Document and Entity Information
Document and Entity Information - shares | 6 Months Ended | |
Jun. 30, 2018 | Aug. 08, 2018 | |
Document And Entity Information [Abstract] | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Jun. 30, 2018 | |
Document Fiscal Year Focus | 2,018 | |
Document Fiscal Period Focus | Q2 | |
Trading Symbol | AQXP | |
Entity Registrant Name | AQUINOX PHARMACEUTICALS, INC | |
Entity Central Index Key | 1,404,644 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Smaller Reporting Company | |
Entity Common Stock, Shares Outstanding | 23,537,368 |
Condensed consolidated balance
Condensed consolidated balance sheets - USD ($) $ in Thousands | Jun. 30, 2018 | Dec. 31, 2017 |
Current assets | ||
Cash and cash equivalents (Note 3) | $ 99,130 | $ 52,032 |
Short-term investments (Note 9) | 3,007 | 56,053 |
Receivables, prepayments and deposits | 1,104 | 740 |
Total current assets | 103,241 | 108,825 |
Property and equipment, net | 781 | 905 |
Long-term prepayments and deposits | 404 | 599 |
Total assets | 104,426 | 110,329 |
Current liabilities | ||
Accounts payable and other liabilities | 13,348 | 10,956 |
Total current liabilities | 13,348 | 10,956 |
Other liabilities (Note 5) | 401 | 486 |
Total liabilities | 13,749 | 11,442 |
Share capital: (Note 6) | ||
Common stock | 0 | 0 |
Additional paid-in capital | 300,886 | 297,459 |
Accumulated deficit | (210,207) | (198,502) |
Accumulated other comprehensive loss | (2) | (70) |
Total stockholders' equity | 90,677 | 98,887 |
Total liabilities and stockholders' equity | $ 104,426 | $ 110,329 |
Condensed consolidated balance3
Condensed consolidated balance sheets (Parenthetical) - $ / shares | Jun. 30, 2018 | Dec. 31, 2017 |
Statement of Financial Position [Abstract] | ||
Common stock, par value | $ 0.000001 | $ 0.000001 |
Common stock, shares authorized | 50,000,000 | 50,000,000 |
Common stock, shares issued | 23,537,368 | 23,472,430 |
Common stock, shares outstanding | 23,537,368 | 23,472,430 |
Condensed consolidated statemen
Condensed consolidated statements of operations and comprehensive income (loss) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | |
Income Statement [Abstract] | ||||
Revenue (Note 4) | $ 25,000 | $ 25,000 | ||
Operating expenses | ||||
Research and development | 17,996 | $ 10,475 | 28,504 | $ 16,252 |
General and administrative | 4,314 | 3,520 | 8,623 | 6,265 |
Total operating expenses | 22,310 | 13,995 | 37,127 | 22,517 |
Income (loss) from operations | 2,690 | (13,995) | (12,127) | (22,517) |
Other income, net (Note 7) | 228 | 229 | 422 | 435 |
Net income (loss) | $ 2,918 | $ (13,766) | $ (11,705) | $ (22,082) |
Earnings (net loss) per common stock (Note 8) | ||||
Basic | $ 0.12 | $ (0.59) | $ (0.50) | $ (0.94) |
Diluted | $ 0.12 | $ (0.59) | $ (0.50) | $ (0.94) |
Weighted average number of common stock outstanding (Note 8) | ||||
Basic | 23,521,719 | 23,444,150 | 23,501,351 | 23,433,708 |
Diluted | 23,846,256 | 23,444,150 | 23,501,351 | 23,433,708 |
Comprehensive income (loss): | ||||
Net income (loss) | $ 2,918 | $ (13,766) | $ (11,705) | $ (22,082) |
Other comprehensive income (loss) - unrealized gain (loss) on available-for-salesecurities | 22 | 68 | (36) | |
Comprehensive income (loss) | $ 2,940 | $ (13,766) | $ (11,637) | $ (22,118) |
Condensed consolidated stateme5
Condensed consolidated statements of cash flows - USD ($) $ in Thousands | 6 Months Ended | |
Jun. 30, 2018 | Jun. 30, 2017 | |
Operating activities | ||
Net loss | $ (11,705) | $ (22,082) |
Non-cash items: | ||
Stock-based compensation (Note 6(c)) | 2,825 | 1,685 |
Unrealized foreign exchange loss and others | 322 | 271 |
Changes in operating assets and liabilities: | ||
Receivable, prepayments and deposits | (174) | (484) |
Accounts payable and other liabilities | 2,324 | (973) |
Cash used in operating activities | (6,408) | (21,583) |
Investing activities | ||
Proceeds from maturity of investments | 53,000 | 16,500 |
Purchase of property and equipment | (69) | (452) |
Cash provided by investing activities | 52,931 | 16,048 |
Financing activities | ||
Proceeds from exercise of stock options | 602 | 377 |
Payment on capital lease obligations | (8) | (7) |
Cash provided by financing activities | 594 | 370 |
Effect of exchange rate changes on cash and cash equivalents | (19) | 11 |
Net change in cash and cash equivalents during the period | 47,098 | (5,154) |
Cash and cash equivalents, beginning of period | 52,032 | 32,301 |
Cash and cash equivalents, end of period | 99,130 | 27,147 |
Supplemental disclosure of cash flow information: | ||
Interest received | $ 736 | 623 |
Non-cash investing and financing activities: | ||
Accrued purchase of property & equipment | $ (77) |
Nature of operations
Nature of operations | 6 Months Ended |
Jun. 30, 2018 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Nature of operations | 1. Nature of operations Aquinox Pharmaceuticals, Inc. and its subsidiary, Aquinox Pharmaceuticals (Canada) Inc., (consolidated, the “Company”) is a pharmaceutical company developing novel therapeutics for conditions marked by inflammation, inflammatory pain, and blood cancers. On June 27, 2018, the Company announced that its Phase 3 Leadership 301 clinical trial evaluating once-daily, oral rosiptor for the treatment of interstitial cystitis/bladder pain syndrome (IC/BPS) failed to meet its primary endpoint. As a result, all further development activities with rosiptor were halted. The Company is undertaking a thorough evaluation of its pipeline and other strategic options. Aquinox Pharmaceuticals, Inc. was originally incorporated under the name of Aquinox Pharmaceuticals (USA) Inc. on May 31, 2007 in the State of Delaware, United States. On January 27, 2014, Aquinox Pharmaceuticals (USA) Inc. changed its name to Aquinox Pharmaceuticals, Inc. (“Aquinox USA”). Aquinox Pharmaceuticals (Canada) Inc. (“AQXP Canada”) was originally incorporated under the name of 6175813 Canada Inc. on December 26, 2003 under the Canada Business Corporations Act. In May 2014, after a corporate restructuring, the name was changed to Aquinox Pharmaceuticals (Canada) Inc. The Company operates in Vancouver, British Columbia, Canada. |
