Verastem (VSTM) 10-Q 8 Aug 17 2017 Q2 Quarterly report Financial data

Document and Entity Information

Document and Entity Information - shares	6 Months Ended
	Jun. 30, 2017	Aug. 04, 2017
Document and Entity Information
Entity Registrant Name	Verastem, Inc.
Entity Central Index Key	1,526,119
Document Type	10-Q
Document Period End Date	Jun. 30, 2017
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Current Reporting Status	Yes
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		36,992,418
Document Fiscal Year Focus	2,017
Document Fiscal Period Focus	Q2

CONDENSED CONSOLIDATED BALANCE

CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Jun. 30, 2017	Dec. 31, 2016
Current assets:
Cash and cash equivalents	$ 27,583	$ 32,349
Short-term investments	30,335	48,548
Prepaid expenses and other current assets	1,835	398
Total current assets	59,753	81,295
Property and equipment, net	1,127	1,417
Restricted cash	162	162
Other assets	797	755
Total assets	61,839	83,629
Current liabilities:
Accounts payable	6,825	4,095
Accrued expenses	4,241	6,896
Total current liabilities	11,066	10,991
Long-term debt	2,293
Other non-current liabilities	248	341
Total liabilities	13,607	11,332
Stockholders' equity
Preferred stock, $0.0001 par value; 5,000 shares authorized, no shares issued and outstanding at June 30, 2017 and December 31, 2016, respectively	0	0
Common stock, $0.0001 par value; 100,000 shares authorized, 36,992 shares issued and outstanding at June 30, 2017 and December 31, 2016, respectively	4	4
Additional paid-in capital	310,014	307,587
Accumulated other comprehensive (loss) income	(5)	29
Accumulated deficit	(261,781)	(235,323)
Total stockholders' equity	48,232	72,297
Total liabilities and stockholders' equity	$ 61,839	$ 83,629

CONDENSED CONSOLIDATED BALANCE3

CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares	Jun. 30, 2017	Dec. 31, 2016
CONDENSED CONSOLIDATED BALANCE SHEETS
Preferred stock, par value (in dollars per share)	$ 0.0001	$ 0.0001
Preferred stock, shares authorized	5,000,000	5,000,000
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	100,000,000	100,000,000
Common stock, shares issued	36,992,000	36,992,000
Common stock, shares outstanding	36,992,000	36,992,000

CONDENSED CONSOLIDATED STATEMEN

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016
Operating expenses:
Research and development	$ 9,042	$ 4,492	$ 17,427	$ 8,671
General and administrative	4,425	4,217	9,188	8,472
Total operating expenses	13,467	8,709	26,615	17,143
Loss from operations	(13,467)	(8,709)	(26,615)	(17,143)
Interest income	140	140	295	280
Interest expense	(109)		(121)
Net loss	$ (13,436)	$ (8,569)	$ (26,441)	$ (16,863)
Net loss per share - basic and diluted	$ (0.36)	$ (0.23)	$ (0.71)	$ (0.46)
Weighted-average number of common shares used in net loss per share-basic and diluted	36,992	36,992	36,992	36,983
Net loss	$ (13,436)	$ (8,569)	$ (26,441)	$ (16,863)
Unrealized (loss) gain on available-for-sale securities	(17)	(58)	(34)	34
Comprehensive loss	$ (13,453)	$ (8,627)	$ (26,475)	$ (16,829)

CONDENSED CONSOLIDATED STATEME5

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016
Operating activities
Net loss	$ (26,441)	$ (16,863)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation	290	359
Stock-based compensation expense	2,410	3,433
Amortization of deferred financing costs, debt discounts and premiums and discounts on available-for-sale marketable securities	105	(92)
Changes in operating assets and liabilities:
Prepaid expenses, other current assets and other assets	(1,479)	(41)
Accounts payable	2,730	(1,832)
Accrued expenses and other liabilities	(2,748)	(2,408)
Liability classified stock-based compensation awards		(69)
Net cash used in operating activities	(25,133)	(17,513)
Investing activities
Purchase of investments	(6,461)	(40,398)
Maturities of investments	24,580	72,610
Net cash provided by investing activities	18,119	32,212
Financing activities
Proceeds from long-term debt, net	2,386
Deferred debt financing costs	(138)
Cash used to settle restricted stock liability		(5)
Net cash provided by (used in) financing activities	2,248	(5)
(Decrease) increase in cash and cash equivalents	(4,766)	14,694
Cash and cash equivalents at beginning of period	32,349	24,870
Cash and cash equivalents at end of period	$ 27,583	39,564
Supplemental disclosure of non-cash investing and financing activities
Purchase of property and equipment in accounts payable		$ 39

Nature of business

Nature of business	6 Months Ended
	Jun. 30, 2017
Nature of business
Nature of business	Verastem, Inc. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) 1. Nature of business Verastem, Inc. (the Company) is a biopharmaceutical company focused on discovering and developing drugs to improve the survival and quality of life of cancer patients. The Company’s operations to date have been limited to organizing and staffing the Company, business planning, raising capital, identifying and acquiring potential product candidates and undertaking preclinical and clinical studies of its product candidates. The Company is subject to a number of risks similar to other life science companies, including, but not limited to, the need to obtain adequate additional funding, possible failure of preclinical testing or clinical trials, inability to obtain marketing approval of product candidates, competitors developing new technological innovations, market acceptance of the Company’s products and protection of proprietary technology. If the Company does not successfully commercialize any of its product candidates, it will be unable to generate product revenue or achieve profitability. As of June 30, 2017, the Company had cash, cash equivalents and investments of $57.9 million and accumulated deficit of $261.8 million. Although the Company has incurred recurring losses and expects to continue to incur losses for the foreseeable future, the Company expects its cash, cash equivalents and investments to be sufficient to fund its current operating plan for at least the next twelve months from the date of issuance of these condensed consolidated financial statements.

