Aclaris Therapeutics (ACRS) 10-Q7 May 242024 Q1 Quarterly reportFinancial data

Company Profile

Document and Entity Information

Document and Entity Information - shares	3 Months Ended
Document and Entity Information - shares	Mar. 31, 2024	Apr. 30, 2024
Document and Entity Information
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Mar. 31, 2024
Document Transition Report	false
Entity File Number	001-37581
Entity Registrant Name	Aclaris Therapeutics, Inc.
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	46-0571712
Entity Address, Address Line One	701 Lee Road, Suite 103
Entity Address, City or Town	Wayne
Entity Address, State or Province	PA
Entity Address, Postal Zip Code	19087
City Area Code	484
Local Phone Number	324-7933
Title of 12(b) Security	Common Stock, $0.00001 par value
Trading Symbol	ACRS
Security Exchange Name	NASDAQ
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Large Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		71,264,786
Entity Central Index Key	0001557746
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2024
Document Fiscal Period Focus	Q1
Amendment Flag	false

CONDENSED CONSOLIDATED BALANCE

CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Mar. 31, 2024	Dec. 31, 2023
Current assets:
Cash and cash equivalents	$ 35,841	$ 39,878
Short-term marketable securities	92,325	79,228
Accounts receivable, net	373	298
Prepaid expenses and other current assets	6,799	9,452
Total current assets	135,338	128,856
Marketable securities	33,199	62,771
Property and equipment, net	1,531	1,620
Other assets	3,997	4,158
Total assets	174,065	197,405
Current liabilities:
Accounts payable	10,810	8,878
Accrued expenses	6,565	19,446
Other current liabilities	2,705	2,628
Total current liabilities	20,080	30,952
Other liabilities	2,971	3,074
Contingent consideration	9,000	6,200
Total liabilities	32,051	40,226
Stockholders' Equity:
Preferred stock, $0.00001 par value; 10,000,000 shares authorized and no shares issued or outstanding at March 31, 2024 and December 31, 2023
Common stock, $0.00001 par value; 200,000,000 shares authorized at March 31, 2024 and December 31, 2023; 71,248,017 and 70,894,889 shares issued and outstanding at March 31, 2024 and December 31, 2023, respectively	1	1
Additional paidin capital	930,114	928,080
Accumulated other comprehensive loss	(364)	(106)
Accumulated deficit	(787,737)	(770,796)
Total stockholders' equity	142,014	157,179
Total liabilities and stockholders' equity	$ 174,065	$ 197,405

CONDENSED CONSOLIDATED BALANC_2

CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares	Mar. 31, 2024	Dec. 31, 2023
CONDENSED CONSOLIDATED BALANCE SHEETS
Preferred stock, par value (in dollars per share)	$ 0.00001	$ 0.00001
Preferred stock, shares authorized (in shares)	10,000,000	10,000,000
Preferred stock, shares issued (in shares)	0	0
Preferred stock, shares outstanding (in shares)	0	0
Common stock, par value (in dollars per share)	$ 0.00001	$ 0.00001
Common stock, shares authorized (in shares)	200,000,000	200,000,000
Common stock, shares issued (in shares)	71,248,017	70,894,889
Common stock, shares outstanding (in shares)	71,248,017	70,894,889

CONDENSED CONSOLIDATED STATEMEN

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2024	Mar. 31, 2023
Revenues:
Total revenue	$ 2,398	$ 2,528
Costs and expenses:
Cost of revenue	809	808
Research and development	9,845	22,587
General and administrative	6,844	8,790
Licensing	1,031	1,061
Revaluation of contingent consideration	2,800	(800)
Total costs and expenses	21,329	32,446
Loss from operations	(18,931)	(29,918)
Other income, net	1,990	1,758
Net loss	$ (16,941)	$ (28,160)
Net loss per share, basic	$ (0.24)	$ (0.42)
Net loss per share, diluted	$ (0.24)	$ (0.42)
Weighted average common shares outstanding, basic	71,074,858	66,872,778
Weighted average common shares outstanding, diluted	71,074,858	66,872,778
Other comprehensive loss:
Unrealized (loss) gain on marketable securities, net of tax of $0	$ (258)	$ 543
Total other comprehensive (loss) gain	(258)	543
Comprehensive loss	(17,199)	(27,617)
Contract research
Revenues:
Total revenue	657	889
Licensing
Revenues:
Total revenue	$ 1,741	$ 1,639

CONDENSED CONSOLIDATED STATEM_2

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (Parenthetical) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2024	Mar. 31, 2023
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
Unrealized (loss) gain on marketable securities	$ 0	$ 0

CONDENSED CONSOLIDATED STATEM_3

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY - USD ($) $ in Thousands	Common Stock	Additional Paid-in Capital	Accumulated Other Comprehensive Loss	Accumulated Deficit	Total
Balance at beginning of period at Dec. 31, 2022	$ 1	$ 880,832	$ (897)	$ (682,315)	$ 197,621
Balance at beginning of period (in shares) at Dec. 31, 2022	66,688,647
Increase (Decrease) in Stockholders' Equity
Issuance of common stock in connection with vesting of restricted stock units (in shares)	517,378
Unrealized gain (loss) on marketable securities			543		543
Stock-based compensation expense		6,806			6,806
Net loss				(28,160)	(28,160)
Balance at end of period at Mar. 31, 2023	$ 1	887,638	(354)	(710,475)	176,810
Balance at end of period (in shares) at Mar. 31, 2023	67,206,025
Balance at beginning of period at Dec. 31, 2023	$ 1	928,080	(106)	(770,796)	$ 157,179
Balance at beginning of period (in shares) at Dec. 31, 2023	70,894,889				70,894,889
Increase (Decrease) in Stockholders' Equity
Issuance of common stock in connection with vesting of restricted stock units		(55)			$ (55)
Issuance of common stock in connection with vesting of restricted stock units (in shares)	353,128
Unrealized gain (loss) on marketable securities			(258)		(258)
Stock-based compensation expense		2,089			2,089
Net loss				(16,941)	(16,941)
Balance at end of period at Mar. 31, 2024	$ 1	$ 930,114	$ (364)	$ (787,737)	$ 142,014
Balance at end of period (in shares) at Mar. 31, 2024	71,248,017				71,248,017

CONDENSED CONSOLIDATED STATEM_4

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2024	Mar. 31, 2023
Cash flows from operating activities:
Net loss	$ (16,941)	$ (28,160)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	243	198
Stock-based compensation expense	2,089	6,806
Revaluation of contingent consideration	2,800	(800)
Changes in operating assets and liabilities:
Accounts receivable	(75)	(202)
Prepaid expenses and other assets	2,044	(874)
Accounts payable	1,932	(2,161)
Accrued expenses	(12,907)	(1,160)
Net cash used in operating activities	(20,815)	(26,353)
Cash flows from investing activities:
Purchases of property and equipment	(135)	(553)
Purchases of marketable securities		(28,524)
Proceeds from sales and maturities of marketable securities	16,968	54,875
Net cash provided by investing activities	16,833	25,798
Cash flows from financing activities:
Payments of employee withholding taxes related to restricted stock unit award vesting	(55)
Net cash used in financing activities	(55)
Net decrease in cash and cash equivalents	(4,037)	(555)
Cash and cash equivalents at beginning of period	39,878	45,277
Cash and cash equivalents at end of period	$ 35,841	44,722
Supplemental disclosure of non-cash investing and financing activities:
Additions to property and equipment included in accounts payable		$ 41

