Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Sep. 30, 2017 | Nov. 08, 2017 | |
Document and Entity Information | ||
Entity Registrant Name | Mersana Therapeutics, Inc. | |
Entity Central Index Key | 1,442,836 | |
Document Type | 10-Q | |
Document Period End Date | Sep. 30, 2017 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --09-30 | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Non-accelerated Filer | |
Entity Common Stock, Shares Outstanding | 22,753,404 | |
Document Fiscal Year Focus | 2,017 | |
Document Fiscal Period Focus | Q3 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets - USD ($) $ in Thousands | Sep. 30, 2017 | Dec. 31, 2016 |
Current assets: | ||
Cash and cash equivalents | $ 50,756 | $ 100,297 |
Short-term marketable securities | 82,622 | |
Accounts receivable | 731 | 1,051 |
Prepaid expenses and other current assets | 2,616 | 825 |
Total current assets | 136,725 | 102,173 |
Property and equipment, net | 2,325 | 2,483 |
Long-term marketable securities | 3,482 | |
Other assets | 384 | 431 |
Total assets | 142,916 | 105,087 |
Current liabilities: | ||
Accounts payable | 3,215 | 2,068 |
Accrued expenses | 4,607 | 3,428 |
Deferred rent | 215 | 159 |
Deferred revenue | 16,476 | 22,731 |
Total current liabilities | 24,513 | 28,386 |
Deferred rent, net of current portion | 128 | 299 |
Deferred revenue, net of current portion | 34,633 | 37,571 |
Commitments (Note 10) | ||
Stockholders’ equity (deficit) | ||
Preferred stock, $0.0001 par value; 25,000,000 and 0 shares authorized; 0 shares issued and outstanding at September 30, 2017 and December 31, 2016, respectively | ||
Common stock, $0.0001 par value; 175,000,000 and 95,000,000 shares authorized; 22,734,333 and 1,294,352 shares issued and outstanding at September 30, 2017 and December 31, 2016, respectively | 3 | 1 |
Additional paid-in capital | 167,565 | 3,551 |
Accumulated other comprehensive loss | (15) | |
Accumulated deficit | (83,911) | (59,171) |
Total stockholders’ equity (deficit) | 83,642 | (55,619) |
Total liabilities, convertible preferred stock, and stockholders’ equity (deficit) | $ 142,916 | 105,087 |
Series A-1 convertible preferred stock | ||
Current liabilities: | ||
Convertible redeemable preferred shares, carrying Amount | 26,336 | |
Series B-1 convertible preferred stock | ||
Current liabilities: | ||
Convertible redeemable preferred shares, carrying Amount | 35,232 | |
Series C-1 convertible preferred stock | ||
Current liabilities: | ||
Convertible redeemable preferred shares, carrying Amount | $ 32,882 |
Condensed Consolidated Balance3
Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares | Sep. 30, 2017 | Dec. 31, 2016 |
Preferred stock, par value (in dollars per share) | $ 0.0001 | $ 0.0001 |
Preferred stock, shares authorized | 25,000,000 | 0 |
Preferred stock, shares issued | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
Common stock, par value (in dollars per share) | $ 0.0001 | $ 0.0001 |
Common stock, shares authorized | 175,000,000 | 95,000,000 |
Common stock, shares issued | 22,734,333 | 1,294,352 |
Common stock, shares outstanding | 22,734,333 | 1,294,352 |
Series A-1 convertible preferred stock | ||
Convertible preferred stock, par value (in dollars per share) | $ 0.0001 | $ 0.0001 |
Convertible preferred stock, shares authorized | 0 | 25,085,153 |
Convertible preferred stock, shares issued | 0 | 25,085,153 |
Convertible preferred stock, shares outstanding | 0 | 25,085,153 |
Series B-1 convertible preferred stock | ||
Convertible preferred stock, par value (in dollars per share) | $ 0.0001 | $ 0.0001 |
Convertible preferred stock, shares authorized | 0 | 32,936,919 |
Convertible preferred stock, shares issued | 0 | 32,936,919 |
Convertible preferred stock, shares outstanding | 0 | 32,936,919 |
Series C-1 convertible preferred stock | ||
Convertible preferred stock, par value (in dollars per share) | $ 0.0001 | $ 0.0001 |
Convertible preferred stock, shares authorized | 0 | 14,674,062 |
Convertible preferred stock, shares issued | 0 | 14,674,062 |
Convertible preferred stock, shares outstanding | 0 | 14,674,062 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Operations and Comprehensive Loss - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
Condensed Consolidated Statements of Operations and Comprehensive Loss | ||||
Collaboration revenue | $ 6,267 | $ 3,262 | $ 14,284 | $ 13,175 |
Operating expenses: | ||||
Research and development | 11,412 | 7,555 | 32,145 | 23,163 |
General and administrative | 2,905 | 1,598 | 7,406 | 5,044 |
Total operating expenses | 14,317 | 9,153 | 39,551 | 28,207 |
Other income: | ||||
Interest income | 318 | 54 | 527 | 73 |
Total other income | 318 | 54 | 527 | 73 |
Net loss | (7,732) | (5,837) | (24,740) | (14,959) |
Other comprehensive loss: | ||||
Unrealized loss on marketable securities | (6) | (15) | ||
Comprehensive loss | $ (7,738) | $ (5,837) | $ (24,755) | $ (14,959) |
Net loss per share attributable to common stockholders — basic and diluted | $ (0.35) | $ (4.56) | $ (2.94) | $ (11.72) |
Weighted-average number of common shares used in net loss per share attributable to common stockholders — basic and diluted | 22,242,129 | 1,279,383 | 8,407,541 | 1,276,819 |
Condensed consolidated Stateme5
Condensed consolidated Statements of Cash Flows - USD ($) $ in Thousands | 9 Months Ended | |
Sep. 30, 2017 | Sep. 30, 2016 | |
Cash flows from operating activities | ||
Net loss | $ (24,740) | $ (14,959) |
Adjustments to reconcile net loss to net cash (used in) provided by operating activities: | ||
Depreciation | 673 | 449 |
Net amortization of premiums and discounts on investments | (118) | |
Stock-based compensation | 990 | 437 |
Change in deferred rent | (115) | 473 |
Changes in operating assets and liabilities: | ||
Accounts receivable | 320 | (173) |
Prepaid expenses and other current assets | (1,791) | (437) |
Other assets | 47 | |
Accounts payable | 1,112 | (749) |
Accrued expenses | 1,132 | 884 |
Deferred revenue | (9,193) | 32,487 |
Net cash (used in) provided by operating activities | (31,683) | 18,412 |
Cash flows from investing activities | ||
Purchase of property and equipment | (433) | (1,338) |
Purchase of marketable securities | (111,321) | |
Maturities of marketable securities | 25,320 | |
Net cash used in investing activities | (86,434) | (1,338) |
Cash flows from financing activities | ||
Proceeds from exercise of stock options | 431 | 81 |
Net cash provided by financing activities | 68,576 | 58,235 |
Increase (decrease) in cash and cash equivalents | (49,541) | 75,309 |
Cash and cash equivalents, beginning of period | 100,297 | 11,534 |
Cash and cash equivalents, end of period | 50,756 | 86,843 |
Supplemental disclosures of non-cash activities: | ||
Conversion of preferred stock to common stock upon closing of initial public offering | 94,450 | |
Purchases of property and equipment included in accounts payable and accrued expenses | 82 | 18 |
Purchases of property and equipment reimbursed by landlord | 356 | |
Series B-1 convertible preferred stock | ||
Cash flows from financing activities | ||
Net proceeds from sale of convertible preferred stock | 25,272 | |
Series C-1 convertible preferred stock | ||
Cash flows from financing activities | ||
Net proceeds from sale of convertible preferred stock | $ 32,882 | |
IPO | ||
Cash flows from financing activities | ||
Net proceeds from issuance of stock | 67,420 | |
Underwriter's option | ||
Cash flows from financing activities | ||
Net proceeds from issuance of stock | $ 725 |
Nature of business and basis of
Nature of business and basis of presentation | 9 Months Ended |
Sep. 30, 2017 | |
Nature of business and basis of presentation | |
Nature of business and basis of presentation | 1. Nature of business and basis of presentation Mersana Therapeutics, Inc. (the Company) is a clinical stage company located in Cambridge, Massachusetts. The Company is advancing a proprietary pipeline of targeted oncology therapeutics leveraging its Dolaflexin® antibody drug conjugate (ADC) platform. Mersana's first product candidate, XMT-1522, designed to address a much broader population of patients with HER2-expressing tumors than served by currently approved HER2 therapies, is currently in a Phase 1 dose escalation study. The Company’s second product candidate, XMT-1536, is an ADC targeting NaPi2b, an antigen broadly expressed in certain types of cancer. In October 2017, the Company received FDA clearance of the XMT-1536 IND and we expect to begin dosing patients in early 2018. The Company also has partnerships utilizing the Dolaflexin platform with multiple strategic partners. The Company is subject to risks common to companies in the biotechnology industry, including but not limited to, risks of failure of preclinical studies and clinical trials, the need to obtain marketing approval for any drug product candidate that it may identify and develop, the need to successfully commercialize and gain market acceptance of its product candidates, dependence on key personnel, protection of proprietary technology, compliance with government regulations, development of technological innovations by competitors, reliance on third party manufacturers and ability to transition from pilot-scale production to large-scale manufacturing of products. On July 3, 2017, the Company completed an initial public offering (IPO), in which the Company issued and sold 5,000,000 shares of its common stock at a public offering price of $ 15.00 per share, for aggregate gross proceeds of $75,000. The Company received $67,420 in net proceeds after deducting $7,580 of underwriting discounts and commissions and offering costs. On August 2, 2017, the Company issued and sold 51,977 shares of common stock at $15.00 per share for gross proceeds of $780 upon the partial exercise of the underwriters’ overallotment option. The Company received net proceeds of $725 after deducting $55 in underwriting discounts and commissions. Upon the closing of the IPO, all of the outstanding shares of convertible preferred stock automatically converted into 16,154,671 shares of common stock. Subsequent to the closing of the IPO, there were no shares of preferred stock outstanding. In connection with the IPO, the Company amended and restated its certificate of incorporation to change the authorized capital stock to 175,000,000 shares designated as common stock and 25,000,000 shares designated as preferred stock, all with a par value of $0.0001 per share. In connection with preparing for its IPO, the Company effected a 1-for-4.5 reverse stock split of the Company’s common stock. The reverse stock split became effective on June 15, 2017. The par value and authorized shares of common stock and convertible preferred stock were not adjusted as a result of the reverse stock split. All share and per share amounts in the financial statements and notes thereto have been retroactively adjusted for all periods presented to give effect to this reverse stock split, including reclassifying an amount equal to the reduction in par value of common stock to additional paid-in capital. The financial statements have also been retroactively adjusted to reflect adjustments to the conversion ratio for each series of convertible preferred stock effected in connection with the reverse stock split. The Company has incurred net losses since inception. The Company’s net loss was $24,740 for the nine months ended September 30, 2017 and $13,700 for the year ended December 31, 2016. The Company expects to continue to incur operating losses for at least the next several years. As of September 30, 2017, the Company had an accumulated deficit of $83,911. The future success of the Company is dependent on its ability to identify and develop its product candidates, and ultimately upon its ability to attain profitable operations. The Company has devoted substantially all of its financial resources and efforts to research and development and general and administrative expense to support such research and development. The Company’s net losses may fluctuate significantly from quarter to quarter and year to year. Net losses and negative cash flows have had, and will continue to have, an adverse effect on the Company’s stockholders' deficit and working capital. The Company believes that its existing cash, cash equivalents and marketable securities as of September 30, 2017, will enable it to fund its operating plan through at least mid-2019, which the Company expects will allow it to achieve initial clinical data readouts for its two lead development programs. The Company’s unaudited interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (U.S. GAAP) and the rules and regulations of the Securities and Exchange Commission (SEC). Any reference in these notes to applicable guidance is meant to refer to the authoritative United States generally accepted accounting principles as found in the Accounting Standards Codification (ASC) and Accounting Standards Updates (ASU) of the Financial Accounting Standards Board (FASB). Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted from this report, as is permitted by such rules and regulations. Accordingly, these financial statements should be read in conjunction with the audited financial statements as of and for the year ended December 31, 2016 and notes thereto, included in the Company’s final prospectus for the IPO filed with the Securities and Exchange Commission pursuant to Rule 424(b)(4) on June 29, 2017 (the Prospectus). The unaudited interim consolidated financial statements have been prepared on the same basis as the audited financial statements. In the opinion of the Company’s management, the accompanying unaudited interim condensed consolidated financial statements contain all adjustments which are necessary to present fairly the Company’s financial position as of September 30, 2017, the results of its operations for the three and nine months ended September 30, 2017 and 2016 and cash flows for the nine months ended September 30, 2017 and 2016. Such adjustments are of a normal and recurring nature. The results for the three and nine months ended September 30, 2017 are not necessarily indicative of the results for the year ending December 31, 2017, or for any future period. |
Summary of significant accounti
Summary of significant accounting policies | 9 Months Ended |
Sep. 30, 2017 | |
Summary of significant accounting policies | |
Summary of significant accounting policies | 2. Summary of significant accounting policies Principles of consolidation The accompanying condensed consolidated financial statements include those of the Company and its subsidiary, Mersana Securities Corp., which was established in December 2016. All intercompany balances and transactions have been eliminated. Use of estimates The preparation of the Company's consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, equity, revenue, expenses and related disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenue and expenses during the reporting period. On an ongoing basis, the Company's management evaluates its estimates, which include, but are not limited to management's judgments with respect to the separate units of accounting and best estimate of selling price of those units of accounting within its revenue arrangements, accrued expenses, valuation of stock-based awards and income taxes. Actual results could differ from those estimates. The Company utilized significant estimates and assumptions in determining the fair value of its common stock prior to the Company’s IPO. The Company has utilized various valuation methodologies in accordance with the framework of the American Institute of Certified Public Accountants Technical Practice Aid, Valuation of Privately‑Held Company Equity Securities Issued as Compensation , the Practice Aid, to estimate the fair value of its common stock. Each valuation methodology includes estimates and assumptions that require the Company’s judgment. These estimates and assumptions include a number of objective and subjective factors, including external market conditions, the prices at which the Company sold shares of preferred stock, the superior rights and preferences of securities senior to the Company’s common stock at the time of, and the likelihood of, achieving a liquidity event, such as an initial public offering or sale. Significant changes to the key assumptions used in the valuations could result in different fair values of common stock at each valuation date. Segment information Operating segments are defined as components of an enterprise about which separate discrete information is available for evaluation by the chief operating decision-maker in deciding how to allocate resources and assess performance. The Company and the Company's chief operating decision-maker, the Company's chief executive officer, view the Company's operations and manage its business as a single operating segment, which is the business of discovering and developing ADC’s. Research and development The Company expenses all costs incurred in performing research and development activities. Research and development expenses include salaries and benefits, materials and supplies, preclinical expenses, manufacturing expenses, stock-based compensation expense, depreciation of equipment, contract services and other outside expenses. Costs of certain development activities, such as manufacturing, are recognized based on an evaluation of