Condensed summary of significan
Condensed summary of significant accounting policies | 6 Months Ended |
Jun. 30, 2018 | |
Accounting Policies [Abstract] | |
Condensed summary of significant accounting policies | 2. Condensed summary of significant accounting policies (a) Basis of presentation The accompanying unaudited condensed consolidated financial statements are presented in United States (“U.S.”) dollars and have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and pursuant to the rules and regulations of the United States Securities and Exchange Commission (“SEC”) for interim financial information. Accordingly, these financial statements do not include all of the information and footnotes required for complete financial statements and should be read in conjunction with the audited consolidated financial statements and accompanying notes included in the Company’s Annual Report on Form 10-K In management’s opinion, the unaudited condensed consolidated financial statements reflect all adjustments (including reclassifications and normal recurring adjustments) necessary to present fairly the financial position as of June 30, 2018, and results of operations and cash flows for all periods presented. The interim results presented are not necessarily indicative of results that can be expected for a full year. (b) Use of estimates and assumptions The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Significant areas requiring management estimates include valuation of stock options, amortization and depreciation, accrual of expenses, valuation allowance for deferred income taxes, and contingencies. Actual results could differ from those estimates. (c) Short-term investments Short-term investments consist of bank term deposits and U.S. government securities with initial maturities of less than a year. Short-term investments are classified as available-for-sale (d) Accounting for stock-based compensation The Company measures the cost of services received in exchange for an award of equity instruments based on the grant-date fair value of the award. The cost of such award will be recognized over the period during which services are provided in exchange for the award, generally the vesting period. The Company accounts for forfeitures as they occur. All share-based payments to employees are recognized in the consolidated financial statements based upon their respective grant date fair values. The Company estimates the fair value of options granted using the Black-Scholes option pricing model. This approximation uses assumptions regarding a number of inputs that requires management to make significant estimates and judgments. Prior to the completion of the Company’s initial public offering in March 2014, the Company’s common stock was not publicly traded. As a result, the expected volatility assumption is based on industry peer information due to insufficient trading history of the Company’s common stock. Additionally, because the Company has no significant history to calculate the expected term, the simplified method calculation is used. (e) Revenue recognition The Company adopted the Financial Accounting Standards Board, or FASB, issued ASU 2014-09, “Revenue (f) Segment reporting The Company operates in one segment, the development of novel therapeutics for conditions marked by inflammation, inflammatory pain and blood cancers. The Company has significant Canadian operations but its assets are mostly held in the United States with an immaterial amount of long lived assets in Canada. (g) Earnings (net loss) per common stock Basic earnings (net loss) per common stock is computed by dividing earnings (net loss) by the weighted-average number of common stock outstanding during the period. Diluted earnings (net loss) per common stock is determined using the weighted-average number of common stock outstanding during the period, adjusted for the dilutive effect of common stock equivalents, consisting of shares that might be issued upon exercise of common stock options. In periods where losses are reported, the weighted-average number of common stock outstanding excludes common stock equivalents because their inclusion would be anti-dilutive. (h) Recently issued and recently adopted accounting standards The Company adopted FASB ASU 2014-09, “Revenue ASU 2014-09 did The Company adopted FASB ASU 2016-01 825-10): In February 2016, the FASB issued ASU 2016-02 right-of-use 2016-02, 2016-02 2016-02 In July 2018, the FASB issued ASU 2018-11 “Leases (Topic 842) Targeted Improvements” which provides entities with an alternative transition method for adopting the new lease standard. Entities can elect to initially apply the new leases standard at the adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings. Consequently, comparative periods will continue to be accounted for in accordance with the current lease standard (Topic 840) and the disclosures will be in accordance with ASC 840. The Company is assessing this option in conjunction with its analysis of ASU 2016-02. (i) Risks and uncertainties The Company is subject to numerous risks and uncertainties. These risks, among others, included the following: • the Company has no source of recurring revenue, has an accumulated deficit of $210.2 million as of June 30, 2018, may never become profitable and may incur substantial and increasing net losses for the foreseeable future as it continues its research and development programs; • the Company is likely to require additional capital to finance its operations which may not be available to it on acceptable terms, or at all; • the Company’s success is primarily dependent on the successful development, regulatory approval and commercialization of drug product candidates; • in June 2018, the Company announced that its Phase 3 Leadership 301 clinical trial evaluating its