Organization and Nature of Busi

Organization and Nature of Business	3 Months Ended
Organization and Nature of Business	Mar. 31, 2024
Organization and Nature of Business
Organization and Nature of Business	1. Organization and Nature of Business Overview Aclaris Therapeutics, Inc. was incorporated under the laws of the State of Delaware in 2012. Aclaris Therapeutics, Inc. and its wholly owned subsidiaries are referred to collectively as the “Company.” The Company is a clinical-stage biopharmaceutical company focused on developing novel drug candidates for immuno-inflammatory diseases. The Company’s proprietary KINect drug discovery platform allows the Company to identify and advance potential drug candidates that it may develop independently or in collaboration with third parties. In addition to identifying and developing its novel drug candidates, the Company is pursuing strategic alternatives, including identifying and consummating transactions with third-party partners, to further develop, obtain marketing approval for and/or commercialize its novel drug candidates. early-stage research and development Liquidity The Company’s condensed consolidated financial statements have been prepared on the basis of continuity of operations, realization of assets and the satisfaction of liabilities in the ordinary course of business. As of March 31, 2024, the Company had cash, cash equivalents and marketable securities of $161.4 million and an accumulated deficit of $787.7 million. Since inception, the Company has incurred net losses and negative cash flows from its operations. Prior to the acquisition of Confluence Life Sciences, Inc. (now known as Aclaris Life Sciences, Inc.) (“Confluence”) in 2017, the Company had never generated revenue. There can be no assurance that profitable operations will ever be achieved, and, if achieved, will be sustained on a continuing basis. In addition, development activities, including clinical and preclinical testing of the Company’s drug candidates, will require significant additional financing. The future viability of the Company is dependent on its ability to successfully develop its drug candidates and to generate revenue from identifying and consummating transactions with third-party partners to further develop, obtain marketing approval for and/or commercialize its development assets or to raise additional capital to finance its operations. The Company will require additional capital to develop its drug candidates and to support its discovery efforts. Additional funds may not be available on a timely basis, on commercially acceptable terms, or at all, and such funds, if raised, may not be sufficient to enable the Company to continue to implement its long-term business strategy. The Company's ability to raise additional capital may be adversely impacted by potentially worsening global economic conditions caused by a variety of factors including geopolitical tensions, rising interest rates, and inflationary pressures. If the Company is unable to raise sufficient additional capital or generate revenue from transactions with potential third-party partners for the development and/or commercialization of its drug candidates, it may need to substantially curtail planned operations. The Company’s failure to raise capital as and when needed could have a negative impact on its financial condition and ability to pursue its business strategies. In accordance with Accounting Standards Codification (“ASC”) Subtopic 205-40, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern, the Company evaluated whether there are conditions and events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that its condensed consolidated financial statements are issued. As of the report date, the Company does not believe that substantial doubt exists about its ability to continue as a going concern. The Company believes its existing cash, cash equivalents and marketable securities are sufficient to fund its operating and capital expenditure requirements for a period greater than 12 months from the date of issuance of these condensed consolidated financial statements.

Summary of Significant Accounti

Summary of Significant Accounting Policies	3 Months Ended
Summary of Significant Accounting Policies	Mar. 31, 2024
Summary of Significant Accounting Policies
Summary of Significant Accounting Policies	2. Summary of Significant Accounting Policies Unaudited Interim Financial Information The accompanying condensed consolidated balance sheet as of March 31, 2024, the condensed consolidated statements of operations and comprehensive loss for the three months ended March 31, 2024 and 2023, the condensed consolidated statement of stockholders’ equity for the three months ended March 31, 2024 and 2023, and the condensed consolidated statements of cash flows for the three months ended March 31, 2024 and 2023 are unaudited. The unaudited interim condensed consolidated financial statements have been prepared on the same basis as the audited annual financial statements contained in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on February 27, 2024 and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments necessary for the fair statement of the Company’s financial position as of March 31, 2024, the results of its operations and comprehensive loss for the three months ended March 31, 2024 and 2023, its changes in stockholders’ equity for the three months ended March 31, 2024 and 2023 and its cash flows for the three months ended March 31, 2024 and 2023. The condensed consolidated balance sheet data as of December 31, 2023 was derived from audited financial statements but does not include all disclosures required by generally accepted accounting principles in the United States (“GAAP”). The financial data and other information disclosed in these notes related to the three months ended March 31, 2024 and 2023 are unaudited. The results for the three months ended March 31, 2024 are not necessarily indicative of results to be expected for the year ending December 31, 2024, any other interim periods, or any future year or period. The unaudited interim financial statements of the Company included herein have been prepared, pursuant to the rules and regulations of the SEC. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted from this report, as is permitted by such rules and regulations. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto for the year ended December 31, 2023 included in the Company’s Annual Report on Form 10-K filed with the SEC on February 27, 2024. Basis of Presentation The accompanying condensed consolidated financial statements have been prepared in conformity with GAAP. The condensed consolidated financial statements of the Company include the accounts of the operating parent company, Aclaris Therapeutics, Inc., and its wholly owned subsidiaries. All intercompany transactions have been eliminated. Based upon the Company’s revenue, the Company believes that gross profit does not provide a meaningful measure of profitability and, therefore, has not included a line item for gross profit on the condensed consolidated statement of operations. Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting periods. Significant estimates and assumptions reflected in these financial statements include, but are not limited to, contingent consideration and the valuation of stock-based awards. Estimates are periodically reviewed in light of changes in circumstances, facts and experience. As of the date of issuance of these financial statements, the Company is not aware of any specific event or circumstance that would require an update to its estimates, assumptions and judgments or revise the carrying value of its assets or liabilities. Actual results could differ from the Company’s estimates. Reclassifications Certain prior year amounts have been reclassified to conform to the current year’s financial statement presentation. Significant Accounting Policies The Company’s significant accounting policies are disclosed in the audited consolidated financial statements for the year ended December 31, 2023 included in the Company’s Annual Report on Form 10-K filed with the SEC on February 27, 2024. There have been no changes to the Company’s significant accounting policies from those disclosed in the annual report. Contingent Consideration The Company records a contingent consideration liability related to future potential payments resulting from the acquisition of Confluence based upon significant unobservable inputs including the achievement of regulatory and commercial milestones, as well as estimated future sales levels and the discount rates applied to calculate the present value of the potential payments. Significant judgement is involved in determining the appropriateness of these assumptions. These assumptions are considered Level 3 inputs. Revaluation of the contingent consideration liability can result from changes to one or more of these assumptions. The Company evaluates the fair value estimate of the contingent consideration liability on a quarterly basis with changes, if any, recorded as income or expense in the condensed consolidated statement of operations. The fair value of contingent consideration is estimated using a probability-weighted expected payment model for regulatory milestone payments and a Monte Carlo simulation model for commercial milestone and royalty payments and then applying a risk-adjusted discount rate to calculate the present value of the potential payments. Significant assumptions used in the Company’s estimates include the probability of achieving regulatory milestones and commencing commercialization, which are based on an asset’s current stage of development and a review of existing clinical data. Probability of success on the year of each potential payment. Revenue Recognition The Company accounts for revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers. Under ASC Topic 606, revenue is recognized when a customer obtains control of promised goods or services in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services. To determine revenue recognition in accordance with ASC Topic 606, the Company performs the following five steps: (i) identify the contract(s) with a customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations in the contract, and (v) recognize revenue when (or as) performance obligations are satisfied. At contract inception, the Company assesses the goods or services promised within a contract with a customer to identify the performance obligations, and to determine if they are distinct. The Company recognizes the revenue that is allocated to each distinct performance obligation when (or as) that performance obligation is satisfied. The Company only recognizes revenue when collection of the consideration it is entitled to under a contract with a customer is probable. Contract Research Revenue Licensing Revenue Licenses of Intellectual Property Milestone and Royalty Payments The Company recognizes revenue from development, regulatory and anniversary milestone payments as they are achieved. The Company recognizes revenue from commercial milestones and royalty payments as the sales occur. Discontinued Operations As of March 31, 2024 and December 31, 2023, the Company had $2.2 million in discontinued operations reported as other current liabilities in the Company’s consolidated balance sheet, related to discontinued commercial products. Recently Issued Accounting Pronouncements In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures.” This standard requires disclosure of significant segment expenses and other segment items by reportable segment. This ASU becomes effective for annual periods beginning in 2024 and interim periods in 2025. The Company is assessing the impact of this ASU and upon adoption expects that any impact would be limited to additional segment expense disclosures in the footnotes to the Company’s consolidated financial statements. In December 2023, the FASB issued ASU No. 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures.” This standard enhances disclosures related to income taxes, including the rate reconciliation and information on income taxes paid. This ASU becomes effective January 1, 2025. The Company is currently assessing the impact of this ASU.

