arrangement consideration that is fixed or determinable is allocated among the separate units of accounting using the relative selling price method. The Company uses the following hierarchy of values to estimate the selling price of each deliverable: (1) vendor-specific objective evidence of fair value; (2) third party evidence of selling price; and (3) best estimate of selling price (BESP). The BESP reflects the Company’s best estimate of what the selling price would be if the Company regularly sold the deliverable on a standalone basis. In developing the BESP for a unit of accounting, the Company considers applicable market conditions and relevant entity-specific factors, including factors that are contemplated in negotiating an arrangement and estimated costs. The Company validates the BESP for units of accounting by evaluating whether changes in the key assumptions used to determine the BESP will have a significant effect on the allocation of arrangement consideration between multiple units of accounting. The Company then applies the applicable revenue recognition criteria to each of the separate units of accounting in determining the appropriate period and pattern of recognition. If there is no discernible pattern of performance and/or objectively measurable performance measures do not exist, then the Company recognizes revenue under the arrangement on a straight-line basis over the period the Company expects to complete its performance obligations. With respect to revenue derived from reimbursement of direct, out-of-pocket expenses for research and development costs associated with collaborations, where the Company acts as a principal with discretion to choose suppliers, bear credit risk, and perform part of the services required in the transaction, the Company records revenue for the gross amount of the reimbursement. The costs associated with these reimbursements are reflected as a component of research and development expense in the statements of operations. Milestones The Company uses the milestone method of accounting and revenue is recognized when earned, as evidenced by written acknowledgement from the collaborator or other persuasive evidence that the milestone has been achieved and the payment is non-refundable, provided that the milestone event is substantive. A milestone event is defined as an event: (1) that can only be achieved based in whole or in part on either the Company’s performance or on the occurrence of a specific outcome resulting from the Company’s performance; (2) for which there is substantive uncertainty at the inception of the arrangement that the event will be achieved; and (3) that would result in additional payments being due to the Company. Events for which the occurrence is either contingent solely upon the passage of time or the result of a counterparty’s performance are not considered to be milestone events. A milestone event is substantive if all of the following conditions are met: (a) the consideration is commensurate with either the Company’s performance to achieve the milestone, or the enhancement of the value to the delivered item(s) as a result of a specific outcome resulting from the Company’s performance to achieve the milestone; (b) the consideration relates solely to past performance; and (c) the consideration is reasonable relative to all the deliverables and payment terms (including other potential milestone consideration) within the arrangement. The Company assesses whether a milestone is substantive at the inception of each arrangement. If a milestone is deemed non-substantive, the Company will account for that milestone payment in accordance with the multiple element arrangements guidance and recognize it consistent with the related units of accounting for the arrangement over the related performance period.
Stock-Based Compensation	Stock-Based Compensation Stock-based compensation expense represents the grant date fair value of employee stock option grants recognized as expense over the requisite service period of the awards (usually the vesting period) on a straight-line basis, net of estimated forfeitures. The Company estimates the fair value of stock option grants using the Black-Scholes option pricing model. The Company accounts for stock options granted to non-employees using the fair value approach. These option grants are subject to periodic revaluation over their vesting terms.
Comprehensive Loss	Comprehensive Loss Comprehensive loss is defined as a change in equity during a period from transactions and other events and circumstances from non-owner sources. Net loss and comprehensive loss were the same for all periods presented.
Net Loss Per Share	Net Loss Per Share Basic net loss per share is calculated by dividing the net loss by the weighted-average shares of common stock outstanding for the period, without consideration for common stock equivalents and adjusted for the weighted-average number of common shares outstanding that are subject to repurchase. The Company has excluded 6,301 and 6,818 weighted-average shares subject to repurchase from the weighted-average number of common shares outstanding for the three and nine months ended September 30, 2015, respectively, and 3,583 and 1,207 common shares subject to repurchase for the three and nine months ended September 30, 2014, respectively. Diluted net loss per share is calculated by dividing the net loss by the weighted-average number of common stock equivalents outstanding for the period determined using the treasury-stock method. Dilutive common stock equivalents are comprised of redeemable convertible preferred stock, warrants for the purchase of common stock and redeemable convertible preferred stock, options outstanding under the Company’s stock option plan s , and shares issuable under the Company’s Employee Stock Purchase Plan (ESPP). For all periods presented, there is no difference in the number of shares used to calculate basic and diluted shares outstanding due to the Company’s net loss position. Outstanding potentially dilutive securities not included in the calculation of diluted net loss per share because to do so would be anti-dilutive were as follows (in common stock equivalent shares): September 30, 2015 2014 Redeemable convertible preferred stock outstanding — Warrants to purchase redeemable convertible preferred stock — Warrants to purchase common stock — Common stock options ESPP shares —
Recent Accounting Pronouncements	Recent Accounting Pronouncements In May 2014, the FASB issued Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers , which converges the FASB and the International Accounting Standards Board standard on revenue recognition. Areas of revenue recognition that will be affected include, but are not limited to, transfer of control, variable consideration, allocation of transfer pricing, licenses, time value of money, contract costs and disclosures. This guidance is effective for the fiscal years and interim reporting periods beginning after December 15, 2017. The Company has not yet selected a transition method and is currently evaluating the impact that the adoption of ASU 2014-09 will have on its financial statements and related disclosures. In August 2014, the FASB issued ASU 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern . ASU 2014-15 requires management to evaluate relevant conditions, events and certain management plans that are known or reasonably knowable that when, considered in the aggregate, raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date that the financial statements are issued, for both annual and interim periods. ASU 2014-15 also requires certain disclosures around management’s plans and evaluation, as well as the plans, if any, that are intended to mitigate those conditions or events that will alleviate the substantial doubt. ASU 2014-15 is effective for fiscal years ending after December 15, 2016. The Company is currently evaluating the impact that the adoption of ASU 2014-15 will have on its financial statements and related disclosures. In April 2015, the FASB issued ASU 2015-03, “Interest – Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs ”. ASU 2015-03 requires debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying value of that debt liability, consistent with debt discounts. The recognition and measurement guidance for debt issuance costs are not affected by ASU 2015-03. ASU 2015-03 is effective for interim and annual periods beginning on January 1, 2016, and is required to be retrospectively adopted. The Company is currently evaluating the impact that the adoption of ASU 2015-03 will have on its financial statements and related disclosures .

