Document and Entity Information
Document and Entity Information - USD ($) | 12 Months Ended | ||
Dec. 31, 2019 | Feb. 27, 2020 | Jun. 28, 2019 | |
Document and Entity Information | |||
Document Type | 10-K | ||
Document Period End Date | Dec. 31, 2019 | ||
Entity Registrant Name | MORPHIC HOLDING, INC. | ||
Entity Well Known Seasoned Issuer | No | ||
Entity Voluntary Filers | No | ||
Entity Current Reporting Status | Yes | ||
Entity Interactive Data Current | Yes | ||
Entity Filer Category | Non-accelerated Filer | ||
Entity Small Business | true | ||
Entity Emerging Growth Company | true | ||
Entity Ex Transition Period | false | ||
Entity Shell Company | false | ||
Entity Public Float | $ 373,528,000 | ||
Entity Common Stock, Shares Outstanding | 30,483,521 | ||
Entity Central Index Key | 0001679363 | ||
Current Fiscal Year End Date | --12-31 | ||
Document Fiscal Year Focus | 2019 | ||
Document Fiscal Period Focus | FY | ||
Amendment Flag | false |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | Dec. 31, 2019 | Dec. 31, 2018 |
Current assets: | ||
Cash and cash equivalents | $ 101,559 | $ 185,901 |
Marketable securities | 135,457 | |
Accounts receivable | 3,467 | |
Prepaid expenses and other current assets | 3,090 | 1,222 |
Total current assets | 243,573 | 187,123 |
Property and equipment, net | 3,446 | 1,843 |
Restricted cash | 275 | 275 |
Other assets | 141 | 64 |
Total assets | 247,435 | 189,305 |
Current liabilities: | ||
Accounts payable | 5,167 | 1,745 |
Accrued expenses | 6,639 | 3,239 |
Deferred revenue, current portion | 23,450 | 29,862 |
Deferred rent, current portion | 94 | 57 |
Total current liabilities | 35,350 | 34,903 |
Long-term liabilities: | ||
Deferred revenue, net of current portion | 70,954 | 66,781 |
Deferred rent, net of current portion | 213 | 306 |
Other long-term liabilities | 58 | |
Total liabilities | 106,517 | 102,048 |
Commitments and contingencies (Note 9) | ||
Stockholders’ Equity (Deficit) | ||
Preferred shares, $0.0001 par value, 10,000,000 shares authorized, no shares issued and outstanding as of December 31, 2019 and December 31, 2018 | ||
Common shares, $0.0001 par value, 400,000,000 shares authorized, 30,110,251 shares issued and outstanding as of December 31, 2019 and 151,000,000 shares authorized and 1,832,923 shares issued and outstanding as of December 31, 2018 | 3 | |
Additional paid-in capital | 238,384 | 1,633 |
Accumulated deficit | (97,513) | (54,185) |
Accumulated other comprehensive income | 44 | |
Total stockholders’ equity (deficit) | 140,918 | (52,552) |
Total liabilities, preferred shares, and stockholders’ equity (deficit) | $ 247,435 | 189,305 |
Series Seed Preferred Shares | ||
Long-term liabilities: | ||
Preferred shares | 8,658 | |
Series A Preferred Shares | ||
Long-term liabilities: | ||
Preferred shares | 51,320 | |
Series B Preferred Shares | ||
Long-term liabilities: | ||
Preferred shares | $ 79,831 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands | Dec. 31, 2019 | Dec. 31, 2018 |
Preferred shares, par value (in dollars per share) | $ 0.0001 | $ 0.0001 |
Preferred shares, shares authorized | 10,000,000 | 10,000,000 |
Preferred shares, shares issued | 0 | 0 |
Preferred shares, shares outstanding | 0 | 0 |
Series Seed Convertible Preferred Shares | ||
Series Preferred shares, par value (in dollars per share) | $ 0.0001 | $ 0.0001 |
Series Preferred shares, shares authorized | 0 | 11,967,689 |
Series Preferred shares, shares Issued | 0 | 2,045,556 |
Series Preferred shares, shares outstanding | 0 | 2,045,556 |
Series Preferred shares, liquidation preference | $ 8,980 | |
Series A Convertible Preferred Shares | ||
Series Preferred shares, par value (in dollars per share) | $ 0.0001 | $ 0.0001 |
Series Preferred shares, shares authorized | 0 | 49,047,619 |
Series Preferred shares, shares Issued | 0 | 8,411,368 |
Series Preferred shares, shares outstanding | 0 | 8,411,368 |
Series Preferred shares, liquidation preference | $ 51,500 | |
Series B Convertible Preferred Shares | ||
Series Preferred shares, par value (in dollars per share) | $ 0.0001 | $ 0.0001 |
Series Preferred shares, shares authorized | 0 | 61,538,454 |
Series Preferred shares, shares Issued | 0 | 10,553,483 |
Series Preferred shares, shares outstanding | 0 | 10,553,483 |
Series Preferred shares, liquidation preference | $ 80,000 | |
Common shares | ||
Common shares, par value (in dollars per share) | $ 0.0001 | $ 0.0001 |
Common stock, authorized | 400,000,000 | 151,000,000 |
Common shares, shares issued | 30,110,251 | 1,832,923 |
Common shares, shares outstanding | 30,110,251 | 1,832,923 |
CONSOLIDATED STATEMENTS OF OPER
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Collaboration revenue | $ 16,977 | $ 3,358 |
Operating expenses: | ||
Research and development | 53,732 | 22,631 |
General and administrative | 10,233 | 5,355 |
Total operating expenses | 63,965 | 27,986 |
Loss from operations | (46,988) | (24,628) |
Other income: | ||
Interest income, net | 4,666 | 871 |
Other expense, net | (94) | (74) |
Total other income, net | 4,572 | 797 |
Loss before provision for income taxes | (42,416) | (23,831) |
Provision for income taxes | (912) | 0 |
Net loss | $ (43,328) | $ (23,831) |
Net loss per share, basic and diluted | $ (2.69) | $ (22.28) |
Weighted average common shares outstanding, basic and diluted | 16,101,928 | 1,069,762 |
Comprehensive loss: | ||
Net loss | $ (43,328) | $ (23,831) |
Other comprehensive income (loss): | ||
Unrealized holding gains on marketable securities, net of tax | 44 | |
Total other comprehensive income | 44 | |
Comprehensive loss | (43,284) | (23,831) |
AbbVie Inc. | ||
Collaboration revenue | 10,797 | $ 3,358 |
Janssen | ||
Collaboration revenue | $ 6,180 |
CONSOLIDATED STATEMENTS OF STOC
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT) - USD ($) $ in Thousands | Series Seed Convertible Preferred Shares | Series Seed Preferred Shares | Series A Convertible Preferred Shares | Series A Preferred Shares | Series B Convertible Preferred Shares | Series B Preferred Shares | Common shares | Common units | Additional Paid-in Capital | Accumulated Deficit | Accumulated Other Comprehensive Income | Total |
Balance at beginning of period at Dec. 31, 2017 | $ 661 | $ (30,354) | $ (29,693) | |||||||||
Balance at beginning of period ( in shares) at Dec. 31, 2017 | 1,011,227 | |||||||||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||||||
Equity-based compensation expense | 997 | 997 | ||||||||||
Net loss | (23,831) | (23,831) | ||||||||||
Vesting of restricted shares (in shares) | 31,645 | |||||||||||
Exchange of incentive units for common stock in connection with the Reorganization (in shares) | 790,051 | |||||||||||
Effect of Reorganization | $ (8,658) | $ 8,658 | $ (51,320) | $ 51,320 | $ (79,831) | $ 79,831 | ||||||
Effect of Reorganization (in shares) | (2,045,556) | 2,045,556 | (8,411,368) | 8,411,368 | (10,553,483) | 10,553,483 | 1,011,227 | (1,011,227) | ||||
Reclassification of warrants to purchase preferred shares to stockholder's equity | (25) | (25) | ||||||||||
Balance at end of period at Dec. 31, 2018 | 1,633 | (54,185) | (52,552) | |||||||||
Balance at end of period ( in shares) at Dec. 31, 2018 | 1,832,923 | |||||||||||
Balance at beginning of period at Dec. 31, 2017 | $ 8,658 | $ 41,029 | ||||||||||
Balance at beginning of period ( in shares) at Dec. 31, 2017 | 2,045,556 | 6,729,096 | ||||||||||
Increase (Decrease) in Temporary Equity [Roll Forward] | ||||||||||||
Issuance of Series A Preferred Units August 10, 2018, net of offering costs of $9 | $ 10,291 | |||||||||||
Issuance of Series A Preferred Units August 10, 2018, net of offering costs of $9 (in shares) | 1,682,272 | |||||||||||
Issuance of Series B Preferred Units September 25, 2018, net of offering costs of $169 | $ 79,831 | |||||||||||
Issuance of Series B Preferred Units September 25, 2018, net of offering costs of $169 (in shares) | 10,553,483 | |||||||||||
Balance at end of period at Dec. 31, 2018 | $ 8,658 | $ 8,658 | $ 51,320 | $ 51,320 | $ 79,831 | $ 79,831 | ||||||
Balance at end of period ( in shares) at Dec. 31, 2018 | 2,045,556 | 2,045,556 | 8,411,368 | 8,411,368 | 10,553,483 | 10,553,483 | ||||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||||||
Equity-based compensation expense | 3,532 | 3,532 | ||||||||||
Net loss | (43,328) | (43,328) | ||||||||||
Vesting of restricted shares (in shares) | 354,660 | |||||||||||
Unrealized holding gains on marketable securities, net of tax | $ 44 | 44 | ||||||||||
Conversion of convertible preferred stock into common stock | $ 2 | 139,807 | 139,809 | |||||||||
Conversion of convertible preferred stock into common stock (in shares) | 21,010,407 | |||||||||||
Reclassification of warrants to purchase preferred shares to stockholder's equity | 118 | 118 | ||||||||||
Issuance of common shares at initial public offering, net of offering costs of $10.2 million | $ 1 | 93,267 | 93,268 | |||||||||
Issuance of common shares at initial public offering, net of offering costs of $10.2 million (in shares) | 6,900,000 | |||||||||||
Issuance of common shares upon warrant exercise (in shares) | 5,766 | |||||||||||
Issuance of common shares upon stock option exercise | 27 | 27 | ||||||||||
Issuance of common shares upon stock option exercise (in shares) | 6,495 | |||||||||||
Balance at end of period at Dec. 31, 2019 | $ 3 | $ 238,384 | $ (97,513) | $ 44 | $ 140,918 | |||||||
Balance at end of period ( in shares) at Dec. 31, 2019 | 30,110,251 | |||||||||||
Increase (Decrease) in Temporary Equity [Roll Forward] | ||||||||||||
Conversion of convertible preferred stock into common stock | $ (8,658) | $ (51,320) | $ (79,831) | |||||||||
Conversion of convertible preferred stock into common stock (in shares) | (2,045,556) | (8,411,368) | (10,553,483) | |||||||||
Balance at end of period ( in shares) at Dec. 31, 2019 | 0 | |||||||||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||||||
Issuance of common shares at initial public offering, net of offering costs of $10.2 million (in shares) | 6,900,000 | |||||||||||
Balance at end of period ( in shares) at Jul. 01, 2019 | 0 |
CONSOLIDATED STATEMENTS OF ST_2
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT) (Parenthetical) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Series A Convertible Preferred Shares | ||
Offering costs | $ 9 | |
Series B Convertible Preferred Shares | ||
Offering costs | $ 169 | |
Common shares | ||
Offering costs | $ 10,200 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Cash flows from operating activities: | ||
Net loss | $ (43,328) | $ (23,831) |
Adjustments to reconcile net loss to net cash used in operating activities: | ||
Depreciation and amortization | 821 | 539 |
Premium amortization and discount accretion on marketable securities | (1,560) | |
Equity-based compensation | 3,532 | 997 |
Non-cash interest expense | 43 | |
Loss on early debt extinguishment | 28 | |
Change in fair value of warrants | 93 | |
Other non-cash items | (22) | 1 |
Change in operating assets and liabilities: | ||
Accounts receivable | (3,467) | |
Prepaid expenses and other current assets | (1,868) | (743) |
Other assets | (77) | (51) |
Accounts payable | 3,164 | 862 |
Accrued expenses | 3,389 | 1,888 |
Deferred revenue | (2,239) | 96,643 |
Deferred rent | (56) | (27) |
Other long-term liabilities | (33) | (12) |
Net cash used in operating activities | (41,651) | 76,337 |
Cash flows from investing activities: | ||
Purchases of marketable securities | (296,328) | |
Proceeds from maturities of marketable securities | 162,500 | |
Purchase of property and equipment | (2,158) | (659) |
Proceeds from disposal of lab equipment | 3 | |
Net cash used in investing activities | (135,986) | (656) |
Cash flows from financing activities: | ||
Repayment of debt | (652) | |
Proceeds from issuance of Common Stock pursuant to stock options exercise | 27 | |
Proceeds from issuance of Common Stock, net | 93,268 | |
Proceeds from issuance of Preferred Stock, net | 90,122 | |
Net cash provided by financing activities | 93,295 | 89,470 |
Net (decrease) increase in cash and cash equivalents and restricted cash | (84,342) | 165,151 |
Cash and cash equivalents and restricted cash, beginning of period | 186,176 | 186,176 |
Cash and cash equivalents and restricted cash, end of period | 101,834 | 186,176 |
Non-cash financing activities: | ||
Purchases of property and equipment in accounts payable and accrued expenses | 269 | |
Reclassification of warrants to additional paid-in capital | 118 | |
Conversion of preferred shares to common stock | 139,809 | |
Supplemental cash flow information: | ||
Cash paid for taxes | $ 550 | |
Cash paid for interest | $ 68 |
Nature of the Business and Basi
Nature of the Business and Basis of Presentation | 12 Months Ended |
Dec. 31, 2019 | |
Nature of the Business and Basis of Presentation | |
Nature of the Business and Basis of Presentation | 1. Nature of the Business and Basis of Presentation Organization Morphic Holding, Inc. was f ormed under the laws of the State of Delaware in August 2014 under the name Integrin Rock, LLC. The Company subsequently changed its name to Morphic Rock Holding, LLC in October 2014 and then to Morphic Holding, LLC in June 2016. On December 5, 2018, the Company completed a series of transactions (the “Reorganization”) pursuant to which Morphic Holding, LLC was converted in a tax-free reorganization into Morphic Holding, Inc. and three wholly-owned subsidiaries, namely Lazuli, Inc., Tourmaline, Inc, and Phyllite, Inc, were merged with and into another wholly-owned subsidiary, Morphic Therapeutic, Inc. For further details regarding the tax-free reorganization, refer to Note 7 appearing elsewhere in this Annual Report on Form 10-K. At the time of the Reorganization, the Company created a Massachusetts Securities Corporation (the “Security Corporation”) to take advantage of the favorable tax treatment of income earned on securities held within such entity. As of December 31, 2019, all of the Company’s excess funds were invested through the Security Corporation. The Company is a biopharmaceutical company applying proprietary insights into integrin medicine to discover and develop first-in-class oral small molecule integrin therapeutics. Integrins are a validated target class with multiple approved drugs for the treatment of serious chronic diseases. Despite significant biopharmaceutical industry investment, no oral integrin therapies have been approved. The Company has created the Morphic integrin technology platform, or MInT Platform, by leveraging our unique understanding of integrin structure and biology, to develop a pipeline of novel product candidates designed to achieve potency, high selectivity, and the pharmaceutical properties required for oral administration. The Company is subject to risks and uncertainties common to early-stage companies in the biotechnology industry, including, but not limited to, development by competitors of new technological innovations, dependence on key personnel, protection of proprietary technology, compliance with government regulations and the ability to secure additional capital to fund operations. Product candidates currently under development will require significant additional research and development efforts, including extensive preclinical and clinical testing and regulatory approval prior to commercialization. These efforts require significant amounts of additional capital, adequate personnel and infrastructure and extensive compliance-reporting capabilities. Even if the Company’s drug development efforts are successful, it is uncertain when, if ever, the Company will realize significant revenue from product sales. The Company expects to continue to incur losses from operations for the foreseeable future; the Company expects that its cash and cash equivalents and marketable securities will be sufficient to fund its operating expenses and capital expenditure requirements through at least the next 12 months from the date these financial statements were issued. On July 1, 2019, the Company completed its initial public offering “IPO”, in which the Company issued and sold 6,900,000 shares of its common stock at a public offering price of $15.00 per share, including 900,000 shares of common stock sold pursuant to the underwriters’ exercise of their option to purchase additional shares of common stock, for aggregate gross proceeds of $103.5 million. The Company raised approximately $93.3 million in net proceeds after deducting underwriting discounts and commissions and offering expenses payable by the Company . Upon the closing of the IPO, all of the outstanding shares of convertible preferred stock automatically converted into 21,010,407 shares of common stock; the warrants to purchase 6,825 convertible preferred shares automatically converted into warrants to purchase 6,825 common shares. Subsequent to the closing of the IPO, there were no shares of preferred stock outstanding. In connection with the closing of the IPO, the Company amended and restated its Fourth Amended and Restated Certificate of Incorporation to change the authorized capital stock to 400,000,000 shares designated as common stock and 10,000,000 shares designated as preferred stock, all with a par value of $0.0001 per share. Basis of Presentation The consolidated financial statements include the accounts of Morphic Holding, Inc. and its wholly owned subsidiaries described above. All intercompany balances have been eliminated in consolidation. These consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States (“GAAP”). Any reference in these notes to applicable guidance is meant to refer to the authoritative United States generally accepted accounting principles as found in the Accounting Standards Codification (“ASC”) and Accounting Standards Update (“ASU”) of the Financial Accounting Standards Board (“FASB”). On June 10, 2019, the Company's board of directors and stockholders approved a 5.8311-to-one reverse stock split of the Company's issued and outstanding shares of common stock and convertible preferred stock. All unit, per unit, share and per share amounts in the consolidated financial statements and notes thereto have been retrospectively adjusted for all periods presented to give effect of the reverse stock split. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 12 Months Ended |
Dec. 31, 2019 | |
Summary of Significant Accounting Policies | |
Summary of Significant Accounting Policies | 2. Summary of Significant Accounting Policies Use of Estimates and Judgments The preparation of financial statements in accordance with GAAP requires management to make estimates and judgments that may affect the reported amounts of assets and liabilities and related disclosures of contingent assets and liabilities at the date of the financial statements and the related reporting of revenues and expenses during the reporting period. Significant estimates of accounting reflected in these consolidated financial statements include, but are not limited to, estimates related to revenue recognition, accrued research and development expenses, the valuation of equity‑based compensation, and income taxes. Actual results could differ from those estimates. Concentration of Credit Risk and Off‑Balance Sheet Risk Financial instruments that potentially expose the Company to concentrations of credit risk consist primarily of cash and cash equivalents, marketable securities, and accounts receivable under Janssen agreement. The Company has all cash and cash equivalents at one accredited financial institution, in amounts that exceed federally insured limits. The Company does not believe that it is subject to unusual credit risk beyond the normal credit risk associated with commercial banking relationships. The primary objectives for the Company’s investment portfolio are the preservation of capital and maintenance of liquidity. In 2019, the Company adopted its investment policy which allows funds to be held outside bank accounts, but to be invested only in readily marketable fixed income instruments with readily ascertainable market values, denominated and payable in U.S. dollars including obligations of the U.S. government and its agencies and money market funds registered according to Rule 2a‑7 of the Investment Company Act of 1940. Investments in the money market fund shall be consistent with approved instruments and assets under management must be at least $1.0 billion. Accounts receivable generally represent amounts due from Janssen. The Company monitors economic conditions to identify facts or circumstances that may indicate that any of its accounts receivable are at risk of collection. The Company has no off‑balance sheet risk, such as foreign exchange contracts, option contracts, or other foreign‑hedging arrangements. Cash and Cash Equivalents and Restricted Cash The Company considers highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. At December 31, 2019 and 2018, cash and cash equivalents include bank demand deposits and money market funds that invest primarily in U.S. government‑backed securities and treasuries. At December 31, 2019, cash equivalents also included one U.S. Treasury security with fair value of approximately $10.0 million. Cash equivalents are stated at cost, which approximates fair value. Restricted cash consists of a letter of credit in the amount of $275,000 issued to the landlord of the Company’s facility lease. The terms of the letter of credit extend beyond one year. The following table reconciles cash and cash equivalents and restricted cash per the balance sheet to the statements of cash flows: As of December 31, 2019 2018 Cash and cash equivalents $ 101,559 $ 185,901 Restricted cash 275 275 Total cash, cash equivalents, and restricted cash $ 101,834 $ 186,176 Marketable securities The Company invests funds in the United States Treasury securities; those securities are included in the current assets based on their contractual maturities, classified as available-for-sale, and carried at fair value. Changes in fair value of marketable securities are recorded in other comprehensive income (loss) as net unrealized gains (losses) on marketable securities. The Company recognized $44,000 and $0 in unrealized gains for the years ended December 31, 2019 and 2018, respectively. Interest income on investments The Company recognizes interest income from investments in money market funds and available-for-sale securities, including amortization of premium/accretion of discount, on an accrual basis. For the years ended December 31, 2019 and 2018 , the Company recognized $4.7 million and $0.9 million in interest income, respectively. Interest income is included with other income on the consolidated statements of operations and comprehensive loss. Property and Equipment, net Property and equipment are recorded at cost. Expenditures for major renewals or betterments that extend the useful lives of property and equipment are capitalized; expenditures for maintenance and repairs are charged to expense as incurred. Depreciation is calculated on a straight‑line basis over the estimated useful lives of the related asset. Property and equipment are depreciated as follows: Estimated Useful Life (in Years) Laboratory equipment 5 Computers and software 3 - 5 Leasehold improvements Shorter of the useful life or the remaining term of the lease Impairment of Long‑Lived Assets Long‑lived assets consist of property and equipment. Long‑lived assets to be held and used are tested for recoverability whenever events or changes in business circumstances indicate that the carrying amount of the assets may not be fully recoverable. Factors that the Company considers in deciding when to perform an impairment review include significant