the progress to completion of specific tasks. Payments for these activities are based on the terms of the individual arrangements, which may differ from the pattern of costs incurred, and are reflected in the financial statements as prepaid or accrued research and development costs. Nonrefundable advance payments for goods or services to be received in the future for use in research and development activities are deferred and capitalized. The capitalized amounts are expensed as the related goods are delivered or the services are performed. Costs associated with collaboration agreements are included in research and development expense. Revenue recognition The Company recognizes revenue from collaboration arrangements in accordance with FASB ASC Topic 605, Revenue Recognition (ASC 605). Accordingly, revenue is recognized when all of the following criteria are met: · Persuasive evidence of an arrangement exists; · Delivery has occurred or services have been rendered; · The seller's price to the buyer is fixed or determinable; and · Collectibility is reasonably assured. Amounts received prior to satisfying the revenue recognition criteria are recorded as deferred revenue in the consolidated balance sheets. Amounts expected to be recognized as revenue within the 12 months following the balance sheet date are classified as current liabilities. Amounts not expected to be recognized as revenue within the 12 months following the balance sheet date are classified as deferred revenue, net of current portion. Multiple element arrangements The Company analyzes its strategic partnerships that include multiple element arrangements based on the guidance in FASB ASC Topic 605-25, Revenue Recognition—Multiple Element Arrangements , or ASC 605-25. Pursuant to the guidance in ASC 605-25, the Company evaluates multiple element arrangements to determine i) the deliverables included in the arrangement and ii) whether the individual deliverables represent separate units of accounting or whether they must be accounted for as a combined unit of accounting. This evaluation requires subjective determinations and requires management to make judgments about the individual deliverables and whether such deliverables are separable from the other aspects of the contractual relationship. Deliverables are considered separate units of accounting provided that: (i) the delivered item(s) has value to the customer on a standalone basis and (ii) if the arrangement includes a general right of return relative to the delivered item(s), delivery or performance of the undelivered item(s) 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 collaboration partner and the availability of the associated expertise in the general marketplace. In addition, the Company considers whether the collaboration partner can use the deliverable(s) for their intended purpose without the receipt of the remaining element(s), whether the value of the deliverable is dependent on the undelivered item(s) and whether there are other vendors that can provide the undelivered element(s). Options are considered substantive if, at the inception of the arrangement, the Company is at risk as to whether the collaboration partner will choose to exercise the option. Factors that the Company considers in evaluating whether an option is substantive include the cost to exercise the option, the overall objective of the arrangement, the benefit the collaborator might obtain from the arrangement without exercising the option and the likelihood the option will be exercised. When an option is considered substantive, the Company does not consider the option or item underlying the option to be a deliverable at the inception of the arrangement and the associated option fees are not included in the allocable consideration, assuming the option is not priced at a significant and incremental discount. Conversely, when an option is not considered substantive, the Company would consider the option including other deliverables contingent upon the exercise of the option, to be a deliverable at the inception of the arrangement and a corresponding amount would be included in the allocable arrangement consideration. Notwithstanding whether the option is considered substantive or non-substantive, if the price of the option includes a significant incremental discount, the discount would be included as a deliverable at the inception of the arrangement. Allocation of arrangement consideration Arrangement consideration that is fixed or determinable is allocated among the separate units of accounting using the relative selling price method. Then, the applicable revenue recognition criteria in ASC 605-25 are applied to each of the separate units of accounting in determining the appropriate period and pattern of recognition. The Company determines the selling price of a unit of accounting following the hierarchy of evidence prescribed by ASC 605-25. Accordingly, the Company determines the estimated selling price for units of accounting within each arrangement using vendor-specific objective evidence (VSOE) of selling price, if available, third-party evidence (TPE) of selling price if VSOE is not available, or best estimate of selling price (BESP) if neither VSOE nor TPE is available. The Company typically uses BESP to estimate the selling price, since it generally does not have VSOE or TPE of selling price for its units of accounting. Determining the BESP for a unit of accounting requires significant judgment. In developing the BESP for a unit of accounting, the Company considers applicable market conditions and relevant entity-specific factors, including factors that were contemplated in negotiating the agreement with the customer 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. Pattern of recognition The Company recognizes arrangement consideration allocated to each unit of accounting when all of the revenue recognition criteria in ASC 605 are satisfied for that particular unit of accounting. Deliverables under collaboration agreements generally consist of licenses and research and development services. License revenue is recognized when the license is delivered when it is determined to have standalone value from the undelivered elements of the arrangement. If the license does not have standalone value, the amounts allocated to the license will be combined with the related undelivered items as a single unit of accounting. The revenue recognition of a combined unit of accounting typically follows the pattern of revenue of the last delivered item in the combined accounting unit. The Company recognizes the amounts associated with research and development services and other service related deliverables over the associated period of performance. If there is no discernable pattern of performance 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 is expected to complete its performance obligations. Conversely, if the pattern of performance in which the service is provided to the customer can be determined and objectively measurable performance exists, then the Company recognizes revenue under the arrangement using the proportional performance method. The Company recognizes revenue associated with license options upon exercise of the option, if the underlying license has standalone value from the other deliverables to be provided subsequent to delivery of the license. If the license does not have standalone value, the amounts allocated to the license option will be combined with the related undelivered items as a single unit of accounting. Revenue recognized is limited to the lesser of the cumulative amount of payments received or the cumulative revenue earned determined using the straight-line method or proportional performance, as applicable, as of the period end date. Recognition of milestones and royalties At the inception of each arrangement that includes milestone payments, the Company evaluates whether each milestone is substantive and at-risk. This evaluation includes an assessment of whether (a) the consideration is commensurate with either (1) the entity's performance to achieve the milestone, or (2) the enhancement of the value of the delivered item(s) as a result of a specific outcome resulting at least in part from the entity's performance to achieve the milestone, (b) the consideration relates solely to past performance, and (c) the consideration is reasonable relative to all of the deliverables and payment terms within the arrangement. The Company evaluates factors such as the scientific, regulatory, commercial, and other risks that must be overcome to achieve the respective milestone, the level of effort and investment required to achieve the respective milestone, and whether the milestone consideration is reasonable relative to all deliverables and payment terms in the arrangement in making this assessment. On the milestone achievement date, assuming all other revenue recognition criteria are met and the milestone is deemed substantive and at-risk, the Company recognizes the payment as collaboration revenue. For milestones that are not deemed substantive and at-risk, where payment is reasonably assured, the Company recognizes the milestone payment over the remaining service period. The Company will recognize royalty revenue, if any, in the period of sale of the related product(s), based on the underlying contract terms, provided that the reported sales are reliably measurable and the Company has no remaining performance obligations, assuming all other revenue recognition criteria are met. Collaborative arrangements The Company records the elements of its collaboration agreements that represent joint operating activities in accordance with ASC Topic 808, Collaborative Arrangements (ASC 808). Accordingly, the elements of the collaboration agreements that represent activities in which both parties are active participants and to which both parties are exposed to the significant risks and rewards that are dependent on the commercial success of the activities, are recorded as collaborative arrangements. The Company considers the guidance in ASC Topic 605-45, Revenue Recognition—Principal Agent Considerations (ASC 605-45) in determining the appropriate treatment for the transactions between the Company and its collaborative partner and the transactions between the Company and third parties. Generally, the classification of transactions under the collaborative arrangements is determined based on the nature and contractual terms of the arrangement along with the nature of the operations of the participants. To the extent revenue is generated from a collaboration, the Company will recognize its share of the net sales on a gross basis if it is deemed to be the principal in the transactions with customers, or on a net basis if it is instead deemed to be the agent in the transactions with customers, consistent with the guidance in ASC 605-45. Fair value measurements Fair value is defined as the price that would be received upon sale of an asset or paid to transfer a liability between market participants at measurement dates. ASC Topic 820 Fair Value Measurement (ASC 820), establishes a three-level valuation hierarchy for instruments measured at fair value. The hierarchy is based on the transparency of inputs to the valuation of an asset or liability as of the measurement date. The three levels are defined as follows: Level 1—Inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets. Level 2—Inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument. Level 3—Inputs to the valuation methodology are unobservable and significant to the fair value measurement. Cash and cash equivalents The Company considers all highly liquid investments with an original maturity, or a remaining maturity at the time of purchase, of three months or less to be cash equivalents. The Company invests excess cash primarily in money market funds, commercial paper and government agency securities, which are highly liquid and have strong credit ratings. These investments are subject to minimal credit and market risks. Cash and cash equivalents are stated at cost, which approximates market value. Marketable securities Short-term marketable securities consist of investments with maturities greater than three months and less than one year from the balance sheet date. Long-term marketable securities consist of investments with maturities greater than one year that are not expected to be used to fund current operations. The Company classifies all of its marketable securities as available-for-sale. Accordingly, these investments are recorded at fair value. Amortization and accretion of discounts and premiums are recorded as interest income within other income. Unrealized gains and losses on available-for-sale securities are included in other comprehensive loss as a component of stockholders’ equity (deficit) until realized. Restricted cash Restricted cash of $371 is recorded in other non-current assets as of September 30, 2017 and December 31, 2016 and includes amounts held as security deposits for a standby letter of credit related to a facility lease and a corporate credit card program. Accounting for stock-based compensation The Company accounts for its stock-based compensation in accordance with ASC Topic 718 Compensation— Stock Compensation (ASC 718). ASC 718 requires all stock-based payments to employees and directors to be recognized as expense in the statements of operations based on their grant date fair values. Expense related to stock awards to non-employees is required to be recognized in the statement of operations based on the awards' vesting date fair values. The Company estimates the fair value of options granted using the Black-Scholes option pricing model. The Black-Scholes option pricing model requires inputs based on certain subjective assumptions, including (a) the expected stock price volatility, (b) the calculation of expected term of the award, (c) the risk-free interest rate and (d) expected dividends. Due to the lack of a public market for the Company's common stock prior to completion of the IPO and a lack of company-specific historical and implied volatility data, the Company has based its estimate of expected volatility on the historical volatility of a group of similar companies that are publicly traded. The historical volatility is calculated based on a period of time commensurate with the expected term assumption. The computation of expected volatility is based on the historical volatility of a representative group of companies with similar characteristics to the Company, including stage of product development and life science industry focus. The Company uses the simplified method as prescribed by the SEC Staff Accounting Bulletin No. 107, Share-Based Payment , to calculate the expected term for options granted to employees as it does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate the expected term. For options granted to non-employees, the Company utilizes the contractual term of the arrangement as the basis for the expected term assumption. The risk-free interest rate is based on a treasury instrument whose term is consistent with the expected term of the stock options. The expected dividend yield is assumed to be zero as the Company has never paid dividends and has no current plans to do so. There were significant judgments and estimates inherent in the determination of the fair value of our common stock prior to the closing of the IPO. These estimates and assumptions include a number of objective and subjective factors, including external market conditions, the prices at which the Company sold shares of preferred stock, the superior rights and preferences of securities senior to its common stock at the time of, and the likelihood of, achieving a liquidity event, such as an IPO or sale. Through December 31, 2016, the Company was required to estimate forfeitures at the time of grant, and revise those estimates in subsequent periods if actual forfeitures differ from its estimates. The Company used historical data to estimate post-vesting forfeitures and recorded stock-based compensation expense only for those awards that were expected to vest. To the extent that actual forfeitures differ from estimates, the difference was recorded as a cumulative adjustment in the period the estimates were revised. Stock-based compensation expense recognized in the financial statements is based on awards that were ultimately expected to vest. The fair value of stock-based payments was recognized as expense, net of estimated forfeitures, over the requisite service period which is generally the vesting period. In the first quarter of 2017, the Company made an accounting policy election to recognize forfeitures as they occur upon adoption of guidance per ASU No. 2016-09. The adoption of this ASU did not have a material impact on the Company's financial statements. In reporting periods prior to 2017, the Company estimated forfeitures at the time of grant and revised in subsequent periods as necessary if actual forfeitures differed from estimates. Net loss per share Basic net loss per common share is calculated by dividing the net loss attributable to common stockholders by the weighted-average number of common shares outstanding during the period, without consideration for potentially dilutive securities. Diluted net loss per share is computed by dividing the net loss attributable to common stockholders