lead product candidate, rosiptor, for the treatment of IC/BPS failed to meet its primary endpoint and all further development activities with rosiptor were halted; the Company may be unable to identify or acquire another lead product candidate to replace rosiptor; • the Company is subject to regulatory approval processes that are lengthy, time consuming and inherently unpredictable; the Company may not be able to obtain approval for any drug product candidates from the U.S. Food and Drug Administration, or FDA, or foreign regulatory authorities; • the Company’s intellectual property rights may be subject to claims by third parties and can be difficult and costly to protect; • the Company may not be able to recruit or retain key employees, including its senior management team; • the Company depends on the performance of third parties, including contract research organizations and third-party manufacturers; and • the Company faces competition from other pharmaceutical and biotechnology companies, academic institutions, governmental agencies, and public and private research institutions, among others. |
Cash and cash equivalents
Cash and cash equivalents | 6 Months Ended |
Jun. 30, 2018 | |
Cash and Cash Equivalents [Abstract] | |
Cash and cash equivalents | 3. Cash and cash equivalents (in thousands) JUNE 30, 2018 DECEMBER 31, Cash $ 49,244 $ 12,583 Cash equivalents 49,886 39,449 $ 99,130 $ 52,032 |
License and collaboration agree
License and collaboration agreement | 6 Months Ended |
Jun. 30, 2018 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
License and collaboration agreement | 4. License and collaboration agreement In May 2018, the Company entered into an exclusive license and collaboration agreement with Astellas US LLC, a subsidiary of Astellas Pharma Inc. (“Astellas”). The Company has granted Astellas an exclusive, royalty-bearing license to use, research, develop, manufacture and commercialize the Company’s drug candidate, rosiptor, and related compounds for all human diseases and conditions in Japan and certain other countries in the Asia-Pacific region, including major markets such as Taiwan, Indonesia, Malaysia, South Korea, and Australia, but excluding China and India (the “Licensed Territory”). The Company’s license and collaboration agreement includes contractual milestones. These consist of development and regulatory milestones (such as the initiation of phase 2b, or phase 3 clinical trials in the primary and other indication), and commercialization milestones (such as product sales in excess of a pre-specified The Company determined that its performance obligations under the agreement are the license and transfer of data, ongoing information sharing with Astellas and manufacturing and supplying rosiptor. The upfront payment of $25.0 million was allocated between each of the performance obligations. On June 27, 2018, the Company announced the Phase 3 trial of rosiptor failed to meet its primary endpoint and that all further development activities with rosiptor would be halted. As such, the Company will have no further performance obligations under the agreement. The $25.0 million upfront payment is non-refundable |
Other liabilities
Other liabilities | 6 Months Ended |
Jun. 30, 2018 | |
Other Liabilities Disclosure [Abstract] | |
Other liabilities | 5. Other liabilities (in thousands) JUNE 30, 2018 DECEMBER 31, Capital lease obligations $ 24 $ 33 Deferred rent liability 377 453 $ 401 $ 486 |
Stockholders' equity
Stockholders' equity | 6 Months Ended |
Jun. 30, 2018 | |
Equity [Abstract] | |
Stockholders' equity | 6. Stockholders’ equity (a) Share capital Aquinox USA is authorized to issue two classes of stock, common and preferred. The total number of shares Aquinox USA is authorized to issue is 55,000,000 shares, comprised of 50,000,000 common stock and 5,000,000 preferred stock both with a par value of $0.000001 per share. As of June 30, 2018, the total number of shares of common stock issued and outstanding was 23,537,368 (December 31, 2017 – 23,472,430). As of June 30, 2018 and December 31, 2017, no shares of preferred stock were issued or outstanding. (b) Stock option plan On January 27, 2014, the stockholders of Aquinox USA approved a 2014 Equity Incentive Plan (“2014 Plan”). The 2014 Plan became effective on March 6, 2014. The 2014 Plan is the successor to and continuation of the Joint Canadian Stock Option Plan (the “2006 Plan”). No further grants will be made under the 2006 Plan. The 2014 Plan provides for the grant of stock options, stock appreciation rights, restricted stock awards, restricted stock unit awards, performance stock awards, performance cash awards, and other forms of equity awards to employees, directors, and consultants. As at June 30, 2018, the maximum number of shares of common stock that may be issued under the 2014 Plan was 3,746,176 shares. Additionally, the number of shares of common stock reserved for issuance under the 2014 Plan will automatically increase on January 1 of each year for a period of up to 10 years, beginning on January 1, 2015 and ending on and including January 1, 2024, by 4% of the total number of shares of capital outstanding on December 31 of the preceding calendar year, or a lesser number of shares determined by the board of directors. Stock option transactions and the number of stock options outstanding are summarized below: NUMBER OF SHARES WEIGHTED WEIGHTED (IN YEARS) AGGREGATE Outstanding at December 31, 2017 2,069,167 $ 12.18 7.76 $ 3,187 Options granted 963,340 15.92 Options exercised (64,938 ) 9.28 Options forfeited (223,460 ) 14.98 Outstanding at June 30, 2018 2,744,109 $ 13.33 8.02 $ — Exercisable as of June 30, 2018 1,184,621 $ 10.99 6.54 $ — During the six months ended June 30, 2018, the Company granted 858,340 stock options to employees and 105,000 stock options to non-employee thirty-six non-employee 10-year During the three and six months ended June 30, 2018, 45,207 and 64,938 shares of common stock were issued upon exercise of