Fair Value of Financial Assets

Fair Value of Financial Assets and Liabilities	3 Months Ended
Fair Value of Financial Assets and Liabilities	Mar. 31, 2024
Fair Value of Financial Assets and Liabilities
Fair Value of Financial Assets and Liabilities	3. Fair Value of Financial Assets and Liabilities The following tables present information about the fair value measurements of the Company’s financial assets and liabilities which are measured at fair value on a recurring and non-recurring basis, and indicate the level of the fair value hierarchy utilized to determine such fair values: March 31, 2024 (In thousands) Level 1 Level 2 Level 3 Total Assets: Cash equivalents $ 33,536 $ — $ — $ 33,536 Marketable securities — 125,524 — 125,524 Total assets $ 33,536 $ 125,524 $ — $ 159,060 Liabilities: Contingent consideration $ — $ — $ 9,000 $ 9,000 Total liabilities $ — $ — $ 9,000 $ 9,000 December 31, 2023 (In thousands) Level 1 Level 2 Level 3 Total Assets: Cash equivalents $ 32,177 $ — $ — $ 32,177 Marketable securities — 141,999 — 141,999 Total assets $ 32,177 $ 141,999 $ — $ 174,176 Liabilities: Contingent consideration $ — $ — $ 6,200 $ 6,200 Total liabilities $ — $ — $ 6,200 $ 6,200 As of March 31, 2024 and December 31, 2023, the Company’s cash equivalents consisted of money market funds, which were valued based upon Level 1 inputs. The Company’s marketable securities as of March 31, 2024 and December 31, 2023 consisted of commercial paper and corporate debt, asset-backed debt, foreign government agency debt and U.S. government and government agency debt securities, which were all valued based upon Level 2 inputs. In determining the fair value of its Level 2 investments, the Company relies on quoted prices for identical securities in markets that are not active. These quoted prices are obtained by the Company with the assistance of a third-party pricing service based on available trade, bid and other observable market data for identical securities. During the three months ended March 31, 2024 and 2023, there were no transfers into or out of Level 3. The overall $2.8 million increase in the fair value of the contingent consideration liability during the three months ended March 31, 2024 was primarily due to changes in estimated sales levels and changes to the probability of success for certain drug candidates. As of March 31, 2024 and December 31, 2023, the fair value of the Company’s available-for-sale marketable securities by type of security was as follows: March 31, 2024 Gross Gross Book Unrealized Unrealized Fair (In thousands) Value Gain Loss Value Marketable securities: Corporate debt securities (1) $ 52,531 $ 26 $ (186) $ 52,371 Commercial paper 4,949 — — 4,949 Asset-backed debt securities (2) 10,537 71 (33) 10,575 Foreign government agency debt securities (3) 4,765 22 — 4,787 U.S. government and government agency debt securities (4) 53,110 — (268) 52,842 Total marketable securities $ 125,892 $ 119 $ (487) $ 125,524 (1) Included in Corporate debt securities is $17.9 million with maturity dates between one and two years . (2) Included in Asset-backed debt securities is $5.8 million with maturity dates between one and two years . (3) Included in Foreign government agency debt securities is $4.8 million with a maturity date between one and two years . (4) Included in U.S. government and government agency debt securities is $4.7 million with maturity dates between one and two years . December 31, 2023 Gross Gross Book Unrealized Unrealized Fair (In thousands) Value Gain Loss Value Marketable securities: Corporate debt securities (1) $ 52,362 $ 65 $ (142) $ 52,285 Commercial paper 12,345 2 (1) 12,346 Asset-backed debt securities (2) 10,953 42 (30) 10,965 Foreign government agency debt securities (3) 4,698 43 — 4,741 U.S. government and government agency debt securities (4) 61,750 8 (96) 61,662 Total marketable securities $ 142,108 $ 160 $ (269) $ 141,999 (1) Included in Corporate debt securities is $28.0 million with maturity dates between one and two years . (2) Included in Asset-backed debt securities is $6.2 million with maturity dates between one and three years . (3) Included in Foreign government agency debt securities is $4.7 million with a maturity date between one and two years . (4) Included in U.S. government and government agency debt securities is $23.9 million with maturity dates between one and two years .

Property and Equipment, Net

Property and Equipment, Net	3 Months Ended
Property and Equipment, Net	Mar. 31, 2024
Property and Equipment, Net
Property and Equipment, Net	4. Property and Equipment, Net Property and equipment, net consisted of the following: March 31, December 31, (In thousands) 2024 2023 Computer equipment $ 1,206 $ 1,253 Lab equipment 3,153 3,154 Furniture and fixtures 694 558 Leasehold improvements 817 817 Property and equipment, gross 5,870 5,782 Accumulated depreciation (4,339) (4,162) Property and equipment, net $ 1,531 $ 1,620 Depreciation expense was $0.2 million for each of the three months ended March 31, 2024 and 2023.

Accrued Expenses

Accrued Expenses	3 Months Ended
Accrued Expenses	Mar. 31, 2024
Accrued Expenses
Accrued Expenses	5. Accrued Expenses Accrued expenses consisted of the following: March 31, December 31, (In thousands) 2024 2023 Employee compensation expenses $ 1,694 $ 3,910 Research and development expenses 1,232 6,661 Licensing expenses 794 5,478 Restructuring expenses (Note 12) 2,588 3,112 Other expenses 257 285 Total accrued expenses $ 6,565 $ 19,446

Stockholders' Equity

Stockholders' Equity	3 Months Ended
Stockholders' Equity	Mar. 31, 2024
Stockholders' Equity
Stockholders' Equity	6. Stockholders’ Equity Preferred Stock As of March 31, 2024 and December 31, 2023, the Company’s amended and restated certificate of incorporation (the “Charter”) authorized the Company to issue 10,000,000 shares of undesignated preferred stock. There were no shares of preferred stock outstanding as of March 31, 2024 or December 31, 2023. Common Stock As of March 31, 2024 and December 31, 2023, the Company’s Charter authorized the Company to issue 200,000,000 shares of $0.00001 par value common stock. There were 71,248,017 and 70,894,889 shares of common stock issued outstanding Each share of common stock entitles the holder to one vote on all matters submitted to a vote of the Company’s stockholders. Common stockholders are entitled to receive dividends, as may be declared by the board of directors, if any, subject to any preferential dividend rights of any series of preferred stock that may be outstanding. No dividends have been declared through March 31, 2024.

Stock-Based Awards

Stock-Based Awards	3 Months Ended
Stock-Based Awards	Mar. 31, 2024
Stock-Based Awards
Stock-Based Awards	7. Stock-Based Awards 2015 Equity Incentive Plan In September 2015, the Company’s board of directors adopted the 2015 Equity Incentive Plan (the “2015 Plan”), and the Company’s stockholders approved the 2015 Plan. The 2015 Plan became effective in connection with the Company’s initial public offering in October 2015. Beginning at the time the 2015 Plan became effective, no further grants may be made under the Company’s 2012 Equity Compensation Plan, as amended and restated (the “2012 Plan”). The 2015 Plan provides for the grant of incentive stock options, nonqualified stock options, stock appreciation rights, restricted stock awards, restricted stock unit (“RSU”) awards, performance stock awards, cash-based awards, and other stock-based awards. The number of shares initially reserved for issuance under the 2015 Plan was 1,643,872 shares of common stock. The number of shares of common stock that may be issued under the 2015 Plan will automatically increase on January 1 of each year ending on January 1, 2025, in an amount equal to the lesser of (i) 4.0% of the shares of the Company’s common stock outstanding on December 31st of the preceding calendar year or (ii) an amount determined by the Company’s board of directors. The shares of common stock underlying any awards that expire, are otherwise terminated, settled in cash, or repurchased by the Company under the 2015 Plan and the 2012 Plan will be added back to the shares of common stock available for issuance under the 2015 Plan. As of January 1, 2024, the number of shares of common stock that may be issued under the 2015 Plan was automatically increased by 2,835,795 shares. As of March 31, 2024, 4,020,777 shares remained available for grant under the 2015 Plan. The Company had 6,233,088 stock options and 3,139,539 RSUs outstanding as of March 31, 2024 under the 2015 Plan. 2017 Inducement Plan In July 2017, the Company’s board of directors adopted the 2017 Inducement Plan (the “2017 Inducement Plan”). The 2017 Inducement Plan is a non-stockholder approved stock plan adopted pursuant to the “inducement exception” provided under Nasdaq listing rules. The Company had 353,100 stock options outstanding as of March 31, 2024 under the 2017 Inducement Plan. All shares of common stock that were eligible for issuance under the 2017 Inducement Plan after October 1, 2018, including any shares underlying any awards that expire or are otherwise terminated, reacquired to satisfy tax withholding obligations, settled in cash or repurchased by the Company in the future that would have been eligible for re-issuance under the 2017 Inducement Plan, were retired. 2012 Equity Compensation Plan In August 2012, the Company’s board of directors adopted the 2012 Plan and the Company’s stockholders approved the 2012 Plan. Upon the 2015 Plan becoming effective, no further grants can be made under the 2012 Plan. The Company had 380,792 stock options outstanding as of March 31, 2024 under the 2012 Plan. Stock Option Valuation The weighted average assumptions the Company used to estimate the fair value of stock options granted during the three months ended March 31, 2024 and 2023 were as follows: Three Months Ended March 31, 2024 2023 Risk-free interest rate 3.81 % 3.46 % Expected term (in years) 6.0 6.3 Expected volatility 81.81 % 77.73 % Expected dividend yield 0 % 0 % The Company recognizes compensation expense for awards over their vesting period. Compensation expense for awards includes the impact of forfeitures in the period when they occur. Stock Options The following table summarizes stock option activity for the three months ended March 31, 2024: Weighted Weighted Average Average Remaining Aggregate Number Exercise Contractual Intrinsic (In thousands, except share and per share data and years) of Shares Price Term Value (in years) Outstanding as of December 31, 2023 6,419,455 $ 15.94 7.1 $ 14 Granted 1,842,300 1.20 Forfeited and cancelled (1,294,775) 14.54 Outstanding as of March 31, 2024 6,966,980 $ 12.32 7.0 $ 96 Options vested and expected to vest as of March 31, 2024 6,966,980 $ 12.32 7.0 $ 96 Options exercisable as of March 31, 2024 3,695,196 $ 16.24 5.1 $ 24 The weighted average grant date fair value of stock options granted during the three months ended March 31, 2024 was $0.86 per share. Restricted Stock Units The following table summarizes RSU activity for the three months ended March 31, 2024: Weighted Average Grant Date Aggregate Number Fair Value Intrinsic (In thousands, except share and per share data) of Shares Per Share Value Outstanding as of December 31, 2023 1,521,940 $ 15.72 Granted 2,444,350 1.20 Vested (399,716) 14.93 $ 482 Forfeited and cancelled (427,035) 13.65 Outstanding as of March 31, 2024 3,139,539 $ 4.81 Stock-Based Compensation Stock-based compensation expense included in total costs and expenses on the condensed consolidated statement of operations included the following: Three Months Ended March 31, (In thousands) 2024 2023 Cost of revenue $ 252 $ 299 Research and development (29) 2,602 General and administrative 1,866 3,905 Total stock-based compensation expense $ 2,089 $ 6,806 As of March 31, 2024, the Company had unrecognized stock-based compensation expense for stock options and RSUs of $16.6 million and $13.6 million, respectively, which is expected to be recognized over weighted average periods of 2.5 years and 2.3 years, respectively.