Summary of significant accounti

Summary of significant accounting policies	6 Months Ended
	Jun. 30, 2017
Summary of significant accounting policies.
Significant accounting policies	2. Summary of significant accounting policies Basis of Presentation The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States (GAAP) for interim financial reporting and as required by Regulation S-X, Rule 10-01. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (including those which are normal and recurring) considered necessary for a fair presentation of the interim financial information have been included. When preparing financial statements in conformity with GAAP, the Company must make estimates and assumptions that affect the reported amounts and related disclosures at the date of the financial statements. Actual results could differ from those estimates. Additionally, operating results for the three and six months ended June 30, 2017 are not necessarily indicative of the results that may be expected for any other interim period or for the fiscal year ending December 31, 2017. For further information, refer to the financial statements and footnotes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016 as filed with the Securities and Exchange Commission (SEC) on March 23, 2017. Recently Issued Accounting Standards Updates In May 2017, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2017-09, Compensation – Stock Compensation (Topic 718): Scope of Modification Accounting . ASU 2017-09 provides guidance about which changes to the terms or conditions of a share-based award require an entity to apply modification accounting under Topic 718. Specifically, an entity would not apply modification accounting if the fair value, vesting conditions and classification of the awards are the same immediately before and after a modification. ASU 2017-09 is effective for annual and interim periods beginning after December 15, 2017, with early adoption permitted. The Company has not elected to early adopt this standard and is currently evaluating the impact the adoption will have on its consolidated financial statements and related disclosures. In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash . ASU 2016-18 requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents and amounts generally described as restricted cash or restricted cash equivalents. Amounts generally described as restricted cash and restricted cash equivalents should be included with 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 is effective for annual and interim periods beginning after December 15, 2017, with early adoption permitted. The Company has not elected to early adopt this standard and is currently evaluating the impact the adoption will have on its consolidated financial statements and related disclosures. In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. ASU 2016-15 adds or clarifies guidance on the classification of certain cash receipts and payments in the statement of cash flows. The standard is effective for annual and interim periods beginning after December 15, 2017, with early adoption permitted. The Company has not elected to early adopt this standard and is currently evaluating the impact the adoption of the standard will have on its consolidated financial statements and related disclosures. In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which supersedes the guidance under FASB Accounting Standards Codification (ASC) Topic 840, Leases , resulting in the creation of FASB ASC Topic 842, Leases. ASU 2016-02 requires lessees to recognize in the statement of financial position a liability to make lease payments and a right-of-use asset representing its right to use the underlying asset for the lease term for both finance and operating leases. The guidance also eliminates the current real estate-specific provisions for all entities. ASU 2016-02 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2018. Early adoption is permitted. The Company has not elected to early adopt this standard and is currently evaluating the impact the adoption of the standard will have on its consolidated financial statements and related disclosures. Recently Adopted Accounting Standards Updates In January 2017, the FASB issued ASU 2017-03, Accounting Changes and Error Corrections (Topic 250) and Investments – Equity Method and Joint Ventures (Topic 323): Amendments to SEC Paragraphs Pursuant to Staff Announcements at the September 22, 2016 and November 17, 2016 EITF Meetings. ASU 2017-03 clarifies the SEC staff’s expectations about the extent of disclosures that a registrant is expected to provide regarding the impact that the adoption of ASUs 2014-09 (Revenue from Contracts with Customers), 2016-02 (Leases) and 2016-13 (Measurement of Credit Losses on Financial Instruments) will have on its financial statements. It also conforms SEC guidance on accounting for tax benefits resulting from investments in affordable housing projects to the guidance in ASU 2014-01, Investments -Equity Method and Joint Ventures (Topic 323) . The guidance under this ASU was effective upon issuance and did not have a material impact on the Company’s disclosures. In October 2016, the FASB issued ASU 2016-17, Consolidation (Topic 810): Interests Held through Related Parties That Are under Common Control . ASU 2016-17 updates ASU 2015-02. Under the amendments, a single decision maker is not required to consider indirect interests held through related parties that are under common control with the single decision maker to be the equivalent of direct interests in their entirety. Instead, a single decision maker is required to include those interests on a proportionate basis consistent with indirect interests held through other related parties. ASU 2016-17 is effective for annual and interim periods beginning after December 15, 2016. The Company adopted this standard effective January 1, 2017. The adoption of this ASU did not have an effect on the Company’s financial statements or disclosures. In March 2016, the FASB issued ASU 2016-09, Compensation – Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting . ASU 2016-09 simplifies the accounting for share-based compensation arrangements, including the accounting for forfeitures, income tax consequences, classification of awards as either equity or liabilities and classification on the statement of cash flows. The standard was effective for annual and interim periods beginning after December 15, 2016, with early adoption permitted. The Company adopted ASU 2016-09 effective January 1, 2017. Upon adoption, the Company elected to begin accounting for forfeitures as they occur, rather than estimating a forfeiture rate, and recorded an immaterial cumulative-effect adjustment to opening accumulated deficit. Also u pon adoption, the Company recognized all previously unrecognized tax benefits, which would have resulted in the recognition of an immaterial cumulative-effect adjustment to opening accumulated deficit; however, these unrecognized tax benefits were recorded as a deferred tax asset, which was fully offset by a valuation allowance. Therefore, the recognition of these benefits had no net cumulative-effect on opening accumulated deficit upon adoption. Significant accounting policies There have been no material changes, other than those described above, to the significant accounting policies included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016 as filed with the SEC on March 23, 2017.