options with an aggregate intrinsic value of $0.2 million and $0.3 million, respectively. (c) Stock-based compensation The fair value of stock options granted is estimated using the Black-Scholes option pricing model with the following weighted average assumptions: THREE MONTHS ENDED SIX MONTHS ENDED 2018 2017 2018 2017 Expected volatility 86 % 90 % 77 % 91 % Expected dividends 0 % 0 % 0 % 0 % Expected terms (years) 6.00 6.00 6.00 6.00 Risk free rate 2.82 % 1.82 % 2.74 % 1.89 % Weighted average grant-date fair value of stock options $ 9.60 $ 10.25 $ 10.83 $ 12.72 The Company amortizes the fair value of the stock options on a straight-line basis over the applicable requisite service periods of the awards, which is generally the vesting period. Stock-based compensation expense charged to operating expenses was $1.5 million and $2.8 million for the three and six months ended June 30, 2018, respectively, and $1.1 million and $1.7 million for the three and six months ended June 30, 2017, respectively. Total unrecognized compensation cost for all stock-based compensation plans was $15.4 million and $12.6 million as of June 30, 2018 and June 30, 2017, respectively, which is expected to be recognized over a weighted-average period of 3.00 years (June 30, 2017 – 3.06 years) |
Other income, net
Other income, net | 6 Months Ended |
Jun. 30, 2018 | |
Other Income and Expenses [Abstract] | |
Other income, net | 7. Other income, net THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30, (in thousands) 2018 2017 2018 2017 Foreign exchange losses $ (30 ) $ (12 ) $ (31 ) $ (20 ) Interest income 376 250 624 484 Miscellaneous expenses (118 ) (9 ) (171 ) (29 ) $ 228 $ 229 $ 422 $ 435 |
Earnings (net loss) per common
Earnings (net loss) per common stock | 6 Months Ended |
Jun. 30, 2018 | |
Earnings Per Share [Abstract] | |
Earnings (net loss) per common stock | 8. Earnings (net loss) per common stock Basic and diluted earnings (net loss) per common stock is computed by dividing earnings (net loss) by the weighted average number of shares of common stock outstanding. For the three months ended June 30, 2018, the Company reported net income and therefore included the dilutive effect of 324,537 shares that might be issued upon the exercise of stock options. For the six months ended June 30, 2018, the Company reported net loss and therefore excluded outstanding stock options to purchase 2,744,109 shares as the effect would have been antidilutive. For the three and six months ended June 30, 2017, the Company excluded 2,056,767 shares from the computation of basic and diluted net loss per common stock as the effect would have been antidilutive for the periods presented. |
Financial instruments
Financial instruments | 6 Months Ended |
Jun. 30, 2018 | |
Investments, All Other Investments [Abstract] | |
Financial instruments | 9. Financial instruments Securities classified as available for sale The Company’s short-term investments consisted of available-for-sale (in thousands) June 30, 2018 Amortized cost Gross Gross Fair value Short-term investments: U.S. treasury securities $ 3,008 $ — $ (1 ) $ 3,007 Contractual maturities: Due within one year $ 3,008 $ 3,007 December 31, 2017 Amortized cost Gross Gross Fair value Short-term investments: U.S. treasury securities $ 56,123 $ — $ (70 ) $ 56,053 Contractual maturities: Due within one year $ 56,123 $ 56,053 The aggregate estimated fair value of the Company’s investments with unrealized losses are as follows: (in thousands) Period of continuous unrealized loss 12 months or less Greater than 12 months June 30, 2018 Fair value Gross Fair value Gross U.S. treasury securities $ 3,007 $ (1 ) NA NA December 31, 2017 U.S. treasury securities $ 15,983 $ (27 ) $ 40,070 $ (43 ) Fair value of financial instruments Fair value is defined as the amounts that would be received upon sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). The fair value of the Company’s financial instruments are determined according to a fair value hierarchy that prioritizes the inputs and assumptions used, and the valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the hierarchy are as follows: Level 1 - Quoted prices in active markets for identical assets or liabilities. 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. 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. The determination of a financial instrument’s level within the fair value hierarchy is based on an assessment of the lowest level of any input that is significant to the fair value measurement. The Company considers observable data to be market data which is readily available, regularly distributed or updated, reliable and verifiable, not proprietary, and provided by independent sources that are actively involved in the relevant market. The carrying amounts of certain of the Company’s financial instruments including cash, cash equivalents, receivables, accounts payable and other liabilities, approximate their fair values because of their nature and/or short maturities. The Company holds short-term investments that are classified as available-for-sale The following table presents the fair value of our financial instruments that are measured at fair value on a recurring basis: QUOTED (LEVEL 1) OTHER (LEVEL 2) SIGNIFICANT UN-OBSERVABLE (LEVEL 3) TOTAL BALANCES – June 30, 2018 Short-term investments – U.S. treasury securities $ 3,007 $ — $ — $ 3,007 $ 3,007 $ — $ — $ 3,007 BALANCES – December 31, 2017 Short-term investments – U.S. treasury securities $ 56,053 $ — $ — $ 56,053 $ 56,053 $ — $ — $ 56,053 Level 1 instruments, which include investments that are valued based on quoted market prices in active markets, consisted of U.S. treasury securities. The Company had no Level 2 or 3 investments as at June 30, 2018 and December 31, 2017. There were no transfers between Levels 1, 2, and 3 during the three and six months ended June 30, 2018 and the year ended December 31, 2017. As at June 30, 2018, the Company had short-term investments consisting of available-for-sale |