Net Loss per Share

Net Loss per Share	3 Months Ended
Net Loss per Share	Mar. 31, 2024
Net Loss per Share
Net Loss per Share	8. Net Loss per Share Basic and diluted net loss per share is summarized in the following table: Three Months Ended March 31, (In thousands, except for share and per share data) 2024 2023 Numerator: Net loss $ (16,941) $ (28,160) Denominator: Weighted average shares of common stock outstanding, basic and diluted 71,074,858 66,872,778 Net loss per share, basic and diluted $ (0.24) $ (0.42) The Company’s potentially dilutive securities, which included stock options and RSUs, have been excluded from the computation of diluted net loss per share since the effect would be to reduce the net loss per share. Therefore, the weighted average number of shares of common stock outstanding used to calculate both basic and diluted net loss per share is the same. The following table presents potential shares of common stock excluded from the calculation of diluted net loss per share for the three months ended March 31, 2024 and 2023. All share amounts presented in the table below represent the total number outstanding as of March 31, 2024 and 2023. March 31, 2024 2023 Options to purchase common stock 6,966,980 6,865,524 Restricted stock unit awards 3,139,539 1,740,081 Total potential shares of common stock 10,106,519 8,605,605

Leases

Leases	3 Months Ended
Leases	Mar. 31, 2024
Leases
Leases	9. Leases Operating Leases Agreements for Office and Laboratory Space The Company had a sublease agreement pursuant to which it subleased 33,019 square feet of office space for its headquarters in Wayne, Pennsylvania, which expired on October 31, 2023. In May 2023, the Company entered into a new lease agreement pursuant to which it leases 11,564 square feet of office space for its headquarters in Wayne, Pennsylvania. The lease commenced on November 1, 2023 and has a term that runs through February 2029. In February 2019, the Company entered into a sublease agreement for 20,433 square feet of office and laboratory space in St. Louis, Missouri. The lease commenced in June 2019 and has a term that runs through June 2029. In January 2023, the Company amended the sublease agreement to add an additional 6,261 square feet of office and laboratory space effective February 2023, which term runs concurrently with the existing term. Supplemental balance sheet information related to operating leases is as follows: March 31, December 31, (In thousands) 2024 2023 Operating Leases: Gross cost $ 5,094 $ 5,094 Accumulated amortization (1,378) (1,235) Other assets $ 3,716 $ 3,859 Current portion of lease liabilities $ 503 $ 426 Other liabilities 2,971 3,074 Total operating lease liabilities $ 3,474 $ 3,500 Amortization expense related to operating lease right-of-use assets and accretion of operating lease liabilities totaled $0.1 million and $0.3 million for the three months ended March 31, 2024 and 2023, respectively.

Agreements Related to Intellect

Agreements Related to Intellectual Property	3 Months Ended
Agreements Related to Intellectual Property	Mar. 31, 2024
Agreements Related to Intellectual Property
Agreements Related to Intellectual Property	10. Agreements Related to Intellectual Property License Agreement – Sun Pharmaceutical Industries, Inc. In December 2023, the Company entered into an exclusive patent license agreement with Sun Pharmaceutical Industries, Inc. (“Sun Pharma”). Under the license agreement, the Company granted Sun Pharma exclusive rights under certain patents that the Company exclusively licenses from a third party. The patents relate to the use of deuruxolitinib, Sun Pharma’s Janus kinase (“JAK”) inhibitor, or other isotopic forms of ruxolitinib, to treat alopecia areata or androgenetic alopecia. Under the license agreement, Sun Pharma has paid the Company an upfront payment, and has agreed to pay the Company regulatory and commercial milestone payments upon the achievement of specified milestones set forth in the agreement, and a mid single-digit tiered royalty calculated as a percentage of Sun Pharma’s net sales. The Company has separate contractual obligations under which the Company has agreed to pay to third parties a portion of the consideration it may receive under the license agreement. Upon execution of the agreement, the Company received an upfront payment of $15.0 million from Sun Pharma, a portion of which was payable to third parties. License Agreement – Pediatrix Therapeutics, Inc. In November 2022, the Company entered into a license agreement with Pediatrix Therapeutics, Inc. (“Pediatrix”), under which the Company granted Pediatrix the exclusive rights to develop, manufacture and commercialize lepzacitinib in Greater China. Pediatrix has paid the Company an upfront payment, and has agreed to pay the Company development, regulatory and commercial milestone payments upon the achievement of specified milestones set forth in the agreement, and a tiered royalty ranging from a low-to-high single digit percentage of net sales of lepzacitinib by Pediatrix in Greater China. A portion of consideration received from Pediatrix is payable to the former Confluence equity holders as described below under the caption “Agreement and Plan of Merger - Confluence.” License Agreement – Eli Lilly and Company In August 2022, the Company entered into a non-exclusive patent license agreement with Eli Lilly and Company (“Lilly”). Under the license agreement, the Company granted Lilly non-exclusive rights under certain patents and patent applications that the Company exclusively licenses from a third party. The patents and patent applications relate to the use of baricitinib, Lilly’s JAK inhibitor, to treat alopecia areata. Under the license agreement, Lilly has paid the Company an upfront payment, and regulatory and certain commercial milestone payments, and has agreed to pay the Company anniversary payments and other commercial milestone payments upon the achievement of specified milestones as set forth in the agreement, and a low single-digit royalty calculated as a percentage of Lilly’s net sales of baricitinib for the treatment of alopecia areata. The Company has separate contractual obligations under which the Company has agreed to pay to third parties an amount equal to any regulatory and commercial milestone payments it receives under the Lilly license agreement, as well as a portion of the upfront consideration and a portion of the royalties it may receive under the license agreement. During the three months ended March 31, 2024 and 2023, the Company recorded licensing revenue under this agreement of $1.7 million and $1.6 million, respectively, from Lilly, a portion of which was payable to third parties. Asset Purchase Agreement – EPI Health, LLC In October 2019, the Company sold RHOFADE (oxymetazoline hydrochloride) cream, 1% (“RHOFADE”) to EPI Health, LLC (“EPI Health”) pursuant to an asset purchase agreement. In July 2023, EPI Health filed a voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code. Through the bankruptcy process, EPI Health and its parent company, Novan, Inc., sold the RHOFADE assets to a third party, which excluded the Company’s asset purchase agreement with EPI Health and the outstanding amounts due. The sale was approved by the bankruptcy court in September 2023. As a result of the bankruptcy proceedings, all amounts that are due and outstanding by EPI Health have been fully reserved for as of March 31, 2024. Agreement and Plan of Merger – Confluence In August 2017, the Company entered into an Agreement and Plan of Merger, pursuant to which it acquired Confluence (the “Confluence Agreement”). Under the Confluence Agreement, the Company has agreed to pay the former Confluence equity holders aggregate remaining contingent consideration of up to $75.0 million based upon the achievement of specified regulatory and commercial milestones set forth in the Confluence Agreement. In addition, the Company has agreed to pay the former Confluence equity holders future royalty payments calculated as a low single-digit percentage of annual net sales, subject to specified reductions, limitations and other adjustments, until the date that all of the patent rights for that product have expired, as determined on a country-by-country and product-by-product basis or, in specified circumstances, ten years from the first commercial sale of such product. In addition to the payments described above, if the Company sells, licenses or transfers any of the intellectual property acquired from Confluence pursuant to the Confluence Agreement to a third party, the Company will be obligated to pay the former Confluence equity holders a portion of any consideration received from such sale, license or transfer in specified circumstances. As of March 31, 2024 and December 31, 2023, the balance of the Company’s contingent consideration liability was $9.0 million and $6.2 million, respectively (see Note 3).