underperformance of the business in relation to expectations, significant negative industry or economic trends, and significant changes or planned changes in the use of the assets. If an impairment review is performed to evaluate a long‑lived asset for recoverability, the Company compares forecasts of undiscounted cash flows expected to result from the use and eventual disposition of the long‑lived asset to its carrying value. An impairment loss would be recognized when estimated undiscounted future cash flows expected to result from the use of an asset are less than its carrying amount. The impairment loss would be based on the excess of the carrying value of the impaired asset over its fair value, determined based on discounted cash flows. To date, the Company has not recorded any impairment losses on long‑lived assets. Fair Value Measurements ASC Topic 820, Fair Value Measurement (“ASC 820”), establishes a fair value hierarchy for instruments measured at fair value that distinguishes between assumptions based on market data (observable inputs) and the Company’s own assumptions (unobservable inputs). Observable inputs are inputs that market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the inputs that market participants would use in pricing the asset or liability and are developed based on the best information available in the circumstances. ASC 820 identifies fair value as the exchange price, or exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As a basis for considering market participant assumptions in fair value measurements, ASC 820 establishes a three‑tier fair value hierarchy that distinguishes between the following: Level 1 — Quoted market prices in active markets for identical assets or liabilities. Level 2 — Inputs other than Level 1 inputs that are either directly or indirectly observable, such as quoted market prices, interest rates and yield curves. Level 3 — Unobservable inputs developed using estimates of assumptions developed by the Company, which reflect those that a market participant would use. To the extent the valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair values requires more judgment. Accordingly, the degree of judgment exercised by the Company in determining fair value is greatest for instruments categorized as Level 3. A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. The Company believes that the carrying amounts of the Company’s consolidated financial instruments, including prepaid expenses and other current assets, accounts receivable, accounts payable, and accrued expenses approximate fair value due to the short-term nature of those instruments. Segment Information Operating segments are defined as components of an entity about which separate discrete information is available for evaluation by the chief operating decision maker, or decision‑making group, in deciding how to allocate resources and in assessing performance. The Company’s Chief Executive Officer is its chief operating decision‑maker and views operations and manages the Company’s business in one operating segment operating exclusively in the United States. Revenue Recognition Effective January 1, 2018, the Company adopted the provisions of ASC 606 using the full retrospective transition method. To date all revenue has been generated from the Company’s agreements with AbbVie and Janssen, executed in October 2018 and February 2019, respectively. As a result, there was no impact of the adoption of ASC 606 to the Company’s financial statements. Please refer to Note 12 below for details of ASC 606 application to the Company’s agreements with AbbVie and Janssen. The Company first evaluates collaboration arrangements to determine whether the arrangement (or part of the arrangement) represents a collaborative arrangement pursuant to ASC Topic 808, Collaborative Arrangements , based on the risks and rewards and activities of the parties pursuant to the contractual arrangement. The Company accounts for any collaborative arrangement or elements within the contract that are deemed to be a collaborative arrangement, and not a customer relationship, in accordance with ASC 808. Through December 31, 2019, the Company entered into two agreements – with AbbVie and Janssen – that have been accounted for pursuant to ASC 606. Under ASC 606, an entity recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services. To determine the appropriate amount of revenue to be recognized for arrangements determined to be within the scope of ASC 606, the Company performs the following five steps: (i) identification of the contract(s) with the customer, (ii) identification of the promised goods or services in the contract and determination of whether the promised goods or services are performance obligations, (iii) measurement of the transaction price, (iv) allocation of the transaction price to the performance obligations, and (v) recognition of revenue when (or as) the Company satisfies each performance obligation. The Company only applies the five‑step model to contracts when it is probable that the entity will collect consideration it is entitled to in exchange for the goods or services it transfers to the customer. The Company accounts for a contract with a customer that is within the scope of ASC 606 when all of the following criteria are met: (i) the arrangement has been approved by the parties and the parties are committed to perform their respective obligations, (ii) each party’s rights regarding the goods or services to be transferred can be identified, (iii) the payment terms for the goods or services to be transferred can be identified, (iv) the arrangement has commercial substance and (v) collection of substantially all of the consideration to which the Company will be entitled in exchange for the goods or services that will be transferred to the customer is probable. Performance obligations are promised goods or services in a contract to transfer a distinct good or service to the customer. Promised goods or services are considered distinct when: (i) the customer can benefit from the good or service on its own or together with other readily available resources and (ii) the promised good or service is separately identifiable from other promises in the contract. Options to purchase additional goods or services are considered to be marketing offers and are to be accounted for as separate contracts when the customer elects such options, unless the Company determines the option provides a material right which would not be provided without entering into the contract. If, however, an option is determined to provide a material right that would not be provided without entering into a contract, a portion of the transaction price is allocated to such option. The Company estimates the transaction price based on the amount of consideration the Company expects to receive for transferring the promised goods or services in the contract. The consideration may include both fixed consideration and variable consideration. At the inception of each arrangement that includes variable consideration, the Company evaluates the amount of the potential payments and the likelihood that the payments will be received. The Company utilizes either the most likely amount method or expected value method to estimate the transaction price based on which method better predicts the amount of consideration expected to be received. If it is probable that a significant revenue reversal would not occur, the variable consideration is included in the transaction price. The Company also evaluates whether instances in which the timing of payments by customers do not match the timing of performance obligation satisfaction contain an element of financing and adjusts the transaction price for the effect of the financing component, if any. The Company’s transactions with customers may include development and regulatory milestone payments. The Company evaluates whether the milestones are considered probable of being reached and estimates the amount to be included in the transaction price using the most likely amount method. If it is probable that a significant revenue reversal would not occur, the associated milestone value is included in the transaction price. Milestone payments that are not within the Company’s control or the customer’s control, such as regulatory approvals, are not considered probable of being achieved until those approvals are received. At the end of each reporting period, the Company re‑evaluates the probability of achievement of such milestones and any related constraint, and if necessary, adjusts the estimate of the overall transaction price. Any such adjustments are recorded on a cumulative catch‑up basis, which would affect collaboration revenue and net income (loss) in the period of adjustment. For sales‑based royalties, including milestone payments based on the level of sales, the Company determines whether the sole or predominant item to which the royalties relate is a license. When the license is the sole or predominant item to which the sales‑based royalty relates, the Company recognizes revenue at the later of: (i) when the related sales occur, or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied). The Company allocates the transaction price based on the estimated standalone selling price of the identified performance obligations. The Company must develop assumptions that require judgment to determine the standalone selling price for each performance obligation identified in the contract. The Company utilizes key assumptions to determine the standalone selling price, which may include other comparable transactions, pricing considered in negotiating the transaction, and the estimated costs. Certain variable consideration is allocated specifically to one or more performance obligations in a contract when the terms of the variable consideration relate to the satisfaction of the performance obligation and the resulting amounts allocated to each performance obligation are consistent with the amounts the Company would expect to receive for each performance obligation. We recognize as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) each performance obligation is satisfied, either at a point in time or over time. In particular, for the Company’s collaborations with AbbVie and Janssen, revenue attributable to research services is recognized as those services are provided, based on the costs incurred to date. The Company receives payments from customers based on billing schedules established in each contract. Up‑front payments and fees are recorded as deferred revenue upon receipt or when due until the Company performs its obligations under these arrangements. Amounts are recorded as accounts receivable when the Company’s right to consideration is unconditional. Research and Development Expenses Research and development expenses are expensed as incurred and consist of costs incurred in performing research and development activities, including compensation related expenses for research and development personnel, preclinical and clinical activities including cost of supply, overhead expenses including facilities expenses, materials and supplies, amounts paid to consultants and outside service providers, and depreciation of equipment. Upfront license payments related to acquired technologies which have not yet reached technological feasibility and have no alternative future use are also included in research and development expense. Research Contract Costs and Accruals The Company has entered into various research service arrangements under which vendors perform various services. The Company records accrued expenses for estimated costs incurred under the arrangements. When evaluating the adequacy of the accrued expenses, the Company analyzed the progress of the studies, trials or other services performed, including invoices received and contracted costs. Judgments and estimates are made in determining the accrued expense balances at the end of each reporting period. Equity‑Based Compensation The Company accounts for equity awards, including restricted common stock, incentive units, and common stock options granted to employees and non-employees as equity award compensation in accordance with ASC Topic 718, Compensation — Stock Compensation (“ASC 718”). ASC 718 requires all equity‑based payments to employees, which includes grants of employee equity awards, to be recognized as expense in the statements of operations based on their grant date fair values. The fair value of each incentive unit and stock option award is estimated using the Black‑Scholes option‑pricing model, using inputs which include the fair value of the Company’s common stock and certain subjective assumptions, the expected stock price volatility, the expected term of the award, the risk‑free rate, and expected dividends. Expected volatility is calculated based on reported volatility data for a representative group of publicly traded companies for which historical information was available. The historical volatility is generally calculated based on a period of time commensurate with the expected term assumptions. The risk‑free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant commensurate with the expected term assumption. The Company uses the simplified method, under which the expected term is presumed to be the midpoint between the vesting date and the end of the contractual term. The Company utilizes this method due to lack of historical exercise data and the plain‑vanilla nature of its stock‑based awards. The expected dividend yield is assumed to be zero as the Company has never paid dividends and has no current plans to pay any dividends on common stock. Compensation expense related to equity awards to employees and non-employees that are subject to graded vesting is recognized on a straight‑line basis, based on the grant date fair value, over the requisite service period of the award, which is generally the vesting term. All awards granted to employees and the Board members to date contain only service vesting conditions. The Company recognizes forfeitures when they occur. All awards granted to date were equity‑classified as of December 31, 2019 and 2018. The Company classifies equity‑based compensation expense in its consolidated statements of operations in the same manner in which the award recipient’s salary and related costs are classified or in which the award recipient’s service payments are classified. Comprehensive Loss Comprehensive loss is the change in equity of a business enterprise during a period from transactions and other events and circumstances from non‑owner sources. Comprehensive loss includes net loss and the change in accumulated other comprehensive loss for the period. For the year ended December 31, 2019, comprehensive loss included $44,000 in unrealized holding gains, net on marketable securities; for the year ended December 31, 2018, comprehensive loss equaled net loss. Net Loss per Share The Company applies the two‑class method to compute basic and diluted net loss per share because it has issued instruments that meet the definition of participating securities. The two‑class method determines net income (loss) per share for each class of common and participating securities according to dividends declared or accumulated and participation rights in undistributed earnings. The two‑class method requires income (losses) available to common unit holders and common stockholders for the period to be allocated between common and participating securities based upon their respective rights to share in the earnings as if all income (losses) for the period had been distributed. During periods of loss, there is no allocation required under the two‑class method since the participating securities do not have a contractual obligation to fund the losses of the Company. The Company calculates basic net loss per share by dividing net loss by the weighted average number of common shares outstanding, excluding unvested restricted common stock. The Company calculates diluted net loss per share by dividing net loss by the weighted average number of common shares outstanding, as applicable, after giving consideration to the dilutive effect of convertible preferred stock, restricted common stock, warrants, and stock options that are outstanding during the period. The Company has generated a net loss in all periods presented, so the basic and diluted net loss share are the same, as the inclusion of the potentially dilutive securities would be anti‑dilutive. Income Taxes Since inception, the Company recorded income taxes in accordance with FASB Accounting Standards Codification Topic 740, Income Taxes (“ASC 740”), which provides for deferred taxes using an asset and liability approach. Under this method, deferred tax assets and liabilities are determined based on temporary differences between the financial statement basis and tax basis of assets and liabilities and net operating loss and credit carryforwards using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Valuation allowances are established when it is more likely than not that some portion of the deferred tax assets will not be realized. The Company accounts for uncertainty in income taxes recognized in the financial statements by applying a two‑step process to determine the amount of tax benefit to be recognized. First, the tax position must be evaluated to determine the likelihood that it will be sustained upon external examination by the taxing authorities. If the tax position is deemed more‑likely‑than‑not to be sustained, the tax position is then assessed to determine the amount of benefit to recognize in the financial statements. The amount of the benefit that may be recognized is the largest amount that has a greater than 50% likelihood of being realized upon ultimate settlement. At December 31, 2019 and 2018, the Company had not identified any significant uncertain tax positions. Prior to the Reorganization, Morphic Holding, LLC elected to be treated under the partnership provisions of the Internal Revenue Service code. Accordingly, all income and deductions of Morphic Therapeutic, LLC were recorded on the members’ individual tax returns and no taxes were recorded by Morphic Holding, LLC. The wholly‑owned subsidiaries of Morphic Holding, LLC — Morphic Therapeutic, Inc., Lazuli, Inc., Tourmaline, Inc., and Phyllite, Inc. — were taxed as C‑corporations for federal income tax purposes and filed separate corporate income tax returns from the LLC entity. As part of the Reorganization, the parent Company made the election to be treated as C‑corporation for federal and state income tax purposes and subsequently legally converted the parent Company to a corporation. Following the Reorganization, the Company has elected to file consolidated tax returns. The Company is open to examination by the Internal Revenue Service for the tax years ended December 31, 2017 to December 31, 2019. The Company is currently not under examination by the Internal Revenue Service or any other jurisdictions for any tax years. The Company has not recorded any interest or penalties on any unrecognized tax benefits since its inception. Subsequent Events The Company considers events or transactions that occur after the balance sheet date but prior to the issuance of the consolidated financial statements for potential recognition or disclosure in the consolidated financial statements. Subsequent events have been evaluated through the date these consolidated financial statements were issued for potential recognition or disclosure in the consolidated financial statements. Recently Issued Accounting Pronouncements not yet Adopted In December 2019, the FASB issued ASU No. 2019-12, Simplifying the Accounting for Income Taxes (“ASU 2019-12”), which removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. The guidance will be effective for the Company for the fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022. Provisions of ASU 2019-12 must be adopted using either full retrospective, modified retrospective, or prospective method, depending on the provision adopted, as specified within the guidance. Early adoption is permitted. The Company is evaluating the impact of the adoption of ASU 2019-12 on its consolidated financial statements but does not expect such adoption to have a material impact. In November 2019, the FASB issued ASU 2019-10, Financial Instruments—Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842): Effective Dates (“ASU 2019-10”), which finalizes effective date delays for private companies, not-for-profit organizations, and certain smaller reporting companies as follows: · January 1, 2023 as the effective date for adoption of the Topic 326 for annual and interim reporting periods; · January 1, 2021 and January 1, 2022 as the effective dates for adoption of the Topic 815 amendments for annual and interim periods, respectively; and · January 1, 2021 and January 1, 2022 as the effective dates for adoption of the Topic 842 for annual and interim periods, respectively. In June 2016, the FASB issued ASU 2016-13, Financial Instruments Credit Losses (Topic 326) ("ASU 2016-13"), which requires consideration of a broader range of reasonable and supportable information in developing credit loss estimates. In April 2019, the FASB issued ASU 2019-04, Financial Instruments-Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments (“ASU 2019-04”). Certain provisions of ASU 2019-04 amend the guidance of ASU 2016-13, are applicable to the Company’s investments portfolio, and allow the Company to make certain accounting policy elections regarding establishing allowance for credit losses for the accrued interest receivable and the corresponding disclosures. In November 2019, the FASB issued ASU No. 2019-11, Codification Improvements to Topic 326, Financial Instruments – Credit Losses (“ASU 2019-11”), which clarifies certain areas of the guidance to ensure all companies and organizations can make a smoother transition to the standard. Following the issuance of ASU 2019-10 described above, the guidance is effective for the Company for the fiscal years beginning after December 15, 2022, including interim periods within those fiscal years, and will be adopted using the modified retrospective approach. The Company is currently evaluating the impact of ASU 2019-11 and the related ASU 2019-04 and ASU 2016-13 on the consolidated financial statements, including the impact of the available accounting policy elections. In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), with guidance regarding the accounting for and disclosure of leases. In general, for lease arrangements exceeding a twelve-month term, these arrangements must now be recognized as assets and liabilities on the balance sheet of the lessee. Under ASU 2016-02, a right-of-use asset and lease obligation will be recorded for all leases, whether operating or financing, while the income statement will reflect lease expense for operating leases and amortization/interest expense for financing leases. The balance sheet amount recorded for existing leases at the date of adoption of ASU 2016-02 must be calculated using the applicable incremental borrowing rate at the date of adoption. This update also requires lessees and lessors to disclose key information about their leasing transactions. In July 2018, the FASB issued ASU 2018-11, Leases - Targeted Improvements , intended to ease the implementation of the new lease standard for financial statement preparers by, among other things, allowing for an additional transition method. In lieu of presenting transition requirements to comparative periods, as previously required, an entity may now elect to show a cumulative effect adjustment on the date of adoption without the requirement to recast prior period financial statements or disclosures presented in accordance with ASU 2016-02. The Company currently expects to elect the available package of practical expedients which allows the Company to not reassess previous accounting conclusions around whether arrangements are or contain leases, the classification of leases, and the treatment of initial direct costs. The Company also expects it will make an accounting policy election to keep leases with an initial term of 12 months or less off of the balance sheet. The Company is in the process of assessing the impact of the standard and while not complete, it expects that it will record a material asset and liability related to its current operating lease; however, the full impact of adoption to the Company’s financial statements is yet to be determined. Effective with the issuance of ASU 2019-10, described above, this standard is effective for the Company for the annual periods beginning after December 15, 2021, which will be the initial date of application, and interim periods within fiscal years beginning after December 15, 2022. The Company has considered other recent accounting pronouncements and concluded that they are either not applicable to the business, or that the effect is not expected to be material to the consolidated financial statements as a result of future adoption . |