Organization and Summary of S14

Organization and Summary of Significant Accounting Policies (Tables)	9 Months Ended
	Sep. 30, 2015
Organization and Summary of Significant Accounting Policies
Schedule of potentially dilutive securities not included in the calculation of diluted net loss per share	September 30, 2015 2014 Redeemable convertible preferred stock outstanding — Warrants to purchase redeemable convertible preferred stock — Warrants to purchase common stock — Common stock options ESPP shares —

Short-Term Investments and Fa15

Short-Term Investments and Fair Value Measurements (Tables)	9 Months Ended
	Sep. 30, 2015
Short-Term Investments and Fair Value Measurements
Schedule of liabilities measured at fair value on a recurring basis	The fair values of the Company’s assets and liabilities, which are measured at fair value on a recurring basis, were determined using the following inputs ( in thousands ): Fair Value Measurements at Reporting Date Using Quoted Prices in Significant Active Markets Other Significant for Identical Observable Unobservable Assets Inputs Inputs Total (Level 1) (Level 2) (Level 3) Assets: At September 30, 2015 Certificates of deposit, included in Cash equivalents and Short-term investments $ $ — $ $ — Liabilities: At December 31, 2014 Preferred stock warrant liabilities $ $ — $ — $
Schedule of reconciliation of all liabilities measured at fair value using Level 3 significant unobservable inputs	The following table provides a reconciliation of all liabilities measured at fair value using Level 3 significant unobservable inputs (in thousands): Preferred Stock Warrant Liabilities Balance at December 31, 2013 $ Issuance of preferred stock warrants Change in fair value Balance at December 31, 2014 Change in fair value Reclassification of warrants Balance at September 30, 2015 $ —

Property and Equipment (Tables)

Property and Equipment (Tables)	9 Months Ended
	Sep. 30, 2015
Property and Equipment
Schedule of property and equipment	Property and equipment consist of the following (in thousands): September 30, December 31, 2015 2014 Computer and office equipment $ $ Furniture and fixtures Leasehold improvements Less accumulated depreciation and amortization $ $

Long-Term Debt (Tables)

Long-Term Debt (Tables)	9 Months Ended
	Sep. 30, 2015
Long-Term Debt
Schedule of Long-term debt and unamortized debt discount balances	Long-term debt and unamortized debt discount balances are as follows (in thousands): September 30, December 31, 2015 2014 Long-term debt $ $ Less debt discount, net of current portion Long-term debt, net of debt discount Less current portion of long-term debt Long-term debt, net of current portion $ $ Current portion of long-term debt $ $ Current portion of debt discount Current portion of long-term debt, net $ $
Schedule of future minimum principal and interest payments	Future minimum principal and interest payments under the 2015 Amended SVB Loan, including the final payment, as of September 30, 2015 are as follows (in thousands): 2015 $ 2016 2017 2018 Less interest and final payment Long-term debt $