Income Taxes

Income Taxes	3 Months Ended
Income Taxes	Mar. 31, 2024
Income Taxes
Income Taxes	11. Income Taxes The Company did not record a federal or state income tax benefit for losses incurred during the three months ended March 31, 2024 and 2023. The Company concluded that it is more likely than not that its deferred tax assets will not be realized which resulted in recording a full valuation allowance during those periods.

Restructuring Charges

Restructuring Charges	3 Months Ended
Restructuring Charges	Mar. 31, 2024
Restructuring Charges.
Restructuring Charges	12. Restructuring Charges In December 2023, the Company’s board of directors approved a reduction of the Company’s workforce by approximately 46%, which the Company expects to be substantially completed by June 2024. This action was taken in order to streamline operations, reduce costs and preserve capital. As a result, the Company terminated certain employees (“terminated employees”) and gave notice to additional employees (“noticed employees”) who were asked to provide transition services through termination dates ranging between one During the year ended December 31, 2023, the Company recorded a restructuring charge for the one-time termination benefit for impacted employees with retention periods less than the sixty-day minimum retention period, which was triggered immediately upon either terminating or giving notice to the impacted employees. During the three months ended March 31, 2024, the Company recognized severance expense of $2.5 million and made cash payments of $3.0 million related to severance to terminated employees.

Segment Information

Segment Information	3 Months Ended
Segment Information	Mar. 31, 2024
Segment Information
Segment Information	13. Segment Information The Company has two reportable segments, therapeutics and contract research. The therapeutics segment is focused on identifying and developing innovative therapies to address significant unmet needs for immuno-inflammatory diseases and earns revenue through licensing of the Company’s intellectual property. The contract research segment earns revenue from the provision of laboratory services. All intersegment revenue has been eliminated in the Company’s consolidated statement of operations. All customers and revenue pertaining to the Company’s segments are based in the United States. Corporate and other includes general and administrative expenses as well as eliminations of intercompany transactions. The Company does not report balance sheet information by segment since it is not reviewed by the chief operating decision maker, and all of the Company’s tangible assets are held in the United States. The Company’s results of operations by segment for the three months ended March 31, 2024 and 2023 are summarized in the tables below: (In thousands) Contract Corporate Total Three Months Ended March 31, 2024 Therapeutics Research and Other Company Revenue from external customers $ 1,741 $ 657 $ — $ 2,398 Intercompany revenue — 3,666 (3,666) — Cost of revenue — 4,024 (3,432) 592 Research and development 8,760 — (233) 8,527 General and administrative — 1,108 4,742 5,850 Licensing 1,031 — — 1,031 Revaluation of contingent consideration 2,800 — — 2,800 Restructuring expense 1,318 217 994 2,529 Loss from operations $ (12,168) $ (1,026) $ (5,737) $ (18,931) (In thousands) Contract Corporate Total Three Months Ended March 31, 2023 Therapeutics Research and Other Company Revenue from external customers $ 1,638 $ 890 $ — $ 2,528 Intercompany revenue — 4,011 (4,011) — Cost of revenue — 4,547 (3,739) 808 Research and development 22,859 — (272) 22,587 General and administrative — 1,062 7,728 8,790 Licensing 1,061 — — 1,061 Revaluation of contingent consideration (800) — — (800) Loss from operations $ (21,482) $ (708) $ (7,728) $ (29,918)

Summary of Significant Accoun_2

Summary of Significant Accounting Policies (Policies)	3 Months Ended
Summary of Significant Accounting Policies (Policies)	Mar. 31, 2024
Summary of Significant Accounting Policies
Unaudited Interim Financial Information	Unaudited Interim Financial Information The accompanying condensed consolidated balance sheet as of March 31, 2024, the condensed consolidated statements of operations and comprehensive loss for the three months ended March 31, 2024 and 2023, the condensed consolidated statement of stockholders’ equity for the three months ended March 31, 2024 and 2023, and the condensed consolidated statements of cash flows for the three months ended March 31, 2024 and 2023 are unaudited. The unaudited interim condensed consolidated financial statements have been prepared on the same basis as the audited annual financial statements contained in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on February 27, 2024 and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments necessary for the fair statement of the Company’s financial position as of March 31, 2024, the results of its operations and comprehensive loss for the three months ended March 31, 2024 and 2023, its changes in stockholders’ equity for the three months ended March 31, 2024 and 2023 and its cash flows for the three months ended March 31, 2024 and 2023. The condensed consolidated balance sheet data as of December 31, 2023 was derived from audited financial statements but does not include all disclosures required by generally accepted accounting principles in the United States (“GAAP”). The financial data and other information disclosed in these notes related to the three months ended March 31, 2024 and 2023 are unaudited. The results for the three months ended March 31, 2024 are not necessarily indicative of results to be expected for the year ending December 31, 2024, any other interim periods, or any future year or period. The unaudited interim financial statements of the Company included herein have been prepared, pursuant to the rules and regulations of the SEC. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted from this report, as is permitted by such rules and regulations. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto for the year ended December 31, 2023 included in the Company’s Annual Report on Form 10-K filed with the SEC on February 27, 2024.
Basis of Presentation	Basis of Presentation The accompanying condensed consolidated financial statements have been prepared in conformity with GAAP. The condensed consolidated financial statements of the Company include the accounts of the operating parent company, Aclaris Therapeutics, Inc., and its wholly owned subsidiaries. All intercompany transactions have been eliminated. Based upon the Company’s revenue, the Company believes that gross profit does not provide a meaningful measure of profitability and, therefore, has not included a line item for gross profit on the condensed consolidated statement of operations.
Use of Estimates	Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting periods. Significant estimates and assumptions reflected in these financial statements include, but are not limited to, contingent consideration and the valuation of stock-based awards. Estimates are periodically reviewed in light of changes in circumstances, facts and experience. As of the date of issuance of these financial statements, the Company is not aware of any specific event or circumstance that would require an update to its estimates, assumptions and judgments or revise the carrying value of its assets or liabilities. Actual results could differ from the Company’s estimates.
Reclassifications	Reclassifications Certain prior year amounts have been reclassified to conform to the current year’s financial statement presentation.
Significant Accounting Policies	Significant Accounting Policies The Company’s significant accounting policies are disclosed in the audited consolidated financial statements for the year ended December 31, 2023 included in the Company’s Annual Report on Form 10-K filed with the SEC on February 27, 2024. There have been no changes to the Company’s significant accounting policies from those disclosed in the annual report.
Contingent Consideration	Contingent Consideration The Company records a contingent consideration liability related to future potential payments resulting from the acquisition of Confluence based upon significant unobservable inputs including the achievement of regulatory and commercial milestones, as well as estimated future sales levels and the discount rates applied to calculate the present value of the potential payments. Significant judgement is involved in determining the appropriateness of these assumptions. These assumptions are considered Level 3 inputs. Revaluation of the contingent consideration liability can result from changes to one or more of these assumptions. The Company evaluates the fair value estimate of the contingent consideration liability on a quarterly basis with changes, if any, recorded as income or expense in the condensed consolidated statement of operations. The fair value of contingent consideration is estimated using a probability-weighted expected payment model for regulatory milestone payments and a Monte Carlo simulation model for commercial milestone and royalty payments and then applying a risk-adjusted discount rate to calculate the present value of the potential payments. Significant assumptions used in the Company’s estimates include the probability of achieving regulatory milestones and commencing commercialization, which are based on an asset’s current stage of development and a review of existing clinical data. Probability of success on the year of each potential payment.
Revenue Recognition	Revenue Recognition The Company accounts for revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers. Under ASC Topic 606, revenue is recognized when a customer obtains control of promised goods or services in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services. To determine revenue recognition in accordance with ASC Topic 606, the Company performs the following five steps: (i) identify the contract(s) with a customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations in the contract, and (v) recognize revenue when (or as) performance obligations are satisfied. At contract inception, the Company assesses the goods or services promised within a contract with a customer to identify the performance obligations, and to determine if they are distinct. The Company recognizes the revenue that is allocated to each distinct performance obligation when (or as) that performance obligation is satisfied. The Company only recognizes revenue when collection of the consideration it is entitled to under a contract with a customer is probable. Contract Research Revenue Licensing Revenue Licenses of Intellectual Property Milestone and Royalty Payments The Company recognizes revenue from development, regulatory and anniversary milestone payments as they are achieved. The Company recognizes revenue from commercial milestones and royalty payments as the sales occur.
Discontinued Operations	Discontinued Operations As of March 31, 2024 and December 31, 2023, the Company had $2.2 million in discontinued operations reported as other current liabilities in the Company’s consolidated balance sheet, related to discontinued commercial products.
Recently Issued Accounting Pronouncements	Recently Issued Accounting Pronouncements In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures.” This standard requires disclosure of significant segment expenses and other segment items by reportable segment. This ASU becomes effective for annual periods beginning in 2024 and interim periods in 2025. The Company is assessing the impact of this ASU and upon adoption expects that any impact would be limited to additional segment expense disclosures in the footnotes to the Company’s consolidated financial statements. In December 2023, the FASB issued ASU No. 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures.” This standard enhances disclosures related to income taxes, including the rate reconciliation and information on income taxes paid. This ASU becomes effective January 1, 2025. The Company is currently assessing the impact of this ASU.