Subsequent event
Subsequent event | 6 Months Ended |
Jun. 30, 2018 | |
Subsequent Events [Abstract] | |
Subsequent event | 10. Subsequent event In July 2018, the Company’s Board of Directors approved a restructuring plan to reduce operating costs and better align the Company’s workforce with the needs of its business following the June 27, 2018 announcement that its Phase 3 Leadership 301 clinical trial evaluating once-daily, oral rosiptor for the treatment of IC/BPS failed to meet its primary endpoint. The Company has halted all further development activities with rosiptor. Under this plan, the Company reduced its workforce by 30 employees (approximately 53% of total employees) and closed its office in San Bruno, California. Affected employees are eligible to receive severance payments and outplacement services. Employee severance benefits are contingent upon an affected employee’s execution (and non-revocation) In connection with the restructuring, the Company estimates that it will incur aggregate restructuring charges of approximately $2.5 million related to one-time The Company will account for the restructuring cost in accordance with ASC 420, Exit or Disposal Cost Obligations. ASC 420 specifies that a liability for a cost associated with an exit or disposal activity be recognized when the liability is incurred, except for a liability where employees are required to render service until they are terminated in order to receive termination benefits and will be retained to render service beyond the minimum retention period. A liability for such one-time |
Condensed summary of signific16
Condensed summary of significant accounting policies (Policies) | 6 Months Ended |
Jun. 30, 2018 | |
Accounting Policies [Abstract] | |
Basis of presentation | (a) Basis of presentation The accompanying unaudited condensed consolidated financial statements are presented in United States (“U.S.”) dollars and have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and pursuant to the rules and regulations of the United States Securities and Exchange Commission (“SEC”) for interim financial information. Accordingly, these financial statements do not include all of the information and footnotes required for complete financial statements and should be read in conjunction with the audited consolidated financial statements and accompanying notes included in the Company’s Annual Report on Form 10-K In management’s opinion, the unaudited condensed consolidated financial statements reflect all adjustments (including reclassifications and normal recurring adjustments) necessary to present fairly the financial position as of June 30, 2018, and results of operations and cash flows for all periods presented. The interim results presented are not necessarily indicative of results that can be expected for a full year. |
Use of estimates and assumptions | (b) Use of estimates and assumptions The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Significant areas requiring management estimates include valuation of stock options, amortization and depreciation, accrual of expenses, valuation allowance for deferred income taxes, and contingencies. Actual results could differ from those estimates. |
Short-term investments | (c) Short-term investments Short-term investments consist of bank term deposits and U.S. government securities with initial maturities of less than a year. Short-term investments are classified as available-for-sale |
Accounting for stock-based compensation | (d) Accounting for stock-based compensation The Company measures the cost of services received in exchange for an award of equity instruments based on the grant-date fair value of the award. The cost of such award will be recognized over the period during which services are provided in exchange for the award, generally the vesting period. The Company accounts for forfeitures as they occur. All share-based payments to employees are recognized in the consolidated financial statements based upon their respective grant date fair values. The Company estimates the fair value of options granted using the Black-Scholes option pricing model. This approximation uses assumptions regarding a number of inputs that requires management to make significant estimates and judgments. Prior to the completion of the Company’s initial public offering in March 2014, the Company’s common stock was not publicly traded. As a result, the expected volatility assumption is based on industry peer information due to insufficient trading history of the Company’s common stock. Additionally, because the Company has no significant history to calculate the expected term, the simplified method calculation is used. |
Revenue recognition | (e) Revenue recognition The Company adopted the Financial Accounting Standards Board, or FASB, issued ASU 2014-09, “Revenue |
Segment reporting | (f) Segment reporting The Company operates in one segment, the development of novel therapeutics for conditions marked by inflammation, inflammatory pain and blood cancers. The Company has significant Canadian operations but its assets are mostly held in the United States with an immaterial amount of long lived assets in Canada. |
Earnings (net loss) per common stock | (g)Earnings (net loss) per common stock Basic earnings (net loss) per common stock is computed by dividing earnings (net loss) by the weighted-average number of common stock outstanding during the period. Diluted earnings (net loss) per common stock is determined using the weighted-average number of common stock outstanding during the period, adjusted for the dilutive effect of common stock equivalents, consisting of shares that might be issued upon exercise of common stock options. In periods where losses are reported, the weighted-average number of common stock outstanding excludes common stock equivalents because their inclusion would be anti-dilutive. |