Fair Value of Financial Assets
Fair Value of Financial Assets and Liabilities | 12 Months Ended |
Dec. 31, 2019 | |
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 summarize the assets and liabilities measured at fair value on a recurring basis at December 31, 2019 and 2018 (in thousands): Fair Value Measurements at December 31, 2019 Total Level 1 Level 2 Level 3 Assets: Money market funds, included in cash and cash equivalents $ 91,332 $ 91,332 $ — $ — U.S. Treasury obligations, included in cash and cash equivalents 9,995 — 9,995 — U.S. Treasury obligations 135,457 — 135,457 — Total assets $ 236,784 $ 91,332 $ 145,452 $ — Fair Value Measurements at December 31, 2018 Total Level 1 Level 2 Level 3 Assets: Money market funds, included in cash and cash equivalents $ 185,676 $ 185,676 $ — $ — Total assets $ 185,676 $ 185,676 $ — $ — The money market funds included in the table above invest in U.S. government securities that are valued using quoted market prices. Accordingly, money market funds are categorized as Level 1 as of December 31, 2019 and 2018. Marketable securities, included in the table above, consist exclusively of U.S. Treasury securities that are valued using prices provided by third party pricing vendors, using observable market inputs such as interest rates, yield curves, and credit risk. Accordingly, these securities are categorized as Level 2 as of December 31, 2019. The Company held no marketable securities as of December 31, 2018. During the years ended December 31, 2019 and 2018, no assets were transferred between the fair value hierarchy categories. |
Marketable securities
Marketable securities | 12 Months Ended |
Dec. 31, 2019 | |
Marketable securities. | |
Marketable securities | 4. Marketable securities As of December 31, 2019, the Company had the following investments in marketable securities classified as available for sale (in thousands): Gross Gross Aggregate Amortized unrealized unrealized estimated Maturity cost holding gains holding losses fair value U.S. Treasury securities less than 1 year $ 135,389 $ 70 $ (2) $ 135,457 All of the Company’s investments are classified as available‑for‑sale and are carried at fair value with unrealized gains and losses recorded as a component of accumulated other comprehensive income (loss), net of related income taxes. The Company recognized in accumulated other comprehensive income $44,000 in net unrealized holding gains related to changes in the securities’ fair values, impacted by interest rates fluctuations. As of December 31, 2019, the aggregate fair value of three securities in an unrealized loss position was $30.2 million and the aggregate unrealized losses were $2,000. No securities have been in an unrealized loss position for more than one year. As of December 31, 2019, no securities are considered to be other than temporarily impaired because the impairments are not severe, have been for a short duration, and are due to normal market and interest rate fluctuations. Furthermore, the Company does not intend to sell the investment securities in an unrealized loss position and it is not more likely than not that the Company will be required to sell these securities before the recovery of the value. The Company did not have any investments in marketable securities at December 31, 2018. |
Property and Equipment, Net
Property and Equipment, Net | 12 Months Ended |
Dec. 31, 2019 | |
Property and Equipment, Net. | |
Property and Equipment, Net | 5. Property and Equipment, Net At December 31, 2019, property and equipment, net consists of the following (in thousands): As of December 31, 2019 2018 Laboratory equipment $ 4,194 $ 2,415 Computers and software 280 163 Leasehold improvements 535 475 Construction in progress 465 — 5,474 3,053 Less: Accumulated depreciation and amortization (2,028) (1,210) $ 3,446 $ 1,843 Depreciation and amortization expense was $821,000 and $539,000 for the years ended December 31, 2019 and 2018, respectively. |
Accrued Expenses
Accrued Expenses | 12 Months Ended |
Dec. 31, 2019 | |
Accrued Expenses | |
Accrued Expenses | 6. Accrued Expenses At December 31, 2019 and 2018 accrued expenses consist of the following (in thousands): As of December 31, 2019 2018 Payroll and related expenses 3,159 2,012 Research and development activities 2,465 715 Other expenses 1,015 512 $ 6,639 $ 3,239 |
Stockholder's Equity
Stockholder's Equity | 12 Months Ended |
Dec. 31, 2019 | |
Stockholder's Equity | |
Stockholder's Equity | 7. Stockholders’ Equity Prior to the Reorganization described below, all interests of members in distributions and other amounts were represented by their units of membership in the Company as specified in its operating agreement. There were two classes of units: capital units and incentive units. Capital units were comprised of common units and convertible preferred units, which represent a capital interest in the Company, while incentive units represent profits interests within the meaning of IRS Revenue Procedures 93‑27 and 2001‑43. The various classes of capital units are described below. Convertible Preferred Units and Shares As of December 31, 2017, the total authorized capital units of the Company were 138,035,280 units, which consisted of 77,000,000 Common Units and 61,035,280 Preferred Units, of which 11,987,661 were designated Series Seed Preferred Units and 49,047,619 were designated Series A Preferred Units. During the year ended December 31, 2018, 61,538,454 units were designated Series B Preferred Units. In August 2018, in accordance with the terms of the Series A Preferred Unit Purchase Agreement, the Company issued additional Series A Preferred Units to the Series A Investors for proceeds of $10,290,962, net of issuance costs of $9,038. In September 2018, the Company issued Series B Preferred Units at $7.58 per unit for proceeds of $79,831,491, net of issuance costs of $168,499. There were no additional convertible preferred units issued during the years ended December 31, 2018 and 2019. Common Units As of December 31, 2017, the Company had outstanding 1,011,227 common units. There were no additional common units issued during the years ended December 31, 2018 and 2019. Reorganization and Convertible Preferred Stock On December 5, 2018, the Company completed a series of transactions, or the Reorganization, pursuant to which Morphic Holding, LLC was converted in a tax‑free exchange into Morphic Holding, Inc. and three subsidiaries, namely Lazuli, Inc., Tourmaline, Inc. and Phyllite, Inc. were merged with and into Morphic Therapeutic, Inc. In connection with the Reorganization: § Holders of Morphic Holding, LLC Series B convertible preferred units received one share of Morphic Holding, Inc. Series B convertible preferred stock for each outstanding Series B convertible preferred unit held immediately prior to the Reorganization, with an aggregate of 10,553,483 shares of Morphic Holding, Inc. Series B convertible preferred stock issued in the Reorganization; § Holders of Morphic Holding, LLC Series A convertible preferred units received one share of Morphic Holding, Inc. Series A convertible preferred stock for each outstanding Series A convertible preferred unit held immediately prior to the Reorganization, with an aggregate of 8,411,368 shares of Morphic Holding, Inc. Series A convertible preferred stock issued in the Reorganization; § Holders of Morphic Holding, LLC Series Seed convertible preferred units received one share of Morphic Holding, Inc. Series Seed convertible preferred stock for each outstanding Series Seed convertible preferred unit held immediately prior to the Reorganization, with an aggregate of 2,045,556 shares of Morphic Holding, Inc. Series Seed convertible preferred stock issued in the Reorganization; § Holders of Morphic Holding, LLC common units received one share of Morphic Holding, Inc. common stock for each outstanding common unit held immediately prior to the Reorganization, with an aggregate of 1,011,227 shares of common stock issued in the Reorganization; § Holders of Morphic Holding, LLC vested and unvested incentive units, exchanged one incentive unit for one share of common stock or restricted common stock, respectively. Threshold amounts on all vested and unvested incentive units were decreased to $0. The restricted common stock was issued with the same vesting terms as the unvested incentive units held immediately prior to the Reorganization. A total of 1,574,749 shares of common stock and restricted common stock were issued to the prior holders of incentive units; and § The outstanding warrants to purchase 6,825 Series Seed convertible preferred units at an exercise price of $4.39 per unit were converted to warrants to purchase 6,825 shares of Series Seed convertible preferred stock at the same exercise price per share. The Company’s Series B convertible preferred stock, Series A convertible preferred stock, Series Seed convertible preferred stock were designated as convertible preferred stock under the amended and restated certificate of incorporation. All outstanding shares of convertible preferred stock were convertible into shares of common stock at a one‑to‑one conversion ratio and certain terms and preferences that made them senior to shares of common stock. The purpose of the Reorganization was to reorganize the Company’s corporate structure so that Morphic Holding, Inc. would continue as a corporation and so that the Company’s existing investors would own capital stock rather than equity interests in a limited liability company. The Company evaluated the accounting for the Reorganization and specifically the exchange of (1) preferred and common units for preferred and common shares and (2) the modification to the terms of the incentive units. With respect to the exchange of preferred and common units for preferred and common shares, the Company considered that there were no changes to the ownership interest held by each unit/stockholder as a result of the Reorganization, there was no consideration exchanged to effect the exchange, and the significant terms of the preferred units and common units were substantially the same before and after the Reorganization. Based on these considerations, the Company determined that the exchange of shares occurring in the Reorganization should be accounted for as a modification of equity securities. The accounting for the modification to the terms of the incentive units is described in Note 8. Immediately prior to the closing of the IPO on July 1, 2019, the Company had 21,010,407 convertible preferred shares outstanding, all of which automatically converted into 21,010,407 shares of common stock upon closing of the IPO. As of December 31, 2019 , the Company had 400,000,000 common shares authorized and 30,110,251 common shares issued and outstanding and 10,000,000 preferred shares authorized, none of which were outstanding. Common Stock The common stock has the following characteristics: Voting The holders of common stock are entitled to one vote for each share of common stock held. Dividends The holders of shares of common stock are entitled to receive dividends, if and when declared by the Company’s board of directors. Cash dividends may not be declared or paid to holders of shares of common stock until all unpaid dividends on any preferred stock outstanding have been paid in accordance with their terms. As of December 31, 2019, no preferred stock was outstanding. No dividends have been declared or paid by the Company to the holders of common stock since the issuance of the common stock. Liquidation Holders of the common shares are entitled to receive distributions of cash, including in the event of a liquidation or dissolution of the Company, which preference is junior to the liquidation preference of any preferred stock holders. After any preferred stock holders have received their respective preferred distributions, any assets remaining for distribution shall be distributed to the holders of preferred or common shares determined on an as‑converted basis. Shares Reserved for Future Issuance As of December 31, 2019, the Company had reserved common shares for exercise of outstanding stock options granted under the 2018 Stock Incentive Plan and the future issuance under the 2019 Stock Incentive Plan and the 2019 Employee Stock Purchase Plan (described in note 8 below) as follows: As of December 31, 2019 Common shares reserved for exercise of outstanding stock options under the 2018 Plan 2,028,233 Common shares reserved for issuance under the 2019 ESPP 300,000 Common shares reserved for exercise of outstanding stock options under the 2019 Plan 959,170 Common shares reserved for future issuance under the 2019 Plan 2,050,079 5,337,482 |
Equity Based Compensation
Equity Based Compensation | 12 Months Ended |
Dec. 31, 2019 | |
Equity Based Compensation | |
Equity Based Compensation | 8. Equity Based Compensation Prior to the Reorganization, the Company’s operating agreement, as amended and restated, provided for the granting of incentive units to employees, officers, directors, and consultants, as determined by the Board of Directors. At December 31, 2017, 1,586,907 incentive units were authorized to be granted of which 54,768 were available for the future grants. The terms of the incentive units granted prior to the Reorganization were determined by the Board of Directors and included vesting, forfeiture, repurchase, and other provisions. Incentive units had rights to dividends and were entitled to distributions. Incentive unit holders were not required to purchase or “exercise” their incentive units in order to receive such distributions. However, distributions to incentive unit holders began only after the cumulative amount distributed to common unit holders exceeded the threshold amount with respect to such incentive unit. Distributions were entitled to be made to incentive unit holders whether vested or unvested. Distributions on unvested units were to be held by the Company until the incentive units vest, at which time they would be released to the incentive unit holder. Unless otherwise approved by the Board of Directors, the incentive units generally vested over a four-year period with the first 25% vesting following 12 months of employment or service and the remaining incentive units vesting in equal quarterly installments over the following 36 months. The incentive units had no contractual term. In connection with the issuance of each incentive unit, the Board of Directors set a threshold amount based on the amount of distributions that the holders of a common unit would be entitled to receive in a hypothetical liquidation of the Company on the date of issuance of the incentive unit in which the Company sold its assets at fair market value, satisfied its liabilities, and distributed the net proceeds to the holders of units in liquidation of the Company. A summary of the Company’s incentive unit activity in 2018 prior to the Reorganization and related information is as follows: Weighted Weighted Average Grant Date Average Threshold Number of Units Fair Value per Unit Price per Unit Outstanding at December 31, 2017 1,532,139 $ 1.34 $ 1.11 Granted 60,708 2.39 1.92 Forfeited (18,098) 1.87 1.57 Exchanged for common stock and restricted common stock pursuant to the Reorganization (1,574,749) 1.40 1.17 Outstanding at December 31, 2018 — — — A summary of vested incentive units is as follows: Number of Units Vested at December 31, 2017 439,332 Vested 350,719 Cancelled/Forfeited — Vested as of the Reorganization 790,051 The total fair value of incentive units vested during 2018 through the date of the Reorganization was $473,000. Compensation Expense related to Incentive Units The Company recorded equity‑based compensation expense for incentive units granted to employees, directors and non‑employees of $507,000 for the year ended December 31, 2018. Reorganization Pursuant to the Reorganization, all vested and unvested incentive units granted under the 2015 Compensatory Benefit Plan which were outstanding immediately prior to the Reorganization were exchanged for an equal number of shares of common stock or restricted common stock, respectively, under the 2018 Stock Incentive Plan, described below. The threshold amount per incentive unit was decreased to $0 for all vested and unvested units outstanding immediately prior to the Reorganization. A total of 35 active employees of the Company were subject to the exchange of the incentive units for common shares and restricted common shares. The restricted common stock was issued with the same vesting terms as the unvested incentive units held immediately prior to the Reorganization. The Company accounted for the exchange of incentive units in Morphic Holding, LLC for common stock and restricted common stock of Morphic Therapeutic, Inc. as a modification in accordance with the requirements of ASC 718. Accordingly, the Company determined there was an excess fair value of the replacement awards over the fair value of the incentive units exchanged in connection with the Reorganization, which resulted in incremental compensation expense. The incremental fair value related to vested awards was recognized immediately as compensation expense. The incremental fair value of unvested awards and any remaining unrecognized compensation of the original awards will be recognized as compensation expense over the remaining vesting period. The incremental expense resulting from modification of awards totaled $968,000 of which $365,000, was recognized during the year ended December 31, 2018 and $255,000 during the year ended December 31, 2019. Incentive Unit Compensation Expense Assumptions The following weighted average assumptions were used in determining the fair value of incentive units granted to both employees and non‑employees during 2018: Year ended December 31, 2018 Risk‑free interest rate 2.79% Expected dividend yield — Expected term (years to liquidity) 5.98 Expected volatility 76.63% 2018 Stock Incentive Plan The 2018 Stock Incentive Plan (the “2018 Plan”), instituted as part of the Reorganization, provided for the grant of incentive stock options, non‑qualified stock options, and restricted stock awards. The 2018 Plan was administered by the Board of Directors, or at the discretion of the Board of Directors, by a committee of the board. The exercise prices, vesting, and other restrictions were determined at the discretion of the Board of Directors, or a committee if so delegated, except that the exercise price per share of stock options may not be less than 100% of the fair market value of the share of common stock on the date of grant and the term of stock option may not be greater than ten years. The number of shares initially reserved for issuance under the 2018 Plan was 3,818,816 shares of common stock. The shares of common stock underlying any awards that are forfeited, cancelled, repurchased, or are otherwise terminated by the Company under the 2018 Plan were to be added back to the shares of common stock available for issuance under the 2018 Plan up to the number of shares of common stock subject to awards granted prior to the effectiveness of the 2018 Plan. Options generally vest over a four-year period with the first 25% vesting following 12 months of employment or service and the remaining award vesting in equal monthly installments over the following 36 months. All options have a contractual term of 10 years. As of December 31, 2018, there were 457,438 available for future issuance under the 2018 Plan. Restricted Common Stock The following table summarizes the common stock and restricted common stock issued as part of the Reorganization and restricted common stock activity under the 2018 Plan from the Reorganization to December 31, 2018: Weighted Average Fair Value per Share Number of Shares at Issuance Common stock and restricted common stock issued as part of the Reorganization 1,574,749 $ 4.32 Vested as of the Reorganization 790,051 4.32 Unvested restricted common stock as of the Reorganization 784,698 4.32 Granted — — Vested 31,645 4.32 Forfeited — — Unvested restricted common stock as of December 31, 2018 753,053 $ 4.32 The aggregate fair value of restricted stock awards that vested subsequent to the Reorganization during the year ended December 31, 2018, based on estimated fair values of stock underlying the restricted stock awards on the date of vesting was $137,000. Stock Options The following table summarizes the Company’s stock option activity under the 2018 Plan during the year ended December 31, 2018: Weighted Weighted Average Number of Average Remaining Aggregate Shares Exercise Price Contractual Term Intrinsic Value (in years) (in thousands) Outstanding as of December 31, 2017 — $ — — $ — Granted 1,786,551 4.32 9.96 — Exercised — — — — Forfeited — — — — Outstanding as of December 31, 2018 1,786,551 $ 4.32 9.96 $ — Options exercisable as of December 31, 2018 — $ — — $ — The weighted average grant-date fair value per share of stock options granted to employees and non-employees for stock option awards with service-based vesting conditions through December 31, 2018 was $2.92 per share. The Company recorded equity-based compensation expense for the stock options granted to employees and non-employees of $312,000 for the year ended December 31, 2018. The following table summarizes assumptions used in determining the fair value of the options granted in 2018: Year ended December 31, 2018 Risk‑free interest rate 2.75% Expected dividend yield - Expected term (in years) 6.03 Expected Volatility 75.33% 2019 Stock Incentive Plan The 2019 Stock Incentive Plan (the “2019 Plan”) was approved by the Board of Directors on June 10, 2019 and replaced the 2018 Stock Incentive Plan (the “2018 Plan”), previously instituted as part of the Reorganization. The 2018 Plan provided for the grant of incentive stock options, non-qualified stock options, and restricted stock awards. The 2019 Plan provides for the grant of stock options, restricted stock awards, stock bonus awards, cash awards, stock appreciation right, RSUs, and performance awards to purchase up to 2.8 million shares of common stock. The number of shares reserved for issuance under the Company’s 2019 Plan will increase automatically on January 1 of each of 2020 through 2029 by the number of shares equal