Redeemable Convertible Prefer18

Redeemable Convertible Preferred Stock and Stockholders’ Deficit (Tables)	9 Months Ended
	Sep. 30, 2015
Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit)
Summary of weighted-average assumptions used Black-Scholes option pricing model to determine the fair value	Three Months Ended Nine Months Ended September 30, September 30, 2015 2014 2015 2014 Risk-free interest rate % % % % Expected volatility % % % % Expected term (in years) Expected dividend yield — % — % — % — %
Summary of allocation of stock-based compensation	Three Months Ended Nine Months Ended September 30, September 30, 2015 2014 2015 2014 Risk-free interest rate % % % % Expected volatility % % % % Expected term (in years) Expected dividend yield — % — % — % — % The allocation of stock-based compensation is as follows (in thousands): Three Months Ended Nine Months Ended September 30, September 30, 2015 2014 2015 2014 Research and development $ $ $ $ General and administrative $ $ $ $

Organization and Summary of S19

Organization and Summary of Significant Accounting Policies (Details)	Feb. 04, 2015USD ($)$ / sharesshares	Jan. 16, 2015	Sep. 30, 2015USD ($)shares	Sep. 30, 2014USD ($)	Dec. 31, 2014shares
Stockholders' equity
Common stock authorized	200,000,000		200,000,000		40,000,000
Undesignated preferred stock authorized	10,000,000		10,000,000		0
Reverse stock split of common stock		0.2584
Change in fair value recorded into other income (expense) | $			$ 65,000	$ (48,000)
Common Stock
Stockholders' equity
Underwriting discounts, commissions and offering cost | $	$ 6,100,000
Proceeds from initial public offering | $	$ 34,900,000
Total number of shares issued for converted preferred stock	6,369,567
Conversion of warrants to purchase shares	38,758
Redeemable convertible preferred stock
Stockholders' equity
Conversion of warrants to purchase shares	150,000
IPO | Common Stock
Stockholders' equity
Issuance of common stock in for cash (in shares)	3,600,000
Share price (in dollar per share) | $ / shares	$ 10
Private Placement | Common Stock
Stockholders' equity
Issuance of common stock in for cash (in shares)	500,000
Share price (in dollar per share) | $ / shares	$ 10
Stock Warrants | Other income (expense)
Stockholders' equity
Change in fair value recorded into other income (expense) | $			$ 65,000

Organization and Summary of S20

Organization and Summary of Significant Accounting Policies (EPS) (Details) - shares	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014
Antidilutive securities
Weighted-average shares subject to repurchase (in shares)	6,301	3,583	6,818	1,207
Antidilutive securities			1,644,098	7,117,353
Redeemable convertible preferred stock
Antidilutive securities
Antidilutive securities				6,369,567
Redeemable convertible preferred stock | Stock Warrants
Antidilutive securities
Antidilutive securities				38,758
Common Stock | Stock Warrants
Antidilutive securities
Antidilutive securities			53,490
Stock Options
Antidilutive securities
Antidilutive securities			1,586,677	709,028
ESPP
Antidilutive securities
Antidilutive securities			3,931

Short-Term Investments and Fa21

Short-Term Investments and Fair Value Measurements (Details) - USD ($) $ in Thousands	Sep. 30, 2015	Dec. 31, 2014
Short-Term Investments and Fair Value Measurements
Maximum period for remaining contractual maturities of available-for-sale investments	1 year
Amount of transfers between levels	$ 0	$ 0
Recurring | Preferred Stock Warrant Liabilities
Liabilities:
Fair value, liabilities		246
Recurring | Certificates of deposit, included in Cash equivalents and Short-term investments
Assets:
Fair value, assets	19,988
Recurring | Level 2 | Certificates of deposit, included in Cash equivalents and Short-term investments
Assets:
Fair value, assets	$ 19,988
Recurring | Level 3 | Preferred Stock Warrant Liabilities
Liabilities:
Fair value, liabilities		$ 246