Fair value of financial instrum

Fair value of financial instruments	6 Months Ended
	Jun. 30, 2017
Fair value of financial instruments
Fair value of financial instruments	3. Fair value of financial instruments The Company determines the fair value of its financial instruments based upon the fair value hierarchy, which prioritizes valuation inputs based on the observable nature of those inputs. The fair value hierarchy applies only to the valuation inputs used in determining the reported fair value of the investments and is not a measure of the investment credit quality. The hierarchy defines three levels of valuation inputs: Level 1 inputs Quoted prices in active markets for identical assets or liabilities that the Company can access at the measurement date. Level 2 inputs Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 3 inputs Unobservable inputs that reflect the Company’s own assumptions about the assumptions market participants would use in pricing the asset or liability. Items Measured at Fair Value on a Recurring Basis The following table presents information about the Company’s financial instruments that are measured at fair value on a recurring basis (in thousands): June 30, 2017 Description Total Level 1 Level 2 Level 3 Financial assets Cash equivalents $ 25,627 $ 25,627 $ — $ — Short-term investments 30,335 — 30,335 — Total financial assets $ 55,962 $ 25,627 $ 30,335 $ — December 31, 2016 Description Total Level 1 Level 2 Level 3 Financial assets Cash equivalents $ 30,540 $ 20,540 $ 10,000 $ — Short-term investments 48,548 — 48,548 — Total financial assets $ 79,088 $ 20,540 $ 58,548 $ — The Company’s cash equivalents and investments are comprised of U.S. Government money market funds and corporate bonds and commercial paper of publicly traded companies. These investments have been initially valued at the transaction price and subsequently valued, at the end of each reporting period, utilizing third party pricing services or other market observable data. The pricing services utilize industry standard valuation models, including both income and market based approaches and observable market inputs to determine value. These observable market inputs include reportable trades, benchmark yields, credit spreads, broker/dealer quotes, bids, offers, current spot rates and other industry and economic events. The Company validates the prices provided by third party pricing services by reviewing their pricing methods and matrices, obtaining market values from other pricing sources, analyzing pricing data in certain instances and confirming that the relevant markets are active. After completing its validation procedures, the Company did not adjust or override any fair value measurements provided by the pricing services as of June 30, 2017 and December 31, 2016. Fair Value of Financial Instruments The fair value of the Company’s long-term debt is determined using current applicable rates for similar instruments as of the balance sheet dates and an assessment of the credit rating of the Company. The carrying value of the Company’s debt approximates fair value because the Company’s interest rate yield is near current market rates for comparable debt instruments. The fair value of the Company’s long-term debt was determined using Level 3 inputs.

Investments

Investments	6 Months Ended
	Jun. 30, 2017
Investments
Investments	4. Investments Cash, cash equivalents and investments consist of the following (in thousands): June 30, 2017 Gross Gross Amortized Unrealized Unrealized Fair Cost Gains Losses Value Cash and cash equivalents: Cash and money market accounts $ 27,583 $ — $ — $ 27,583 Total cash and cash equivalents $ 27,583 $ — $ — $ 27,583 Investments: Corporate bonds and commercial paper (due within 1 year) $ 30,340 $ 6 $ (11) $ 30,335 Total investments $ 30,340 $ 6 $ (11) $ 30,335 Total cash, cash equivalents, and investments $ 57,923 $ 6 $ (11) $ 57,918 December 31, 2016 Gross Gross Amortized Unrealized Unrealized Fair Cost Gains Losses Value Cash and cash equivalents: Cash and money market accounts $ 22,349 $ — $ — $ 22,349 Overnight repurchase agreements 10,000 — — 10,000 Total cash and cash equivalents $ 32,349 $ — $ — $ 32,349 Investments: Corporate bonds and commercial paper (due within 1 year) $ 48,519 $ 53 $ (24) $ 48,548 Total investments $ 48,519 $ 53 $ (24) $ 48,548 Total cash, cash equivalents, and investments $ 80,868 $ 53 $ (24) $ 80,897 There were no realized gains or losses on investments for the three and six months ended June 30, 2017 or 2016. There were no investments that had been in an unrealized loss position for more than 12 months as of June 30, 2017 or December 31, 2016. There were 8 debt securities in an unrealized loss position for less than 12 months at June 30, 2017 and there were 14 debt securities that had been in an unrealized loss position for less than 12 months at December 31, 2016. The aggregate unrealized loss on these securities as of June 30, 2017 and December 31, 2016 was approximately $11,000 and $24,000, respectively, and the fair value was $17.4 million and $23.6 million, respectively. The Company considered the decline in the market value for these securities to be primarily attributable to current economic conditions. As it was not more likely than not that the Company would be required to sell these securities before the recovery of their amortized cost basis, which may be at maturity, the Company did not consider these investments to be other-than-temporarily impaired as of June 30, 2017.