Recently issued and recently adopted accounting standards | (h) Recently issued and recently adopted accounting standards The Company adopted FASB ASU 2014-09, “Revenue ASU 2014-09 did The Company adopted FASB ASU 2016-01 825-10): In February 2016, the FASB issued ASU 2016-02 right-of-use 2016-02, 2016-02 2016-02 In July 2018, the FASB issued ASU 2018-11 “Leases (Topic 842) Targeted Improvements” which provides entities with an alternative transition method for adopting the new lease standard. Entities can elect to initially apply the new leases standard at the adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings. Consequently, comparative periods will continue to be accounted for in accordance with the current lease standard (Topic 840) and the disclosures will be in accordance with ASC 840. The Company is assessing this option in conjunction with its analysis of ASU 2016-02. |
Risks and uncertainties | (i) Risks and uncertainties The Company is subject to numerous risks and uncertainties. These risks, among others, included the following: • the Company has no source of recurring revenue, has an accumulated deficit of $210.2 million as of June 30, 2018, may never become profitable and may incur substantial and increasing net losses for the foreseeable future as it continues its research and development programs; • the Company is likely to require additional capital to finance its operations which may not be available to it on acceptable terms, or at all; • the Company’s success is primarily dependent on the successful development, regulatory approval and commercialization of drug product candidates; • in June 2018, the Company announced that its Phase 3 Leadership 301 clinical trial evaluating its lead product candidate, rosiptor, for the treatment of IC/BPS failed to meet its primary endpoint and all further development activities with rosiptor were halted; the Company may be unable to identify or acquire another lead product candidate to replace rosiptor; • the Company is subject to regulatory approval processes that are lengthy, time consuming and inherently unpredictable; the Company may not be able to obtain approval for any drug product candidates from the U.S. Food and Drug Administration, or FDA, or foreign regulatory authorities; • the Company’s intellectual property rights may be subject to claims by third parties and can be difficult and costly to protect; • the Company may not be able to recruit or retain key employees, including its senior management team; • the Company depends on the performance of third parties, including contract research organizations and third-party manufacturers; and • the Company faces competition from other pharmaceutical and biotechnology companies, academic institutions, governmental agencies, and public and private research institutions, among others. |
Cash and cash equivalents (Tabl
Cash and cash equivalents (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Cash and Cash Equivalents [Abstract] | |
Schedule of Cash and Cash Equivalents | (in thousands) JUNE 30, 2018 DECEMBER 31, Cash $ 49,244 $ 12,583 Cash equivalents 49,886 39,449 $ 99,130 $ 52,032 |
Other liabilities (Tables)
Other liabilities (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Other Liabilities Disclosure [Abstract] | |
Schedule of Other Liabilities | (in thousands) JUNE 30, 2018 DECEMBER 31, Capital lease obligations $ 24 $ 33 Deferred rent liability 377 453 $ 401 $ 486 |
Stockholders' equity (Tables)
Stockholders' equity (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Equity [Abstract] | |
Schedule of Stock Option Transactions and Number of Stock Options Outstanding | Stock option transactions and the number of stock options outstanding are summarized below: NUMBER OF SHARES WEIGHTED WEIGHTED (IN YEARS) AGGREGATE Outstanding at December 31, 2017 2,069,167 $ 12.18 7.76 $ 3,187 Options granted 963,340 15.92 Options exercised (64,938 ) 9.28 Options forfeited (223,460 ) 14.98 Outstanding at June 30, 2018 2,744,109 $ 13.33 8.02 $ — Exercisable as of June 30, 2018 1,184,621 $ 10.99 6.54 $ — |
Schedule of Weighted Average Assumptions | The fair value of stock options granted is estimated using the Black-Scholes option pricing model with the following weighted average assumptions: THREE MONTHS ENDED SIX MONTHS ENDED 2018 2017 2018 2017 Expected volatility 86 % 90 % 77 % 91 % Expected dividends 0 % 0 % 0 % 0 % Expected terms (years) 6.00 6.00 6.00 6.00 Risk free rate 2.82 % 1.82 % 2.74 % 1.89 % Weighted average grant-date fair value of stock options $ 9.60 $ 10.25 $ 10.83 $ 12.72 |
Other income, net (Tables)
Other income, net (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Other Income and Expenses [Abstract] | |
Schedule of Other Income, Net | THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30, (in thousands) 2018 2017 2018 2017 Foreign exchange losses $ (30 ) $ (12 ) $ (31 ) $ (20 ) Interest income 376 250 624 484 Miscellaneous expenses (118 ) (9 ) (171 ) (29 ) $ 228 $ 229 $ 422 $ 435 |
Financial instruments (Tables)
Financial instruments (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Investments, All Other Investments [Abstract] | |
Summary of Short-Term Investments of Available-for-Sale Securities | The Company’s short-term investments consisted of available-for-sale (in thousands) June 30, 2018 Amortized cost Gross Gross Fair value Short-term investments: U.S. treasury securities $ 3,008 $ — $ (1 ) $ 3,007 Contractual maturities: Due within one year $ 3,008 $ 3,007 December 31, 2017 Amortized cost Gross Gross Fair value Short-term investments: U.S. treasury securities $ 56,123 $ — $ (70 ) $ 56,053 Contractual maturities: Due within one year $ 56,123 $ 56,053 |
Aggregate Estimated Fair Value of Investments with Unrealized Losses | The aggregate estimated fair value of the Company’s investments with unrealized losses are as follows: (in thousands) Period of continuous unrealized loss 12 months or less Greater than 12 months June 30, 2018 Fair value Gross Fair value Gross U.S. treasury securities $ 3,007 $ (1 ) NA NA December 31, 2017 U.S. treasury securities $ 15,983 $ (27 ) $ 40,070 $ (43 ) |