Fair Value of Financial Asset_2

Fair Value of Financial Assets and Liabilities (Tables)	3 Months Ended
Fair Value of Financial Assets and Liabilities (Tables)	Mar. 31, 2024
Fair Value of Financial Assets and Liabilities
Schedule of assets and liabilities measured at fair value on a recurring basis	March 31, 2024 (In thousands) Level 1 Level 2 Level 3 Total Assets: Cash equivalents $ 33,536 $ — $ — $ 33,536 Marketable securities — 125,524 — 125,524 Total assets $ 33,536 $ 125,524 $ — $ 159,060 Liabilities: Contingent consideration $ — $ — $ 9,000 $ 9,000 Total liabilities $ — $ — $ 9,000 $ 9,000 December 31, 2023 (In thousands) Level 1 Level 2 Level 3 Total Assets: Cash equivalents $ 32,177 $ — $ — $ 32,177 Marketable securities — 141,999 — 141,999 Total assets $ 32,177 $ 141,999 $ — $ 174,176 Liabilities: Contingent consideration $ — $ — $ 6,200 $ 6,200 Total liabilities $ — $ — $ 6,200 $ 6,200
Schedule of the fair value of available for sale marketable securities	March 31, 2024 Gross Gross Book Unrealized Unrealized Fair (In thousands) Value Gain Loss Value Marketable securities: Corporate debt securities (1) $ 52,531 $ 26 $ (186) $ 52,371 Commercial paper 4,949 — — 4,949 Asset-backed debt securities (2) 10,537 71 (33) 10,575 Foreign government agency debt securities (3) 4,765 22 — 4,787 U.S. government and government agency debt securities (4) 53,110 — (268) 52,842 Total marketable securities $ 125,892 $ 119 $ (487) $ 125,524 (1) Included in Corporate debt securities is $17.9 million with maturity dates between one and two years . (2) Included in Asset-backed debt securities is $5.8 million with maturity dates between one and two years . (3) Included in Foreign government agency debt securities is $4.8 million with a maturity date between one and two years . (4) Included in U.S. government and government agency debt securities is $4.7 million with maturity dates between one and two years . December 31, 2023 Gross Gross Book Unrealized Unrealized Fair (In thousands) Value Gain Loss Value Marketable securities: Corporate debt securities (1) $ 52,362 $ 65 $ (142) $ 52,285 Commercial paper 12,345 2 (1) 12,346 Asset-backed debt securities (2) 10,953 42 (30) 10,965 Foreign government agency debt securities (3) 4,698 43 — 4,741 U.S. government and government agency debt securities (4) 61,750 8 (96) 61,662 Total marketable securities $ 142,108 $ 160 $ (269) $ 141,999 (1) Included in Corporate debt securities is $28.0 million with maturity dates between one and two years . (2) Included in Asset-backed debt securities is $6.2 million with maturity dates between one and three years . (3) Included in Foreign government agency debt securities is $4.7 million with a maturity date between one and two years . (4) Included in U.S. government and government agency debt securities is $23.9 million with maturity dates between one and two years .

Property and Equipment, Net (Ta

Property and Equipment, Net (Tables)	3 Months Ended
Property and Equipment, Net (Tables)	Mar. 31, 2024
Property and Equipment, Net
Schedule of property and equipment, net	March 31, December 31, (In thousands) 2024 2023 Computer equipment $ 1,206 $ 1,253 Lab equipment 3,153 3,154 Furniture and fixtures 694 558 Leasehold improvements 817 817 Property and equipment, gross 5,870 5,782 Accumulated depreciation (4,339) (4,162) Property and equipment, net $ 1,531 $ 1,620

Accrued Expenses (Tables)

Accrued Expenses (Tables)	3 Months Ended
Accrued Expenses (Tables)	Mar. 31, 2024
Accrued Expenses
Schedule of accrued expenses	March 31, December 31, (In thousands) 2024 2023 Employee compensation expenses $ 1,694 $ 3,910 Research and development expenses 1,232 6,661 Licensing expenses 794 5,478 Restructuring expenses (Note 12) 2,588 3,112 Other expenses 257 285 Total accrued expenses $ 6,565 $ 19,446

Stock-Based Awards (Tables)

Stock-Based Awards (Tables)	3 Months Ended
Stock-Based Awards (Tables)	Mar. 31, 2024
Stock-Based Awards
Summary of assumptions used to determine fair value of stock options granted	Three Months Ended March 31, 2024 2023 Risk-free interest rate 3.81 % 3.46 % Expected term (in years) 6.0 6.3 Expected volatility 81.81 % 77.73 % Expected dividend yield 0 % 0 %
Summary of stock option activity	Weighted Weighted Average Average Remaining Aggregate Number Exercise Contractual Intrinsic (In thousands, except share and per share data and years) of Shares Price Term Value (in years) Outstanding as of December 31, 2023 6,419,455 $ 15.94 7.1 $ 14 Granted 1,842,300 1.20 Forfeited and cancelled (1,294,775) 14.54 Outstanding as of March 31, 2024 6,966,980 $ 12.32 7.0 $ 96 Options vested and expected to vest as of March 31, 2024 6,966,980 $ 12.32 7.0 $ 96 Options exercisable as of March 31, 2024 3,695,196 $ 16.24 5.1 $ 24
Summary of restricted stock units activity	Weighted Average Grant Date Aggregate Number Fair Value Intrinsic (In thousands, except share and per share data) of Shares Per Share Value Outstanding as of December 31, 2023 1,521,940 $ 15.72 Granted 2,444,350 1.20 Vested (399,716) 14.93 $ 482 Forfeited and cancelled (427,035) 13.65 Outstanding as of March 31, 2024 3,139,539 $ 4.81
Summary of stock-based compensation expense	Three Months Ended March 31, (In thousands) 2024 2023 Cost of revenue $ 252 $ 299 Research and development (29) 2,602 General and administrative 1,866 3,905 Total stock-based compensation expense $ 2,089 $ 6,806

Net Loss per Share (Tables)

Net Loss per Share (Tables)	3 Months Ended
Net Loss per Share (Tables)	Mar. 31, 2024
Net Loss per Share
Summary of basic and diluted net loss per share	Three Months Ended March 31, (In thousands, except for share and per share data) 2024 2023 Numerator: Net loss $ (16,941) $ (28,160) Denominator: Weighted average shares of common stock outstanding, basic and diluted 71,074,858 66,872,778 Net loss per share, basic and diluted $ (0.24) $ (0.42)
Summary of potential common shares excluded from the calculation of diluted net loss per share attributable to common stockholders	March 31, 2024 2023 Options to purchase common stock 6,966,980 6,865,524 Restricted stock unit awards 3,139,539 1,740,081 Total potential shares of common stock 10,106,519 8,605,605

Leases (Tables)

Leases (Tables)	3 Months Ended
Leases (Tables)	Mar. 31, 2024
Leases
Summary of supplemental balance sheet information related to operating leases	March 31, December 31, (In thousands) 2024 2023 Operating Leases: Gross cost $ 5,094 $ 5,094 Accumulated amortization (1,378) (1,235) Other assets $ 3,716 $ 3,859 Current portion of lease liabilities $ 503 $ 426 Other liabilities 2,971 3,074 Total operating lease liabilities $ 3,474 $ 3,500

Segment Information (Tables)

Segment Information (Tables)	3 Months Ended
Segment Information (Tables)	Mar. 31, 2024
Segment Information
Summary of results of operations by segment	(In thousands) Contract Corporate Total Three Months Ended March 31, 2024 Therapeutics Research and Other Company Revenue from external customers $ 1,741 $ 657 $ — $ 2,398 Intercompany revenue — 3,666 (3,666) — Cost of revenue — 4,024 (3,432) 592 Research and development 8,760 — (233) 8,527 General and administrative — 1,108 4,742 5,850 Licensing 1,031 — — 1,031 Revaluation of contingent consideration 2,800 — — 2,800 Restructuring expense 1,318 217 994 2,529 Loss from operations $ (12,168) $ (1,026) $ (5,737) $ (18,931) (In thousands) Contract Corporate Total Three Months Ended March 31, 2023 Therapeutics Research and Other Company Revenue from external customers $ 1,638 $ 890 $ — $ 2,528 Intercompany revenue — 4,011 (4,011) — Cost of revenue — 4,547 (3,739) 808 Research and development 22,859 — (272) 22,587 General and administrative — 1,062 7,728 8,790 Licensing 1,061 — — 1,061 Revaluation of contingent consideration (800) — — (800) Loss from operations $ (21,482) $ (708) $ (7,728) $ (29,918)