Accrued expenses

Accrued expenses	6 Months Ended
	Jun. 30, 2017
Accrued expenses
Accrued expenses	5. Accrued expenses Accrued expenses consist of the following (in thousands): June 30, 2017 December 31, 2016 Contract research organization costs $ 2,493 $ 3,258 Compensation and related benefits 1,102 2,505 Professional fees 346 403 Deferred rent 182 175 Consulting fees 81 527 Other 37 28 $ 4,241 $ 6,896

Long-term debt

Long-term debt	6 Months Ended
	Jun. 30, 2017
Debt
Long-term debt	6. Long-term debt On March 21, 2017 (Closing Date), Verastem, Inc. (Borrower) entered into a term loan facility of up to $25.0 million (Term Loan) with Hercules Capital, Inc., a Maryland corporation (Hercules), the proceeds of which will be used for its ongoing research and development programs and for general corporate purposes. The Term Loan is governed by a loan and security agreement, dated March 21, 2017 (Loan Agreement), which provides for up to four separate advances subject to certain conditions of funding. The first tranche of $2.5 million was drawn on the Closing Date. The Term Loan will mature on December 1, 2020 (Loan Maturity Date). Each advance accrues interest at a floating per annum rate equal to the greater of either (a) 10.5% or (b) the lesser of (i) 12.75% and (ii) the sum of (x) 10.5% plus (y) (A) the prime rate minus (B) 4.5%. As of June 30, 2017, the interest rate was 10.5%. The Term Loan provides for interest-only payments until November 1, 2018. The interest-only period may be extended to May 1, 2019 if the Borrower obtains minimum cash proceeds of $20.0 million from a sale of equity securities or subordinated debt and/or ongoing commercial partnerships. Thereafter, amortization payments will be payable monthly in twenty-six installments (or, if the period requiring interest-only payments has been extended to May 1, 2019, in twenty installments) of principal and interest (subject to recalculation upon a change in prime rates). The Term Loan is secured by a lien on substantially all of the assets of the Borrower, other than intellectual property, and contains customary covenants and representations. The Company assessed all terms and features of the Loan Agreement in order to identify any potential embedded features that would require bifurcation or any beneficial conversion features. As part of this analysis, the Company assessed the economic characteristics and risks of the Loan Agreement, including put and call features. The Company determined that all features of the Loan Agreement were clearly and closely associated with a debt host and did not require bifurcation as a derivative liability, or the fair value of the feature was immaterial to the Company's financial statements. The Company reassesses the features on a quarterly basis to determine if they require separate accounting. The future principal payments under the Loan Agreement are as follows as of June 30, 2017 (in thousands): Remainder of 2017 $ — 2018 146 2019 936 2020 1,418 Total $ 2,500

Net loss per share

Net loss per share	6 Months Ended
	Jun. 30, 2017
Net loss per share
Net loss per share	7. Net loss per share Basic and diluted net loss per common share is calculated by dividing net loss applicable to common stockholders by the weighted-average number of common shares outstanding during the period, without consideration for common stock equivalents. The Company’s potentially dilutive shares, which include outstanding stock options, are considered to be common stock equivalents and are only included in the calculation of diluted net loss per share when their effect is dilutive. The following potentially dilutive securities were excluded from the calculation of diluted net loss per share for the periods indicated because including them would have had an anti-dilutive effect: Three months ended Six months ended June 30, June 30, 2017 2016 2017 2016 Outstanding stock options 7,573,155 6,691,059 7,573,155 6,691,059 Outstanding warrants — 142,857 — 142,857 7,573,155 6,833,916 7,573,155 6,833,916

Stock-based compensation

Stock-based compensation	6 Months Ended
	Jun. 30, 2017
Stock-based compensation
Stock-based compensation	8. Stock‑based compensation Stock options A summary of the Company’s stock option activity and related information for the six months ended June 30, 2017 is as follows: Weighted-average Weighted-average remaining Aggregate exercise price per contractual term intrinsic value Shares share (years) (in thousands) Outstanding at December 31, 2016 5,848,470 $ 6.35 8.0 $ 62 Granted 1,905,000 $ 1.32 Exercised — $ — Forfeited/cancelled (180,315) $ 2.31 Outstanding at June 30, 2017 7,573,155 $ 5.19 8.0 $ 2,939 Vested at June 30, 2017 3,921,304 $ 7.74 7.1 $ 694 Vested and expected to vest at June 30, 2017(1) 7,323,155 $ 5.32 8.0 $ 2,737 (1) This represents the number of vested options as of June 30, 2017, plus the number of unvested options expected to vest as of June 30, 2017. The fair value of each stock option granted during the six months ended June 30, 2017 and 2016 was estimated on the grant date using the Black-Scholes option-pricing model using the following weighted-average assumptions: Six months ended June 30, 2017 2016 Risk-free interest rate 2.05 % 1.47 % Volatility 79 % 75 % Dividend yield — — Expected term (years) In June 2016, the Company granted stock options to purchase a total of 500,000 shares of common stock to certain employees that vest only upon the achievement of specified performance conditions. The grant date fair value of these options was approximately $445,000. In October 2016, the Company determined that 50% of performance conditions had been achieved and as a result 250,000 shares vested and the Company recognized stock-based compensation expense of approximately $222,000 for the year ended December 31, 2016. The Company determined that the remaining 50% of the performance conditions were not considered probable of achievement as of June 30, 2017 and as a result, has not recognized any stock-based compensation expense related to the remaining unvested awards. Restricted stock units The approximate total fair value of restricted stock units (RSUs) vested during the three and six months ended June 30, 2016 was $0 and $65,000, respectively. As of June 30, 2016, all RSUs had vested and there was no remaining unrecognized stock-based compensation expense. There were no RSUs granted during or subsequent to the three and six months ended June 30, 2016. During the first quarter of 2013, the Company amended the terms of certain RSUs related to a total of 697,060 shares of common stock to allow for tax withholdings greater than the minimum required statutory withholding amount. As a result of this change in the terms of the awards, the outstanding RSUs were considered to be liability instruments. As a result of this modification, the Company recorded a liability for the fair value of the awards as of each reporting date with the change in fair value recorded through the statement of operations. During the three and six months ended June 30, 2016, the Company made approximate deposits with the taxing authorities of $0 and $5,000 in respect of the tax liability for awards that settled during the period. As of June 30, 2016, the Company had no remaining tax liability related to these awards.