Short-Term Investments and Fa22

Short-Term Investments and Fair Value Measurements (Level 3) (Details) - Level 3 - Preferred Stock Warrant Liabilities - USD ($) $ in Thousands	9 Months Ended	12 Months Ended
	Sep. 30, 2015	Dec. 31, 2014
Reconciliation of Level 3 liabilities
Balance at the beginning	$ 246	$ 97
Issuance of preferred stock warrants		186
Change in fair value	65	(37)
Reclassification of warrants	$ (311)
Balance at the end		$ 246

Property and Equipment (Details

Property and Equipment (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014	Dec. 31, 2014
Property and Equipment
Property and equipment, gross	$ 287,000		$ 287,000		$ 210,000
Less accumulated depreciation and amortization	(146,000)		(146,000)		(113,000)
Property and equipment, net	141,000		141,000		97,000
Depreciation and amortization	15,000	$ 3,000	33,000	$ 8,000
Computer and office equipment
Property and Equipment
Property and equipment, gross	179,000		179,000		154,000
Furniture and fixtures
Property and Equipment
Property and equipment, gross	32,000		32,000		25,000
Leasehold improvements
Property and Equipment
Property and equipment, gross	$ 76,000		$ 76,000		$ 31,000

Long-Term Debt (Details)

Long-Term Debt (Details) $ / shares in Units, $ in Thousands	1 Months Ended				9 Months Ended
	May. 31, 2015USD ($)$ / sharesshares	Sep. 30, 2014USD ($)	Jun. 30, 2014USD ($)item$ / sharesshares	Nov. 30, 2013USD ($)$ / sharesshares	Sep. 30, 2015USD ($)	Sep. 30, 2014USD ($)	Feb. 04, 2015$ / sharesshares	Dec. 31, 2014USD ($)
Long-term debt
Long-Term Debt					$ 8,000			$ 9,080
Less debt discount, net of current portion					(599)			(35)
Long-term debt, net of debt discount					7,401			9,045
Less current portion of long-term debt					(800)			(4,787)
Long-term debt, net of current portion					6,601			4,258
Current portion of long-term debt					800			4,787
Current portion of debt discount					(479)			(111)
Current portion of long-term debt, net					321			$ 4,676
Proceeds from long-term debt					8,000	$ 7,500
Silicon Valley Bank
Long-term debt
Long-Term Debt					$ 8,000
Redeemable convertible preferred stock
Long-term debt
Warrants issued | shares							150,000
Redeemable convertible preferred stock | Silicon Valley Bank
Long-term debt
Warrants issued | shares			112,500	37,500
Exercise price (per share) | $ / shares			$ 2	$ 2
Initial fair value of warrants			$ 200	$ 100
Common Stock
Long-term debt
Warrants issued | shares							38,758
Common Stock | Silicon Valley Bank
Long-term debt
Warrants issued | shares							38,758
Exercise price (per share) | $ / shares							$ 7.74
Loan and Security Agreement | Silicon Valley Bank
Long-term debt
Maximum borrowing capacity	$ 10,000		7,500
Proceeds from long-term debt	8,000	$ 2,500	$ 5,000
Remaining borrowing capacity	$ 2,000
Warrants issued | shares	14,732
Exercise price (per share) | $ / shares	$ 10.86
Increase in number of warrant at maximum borrowing	2.00%
Interest rate	6.50%		4.50%	5.00%
Repayment period	30 months
Additional fee on final payment due (as a percent)			9.00%	7.00%
Additional fee on final payment due			$ 700	$ 200
Borrowing under loan and security agreement				$ 2,500
Number of advances | item			2
Loan and Security Agreement | Prior to May 7, 2016 | Silicon Valley Bank
Long-term debt
Prepayment fee (as a percent)	3.00%
Loan and Security Agreement | After May 7, 2016-Prior to May 7, 2017 | Silicon Valley Bank
Long-term debt
Prepayment fee (as a percent)	2.00%
Loan and Security Agreement | After May 7, 2017 | Silicon Valley Bank
Long-term debt
Prepayment fee (as a percent)	1.00%

Long-Term Debt (Maturities) (De

Long-Term Debt (Maturities) (Details) - USD ($) $ in Thousands	Sep. 30, 2015	Dec. 31, 2014
Future minimum principal and interest payments
Long-term debt	$ 8,000	$ 9,080
Silicon Valley Bank
Future minimum principal and interest payments
2,015	131
2,016	2,107
2,017	3,525
2,018	3,994
Debt, including interest and final payment	9,757
Less interest and final payment	(1,757)
Long-term debt	$ 8,000

