Quarterly Report (10-q)

Date : 05/07/2019 @ 9:39PM
Source : Edgar (US Regulatory)
Stock : Eidos Therapeutics, Inc. (MM) (EIDX)
Quote : 25.3  0.0 (0.00%) @ 1:00AM

Quarterly Report (10-q)

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2019

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

Commission File Number: 001-38533

 

EIDOS THERAPEUTICS, INC.

(Exact Name of Registrant as Specified in its Charter)

 

 

Delaware

46-3733671

( State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer
Identification No.)

101 Montgomery Street, Suite 2550

San Francisco, CA

94104

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: (415) 887-1471

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes       No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes       No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

  

Accelerated filer

 

 

 

 

 

Non-accelerated filer

 

 

  

Smaller reporting company

 

 

 

 

 

 

 

 

Emerging growth company

 

 

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes       No  

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock

EIDX

The Nasdaq Global Select Market

As of May 1, 2019, the registrant had 36,827,549 shares of common stock, $0.001 par value per share, outstanding.

 

 

 

 

 


Table of Contents

 

 

 

 

 

Page

PART I.

 

FINANCIAL INFORMATION

 

 

Item 1.

 

Financial Statements (Unaudited)

 

1

 

 

Condensed Balance Sheets

 

1

 

 

Condensed Statements of Operations and Comprehensive Loss

 

2

 

 

Condensed Statements of Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit)

 

3

 

 

Condensed Statements of Cash Flows

 

4

 

 

Notes to Unaudited Condensed Financial Statements

 

5

Item 2.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

19

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

 

24

Item 4.

 

Controls and Procedures

 

25

PART II.

 

OTHER INFORMATION

 

 

Item 1.

 

Legal Proceedings

 

26

Item 1A.

 

Risk Factors

 

26

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

 

64

Item 3.

 

Defaults Upon Senior Securities

 

64

Item 4.

 

Mine Safety Disclosures

 

64

Item 5.

 

Other Information

 

64

Item 6.

 

Exhibits

 

65

Signatures

 

66

 

 

 

i


 

PART I—FINANCI AL INFORMATION

Item 1. Financial Statements.

EIDOS THERAPEUTICS, INC.

Condensed Balance Sheets

(Unaudited)

(In thousands, except share and per share data)

 

 

 

March 31,

 

 

December 31,

 

 

 

2019

 

 

2018

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

147,064

 

 

$

157,147

 

Related party receivable

 

 

72

 

 

 

34

 

Prepaid expenses and other current assets

 

 

2,160

 

 

 

1,789

 

Total current assets

 

 

149,296

 

 

 

158,970

 

Property and equipment, net

 

 

196

 

 

 

209

 

Operating lease, right of use asset

 

 

1,053

 

 

 

 

Other assets

 

 

2,652

 

 

 

933

 

Total assets

 

$

153,197

 

 

$

160,112

 

Liabilities, Redeemable Convertible Preferred Stock and

   Stockholders’ Equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

3,212

 

 

$

1,956

 

Related party payable

 

 

407

 

 

 

256

 

Lease liabilities

 

 

269

 

 

 

 

Accrued expenses and other current liabilities

 

 

3,953

 

 

 

2,577

 

Total current liabilities

 

 

7,841

 

 

 

4,789

 

Other liabilities

 

 

201

 

 

 

316

 

Lease liabilities, non-current

 

 

854

 

 

 

 

Total liabilities

 

 

8,896

 

 

 

5,105

 

Commitments and contingencies

 

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

 

 

Preferred stock, $0.001 par value, 5,000,000 shares authorized; no shares

   issued and outstanding;

 

 

 

 

 

 

Common stock, $0.001 par value; 150,000,000 shares

   authorized as of March 31, 2019 and December 31, 2018,

   respectively; 36,811,069 and 36,760,536 shares issued and

   outstanding as of March 31, 2019 and December 31, 2018,

   respectively;

 

 

37

 

 

 

37

 

Additional paid-in-capital

 

 

221,267

 

 

 

220,240

 

Accumulated deficit

 

 

(77,003

)

 

 

(65,270

)

Total stockholders’ equity

 

 

144,301

 

 

 

155,007

 

Total liabilities, redeemable convertible preferred stock and stockholders’

   equity

 

$

153,197

 

 

$

160,112

 

 

The accompanying notes are an integral part of these unaudited condensed financial statements.