Equity offerings

Equity offerings	6 Months Ended
	Jun. 30, 2017
Equity offerings.
Equity offerings	9. Equity offerings In March 2017, the Company terminated the at-the-market equity offering program established in December 2013 and established a new at-the-market equity offering program pursuant to which it is able to offer and sell up to $35.0 million of its common stock at then current market prices from time to time through Cantor Fitzgerald & Co., as sales agent. The Company has not commenced sales under this program.

Reduction in force

Reduction in force	6 Months Ended
	Jun. 30, 2017
Reduction in force
Reduction in force	10. Reduction in force In October 2015, the Company announced a reduction of workforce by approximately 50% to 20 full time employees. All affected employees received severance pay and outplacement assistance. As a result of the reduction in force and associated costs, the Company paid one-time severance and related costs of $1.1 million. Of these one-time severance and related costs, approximately $349,000 was paid through December 31, 2015, approximately $114,000 and approximately $635,000 was paid in the three and six months ended June 30, 2016, and approximately $78,000 was paid in the 2016 fiscal year subsequent to June 30, 2016. As of December 31, 2016, all one-time severance and related costs have been paid and no liability remains.

Subsequent events

Subsequent events	6 Months Ended
	Jun. 30, 2017
Subsequent events.
Subsequent events	11. Subsequent events The Company reviews all activity subsequent to the end of the quarter but prior to issuance of the condensed consolidated financial statements for events that could require disclosure or that could impact the carrying value of assets or liabilities as of the balance sheet date. There are no material subsequent events to the three and six months ended June 30, 2017.

Summary of significant accoun17

Summary of significant accounting policies (Policies)	6 Months Ended
	Jun. 30, 2017
Summary of significant accounting policies.
Basis of Presentation	Basis of Presentation The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States (GAAP) for interim financial reporting and as required by Regulation S-X, Rule 10-01. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (including those which are normal and recurring) considered necessary for a fair presentation of the interim financial information have been included. When preparing financial statements in conformity with GAAP, the Company must make estimates and assumptions that affect the reported amounts and related disclosures at the date of the financial statements. Actual results could differ from those estimates. Additionally, operating results for the three and six months ended June 30, 2017 are not necessarily indicative of the results that may be expected for any other interim period or for the fiscal year ending December 31, 2017. For further information, refer to the financial statements and footnotes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016 as filed with the Securities and Exchange Commission (SEC) on March 23, 2017.
Recently Issued and/or Adopted Accounting Standards Updates	Recently Issued Accounting Standards Updates In May 2017, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2017-09, Compensation – Stock Compensation (Topic 718): Scope of Modification Accounting . ASU 2017-09 provides guidance about which changes to the terms or conditions of a share-based award require an entity to apply modification accounting under Topic 718. Specifically, an entity would not apply modification accounting if the fair value, vesting conditions and classification of the awards are the same immediately before and after a modification. ASU 2017-09 is effective for annual and interim periods beginning after December 15, 2017, with early adoption permitted. The Company has not elected to early adopt this standard and is currently evaluating the impact the adoption will have on its consolidated financial statements and related disclosures. In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash . ASU 2016-18 requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents and amounts generally described as restricted cash or restricted cash equivalents. Amounts generally described as restricted cash and restricted cash equivalents should be included with 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 is effective for annual and interim periods beginning after December 15, 2017, with early adoption permitted. The Company has not elected to early adopt this standard and is currently evaluating the impact the adoption will have on its consolidated financial statements and related disclosures. In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. ASU 2016-15 adds or clarifies guidance on the classification of certain cash receipts and payments in the statement of cash flows. The standard is effective for annual and interim periods beginning after December 15, 2017, with early adoption permitted. The Company has not elected to early adopt this standard and is currently evaluating the impact the adoption of the standard will have on its consolidated financial statements and related disclosures. In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which supersedes the guidance under FASB Accounting Standards Codification (ASC) Topic 840, Leases , resulting in the creation of FASB ASC Topic 842, Leases. ASU 2016-02 requires lessees to recognize in the statement of financial position a liability to make lease payments and a right-of-use asset representing its right to use the underlying asset for the lease term for both finance and operating leases. The guidance also eliminates the current real estate-specific provisions for all entities. ASU 2016-02 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2018. Early adoption is permitted. The Company has not elected to early adopt this standard and is currently evaluating the impact the adoption of the standard will have on its consolidated financial statements and related disclosures. Recently Adopted Accounting Standards Updates In January 2017, the FASB issued ASU 2017-03, Accounting Changes and Error Corrections (Topic 250) and Investments – Equity Method and Joint Ventures (Topic 323): Amendments to SEC Paragraphs Pursuant to Staff Announcements at the September 22, 2016 and November 17, 2016 EITF Meetings. ASU 2017-03 clarifies the SEC staff’s expectations about the extent of disclosures that a registrant is expected to provide regarding the impact that the adoption of ASUs 2014-09 (Revenue from Contracts with Customers), 2016-02 (Leases) and 2016-13 (Measurement of Credit Losses on Financial Instruments) will have on its financial statements. It also conforms SEC guidance on accounting for tax benefits resulting from investments in affordable housing projects to the guidance in ASU 2014-01, Investments -Equity Method and Joint Ventures (Topic 323) . The guidance under this ASU was effective upon issuance and did not have a material impact on the Company’s disclosures. In October 2016, the FASB issued ASU 2016-17, Consolidation (Topic 810): Interests Held through Related Parties That Are under Common Control . ASU 2016-17 updates ASU 2015-02. Under the amendments, a single decision maker is not required to consider indirect interests held through related parties that are under common control with the single decision maker to be the equivalent of direct interests in their entirety. Instead, a single decision maker is required to include those interests on a proportionate basis consistent with indirect interests held through other related parties. ASU 2016-17 is effective for annual and interim periods beginning after December 15, 2016. The Company adopted this standard effective January 1, 2017. The adoption of this ASU did not have an effect on the Company’s financial statements or disclosures. In March 2016, the FASB issued ASU 2016-09, Compensation – Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting . ASU 2016-09 simplifies the accounting for share-based compensation arrangements, including the accounting for forfeitures, income tax consequences, classification of awards as either equity or liabilities and classification on the statement of cash flows. The standard was effective for annual and interim periods beginning after December 15, 2016, with early adoption permitted. The Company adopted ASU 2016-09 effective January 1, 2017. Upon adoption, the Company elected to begin accounting for forfeitures as they occur, rather than estimating a forfeiture rate, and recorded an immaterial cumulative-effect adjustment to opening accumulated deficit. Also u pon adoption, the Company recognized all previously unrecognized tax benefits, which would have resulted in the recognition of an immaterial cumulative-effect adjustment to opening accumulated deficit; however, these unrecognized tax benefits were recorded as a deferred tax asset, which was fully offset by a valuation allowance. Therefore, the recognition of these benefits had no net cumulative-effect on opening accumulated deficit upon adoption. Significant accounting policies There have been no material changes, other than those described above, to the significant accounting policies included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016 as filed with the SEC on March 23, 2017.