by the weighted-average number of common shares and potentially dilutive securities outstanding for the period determined using the treasury stock and if-converted methods. For purposes of the diluted net loss per share calculation, convertible preferred stock, warrants to purchase common stock and options to purchase common stock are considered to be potentially dilutive securities, but are excluded from the calculation of diluted net loss per share because their effect would be anti-dilutive and therefore, basic and diluted net loss per share were the same for all periods presented. The following table sets forth the outstanding potentially dilutive securities that have been excluded from the calculation of diluted net loss per share because to include them would be anti-dilutive (in common stock equivalent shares): Three months ended Nine months ended September 30, 2017 September 30, 2016 September 30, 2017 September 30, 2016 Series A-1 convertible preferred stock — 5,574,467 — 5,574,467 Series B-1 convertible preferred stock — 7,319,307 — 7,319,307 Series C-1 convertible preferred stock — 3,260,897 — 3,260,897 Warrants 129,491 129,491 129,491 129,491 Stock options 3,205,714 2,827,280 3,205,714 2,827,280 3,335,205 19,111,442 3,335,205 19,111,442 Recently issued accounting pronouncements In May 2014, the Financial Accounting Standards Board (FASB) issued a new standard, ASU No. 2014-09, Revenue from Contracts with Customers (ASU No. 2014-09), as amended, which will supersede nearly all existing revenue recognition guidance. Under ASU No. 2014-09, an entity is required to recognize revenue upon transfer of promised goods or services to customers in an amount that reflects the expected consideration received in exchange for those goods or services. ASU No. 2014-09 defines a five-step process in order to achieve this core principle, which may require the use of judgment and estimates, and also requires expanded qualitative and quantitative disclosures relating to the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers, including significant judgments and estimates used. The FASB has issued several amendments to the new standard, including clarification on accounting for licenses of intellectual property and identifying performance obligations. The amendments include ASU No. 2016-08, Revenue from Contracts with Customers (Topic 606)—Principal versus Agent Considerations , which was issued in March 2016, and clarifies the implementation guidance for principal versus agent considerations in ASU No. 2014-09, and ASU No. 2016-10, Revenue from Contracts with Customers (Topic 606)—Identifying Performance Obligations and Licensing , which was issued in April 2016, and amends the guidance in ASU No. 2014-09 related to identifying performance obligations and accounting for licenses of intellectual property. The new standard permits adoption either by using (i) a full retrospective approach for all periods presented in the period of adoption or (ii) a modified retrospective approach with the cumulative effect of initially applying the new standard recognized at the date of initial application and providing certain additional disclosures. The new standard is effective for annual reporting periods beginning after December 15, 2017. The Company plans to adopt the new standard effective January 1, 2018 using the modified retrospective approach. The Company is in process of implementing its overall adoption plan and evaluating the impact of the new standard on its accounting policies. The Company has assigned internal resources and engaged third-party service providers to assist in the implementation. While the Company continues to assess the standard, it is expected that it may have a material impact on the revenue recognition for the Company's current arrangements with Takeda Pharmaceutical Company Limited (Takeda) and Merck KGaA. In February 2016, the FASB issued ASU No. 2016-02, Leases (ASU No. 2016-02), which will replace the existing guidance in ASC 840, Leases. The updated standard aims to increase transparency and comparability among organizations by requiring lessees to recognize lease assets and lease liabilities on the balance sheet and requiring disclosure of key information about leasing arrangements. This amendment is effective for the Company in the fiscal year beginning after December 15, 2019, but early adoption is permissible. The Company is currently evaluating the potential impact that ASU No. 2016-02 may have on its financial position and results of operations. In March 2016, the FASB issued ASU No. 2016-09, Compensation—Stock Compensation (ASU No. 2016-09), which amends ASC Topic 718, Compensation—Stock Compensation. The new standard identifies areas for simplification involving several aspects of accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, an option to recognize gross stock compensation expense with actual forfeitures recognized as they occur, as well as certain classifications on the consolidated statements of cash flows. The amendments are effective for annual reporting periods (including interim reporting periods within those years) beginning after December 15, 2016. The Company adopted this ASU effective January 1, 2017. The adoption of this ASU did not have a material impact on the Company's financial statements. Upon adoption of ASU No. 2016-09, the Company accounts for forfeitures as they occur. In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows: Classification of Certain Cash Receipts and Cash Payments . The new standard clarifies certain aspects of the statement of cash flows, including the classification of contingent consideration payments made after a business combination and several other clarifications not currently applicable to the Company. The new standard also clarifies that an entity should determine each separately identifiable source or use within the cash receipts and cash payments on the basis of the nature of the underlying cash flows. In situations in which cash receipts and payments have aspects of more than one class of cash flows and cannot be separated by source or use, the appropriate classification should depend on the activity that is likely to be the predominant source or use of cash flows for the item. The new standard will be effective for the Company on January 1, 2018. The adoption of this standard is not expected to have a material impact on the Company’s consolidated statement of cash flows upon adoption. In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows: Restricted Cash (ASU 2016-18). The amendments in this update require that amounts generally described as restricted cash and restricted cash equivalents be included within cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. ASU 2016-18 will be effective January 1, 2018, with early adoption permitted. The Company expects the adoption to impact its consolidated statement of cash flows as, upon adoption, it will include the Company’s restricted cash balance in the cash and cash equivalents reconciliation of operating, investing and financing activities. |
Collaboration agreements
Collaboration agreements | 9 Months Ended |
Sep. 30, 2017 | |
Collaboration agreements | |
Collaboration agreements | 3. Collaboration agreements Takeda strategic research and development partnership In March 2014, the Company entered into a Research Collaboration and Commercial License Agreement with Takeda through its wholly owned subsidiary, Millennium Pharmaceuticals, Inc. (the 2014 Agreement). The 2014 Agreement was amended in January 2015 (the 2015 Amended Agreement) and amended and restated in January 2016 (the 2016 Restated Agreement). The agreements provide Takeda with the right to develop ADCs directed to a total of seven exclusive targets over a specified period of time. Takeda will be responsible for the product development and marketing of any products resulting from this collaboration. The 2014 Agreement was structured to allow Takeda the right to evaluate two targets upon payment of a per target technology access fee with the right to receive a development and commercialization license upon the exercise of an option with an additional payment to the Company. The 2014 Agreement also provided a limited replacement right for a target. The 2015 Amended Agreement granted Takeda the right to develop two additional targets and also gave Takeda an additional limited replacement right. The 2016 Restated Agreement provided Takeda with the right to develop three additional targets. Under the terms of the 2014 Agreement, the Company was eligible to receive a nonrefundable technology access fee of $500 per target, payable upon designation of the target, and an option exercise fee of $1,300 per target to receive a development and commercialization license. The Company received an upfront payment of $1,150 representing the $500 technology access fee for the first designated target and a $650 nonrefundable payment creditable against the $1,300 option exercise payment for the development and commercialization license for the first designated target. In 2014, the Company also received the remaining $650 option exercise fee for the first designated target and the $500 technology access fee for the second designated target. In connection with the 2015 Amended Agreement, the Company received a nonrefundable payment of $9,000 for the right to develop two additional targets. Takeda is required to pay $500 in order to utilize the second limited replacement right. Under the terms of the 2016 Restated Agreement, the Company received a nonrefundable payment of $13,500 for the right to develop three additional targets, bringing the total to seven. For all targets under the 2015 Amended Agreement and the 2016 Restated Agreement, the Company grants a research, development and commercialization license upon the designation of a target, including targets initially covered by the 2015 Amended Agreement. Through September 30, 2017 Takeda has designated four targets and received development and commercialization licenses for the first, third and fourth designated targets. In order to receive a development and commercialization license for the second designated target, Takeda must exercise its option and make a payment of $1,300. Takeda still has three targets and the limited replacement rights for two targets available. Under the terms of the agreements, the Company and Takeda develop research plans to evaluate Takeda's antibodies as ADCs incorporating the Company's technology. The Company receives reimbursement for its efforts under the research plans. The goal of the research plans is to provide Takeda with sufficient information to formally nominate a development candidate and begin Investigational New Drug Application, or IND, enabling studies or cease development on the designated target. If products are successfully developed and commercialized, the Company is entitled to receive aggregate milestones of up to $1,063,300 for all seven designated targets consisting of $107,800 in development milestones, $325,000 in regulatory milestones, and $630,500 in commercial milestones. The total milestones payable on each of the first and second designated targets are $136,000 and the total milestones payable on each of the third, fourth, fifth, sixth and seventh designated target are $158,300. There are four individual development milestones per target, which are payable upon either the initiation of a GLP toxicology study or the filing of an IND application (depending upon the designated target), and the initiation of Phase 1 through Phase 3 clinical trials. There are six or eight individual regulatory milestones per target, depending on the target. These are payable upon regulatory submissions, regulatory approvals and pricing approvals, as applicable, for the U.S., European Union and Japanese markets and regulatory approvals for both a second and third indication. There are six individual commercial milestones, which are payable upon the first commercial sale in each of the U.S., European Union and Japanese markets and upon the attainment of three separate defined thresholds for annual net sales. The next potential milestone payment the Company will be eligible to receive is either a development milestone of $500 related to a GLP toxicology study or a development milestone of $750 related to the filing of an IND, depending upon the designated target. The Company is also entitled to receive royalties on product sales, if any, during the applicable royalty term. Royalties payable on the first and second designated targets are in the mid single digits and royalties payable on the third, fourth, fifth, sixth and seventh designated target are in the mid to high single digits. In connection with the 2016 Restated Agreement, the Company may elect to exercise an option to co-develop and co-commercialize one product incorporating either Takeda's third, fourth, fifth, sixth or seventh target in the United States for a payment of $15,000. If the Company elects to exercise the option to co-develop and co-commercialize a product, the Company will share in 50% of the profits related to United States. The Company will be responsible for 50% of costs incurred specifically for the United States and 30% of global development costs. Any costs incurred specifically for a foreign country will be borne 100% by Takeda. If the Company elects to co-develop and co-commercialize a product, certain regulatory milestones and royalties related to the United States for that target would not be paid by Takeda. Unless earlier terminated, the 2016 Restated Agreement will expire upon the expiration of the last royalty term for a product under the agreement, after which time, Takeda will have a perpetual, royalty-free license. Except with respect to the target antigen of a product for which the Company exercised its option to co-develop and co-commercialize in the United States, Takeda may terminate the 2016 Restated Agreement in its entirety or with respect to any target for convenience upon 45 days' prior written notice. Each party may terminate the 2016 Restated Agreement in its entirety upon bankruptcy or similar proceedings of the other party or upon an uncured material breach of the agreement by the other party. However, if such breach only relates to one target, the agreement may only be terminated with respect to such target. Takeda XMT-1522 strategic partnership In January 2016, the Company entered into a Development Collaboration and Commercial license Agreement with Takeda through its wholly owned subsidiary, Millennium Pharmaceuticals, Inc. for the development and commercialization of XMT-1522 (the XMT-1522 Agreement). Under the XMT-1522 Agreement, Takeda was granted the exclusive right to commercialize XMT-1522 outside of the United States and Canada. Under the XMT-1522 Agreement, the Company is responsible for conducting certain Phase 1 development activities for XMT-1522, including the ongoing Phase 1 clinical study, at its own expense. Takeda has the option to conduct Phase 1 development activities at its own expense within its territory. The parties will collaborate on the further development of XMT-1522 in accordance with a global development plan (Post-Phase 1 Development). The parties will share equally all clinical stage manufacturing costs and any Post-Phase 1 Development costs incurred in the performance of activities for the purpose of obtaining regulatory approval in either the United States or Canada and in certain major markets in the rest of the world. Each party will be responsible for all Post-Phase 1 Development costs incurred in the performance of activities solely for the purpose of obtaining regulatory approval in such party's territory. Each party may conduct independent development of XMT-1522, subject to certain restrictions. The Company received an upfront payment of $26,500 upon execution of the XMT-1522 Agreement. In addition, the Company was entitled to a milestone payment of $20,000 upon achievement of the IND Clearance Date. The Company achieved the IND Clearance Date in October 2016. Accordingly, the right to credit a portion of the upfront payment lapsed and the Company received the $20,000 milestone payment in October 2016. In addition to the milestone payment upon achievement of the IND Clearance Date, the Company is entitled to receive future development, regulatory and commercial milestones of up to $288,000 consisting of $87,000 of development milestones, $128,000 of regulatory milestones and $73,000 of commercial milestones, as well as royalties in the low to mid teens on net sales of XMT-1522 in Takeda's territory during the applicable royalty term. There are development milestones payable upon the achievement of nine separate events: the initiation of Phase 2 clinical trials and Phase 3 clinical trials for four separate specified patient populations and the initiation of a Phase 3 clinical trial for one additional unspecified patient population. There are 14 regulatory milestones, which are payable upon regulatory submissions, regulatory approvals and pricing approvals, as applicable, for the U.S., European Union and Japanese markets for up to four separate patient populations and multiple label indications. In addition, a regulatory milestone is payable upon the receipt of regulatory and pricing approval in two specified markets other than the United States, the European Union