Organization and Nature of Bu_2

Organization and Nature of Business (Details) - USD ($) $ in Thousands	Mar. 31, 2024	Dec. 31, 2023
Organization and Nature of Business
Cash, cash equivalents and marketable securities	$ 161,400
Accumulated deficit	$ 787,737	$ 770,796

Summary of Significant Accoun_3

Summary of Significant Accounting Policies (Details) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2024	Dec. 31, 2023
Discontinued Operations.
Other current liabilities	$ 2.2	$ 2.2
Minimum
Contingent Consideration
Probability of success assumptions	17%
Discount range	7.40%
Maximum
Contingent Consideration
Probability of success assumptions	40%
Discount range	8.30%

Fair Value of Financial Asset_3

Fair Value of Financial Assets and Liabilities (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2024	Mar. 31, 2023	Dec. 31, 2023
Assets:
Marketable securities	$ 125,524		$ 141,999
Liabilities:
Transfers into or out of Level 3	0	$ 0
Increase in value of contingent consideration	2,800	$ (800)
Confluence
Liabilities:
Increase in value of contingent consideration	2,800
Recurring
Assets:
Cash equivalents	33,536		32,177
Marketable securities	125,524		141,999
Total assets measured at fair value	159,060		174,176
Liabilities:
Contingent consideration	9,000		6,200
Total liabilities measured at fair value	9,000		6,200
Recurring \| Level 1
Assets:
Cash equivalents	33,536		32,177
Total assets measured at fair value	33,536		32,177
Recurring \| Level 2
Assets:
Marketable securities	125,524		141,999
Total assets measured at fair value	125,524		141,999
Recurring \| Level 3
Liabilities:
Contingent consideration	9,000		6,200
Total liabilities measured at fair value	$ 9,000		$ 6,200

Fair Value of Financial Asset_4

Fair Value of Financial Assets and Liabilities - By Type of Security (Details) - USD ($) $ in Thousands	3 Months Ended	12 Months Ended
	Mar. 31, 2024	Dec. 31, 2023
Marketable securities:
Book Value	$ 125,892	$ 142,108
Gross Unrealized Gain	119	160
Gross Unrealized Loss	(487)	(269)
Fair Value	125,524	141,999
Corporate debt securities
Marketable securities:
Book Value	52,531	52,362
Gross Unrealized Gain	26	65
Gross Unrealized Loss	(186)	(142)
Fair Value	52,371	52,285
Debt securities, maturity dates between one and five years	$ 17,900	$ 28,000
Corporate debt securities \| Minimum
Marketable securities:
Marketable securities maturity period	1 year	1 year
Corporate debt securities \| Maximum
Marketable securities:
Marketable securities maturity period	2 years	2 years
Commercial paper
Marketable securities:
Book Value	$ 4,949	$ 12,345
Gross Unrealized Gain		2
Gross Unrealized Loss		(1)
Fair Value	4,949	12,346
Asset-backed securities
Marketable securities:
Book Value	10,537	10,953
Gross Unrealized Gain	71	42
Gross Unrealized Loss	(33)	(30)
Fair Value	10,575	10,965
Debt securities, maturity dates between one and five years	$ 5,800	$ 6,200
Asset-backed securities \| Minimum
Marketable securities:
Marketable securities maturity period	1 year	1 year
Asset-backed securities \| Maximum
Marketable securities:
Marketable securities maturity period	2 years	3 years
Foreign government agency debt securities
Marketable securities:
Book Value	$ 4,765	$ 4,698
Gross Unrealized Gain	22	43
Fair Value	4,787	4,741
Debt securities, maturity dates between one and five years	$ 4,800	$ 4,700
Foreign government agency debt securities \| Minimum
Marketable securities:
Marketable securities maturity period	1 year	1 year
Foreign government agency debt securities \| Maximum
Marketable securities:
Marketable securities maturity period	2 years	2 years
U.S. government and agency debt securities
Marketable securities:
Book Value	$ 53,110	$ 61,750
Gross Unrealized Gain		8
Gross Unrealized Loss	(268)	(96)
Fair Value	52,842	61,662
Debt securities, maturity dates between one and five years	$ 4,700	$ 23,900
U.S. government and agency debt securities \| Minimum
Marketable securities:
Marketable securities maturity period	1 year	1 year
U.S. government and agency debt securities \| Maximum
Marketable securities:
Marketable securities maturity period	2 years	2 years

Property and Equipment, Net (De

Property and Equipment, Net (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2024	Mar. 31, 2023	Dec. 31, 2023
Property and Equipment, Net
Property and equipment, gross	$ 5,870		$ 5,782
Accumulated depreciation	(4,339)		(4,162)
Property and equipment, net	1,531		1,620
Depreciation expense	200	$ 200
Computer equipment
Property and Equipment, Net
Property and equipment, gross	1,206		1,253
Lab equipment
Property and Equipment, Net
Property and equipment, gross	3,153		3,154
Furniture and fixtures
Property and Equipment, Net
Property and equipment, gross	694		558
Leasehold improvements
Property and Equipment, Net
Property and equipment, gross	$ 817		$ 817

Accrued Expenses (Details)

Accrued Expenses (Details) - USD ($) $ in Thousands	Mar. 31, 2024	Dec. 31, 2023
Accrued Expenses
Employee compensation expenses	$ 1,694	$ 3,910
Research and development expenses	1,232	6,661
Licensing expenses	794	5,478
Restructuring expenses (Note 12)	2,588	3,112
Other expenses	257	285
Total accrued expenses	$ 6,565	$ 19,446

Stockholders' Equity (Details)

Stockholders' Equity (Details) $ / shares in Units, $ in Thousands	3 Months Ended
	Mar. 31, 2024 USD ($) Vote $ / shares shares	Dec. 31, 2023 $ / shares shares
Stockholders' Equity
Preferred stock, shares authorized (in shares)	10,000,000	10,000,000
Preferred stock, shares outstanding (in shares)	0	0
Common stock, shares authorized	200,000,000	200,000,000
Common stock, par value (in dollars per share) \| $ / shares	$ 0.00001	$ 0.00001
Common stock, shares issued (in shares)	71,248,017	70,894,889
Common stock, shares outstanding (in shares)	71,248,017	70,894,889
Number of votes per share \| Vote	1
Dividends declared \| $	$ 0

Stock-Based Awards (Details)

Stock-Based Awards (Details) - shares		3 Months Ended
Stock-Based Awards (Details) - shares	Jan. 01, 2024	Mar. 31, 2024	Mar. 31, 2023	Dec. 31, 2023	Sep. 30, 2015
Stock-based awards
Options outstanding		6,966,980		6,419,455
Stock Option Valuation
Risk-free interest rate (as a percent)		3.81%	3.46%
Expected term (in years)		6 years	6 years 3 months 18 days
Expected volatility (as a percent)		81.81%	77.73%
Expected dividend yield (as a percent)		0%	0%
2017 Inducement Plan
Stock-based awards
Options outstanding		353,100
2015 Equity Incentive Plan
Stock-based awards
Number of shares authorized					1,643,872
Number of shares available for grant		4,020,777
Percentage increase to shares available for grant from common outstanding as of preceding December 31 (as a percent)		4%
Additional shares available	2,835,795
Options outstanding		6,233,088
2015 Equity Incentive Plan \| Restricted stock unit awards
Stock-based awards
Number of shares outstanding		3,139,539
2012 Equity Compensation Plan
Stock-based awards
Number of shares available for grant		0
Options outstanding		380,792

Stock-Based Awards - Option Act

Stock-Based Awards - Option Activity (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended	12 Months Ended
	Mar. 31, 2024	Dec. 31, 2023
Options, Number of Shares
Number of Shares, beginning balance	6,419,455
Number of Shares, Granted	1,842,300
Number of Shares, Forfeited and cancelled	(1,294,775)
Number of Shares, ending balance	6,966,980	6,419,455
Number of Shares, Options vested and expected to vest	6,966,980
Number of Shares, Options exercisable	3,695,196
Options, Weighted Average Exercise Price
Weighted Average Exercise Price, beginning balance (in dollars per share)	$ 15.94
Weighted Average Exercise Price, Granted (in dollars per share)	1.20
Weighted Average Exercise Price, Forfeited and cancelled (in dollars per share)	14.54
Weighted Average Exercise Price, ending balance (in dollars per share)	12.32	$ 15.94
Weighted Average Exercise Price, Options vested and expected to vest (in dollars per share)	12.32
Weighted Average Exercise Price, Options exercisable (in dollars per share)	$ 16.24
Options, Weighted Average Remaining Contractual Term
Weighted Average Remaining Contractual Term (in years)	7 years	7 years 1 month 6 days
Weighted Average Remaining Contractual Term, Options vested and expected to vest (in years)	7 years
Weighted Average Remaining Contractual Term, Options exercisable (in years)	5 years 1 month 6 days
Aggregate Intrinsic Value
Aggregate Intrinsic Value	$ 96	$ 14
Aggregate Intrinsic Value, Options vested and expected to vest	96
Aggregate Intrinsic Value, Options exercisable	$ 24
Weighted average grant-date fair value of stock options granted (in dollars per share)	$ 0.86