to the lesser of 4% of the aggregate number of outstanding shares of the Company’s common stock as of the immediately preceding December 31, or a number as may be determined by the Company’s board of directors. The 2019 Plan is administered by the Board of Directors, or at the discretion of the Board of Directors, by a committee of the board. The exercise prices, vesting, and other restrictions are determined at the discretion of the Board of Directors, or a committee if so delegated, except that the exercise price per share of stock options may not be less than 100% of the fair market value of the share of common stock on the date of grant and the term of stock option may not be greater than ten years. The shares of common stock underlying any awards that are forfeited, cancelled, repurchased, or are otherwise terminated by the Company under the 2019 Plan, and those previously granted under the 2018 Plan, will be added back to the shares of common stock available for issuance under the 2019 Plan. Options generally vest over a four-year period with the first 25% vesting following 12 months of employment or service and the remaining award vesting in equal monthly installments over the following 36 months. All options have a contractual term of 10 years. Restricted Common Stock The following table summarizes the restricted common stock activity under the 2018 Plan and the 2019 Plan during the year ended December 31, 2019: Weighted Average Fair Number Value per Share of Shares at Issuance Unvested restricted common stock as of December 31, 2018 753,053 $ 4.32 Granted — — Vested (354,660) 4.32 Forfeited (18,623) 4.32 Unvested restricted common stock as of December 31, 2019 379,770 $ 4.32 As of December 31, 2019, the Company had unrecognized equity‑based compensation expense of $959,000 which includes $336,000 related to the modification described above, for the restricted common shares issued to employees and non‑employees, which is expected to be recognized over a weighted average period of 0.8 years. The Company recognized equity‑based expense for the restricted common stock of $737,000 during the year ended December 31, 2019. The total fair value of shares vested during the year ended December 31, 2019 was approximately $1.5 million. Stock Options The following table summarizes the Company’s stock option activity under the 2018 Plan and the 2019 Plan during the year ended December 31, 2019: Weighted Weighted Average Number of Average Remaining Aggregate Shares Exercise Price Contractual Term Intrinsic Value (in years) (in thousands) Outstanding as of December 31, 2018 1,786,551 $ 4.32 9.96 $ — Granted 1,220,241 14.98 — — Exercised (6,495) 4.32 — 89 Forfeited (12,894) 4.32 — — Outstanding as of December 31, 2019 2,987,403 $ 8.67 9.22 $ 26,254 Options vested and expected to vest as of December 31, 2019 2,987,403 $ 8.67 9.22 $ 26,254 Options exercisable as of December 31, 2019 462,456 $ 4.49 8.96 $ 5,858 The weighted average grant‑date fair value per share of stock options granted to employees and non-employees for stock option awards with service‑based vesting conditions during the year ended December 31, 2019 was $9.95 per share. The following table summarizes assumptions used in determining the fair value of the options granted in 2019: Year ended December 31, 2019 Risk‑free interest rate 1.9% Expected dividend yield - Expected term (in years) 6.01 Expected Volatility 75.45% The Company determined the volatility for options granted in 2019 based on reported data for a guideline group of companies that issued options with substantially similar terms. The risk-free interest rate is based on a zero-coupon United States Treasury instrument with terms consistent with the expected life of the stock options. The expected term of options granted has been determined based upon the simplified method, because the Company does not have sufficient historical information regarding its options to derive the expected term. Under this approach, the expected term is the mid-point between the weighted average of vesting period and the contractual term. The Company has not paid and does not anticipate paying cash dividends on shares of common stock; therefore, the expected dividend yield is assumed to be zero. Compensation Expense related to Stock Options The Company recorded equity-based compensation expense for stock options granted to employees and non-employees of $2.5 million and $104,000 for the years ended December 31, 2019 and 2018, respectively. As of December 31, 2019, the Company had unrecognized equity‑based compensation expense of $14.6 million related to stock options issued to employees and non-employees, which is expected to be recognized over a weighted average period of 3.01 years. 2019 Employee Stock Purchase Plan In June 2019, the Company adopted the 2019 Employee Stock Purchase Plan (“ESPP”), which became effective on June 26, 2019. The Company initially reserved 300,000 shares of common stock for sale under the ESPP. The number of shares reserved for issuance under the ESPP will increase automatically on January 1st of each of the first 10 calendar years following the first offering date by the number of shares equal to the lesser of 1% of the total outstanding shares of the Company’s common stock as of the immediately preceding December 31 or an amount determined by the Company’s board of directors. The aggregate number of shares issued over the term of the ESPP will not exceed 3,000,000 shares of the Company’s common stock. The ESPP is a qualified, compensatory plan under Section 423 of the Internal Revenue Code and offers substantially all employees opportunity to purchase up to $25,000 of common stock per year at 15% discount to the lower of the beginning of the offering period price or the end of the offering period price. Compensation expense for discounted purchases under the ESPP is measured using the Black-Scholes model to compute the fair value of the lookback provision plus the purchase discount and is recognized as compensation expense over the course of the offering period. During the year ended December 31, 2019, the Company granted awards with the weighted average grant date fair value of $5.30 and recognized $246,000 in compensation expense related to the discount offered under the 2019 ESPP. The Company recognized no expense during the year ended December 31, 2018. Total Equity‑based Compensation Expense The Company recorded equity‑based compensation expense related to all equity‑based awards for employees and non‑employees, which was allocated as follows in the consolidated statements of operations (in thousands): Year Ended December 31, 2019 2018 Research and development expense $ 2,241 $ 520 General and administrative expense 1,291 477 $ 3,532 $ 997 |
Income Taxes
Income Taxes | 12 Months Ended |
Dec. 31, 2019 | |
Income Taxes | |
Income Taxes | 9. Income Taxes The components of the income tax expense for the years ended December 31, 2019 and 2018 were: Year Ended December 31, 2019 2018 Current Federal $ 512 $ — State 410 — Total current tax provision 922 — Deferred Federal (6) — State (4) — Total deferred tax provision (10) — Total income tax provision $ 912 $ — The effective income tax rate differed from the amount computed by applying the federal statutory rate to the Company’s loss before income taxes as follows: Year Ended December 31, 2019 2018 Tax effected at statutory rate 21.00 % 21.00 % State taxes 8.39 2.89 Stock compensation (1.09) (0.84) Non-deductible expenses 0.08 0.29 Federal research and development credits 5.09 1.89 Change in valuation allowance (35.64) (25.23) (2.17) % — % Deferred tax assets and liabilities consist of the following at December 31, 2019 and 2018 (in thousands): As of December 31, 2019 2018 Long‑term net deferred tax assets: Net operating loss carryforwards $ 1,170 $ 8,631 Deferred revenue 23,453 Research and development credit carryforwards 1,091 938 Intangible assets 4,246 4,670 Reserves and accruals 195 692 Stock-based compensation 353 11 Total long‑term deferred tax assets: 30,508 14,942 Valuation allowance (29,618) (14,710) Subtotal 890 232 Fixed assets (656) (232) Prepaid expense (234) Total net deferred tax assets $ — $ — As required by ASC 740, the Company has evaluated the positive and negative evidence bearing upon the realizability of its deferred tax assets, which is composed principally of collaboration revenue that has been recognized as taxable but remains deferred for book reporting purposes at year end. The Company has determined that it is more likely than not that the Company will not realize the benefits of its federal and state deferred tax assets, and, as a result, a valuation allowance of $29.6 million and $14.7 million has been established at 2019 and 2018, respectively. The change in the valuation allowance was $14.9 million and $5.8 million for the years ended December 31, 2019 and 2018. The Company has incurred NOLs from inception. At December 31, 2019, the Company has federal and state NOL carryforwards of approximately $3.9 million and $5.6 million, respectively, available to reduce future taxable income, that expire beginning in 2037. As of December 31, 2019, the Company also has federal and state research and development tax credit carryforwards of approximately $1.0 million and $0.1 million, respectively, to offset future income taxes, which will begin to expire beginning in December 2032. The Company’s NOL carryforwards are subject to review and possible adjustment by the appropriate taxing authorities. The Company has reviewed its historic ownership changes to determine if there are any IRC 382 limitations which would limit the annual utilization of the NOLs. The NOLs carryforwards remaining as of December 31, 2019 are subject to annual utilization limitation of approximately $0.6 milion. On December 22, 2017, the Tax Cuts and Jobs Act (“the Act”) was signed into law. The Act, among other things, contains significant changes to corporate taxation, including reduction of the corporate tax rate from a marginal rate of 34% to a flat rate of 21%, limitation of the tax deduction for interest expense to 30% of adjusted earnings (except for certain small businesses), limitation of the deduction for net operating losses to 80% of current year taxable income and elimination of net operating loss carrybacks, one time taxation of offshore earnings at reduced rates regardless of whether they are repatriated, elimination of U.S. tax on foreign earnings (subject to certain important exceptions), immediate deductions for certain new investments instead of deductions for depreciation expense over time, and modifying or repealing many business deductions and credits. The Company recognizes the changes in tax law, including the Act, in the period the law is enacted. Accordingly, the effects of the Act have been recognized in the financial statements for the year ended December 31, 2017. As a result of the change in law, the Company recorded a reduction to its deferred tax assets and a corresponding reduction to its valuation allowance. As a result, there was no impact to the Company’s income statement due to the reduction in the U.S. corporate tax rate. The Company also had no investments in foreign corporations as of December 31, 2019 or 2018. The Company’s reporting of the Act was complete as of December 31, 2018 and no adjustment to the provisional amounts recorded was recorded. The Company follows the provisions of ASC 740-10, “Accounting for Uncertainty in Income Taxes,” which specifies how tax benefits for uncertain tax positions are to be recognized, measured, and recorded in financial statements; requires certain disclosures of uncertain tax matters; specifies how reserves for uncertain tax positions should be classified on the balance sheet; and provides transition and interim period guidance, among other provisions. As of December 31, 2019 and 2018, the Company had no unrecognized tax benefits. As the Company’s research spending has increased in scope and complexity during 2019, a detailed review of the current year R&D credit computation was undertaken to support the company’s methodology and conclusions. The company has not identified any uncertain positions with respect to the credit computations. The Company’s policy is to recognize interest and penalties accrued on any uncertain tax positions as a component of income tax expense, if any, in its statements of operations. The Company files U.S. federal and state income tax returns and is generally subject to income tax examinations by these authorities for all tax years. Currently, no federal or state income tax returns are under examination by the respective income tax authorities. Provision for Income Taxes The Company recorded an income tax expense of $0.9 million and $0 for the years ended December 31, 2019 and 2018, respectively. In the year ended December 31, 2019, the income tax expense recorded was driven largely by the current tax liability associated with the tax recognition of the upfront AbbVie collaboration payment received in 2018. A significant portion of the taxable income related to the collaboration payments was offset by current year expenses and prior year accumulated losses. A current tax liability has been calculated for the remaining taxable income. The Company reported no income tax provision in the year ended December 31, 2018, as the Company generated a taxable loss, offset by an increase to the Company’s valuation allowance. Despite the collaboration revenue, the Company continues to maintain a valuation allowance against all deferred tax assets. The Company believes that it is more likely than not that the Company will not realize a future tax benefit of these attributes, as the research programs continue to require significant investment and future revenue is subject to uncertainties. Ultimate realization of any deferred tax asset is dependent on the Company’s ability to generate sufficient future taxable income in the appropriate tax jurisdiction before the expiration of carryforward periods, if any. |
Commitments and Contingencies
Commitments and Contingencies | 12 Months Ended |
Dec. 31, 2019 | |
Commitments and Contingencies | |
Commitments and Contingencies | 10. Commitments and Contingencies Guarantees and Indemnifications The Company entered, and intends to continue to enter, into separate indemnification agreements with directors, officers, and certain of key employees, in addition to the indemnification provided for in the restated certificate of incorporation and restated bylaws. These agreements, among other things, require the Company to indemnify directors, officers, and key employees for certain expenses, including attorneys' fees, judgments, penalties, fines, and settlement amounts actually incurred by these individuals in any action or proceeding arising out of their service to the Company or any of its subsidiaries or any other company or enterprise to which these individuals provide services at the Company’s request. Subject to certain limitations, the indemnification agreements also require the Company to advance expenses incurred by directors, officers, and key employees for the defense of any action for which indemnification is required or permitted. The Company has standard indemnification arrangements in its leases for laboratory and office space that require it to indemnify the landlord against any liability for injury, loss, accident, or damage from any claims, actions, proceedings, or costs resulting from certain acts, breaches, violations, or non-performance under the Company’s lease. Through December 31, 2019, the Company had not experienced any losses related to these indemnification obligations, and no material claims were outstanding. The Company does not expect significant claims related to these indemnifications’ obligations and, consequently, concluded that the fair value of these obligations is negligible, and no related reserves were established. Operating Leases Facility Lease Starting in June 2017, the Company leases office and laboratory space and obtains services (facilities management, office, and laboratory services) under an operating lease that expires in May 2022. The lease agreement provided for a fixed rental payment for the first 12 months with subsequent annual escalation of approximately 3%. The Company has an option to extend the lease by three years at a rate of at least the amount paid in the last year of the current lease or the then-current market rate, whichever is higher. In accordance with the lease, the Company entered into a cash-collateralized irrevocable standby letter of credit naming the landlord as beneficiary and the amount is included in restricted cash in the consolidated balance sheets. The Company recognizes rent expense for the space it currently occupies and records a deferred rent obligation, representing the cumulative difference between actual rent payments and rent expense recognized ratably over the lease period, which is included in the Company’s consolidated balance sheets as of December 31, 2019 and 2018. Minimum annual rent payments under this lease for the remaining term of the amended lease, excluding operating expenses and taxes, which are not fixed for future periods as of December 31, 2019, are as follows (in thousands): Total Minimum Year ending December 31, Lease Payments 2020 1,122 2021 1,175 2022 495 Total minimum lease payments $ 2,792 The Company recorded approximately $928,000 and $941,000 in rent expense for the years ended December 31, 2019 and 2018, respectively. Legal Proceedings The Company is not currently a party to any material legal proceedings. |
Extinguishment of Notes Payable
Extinguishment of Notes Payable | 12 Months Ended |
Dec. 31, 2019 | |
Extinguishment of Notes Payable | |
Extinguishment of Notes Payable | 11. Extinguishment of Notes Payable In December 2018, the Company extinguished its obligation under the 2016 Loan and Security Agreement with Silicon Valley Bank (the “SVB Agreement”). As part of extinguishment, the Company paid the 5% of amounts drawn fee, originally agreed upon, certain other fees required by the Silicon Valley Bank, and recognized charges related to unaccreted issuance discount and unamortized debt issuance costs, resulting in the aggregate loss of $28,000. The Company had no outstanding obligations to SVB or another lender as of December 31, 2019. In 2016, in connection with obtaining funding under the SVB Agreement, the Company issued a warrant to purchase 3,409 Series Seed Preferred Units at $4.39 per unit on March 31, 2016 and a warrant to purchase 3,416 Series Seed Preferred Units at $4.39 per unit on December 31, 2016. The warrants were outstanding on December 31, 2018 and were included in other long‑term liabilities. SVB exercised the warrants during the year ended December 31, 2019, via cashless exercise, resulting in issuance of 5,766 common shares. |
Option and License Agreements
Option and License Agreements | 12 Months Ended |
Dec. 31, 2019 | |
Option and License Agreements | |
Option and License Agreements | 12. Option and License Agreements AbbVie Agreement Overview In October 2018, the Company entered into a 5‑year collaboration and option agreement with AbbVie, “AbbVie agreement”, a research‑based global biopharmaceutical company that held Series A and Series B Convertible Preferred Shares of the Company at the time the AbbVie agreement was executed. Pursuant to this agreement, AbbVie paid the Company an upfront, non‑refundable amount of $100.0 million. In exchange, the Company: (i) assumed the obligation to perform research and development activities to identify and develop compounds directed at multiple fibrosis indications (grouped into four research programs) through completion of Investigational New Drug (IND)‑enabling studies, and (ii) granted AbbVie options to license the results of R&D in exchange for separate upfront option‑exercise fees. At any time during the five‑year period, AbbVie holds the right to exercise its license options for molecules with the selected pharmacological profiles by providing written notice to the Company and paying an option exercise fee of $20.0 million per option exercised (up to three in total). Morphic is solely responsible for performing the R&D activities and generating at least one research product and one backup research product for each research target. The Company’s obligations to perform R&D activities for the molecules with selected pharmacological profile cease after AbbVie exercises the option(s) and accepts the results of R&D activities. Upon exercise of an option, AbbVie assumes full responsibility for further development of the molecules at its sole cost, and the Company is obligated to transfer any and all manufacturing related activities to AbbVie at AbbVie’s cost. In addition, after AbbVie exercises its options, it is obligated to pay the Company certain development milestones totaling up to $80.0 million per indication, launch milestones totaling up to $110.0 million per indication, and net sales milestones totaling up to $160.0 million per indication. Development milestones are triggered upon the initiation of various phases of clinical trials. Launch milestones are achieved by recording first commercial sale in each of the specified markets. The net sales milestones are achieved by reaching the agreed upon volume of sales in certain territories. The Company is also entitled to royalty payments ranging in high single digit to low teens percentage of sales in a calendar year. The Company retained cost‑sharing rights in the development of compounds for the liver fibrosis indications, including non‑alcoholic steatohepatitis, and may opt into paying a percentage of AbbVie’s development costs in exchange for enhanced royalties. As of December 31, 2019, AbbVie has not exercised any options. AbbVie Agreement Accounting Analysis The Company has concluded that the performance obligations in the agreement include the research services for the four research programs. The Company has concluded that the unexercised license options were marketing offers as the options did not provide any discounts or other rights that would be considered a material right in the arrangement. All other performance obligations were determined to be immaterial in the context of the contract. The Company estimated the standalone selling price of each research program based on internal and external costs to perform the research plus a reasonable profit margin of 10%. The total estimated cost of the research and development services reflects the nature of the services to be performed and the Company’s best estimate of the length of time required to perform the services. The Company recognizes revenue as research and development services are provided based on the costs incurred to date, as such costs have a direct relationship between the Company’s effort and the progress made towards satisfying its performance obligations to AbbVie. Changes to the estimated cost of internal and external development services are recognized in the period of change as a cumulative catch‑up adjustment. The Company reassesses cost estimates which may change due to feedback from FDA, as well as the results and findings of any nonclinical activities performed under the agreement with AbbVie. The Company determined that the transaction price included only the non‑refundable up‑front payment of $100.0 million and recorded this amount as deferred revenue as of December 31, 2018. The option exercise payments were not included in the transaction price, as the Company determined that the agreed upon fees represent fair value of such options. Exercise of any of the options will be accounted for as contract