or Japan. There are three individual commercial milestones, which are payable upon the attainment of certain thresholds for annual net sales. The next potential milestone the Company will be eligible to receive is a development milestone of $12,000 related to the initiation of a Phase 2 clinical trial. Under the XMT-1522 Agreement, Takeda committed to make equity investments in the Company of up to $20,000 in the aggregate in either a qualified private financing or in connection with the Company's IPO at the same price paid by the investors in the qualified private financing or the price per share in the IPO. Takeda invested approximately $10,000 in the Company's Series C-1 financing in June 2016 and invested the remaining $10,000 in the Company's IPO. The XMT-1522 Agreement expires upon the expiration of the royalty term for XMT-1522, after which time, Takeda will have a perpetual, royalty-free license. However, Takeda may terminate the XMT-1522 Agreement in its entirety for convenience upon 30 days' prior written notice at any time up to the initiation of the first Phase 2 clinical study of XMT-1522 or upon 90 days' prior written notice following the initiation of the first Phase 2 clinical study of XMT-1522. Each party may terminate the XMT-1522 Agreement in its entirety upon bankruptcy or similar proceedings of the other party and in its entirety or on a country-by-country basis upon an uncured material breach of the agreement by the other party. Following termination, XMT-1522 will revert to the Company for further development and commercialization. Accounting analysis In accordance with ASC 605-25, the Company identified the deliverables under the 2014 Agreement. The deliverables were determined to be (i) research license for the first designated target, (ii) exclusive development and commercialization license for the first designated target, (iii) research and development services under the research plan associated with the first designated target, (iv) replacement right for a designated target, (v) rights to future technological improvements, and (vi) providing joint research committee services. The Company determined that the option to obtain an exclusive development and commercialization license for the first designated target was not a substantive option for accounting purposes, primarily because Takeda had made an upfront nonrefundable payment of 50% of the option exercise fee. As a result, the exclusive development and commercialization license was considered a deliverable at the inception of the arrangement. In addition, the total option exercise fee of $1,300 related to the first designated target was included in the allocable consideration. Similarly, the Company concluded the option to replace a designated target was not a substantive option as there were no additional payments required in connection with the first replacement option. Conversely, the Company concluded that Takeda's ability to designate a second designated target was a substantive option as the designation of an additional target was at Takeda's option and was not required to pursue the development of the first designated target. The Company has determined that the research license for the first designated target and the research and development services under the research plan associated with the first designated target should be combined into one unit of accounting (the research license and related service) as the research license does not have standalone value from the research services as the research services are required for Takeda to obtain the benefit of the research license. The Company has concluded the research license and related services have standalone value from the other units of accounting. The exclusive commercial license, replacement right for a designated target, rights to future technological improvements and joint research committee services are not required for Takeda to realize the value of the initial research license and related services. Under the terms of the 2014 Agreement, the total arrangement consideration of $4,500 (which comprises the $500 upfront technology access payment, expected fees of $2,700 for the research services and $1,300 for the option exercise fee for the first designated target) was allocated to the units of accounting based on management's BESP. The Company determined the BESP for the research license and related research services based on the estimated selling price of a research license and an estimate of the overall effort to perform the research services and an estimated market rate for research services. In developing the BESP for the exclusive development and commercialization license, the replacement rights for a designated target and the future technological improvements, the Company considered other comparable transactions, the selling price for a research license and the probability that the future technology will be developed and utilized. The BESP for the joint research committee services was developed using an estimate of the time and costs incurred to participate in the committees. The Company applied the relative selling price allocation using these BESP, which resulted in the consideration being allocated as follows: $2,790 to the research license and related service for the first designated target, $1,125 related to the commercial license on the first designated target, $450 to the replacement right for a designated target, $45 to rights to future technological improvements and $90 to joint research committee services. In addition, Takeda paid $500 in 2014 for the technology access fee and research license associated with the second designated target. In connection with the 2015 Amended Agreement, the Company reassessed the units of accounting from the 2014 Agreement and identified incremental deliverables, resulting in the following units of accounting at the time of the 2015 Amended Agreement (i) exclusive license to the first designated target and related research services, (ii) research license to the second designated target and related research services, (iii) research license to the third designated target and related services, (iv) research license to the fourth designated target and related services, (v) replacement right to the first or second designated target, (vi) discount on the option for an exclusive development and commercialization license for the second designated target, (vii) option for exclusive development and commercialization license for the third designated target, (viii) option for an exclusive development and commercialization license for the fourth designated target, (ix) rights to future technological improvements and (x) joint research committee services. The Company concluded that the option for the exclusive development and commercialization license for the second designated target includes a significant incremental discount as the option exercise fee was at a discount to the then-current estimated selling price of an exclusive development and commercialization license for a designated target. The Company concluded the options to obtain exclusive development and commercialization licenses for the third and fourth designated targets were not substantive options as there were no additional payments required to exercise those options. Consistent with the assessment of the units of accounting under the 2014 Agreement, the research licenses (and the exclusive commercial license as it relates to the first designated target) have been combined with the related research services under the related research plan as the license does not have standalone value from the related research services. Upon execution of the 2015 Amended Agreement the total arrangement consideration of $16,697 (which comprises the $9,000 upfront payment, expected fees of $5,776 for the research services and $1,921 of remaining deferred revenue related to the initial 2014 Agreement) was allocated to the units of accounting based on management's BESP, which were developed using consistent methodologies to the 2014 Agreement, as follows: $4,308 to the exclusive development and commercialization license to the first designated target and related research services, $1,611 to each of the research licenses and related research services for the second, third and fourth designated targets, $388 to the replacement right on the first or second designated target, $524 to the discount on the exclusive license to the second designated target, $3,105 to each of the exclusive development and commercialization licenses on the third and fourth designated targets, $262 to rights to future technological improvements and $174 to joint research committee services. The Company has concluded that the 2016 Restated Agreement and the XMT-1522 Agreement should be accounted for as one arrangement due in part because the agreements are with the same party and were negotiated and executed contemporaneously. The Company reassessed the accounting units from the 2015 Amended Agreement and identified the additional deliverables and units of accounting. As such, the Company identified the units of accounting: (i) exclusive development and commercialization license to the first designated target and related research services, (ii) research license to the second designated target and related research services, (iii) discount on the exclusive development and commercialization license to the second designated target, (iv) exclusive development and commercialization license to the third designated target and related research services, (v) exclusive development and commercialization license to the fourth designated target and related research services, (vi) exclusive development and commercialization license to the fifth designated target and related research services, (vii) exclusive development and commercialization license to the sixth designated target and related research services, (viii) exclusive development and commercialization license to the seventh designated target and related research services, (ix) first replacement right for a designated target, (x) discount on the second replacement right to a designated target, (xi) rights to future technological improvements, (xii) joint research committee services, (xiii) XMT-1522 license and related services, and (xiv) joint research committee services for XMT-1522. Consistent with the assessment under the prior Takeda agreements, the Company has concluded that the license does not have standalone value from the research services and has accounted for each exclusive license and the related research services as a combined unit of accounting. In addition, in assessing the additional accounting units under the XMT-1522 Agreement, the Company concluded that the license to the Company's intellectual property and the related obligations to perform services, including Phase 1 development and transfer certain materials and know how related to the Company's manufacturing processes should be a combined unit of accounting. The license to the Company's intellectual property does not have standalone value from the services that the Company is obligated to perform. Takeda would not have the ability to realize the value of the license without the Company performing the related services. The Company has concluded that the Post-Phase 1 Development activities under the XMT-1522 Agreement represent joint operating activities in which both parties are active participants and of which both parties are exposed to significant risks and rewards that are dependent on the commercial success of the activities. Accordingly, the Company is accounting for the Post-Phase 1 Development activities in accordance with ASC No. 808, Collaborative Arrangements (ASC 808) and they are not considered revenue elements under ASC 605-25. For the three months ended September 30, 2017 and 2016 and the nine months ended September 30, 2017 and 2016, the Company was billed approximately $924, $196, $1,719 and $353, respectively, from Takeda representing the Company's share of Post-Phase 1 Development costs incurred by Takeda. These amounts have been reflected as research and development costs in the consolidated statement of operations for the three months ended September 30, 2017 and 2016 and the nine months ended September 30, 2017 and 2016. The Company did not perform any Post-Phase 1 Development activities or incur any associated costs during the three months ended September 30, 2017 and 2016 or the nine months ended September 30, 2017 and 2016. The total allocable arrangement consideration for the 2016 Restated Agreement and the XMT-1522 Agreement was $50,089 comprised of the following: (i) nonrefundable upfront payment—$13,500, (ii) expected fees for the remaining research services—$9,515, (iii) remaining deferred revenue from the 2015 Amended Agreement—$7,498, (iv) non-creditable portion of the XMT-1522 upfront fee—$13,250, and (v) expected reimbursement for related services—$6,326. In the third quarter 2017, based on an assessment of the total costs to complete research services, the Company revised its estimate for (i) the expected fees for the remaining research services under the 2016 Restated Agreement to $4,160 and (ii) the expected reimbursement for the related services under the XMT-1522 Agreement to $7,740. The revised total allocable arrangement consideration for the 2016 Restated Agreement and the XMT-1522 Agreement is $46,148. Additionally, the Company has received approximately $800 in additional license consideration and research plan extension fees through September 30, 2017 which has been included in total allocable arrangement consideration. The Company excluded from the initial allocable consideration $13,250 of the upfront fee under the XMT-1522 Agreement as it was contingent on the Company achieving IND Clearance before January 30, 2017. Upon achievement of the IND Clearance, which occurred in October 2016, the contingent consideration was included in the allocable consideration and the Company recognized the cumulative revenue that would have been recognized if the contingent consideration was included in allocable consideration at the inception of the agreements. The allocable arrangement consideration was allocated to the units of accounting based on the relative estimated selling prices of each unit of accounting. The Company utilized BESP for each accounting unit which was developed on a basis similar to the prior Takeda agreements. The BESP for units of accounting which include a license and research services, was developed using the estimated selling price of the license and an estimate of the overall effort to perform the research service and an estimated market rate for research services. The BESP for the discounts on exclusive license, replacement rights (or discounts thereon) and rights to future technological improvements were developed based on the estimated selling prices of a license, as well as considering the probability that additional technology would be made available or the probability the counterpart would utilize the technology or exercise the option. The BESP for the joint research committee services was developed using an estimate of the time and costs incurred to participate in the committees. The total allocable consideration, as revised in the third quarter 2017 and including contingent fees received after achieving IND Clearance in October 2016, was allocated to each unit of accounting as follows (i) exclusive development and commercialization license to the first designated target and related research services—$4,502, (ii) research license to the second designated target and related research services—$1,362, (iii) discount on the exclusive development and commercialization license to the second designated target—$553, (iv) exclusive development and commercialization license to the third designated target and related research services—$4,546, (v) exclusive development and commercialization license to the fourth designated target and related research services—$4,975, (vi) exclusive development and commercialization license to the fifth designated target and related research services—$4,975, (vii) exclusive development and commercialization license to the sixth designated target and related research services—$4,975, (viii) exclusive development and commercialization license to the seventh designated target and related research services—$4,975, (ix) first replacement right for a designated target—$3,685, (x) discount on the second replacement right to a designated target—$3,276, (xi) rights to future technological improvements—$1,843, (xii) joint research committee services—$157, (xiii) XMT-1522 license and related services—$39,901, and (xiv) XMT-1522 joint research committee services—$472. The Company will recognize revenue related to the combined units of accounting which include research licenses or an exclusive development and commercialization license (if the license option is exercised during the research term) and the related research services, over the estimated period of the research and development services using a proportional performance model. Revenue related to discounts on options will be recognized when the option is exercised, unless there are additional research services that the Company is required to perform related to the designated target or at the time the option right lapses. Revenue related to the