Stock-Based Awards - RSUs (Deta

Stock-Based Awards - RSUs (Details) - Restricted stock unit awards $ / shares in Units, $ in Thousands	3 Months Ended
	Mar. 31, 2024 USD ($) $ / shares shares
RSU, Number of Units
Units outstanding, beginning of the year \| shares	1,521,940
Granted \| shares	2,444,350
Vested \| shares	(399,716)
Forfeited and cancelled \| shares	(427,035)
Units outstanding, end of the year \| shares	3,139,539
RSU, Weighted Average Grant Date Fair Value Per Unit
Weighted average grant date fair value, beginning balance (in dollars per share) \| $ / shares	$ 15.72
Weighted average grant date fair value, granted (in dollars per share) \| $ / shares	1.20
Weighted average grant date fair value, vested (in dollars per share) \| $ / shares	14.93
Weighted average grant date fair value, forfeited and cancelled (in dollars per share) \| $ / shares	13.65
Weighted average grant date fair value, ending balance (in dollars per share) \| $ / shares	$ 4.81
Aggregate intrinsic value of awards that vested during the period \| $	$ 482

Stock-Based Awards - Compensati

Stock-Based Awards - Compensation (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2024	Mar. 31, 2023
Stock-based compensation expense
Stock-based compensation expense	$ 2,089	$ 6,806
Unrecognized stock-based compensation expense, options	16,600
Unrecognized stock-based compensation expense, RSUs	13,600
Cost of revenue
Stock-based compensation expense
Stock-based compensation expense	252	299
Research and development
Stock-based compensation expense
Stock-based compensation expense	(29)	2,602
General and administrative
Stock-based compensation expense
Stock-based compensation expense	$ 1,866	$ 3,905
Options to purchase common stock
Stock-based compensation expense
Weighted average recognition period unrecognized stock-based compensation cost (in years)	2 years 6 months
Restricted stock unit awards
Stock-based compensation expense
Weighted average recognition period unrecognized stock-based compensation cost (in years)	2 years 3 months 18 days

Net Loss per Share (Details)

Net Loss per Share (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended
	Mar. 31, 2024	Mar. 31, 2023
Numerator:
Net loss	$ (16,941)	$ (28,160)
Denominator:
Weighted average shares of common stock outstanding, basic	71,074,858	66,872,778
Weighted average shares of common stock outstanding, diluted	71,074,858	66,872,778
Net loss per share, basic	$ (0.24)	$ (0.42)
Net loss per share, diluted	$ (0.24)	$ (0.42)

Net Loss per Share - Anti-dilut

Net Loss per Share - Anti-dilution (Details) - shares	3 Months Ended
Net Loss per Share - Anti-dilution (Details) - shares	Mar. 31, 2024	Mar. 31, 2023
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Potential common shares excluded from the calculation of diluted net loss per share attributable to common stockholders	10,106,519	8,605,605
Options to purchase common stock
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Potential common shares excluded from the calculation of diluted net loss per share attributable to common stockholders	6,966,980	6,865,524
Restricted stock unit awards
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Potential common shares excluded from the calculation of diluted net loss per share attributable to common stockholders	3,139,539	1,740,081

Leases (Details)

Leases (Details) $ in Thousands	3 Months Ended
Leases (Details) $ in Thousands	Mar. 31, 2024 USD ($) ft²	Mar. 31, 2023 USD ($)	Dec. 31, 2023 USD ($)	May 31, 2023 ft²	Jan. 31, 2023 ft²	Feb. 28, 2019 ft²
Leases
Area leased, sublease agreement \| ft²	33,019			11,564	6,261	20,433
Amortization expense	$ 100	$ 300
Operating Leases:
Current portion of lease liabilities	503		$ 426
Other liabilities	$ 2,971		$ 3,074
Financial position	Other liabilities		Other liabilities
Total operating lease liabilities	$ 3,474		$ 3,500
Operating Leases
Operating Leases:
Gross cost	5,094		5,094
Accumulated amortization	(1,378)		(1,235)
Other assets	$ 3,716		$ 3,859

Agreements Related to Intelle_2

Agreements Related to Intellectual Property (Details) - USD ($) $ in Thousands	1 Months Ended		3 Months Ended
	Oct. 31, 2019	Aug. 31, 2017	Mar. 31, 2024	Mar. 31, 2023	Dec. 31, 2023
Agreements Related to Intellectual Property
Revenue			$ 2,398	$ 2,528
Payment licensing to third parties			1,031	1,061
Contingent consideration			9,000		$ 6,200
License and Service
Agreements Related to Intellectual Property
Revenue			1,741	1,639
Agreement and Plan of Merger
Agreements Related to Intellectual Property
Term of agreement		10 years
Additional contingent consideration based on milestones, maximum, per Agreement		$ 75,000
License Agreement \| Sun Pharmaceutical Industries, Inc
Agreements Related to Intellectual Property
Upfront payment receivable					$ 15,000
Patent License Agreement \| Eli Lilly and Company \| License and Service
Agreements Related to Intellectual Property
Revenue			$ 1,700	$ 1,600
APA
Agreements Related to Intellectual Property
Percentage of Sale of EPI Health Cream	1%

Income Taxes (Details)

Income Taxes (Details) - USD ($) $ in Thousands	3 Months Ended
Income Taxes (Details) - USD ($) $ in Thousands	Mar. 31, 2024	Mar. 31, 2023
Income Taxes
Federal income tax benefit	$ 0	$ 0
State income tax benefit	$ 0	$ 0

Restructuring Charges (Details)

Restructuring Charges (Details) - USD ($) $ in Thousands	1 Months Ended	3 Months Ended	12 Months Ended
Restructuring Charges (Details) - USD ($) $ in Thousands	Dec. 31, 2023	Mar. 31, 2024	Dec. 31, 2023
Restructuring Charges
Percentage of approved reduction in workforce	46%
Cash severance payments		$ 2,500
Cash payments		3,000
Restructuring charges		$ 2,529
Minimum
Restructuring Charges
Period for which transition services is provided by noticed employees	1 month
Maximum
Restructuring Charges
Period for which transition services is provided by noticed employees	13 months
Retention periods			60 days

Segment Information (Details)

Segment Information (Details) $ in Thousands	3 Months Ended
Segment Information (Details) $ in Thousands	Mar. 31, 2024 USD ($) segment	Mar. 31, 2023 USD ($)
Segment Information
Number of reportable segments \| segment	2
Total revenue	$ 2,398	$ 2,528
Cost of revenue	592	808
Research and development	8,527	22,587
General and administrative	5,850	8,790
Licensing	1,031	1,061
Revaluation of contingent consideration	2,800	(800)
Restructuring expense	2,529
Loss from operations	(18,931)	(29,918)
Dermatology Therapeutics Segment
Segment Information
Total revenue	1,741	1,638
Contract Research Segment
Segment Information
Total revenue	657	890
Operating Segments \| Dermatology Therapeutics Segment
Segment Information
Research and development	8,760	22,859
Licensing	1,031	1,061
Revaluation of contingent consideration	2,800	(800)
Restructuring expense	1,318
Loss from operations	(12,168)	(21,482)
Operating Segments \| Contract Research Segment
Segment Information
Total revenue	3,666	4,011
Cost of revenue	4,024	4,547
General and administrative	1,108	1,062
Restructuring expense	217
Loss from operations	(1,026)	(708)
Corporate and Other
Segment Information
Total revenue	(3,666)	(4,011)
Cost of revenue	(3,432)	(3,739)
Research and development	(233)	(272)
General and administrative	4,742	7,728
Restructuring expense	994
Loss from operations	$ (5,737)	$ (7,728)

Pay vs Performance Disclosure

Pay vs Performance Disclosure - USD ($) $ in Thousands	3 Months Ended
Pay vs Performance Disclosure - USD ($) $ in Thousands	Mar. 31, 2024	Mar. 31, 2023
Pay vs Performance Disclosure
Net Income (Loss)	$ (16,941)	$ (28,160)

Insider Trading Arrangements

Insider Trading Arrangements	3 Months Ended
Insider Trading Arrangements	Mar. 31, 2024
Trading Arrangements, by Individual
Rule 10b5-1 Arrangement Adopted	false
Non-Rule 10b5-1 Arrangement Adopted	false
Rule 10b5-1 Arrangement Terminated	false
Non-Rule 10b5-1 Arrangement Terminated	false