| Summary of Significant Accounting Policies | Summary of Significant Accounting Policies Basis of Presentation The unaudited condensed consolidated financial statements contained in this Quarterly Report on Form 10-Q have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission ("SEC") and, therefore, certain information and disclosures normally included in annual financial statements prepared in accordance with U.S. generally accepted accounting principles ("GAAP") have been omitted. In the opinion of management, the information reflects all adjustments necessary to make the results of operations for the interim periods a fair statement of such operations. All such adjustments are of a normal recurring nature. Interim results are not necessarily indicative of results for the full year. The consolidated balance sheet at December 31, 2014 has been derived from the audited consolidated financial statements at that date, but does not include all information and footnotes required by U.S. generally accepted accounting principles for complete financial statements. These unaudited condensed consolidated financial statements should be read in conjunction with the audited financial statements included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2014 filed with the SEC on March 11, 2015. Mirati was incorporated under the laws of the State of Delaware on April 29, 2013. The Company was created to enter into an arrangement agreement with MethylGene, which was consummated on June 28, 2013. Upon completion of the agreement, MethylGene became the Company’s wholly-owned subsidiary. These condensed interim consolidated financial statements are presented in U.S. dollars, which effective January 1, 2013, is also the functional currency of the Company. Use of Estimates The preparation of the Company's unaudited condensed consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Reported amounts and note disclosures reflect the overall economic conditions that are most likely to occur and anticipated measures management intends to take. Actual results could differ materially from those estimates. Estimates and assumptions are reviewed quarterly. Any revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected. Cash, Cash Equivalents and Short-term Investments Cash and cash equivalents consist of cash and highly liquid securities with original maturities at the date of acquisition of ninety days or less. Investments with an original maturity of more than ninety days are considered short-term investments and have been classified by management as available-for-sale. These investments are classified as current assets, even though the stated maturity date may be one year or more beyond the current balance sheet date, which reflects management’s intention to use the proceeds from sales of these securities to fund its operations, as necessary. Such investments are carried at fair value, with unrealized gains and losses included as a separate component of stockholders’ equity. Realized gains and losses from the sale of available-for-sale securities or the amounts, net of tax, reclassified out of accumulated other comprehensive income, if any, are determined on a specific identification basis. Concentration of Credit Risk The Company invests its excess cash in accordance with its investment policy. The Company's investments are comprised primarily of commercial paper and debt instruments of financial institutions, corporations, U.S. government-sponsored agencies and the U.S. Treasury. The Company mitigates credit risk by maintaining a diversified portfolio and limiting the amount of investment exposure as to institution, maturity and investment type. Financial instruments that potentially subject the Company to significant credit risk consist principally of cash equivalents and short-term investments. Foreign Currency Transactions Foreign currency transactions are initially recorded by the Company using the exchange rates prevailing at the date of the transaction. At the balance sheet date, monetary assets and liabilities denominated in foreign currencies are translated at the period-end rates of exchange. Non-monetary assets and liabilities are translated at the historical exchange rates. Exchange gains and losses arising from the translation of foreign currency items are included in other income (expense), net in the condensed consolidated statements of operations and comprehensive loss. Reclassification of Warrants In 2011 and 2012, MethylGene issued common stock warrants in connection with the issuance of common stock through private placements (referred to as the 2011 Warrants and the 2012 Warrants). The exercise prices of the 2011 and 2012 Warrants were denominated in Canadian dollars. Upon the issuance of the 2011 and 2012 Warrants, the net proceeds were allocated to common stock and warrants based on their relative fair values, and the fair value of the issued common stock warrants was calculated utilizing the Black-Scholes option-pricing model. The allocated fair value was then recorded as warrants within stockholders’ equity on the consolidated balance sheet. Effective January 1, 2013, the Company changed its functional currency to the U.S. dollar which changed how the 2011 and 2012 warrants are accounted for as they continued to have exercise prices denominated in Canadian dollars. Upon the change in functional currency, a warrant liability was recorded which represented the fair market value of the warrants at that date in accordance with accounting standards. At each reporting period subsequent to January 1, 2013, the fair value of the warrant liability was recalculated and any corresponding increase or decrease to the warrant