replacement rights will be recognized over the research term of the replacement target once the replacement right is exercised or at the time the right lapses unused. Revenue related to future technological improvements and joint research committee services will be recognized ratably over the performance period, which is expected to be ten years and six years, respectively. The Company will reassess the estimated remaining term at each subsequent reporting period. The Company has evaluated all of the development, regulatory and commercial milestones that may be received in connection with the Takeda agreements. In evaluating if a milestone is substantive, the Company assesses whether: (i) the consideration is commensurate with either the Company's performance to achieve the milestone or the enhancement of the value of the delivered item(s) as a result of a specific outcome resulting from the Company's performance to achieve the milestone, (ii) the consideration relates solely to past performance, and (iii) the consideration is reasonable relative to all of the deliverables and payment terms within the arrangement. With the exception of the $20,000 milestone payment due upon achievement of IND Clearance under the XMT-1522 Agreement, all development and regulatory milestones are considered substantive on the basis of the contingent nature of the milestone, specifically reviewing factors such as the scientific, clinical, regulatory, commercial and other risks that must be overcome to achieve the milestone as well as the level of effort and investment required. Accordingly, such amounts will be recognized as revenue in full in the period in which the associated milestone is achieved, assuming all other revenue recognition criteria have been met. The $20,000 milestone payment was not considered a substantive milestone as the payment was not considered commensurate with the Company's performance to achieve IND Clearance nor was the payment solely for past performance. The $20,000 milestone payment was in substance part of the overall consideration for the license and development services the Company is required to perform under the XMT-1522 Agreement. Upon achievement of the IND Clearance, which occurred in October 2016, the contingent consideration was included in the allocable consideration and the Company recognized the cumulative revenue that would have been recognized if the contingent consideration as included in allocable consideration at the inception of the agreement. All commercial milestones will be accounted for in the same manner as royalties and recorded as revenue upon achievement of the milestone, assuming all other revenue recognition criteria are met. The Company will recognize royalty revenue in the period of sale of the related product(s), based on the underlying contract terms, provided that the reported sales are reliably measurable and the Company has no remaining performance obligations, assuming all other revenue recognition criteria are met. For the three months ended September 30, 2017 and 2016 and the nine months ended September 30, 2017 and 2016, the Company recorded total revenue of $5,768, $2,422, $12,052 and $10,456, respectively, related to its efforts under the 2016 Restated Agreement and the XMT-1522 Agreement. Included in accounts receivable as of September 30, 2017 and December 31, 2016 was $4 84 and $542, respectively, related to the Takeda agreements. During the quarter ended September 30, 2017, the Company revised its estimates of the total costs to complete the research services under the Takeda agreements, which changed the total consideration to be received under the agreements and the amount of revenue recognized in the three months and nine months ended September 30, 2017. Approximately $4,028 of the Company’s revenue from the Takeda agreements for the three months and nine months ended September 30, 2017 is a result of the Company’s change in estimates. The change in estimates decreased net loss by $4,028 for the three months ended September 30, 2017, or $0.18 per common share. As of September 30, 2017 and December 31, 2016, the Company had $43,578 and $52,066, respectively, of deferred revenue related to the Takeda agreements that will be recognized over the remaining performance period, of which amounts approximately $11,263 and $16,536, respectively, are classified as short-term. Merck KGaA In June 2014, the Company entered into a Collaboration and Commercial License Agreement with Merck KGaA. Upon the execution of the agreement, Merck KGaA paid the Company a nonrefundable technology access fee of $12,000 for the right to develop ADCs directed to six exclusive targets over a specified period of time. No additional fees are due when a target is designated and the commercial license to the target is granted. Merck KGaA will be responsible for the product development and marketing of any products resulting from this collaboration. Under the terms of the agreem |
Fair value measurements
Fair value measurements | 9 Months Ended |
Sep. 30, 2017 | |
Fair value measurements | |
Fair value measurements | 4. Fair value measurements The following table presents information about the Company's assets and liabilities regularly measured and carried at a fair value and indicates the level within fair value hierarchy of the valuation techniques utilized to determine such value as of September 30, 2017 and December 31, 2016: Significant Quoted Prices Other Significant in Active Observable Unobservable Fair Markets Inputs Inputs Value (Level 1) (Level 2) (Level 3) September 30, 2017 Cash and cash equivalents $ 50,756 $ 50,756 $ — $ — Marketable securities: U.S. Treasuries 41,783 41,783 — — Commercial paper 33,254 — 33,254 — Corporate bonds 11,067 — 11,067 — $ 136,860 $ 92,539 $ 44,321 $ — Significant Quoted Prices Other Significant in Active Observable Unobservable Fair Markets Inputs Inputs Value (Level 1) (Level 2) (Level 3) December 31, 2016 Cash and cash equivalents $ 100,297 $ 100,297 $ — $ — $ 100,297 $ 100,297 $ — $ — There were no changes in valuation techniques or transfers between fair value measurement levels during the nine months ended September 30, 2017 and 2016. As of September 30, 2017 and December 31, 2016, cash and cash equivalents were comprised of cash and money market funds. |
Marketable securities
Marketable securities | 9 Months Ended |
Sep. 30, 2017 | |
Marketable securities | |
Marketable securities | 5. Marketable securities The following table summarizes marketable securities held at September 30, 2017. There were no marketable securities as of December 31, 2016. Gross Gross Amortized Unrealized Unrealized Fair Cost Gains Losses Value September 30, 2017 U.S. Treasuries 41,796 — (13) 41,783 Commercial paper 33,254 — — 33,254 Corporate bonds 11,069 — (2) 11,067 $ 86,119 $ — $ (15) $ 86,104 As of September 30, 2017, the Company held 17 securities that were in an unrealized loss position. The aggregate fair value of securities held by the Company in an unrealized loss position for less than 12 months at September 30, 2017 was $53,934 and there were no securities held by the Company in an unrealized loss position for more than 12 months. As of September 30, 2017, the Company did not intend to sell, and would not be more likely than not required to sell, the securities in an unrealized loss position before recovery of their amortized cost basis. Furthermore, the Company has determined that there was no material change in the credit risk of these securities. As a result, the Company determined it did not hold any securities with any other-than-temporary impairment as of September 30, 2017. There were no realized gains or losses on available-for-sale securities during the three and nine month periods ended September 30, 2017 and 2016. |
Accrued expenses
Accrued expenses | 9 Months Ended |
Sep. 30, 2017 | |
Accrued expenses | |
Accrued expenses | 6. Accrued expenses Accrued expenses consist of the following: September 30, December 31, 2017 2016 Accrued payroll and related expenses $ 2,155 $ 2,276 Accrued preclinical, manufacturing and clinical expenses 1,655 602 Accrued professional fees 457 402 Accrued other 340 148 $ 4,607 $ 3,428 |
Convertible preferred stock
Convertible preferred stock | 9 Months Ended |
Sep. 30, 2017 | |
Convertible preferred stock | |
Convertible preferred stock | 7. Convertible preferred stock Prior to January 1, 2016, the Company issued 25,085,153 shares of Series A-1 convertible preferred stock (Series A-1 Preferred Stock) at a purchase price of $1.0763 per share resulting in net proceeds of $26,336. In February 2015 and June 2016, the Company issued 9,410,551 and 23,526,368 shares of Series B-1 convertible preferred stock (Series B-1 Preferred Stock) at a purchase price of $1.0763 per share resulting in net proceeds of $35,232. In June 2016 the Company issued 14,674,062 shares of Series C-1 convertible preferred stock (Series C-1 Preferred Stock) at a purchase price of $2.25568 resulting in net proceeds of $32,882. In connection with the closing of the Company’s IPO in July 2017, all outstanding convertible preferred stock was converted into 16,154,671 shares of common stock. |
Stockholders_ equity (deficit)
Stockholders’ equity (deficit) | 9 Months Ended |
Sep. 30, 2017 | |
Stockholders’ equity (deficit) | |
Stockholders' deficit | 8. Stockholders’ equity (deficit Common stock The holders of the common stock are entitled to one vote for each share held. Common stockholders are not entitled to receive dividends, unless declared by the Board of Directors. At September 30, 2017, there were 3,335,205 shares of common stock reserved for the conversion of outstanding stock options and warrants. At December 31, 2016 there were 19,186,147 shares of common stock reserved for the conversion of outstanding Series A-1, Series B-1 and Series C-1 Preferred Stock and for the exercise of outstanding stock options and warrants (in common stock equivalent shares). September 30, 2017 December 31, 2016 Series A-1 Preferred Stock — 5,574,467 Series B-1 Preferred Stock — 7,319,307 Series C-1 Preferred Stock — 3,260,897 Warrants 129,491 129,491 Stock options 3,205,714 2,901,985 3,335,205 19,186,147 Warrants In connection with a 2013 Series A-1 Preferred Stock issuance, the Company granted to certain investors warrants to purchase 129,491 shares of common stock. The warrants have a $0.05 per share exercise price and a contractual life of 10 years. The fair value of these warrants was recorded as a component of equity at the time of issuance. |
Stock options
Stock options | 9 Months Ended |
Sep. 30, 2017 | |
Stock options | |
Stock options | 9. Stock options Stock option plans As of June 30, 2017, there were 3,141,625 options outstanding under the Company’s 2007 Stock Incentive Plan. The 2007 Plan expired in June 2017 and there will be no future grants under this plan. In June 2017 the Company’s shareholders approved the 2017 Stock Incentive Plan (the 2017 Plan or the Plan). Under the 2017 Plan, up to 2,255,000 shares of common stock may be granted to the Company's employees, officers, directors, consultants and advisors in the form of options, restricted stock awards or other stock-based awards. The number of shares of common stock issuable under the Plan will be cumulatively increased annually by 4% of the outstanding shares or such lesser amount specified by the Board of Directors (the Board). The terms of the awards are determined by the Board, subject to the provisions of the Plan. Any cancellations under the 2007 Plan would increase the number of shares that could be granted under the 2017 Plan. As of September 30, 2017 there were 2,160,664 shares available for future issuance under the Plan. With respect to incentive stock options, the option price per share will equal the fair market value of the common stock on the date of grant, as determined by the Board, and the vesting period is generally four years. Nonqualified stock options will be granted at an exercise price established by the Board at its sole discretion (which has not been less than fair market value on the date of grant) and the vesting periods may vary. Options granted under the Plan expire no later than 10 years from the date of grant. The Board may accelerate vesting or extend the expiration of granted options in the case of a merger, consolidation, dissolution, or liquidation of the Company. A summary of the activity under the Plans is as follows: Weighted- Remaining Number Average Contractual Life Aggregate of Shares Exercise Price (in years) Intrinsic Value Options outstanding January 1, 2017 2,901,985 $ 2.23 8.4 $ 8,906 Granted 545,624 8.49 Exercised (233,333) 1.85 Cancelled (8,562) 3.62 Options outstanding September 30, 2017 3,205,714 $ 3.32 8.0 $ 44,797 Options exercisable, September 30, 2017 1,423,801 $ 2.00 7.3 $ 21,764 The weighted-average grant date fair value of options granted during the nine months ended September 30, 2017 and 2016, was $5.27 and $2.19 per share, respectively. Cash received from the exercise of stock options was $431 and $ 81 for the nine months ended September 30, 2017 and 2016, respectively. Stock-based compensation The Company uses the provisions of ASC 718, Stock Compensation, to account for stock-based awards. The measurement date for employee awards is generally the date of grant. Stock-based compensation expense is recognized over the requisite service period, which is generally the vesting period, using the straight-line method. For the three months ended September 30, 2017 and 2016 and the nine months ended September 30, 2017 and 2016, the Company recorded stock-based compensation expense of $373, $196, $990 and $436, respectively. The Company has an aggregate of $ 4,705 of unrecognized stock compensation cost as of September 30, 2017 remaining to be amortized over the weighted-average period of 3.0 years. The fair value of each option award is estimated on the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions: Three months ended Nine months ended September 30, 2017 September 30, 2016 September 30, 2017 September 30, 2016 Risk-free interest rate 1.9 % 1.3 % 2.2 % 1.4 % Expected dividend yield — % — % — % — % Expected term (years) 6.01 6.25 6.22 6.25 Expected stock price volatility 65 % 71 % 67 % 71 % Employee Stock Purchase Plan In connection with the IPO, the Company's board of directors adopted and the Company's stockholders approved the 2017 employee stock purchase plan (the 2017 ESPP), which became effective upon the closing of the Company's IPO in July 2017. The Company has reserved 225,000 shares of common stock for issuance under the 2017 ESPP. The Company has not issued any shares under the 2017 ESPP. |
Commitments
Commitments | 9 Months Ended |
Sep. 30, 2017 | |
Commitments | |
Commitments | 10. Commitments Operating leases The Company leases office space in Cambridge, MA under an operating lease, which is effective through March 2019. The lease also provided the Company with a tenant improvement allowance of up to $356. The Company fully utilized the allowance and recorded the assets acquired with the allowance as leasehold improvements. The Company recorded the tenant improvement allowance as a deferred lease incentive and is amortizing the deferred lease incentive through a reduction of rent expense ratably over the lease term. In connection with the office lease, the Company has a letter of credit agreement for the benefit of its landlord in the amount of $321 as of each September 30, 2017 and December 31, 2016, respectively, collateralized by a money market account. The Company classified this amount as restricted cash in the accompanying consolidated balance sheets. For the three months ended September 30, 2017 and 2016 and for the nine months ended September 30, 2017 and 2016, rent expense was $419, $419, $1,256 and $1,256, respectively. The Company is recording rent expense on a straight-line basis over the term of the lease and has recorded deferred rent in the condensed consolidated balance sheets, accordingly. License agreements Through September 30, 2017 the Company has licensed intellectual property from two biotechnology companies. The consideration included upfront payments and a commitment to pay annual license fees, milestone payments, and, upon product commercialization, royalties on revenue generated from the sale of products covered by the licenses. The Company recorded milestone payments of $750 and $2,250 during the three and nine months ended September 30, 2017. |
Related party transactions
Related party transactions | 9 Months Ended |
Sep. 30, 2017 | |
Related party transactions | |
Related party transactions | 11. Related party transactions Included in Series C‑1 financing and the Company’s IPO are investments of $10,000 and $10,000 by Takeda, one of the Company’s collaborators. |
Subsequent Events
Subsequent Events | 9 Months Ended |
Sep. 30, 2017 | |
Subsequent events | |
Subsequent events | 12. Subsequent events For the purposes of the unaudited financial statements as of September 30, 2017 and the period then ended, the Company has evaluated subsequent events through November 9, 2017, the date the unaudited interim financial statements were issued. There were no items requiring adjustment or disclosure in the consolidated financial statements. |
Summary of significant accoun18
Summary of significant accounting policies (Policies) | 9 Months Ended |
Sep. 30, 2017 | |