Fair value of financial instr18

Fair value of financial instruments (Tables)	6 Months Ended
	Jun. 30, 2017
Fair value of financial instruments
Schedule of financial instruments measured at fair value on a recurring basis	The following table presents information about the Company’s financial instruments that are measured at fair value on a recurring basis (in thousands): June 30, 2017 Description Total Level 1 Level 2 Level 3 Financial assets Cash equivalents $ 25,627 $ 25,627 $ — $ — Short-term investments 30,335 — 30,335 — Total financial assets $ 55,962 $ 25,627 $ 30,335 $ — December 31, 2016 Description Total Level 1 Level 2 Level 3 Financial assets Cash equivalents $ 30,540 $ 20,540 $ 10,000 $ — Short-term investments 48,548 — 48,548 — Total financial assets $ 79,088 $ 20,540 $ 58,548 $ —

Investments (Tables)

Investments (Tables)	6 Months Ended
	Jun. 30, 2017
Investments
Schedule of cash, cash equivalents and investments	Cash, cash equivalents and investments consist of the following (in thousands): June 30, 2017 Gross Gross Amortized Unrealized Unrealized Fair Cost Gains Losses Value Cash and cash equivalents: Cash and money market accounts $ 27,583 $ — $ — $ 27,583 Total cash and cash equivalents $ 27,583 $ — $ — $ 27,583 Investments: Corporate bonds and commercial paper (due within 1 year) $ 30,340 $ 6 $ (11) $ 30,335 Total investments $ 30,340 $ 6 $ (11) $ 30,335 Total cash, cash equivalents, and investments $ 57,923 $ 6 $ (11) $ 57,918 December 31, 2016 Gross Gross Amortized Unrealized Unrealized Fair Cost Gains Losses Value Cash and cash equivalents: Cash and money market accounts $ 22,349 $ — $ — $ 22,349 Overnight repurchase agreements 10,000 — — 10,000 Total cash and cash equivalents $ 32,349 $ — $ — $ 32,349 Investments: Corporate bonds and commercial paper (due within 1 year) $ 48,519 $ 53 $ (24) $ 48,548 Total investments $ 48,519 $ 53 $ (24) $ 48,548 Total cash, cash equivalents, and investments $ 80,868 $ 53 $ (24) $ 80,897

Accrued expenses (Tables)

Accrued expenses (Tables)	6 Months Ended
	Jun. 30, 2017
Accrued expenses
Schedule of accrued expenses	Accrued expenses consist of the following (in thousands): June 30, 2017 December 31, 2016 Contract research organization costs $ 2,493 $ 3,258 Compensation and related benefits 1,102 2,505 Professional fees 346 403 Deferred rent 182 175 Consulting fees 81 527 Other 37 28 $ 4,241 $ 6,896

Long-term debt (Tables)