modification if and when AbbVie delivers the written exercise notice. The milestone payments were fully constrained, as a result of the uncertainty regarding whether AbbVie would exercise any of the options and whether any of the associated milestones would be achieved. There have been no changes to the transaction price in the years ended December 31, 2019 and 2018. The Company also considered the existence of any significant financing component within the AbbVie Agreement given its upfront payment structure. Based upon this assessment, the Company concluded that the up‑front payment was provided for valid business reasons and not for the purpose of providing financing. Accordingly, the Company has concluded that the upfront payment structure of the AbbVie Agreement does not result in the existence of a significant financing component. The Company incurred approximately $20.0 million in research and development costs, and recognized revenue of $10.8 million related to research services performed during the year ended December 31, 2019. The Company incurred $3.2 million in research and development costs and recognized revenue of $3.4 million related to research services performed during year ended December 31, 2018. As of December 31, 2019 and December 31, 2018, the Company had $85.8 million and $96.6 million, respectively, of deferred revenue, which is classified as either current or net of current portion in the accompanying consolidated balance sheets based on the period over which the revenue is expected to be recognized. This deferred revenue balance represents the aggregate amount of the transaction price allocated to the performance obligations that are partially unsatisfied as of December 31, 2019 and 2018. The Company expects to recognize revenue related to these performance obligations through 2024. On November 12, 2019, the Company announced that its selecti ve oral α v β 6 - specific integrin inhibitor program for patients with fibrotic disease, MORF-720, conducted in collaboration with AbbVie, will require additional development activities, extending into the second half of 2020 based on feedback received during pre-IND interactions with the FDA. As the Company progresses towards satisfaction of performance obligations under the AbbVie agreement, the estimated costs associated with the remaining effort required to complete the performance obligations may change, which may materially impact revenue recognition. The Company regularly evaluates and, when necessary, updates the costs associated with the remaining effort pursuant to each performance obligation under the AbbVie agreement. Accordingly, revenue may fluctuate from period to period due to revisions to estimated costs, resulting in a change in the measure of progress for a performance obligation. Such changes can also impact the allocation of deferred revenue between current and long term based on changes in expected timing of the satisfaction of performance obligations. During the year ended December 31, 2019, the Company made revisions to its estimated costs, which included estimated costs to conduct one additional toxicology study before submitting an IND for MORF-720 and to pursue a backup molecule for idiopathic pulmonary fibrosis (IPF) related to MORF-720. These revisions to the Company’s estimated costs reduced the estimated completion of the related performance obligations as of December 31, 2019 and resulted in a $2 million reduction to revenue previously recognized, and corresponding increase to net loss by $2 million or approximately $0.13 per share during the year ended December 31, 2019. Janssen Agreement — Overview In February 2019, the Company entered into a research collaboration and option agreement with Janssen Pharmaceuticals, Inc. (“Janssen agreement”), a subsidiary of Johnson & Johnson, to discover and develop novel integrin therapeutics for patients with conditions not adequately addressed by current therapies. The Janssen agreement focuses on three integrin targets, each target the subject of a research program, with a limited ability to substitute integrin targets for others, not explored by the Company, if research results are not favorable. Under the terms of the agreement, Janssen paid the Company an upfront fee of $10.0 million for the first two research programs and will pay the Company an additional $5.0 million fee upon commencement of the third research program. In addition, Janssen will reimburse the Company for all internal and external costs and expenses incurred during the term of agreement at agreed‑upon contractual rates. The Company invoices Janssen on a quarterly basis and payments are due within 60 days. Upon completing IND‑enabling studies, on a research program‑by‑research program basis, Janssen, in exchange for one-time fee of $6.0 million per program, may exercise an exclusive option to obtain an exclusive license with respect to the target that is the subject of the research program, including all licensed compounds that are the subject of the applicable research program. Upon exercise of an option, Janssen will be responsible for global clinical development and commercialization of each licensed compound. Pursuant to the terms of the agreement, the Company is eligible to receive additional research and development milestone payments totaling $142.0 million per research program and net sales milestones payments totaling $90.0 million per research program. Research and development milestones are triggered upon the initiation of certain development activities and various phases of clinical trials. The net sales milestones are achieved by reaching the agreed upon volume of sales in certain territories. In addition, the Company is entitled to royalty payments in low‑to‑mid single digit percentage of sales in a calendar year. Janssen Agreement — Accounting Analysis The Company has concluded that the performance obligations in the agreement include the research services for the three research programs and three options to license the outcomes of those research programs, which were determined to provide Janssen with material rights. All other performance obligations were determined to be immaterial in the context of the contract. The Company estimated the standalone selling price of each research program based on internal and external costs to perform the research plus a reasonable profit margin. The total estimated cost of the research and development services reflect the nature of the services to be performed and the Company’s best estimate of the length of time required to perform the services. The Company estimated the standalone selling price of each material right by determining the discount provided to the estimated standalone selling price of comparable options and applying appropriate likelihood of exercise, which includes the appropriate probability of successfully completing the research efforts. Based on the standalone selling prices determined, the company allocates the total transaction price among the programs and material rights. The Company recognizes revenue as research services are provided based on the costs incurred to date, as such costs have direct relationship between the Company’s effort and the progress made towards satisfying its performance obligations to Janssen. Transaction price allocated to the material rights was deferred and will be recognized in revenue when Janssen exercises the options or the option period expires. Changes in estimates of total internal and external costs expected to be incurred are recognized in the period of change as a cumulative catch‑up adjustment. There have been no material changes to the Company’s estimates to date. The Company determined that the transaction price included: the non‑refundable up‑front payment of $10.0 million for the first two programs, $5.0 million non‑refundable up‑front payment for the third program to be received at a later point, and the estimated reimbursement payments at agreed upon contractual rates to be received from Janssen for the Company’s on‑going research services. The option exercise payments were not included in the transaction price. Exercise of any of the options will be accounted for as a continuation of the current contract if and when Janssen delivers the written exercise notice. The milestone payments were fully constrained, as a result of the uncertainty regarding whether Janssen would exercise any of the options and whether any of the associated milestones would be achieved. The Company also considered the existence of any significant financing component within the Janssen Agreement given its upfront payment structure. Based upon this assessment, the Company concluded that the up‑front payment was provided for valid business reasons and not for the purpose of providing financing. Accordingly, the Company has concluded that the upfront payment structure of the Janssen Agreement does not result in the existence of a significant financing component. During the year ended December 31, 2019, the Company recorded the $10.0 million upfront payment as deferred revenue, incurred $4.5 million in research and development costs and recognized revenue of $6.2 million, inclusive of $1.4 million of upfront payment received, related to research services performed. As of December 31, 2019 the Company had $3.5 million due from Janssen recorded in accounts receivable. As of December 31, 2019, $8.6 million of deferred revenue is classified as either current or net of current portion in the accompanying consolidated balance sheets based on the period over which the revenue is expected to be recognized. This deferred revenue balance represents the portion of the upfront payment received allocated to the performance obligations that are partially unsatisfied as of December 31, 2019. The Company expects to recognize revenue related to these performance obligations through 2024. |
Net Loss per Unit and Share
Net Loss per Unit and Share | 12 Months Ended |
Dec. 31, 2019 | |
Net Loss per Unit and Share | |
Net Loss per Unit and Share | 13. Net Loss per Unit and Share Basic and diluted net loss per share is calculated as follows (in thousands, except share and per share data) for the year ended December 31, 2019 and 2018: Year Ended Year Ended December 31, 2019 December 31, 2018 Net loss $ (43,328) $ (23,831) Weighted average common shares outstanding, basic and diluted 16,101,928 1,069,762 Net loss per share, basic and diluted $ (2.69) $ (22.28) Following the Reorganization, the Company calculates net loss per share based on its outstanding shares of common stock. The following table sets forth the outstanding common stock equivalents, presented based on amounts outstanding at each period end, that have been excluded from the calculation of diluted net loss per share for the periods indicated because their inclusion would have been anti‑dilutive (in common stock equivalent shares, as applicable): Year Ended December 31, 2019 2018 Convertible preferred stock — 21,010,407 Restricted common stock 379,770 753,053 Warrant — 6,825 Stock options 2,987,403 1,786,551 3,367,173 23,556,836 In addition to the securities listed in the table above, in June 2019, the Company adopted the ESPP (Note 8) and initially reserved 300,000 shares of common stock for sale under the ESPP, which, if issued, would be anti-dilutive if included in calculation of diluted net loss per share. |
Employee Benefit Plan
Employee Benefit Plan | 12 Months Ended |
Dec. 31, 2019 | |
Employee Benefit Plan | |
Employee Benefit Plan | 14. Employee Benefit Plan In 2016, the Company adopted a qualified retirement plan, the Morphic Therapeutic, Inc. 401(k) Plan (the “Plan”) to provide retirement income for eligible employees through employee contributions and employer matching contributions. The Company matches 50% up to the first 6% contributed by a participant. Contributions totaled $224,000 and $182,000 for the years ended December 31, 2019 and 2018, respectively. |
Quarterly Financial Information
Quarterly Financial Information | 12 Months Ended |
Dec. 31, 2019 | |
Quarterly Financial Information | |
Quarterly Financial Information | 15. Quarterly Financial Information (unaudited) The following tables summarize the results of operations and earnings per share and per unit for the interim periods with the years ended December 31, 2019 and 2018: Three Months Ended March 31, June 30, September 30, December 31, 2019 2019 2019 2019 (in thousands, except per share data) (unaudited) Revenue $ 6,068 $ 5,567 $ 5,675 $ (333)* Operating expenses 12,202 15,984 15,533 20,246 Loss from operations (6,134) (10,417) (9,858) (20,579) Other (expense) income, net 1,063 1,119 1,298 1,092 Provision for income taxes (129) (135) (304) (344) Net loss $ (5,200) $ (9,433) $ (8,864) $ (19,831) Net loss per share - basic and diluted $ (2.77) $ (4.73) $ (0.30) $ (0.66)* * Revisions to estimated costs under the AbbVie arrangement during Q4 2019, which principally related to FDA feedback provided in November 2019 on MORF-720, resulted in a $6 million reduction to revenue previously recognized and corresponding increase to net loss by $6 million or approximately $0.37 per share during the three months-ended December 31, 2019. . Three Months Ended March 31, June 30, September 30, December 31, 2018 2018 2018 2018 (in thousands, except per share and per unit data) (unaudited) Revenue $ — $ — $ — $ 3,358 Operating expenses 5,219 6,265 7,172 9,330 Loss from operations (5,219) (6,265) (7,172) (5,972) Other (expense) income, net 39 34 95 629 Provision for income taxes — — — Net loss $ (5,180) $ (6,231) $ (7,077) $ (5,343) Net loss per share - basic and diluted $ (4.27) Net loss per unit - basic and diluted $ (5.12) $ (6.16) $ (7.00) |
Summary of Significant Accoun_2
Summary of Significant Accounting Policies (Policies) | 12 Months Ended |
Dec. 31, 2019 | |
Summary of Significant Accounting Policies | |
Use of Estimates and Judgements | Use of Estimates and Judgments The preparation of financial statements in accordance with GAAP requires management to make estimates and judgments that may affect the reported amounts of assets and liabilities and related disclosures of contingent assets and liabilities at the date of the financial statements and the related reporting of revenues and expenses during the reporting period. Significant estimates of accounting reflected in these consolidated financial statements include, but are not limited to, estimates related to revenue recognition, accrued research and development expenses, the valuation of equity‑based compensation, and income taxes. Actual results could differ from those estimates. |
Concentration of Credit Risk and Off‑Balance Sheet Risk | Concentration of Credit Risk and Off‑Balance Sheet Risk Financial instruments that potentially expose the Company to concentrations of credit risk consist primarily of cash and cash equivalents, marketable securities, and accounts receivable under Janssen agreement. The Company has all cash and cash equivalents at one accredited financial institution, in amounts that exceed federally insured limits. The Company does not believe that it is subject to unusual credit risk beyond the normal credit risk associated with commercial banking relationships. The primary objectives for the Company’s investment portfolio are the preservation of capital and maintenance of liquidity. In 2019, the Company adopted its investment policy which allows funds to be held outside bank accounts, but to be invested only in readily marketable fixed income instruments with readily ascertainable market values, denominated and payable in U.S. dollars including obligations of the U.S. government and its agencies and money market funds registered according to Rule 2a‑7 of the Investment Company Act of 1940. Investments in the money market fund shall be consistent with approved instruments and assets under management must be at least $1.0 billion. Accounts receivable generally represent amounts due from Janssen. The Company monitors economic conditions to identify facts or circumstances that may indicate that any of its accounts receivable are at risk of collection. The Company has no off‑balance sheet risk, such as foreign exchange contracts, option contracts, or other foreign‑hedging arrangements. |
Cash and Cash Equivalents and Restricted Cash | Cash and Cash Equivalents and Restricted Cash The Company considers highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. At December 31, 2019 and 2018, cash and cash equivalents include bank demand deposits and money market funds that invest primarily in U.S. government‑backed securities and treasuries. At December 31, 2019, cash equivalents also included one U.S. Treasury security with fair value of approximately $10.0 million. Cash equivalents are stated at cost, which approximates fair value. Restricted cash consists of a letter of credit in the amount of $275,000 issued to the landlord of the Company’s facility lease. The terms of the letter of credit extend beyond one year. The following table reconciles cash and cash equivalents and restricted cash per the balance sheet to the statements of cash flows: As of December 31, 2019 2018 Cash and cash equivalents $ 101,559 $ 185,901 Restricted cash 275 275 Total cash, cash equivalents, and restricted cash $ 101,834 $ 186,176 |
Marketable securities | Marketable securities The Company invests funds in the United States Treasury securities; those securities are included in the current assets based on their contractual maturities, classified as available-for-sale, and carried at fair value. Changes in fair value of marketable securities are recorded in other comprehensive income (loss) as net unrealized gains (losses) on marketable securities. The Company recognized $44,000 and $0 in unrealized gains for the years ended December 31, 2019 and 2018, respectively. |
Interest income on investments | Interest income on investments The Company recognizes interest income from investments in money market funds and available-for-sale securities, including amortization of premium/accretion of discount, on an accrual basis. For the years ended December 31, 2019 and 2018 , the Company recognized $4.7 million and $0.9 million in interest income, respectively. Interest income is included with other income on the consolidated statements of operations and comprehensive loss. |
Property and Equipment, net | Property and Equipment, net Property and equipment are recorded at cost. Expenditures for major renewals or betterments that extend the useful lives of property and equipment are capitalized; expenditures for maintenance and repairs are charged to expense as incurred. Depreciation is calculated on a straight‑line basis over the estimated useful lives of the related asset. Property and equipment are depreciated as follows: Estimated Useful Life (in Years) Laboratory equipment 5 Computers and software 3 - 5 Leasehold improvements Shorter of the useful life or the remaining term of the lease |
Impairment of Long‑Lived Assets | Impairment of Long‑Lived Assets Long‑lived assets consist of property and equipment. Long‑lived assets to be held and used are tested for recoverability whenever events or changes in business circumstances indicate that the carrying amount of the assets may not be fully recoverable. Factors that the Company considers in deciding when to perform an impairment review include significant underperformance of the business in relation to expectations, significant negative industry or economic trends, and significant changes or planned changes in the use of the assets. If an impairment review is performed to evaluate a long‑lived asset for recoverability, the Company compares forecasts of undiscounted cash flows expected to result from the use and eventual disposition of the long‑lived asset to its carrying value. An impairment loss would be recognized when estimated undiscounted future cash flows expected to result from the use of an asset are less than its carrying amount. The impairment loss would be based on the excess of the carrying value of the impaired asset over its fair value, determined based on discounted cash flows. To date, the Company has not recorded any impairment losses on long‑lived assets. |
Fair Value Measurements | Fair Value Measurements ASC Topic 820, Fair Value Measurement (“ASC 820”), establishes a fair value hierarchy for instruments measured at fair value that distinguishes between assumptions based on market data (observable inputs) and the Company’s own assumptions (unobservable inputs). Observable inputs are inputs that market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the inputs that market participants would use in pricing the asset or liability and are developed based on the best information available in the circumstances. ASC 820 identifies fair value as the exchange price, or exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As a basis for considering market participant assumptions in fair value measurements, ASC 820 establishes a three‑tier fair value hierarchy that distinguishes between the following: Level 1 — Quoted market prices in active markets for identical assets or liabilities. Level 2 — Inputs other than Level 1 inputs that are either directly or indirectly observable, such as quoted market prices, interest rates and yield curves. Level 3 — Unobservable inputs developed using estimates of assumptions developed by the Company, which reflect those that a market participant would use. To the extent the valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair values requires more judgment. Accordingly, the degree of judgment exercised by the Company in determining fair value is greatest for instruments categorized as Level 3. A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. The Company believes that the carrying amounts of the Company’s consolidated financial instruments, including prepaid expenses and other current assets, accounts receivable, accounts payable, and accrued expenses approximate fair value due to the short-term nature of those instruments. |
Segment Information | Segment Information Operating segments are defined as components of an entity about which separate discrete information is available for evaluation by the chief operating decision maker, or decision‑making group, in deciding how to allocate resources and in assessing performance. The Company’s Chief Executive Officer is its chief operating decision‑maker and views operations and manages the Company’s business in one operating segment operating exclusively in the United States. |