Commitments and Contingencies (

Commitments and Contingencies (Details) $ in Millions	Sep. 30, 2015USD ($)
Research and development arrangement
Commitments and Contingencies
Potential milestone payable	$ 22.1

Redeemable Convertible Prefer27

Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit) (Details) - USD ($) $ / shares in Units, $ in Millions	Feb. 04, 2015	Sep. 30, 2015	Dec. 31, 2014
Stockholders' equity
Common stock, shares authorized	200,000,000	200,000,000	40,000,000
Undesignated preferred stock authorized	10,000,000	10,000,000	0
Common Stock
Stockholders' equity
Underwriting discounts, commissions and offering cost	$ 6.1
Proceeds from initial public offering	$ 34.9
Total number of shares issued for converted preferred stock	6,369,567
Conversion of warrants to purchase shares	38,758
Redeemable convertible preferred stock
Stockholders' equity
Conversion of warrants to purchase shares	150,000
IPO | Common Stock
Stockholders' equity
Issuance of common stock in for cash (in shares)	3,600,000
Share price (in dollar per share)	$ 10
Private Placement | Common Stock
Stockholders' equity
Issuance of common stock in for cash (in shares)	500,000
Share price (in dollar per share)	$ 10

Redeemable Convertible Prefer28

Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit) (SBC) (Details) - USD ($)	Jan. 29, 2015	Oct. 31, 2014	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014	Jan. 31, 2015	Aug. 10, 2011
Stock Option Plans
Proceeds from exercise of common stock options					$ 49,000	$ 52,000
Share-based compensation
Stock based compensation expense			$ 672,000	$ 57,000	$ 1,346,000	$ 155,000
Weighted-average assumptions
Risk-free interest rate			1.80%	1.90%	1.70%	1.90%
Expected volatility			72.00%	77.00%	73.00%	79.00%
Expected term (in years)			6 years 2 months 12 days	6 years 3 months 18 days	6 years 2 months 12 days	6 years 3 months 18 days
Expected dividend yield			0.00%	0.00%	0.00%	0.00%
Research and development
Share-based compensation
Stock based compensation expense			$ 295,000	$ 43,000	$ 677,000	$ 112,000
General and administrative
Share-based compensation
Stock based compensation expense			377,000	$ 14,000	669,000	43,000
Stock Option
Stock Option Plans
Proceeds from exercise of common stock options					$ 49,000	$ 52,000
Stock Option | Year One
Stock Option Plans
Grants vesting (as a percent)					25.00%
Grants vesting period					1 year
Stock Option | Thereafter
Stock Option Plans
Grants vesting period					36 months
Stock Option | Contingent
Stock Option Plans
Stock option granted		119,642
Aggregate grant date fair value		$ 600,000
Share-based compensation
Stock based compensation expense			$ 36,000		$ 142,000
ESPP
Stock Option Plans
Shares of common stock reserved for future issuance	183,462
Employee Stock Purchase Plan
Purchase of common stock through payroll deductions (in percentage)	15.00%
2011 Equity Incentive Plan | Stock Option
Stock Option Plans
Shares of common stock reserved for future issuance								1,070,976
2015 Equity Incentive Plan | Stock Option
Stock Option Plans
Shares of common stock reserved for future issuance							801,033
Maximum term of options granted					10 years

Collaboration (Details)

Collaboration (Details) - USD ($) $ in Thousands	1 Months Ended	3 Months Ended			9 Months Ended
	Mar. 31, 2014	Sep. 30, 2015	Jun. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014
Contracts Revenue		$ 1,180		$ 1,133	$ 6,509	$ 2,558
Collaborative Arrangement | Santen
One-time upfront fee	$ 10,000
Period for recognition of revenue	31 months
Potential milestone that could be received	$ 155,000
Balance of potential milestone that could be received	145,000
Royalty continuation term					12 years
Cure period for bankruptcy or dissolution					90 days
Cure period for breach of payment					30 days
Contracts Revenue		1,200		$ 1,100	$ 6,500	$ 2,600
Deferred revenue		$ 4,300			$ 4,300
Development Milestones | Collaborative Arrangement | Santen
Potential milestone that could be received	20,000
Milestone revenue recognized			$ 3,000
Regulatory Milestones | Collaborative Arrangement | Santen
Potential milestone that could be received	52,500
Commercialization Milestones | Collaborative Arrangement | Santen
Potential milestone that could be received	$ 82,500