Long-term debt (Tables)	6 Months Ended
	Jun. 30, 2017
Debt
Schedule of future principal payments under the Loan Agreement	The future principal payments under the Loan Agreement are as follows as of June 30, 2017 (in thousands): Remainder of 2017 $ — 2018 146 2019 936 2020 1,418 Total $ 2,500

Net loss per share (Tables)

Net loss per share (Tables)	6 Months Ended
	Jun. 30, 2017
Net loss per share
Schedule of potentially anti-dilutive securities excluded from calculation of diluted net loss per share	Three months ended Six months ended June 30, June 30, 2017 2016 2017 2016 Outstanding stock options 7,573,155 6,691,059 7,573,155 6,691,059 Outstanding warrants — 142,857 — 142,857 7,573,155 6,833,916 7,573,155 6,833,916

Stock-based compensation (Table

Stock-based compensation (Tables)	6 Months Ended
	Jun. 30, 2017
Stock-based compensation
Summary of stock option activity and related information	Weighted-average Weighted-average remaining Aggregate exercise price per contractual term intrinsic value Shares share (years) (in thousands) Outstanding at December 31, 2016 5,848,470 $ 6.35 8.0 $ 62 Granted 1,905,000 $ 1.32 Exercised — $ — Forfeited/cancelled (180,315) $ 2.31 Outstanding at June 30, 2017 7,573,155 $ 5.19 8.0 $ 2,939 Vested at June 30, 2017 3,921,304 $ 7.74 7.1 $ 694 Vested and expected to vest at June 30, 2017(1) 7,323,155 $ 5.32 8.0 $ 2,737 (1) This represents the number of vested options as of June 30, 2017, plus the number of unvested options expected to vest as of June 30, 2017.
Schedule of assumptions used to estimate fair value of each stock option on grant date	Six months ended June 30, 2017 2016 Risk-free interest rate 2.05 % 1.47 % Volatility 79 % 75 % Dividend yield — — Expected term (years)

Nature of business (Details)

Nature of business (Details) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2017	Dec. 31, 2016
Nature of business
Cash, cash equivalents, and investments	$ 57,918	$ 80,897
Deficit accumulated during the development stage	$ 261,781	$ 235,323
Substantial doubt about the ability to continue as a going concern	false

Summary of significant accoun25

Summary of significant accounting policies (details)	Jan. 01, 2017USD ($)
ASU 2016-09
Recently Adopted Accounting Standards Updates
Net cumulative effect on retained earnings	$ 0

Fair value of financial instr26

Fair value of financial instruments (Details) - USD ($) $ in Thousands	Jun. 30, 2017	Dec. 31, 2016
Financial assets
Cash equivalents	$ 27,583	$ 32,349
Short-term investments	30,335	48,548
Recurring basis | Total
Financial assets
Cash equivalents	25,627	30,540
Short-term investments	30,335	48,548
Total financial assets	55,962	79,088
Level 1 | Recurring basis
Financial assets
Cash equivalents	25,627	20,540
Total financial assets	25,627	20,540
Level 2 | Recurring basis
Financial assets
Cash equivalents		10,000
Short-term investments	30,335	48,548
Total financial assets	$ 30,335	$ 58,548

Investments (Details)

Investments (Details)	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2017USD ($)item	Jun. 30, 2016USD ($)	Jun. 30, 2017USD ($)item	Jun. 30, 2016USD ($)	Dec. 31, 2016USD ($)item	Dec. 31, 2015USD ($)
Amortized cost
Cash and cash equivalents, Amortized cost	$ 27,583,000	$ 39,564,000	$ 27,583,000	$ 39,564,000	$ 32,349,000	$ 24,870,000
Investments, Amortized Cost	30,340,000		30,340,000		48,519,000
Total cash, cash equivalents, and investments, Amortized Cost	57,923,000		57,923,000		80,868,000
Gross unrealized gains
Gross unrealized gains	6,000		6,000		53,000
Gross unrealized losses
Gross unrealized losses	(11,000)		(11,000)		(24,000)
Fair value
Cash and cash equivalents, Fair value	27,583,000		27,583,000		32,349,000
Short-term investments	30,335,000		30,335,000		48,548,000
Total cash, cash equivalents, and investments, Fair Value	57,918,000		57,918,000		$ 80,897,000
Realized gains or losses
Realized gains or losses on investments	$ 0	$ 0	$ 0	$ 0
Number of investments in unrealized loss position for more than 12 months | item	0		0		0
Number of investments in unrealized loss position for less than 12 months | item	8		8		14
Aggregate unrealized loss on these securities			$ 11,000		$ 24,000
Unrealized loss on fair value	$ 17,400,000		17,400,000		23,600,000
Cash and money market accounts
Amortized cost
Cash and cash equivalents, Amortized cost	27,583,000		27,583,000		22,349,000
Fair value
Cash and cash equivalents, Fair value	27,583,000		$ 27,583,000		22,349,000
Overnight repurchase agreements
Amortized cost
Cash and cash equivalents, Amortized cost					10,000,000
Fair value
Cash and cash equivalents, Fair value					$ 10,000,000
Corporate bonds and commercial paper
Investments
Maximum maturity period, investments			1 year		1 year
Amortized cost
Investments, Amortized Cost	30,340,000		$ 30,340,000		$ 48,519,000
Gross unrealized gains
Gross unrealized gains	6,000		6,000		53,000
Gross unrealized losses
Gross unrealized losses	(11,000)		(11,000)		(24,000)
Fair value
Short-term investments	$ 30,335,000		$ 30,335,000		$ 48,548,000