Revenue Recognition | Revenue Recognition Effective January 1, 2018, the Company adopted the provisions of ASC 606 using the full retrospective transition method. To date all revenue has been generated from the Company’s agreements with AbbVie and Janssen, executed in October 2018 and February 2019, respectively. As a result, there was no impact of the adoption of ASC 606 to the Company’s financial statements. Please refer to Note 12 below for details of ASC 606 application to the Company’s agreements with AbbVie and Janssen. The Company first evaluates collaboration arrangements to determine whether the arrangement (or part of the arrangement) represents a collaborative arrangement pursuant to ASC Topic 808, Collaborative Arrangements , based on the risks and rewards and activities of the parties pursuant to the contractual arrangement. The Company accounts for any collaborative arrangement or elements within the contract that are deemed to be a collaborative arrangement, and not a customer relationship, in accordance with ASC 808. Through December 31, 2019, the Company entered into two agreements – with AbbVie and Janssen – that have been accounted for pursuant to ASC 606. Under ASC 606, an entity recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services. To determine the appropriate amount of revenue to be recognized for arrangements determined to be within the scope of ASC 606, the Company performs the following five steps: (i) identification of the contract(s) with the customer, (ii) identification of the promised goods or services in the contract and determination of whether the promised goods or services are performance obligations, (iii) measurement of the transaction price, (iv) allocation of the transaction price to the performance obligations, and (v) recognition of revenue when (or as) the Company satisfies each performance obligation. The Company only applies the five‑step model to contracts when it is probable that the entity will collect consideration it is entitled to in exchange for the goods or services it transfers to the customer. The Company accounts for a contract with a customer that is within the scope of ASC 606 when all of the following criteria are met: (i) the arrangement has been approved by the parties and the parties are committed to perform their respective obligations, (ii) each party’s rights regarding the goods or services to be transferred can be identified, (iii) the payment terms for the goods or services to be transferred can be identified, (iv) the arrangement has commercial substance and (v) collection of substantially all of the consideration to which the Company will be entitled in exchange for the goods or services that will be transferred to the customer is probable. Performance obligations are promised goods or services in a contract to transfer a distinct good or service to the customer. Promised goods or services are considered distinct when: (i) the customer can benefit from the good or service on its own or together with other readily available resources and (ii) the promised good or service is separately identifiable from other promises in the contract. Options to purchase additional goods or services are considered to be marketing offers and are to be accounted for as separate contracts when the customer elects such options, unless the Company determines the option provides a material right which would not be provided without entering into the contract. If, however, an option is determined to provide a material right that would not be provided without entering into a contract, a portion of the transaction price is allocated to such option. The Company estimates the transaction price based on the amount of consideration the Company expects to receive for transferring the promised goods or services in the contract. The consideration may include both fixed consideration and variable consideration. At the inception of each arrangement that includes variable consideration, the Company evaluates the amount of the potential payments and the likelihood that the payments will be received. The Company utilizes either the most likely amount method or expected value method to estimate the transaction price based on which method better predicts the amount of consideration expected to be received. If it is probable that a significant revenue reversal would not occur, the variable consideration is included in the transaction price. The Company also evaluates whether instances in which the timing of payments by customers do not match the timing of performance obligation satisfaction contain an element of financing and adjusts the transaction price for the effect of the financing component, if any. The Company’s transactions with customers may include development and regulatory milestone payments. The Company evaluates whether the milestones are considered probable of being reached and estimates the amount to be included in the transaction price using the most likely amount method. If it is probable that a significant revenue reversal would not occur, the associated milestone value is included in the transaction price. Milestone payments that are not within the Company’s control or the customer’s control, such as regulatory approvals, are not considered probable of being achieved until those approvals are received. At the end of each reporting period, the Company re‑evaluates the probability of achievement of such milestones and any related constraint, and if necessary, adjusts the estimate of the overall transaction price. Any such adjustments are recorded on a cumulative catch‑up basis, which would affect collaboration revenue and net income (loss) in the period of adjustment. For sales‑based royalties, including milestone payments based on the level of sales, the Company determines whether the sole or predominant item to which the royalties relate is a license. When the license is the sole or predominant item to which the sales‑based royalty relates, the Company recognizes revenue at the later of: (i) when the related sales occur, or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied). The Company allocates the transaction price based on the estimated standalone selling price of the identified performance obligations. The Company must develop assumptions that require judgment to determine the standalone selling price for each performance obligation identified in the contract. The Company utilizes key assumptions to determine the standalone selling price, which may include other comparable transactions, pricing considered in negotiating the transaction, and the estimated costs. Certain variable consideration is allocated specifically to one or more performance obligations in a contract when the terms of the variable consideration relate to the satisfaction of the performance obligation and the resulting amounts allocated to each performance obligation are consistent with the amounts the Company would expect to receive for each performance obligation. We recognize as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) each performance obligation is satisfied, either at a point in time or over time. In particular, for the Company’s collaborations with AbbVie and Janssen, revenue attributable to research services is recognized as those services are provided, based on the costs incurred to date. The Company receives payments from customers based on billing schedules established in each contract. Up‑front payments and fees are recorded as deferred revenue upon receipt or when due until the Company performs its obligations under these arrangements. Amounts are recorded as accounts receivable when the Company’s right to consideration is unconditional. |
Research and Development Expenses | Research and Development Expenses Research and development expenses are expensed as incurred and consist of costs incurred in performing research and development activities, including compensation related expenses for research and development personnel, preclinical and clinical activities including cost of supply, overhead expenses including facilities expenses, materials and supplies, amounts paid to consultants and outside service providers, and depreciation of equipment. Upfront license payments related to acquired technologies which have not yet reached technological feasibility and have no alternative future use are also included in research and development expense. |
Research Contract Costs and Accruals | Research Contract Costs and Accruals The Company has entered into various research service arrangements under which vendors perform various services. The Company records accrued expenses for estimated costs incurred under the arrangements. When evaluating the adequacy of the accrued expenses, the Company analyzed the progress of the studies, trials or other services performed, including invoices received and contracted costs. Judgments and estimates are made in determining the accrued expense balances at the end of each reporting period. |
Equity‑Based Compensation | Equity‑Based Compensation The Company accounts for equity awards, including restricted common stock, incentive units, and common stock options granted to employees and non-employees as equity award compensation in accordance with ASC Topic 718, Compensation — Stock Compensation (“ASC 718”). ASC 718 requires all equity‑based payments to employees, which includes grants of employee equity awards, to be recognized as expense in the statements of operations based on their grant date fair values. The fair value of each incentive unit and stock option award is estimated using the Black‑Scholes option‑pricing model, using inputs which include the fair value of the Company’s common stock and certain subjective assumptions, the expected stock price volatility, the expected term of the award, the risk‑free rate, and expected dividends. Expected volatility is calculated based on reported volatility data for a representative group of publicly traded companies for which historical information was available. The historical volatility is generally calculated based on a period of time commensurate with the expected term assumptions. The risk‑free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant commensurate with the expected term assumption. The Company uses the simplified method, under which the expected term is presumed to be the midpoint between the vesting date and the end of the contractual term. The Company utilizes this method due to lack of historical exercise data and the plain‑vanilla nature of its stock‑based awards. The expected dividend yield is assumed to be zero as the Company has never paid dividends and has no current plans to pay any dividends on common stock. Compensation expense related to equity awards to employees and non-employees that are subject to graded vesting is recognized on a straight‑line basis, based on the grant date fair value, over the requisite service period of the award, which is generally the vesting term. All awards granted to employees and the Board members to date contain only service vesting conditions. The Company recognizes forfeitures when they occur. All awards granted to date were equity‑classified as of December 31, 2019 and 2018. The Company classifies equity‑based compensation expense in its consolidated statements of operations in the same manner in which the award recipient’s salary and related costs are classified or in which the award recipient’s service payments are classified. |
Comprehensive Loss | Comprehensive Loss Comprehensive loss is the change in equity of a business enterprise during a period from transactions and other events and circumstances from non‑owner sources. Comprehensive loss includes net loss and the change in accumulated other comprehensive loss for the period. For the year ended December 31, 2019, comprehensive loss included $44,000 in unrealized holding gains, net on marketable securities; for the year ended December 31, 2018, comprehensive loss equaled net loss. |
Net Loss per Share | Net Loss per Share The Company applies the two‑class method to compute basic and diluted net loss per share because it has issued instruments that meet the definition of participating securities. The two‑class method determines net income (loss) per share for each class of common and participating securities according to dividends declared or accumulated and participation rights in undistributed earnings. The two‑class method requires income (losses) available to common unit holders and common stockholders for the period to be allocated between common and participating securities based upon their respective rights to share in the earnings as if all income (losses) for the period had been distributed. During periods of loss, there is no allocation required under the two‑class method since the participating securities do not have a contractual obligation to fund the losses of the Company. The Company calculates basic net loss per share by dividing net loss by the weighted average number of common shares outstanding, excluding unvested restricted common stock. The Company calculates diluted net loss per share by dividing net loss by the weighted average number of common shares outstanding, as applicable, after giving consideration to the dilutive effect of convertible preferred stock, restricted common stock, warrants, and stock options that are outstanding during the period. The Company has generated a net loss in all periods presented, so the basic and diluted net loss share are the same, as the inclusion of the potentially dilutive securities would be anti‑dilutive. |
Income Taxes | Income Taxes Since inception, the Company recorded income taxes in accordance with FASB Accounting Standards Codification Topic 740, Income Taxes (“ASC 740”), which provides for deferred taxes using an asset and liability approach. Under this method, deferred tax assets and liabilities are determined based on temporary differences between the financial statement basis and tax basis of assets and liabilities and net operating loss and credit carryforwards using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Valuation allowances are established when it is more likely than not that some portion of the deferred tax assets will not be realized. The Company accounts for uncertainty in income taxes recognized in the financial statements by applying a two‑step process to determine the amount of tax benefit to be recognized. First, the tax position must be evaluated to determine the likelihood that it will be sustained upon external examination by the taxing authorities. If the tax position is deemed more‑likely‑than‑not to be sustained, the tax position is then assessed to determine the amount of benefit to recognize in the financial statements. The amount of the benefit that may be recognized is the largest amount that has a greater than 50% likelihood of being realized upon ultimate settlement. At December 31, 2019 and 2018, the Company had not identified any significant uncertain tax positions. Prior to the Reorganization, Morphic Holding, LLC elected to be treated under the partnership provisions of the Internal Revenue Service code. Accordingly, all income and deductions of Morphic Therapeutic, LLC were recorded on the members’ individual tax returns and no taxes were recorded by Morphic Holding, LLC. The wholly‑owned subsidiaries of Morphic Holding, LLC — Morphic Therapeutic, Inc., Lazuli, Inc., Tourmaline, Inc., and Phyllite, Inc. — were taxed as C‑corporations for federal income tax purposes and filed separate corporate income tax returns from the LLC entity. As part of the Reorganization, the parent Company made the election to be treated as C‑corporation for federal and state income tax purposes and subsequently legally converted the parent Company to a corporation. Following the Reorganization, the Company has elected to file consolidated tax returns. The Company is open to examination by the Internal Revenue Service for the tax years ended December 31, 2017 to December 31, 2019. The Company is currently not under examination by the Internal Revenue Service or any other jurisdictions for any tax years. The Company has not recorded any interest or penalties on any unrecognized tax benefits since its inception. |
Subsequent Events | Subsequent Events The Company considers events or transactions that occur after the balance sheet date but prior to the issuance of the consolidated financial statements for potential recognition or disclosure in the consolidated financial statements. Subsequent events have been evaluated through the date these consolidated financial statements were issued for potential recognition or disclosure in the consolidated financial statements. |
Recently Adopted Accounting Pronouncements not yet Adopted | Recently Issued Accounting Pronouncements not yet Adopted In December 2019, the FASB issued ASU No. 2019-12, Simplifying the Accounting for Income Taxes (“ASU 2019-12”), which removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. The guidance will be effective for the Company for the fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022. Provisions of ASU 2019-12 must be adopted using either full retrospective, modified retrospective, or prospective method, depending on the provision adopted, as specified within the guidance. Early adoption is permitted. The Company is evaluating the impact of the adoption of ASU 2019-12 on its consolidated financial statements but does not expect such adoption to have a material impact. In November 2019, the FASB issued ASU 2019-10, Financial Instruments—Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842): Effective Dates (“ASU 2019-10”), which finalizes effective date delays for private companies, not-for-profit organizations, and certain smaller reporting companies as follows: · January 1, 2023 as the effective date for adoption of the Topic 326 for annual and interim reporting periods; · January 1, 2021 and January 1, 2022 as the effective dates for adoption of the Topic 815 amendments for annual and interim periods, respectively; and · January 1, 2021 and January 1, 2022 as the effective dates for adoption of the Topic 842 for annual and interim periods, respectively. In June 2016, the FASB issued ASU 2016-13, Financial Instruments Credit Losses (Topic 326) ("ASU 2016-13"), which requires consideration of a broader range of reasonable and supportable information in developing credit loss estimates. In April 2019, the FASB issued ASU 2019-04, Financial Instruments-Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments (“ASU 2019-04”). Certain provisions of ASU 2019-04 amend the guidance of ASU 2016-13, are applicable to the Company’s investments portfolio, and allow the Company to make certain accounting policy elections regarding establishing allowance for credit losses for the accrued interest receivable and the corresponding disclosures. In November 2019, the FASB issued ASU No. 2019-11, Codification Improvements to Topic 326, Financial Instruments – Credit Losses (“ASU 2019-11”), which clarifies certain areas of the guidance to ensure all companies and organizations can make a smoother transition to the standard. Following the issuance of ASU 2019-10 described above, the guidance is effective for the Company for the fiscal years beginning after December 15, 2022, including interim periods within those fiscal years, and will be adopted using the modified retrospective approach. The Company is currently evaluating the impact of ASU 2019-11 and the related ASU 2019-04 and ASU 2016-13 on the consolidated financial statements, including the impact of the available accounting policy elections. In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), with guidance regarding the accounting for and disclosure of leases. In general, for lease arrangements exceeding a twelve-month term, these arrangements must now be recognized as assets and liabilities on the balance sheet of the lessee. Under ASU 2016-02, a right-of-use asset and lease obligation will be recorded for all leases, whether operating or financing, while the income statement will reflect lease expense for operating leases and amortization/interest expense for financing leases. The balance sheet amount recorded for existing leases at the date of adoption of ASU 2016-02 must be calculated using the applicable incremental borrowing rate at the date of adoption. This update also requires lessees and lessors to disclose key information about their leasing transactions. In July 2018, the FASB issued ASU 2018-11, Leases - Targeted Improvements , intended to ease the implementation of the new lease standard for financial statement preparers by, among other things, allowing for an additional transition method. In lieu of presenting transition requirements to comparative periods, as previously required, an entity may now elect to show a cumulative effect adjustment on the date of adoption without the requirement to recast prior period financial statements or disclosures presented in accordance with ASU 2016-02. The Company currently expects to elect the available package of practical expedients which allows the Company to not reassess previous accounting conclusions around whether arrangements are or contain leases, the classification of leases, and the treatment of initial direct costs. The Company also expects it will make an accounting policy election to keep leases with an initial term of 12 months or less off of the balance sheet. The Company is in the process of assessing the impact of the standard and while not complete, it expects that it will record a material asset and liability related to its current operating lease; however, the full impact of adoption to the Company’s financial statements is yet to be determined. Effective with the issuance of ASU 2019-10, described above, this standard is effective for the Company for the annual periods beginning after December 15, 2021, which will be the initial date of application, and interim periods within fiscal years beginning after December 15, 2022. The Company has considered other recent accounting pronouncements and concluded that they are either not applicable to the business, or that the effect is not expected to be material to the consolidated financial statements as a result of future adoption . |
Summary of Significant Accoun_3
Summary of Significant Accounting Policies (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Summary of Significant Accounting Policies | |
Schedule of reconciliation of cash and cash equivalents and restricted cash | As of December 31, 2019 2018 Cash and cash equivalents $ 101,559 $ 185,901 Restricted cash 275 275 Total cash, cash equivalents, and restricted cash $ 101,834 $ 186,176 |
Schedule of estimated useful lives of property and equipment | Estimated Useful Life (in Years) Laboratory equipment 5 Computers and software 3 - 5 Leasehold improvements Shorter of the useful life or the remaining term of the lease |
Fair Value of Financial Asset_2
Fair Value of Financial Assets and Liabilities (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Fair Value of Financial Assets and Liabilities | |
Summary of the assets and liabilities measured at fair value on a recurring basis | The following tables summarize the assets and liabilities measured at fair value on a recurring basis at December 31, 2019 and 2018 (in thousands): Fair Value Measurements at December 31, 2019 Total Level 1 Level 2 Level 3 Assets: Money market funds, included in cash and cash equivalents $ 91,332 $ 91,332 $ — $ — U.S. Treasury obligations, included in cash and cash equivalents 9,995 — 9,995 — U.S. Treasury obligations 135,457 — 135,457 — Total assets $ 236,784 $ 91,332 $ 145,452 $ — Fair Value Measurements at December 31, 2018 Total Level 1 Level 2 Level 3 Assets: Money market funds, included in cash and cash equivalents $ 185,676 $ 185,676 $ — $ — Total assets $ 185,676 $ 185,676 $ — $ — |
Marketable securities (Tables)
Marketable securities (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Marketable securities. | |
Schedule of investments in marketable securities classified as available for sale | As of December 31, 2019, the Company had the following investments in marketable securities classified as available for sale (in thousands): Gross Gross Aggregate Amortized unrealized unrealized estimated Maturity cost holding gains holding losses fair value U.S. Treasury securities less than 1 year $ 135,389 $ 70 $ (2) $ 135,457 |
Property and Equipment, Net (Ta
Property and Equipment, Net (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Property and Equipment, Net. | |
Schedule of Property and equipment | At December 31, 2019, property and equipment, net consists of the following (in thousands): As of December 31, 2019 2018 Laboratory equipment $ 4,194 $ 2,415 Computers and software 280 163 Leasehold improvements 535 475 Construction in progress 465 — 5,474 3,053 Less: Accumulated depreciation and amortization (2,028) (1,210) $ 3,446 $ 1,843 |