liability was recorded as change in fair value of warrant liability on the consolidated statement of operations and comprehensive loss. The estimated fair value was determined using the Black-Scholes option-pricing model based on the estimated value of the underlying common stock at the valuation measurement date, the remaining contractual term of the warrants, risk-free interest rates, expected dividends and expected volatility of the price of the underlying common stock. During the second half of 2014, the Company amended all of its outstanding warrant agreements to allow for the warrants to be denominated in U.S. Dollars. As a result of this amendment, the amended warrants qualified for equity classification and were reclassified into stockholders’ equity at their fair value as of the amendment date and revaluations of fair value are no longer required. For the six months ended June 30, 2014, the Company recorded warrant valuation expense of $6.5 million , which is reported as change in fair value of warrant liability in the condensed consolidated statement of operations and comprehensive loss. Restructuring Restructuring activities relate to the 2013 consolidation of the Company’s operations to the Company’s San Diego, California facility and were reported as a separate line item in the accompanying condensed consolidated statement of operations and comprehensive loss. The restructuring activities were completed as of March 31, 2014, with all restructuring costs incurred paid as of March 31, 2014. Segment Reporting Operating segments are components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision-maker for purposes of making decisions regarding resource allocation and assessing performance. To date, the Company has viewed its operations and managed its business as one segment operating primarily in the United States. Fair value measurements The Company has certain financial assets and liabilities recorded at fair value which have been classified as Level 1, 2 or 3 within the fair value hierarchy as described in the accounting standards for fair value measurements. The authoritative guidance for fair value measurements defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or the most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Market participants are buyers and sellers in the principal market that are (i) independent, (ii) knowledgeable, (iii) able to transact, and (iv) willing to transact. The guidance prioritizes the inputs used in measuring fair value into the following hierarchy: • Level 1- Quoted prices (unadjusted) in active markets for identical assets or liabilities; • Level 2- Inputs other than quoted prices included within Level 1 that are either directly or indirectly observable; and • Level 3- Unobservable inputs in which little or no market activity exists, therefore requiring an entity to develop its own assumptions about the assumptions that market participants would use in pricing. The following table summarizes the assets and liabilities measured at fair value on a recurring basis (in thousands): June 30, Level 1 Level 2 Level 3 Assets Cash and cash equivalents: Cash $ 3,676 $ 3,676 $ — $ — Money market funds 7,923 7,923 — — Corporate debt securities 1,780 — 1,780 — Total cash and cash equivalents 13,379 11,599 1,780 — Short-term investments: Corporate debt securities 36,999 — 36,999 — Commercial paper 8,499 — 8,499 — Total short-term investments 45,498 — 45,498 — Total $ 58,877 $ 11,599 $ 47,278 $ — December 31, Level 1 Level 2 Level 3 Assets Cash and cash equivalents: Cash $ 1,025 $ 1,025 $ — $ — Money market funds 3,565 3,565 — — Corporate debt securities 2,003 — 2,003 — Total cash and cash equivalents 6,593 4,590 2,003 — Short-term investments: Corporate debt securities 21,210 — 21,210 — Commercial paper 1,500 — 1,500 — Total short-term investments 22,710 — 22,710 — Total $ 29,303 $ 4,590 $ 24,713 $ — The Company’s investments in Level 1 assets are valued based on publicly available quoted market prices for identical securities as of June 30, 2015 and December 31, 2014. The Company determines the fair value of Level 2 related securities with the aid of valuations provided by third parties using proprietary valuation models and analytical tools. These valuation models and analytical tools use market pricing or prices for similar instruments that are both objective and publicly available, including matrix pricing or reported trades, benchmark yields, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids and/or offers. There were no transfers between fair value measurement levels during the three and six months ended June 30, 2015 or the year ended December 31, 2014. Net loss per share Basic net loss per common share is calculated by dividing the net loss by the weighted-average number of common shares outstanding during the period, without consideration for potentially dilutive securities. Diluted net loss per share is computed by dividing the net loss by the weighted-average number of common shares and potentially dilutive securities outstanding for the period. Common share equivalents outstanding, determined using the treasury stock method, are comprised of shares that may be issued under the Company’s stock option and warrant agreements. The following table presents the weighted average number of potentially dilutive securities not included in the calculation of diluted net loss per share due to the anti-dilutive effect of the securities: Three Months Ended Six Months Ended June 30, June 30, 2015 2014 2015 2014 Common stock options 554,689 272,538 470,934 281,955 Common stock warrants 1,792,069 1,558,801 1,765,511 1,606,067 Total 2,346,758 1,831,339 2,236,445 1,888,022 |