Summary of significant accounting policies | |
Principles of consolidation | Principles of consolidation The accompanying condensed consolidated financial statements include those of the Company and its subsidiary, Mersana Securities Corp., which was established in December 2016. All intercompany balances and transactions have been eliminated. |
Use of estimates | Use of estimates The preparation of the Company's consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, equity, revenue, expenses and related disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenue and expenses during the reporting period. On an ongoing basis, the Company's management evaluates its estimates, which include, but are not limited to management's judgments with respect to the separate units of accounting and best estimate of selling price of those units of accounting within its revenue arrangements, accrued expenses, valuation of stock-based awards and income taxes. Actual results could differ from those estimates. The Company utilized significant estimates and assumptions in determining the fair value of its common stock prior to the Company’s IPO. The Company has utilized various valuation methodologies in accordance with the framework of the American Institute of Certified Public Accountants Technical Practice Aid, Valuation of Privately‑Held Company Equity Securities Issued as Compensation , the Practice Aid, to estimate the fair value of its common stock. Each valuation methodology includes estimates and assumptions that require the Company’s judgment. These estimates and assumptions include a number of objective and subjective factors, including external market conditions, the prices at which the Company sold shares of preferred stock, the superior rights and preferences of securities senior to the Company’s common stock at the time of, and the likelihood of, achieving a liquidity event, such as an initial public offering or sale. Significant changes to the key assumptions used in the valuations could result in different fair values of common stock at each valuation date. |
Segment information | Segment information Operating segments are defined as components of an enterprise about which separate discrete information is available for evaluation by the chief operating decision-maker in deciding how to allocate resources and assess performance. The Company and the Company's chief operating decision-maker, the Company's chief executive officer, view the Company's operations and manage its business as a single operating segment, which is the business of discovering and developing ADC’s. |
Research and development | Research and development The Company expenses all costs incurred in performing research and development activities. Research and development expenses include salaries and benefits, materials and supplies, preclinical expenses, manufacturing expenses, stock-based compensation expense, depreciation of equipment, contract services and other outside expenses. Costs of certain development activities, such as manufacturing, are recognized based on an evaluation of the progress to completion of specific tasks. Payments for these activities are based on the terms of the individual arrangements, which may differ from the pattern of costs incurred, and are reflected in the financial statements as prepaid or accrued research and development costs. Nonrefundable advance payments for goods or services to be received in the future for use in research and development activities are deferred and capitalized. The capitalized amounts are expensed as the related goods are delivered or the services are performed. Costs associated with collaboration agreements are included in research and development expense. |
Revenue recognition | Revenue recognition The Company recognizes revenue from collaboration arrangements in accordance with FASB ASC Topic 605, Revenue Recognition (ASC 605). Accordingly, revenue is recognized when all of the following criteria are met: · Persuasive evidence of an arrangement exists; · Delivery has occurred or services have been rendered; · The seller's price to the buyer is fixed or determinable; and · Collectibility is reasonably assured. Amounts received prior to satisfying the revenue recognition criteria are recorded as deferred revenue in the consolidated balance sheets. Amounts expected to be recognized as revenue within the 12 months following the balance sheet date are classified as current liabilities. Amounts not expected to be recognized as revenue within the 12 months following the balance sheet date are classified as deferred revenue, net of current portion. Multiple element arrangements The Company analyzes its strategic partnerships that include multiple element arrangements based on the guidance in FASB ASC Topic 605-25, Revenue Recognition—Multiple Element Arrangements , or ASC 605-25. Pursuant to the guidance in ASC 605-25, the Company evaluates multiple element arrangements to determine i) the deliverables included in the arrangement and ii) whether the individual deliverables represent separate units of accounting or whether they must be accounted for as a combined unit of accounting. This evaluation requires subjective determinations and requires management to make judgments about the individual deliverables and whether such deliverables are separable from the other aspects of the contractual relationship. Deliverables are considered separate units of accounting provided that: (i) the delivered item(s) has value to the customer on a standalone basis and (ii) if the arrangement includes a general right of return relative to the delivered item(s), delivery or performance of the undelivered item(s) 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 collaboration partner and the availability of the associated expertise in the general marketplace. In addition, the Company considers whether the collaboration partner can use the deliverable(s) for their intended purpose without the receipt of the remaining element(s), whether the value of the deliverable is dependent on the undelivered item(s) and whether there are other vendors that can provide the undelivered element(s). Options are considered substantive if, at the inception of the arrangement, the Company is at risk as to whether the collaboration partner will choose to exercise the option. Factors that the Company considers in evaluating whether an option is substantive include the cost to exercise the option, the overall objective of the arrangement, the benefit the collaborator might obtain from the arrangement without exercising the option and the likelihood the option will be exercised. When an option is considered substantive, the Company does not consider the option or item underlying the option to be a deliverable at the inception of the arrangement and the associated option fees are not included in the allocable consideration, assuming the option is not priced at a significant and incremental discount. Conversely, when an option is not considered substantive, the Company would consider the option including other deliverables contingent upon the exercise of the option, to be a deliverable at the inception of the arrangement and a corresponding amount would be included in the allocable arrangement consideration. Notwithstanding whether the option is considered substantive or non-substantive, if the price of the option includes a significant incremental discount, the discount would be included as a deliverable at the inception of the arrangement. Allocation of arrangement consideration Arrangement consideration that is fixed or determinable is allocated among the separate units of accounting using the relative selling price method. Then, the applicable revenue recognition criteria in ASC 605-25 are applied to each of the separate units of accounting in determining the appropriate period and pattern of recognition. The Company determines the selling price of a unit of accounting following the hierarchy of evidence prescribed by ASC 605-25. Accordingly, the Company determines the estimated selling price for units of accounting within each arrangement using vendor-specific objective evidence (VSOE) of selling price, if available, third-party evidence (TPE) of selling price if VSOE is not available, or best estimate of selling price (BESP) if neither VSOE nor TPE is available. The Company typically uses BESP to estimate the selling price, since it generally does not have VSOE or TPE of selling price for its units of accounting. Determining the BESP for a unit of accounting requires significant judgment. In developing the BESP for a unit of accounting, the Company considers applicable market conditions and relevant entity-specific factors, including factors that were contemplated in negotiating the agreement with the customer 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. Pattern of recognition The Company recognizes arrangement consideration allocated to each unit of accounting when all of the revenue recognition criteria in ASC 605 are satisfied for that particular unit of accounting. Deliverables under collaboration agreements generally consist of licenses and research and development services. License revenue is recognized when the license is delivered when it is determined to have standalone value from the undelivered elements of the arrangement. If the license does not have standalone value, the amounts allocated to the license will be combined with the related undelivered items as a single unit of accounting. The revenue recognition of a combined unit of accounting typically follows the pattern of revenue of the last delivered item in the combined accounting unit. The Company recognizes the amounts associated with research and development services and other service related deliverables over the associated period of performance. If there is no discernable pattern of performance 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 is expected to complete its performance obligations. Conversely, if the pattern of performance in which the service is provided to the customer can be determined and objectively measurable performance exists, then the Company recognizes revenue under the arrangement using the proportional performance method. The Company recognizes revenue associated with license options upon exercise of the option, if the underlying license has standalone value from the other deliverables to be provided subsequent to delivery of the license. If the license does not have standalone value, the amounts allocated to the license option will be combined with the related undelivered items as a single unit of accounting. Revenue recognized is limited to the lesser of the cumulative amount of payments received or the cumulative revenue earned determined using the straight-line method or proportional performance, as applicable, as of the period end date. Recognition of milestones and royalties At the inception of each arrangement that includes milestone payments, the Company evaluates whether each milestone is substantive and at-risk. This evaluation includes an assessment of whether (a) the consideration is commensurate with either (1) the entity's performance to achieve the milestone, or (2) the enhancement of the value of the delivered item(s) as a result of a specific outcome resulting at least in part from the entity's performance to achieve the milestone, (b) the consideration relates solely to past performance, and (c) the consideration is reasonable relative to all of the deliverables and payment terms within the arrangement. The Company evaluates factors such as the scientific, regulatory, commercial, and other risks that must be overcome to achieve the respective milestone, the level of effort and investment required to achieve the respective milestone, and whether the milestone consideration is reasonable relative to all deliverables and payment terms in the arrangement in making this assessment. On the milestone achievement date, assuming all other revenue recognition criteria are met and the milestone is deemed substantive and at-risk, the Company recognizes the payment as collaboration revenue. For milestones that are not deemed substantive and at-risk, where payment is reasonably assured, the Company recognizes the milestone payment over the remaining service period. The Company will recognize royalty revenue, if any, in the period of sale of the related product(s), based on the underlying contract terms, provided that the reported sales are reliably measurable and the Company has no remaining performance obligations, assuming all other revenue recognition criteria are met. Collaborative arrangements The Company records the elements of its collaboration agreements that represent joint operating activities in accordance with ASC Topic 808, Collaborative Arrangements (ASC 808). Accordingly, the elements of the collaboration agreements that represent activities in which both parties are active participants and to which both parties are exposed to the significant risks and rewards that are dependent on the commercial success of the activities, are recorded as collaborative arrangements. The Company considers the guidance in ASC Topic 605-45, Revenue Recognition—Principal Agent Considerations (ASC 605-45) in determining the appropriate treatment for the transactions between the Company and its collaborative partner and the transactions between the Company and third parties. Generally, the classification of transactions under the collaborative arrangements is determined based on the nature and contractual terms of the arrangement along with the nature of the operations of the participants. To the extent revenue is generated from a collaboration, the Company will recognize its share of the net sales on a gross basis if it is deemed to be the principal in the transactions with customers, or on a net basis if it is instead deemed to be the agent in the transactions with customers, consistent with the guidance in ASC 605-45. |
Fair value measurements | Fair value measurements Fair value is defined as the price that would be received upon sale of an asset or paid to transfer a liability between market participants at measurement dates. ASC Topic 820 Fair Value Measurement (ASC 820), establishes a three-level valuation hierarchy for instruments measured at fair value. The hierarchy is based on the transparency of inputs to the valuation of an asset or liability as of the measurement date. The three levels are defined as follows: Level 1—Inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets. Level 2—Inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument. Level 3—Inputs to the valuation methodology are unobservable and significant to the fair value measurement. |
Cash and cash equivalents | Cash and cash equivalents The Company considers all highly liquid investments with an original maturity, or a remaining maturity at the time of purchase, of three months or less to be cash equivalents. The Company invests excess cash primarily in money market funds, commercial paper and government agency securities, which are highly liquid and have strong credit ratings. These investments are subject to minimal credit and market risks. Cash and cash equivalents are stated at cost, which approximates market value. |
Marketable securities | Marketable securities Short-term marketable securities consist of investments with maturities greater than three months and less than one year from the balance sheet date. Long-term marketable securities consist of investments with maturities greater than one year that are not expected to be used to fund current operations. The Company classifies all of its marketable securities as available-for-sale. Accordingly, these investments are recorded at fair value. Amortization and accretion of discounts and premiums are recorded as interest income within other income. Unrealized gains and losses on available-for-sale securities are included in other comprehensive loss as a component of stockholders’ equity (deficit) until realized. |
Restricted cash | Restricted cash Restricted cash of $371 is recorded in other non-current assets as of September 30, 2017 and December 31, 2016 and includes amounts held as security deposits for a standby letter of credit related to a facility lease and a corporate credit card program. |
Net loss per share | Net loss per share Basic net loss per common share is calculated by dividing the net loss attributable to common stockholders by the weighted-average number of common shares outstanding during the period, without consideration for potentially dilutive securities. Diluted net loss per share is computed by dividing the net loss attributable to common stockholders by the weighted-average number of common shares and potentially dilutive securities outstanding for the period determined using the treasury stock and if-converted methods. For purposes of the diluted net loss per share calculation, convertible preferred stock, warrants to purchase common stock and options to purchase common stock are considered to be potentially dilutive securities, but are excluded from the calculation of diluted net loss per share because their effect would be anti-dilutive and therefore, basic and diluted net loss per share were the same for all periods presented. The following table sets forth the outstanding potentially dilutive securities that have been excluded from the calculation of diluted net loss per share because to include them would be anti-dilutive (in common stock equivalent shares): Three months ended Nine months ended September 30, 2017 September 30, 2016 September 30, 2017 September 30, 2016 Series A-1 convertible preferred stock — 5,574,467 — 5,574,467 Series B-1 convertible preferred stock — 7,319,307 — 7,319,307 Series C-1 convertible preferred stock — 3,260,897 — 3,260,897 Warrants 129,491 129,491 129,491 129,491 Stock options 3,205,714 2,827,280 3,205,714 2,827,280 3,335,205 19,111,442 3,335,205 19,111,442 |