Fair Value of Financial Instruments Measured At Fair Value on a Recurring Basis | The following table presents the fair value of our financial instruments that are measured at fair value on a recurring basis: QUOTED (LEVEL 1) OTHER (LEVEL 2) SIGNIFICANT UN-OBSERVABLE (LEVEL 3) TOTAL BALANCES – June 30, 2018 Short-term investments – U.S. treasury securities $ 3,007 $ — $ — $ 3,007 $ 3,007 $ — $ — $ 3,007 BALANCES – December 31, 2017 Short-term investments – U.S. treasury securities $ 56,053 $ — $ — $ 56,053 $ 56,053 $ — $ — $ 56,053 |
Nature of operations - Addition
Nature of operations - Additional Information (Detail) | 6 Months Ended |
Jun. 30, 2018 | |
Entity Information [Line Items] | |
Date of incorporation | May 31, 2007 |
Aquinox Pharmaceuticals (Canada) Inc. [Member] | |
Entity Information [Line Items] | |
Date of incorporation | Dec. 26, 2003 |
Condensed summary of signific23
Condensed summary of significant accounting policies - Additional Information (Detail) $ in Thousands | 6 Months Ended | |
Jun. 30, 2018USD ($)Segment | Dec. 31, 2017USD ($) | |
Accounting Policies [Abstract] | ||
Operating segment | Segment | 1 | |
Accumulated deficit | $ | $ (210,207) | $ (198,502) |
Cash and cash equivalents - Sch
Cash and cash equivalents - Schedule of Cash and Cash Equivalents (Detail) - USD ($) $ in Thousands | Jun. 30, 2018 | Dec. 31, 2017 |
Cash and Cash Equivalents [Abstract] | ||
Cash | $ 49,244 | $ 12,583 |
Cash equivalents | 49,886 | 39,449 |
Cash and cash equivalents | $ 99,130 | $ 52,032 |
License and Collaboration Agr25
License and Collaboration Agreement - Additional Information (Detail) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended |
Jun. 30, 2018 | Jun. 30, 2018 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||
Non-refundable upfront payment | $ 25,000 | |
Revenue | $ 25,000 | $ 25,000 |
Other liabilities - Schedule of
Other liabilities - Schedule of Other Liabilities (Detail) - USD ($) $ in Thousands | Jun. 30, 2018 | Dec. 31, 2017 |
Other Liabilities [Abstract] | ||
Capital lease obligations | $ 24 | $ 33 |
Deferred rent liability | 377 | 453 |
Other liabilities | $ 401 | $ 486 |
Stockholders' equity - Addition
Stockholders' equity - Additional Information (Detail) - USD ($) $ / shares in Units, $ in Millions | 3 Months Ended | 6 Months Ended | |||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | Dec. 31, 2017 | |
Equity Transactions And Share Based Compensation [Line Items] | |||||
Total number of shares authorized | 55,000,000 | 55,000,000 | |||
Common stock, shares authorized | 50,000,000 | 50,000,000 | 50,000,000 | ||
Common stock, par value | $ 0.000001 | $ 0.000001 | $ 0.000001 | ||
Preferred stock, shares authorized | 5,000,000 | 5,000,000 | |||
Preferred stock, par value | $ 0.000001 | $ 0.000001 | |||
Common stock, shares issued | 23,537,368 | 23,537,368 | 23,472,430 | ||
Common stock, shares outstanding | 23,537,368 | 23,537,368 | 23,472,430 | ||
Preferred stock, shares issued | 0 | 0 | 0 | ||
Preferred stock, shares outstanding | 0 | 0 | 0 | ||
Maximum number of shares of common stock that may be issued | 3,746,176 | 3,746,176 | |||
Shares of common stock reserved for issuance description | Additionally, the number of shares of common stock reserved for issuance under the 2014 Plan will automatically increase on January 1 of each year for a period of up to 10 years, beginning on January 1, 2015 and ending on and including January 1, 2024, by 4% of the total number of shares of capital outstanding on December 31 of the preceding calendar year, or a lesser number of shares determined by the board of directors. | ||||
Shares of common stock reserved for issuance percentage | 4.00% | ||||
Years of increase in shares of common stock reserved for issuance | 10 years | ||||
Stock options granted | 963,340 | ||||
Stock options granted, exercise price per share | $ 15.92 | ||||
Common stock issued upon exercise of options | 45,207 | 64,938 | |||
Common stock issued upon exercise of options aggregate intrinsic value | $ 0.2 | $ 0.3 | |||
Stock-based compensation expense | 1.5 | $ 1.1 | 2.8 | $ 1.7 | |
Unrecognized stock-based compensation cost | $ 15.4 | $ 12.6 | $ 15.4 | $ 12.6 | |
Unrecognized stock-based compensation cost, weighted-average period recognized | 3 years | 3 years 22 days | |||
Employees [Member] | |||||
Equity Transactions And Share Based Compensation [Line Items] | |||||
Stock options granted | 858,340 | ||||
Stock options, expiration period | 10 years | ||||
Employees [Member] | Minimum [Member] | |||||
Equity Transactions And Share Based Compensation [Line Items] | |||||
Stock options granted, exercise price per share | $ 13.10 | ||||
Employees [Member] | Maximum [Member] | |||||
Equity Transactions And Share Based Compensation [Line Items] | |||||
Stock options granted, exercise price per share | $ 16.55 | ||||
Employees [Member] | Vesting 25% One Year After the Beginning of the Vesting Period and Monthly Thereafter [Member] | |||||
Equity Transactions And Share Based Compensation [Line Items] | |||||
Stock options, vesting period from grant date | 1 year | ||||
Stock options, vesting percentage | 25.00% | ||||
Stock options, vesting period | 36 months | ||||
Non-Employee Directors [Member] | |||||
Equity Transactions And Share Based Compensation [Line Items] | |||||
Stock options granted | 105,000 | ||||
Stock options granted, exercise price per share | $ 13.10 | ||||
Stock options, vesting period | 1 year |
Stockholders' equity - Schedule
Stockholders' equity - Schedule of Stock Option Transactions and Number of Stock Options Outstanding (Detail) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 6 Months Ended | 12 Months Ended |
Jun. 30, 2018 | Jun. 30, 2018 | Dec. 31, 2017 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |||
Options Outstanding, Number of Shares, beginning balance | 2,069,167 | ||
Options granted, Number of Shares | 963,340 | ||
Options exercised, Number of Shares | (45,207) | (64,938) | |