Accrued expenses (Details)

Accrued expenses (Details) - USD ($) $ in Thousands	Jun. 30, 2017	Dec. 31, 2016
Accrued expenses
Contract research organization costs	$ 2,493	$ 3,258
Compensation and related benefits	1,102	2,505
Professional fees	346	403
Deferred rent	81	527
Consulting fees	182	175
Other	37	28
Accrued expenses	$ 4,241	$ 6,896

Long-term debt (Details)

Long-term debt (Details) $ in Thousands	Mar. 21, 2017USD ($)item	Jun. 30, 2017USD ($)
Long-term debt
Amount drawn		$ 2,386
Term loan
Long-term debt
Maximum borrowing capacity	$ 25,000
Number of separate advances | item	4
Amount drawn	$ 2,500
Interest rate	10.50%	10.50%
Basis spread	(4.50%)
Minimum cash proceeds to extend interest only payment period	$ 20,000
Amortization payments, installments | item	26
Future principal payments
2,018		$ 146
2,019		936
2,020		1,418
Total		$ 2,500
Term loan | Interest-only payments extended
Long-term debt
Amortization payments, installments | item	20
Term loan | Minimum
Long-term debt
Interest rate	10.50%
Term loan | Maximum
Long-term debt
Interest rate	12.75%

Net loss per share (Details)

Net loss per share (Details) - shares	3 Months Ended		6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016
Net loss per share
Potentially anti-dilutive securities excluded from calculation of diluted net loss per share (in shares)	7,573,155	6,833,916	7,573,155	6,833,916
Outstanding stock options
Net loss per share
Potentially anti-dilutive securities excluded from calculation of diluted net loss per share (in shares)	7,573,155	6,691,059	7,573,155	6,691,059
Outstanding warrants
Net loss per share
Potentially anti-dilutive securities excluded from calculation of diluted net loss per share (in shares)		142,857		142,857

Stock-based compensation - Stoc

Stock-based compensation - Stock Options (Details) - USD ($)	1 Months Ended		6 Months Ended		12 Months Ended
	Oct. 31, 2016	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016	Dec. 31, 2016
Shares
Outstanding at the beginning of the period (in shares)			5,848,470
Granted (in shares)			1,905,000
Forfeited/cancelled (in shares)			(180,315)
Outstanding at the end of the period (in shares)			7,573,155		5,848,470
Vested at the end of the period (in shares)			3,921,304
Vested and expected to vest at end of period (in shares)			7,323,155
Weighted-average exercise price per share
Outstanding at the beginning of the period (in dollars per share)			$ 6.35
Granted (in dollars per share)			1.32
Forfeited/cancelled (in dollars per share)			2.31
Outstanding at the end of the period (in dollars per share)			5.19		$ 6.35
Vested at the end of the period (in dollars per share)			7.74
Vested and expected to vest at end of the period (in dollars per share)			$ 5.32
Weighted-average remaining contractual term
Outstanding at the end of the period					8 years
Vested at the end of the period			7 years 1 month 6 days
Vested and expected to vest at the end of the period			8 years
Exercisable at the end of the period			8 years
Aggregate intrinsic value
Outstanding at the end of the period (in dollars)			$ 2,939,000		$ 62,000
Vested at the end of the period (in dollars)			694,000
Vested and expected to vest at end of the period (in dollars)			$ 2,737,000
Assumptions used to estimate fair value of each stock-based award on the grant date
Risk-free interest rate (as a percent)			2.05%	1.47%
Volatility (as a percent)			79.00%	75.00%
Expected term			6 years 4 months 24 days	5 years 10 months 24 days
Performance shares
Shares
Granted (in shares)		500,000
Vested at the end of the period (in shares)	250,000
Additional disclosures
Grant date fair value of options		$ 445,000
Percentage of performance conditions achieved	50.00%
Stock-based compensation expense					$ 222,000
Percentage of performance conditions not considered probable of achievement			50.00%

Stock-based compensation - Rest

Stock-based compensation - Restricted Stock (Details) - USD ($)	3 Months Ended	6 Months Ended
	Jun. 30, 2016	Jun. 30, 2016	Mar. 31, 2013
Additional disclosures
Cash used to settle tax on restricted stock liability awards		$ 5,000
Restricted Stock Units
Additional disclosures
Fair value of shares vested	$ 0	65,000
Unrecognized stock-based compensation expense	$ 0	$ 0
Granted (in shares)	0	0
Unvested RSUs with amended terms			697,060
Cash used to settle tax on restricted stock liability awards	$ 0	$ 5,000
Remaining tax liability relating to awards	$ 0	$ 0

Equity offerings (Details)

Equity offerings (Details) $ in Millions	1 Months Ended
	Mar. 31, 2017USD ($)
At The Market Equity Offering Program
At-the-market equity offering program
Maximum value of common stock allowed to be sold	$ 35

Reduction in force (Details)

Reduction in force (Details)	1 Months Ended	3 Months Ended	6 Months Ended		12 Months Ended
	Oct. 31, 2015USD ($)employee	Jun. 30, 2016USD ($)	Dec. 31, 2016USD ($)	Jun. 30, 2016USD ($)	Dec. 31, 2015USD ($)
Reduction in force
Reduction of workforce (as a percent)	50.00%
Number of full time employees | employee	20
Severance and related costs	$ 1,100,000
Severance paid		$ 114,000	$ 78,000	$ 635,000	$ 349,000
Severance and related costs payable			$ 0