Disclosure - Summary of signifi
Disclosure - Summary of significant accounting policies (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
Summary of significant accounting policies | |
Schedule of outstanding potentially dilutive securities excluded from calculation of diluted net loss per share | Three months ended Nine months ended September 30, 2017 September 30, 2016 September 30, 2017 September 30, 2016 Series A-1 convertible preferred stock — 5,574,467 — 5,574,467 Series B-1 convertible preferred stock — 7,319,307 — 7,319,307 Series C-1 convertible preferred stock — 3,260,897 — 3,260,897 Warrants 129,491 129,491 129,491 129,491 Stock options 3,205,714 2,827,280 3,205,714 2,827,280 3,335,205 19,111,442 3,335,205 19,111,442 |
Fair value measurements (Tables
Fair value measurements (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
Fair value measurements | |
Schedule of assets and liabilities measured and carried at fair value | Significant Quoted Prices Other Significant in Active Observable Unobservable Fair Markets Inputs Inputs Value (Level 1) (Level 2) (Level 3) September 30, 2017 Cash and cash equivalents $ 50,756 $ 50,756 $ — $ — Marketable securities: U.S. Treasuries 41,783 41,783 — — Commercial paper 33,254 — 33,254 — Corporate bonds 11,067 — 11,067 — $ 136,860 $ 92,539 $ 44,321 $ — Significant Quoted Prices Other Significant in Active Observable Unobservable Fair Markets Inputs Inputs Value (Level 1) (Level 2) (Level 3) December 31, 2016 Cash and cash equivalents $ 100,297 $ 100,297 $ — $ — $ 100,297 $ 100,297 $ — $ — |
Marketable securities (Tables)
Marketable securities (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
Marketable securities | |
Schedule of reconciliation of marketable securities from cost basis to fair value | Gross Gross Amortized Unrealized Unrealized Fair Cost Gains Losses Value September 30, 2017 U.S. Treasuries 41,796 — (13) 41,783 Commercial paper 33,254 — — 33,254 Corporate bonds 11,069 — (2) 11,067 $ 86,119 $ — $ (15) $ 86,104 |
Accrued expenses (Tables)
Accrued expenses (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
Accrued expenses | |
Schedule of accrued expenses | September 30, December 31, 2017 2016 Accrued payroll and related expenses $ 2,155 $ 2,276 Accrued preclinical, manufacturing and clinical expenses 1,655 602 Accrued professional fees 457 402 Accrued other 340 148 $ 4,607 $ 3,428 |
Stockholders_ equity (deficit)
Stockholders’ equity (deficit) (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
Stockholders’ equity (deficit) | |
Schedule for number of common stock reserved for conversion of outstanding Preferred Stock and for the exercise of outstanding stock options and warrants | September 30, 2017 December 31, 2016 Series A-1 Preferred Stock — 5,574,467 Series B-1 Preferred Stock — 7,319,307 Series C-1 Preferred Stock — 3,260,897 Warrants 129,491 129,491 Stock options 3,205,714 2,901,985 3,335,205 19,186,147 |
Stock options (Tables)
Stock options (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
Stock options | |
Schedule of stock option activity under Plan | Weighted- Remaining Number Average Contractual Life Aggregate of Shares Exercise Price (in years) Intrinsic Value Options outstanding January 1, 2017 2,901,985 $ 2.23 8.4 $ 8,906 Granted 545,624 8.49 Exercised (233,333) 1.85 Cancelled (8,562) 3.62 Options outstanding September 30, 2017 3,205,714 $ 3.32 8.0 $ 44,797 Options exercisable, September 30, 2017 1,423,801 $ 2.00 7.3 $ 21,764 |
Schedule of weighted average assumptions for estimating fair value of option awards | Three months ended Nine months ended September 30, 2017 September 30, 2016 September 30, 2017 September 30, 2016 Risk-free interest rate 1.9 % 1.3 % 2.2 % 1.4 % Expected dividend yield — % — % — % — % Expected term (years) 6.01 6.25 6.22 6.25 Expected stock price volatility 65 % 71 % 67 % 71 % |
Nature of business and basis 25
Nature of business and basis of presentation - IPO (Details) $ / shares in Units, $ in Thousands | Aug. 02, 2017USD ($)$ / sharesshares | Jul. 03, 2017USD ($)$ / sharesshares | Jun. 15, 2017 | Jul. 31, 2017shares | Sep. 30, 2017USD ($)$ / sharesshares | Dec. 31, 2016$ / sharesshares |
Initial public offering | ||||||
Convertible preferred stock converted into commons stock | shares | 16,154,671 | 16,154,671 | ||||
Preferred shares, shares outstanding | shares | 0 | 0 | 0 | |||
Common stock, shares authorized | shares | 175,000,000 | 175,000,000 | 95,000,000 | |||
Common stock, par value (in dollars per share) | $ / shares | $ 0.0001 | $ 0.0001 | $ 0.0001 | |||
Preferred stock, share authorized | shares | 25,000,000 | 25,000,000 | 0 | |||
Preferred shares, par value (in dollars per share) | $ / shares | $ 0.0001 | $ 0.0001 | $ 0.0001 | |||
Reverse stock split | 0.2222 | |||||
IPO | ||||||
Initial public offering | ||||||
Issuance of stock (in shares) | shares | 5,000,000 | |||||
Share price (in dollars per share) | $ / shares | $ 15 | |||||
Gross proceeds | $ | $ 75,000 | |||||
Net proceeds from issuance of stock | $ | 67,420 | $ 67,420 | ||||
Underwriting discounts and commissions and other offering costs | $ | $ 7,580 | |||||
Underwriter's option | ||||||
Initial public offering | ||||||
Issuance of stock (in shares) | shares | 51,977 | |||||
Share price (in dollars per share) | $ / shares | $ 15 | |||||
Gross proceeds | $ | $ 780 | |||||
Net proceeds from issuance of stock | $ | 725 | $ 725 | ||||
Underwriting discounts and commissions and other offering costs | $ | $ 55 |
Nature of business and basis 26
Nature of business and basis of presentation - Liquidity (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | Dec. 31, 2016 | |
Nature of business and basis of presentation | |||||
Net loss | $ (7,732) | $ (5,837) | $ (24,740) | $ (14,959) | $ (13,700) |
Accumulated deficit | $ (83,911) | $ (83,911) | $ (59,171) |
Summary of significant accoun27
Summary of significant accounting policies - Restricted cash (Details) - USD ($) $ in Thousands | Sep. 30, 2017 | Dec. 31, 2016 |
Restricted Cash | ||
Restricted cash | $ 371 | $ 371 |
Summary of significant accoun28
Summary of significant accounting policies - Antidilutive securities (Details) - shares | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
Anti-dilutive securities | ||||
Anti-dilutive securities | 3,335,205 | 19,111,442 | 3,335,205 | 19,111,442 |
Series A-1 convertible preferred stock | ||||
Anti-dilutive securities | ||||
Anti-dilutive securities | 5,574,467 | 5,574,467 | ||
Series B-1 convertible preferred stock | ||||
Anti-dilutive securities | ||||
Anti-dilutive securities | 7,319,307 | 7,319,307 | ||
Series C-1 convertible preferred stock | ||||
Anti-dilutive securities | ||||
Anti-dilutive securities | 3,260,897 | 3,260,897 | ||
Warrants | ||||
Anti-dilutive securities | ||||
Anti-dilutive securities | 129,491 | 129,491 | 129,491 | 129,491 |
Stock options. | ||||
Anti-dilutive securities | ||||
Anti-dilutive securities | 3,205,714 | 2,827,280 | 3,205,714 | 2,827,280 |
Collaboration agreements - Take
Collaboration agreements - Takeda partnership (Details) $ in Thousands | 1 Months Ended | 9 Months Ended | 12 Months Ended | |||
Jan. 31, 2016USD ($)productitem | Jan. 31, 2015USD ($)item | Mar. 31, 2014USD ($)item | Dec. 31, 2014USD ($) | Dec. 31, 2014USD ($) | Sep. 30, 2017USD ($)item | |
2014, 2015 and 2016 Takeda Agreements | ||||||
Collaboration agreements | ||||||
Number of targets | item | 7 | |||||
Number of targets designated | item | 4 | |||||
Amount of option exercise fee for second designated target | $ 1,300 | |||||
Number of targets Tokeda has remaining | item | 3 | |||||
Number of targets Tokeda has the limited right to replace | item | 2 | |||||
Aggregate milestones | $ 1,063,300 | |||||
Development milestones | 107,800 | |||||
Regulatory milestones | 325,000 | |||||
Commercial milestones | 630,500 | |||||
Milestone on each of the first and second designated targets | 136,000 | |||||
Milestone on each of the remaining designated targets | $ 158,300 | |||||
Number of individual development milestones per target | item | 4 | |||||
Number of individual commercial milestones per target | item | 6 | |||||
Number of thresholds for annual net sales | item | 3 | |||||
Next potential development milestone payment eligible to receive | $ 500 | |||||
Amount of next potential milestone receivable related to filing IND | $ 750 | |||||
2014, 2015 and 2016 Takeda Agreements | Minimum | ||||||
Collaboration agreements | ||||||
Number of individual regulatory milestones per target | item | 6 | |||||
2014, 2015 and 2016 Takeda Agreements | Maximum | ||||||
Collaboration agreements | ||||||
Number of individual regulatory milestones per target | item | 8 | |||||
2014 Tokeda Agreement | ||||||
Collaboration agreements | ||||||
Number of targets | item | 2 | |||||
Amount of technology access fee per target | $ 500 | |||||
Amount of option exercise fee for first designated target | 1,300 | |||||
Upfront payment received | 1,150 | |||||
Technology access fee for first designated target received | 500 | |||||
Option exercise fee for first designated target received | 650 | $ 650 | ||||
Amount of option exercise fee for first designated target | $ 1,300 | |||||
Technology access fee for second designated target received | $ 500 | $ 500 | ||||
2015 Amended Tokeda Agreement | ||||||
Collaboration agreements | ||||||
Number of targets | item | 2 | |||||
Upfront payment received | $ 9,000 | |||||
Amount to be received for second limited replacement right | $ 500 | |||||
2016 Restated Tokeda Agreement | ||||||
Collaboration agreements | ||||||
Number of targets | item | 3 | |||||
Upfront payment received | $ 13,500 | |||||
Number of products entity may elect to co-develop and co-commercialize | product | 1 | |||||
Payment for option to co-develop and co-commercialize product | $ 15,000 | |||||
Share of profit related to United States (as a percent) | 50.00% | |||||
Costs incurred in United States (as a percent) | 50.00% | |||||
Global development costs (as a percent) | 30.00% | |||||
Costs incurred specifically for a foreign country borne by Takeda (as a percent) | 100.00% | |||||
Prior written notice for termination period | 45 days |
Collaboration agreements - XMT-
Collaboration agreements - XMT-1522 Agreement (Details) $ in Thousands | Jul. 03, 2017USD ($) | Oct. 31, 2016USD ($) | Jun. 30, 2016USD ($) | Jan. 31, 2016USD ($)item | Sep. 30, 2017USD ($) | Sep. 30, 2016USD ($) |
Series C-1 convertible preferred stock | ||||||
Collaboration agreements | ||||||
Amount invested in Company | $ 32,882 | $ 32,882 | ||||
XMT-1522 Agreement | ||||||
Collaboration agreements | ||||||
Upfront payment received | $ 26,500 | |||||
Milestone payment upon achievement of IND Clearance Date | 20,000 | |||||
Milestone payment received upon achievement of the IND Clearance Date | $ 20,000 | |||||
Aggregate milestones, excluding milestone payment upon achievement of IND Clearance Date | 288,000 | |||||
Development milestones | 87,000 | |||||
Regulatory milestones | 128,000 | |||||
Commercial milestones | $ 73,000 | |||||
Number of separate events to be achieved | item | 9 | |||||
Number of separate specified patient populations | item | 4 | |||||
Number of additional unspecified patient populations | item | 1 | |||||
Number of individual commercial milestones per target | item | 3 | |||||
Next potential development milestone payment eligible to receive | $ 12,000 | |||||
Prior written notice for termination, before initiation of clinical study | 30 days | |||||
Prior written notice for termination, after initiation of clinical study | 90 days | |||||
XMT-1522 Agreement | United States, European Union and Japan | ||||||
Collaboration agreements | ||||||
Number of regulatory milestones | item | 14 | |||||
XMT-1522 Agreement | Locations other than United States, European Union and Japan | ||||||
Collaboration agreements | ||||||
Number of specified markets in which regulatory milestone is payable | item | 2 | |||||
XMT-1522 Agreement | Maximum | ||||||
Collaboration agreements | ||||||
Equity investments committed to be made in Company | $ 20,000 | |||||
XMT-1522 Agreement | Maximum | United States, European Union and Japan | ||||||
Collaboration agreements | ||||||
Number of separate patient populations, regulatory milestone | item | 4 | |||||
Takeda | ||||||
Collaboration agreements | ||||||
Proceeds from IPO | $ 10,000 | 10,000 | ||||
Takeda | Series C-1 convertible preferred stock | ||||||
Collaboration agreements | ||||||
Amount invested in Company | $ 10,000 | $ 10,000 |
Collaboration agreements - 2014
Collaboration agreements - 2014 Agreement - Accounting (Details) - 2014 Tokeda Agreement $ in Thousands | 1 Months Ended | 9 Months Ended | 12 Months Ended |
Mar. 31, 2014USD ($)item | Dec. 31, 2014USD ($) | Dec. 31, 2014USD ($) | |
Accounting analysis | |||
Option exercise fee paid by Takeda (as a percent) | 50.00% | ||
Amount of option exercise fee for first designated target | $ 1,300 | ||
Additional payments required in connection with the first replacement option | 0 | ||
Total arrangement consideration | 4,500 | ||
Technology access fee for first designated target received | 500 | ||
Expected fees for research services | $ 2,700 | ||
Technology access fee for second designated target received | $ 500 | $ 500 | |
Research license and related service, First designated target | |||
Accounting analysis | |||
Number of units of accounting | item | 1 | ||
Selling price allocation | $ 2,790 | ||
Commercial license, First designated target | |||
Accounting analysis | |||
Selling price allocation | 1,125 | ||
Replacement right, Designated target | |||
Accounting analysis | |||
Selling price allocation | 450 | ||
Future technological improvements | |||
Accounting analysis | |||
Selling price allocation | 45 | ||
Joint research committee services, Takeda | |||
Accounting analysis | |||
Selling price allocation | $ 90 |
Collaboration agreements - 2015
Collaboration agreements - 2015 Agreement - Accounting (Details) - 2015 Amended Tokeda Agreement $ in Thousands | 1 Months Ended |
Jan. 31, 2015USD ($) | |
Accounting analysis | |
Amount of additional payment to be received in connection with options to obtain licenses for third and fourth designated targets | $ 0 |
Total arrangement consideration | 16,697 |
Upfront payment received | 9,000 |
Expected fees for research services | 5,776 |
Remaining deferred revenue | 1,921 |
Exclusive development and commercialization license and related research services, First designated target | |
Accounting analysis | |
Selling price allocation | 4,308 |
Research license and related services, Second designated target | |
Accounting analysis | |
Selling price allocation | 1,611 |
Research license and related services, Third designated target | |
Accounting analysis | |
Selling price allocation | 1,611 |
Research license and related services, Fourth designated target | |
Accounting analysis | |
Selling price allocation | 1,611 |
Replacement right, First or second designated target | |
Accounting analysis | |
Selling price allocation | 388 |
Discount on exclusive license, Second designated target | |
Accounting analysis | |
Selling price allocation | 524 |
Exclusive development and commercialization license and related research services, Third designated target | |
Accounting analysis | |
Selling price allocation | 3,105 |
Exclusive development and commercialization license and related research services, Fourth designated target | |
Accounting analysis | |
Selling price allocation | 3,105 |
Future technological improvements | |
Accounting analysis | |
Selling price allocation | 262 |
Joint research committee services, Takeda | |
Accounting analysis | |
Selling price allocation | $ 174 |
Collaboration agreements - 2016
Collaboration agreements - 2016 Takeda and XMT-1522 Agreements - Accounting (Details) - USD ($) $ in Thousands | 1 Months Ended | 3 Months Ended | 9 Months Ended | ||
Jan. 31, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
Accounting analysis | |||||
Research and development | $ 11,412 | $ 7,555 | $ 32,145 | $ 23,163 | |
2016 Restated Tokeda Agreement and XMT-1522 Agreement | |||||
Accounting analysis | |||||
Total arrangement consideration | $ 50,089 | 46,148 | 46,148 | ||
Upfront payment received | 13,500 | ||||
Expected fees for research services | 9,515 | 4,160 | 4,160 | ||
Remaining deferred revenue | 7,498 | ||||
Non-creditable portion of XMT-1522 upfront fee | 13,250 | ||||
Expected reimbursement for related services | 6,326 | 7,740 | 7,740 | ||
License consideration and research plan extension fee received | 800 | ||||
2016 Restated Tokeda Agreement and XMT-1522 Agreement | Exclusive development and commercialization license and related research services, First designated target | |||||
Accounting analysis | |||||
Selling price allocation | 4,502 | ||||
2016 Restated Tokeda Agreement and XMT-1522 Agreement | Research license and related services, Second designated target | |||||