Options forfeited, Number of Shares | (223,460) | ||
Options Outstanding, Number of Shares, ending balance | 2,744,109 | 2,744,109 | 2,069,167 |
Exercisable, Number of Shares, ending balance | 1,184,621 | 1,184,621 | |
Options Outstanding, Weighted Average Exercise Price, beginning balance | $ 12.18 | ||
Options granted, Weighted Average Exercise Price | 15.92 | ||
Options exercised, Weighted Average Exercise Price | 9.28 | ||
Options forfeited, Weighted Average Exercise Price | 14.98 | ||
Options Outstanding, Weighted Average Exercise Price, ending balance | $ 13.33 | 13.33 | $ 12.18 |
Exercisable, Weighted Average Exercise Price, ending balance | $ 10.99 | $ 10.99 | |
Options Outstanding, Weighted Average Remaining Contractual Life (Years), ending balance | 8 years 7 days | 7 years 9 months 3 days | |
Exercisable, Weighted Average Remaining Contractual Life (Years), ending balance | 6 years 6 months 14 days | ||
Options Outstanding, Aggregate Intrinsic Value | $ 3,187 | ||
Exercisable, Aggregate Intrinsic Value | $ 0 | $ 0 |
Stockholders' equity - Schedu29
Stockholders' equity - Schedule of Weighted Average Assumptions (Detail) - $ / shares | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | ||||
Expected volatility | 86.00% | 90.00% | 77.00% | 91.00% |
Expected dividends | 0.00% | 0.00% | 0.00% | 0.00% |
Expected terms (years) | 6 years | 6 years | 6 years | 6 years |
Risk free rate | 2.82% | 1.82% | 2.74% | 1.89% |
Weighted average grant-date fair value of stock options | $ 9.60 | $ 10.25 | $ 10.83 | $ 12.72 |
Other income, net - Schedule of
Other income, net - Schedule of Other Income Net (Detail) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | |
Other Income and Expenses [Abstract] | ||||
Foreign exchange losses | $ (30) | $ (12) | $ (31) | $ (20) |
Interest income | 376 | 250 | 624 | 484 |
Miscellaneous expenses | (118) | (9) | (171) | (29) |
Other income, net | $ 228 | $ 229 | $ 422 | $ 435 |
Earnings (net loss) per commo31
Earnings (net loss) per common stock - Additional Information (Detail) - shares | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | |
Earnings Per Share [Abstract] | ||||
Antidilutive securities excluded from the computation of basic and diluted earnings (net loss) per share - outstanding stock options | 2,056,767 | 2,744,109 | 2,056,767 | |
Dilutive shares issued upon the exercise of stock options | 324,537 |
Financial instruments -Summary
Financial instruments -Summary of Short-Term Investments of Available-for-Sale Securities (Detail) - USD ($) $ in Thousands | Jun. 30, 2018 | Dec. 31, 2017 |
Schedule of Available-for-sale Securities [Line Items] | ||
Due within one year, Amortized cost | $ 3,008 | $ 56,123 |
Due within one year, Fair value | 3,007 | 56,053 |
Short-term Investments [Member] | U.S. Treasury Securities [Member] | ||
Schedule of Available-for-sale Securities [Line Items] | ||
Amortized cost | 3,008 | 56,123 |
Gross unrealized gains | 0 | 0 |
Gross unrealized losses | (1) | (70) |
Fair value | $ 3,007 | $ 56,053 |
Financial instruments - Aggrega
Financial instruments - Aggregate Estimated Fair Value of Investments with Unrealized Losses (Detail) - U.S. Treasury Securities [Member] - USD ($) $ in Thousands | Jun. 30, 2018 | Dec. 31, 2017 |
Schedule of Available-for-sale Securities [Line Items] | ||
Period of continuous unrealized loss, 12 months or less, Fair value | $ 3,007 | $ 15,983 |
Period of continuous unrealized loss, 12 months or less, Gross unrealized losses | $ (1) | (27) |
Period of continuous unrealized loss, Greater than 12 months, Fair value | 40,070 | |
Period of continuous unrealized loss, Greater than 12 months, Gross unrealized losses | $ (43) |
Financial instruments - Fair Va
Financial instruments - Fair Value of Financial Instruments Measured At Fair Value on a Recurring Basis (Detail) - USD ($) $ in Thousands | Jun. 30, 2018 | Dec. 31, 2017 |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Short-term investments | $ 3,007 | $ 56,053 |
Fair Value of Financial instruments | 3,007 | 56,053 |
U.S. Treasury Securities [Member] | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Short-term investments | 3,007 | 56,053 |
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Fair Value, Measurements, Recurring [Member] | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Fair Value of Financial instruments | 3,007 | 56,053 |
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Fair Value, Measurements, Recurring [Member] | U.S. Treasury Securities [Member] | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Short-term investments | $ 3,007 | $ 56,053 |
Financial instruments - Additio
Financial instruments - Additional Information (Detail) - USD ($) | 3 Months Ended | 6 Months Ended | 12 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | Dec. 31, 2017 | |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||||
Fair Value of Financial instruments | $ 3,007,000 | $ 3,007,000 | $ 56,053,000 | ||
Transfers between Levels 1, 2 and 3 | 0 | 0 | 0 | ||
Short term investments consisting of available for sale securities | 3,007,000 | 3,007,000 | 56,053,000 | ||
Net realized gains for securities | 200,000 | $ 200,000 | 400,000 | $ 400,000 | |
Other Observable Inputs (Level 2) [Member] | |||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||||
Fair Value of Financial instruments | 0 | 0 | 0 | ||
Significant Unobservable Inputs (Level 3) [Member] | |||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||||
Fair Value of Financial instruments | $ 0 | $ 0 | $ 0 |
Subsequent Event - Additional I
Subsequent Event - Additional Information (Detail) $ in Millions | 1 Months Ended | 9 Months Ended |
Jul. 31, 2018Employees | Sep. 30, 2018USD ($) | |
Scenario, Forecast [Member] | One-time Termination Benefits and Facility Closing [Member] | ||
Subsequent Event [Line Items] | ||
Restructuring charges | $ | $ 2.5 | |
Subsequent Event [Member] | ||
Subsequent Event [Line Items] | ||
Number of employees | Employees | 30 | |
Percentage of workforce reduced | 53.00% |