Accrued Expenses (Tables)
Accrued Expenses (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Accrued Expenses | |
Schedule of accrued expenses | At December 31, 2019 and 2018 accrued expenses consist of the following (in thousands): As of December 31, 2019 2018 Payroll and related expenses 3,159 2,012 Research and development activities 2,465 715 Other expenses 1,015 512 $ 6,639 $ 3,239 |
Stockholder's Equity (Tables)
Stockholder's Equity (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Stockholder's Equity | |
Schedule of shares reserved for future issuance | As of December 31, 2019 Common shares reserved for exercise of outstanding stock options under the 2018 Plan 2,028,233 Common shares reserved for issuance under the 2019 ESPP 300,000 Common shares reserved for exercise of outstanding stock options under the 2019 Plan 959,170 Common shares reserved for future issuance under the 2019 Plan 2,050,079 5,337,482 |
Equity Based Compensation (Tabl
Equity Based Compensation (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Equity Based Compensation | |
Summary of incentive unit activity | Weighted Weighted Average Grant Date Average Threshold Number of Units Fair Value per Unit Price per Unit Outstanding at December 31, 2017 1,532,139 $ 1.34 $ 1.11 Granted 60,708 2.39 1.92 Forfeited (18,098) 1.87 1.57 Exchanged for common stock and restricted common stock pursuant to the Reorganization (1,574,749) 1.40 1.17 Outstanding at December 31, 2018 — — — |
Summary of vested incentive units | Number of Units Vested at December 31, 2017 439,332 Vested 350,719 Cancelled/Forfeited — Vested as of the Reorganization 790,051 |
Summary of weighted average assumptions were used in determining the fair value of incentive units granted to both employees and non employees | Year ended December 31, 2018 Risk‑free interest rate 2.79% Expected dividend yield — Expected term (years to liquidity) 5.98 Expected volatility 76.63% |
Summary of equity based compensation expense related to all equity based awards for employees and non employees | The Company recorded equity‑based compensation expense related to all equity‑based awards for employees and non‑employees, which was allocated as follows in the consolidated statements of operations (in thousands): Year Ended December 31, 2019 2018 Research and development expense $ 2,241 $ 520 General and administrative expense 1,291 477 $ 3,532 $ 997 |
2019 Stock Incentive Plan | |
Equity Based Compensation | |
Summary of common stock and restricted common stock activity | Weighted Average Fair Number Value per Share of Shares at Issuance Unvested restricted common stock as of December 31, 2018 753,053 $ 4.32 Granted — — Vested (354,660) 4.32 Forfeited (18,623) 4.32 Unvested restricted common stock as of December 31, 2019 379,770 $ 4.32 |
Summary of Company’s stock option activity | Weighted Weighted Average Number of Average Remaining Aggregate Shares Exercise Price Contractual Term Intrinsic Value (in years) (in thousands) Outstanding as of December 31, 2018 1,786,551 $ 4.32 9.96 $ — Granted 1,220,241 14.98 — — Exercised (6,495) 4.32 — 89 Forfeited (12,894) 4.32 — — Outstanding as of December 31, 2019 2,987,403 $ 8.67 9.22 $ 26,254 Options vested and expected to vest as of December 31, 2019 2,987,403 $ 8.67 9.22 $ 26,254 Options exercisable as of December 31, 2019 462,456 $ 4.49 8.96 $ 5,858 |
Summary of assumptions used in determining the fair value of the options granted | Year ended December 31, 2019 Risk‑free interest rate 1.9% Expected dividend yield - Expected term (in years) 6.01 Expected Volatility 75.45% |
2018 Stock Incentive Plan | |
Equity Based Compensation | |
Summary of common stock and restricted common stock activity | Weighted Average Fair Value per Share Number of Shares at Issuance Common stock and restricted common stock issued as part of the Reorganization 1,574,749 $ 4.32 Vested as of the Reorganization 790,051 4.32 Unvested restricted common stock as of the Reorganization 784,698 4.32 Granted — — Vested 31,645 4.32 Forfeited — — Unvested restricted common stock as of December 31, 2018 753,053 $ 4.32 |
Summary of Company’s stock option activity | Weighted Weighted Average Number of Average Remaining Aggregate Shares Exercise Price Contractual Term Intrinsic Value (in years) (in thousands) Outstanding as of December 31, 2017 — $ — — $ — Granted 1,786,551 4.32 9.96 — Exercised — — — — Forfeited — — — — Outstanding as of December 31, 2018 1,786,551 $ 4.32 9.96 $ — Options exercisable as of December 31, 2018 — $ — — $ — |
Summary of assumptions used in determining the fair value of the options granted | Year ended December 31, 2018 Risk‑free interest rate 2.75% Expected dividend yield - Expected term (in years) 6.03 Expected Volatility 75.33% |
Income Taxes (Tables)
Income Taxes (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Income Taxes | |
Schedule of components of the income tax expense | Year Ended December 31, 2019 2018 Current Federal $ 512 $ — State 410 — Total current tax provision 922 — Deferred Federal (6) — State (4) — Total deferred tax provision (10) — Total income tax provision $ 912 $ — |
Schedule of effective income tax rate differed from the amount computed by applying the federal statutory rate to the Company’s loss before income taxes | Year Ended December 31, 2019 2018 Tax effected at statutory rate 21.00 % 21.00 % State taxes 8.39 2.89 Stock compensation (1.09) (0.84) Non-deductible expenses 0.08 0.29 Federal research and development credits 5.09 1.89 Change in valuation allowance (35.64) (25.23) (2.17) % — % |
Schedule of deferred tax assets and liabilities | Deferred tax assets and liabilities consist of the following at December 31, 2019 and 2018 (in thousands): As of December 31, 2019 2018 Long‑term net deferred tax assets: Net operating loss carryforwards $ 1,170 $ 8,631 Deferred revenue 23,453 Research and development credit carryforwards 1,091 938 Intangible assets 4,246 4,670 Reserves and accruals 195 692 Stock-based compensation 353 11 Total long‑term deferred tax assets: 30,508 14,942 Valuation allowance (29,618) (14,710) Subtotal 890 232 Fixed assets (656) (232) Prepaid expense (234) Total net deferred tax assets $ — $ — |
Commitments and Contingencies (
Commitments and Contingencies (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Commitments and Contingencies | |
Summary of minimum annual rent payments under this lease | Minimum annual rent payments under this lease for the remaining term of the amended lease, excluding operating expenses and taxes, which are not fixed for future periods as of December 31, 2019, are as follows (in thousands): Total Minimum Year ending December 31, Lease Payments 2020 1,122 2021 1,175 2022 495 Total minimum lease payments $ 2,792 |
Net Loss per Unit and Share (Ta
Net Loss per Unit and Share (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Net Loss per Unit and Share | |
Schedule of Basic and diluted net loss per share | Basic and diluted net loss per share is calculated as follows (in thousands, except share and per share data) for the year ended December 31, 2019 and 2018: Year Ended Year Ended December 31, 2019 December 31, 2018 Net loss $ (43,328) $ (23,831) Weighted average common shares outstanding, basic and diluted 16,101,928 1,069,762 Net loss per share, basic and diluted $ (2.69) $ (22.28) |
Schedule of outstanding common stock equivalent shares | Year Ended December 31, 2019 2018 Convertible preferred stock — 21,010,407 Restricted common stock 379,770 753,053 Warrant — 6,825 Stock options 2,987,403 1,786,551 3,367,173 23,556,836 |
Quarterly Financial Informati_2
Quarterly Financial Information (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Quarterly Financial Information | |
Summary of the results of operations and earnings per share and per unit for the interim periods | The following tables summarize the results of operations and earnings per share and per unit for the interim periods with the years ended December 31, 2019 and 2018: Three Months Ended March 31, June 30, September 30, December 31, 2019 2019 2019 2019 (in thousands, except per share data) (unaudited) Revenue $ 6,068 $ 5,567 $ 5,675 $ (333)* Operating expenses 12,202 15,984 15,533 20,246 Loss from operations (6,134) (10,417) (9,858) (20,579) Other (expense) income, net 1,063 1,119 1,298 1,092 Provision for income taxes (129) (135) (304) (344) Net loss $ (5,200) $ (9,433) $ (8,864) $ (19,831) Net loss per share - basic and diluted $ (2.77) $ (4.73) $ (0.30) $ (0.66)* * Revisions to estimated costs under the AbbVie arrangement during Q4 2019, which principally related to FDA feedback provided in November 2019 on MORF-720, resulted in a $6 million reduction to revenue previously recognized and corresponding increase to net loss by $6 million or approximately $0.37 per share during the three months-ended December 31, 2019. . Three Months Ended March 31, June 30, September 30, December 31, 2018 2018 2018 2018 (in thousands, except per share and per unit data) (unaudited) Revenue $ — $ — $ — $ 3,358 Operating expenses 5,219 6,265 7,172 9,330 Loss from operations (5,219) (6,265) (7,172) (5,972) Other (expense) income, net 39 34 95 629 Provision for income taxes — — — Net loss $ (5,180) $ (6,231) $ (7,077) $ (5,343) Net loss per share - basic and diluted $ (4.27) Net loss per unit - basic and diluted $ (5.12) $ (6.16) $ (7.00) |
Nature of the Business and Ba_2
Nature of the Business and Basis of Presentation (Details) $ / shares in Units, $ in Millions | Jul. 01, 2019USD ($)$ / sharesshares | Jun. 10, 2019 | Dec. 05, 2018shares | Sep. 30, 2019shares | Dec. 31, 2019subsidiaryshares | Dec. 31, 2018shares |
Subsidiary or Equity Method Investee [Line Items] | ||||||
Number of wholly-owned subsidiaries merged in reorganization | subsidiary | 3 | |||||
Common stock issued (in shares) | 6,900,000 | |||||
Public offering price (in dollars per share) | $ / shares | $ 15 | |||||
Gross proceeds | $ | $ 103.5 | |||||
Net proceeds | $ | $ 93.3 | |||||
Reverse stock split | 5.8311 | |||||
Conversion of warrant to purchase shares of convertible preferred stock | 6,825 | 6,825 | ||||
Outstanding warrants | 6,825 | 6,825 | ||||
Series Preferred shares, shares outstanding | 0 | |||||
Common stock, authorized (in shares) | 400,000,000 | |||||
Series Preferred shares, shares authorized | 10,000,000 | |||||
Series Preferred shares, par value (in dollars per share) | $ / shares | $ 0.0001 | |||||
Common shares | ||||||
Subsidiary or Equity Method Investee [Line Items] | ||||||
Stock conversion ratio | 1 | |||||
Common stock issued (in shares) | 6,900,000 | |||||
Conversion of convertible preferred stock into common stock (in shares) | 21,010,407 | |||||
Common stock, authorized (in shares) | 400,000,000 | 151,000,000 | ||||
Underwriters' exercise | ||||||
Subsidiary or Equity Method Investee [Line Items] | ||||||
Common stock issued (in shares) | 900,000 |
Summary of Significant Accoun_4
Summary of Significant Accounting Policies (Details) - USD ($) | 12 Months Ended | |||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Cash and Cash Equivalents and Restricted Cash | ||||
Letter of credit | $ 275,000 | |||
Term of letter of credit (in years) | 1 year | |||
Cash and cash equivalents | $ 101,559,000 | $ 185,901,000 | ||
Restricted cash | 275,000 | 275,000 | ||
Cash and Cash Equivalents and Restricted Cash | 101,834,000 | $ 186,176,000 | $ 186,176,000 | $ 21,025,000 |
U.S. Treasury securities | ||||
Cash and Cash Equivalents and Restricted Cash | ||||
Cash equivalents | 10,000,000 | |||
Minimum | ||||
Concentration of Credit Risk and Off Balance Sheet Risk | ||||
Assets under management | $ 1,000,000,000 |
Summary of Significant Accoun_5
Summary of Significant Accounting Policies - Marketable securities and interest income (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Marketable securities | ||
Marketable securities gains (losses) | $ 44,000 | $ 0 |
Interest income on investments | ||
Interest income | $ 4,700,000 | $ 900,000 |
Summary of Significant Accoun_6
Summary of Significant Accounting Policies - Property and equipment (Details) | 12 Months Ended |
Dec. 31, 2019 | |
Laboratory equipment | |
Property and Equipment, net | |
Estimated useful lives | 5 years |
Computers and software | Minimum | |
Property and Equipment, net | |
Estimated useful lives | 3 years |
Computers and software | Maximum | |
Property and Equipment, net | |
Estimated useful lives | 5 years |
Summary of Significant Accoun_7
Summary of Significant Accounting Policies - Segment Information and Revenue Recognition (Details) | 12 Months Ended |
Dec. 31, 2019segmentagreement | |
Segment Information | |
Number of operating segments | segment | 1 |
Revenue Recognition | |
Number of agreements | agreement | 2 |
Fair Value of Financial Asset_3
Fair Value of Financial Assets and Liabilities (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Assets: | ||
Aggregate estimated fair value | $ 135,457,000 | |
Level 1 to level 2 | 0 | $ 0 |
Level 2 to level 1 | 0 | 0 |
Transfers into level 3 | 0 | 0 |
Transfers out of level 3 | 0 | 0 |
U.S. Treasury securities | ||
Assets: | ||
Aggregate estimated fair value | 135,457,000 | |
Level 2 | U.S. Treasury securities | ||
Assets: | ||
Marketable Securities | 0 | |
Fair value on a recurring basis | ||
Assets: | ||
Total assets | 236,784,000 | 185,676,000 |
Fair value on a recurring basis | Money market funds | ||
Assets: | ||
Assets included in cash and cash equivalents | 91,332,000 | 185,676,000 |
Fair value on a recurring basis | U.S. Treasury securities | ||
Assets: | ||
Assets included in cash and cash equivalents | 9,995,000 | |
Aggregate estimated fair value | 135,457,000 | |
Fair value on a recurring basis | Level 1 | ||
Assets: | ||
Total assets | 91,332,000 | 185,676,000 |
Fair value on a recurring basis | Level 1 | Money market funds | ||
Assets: | ||
Assets included in cash and cash equivalents | 91,332,000 | $ 185,676,000 |
Fair value on a recurring basis | Level 2 | ||
Assets: | ||
Total assets | 145,452,000 | |
Fair value on a recurring basis | Level 2 | U.S. Treasury securities | ||
Assets: | ||
Assets included in cash and cash equivalents | 9,995,000 | |
Aggregate estimated fair value | $ 135,457,000 |
Marketable securities (Details)
Marketable securities (Details) | 12 Months Ended | |
Dec. 31, 2019USD ($)security | Dec. 31, 2018USD ($) | |
Marketable securities | ||
Aggregate estimated fair value | $ 135,457,000 | |
Unrealized gains on marketable securities | 44,000 | $ 0 |
Unrealized loss position | 30,200,000 | |
Accumulated other comprehensive income | $ 44,000 | |
Unrealized loss position (Number of securities) | security | 3 | |
Unrealized loss position more than one year | $ 0 | |
U.S. Treasury securities | ||
Marketable securities | ||
Amortized cost | 135,389,000 | |
Gross unrealized holding gains | 70,000 | |
Gross unrealized holding (losses) | (2,000) | |
Aggregate estimated fair value | $ 135,457,000 |
Property and Equipment, Net (De
Property and Equipment, Net (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Property and Equipment, net | ||
Property and equipment, gross | $ 5,474 | $ 3,053 |
Less: Accumulated depreciation and amortization | (2,028) | (1,210) |
Property and equipment, net | 3,446 | 1,843 |
Depreciation and amortization | 821 | 539 |
Laboratory equipment | ||
Property and Equipment, net | ||
Property and equipment, gross | 4,194 | 2,415 |
Computers and software | ||
Property and Equipment, net | ||
Property and equipment, gross | 280 | 163 |
Leasehold improvements | ||
Property and Equipment, net | ||
Property and equipment, gross | 535 | $ 475 |
Construction in progress | ||
Property and Equipment, net | ||
Property and equipment, gross | $ 465 |
Accrued Expenses (Details)
Accrued Expenses (Details) - USD ($) $ in Thousands | Dec. 31, 2019 | Dec. 31, 2018 |
Accrued Expenses | ||
Payroll and related expenses | $ 3,159 | $ 2,012 |
Research and development activities | 2,465 | 715 |
Other expenses | 1,015 | 512 |
Total | $ 6,639 | $ 3,239 |
Stockholder's Equity (Details)
Stockholder's Equity (Details) | Dec. 04, 2018class | Sep. 30, 2018USD ($)$ / shares | Aug. 31, 2018USD ($) | Dec. 31, 2019shares | Jul. 01, 2019shares | Dec. 31, 2018shares | Dec. 31, 2017shares |
Class of Stock [Line Items] | |||||||
Number of classes of units prior to reorganization | class | 2 | ||||||
Capital units authorized | 138,035,280 | ||||||
Shares Authorized | 10,000,000 | ||||||
Preferred units issued (in shares) | 0 | ||||||
Common units | |||||||
Class of Stock [Line Items] | |||||||
Common Units authorized | 77,000,000 | ||||||
Preferred units | |||||||
Class of Stock [Line Items] | |||||||
Shares Authorized | 61,035,280 | ||||||
Series Seed preferred units | |||||||
Class of Stock [Line Items] | |||||||
Shares Authorized | 11,987,661 | ||||||
Series A Preferred Units | |||||||
Class of Stock [Line Items] | |||||||
Shares Authorized | 49,047,619 | ||||||
Proceeds from Sale of units | $ | $ 10,290,962 | ||||||
Stock issuance cost | $ | $ 9,038 | ||||||
Series B Preferred Units | |||||||
Class of Stock [Line Items] | |||||||
Shares Authorized | 61,538,454 | ||||||
Issue price | $ / shares | $ 7.58 | ||||||
Proceeds from Sale of units | $ | $ 79,831,491 | ||||||
Stock issuance cost | $ | $ 168,499 |
Stockholder's Equity - Common u
Stockholder's Equity - Common units (Details) - shares | Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 |
Stockholder's Equity | |||
Common units outstanding (in shares) | 1,011,227 | ||
Common units issued (in shares) | 0 | 0 |
Stockholder's Equity - Reorgani
Stockholder's Equity - Reorganization and convertible preferred stock (Details) | Dec. 05, 2018USD ($)Vote$ / sharesshares | Jul. 01, 2019shares |
Class of Stock [Line Items] | ||
Number of shares issued after reorganization | 1 | |
Decrease in threshold amount of vested and unvested incentives | $ | $ 0 | |
Conversion of warrant to purchase shares of convertible preferred stock | 6,825 | 6,825 |
Exercise price | $ / shares | $ 4.39 | |
Outstanding warrants | 6,825 | 6,825 |
Number of votes per share | Vote | 1 | |
Dividend declared | $ / shares | $ 0 | |
Dividend paid | $ / shares | $ 0 | |
Series B Preferred Shares | ||
Class of Stock [Line Items] | ||
Stock conversion ratio | 1 | |
Number of shares issued after reorganization | 10,553,483 | |
Series A Convertible Preferred Shares | ||
Class of Stock [Line Items] | ||
Stock conversion ratio | 1 | |
Number of shares issued after reorganization | 8,411,368 | |
Series Seed Preferred Shares | ||
Class of Stock [Line Items] | ||
Stock conversion ratio | 1 | |
Number of shares issued after reorganization | 2,045,556 | |
Common shares | ||
Class of Stock [Line Items] | ||
Stock conversion ratio | 1 | |
Number of shares issued after reorganization | 1,011,227 | |
Common stock and restricted common stock | ||
Class of Stock [Line Items] | ||
Stock conversion ratio | 1 | |
Number of shares issued after reorganization | 1,574,749 |
Stockholder's Equity - Liquidat
Stockholder's Equity - Liquidation (Details) - shares | Dec. 05, 2018 | Dec. 31, 2019 | Jul. 01, 2019 | Jun. 30, 2019 | Dec. 31, 2018 |
Class of Stock [Line Items] | |||||
Shares outstanding | 0 | ||||
Conversion of convertible preferred stock into common stock | 1 | ||||
Common stock, authorized | 400,000,000 | ||||
Preferred shares, shares authorized | 10,000,000 | 10,000,000 | |||
Preferred shares, shares outstanding | 0 | 0 | |||
IPO | |||||
Class of Stock [Line Items] | |||||
Shares outstanding | 21,010,407 | ||||
Conversion of convertible preferred stock into common stock | 21,010,407 | ||||
Common shares | |||||
Class of Stock [Line Items] | |||||
Outstanding Shares | 30,110,251 | 1,832,923 | |||
Conversion of convertible preferred stock into common stock | 1,011,227 | ||||
Common stock, authorized | 400,000,000 | 151,000,000 | |||
Common Stock, Shares, Issued | 30,110,251 | 1,832,923 | |||
Common shares, shares outstanding | 30,110,251 | 1,832,923 |
Stockholder's Equity - Warrants
Stockholder's Equity - Warrants (Details) - $ / shares | Dec. 05, 2018 | Jul. 01, 2019 |
Class of Warrant or Right [Line Items] | ||
Conversion of warrant to purchase shares of convertible preferred stock | 6,825 | 6,825 |
Exercise price | $ 4.39 | |
Number of shares issued | 1 | |
Warrants | 6,825 | 6,825 |
Series Seed Preferred Shares | ||
Class of Warrant or Right [Line Items] | ||
Number of shares issued | 2,045,556 | |
Common shares | ||
Class of Warrant or Right [Line Items] | ||
Number of shares issued | 1,011,227 |
Stockholder's Equity - Shares r
Stockholder's Equity - Shares reserved for future issuance (Details) - shares | Dec. 31, 2019 | Dec. 31, 2018 |
Class of Stock [Line Items] | ||
Shares available for future issuance | 5,337,482 | |
2018 stock option plan | ||
Class of Stock [Line Items] | ||
Shares available for future issuance | 2,028,233 | |
2018 Stock Incentive Plan | ||
Class of Stock [Line Items] | ||
Shares available for future issuance | 457,438 | |
2019 ESPP | ||
Class of Stock [Line Items] | ||
Shares available for future issuance | 300,000 | |
2019 stock option plan | ||
Class of Stock [Line Items] | ||
Shares available for future issuance | 959,170 | |
2019 stock option and incentive plan | ||
Class of Stock [Line Items] | ||
Shares available for future issuance | 2,050,079 |
Equity Based Compensation (Deta
Equity Based Compensation (Details) - USD ($) | 1 Months Ended | 12 Months Ended | ||
Jun. 30, 2019 | Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Equity Based Compensation | ||||
Equity based compensation expense | $ 3,532,000 | $ 997,000 | ||
Number of Units | ||||
Outstanding at the beginning | 1,532,139 | |||
Granted | 60,708 | |||
Forfeited | (18,098) | |||
Exchanged for common stock and restricted common stock pursuant to the Reorganization | (1,574,749) | |||
Weighted Average Grant Date Fair Value per Unit | ||||
Outstanding at the beginning (in dollars per share) | $ 1.34 | |||
Granted (in dollars per share) | 2.39 | |||
Forfeited (in dollars per share) | 1.87 | |||
Exchanged for common stock and restricted common stock pursuant to the Reorganization (in dollars per share) | 1.40 | |||
Weighted Average Threshold Price per Unit | ||||
Outstanding at the beginning (in dollars per share) | 1.11 | |||
Granted (in dollars per share) | 1.92 | |||
Forfeited (in dollars per share) | 1.57 | |||
Exchanged for common stock and restricted common stock pursuant to the Reorganization (in dollars per share) | $ 1.17 | |||
Vested at the beginning | 790,051 | 439,332 | ||
Vested | 350,719 | |||
Cancelled/Forfeited | 18,098 | |||
Vested as of the Reorganization | 790,051 | |||
Total fair value of employee incentive units vested | $ 473,000 | |||
Shares issuable under ESPP | ||||
Equity Based Compensation | ||||
Shares authorized | 300,000 | |||
Percentage of increase in authorized shares | 1.00% | |||
Discount rate to purchase common stock | 15.00% | |||
Equity based compensation expense | $ 246,000 | $ 0 | ||
Weighted Average Threshold Price per Unit | ||||
Granted (in dollars per share) | $ 5.30 | |||
Shares issuable under ESPP | Maximum | ||||
Equity Based Compensation | ||||
Shares authorized | 3,000,000 | |||
Common shares available for purchase | 25,000 | |||
2019 Stock Incentive Plan | ||||
Equity Based Compensation | ||||
Shares authorized | 2,800,000 | |||
Percentage of increase in authorized shares | 4.00% | |||
2018 Stock Incentive Plan | ||||
Number of Units | ||||
Outstanding at the beginning | 753,053 | 784,698 | ||
Outstanding at the end | 753,053 | |||
Weighted Average Grant Date Fair Value per Unit | ||||
Outstanding at the beginning (in dollars per share) | $ 4.32 | $ 4.32 | ||