Accounting analysis | |||||
Selling price allocation | 1,362 | ||||
2016 Restated Tokeda Agreement and XMT-1522 Agreement | Discount on exclusive license, Second designated target | |||||
Accounting analysis | |||||
Selling price allocation | 553 | ||||
2016 Restated Tokeda Agreement and XMT-1522 Agreement | Exclusive development and commercialization license and related research services, Third designated target | |||||
Accounting analysis | |||||
Selling price allocation | 4,546 | ||||
2016 Restated Tokeda Agreement and XMT-1522 Agreement | Exclusive development and commercialization license and related research services, Fourth designated target | |||||
Accounting analysis | |||||
Selling price allocation | 4,975 | ||||
2016 Restated Tokeda Agreement and XMT-1522 Agreement | Exclusive development and commercialization license and related research services, Fifth designated target | |||||
Accounting analysis | |||||
Selling price allocation | 4,975 | ||||
2016 Restated Tokeda Agreement and XMT-1522 Agreement | Exclusive development and commercialization license and related research services, Sixth designated target | |||||
Accounting analysis | |||||
Selling price allocation | 4,975 | ||||
2016 Restated Tokeda Agreement and XMT-1522 Agreement | Exclusive development and commercialization license and related research services, Seventh designated target | |||||
Accounting analysis | |||||
Selling price allocation | 4,975 | ||||
2016 Restated Tokeda Agreement and XMT-1522 Agreement | First replacement right, Designated target | |||||
Accounting analysis | |||||
Selling price allocation | 3,685 | ||||
2016 Restated Tokeda Agreement and XMT-1522 Agreement | Discount on second replacement right, Designated target | |||||
Accounting analysis | |||||
Selling price allocation | 3,276 | ||||
2016 Restated Tokeda Agreement and XMT-1522 Agreement | Future technological improvements | |||||
Accounting analysis | |||||
Selling price allocation | 1,843 | ||||
2016 Restated Tokeda Agreement and XMT-1522 Agreement | Joint research committee services, Takeda | |||||
Accounting analysis | |||||
Selling price allocation | 157 | ||||
2016 Restated Tokeda Agreement and XMT-1522 Agreement | License and related services, XMT-1522 | |||||
Accounting analysis | |||||
Selling price allocation | 39,901 | ||||
2016 Restated Tokeda Agreement and XMT-1522 Agreement | Joint research committee services, XMT-1522 | |||||
Accounting analysis | |||||
Selling price allocation | 472 | ||||
XMT-1522 Agreement | |||||
Accounting analysis | |||||
Research and development | $ 924 | $ 196 | $ 1,719 | $ 353 | |
Upfront payment received | $ 26,500 |
Collaboration agreements - Ta34
Collaboration agreements - Takeda agreements - Accounting (Details) - USD ($) $ / shares in Units, $ in Thousands | 1 Months Ended | 3 Months Ended | 9 Months Ended | 12 Months Ended | |||
Oct. 31, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | Dec. 31, 2016 | Jan. 31, 2016 | |
Accounting analysis | |||||||
Collaboration revenue | $ 6,267 | $ 3,262 | $ 14,284 | $ 13,175 | |||
Accounts receivable | 731 | 731 | $ 1,051 | ||||
Deferred revenue, current | 16,476 | 16,476 | 22,731 | ||||
Net income (loss) | $ (7,732) | $ (5,837) | $ (24,740) | $ (14,959) | (13,700) | ||
Net income (loss) per share attributable to common stockholders — basic and diluted | $ (0.35) | $ (4.56) | $ (2.94) | $ (11.72) | |||
Takeda Agreements | |||||||
Accounting analysis | |||||||
Collaboration revenue | $ 5,768 | $ 2,422 | $ 12,052 | $ 10,456 | |||
Accounts receivable | 484 | 484 | 542 | ||||
Deferred revenue | 43,578 | 43,578 | 52,066 | ||||
Deferred revenue, current | 11,263 | 11,263 | $ 16,536 | ||||
Takeda Agreements | Change in estimate, Research service costs | |||||||
Accounting analysis | |||||||
Collaboration revenue | 4,028 | $ 4,028 | |||||
Net income (loss) | $ 4,028 | ||||||
Net income (loss) per share attributable to common stockholders — basic and diluted | $ 0.18 | ||||||
XMT-1522 Agreement | |||||||
Accounting analysis | |||||||
Milestone payment upon achievement of IND Clearance Date | $ 20,000 | ||||||
Milestone payment received upon achievement of the IND Clearance Date | $ 20,000 | ||||||
Future technological improvements | Takeda Agreements | |||||||
Accounting analysis | |||||||
Estimated performance period in which revenue will be recognized | 10 years | ||||||
Joint research committee services | Takeda Agreements | |||||||
Accounting analysis | |||||||
Estimated performance period in which revenue will be recognized | 6 years |
Collaboration agreements - Merc
Collaboration agreements - Merck KGaA Agreement (Details) $ in Thousands | 1 Months Ended | 3 Months Ended | 9 Months Ended | 31 Months Ended | ||
Jun. 30, 2014USD ($)item | Sep. 30, 2017USD ($)item | Sep. 30, 2016USD ($) | Sep. 30, 2017USD ($)item | Sep. 30, 2016USD ($) | Dec. 31, 2016USD ($) | |
Collaboration agreements | ||||||
Collaboration revenue | $ 6,267 | $ 3,262 | $ 14,284 | $ 13,175 | ||
Accounts receivable | 731 | 731 | $ 1,051 | |||
Deferred revenue, current | 16,476 | 16,476 | 22,731 | |||
Merck KGaA | ||||||
Collaboration agreements | ||||||
Upfront payment received | $ 12,000 | |||||
Number of targets | item | 6 | |||||
Amount of additional fees receivable when target is designated and commercial license to target is granted | $ 0 | |||||
Aggregate milestones | 780,000 | |||||
Development milestones | 84,000 | |||||
Regulatory milestones | 264,000 | |||||
Sales milestones | $ 432,000 | |||||
Number of individual development milestones per target | item | 6 | |||||
Number of individual regulatory milestones per target | item | 5 | |||||
Number of individual commercial milestones per target | item | 3 | |||||
Milestone revenue received and recognized | 500 | 2,000 | ||||
Next potential development milestone payment eligible to receive | $ 500 | $ 500 | ||||
Number of targets designated | item | 6 | 6 | 6 | |||
Prior written notice for termination period | 60 days | |||||
Total arrangement consideration | $ 23,025 | $ 19,875 | $ 19,875 | |||
Expected fees for research services | 11,025 | 7,875 | 7,875 | |||
Collaboration revenue | 499 | $ 777 | 2,107 | $ 2,656 | ||
Accounts receivable | 51 | 51 | 509 | |||
Deferred revenue | 7,335 | 7,335 | 8,236 | |||
Deferred revenue, current | 5,213 | $ 5,213 | $ 6,195 | |||
First and second targets combined | Merck KGaA | ||||||
Collaboration agreements | ||||||
Selling price allocation | 6,428 | |||||
License and corresponding research and development services | Merck KGaA | ||||||
Collaboration agreements | ||||||
Selling price allocation | $ 3,723 | 3,214 | ||||
Estimated period in which revenue will be recognize | 36 months | |||||
Future technological improvements | Merck KGaA | ||||||
Collaboration agreements | ||||||
Selling price allocation | $ 437 | 376 | ||||
Estimated performance period in which revenue will be recognized | 10 years | |||||
Joint research committee services | Merck KGaA | ||||||
Collaboration agreements | ||||||
Selling price allocation | $ 248 | $ 214 | ||||
Estimated performance period in which revenue will be recognized | 6 years |
Collaboration agreements - Asan
Collaboration agreements - Asana BioSciences Agreement (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | Dec. 31, 2016 | |
Collaboration agreements | |||||
Collaboration revenue | $ 6,267 | $ 3,262 | $ 14,284 | $ 13,175 | |
Asana BioSciences | |||||
Collaboration agreements | |||||
Total arrangement consideration | $ 250 | ||||
Collaboration revenue | $ 0 | $ 63 | $ 125 | $ 63 |
Fair value measurements (Detail
Fair value measurements (Details) - USD ($) $ in Thousands | Sep. 30, 2017 | Dec. 31, 2016 | Sep. 30, 2016 |
Fair value measurements | |||
Cash and cash equivalents | $ 50,756 | $ 100,297 | |
Marketable securities | 86,104 | ||
Total assets | 136,860 | 100,297 | |
Transfers between fair value measurement level 1 to level 2 | 0 | $ 0 | |
Transfers between fair value measurement level 2 to level 1 | 0 | $ 0 | |
U.S. Treasuries | |||
Fair value measurements | |||
Marketable securities | 41,783 | ||
Commercial paper | |||
Fair value measurements | |||
Marketable securities | 33,254 | ||
Corporate bonds | |||
Fair value measurements | |||
Marketable securities | 11,067 | ||
Quoted Prices in Active Markets (Level 1) | |||
Fair value measurements | |||
Cash and cash equivalents | 50,756 | 100,297 | |
Total assets | 92,539 | $ 100,297 | |
Quoted Prices in Active Markets (Level 1) | U.S. Treasuries | |||
Fair value measurements | |||
Marketable securities | 41,783 | ||
Significant Other Observable Inputs (Level 2) | |||
Fair value measurements | |||
Total assets | 44,321 | ||
Significant Other Observable Inputs (Level 2) | Commercial paper | |||
Fair value measurements | |||
Marketable securities | 33,254 | ||
Significant Other Observable Inputs (Level 2) | Corporate bonds | |||
Fair value measurements | |||
Marketable securities | $ 11,067 |
Marketable securities (Details)
Marketable securities (Details) $ in Thousands | 9 Months Ended | |
Sep. 30, 2017USD ($)security | Sep. 30, 2016USD ($) | |
Marketable securities | ||
Amortized Cost | $ 86,119 | |
Gross Unrealized Losses | (15) | |
Marketable securities | $ 86,104 | |
Number of securities in an unrealized loss position for less than 12 months | security | 17 | |
Aggregate fair value of securities in an unrealized loss position for less than 12 months | $ 53,934 | |
Number of securities in an unrealized loss position for more than 12 months | security | 0 | |
Number of securities with other-than-temporary impairment | security | 0 | |
Realized gains (losses) on available-for-sale securities | $ 0 | $ 0 |
U.S. Treasuries | ||
Marketable securities | ||
Amortized Cost | 41,796 | |
Gross Unrealized Losses | (13) | |
Marketable securities | 41,783 | |
Commercial paper | ||
Marketable securities | ||
Amortized Cost | 33,254 | |
Marketable securities | 33,254 | |
Corporate bonds | ||
Marketable securities | ||
Amortized Cost | 11,069 | |
Gross Unrealized Losses | (2) | |
Marketable securities | $ 11,067 |
Accrued expenses (Details)
Accrued expenses (Details) - USD ($) $ in Thousands | Sep. 30, 2017 | Dec. 31, 2016 |
Accrued expenses | ||
Accrued payroll and related expenses | $ 2,155 | $ 2,276 |
Accrued preclinical, manufacturing and clinical expenses | 1,655 | 602 |
Accrued professional fees | 457 | 402 |
Accrued other | 340 | 148 |
Total | $ 4,607 | $ 3,428 |
Convertible preferred stock (De
Convertible preferred stock (Details) - USD ($) $ / shares in Units, $ in Thousands | Jul. 03, 2017 | Jul. 31, 2017 | Jun. 30, 2016 | Feb. 28, 2015 | Sep. 30, 2016 | Jun. 30, 2016 | Dec. 31, 2015 |
Convertible preferred stock. | |||||||
Convertible preferred stock converted into commons stock | 16,154,671 | 16,154,671 | |||||
Series A-1 convertible preferred stock | |||||||
Convertible preferred stock. | |||||||
Issuance of convertible preferred stock (in shares) | 25,085,153 | ||||||
Issue price (in dollars per share) | $ 1.0763 | ||||||
Net proceeds from sale of convertible preferred stock | $ 26,336 | ||||||
Series B-1 convertible preferred stock | |||||||
Convertible preferred stock. | |||||||
Issuance of convertible preferred stock (in shares) | 23,526,368 | 9,410,551 | |||||
Issue price (in dollars per share) | $ 1.0763 | $ 1.0763 | $ 1.0763 | ||||
Net proceeds from sale of convertible preferred stock | $ 25,272 | $ 35,232 | |||||
Series C-1 convertible preferred stock | |||||||
Convertible preferred stock. | |||||||
Issuance of convertible preferred stock (in shares) | 14,674,062 | ||||||
Issue price (in dollars per share) | $ 2.25568 | $ 2.25568 | |||||
Net proceeds from sale of convertible preferred stock | $ 32,882 | $ 32,882 |
Stockholders_ equity (deficit41
Stockholders’ equity (deficit) (Details) | 9 Months Ended | |
Sep. 30, 2017Vote$ / sharesshares | Dec. 31, 2016shares | |
Common stock | ||
Number of votes for each shares held | Vote | 1 | |
Warrants | ||
Number of shares of common stock into which warrants granted may be converted | 129,491 | |
Warrant exercise price per share (in dollars per share) | $ / shares | $ 0.05 | |
Contractual life of warrants | 10 years | |
Stock options. | ||
Common stock | ||
Number of shares reserved for future issuance | 3,205,714 | 2,901,985 |
Warrants | ||
Common stock | ||
Number of shares reserved for future issuance | 129,491 | 129,491 |
Series A-1 convertible preferred stock | ||
Common stock | ||
Number of shares reserved for future issuance | 5,574,467 | |
Series B-1 convertible preferred stock | ||
Common stock | ||
Number of shares reserved for future issuance | 7,319,307 | |
Series C-1 convertible preferred stock | ||
Common stock | ||
Number of shares reserved for future issuance | 3,260,897 | |
Convertible preferred stock, warrants and options | ||
Common stock | ||
Number of shares reserved for future issuance | 3,335,205 | 19,186,147 |
Stock options - Plans (Details)
Stock options - Plans (Details) - shares | 1 Months Ended | 9 Months Ended | |
Jun. 30, 2017 | Sep. 30, 2017 | Dec. 31, 2016 | |
Stock options | |||
Number of shares outstanding | 3,205,714 | 2,901,985 | |
2007 Plan | |||
Stock options | |||
Number of shares outstanding | 3,141,625 | ||
Number of shares available for future issuance | 0 | ||
2017 Plan | |||
Stock options | |||
Number of shares available for future issuance | 2,160,664 | ||
Number of shares authorized | 2,255,000 | ||
Cumulative increase in number of shares issuable (as a percent) | 4.00% | ||
Vesting period (in years) | 4 years | ||
2017 Plan | Maximum | |||
Stock options | |||
Expiration period | 10 years |
Stock options - Activity under
Stock options - Activity under stock option plan (Details) - USD ($) $ / shares in Units, $ in Thousands | 9 Months Ended | 12 Months Ended | |
Sep. 30, 2017 | Sep. 30, 2016 | Dec. 31, 2016 | |
Number of Shares | |||
Outstanding at beginning of period (in shares) | 2,901,985 | ||
Granted (in shares) | 545,624 | ||
Exercised (in shares) | (233,333) | ||
Cancelled (in shares) | (8,562) | ||
Outstanding at end of period (in shares) | 3,205,714 | 2,901,985 | |
Options exercisable, at end of period (in shares) | 1,423,801 | ||
Weighted- Average Exercise Price | |||
Outstanding at beginning of period (in dollars per share) | $ 2.23 | ||
Granted (in dollars per share) | 8.49 | ||
Exercised (in dollars per share) | 1.85 | ||
Cancelled (in dollars per share) | 3.62 | ||
Outstanding at end of period (in dollars per share) | 3.32 | $ 2.23 | |
Options exercisable, at end of period (in dollars per share) | $ 2 | ||
Additional Disclosures | |||
Remaining Contractual Life, Options outstanding | 8 years | 8 years 4 months 24 days | |
Remaining Contractual Life, Options exercisable | 7 years 3 months 18 days | ||
Aggregate Intrinsic Value, Options outstanding (in dollars) | $ 44,797 | $ 8,906 | |
Aggregate Intrinsic Value, Options exercisable (in dollars) | $ 21,764 | ||
Weighted-average grant date fair value of options granted (in dollars per share) | $ 5.27 | $ 2.19 | |
Cash received from the exercise of stock options (in dollars) | $ 431 | $ 81 |
Stock options - Stock based com
Stock options - Stock based compensation (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
Stock options | ||||
Share-based compensation charge | $ 373 | $ 196 | $ 990 | $ 436 |
Unrecognized stock compensation cost | $ 4,705 | $ 4,705 | ||
Weighted-average amortization period of unrecognized stock compensation cost | 3 years |
Stock options - Fair value of e
Stock options - Fair value of each option award (Details) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
Weighted average fair value assumptions | ||||
Risk-free interest rate (as a percent) | 1.90% | 1.30% | 2.20% | 1.40% |
Expected term | 6 years 4 days | 6 years 3 months | 6 years 2 months 19 days | 6 years 3 months |
Expected stock price volatility (as a percent) | 65.00% | 71.00% | 67.00% | 71.00% |
Stock options - Employee Stock
Stock options - Employee Stock Purchase Plan (Details) | Sep. 30, 2017shares |
Employee Stock Purchase Plan | |
Employee Stock Purchase Plan | |
Number of shares reserved for future issuance | 225,000 |
Commitments - Operating leases
Commitments - Operating leases (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | Dec. 31, 2016 | |
Operating leases | |||||
Letter of credit for security deposit | $ 321 | $ 321 | $ 321 | ||
Rent expense | 419 | $ 419 | 1,256 | $ 1,256 | |
Maximum | |||||
Operating leases | |||||
Tenant improvement allowance | $ 356 | $ 356 |
Commitments - License agreement
Commitments - License agreements (Details) - License agreements $ in Thousands | 3 Months Ended | 9 Months Ended |
Sep. 30, 2017USD ($) | Sep. 30, 2017USD ($)item | |
License Agreements | ||
Number of biotechnology companies where Company has licensed intellectual property | item | 2 | |
Payment for research and development expenses | $ | $ 750 | $ 2,250 |
Related party transactions (Det
Related party transactions (Details) - USD ($) $ in Thousands | Jul. 03, 2017 | Jun. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 |
Takeda | ||||
Related party transactions | ||||
Proceeds from IPO | $ 10,000 | $ 10,000 | ||
Series C-1 convertible preferred stock | ||||
Related party transactions | ||||
Amount invested in Company | $ 32,882 | $ 32,882 | ||
Series C-1 convertible preferred stock | Takeda | ||||
Related party transactions | ||||
Amount invested in Company | $ 10,000 | $ 10,000 |