Outstanding at the end (in dollars per share) | $ 4.32 | |||
Weighted Average Threshold Price per Unit | ||||
Vested | 31,645 | |||
Total fair value of employee incentive units vested | $ 1,500,000 | $ 137,000 | ||
Incentive units | ||||
Equity Based Compensation | ||||
Shares authorized | 1,586,907 | |||
Shares available for future grants | 54,768 | |||
Equity based compensation expense | 507,000 | |||
Contractual term | 0 months | |||
Weighted Average Threshold Price per Unit | ||||
Total fair value of employee incentive units vested | $ 473,000 | |||
Initial vesting following 12 months of employment or service | Incentive units | ||||
Equity Based Compensation | ||||
Vesting percentage | 25.00% | |||
Contractual term | 12 months | |||
Remaining vesting in equal quarterly installments over the following 36 months | Incentive units | ||||
Equity Based Compensation | ||||
Vesting period | 36 months |
Equity Based Compensation - Ves
Equity Based Compensation - Vested incentive units (Details) - Incentive units | Dec. 05, 2018USD ($)employee | Dec. 31, 2019USD ($) | Dec. 31, 2018USD ($) |
Equity Based Compensation | |||
Threshold amount per incentive unit for all vested and unvested units | $ 0 | ||
Active employees subject to exchange of incentive units for common shares and restricted common shares | employee | 35 | ||
Unrecognized equity based compensation expense related to modification | $ 968,000 | ||
Incremental compensation expense recognized | $ 255,000 | $ 365,000 |
Equity Based Compensation - 201
Equity Based Compensation - 2019 stock incentive plan (Details) - shares | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Equity Based Compensation | ||
Shares available for future issuance | 5,337,482 | |
Stock options | Maximum | ||
Equity Based Compensation | ||
Contractual term | 10 years | |
2019 Stock Incentive Plan | Stock options | ||
Equity Based Compensation | ||
Percentage of exercise price of option over fair market value of shares | 100.00% | |
Vesting period | 4 years | |
Vesting percentage | 25.00% | |
2019 Stock Incentive Plan | Stock options | Initial vesting following 12 months of employment or service | ||
Equity Based Compensation | ||
Vesting period | 12 months | |
2019 Stock Incentive Plan | Stock options | Remaining vesting in equal quarterly installments over the following 36 months | ||
Equity Based Compensation | ||
Vesting period | 36 months | |
2019 Stock Incentive Plan | Stock options | Maximum | ||
Equity Based Compensation | ||
Contractual term | 10 years | |
2018 Stock Incentive Plan | ||
Equity Based Compensation | ||
Shares available for future issuance | 457,438 | |
2018 Stock Incentive Plan | Stock options | ||
Equity Based Compensation | ||
Percentage of exercise price of option over fair market value of shares | 100.00% | |
Number of shares initially reserved for issuance | 3,818,816 | |
Vesting percentage | 25.00% | |
Contractual term | 9 years 11 months 16 days | |
2018 Stock Incentive Plan | Stock options | Initial vesting following 12 months of employment or service | ||
Equity Based Compensation | ||
Vesting period | 12 months | |
2018 Stock Incentive Plan | Stock options | Remaining vesting in equal quarterly installments over the following 36 months | ||
Equity Based Compensation | ||
Vesting period | 36 months | |
2018 Stock Incentive Plan | Stock options | Maximum | ||
Equity Based Compensation | ||
Contractual term | 10 years |
Equity Based Compensation - Com
Equity Based Compensation - Common stock and restricted common stock activity (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Number of Shares | ||
Outstanding at the beginning | 1,532,139 | |
Granted | 60,708 | |
Vested | 350,719 | |
Forfeited | (18,098) | |
Weighted Average Grant Date Fair Value per Unit | ||
Outstanding at the beginning (in dollars per share) | $ 1.34 | |
Granted (in dollars per share) | 2.39 | |
Forfeited (in dollars per share) | $ 1.87 | |
Equity based compensation expense | $ 3,532,000 | $ 997,000 |
Aggregate fair value of restricted stock awards | $ 473,000 | |
Restricted common stock | ||
Number of Shares | ||
Outstanding at the beginning | 753,053 | |
Vested | 354,660 | |
Forfeited | (18,623) | |
Outstanding at the end | 379,770 | 753,053 |
Weighted Average Grant Date Fair Value per Unit | ||
Outstanding at the beginning (in dollars per share) | $ 4.32 | |
Vested as of the Reorganization | 4.32 | |
Forfeited (in dollars per share) | 4.32 | |
Outstanding at the end (in dollars per share) | $ 4.32 | $ 4.32 |
Stock options | ||
Weighted Average Grant Date Fair Value per Unit | ||
Unrecognized equity based compensation expense expected period for recognition | 3 years 4 days | |
Equity based compensation expense | $ 2,500,000 | $ 104,000 |
2018 Stock Incentive Plan | ||
Number of Shares | ||
Outstanding at the beginning | 753,053 | 784,698 |
Vested | 31,645 | |
Outstanding at the end | 753,053 | |
Weighted Average Grant Date Fair Value per Unit | ||
Outstanding at the beginning (in dollars per share) | $ 4.32 | $ 4.32 |
Vested as of the Reorganization | 4.32 | |
Outstanding at the end (in dollars per share) | $ 4.32 | |
Aggregate fair value of restricted stock awards | $ 1,500,000 | $ 137,000 |
2018 Stock Incentive Plan | Restricted common stock | ||
Number of Shares | ||
Vested | 790,051 | |
Weighted Average Grant Date Fair Value per Unit | ||
Vested as of the Reorganization | $ 4.32 | |
2018 Stock Incentive Plan | Common stock and restricted common stock | ||
Number of Shares | ||
Outstanding at the beginning | 1,574,749 | |
Outstanding at the end | 1,574,749 | |
Weighted Average Grant Date Fair Value per Unit | ||
Outstanding at the beginning (in dollars per share) | $ 4.32 | |
Outstanding at the end (in dollars per share) | $ 4.32 | |
2018 Stock Incentive Plan | Stock options | ||
Weighted Average Grant Date Fair Value per Unit | ||
Unrecognized equity based compensation expense related to modification | $ 336,000 | |
Unrecognized equity based compensation expense expected period for recognition | 9 months 18 days | |
Equity based compensation expense | $ 737,000 | $ 312,000 |
Equity Based Compensation - Res
Equity Based Compensation - Restricted common stock activity (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Number of Shares | ||
Outstanding at the beginning | 1,532,139 | |
Granted | 60,708 | |
Vested | (350,719) | |
Forfeited | (18,098) | |
Weighted Average Grant Date Fair Value per Unit | ||
Outstanding at the beginning (in dollars per share) | $ 1.34 | |
Granted (in dollars per share) | 2.39 | |
Forfeited (in dollars per share) | $ 1.87 | |
Equity based compensation expense | $ 3,532,000 | $ 997,000 |
Aggregate fair value of restricted stock awards | $ 473,000 | |
Restricted common stock | ||
Number of Shares | ||
Outstanding at the beginning | 753,053 | |
Vested | (354,660) | |
Forfeited | (18,623) | |
Outstanding at the end | 379,770 | 753,053 |
Weighted Average Grant Date Fair Value per Unit | ||
Outstanding at the beginning (in dollars per share) | $ 4.32 | |
Vested as of the Reorganization | 4.32 | |
Forfeited (in dollars per share) | 4.32 | |
Outstanding at the end (in dollars per share) | $ 4.32 | $ 4.32 |
2018 Stock Incentive Plan | ||
Number of Shares | ||
Outstanding at the beginning | 753,053 | 784,698 |
Vested | (31,645) | |
Outstanding at the end | 753,053 | |
Weighted Average Grant Date Fair Value per Unit | ||
Outstanding at the beginning (in dollars per share) | $ 4.32 | $ 4.32 |
Vested as of the Reorganization | 4.32 | |
Outstanding at the end (in dollars per share) | $ 4.32 | |
Aggregate fair value of restricted stock awards | $ 1,500,000 | $ 137,000 |
2018 Stock Incentive Plan | Restricted common stock | ||
Number of Shares | ||
Vested | (790,051) | |
Weighted Average Grant Date Fair Value per Unit | ||
Vested as of the Reorganization | $ 4.32 |
Equity Based Compensation - Sto
Equity Based Compensation - Stock option awards (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Assumptions used in determining the fair value of the options granted | ||
Risk-free interest rate | 2.79% | |
Expected term (in years) | 5 years 11 months 23 days | |
Expected volatility | 76.63% | |
Total Equity based Compensation Expense | $ 3,532,000 | $ 997,000 |
Stock options | ||
Weighted Average Remaining Contractual Term and Aggregate Intrinsic Value | ||
Weighted average grant date fair value per share of stock options granted to employees and non-employees for stock option awards | $ 9.95 | |
Assumptions used in determining the fair value of the options granted | ||
Total Equity based Compensation Expense | $ 2,500,000 | 104,000 |
Unrecognized equity based compensation expense | $ 14,600,000 | |
Unrecognized equity based compensation expense expected period for recognition | 3 years 4 days | |
Incentive units | ||
Weighted Average Remaining Contractual Term and Aggregate Intrinsic Value | ||
Granted expected term (in years) | 0 months | |
Assumptions used in determining the fair value of the options granted | ||
Total Equity based Compensation Expense | $ 507,000 | |
2019 Stock Incentive Plan | Stock options | ||
Number of Shares | ||
Outstanding at the beginning | 1,786,551 | |
Granted | 1,220,241 | |
Exercised | (6,495) | |
Forfeited | (12,894) | |
Outstanding at the end | 2,987,403 | 1,786,551 |
Options vested and expected to vest at the end | 2,987,403 | |
Options exercisable at the end | 462,456 | |
Weighted Average Exercise Price | ||
Outstanding at the beginning (in dollars per share) | $ 4.32 | |
Granted (in dollars per share) | 14.98 | |
Exercised (in dollars per share) | 4.32 | |
Vested (in dollars per share) | 8.67 | |
Forfeited (in dollars per share) | 4.32 | |
Outstanding at the end (in dollars per share) | 8.67 | $ 4.32 |
Options vested and expected to vest at the end (in dollars per share) | 8.67 | |
Options exercisable at the end (in dollars per share) | $ 4.49 | |
Weighted Average Remaining Contractual Term and Aggregate Intrinsic Value | ||
Expected term (in years) | 9 years 2 months 19 days | |
Options exercisable at the end (in years) | 8 years 11 months 16 days | |
Options vested and expected to vest at the end | 9 years 2 months 19 days | |
Exercised (in dollars) | $ 89,000 | |
Outstanding at the end (in dollars) | 26,254,000 | |
Options vested and expected to vest at the end | 26,254,000 | |
Options exercisable at the end (in dollars) | $ 5,858,000 | |
Assumptions used in determining the fair value of the options granted | ||
Risk-free interest rate | 1.90% | |
Expected term (in years) | 6 years 4 days | |
Expected volatility | 75.45% | |
2018 Stock Incentive Plan | Stock options | ||
Number of Shares | ||
Outstanding at the beginning | 1,786,551 | |
Granted | 1,786,551 | |
Outstanding at the end | 1,786,551 | |
Weighted Average Exercise Price | ||
Outstanding at the beginning (in dollars per share) | $ 4.32 | |
Granted (in dollars per share) | $ 4.32 | |
Outstanding at the end (in dollars per share) | $ 4.32 | |
Weighted Average Remaining Contractual Term and Aggregate Intrinsic Value | ||
Expected term (in years) | 9 years 11 months 16 days | |
Granted expected term (in years) | 9 years 11 months 16 days | |
Weighted average grant date fair value per share of stock options granted to employees and non-employees for stock option awards | $ 2.92 | |
Assumptions used in determining the fair value of the options granted | ||
Risk-free interest rate | 2.75% | |
Expected term (in years) | 6 years 11 days | |
Expected volatility | 75.33% | |
Total Equity based Compensation Expense | $ 737,000 | $ 312,000 |
Unrecognized equity based compensation expense | $ 959,000 | |
Unrecognized equity based compensation expense expected period for recognition | 9 months 18 days |
Equity Based Compensation - Equ
Equity Based Compensation - Equity based compensation expense (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Equity Based Compensation | ||
Total Equity based Compensation Expense | $ 3,532 | $ 997 |
Research and development expense | ||
Equity Based Compensation | ||
Total Equity based Compensation Expense | 2,241 | 520 |
General and administrative expense | ||
Equity Based Compensation | ||
Total Equity based Compensation Expense | $ 1,291 | $ 477 |
Income Taxes - Components (Deta
Income Taxes - Components (Details) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended | ||||
Dec. 31, 2019 | Sep. 30, 2019 | Jun. 30, 2019 | Mar. 31, 2019 | Dec. 31, 2019 | Dec. 31, 2018 | |
Current | ||||||
Federal | $ 512 | |||||
State | 410 | |||||
Total current tax provision | 922 | |||||
Deferred | ||||||
Federal | (6) | |||||
State | (4) | |||||
Total deferred tax provision | (10) | |||||
Total income tax provision | $ 344 | $ 304 | $ 135 | $ 129 | $ 912 | $ 0 |
Income Taxes - Effective income
Income Taxes - Effective income tax rate (Details) | Dec. 21, 2017 | Dec. 31, 2019 | Dec. 31, 2018 |
Effective income tax rate differed from the amount computed by applying the federal statutory rate to the Company’s loss before income taxes | |||
Tax effected at statutory rate | 34.00% | 21.00% | 21.00% |
State taxes | 8.39% | 2.89% | |
Stock compensation | (1.09%) | (0.84%) | |
Non-deductible expenses | 0.08% | 0.29% | |
Federal research and development credits | 5.09% | 1.89% | |
Change in valuation allowance | (35.64%) | (25.23%) | |
Effective Income Tax Rate | (2.17%) |
Income Taxes - Deferred tax ass
Income Taxes - Deferred tax assets (Details) - USD ($) $ in Thousands | Dec. 31, 2019 | Dec. 31, 2018 |
Long‑term net deferred tax assets: | ||
Net operating loss carryforwards | $ 1,170 | $ 8,631 |
Deferred Revenue | 23,453 | |
Research and development credit carryforwards | 1,091 | 938 |
Intangible assets | 4,246 | 4,670 |
Reserves and accruals | 195 | 692 |
Stock-based compensation | 353 | 11 |
Total long‑term net deferred tax assets: | 30,508 | 14,942 |
Valuation allowance | (29,618) | (14,710) |
Subtotal | 890 | 232 |
Fixed assets | (656) | (232) |
Prepaid expense | (234) | |
Total net deferred tax assets |
Income Taxes - Valuation Allowa
Income Taxes - Valuation Allowances (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Income Taxes | ||
Valuation allowance | $ 29,618 | $ 14,710 |
Change in valuation allowance | $ 14,900 | $ 5,800 |
Income Taxes - NOL carryforward
Income Taxes - NOL carryforwards (Details) $ in Millions | Dec. 31, 2019USD ($) |
Federal | |
Operating Loss Carryforwards [Line Items] | |
NOL carryforwards | $ 3.9 |
State | |
Operating Loss Carryforwards [Line Items] | |
NOL carryforwards | $ 5.6 |
Income Taxes - Tax credit carry
Income Taxes - Tax credit carryforward (Details) - Research and Development Tax Credit Carryforward $ in Thousands | Dec. 31, 2019USD ($) |
Federal | |
Tax Credit Carryforward [Line Items] | |
Tax credit carryforward | $ 1,000 |
State | |
Tax Credit Carryforward [Line Items] | |
Tax credit carryforward | $ 100 |
Income Taxes - Others (Details)
Income Taxes - Others (Details) - USD ($) $ in Thousands | Dec. 21, 2017 | Dec. 31, 2019 | Sep. 30, 2019 | Jun. 30, 2019 | Mar. 31, 2019 | Dec. 31, 2019 | Dec. 31, 2018 |
Income Taxes | |||||||
Annual utilization limitation | $ 600 | ||||||
Corporate tax rate | 34.00% | 21.00% | 21.00% | ||||
Tax deduction for interest expense (as a percentage) | 30.00% | 30.00% | |||||
Deduction for net operating losses (as a percentage) | 80.00% | 80.00% | |||||
Unrecognized tax benefits | $ 0 | $ 0 | $ 0 | ||||
Provision for income taxes | $ 344 | $ 304 | $ 135 | $ 129 | $ 912 | $ 0 |
Commitments and Contingencies_2
Commitments and Contingencies (Details) - USD ($) | 1 Months Ended | 12 Months Ended | |
Jun. 30, 2017 | Dec. 31, 2019 | Dec. 31, 2018 | |
Commitments and Contingencies | |||
Percentage of escalation in annual lease rental payments | 3.00% | ||
Option to extend | True | ||
Extension term | 3 years | ||
Total Minimum Lease Payments | |||
2020 | $ 1,122,000 | ||
2021 | 1,175,000 | ||
2022 | 495,000 | ||
Total minimum lease payments | 2,792,000 | ||
Rent expense | $ 928,000 | $ 941,000 |
Extinguishment of Notes Payab_2
Extinguishment of Notes Payable (Details) - USD ($) | 1 Months Ended | 12 Months Ended | |||||
Dec. 31, 2018 | Dec. 31, 2019 | Dec. 31, 2018 | Jul. 01, 2019 | Dec. 05, 2018 | Dec. 31, 2016 | Mar. 31, 2016 | |
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items] | |||||||
Loss on early debt extinguishment | $ 28,000 | ||||||
Warrants | 6,825 | 6,825 | |||||
Warrant purchase price per unit | $ 4.39 | ||||||
Series Seed preferred units | |||||||
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items] | |||||||
Warrants | 3,416 | 3,409 | |||||
Warrant purchase price per unit | $ 4.39 | $ 4.39 | |||||
SVB Agreement | |||||||
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items] | |||||||
Amount drawn fee (as a percent) | 5.00% | ||||||
Loss on early debt extinguishment | $ 28,000 | ||||||
Outstanding obligations | $ 0 | ||||||
Issuance of common shares upon warrant exercise (in shares) | 5,766 |
Option and License Agreements (
Option and License Agreements (Details) $ / shares in Units, $ in Thousands | 1 Months Ended | 3 Months Ended | 12 Months Ended | |||||||||
Feb. 28, 2019USD ($)OptionsitemProgram | Oct. 31, 2018USD ($)OptionsProgram | Dec. 31, 2019USD ($)Program$ / shares | Sep. 30, 2019USD ($) | Jun. 30, 2019USD ($) | Mar. 31, 2019USD ($) | Dec. 31, 2018USD ($) | Sep. 30, 2018USD ($) | Jun. 30, 2018USD ($) | Mar. 31, 2018USD ($) | Dec. 31, 2019USD ($)Program$ / shares | Dec. 31, 2018USD ($) | |
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items] | ||||||||||||
Research and development | $ 53,732 | $ 22,631 | ||||||||||
Net loss | $ (19,831) | $ (8,864) | $ (9,433) | $ (5,200) | $ (5,343) | $ (7,077) | $ (6,231) | $ (5,180) | (43,328) | (23,831) | ||
Revenue | $ 5,675 | $ 5,567 | $ 6,068 | 3,358 | 16,977 | 3,358 | ||||||
Accounts receivable | 3,467 | 3,467 | ||||||||||
Janssen | ||||||||||||
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items] | ||||||||||||
Revenue | 6,180 | |||||||||||
Collaboration and option agreement with AbbVie | ||||||||||||
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items] | ||||||||||||
Term of arrangement | 5 years | |||||||||||
Upfront fees received | $ 100,000 | |||||||||||
Deferred revenue | $ 85,800 | 100,000 | $ 85,800 | 100,000 | ||||||||
Number of research programs | Program | 4 | 4 | ||||||||||
Option exercise fee | $ 20,000 | |||||||||||
Number of options available for exercise | Options | 3 | |||||||||||
Development milestones | $ 80,000 | |||||||||||
Launch milestones | 110,000 | |||||||||||
Net sales milestones | $ 160,000 | |||||||||||
Profit margin percentage | 10.00% | 10.00% | ||||||||||
Up-front payment included in transaction price | $ 100,000 | $ 100,000 | ||||||||||
Research and development | 20,000 | 3,200 | ||||||||||
Revenue related to research services | 10,800 | 3,400 | ||||||||||
Deferred revenue | $ 96,600 | $ 96,600 | ||||||||||
Reduction in revenue previously recognized | 6,000 | 2,000 | ||||||||||
Net loss | $ (6,000) | $ (2,000) | ||||||||||
Impact on net loss (per share) | $ / shares | $ (0.37) | $ (0.13) | ||||||||||
Number of research program | Program | 4 | |||||||||||
Research collaboration and option agreement | Janssen | ||||||||||||
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items] | ||||||||||||
Upfront fees received | $ 10,000 | |||||||||||
Deferred revenue | $ 8,600 | 8,600 | ||||||||||
Number of research programs | Program | 2 | |||||||||||
Number of options available for exercise | Options | 3 | |||||||||||
Development milestones | $ 142,000 | |||||||||||
Net sales milestones | $ 90,000 | |||||||||||
Research and development | 4,500 | |||||||||||
Revenue related to research services | 6,200 | |||||||||||
Number of integrin targets | item | 3 | |||||||||||
Upfront fee for first two research program | $ 10,000 | |||||||||||
Number of research program | Program | 3 | |||||||||||
Payment due period | 60 days | |||||||||||
Additional fee upon commencement of third research program | $ 5,000 | |||||||||||
One time fee | $ 6,000 | |||||||||||
Accounts receivable | $ 3,500 | 3,500 | ||||||||||
Upfront payment received related to research services | $ 1,400 |
Net Loss per Unit and Share - B
Net Loss per Unit and Share - Basic and diluted net loss per share (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 12 Months Ended | ||||||||
Dec. 31, 2019 | Sep. 30, 2019 | Jun. 30, 2019 | Mar. 31, 2019 | Dec. 31, 2018 | Sep. 30, 2018 | Jun. 30, 2018 | Mar. 31, 2018 | Dec. 31, 2019 | Dec. 31, 2018 | |
Net Loss per Unit and Share | ||||||||||
Net loss | $ (19,831) | $ (8,864) | $ (9,433) | $ (5,200) | $ (5,343) | $ (7,077) | $ (6,231) | $ (5,180) | $ (43,328) | $ (23,831) |
Weighted average common shares outstanding, basic and diluted | 16,101,928 | 1,069,762 | ||||||||
Net loss per share, basic and diluted | $ (0.66) | $ (0.30) | $ (4.73) | $ (2.77) | $ (4.27) | $ (2.69) | $ (22.28) |
Net Loss per Unit and Share - O
Net Loss per Unit and Share - Outstanding common stock equivalent shares (Details) - shares | 7 Months Ended | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2019 | Dec. 31, 2018 | |
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | |||
Anti‑dilutive securities | 3,367,173 | 23,556,836 | |
Convertible preferred stock | |||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | |||
Anti‑dilutive securities | 21,010,407 | ||
Restricted common stock | |||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | |||
Anti‑dilutive securities | 379,770 | 753,053 | |
Warrants | |||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | |||
Anti‑dilutive securities | 6,825 | ||
Stock options | |||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | |||
Anti‑dilutive securities | 2,987,403 | 1,786,551 | |
Shares issuable under ESPP | |||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | |||
Anti‑dilutive securities | 300,000 |
Employee Benefit Plan (Details)
Employee Benefit Plan (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Employee Benefit Plan | ||
Employer matching contribution as percentage of first 0% of eligible employee's contribution | 50.00% | |
Percentage of eligible employees contribution matched 0% by employer | 6.00% | |
Contributions | $ 224,000 | $ 182,000 |
Quarterly Financial Informati_3
Quarterly Financial Information (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 12 Months Ended | ||||||||
Dec. 31, 2019 | Sep. 30, 2019 | Jun. 30, 2019 | Mar. 31, 2019 | Dec. 31, 2018 | Sep. 30, 2018 | Jun. 30, 2018 | Mar. 31, 2018 | Dec. 31, 2019 | Dec. 31, 2018 | |
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items] | ||||||||||
Revenue | $ 5,675 | $ 5,567 | $ 6,068 | $ 3,358 | $ 16,977 | $ 3,358 | ||||
Revenue | $ (333) | |||||||||
Operating Expenses | 20,246 | 15,533 | 15,984 | 12,202 | 9,330 | $ 7,172 | $ 6,265 | $ 5,219 | 63,965 | 27,986 |
Loss from operations | (20,579) | (9,858) | (10,417) | (6,134) | (5,972) | (7,172) | (6,265) | (5,219) | (46,988) | (24,628) |
Other (expense) income, net | 1,092 | 1,298 | 1,119 | 1,063 | 629 | 95 | 34 | 39 | 4,572 | 797 |
Provision for income taxes | (344) | (304) | (135) | (129) | (912) | 0 | ||||
Net loss | $ (19,831) | $ (8,864) | $ (9,433) | $ (5,200) | $ (5,343) | $ (7,077) | $ (6,231) | $ (5,180) | $ (43,328) | $ (23,831) |
Net loss per share, basic and diluted | $ (0.66) | $ (0.30) | $ (4.73) | $ (2.77) | $ (4.27) | $ (2.69) | $ (22.28) | |||
Net loss per unit - basic and diluted | $ (7) | $ (6.16) | $ (5.12) | |||||||
Collaboration and option agreement with AbbVie | ||||||||||
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items] | ||||||||||
Net loss | $ (6,000) | $ (2,000) | ||||||||
Reduction in revenue previously recognized | $ 6,000 | $ 2,000 | ||||||||
Impact on net loss (per share) | $ (0.37) | $ (0.13) |