1


 

EIDOS THERAPEUTICS, INC.

Condensed Statements of Operations and Comprehensive Loss

(Unaudited)

(In thousands, except share and per share data)

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2019

 

 

2018

 

Operating expenses:

 

 

 

 

 

 

 

 

Research and development (includes related party

   expense of $94 and $16, respectively)

 

$

8,549

 

 

$

5,652

 

General and administrative (includes related party expense

   of $79 and $314, respectively)

 

 

4,035

 

 

 

2,345

 

Total operating expenses

 

 

12,584

 

 

 

7,997

 

Loss from operations

 

 

(12,584

)

 

 

(7,997

)

Other income (expense), net

 

 

851

 

 

 

(879

)

Net and comprehensive loss

 

 

(11,733

)

 

 

(8,876

)

Deemed dividend related to redemption feature embedded in

   Convertible Promissory Notes payable to stockholders

 

 

 

 

 

(6,523

)

Gain on extinguishment of Convertible Promissory Notes

   payable to stockholders

 

 

 

 

 

7,436

 

Net loss attributable to common stockholders

 

$

(11,733

)

 

$

(7,963

)

Net loss per share attributable to common stockholders, basic and diluted

 

$

(0.32

)

 

$

(1.81

)

Weighted-average shares used in computing net loss

   per share attributable to common stockholders, basic

   and diluted

 

 

36,175,523

 

 

 

4,392,435

 

 

The accompanying notes are an integral part of these unaudited condensed financial statements.

 

 

 

2


 

EIDOS THERAPEUTICS, INC.

Condensed Statements of Redeemable C onvertible Preferred Stock and Stockholders’ Equity (Deficit)

For the Three Months ended March 31, 2018 and 2019 (Unaudited)

(in thousands, except for share amounts)

 

 

 

Redeemable

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

convertible

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

 

Total

 

 

 

preferred stock

 

 

 

Common stock

 

 

paid-in-

 

 

Accumulated

 

 

stockholders'

 

 

 

Share

 

 

Amount

 

 

 

Share

 

 

Amount

 

 

capital

 

 

deficit

 

 

equity

 

Balance—December 31, 2018

 

 

 

 

$

 

 

 

 

36,760,536

 

 

$

37

 

 

$

220,240

 

 

$

(65,270

)

 

$

155,007

 

Issuance of common stock upon exercise of stock options and restricted

   stock

 

 

 

 

 

 

 

 

 

50,533

 

 

 

 

 

 

25

 

 

 

 

 

 

25

 

Vesting of restricted stock and early exercised options

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

38

 

 

 

 

 

 

38

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

964

 

 

 

 

 

 

964

 

Net loss and comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(11,733

)

 

 

(11,733

)

Balance—March 31, 2019

 

 

 

 

$

 

 

 

 

36,811,069

 

 

$

37

 

 

$

221,267

 

 

$

(77,003

)

 

$

144,301

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Redeemable

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

convertible

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

 

Total

 

 

 

preferred stock

 

 

 

Common stock

 

 

paid-in-

 

 

Accumulated

 

 

stockholders'

 

 

 

Share

 

 

Amount

 

 

 

Share

 

 

Amount

 

 

capital

 

 

deficit

 

 

(deficit)

 

Balance—December 31, 2017

 

 

12,856,325

 

 

$

17,028

 

 

 

 

5,137,771

 

 

$

4

 

 

$

1,332

 

 

$

(14,532

)

 

$

(13,196

)

Issuance of Series B redeemable convertible preferred stock upon conversion

   of redeemable convertible promissory notes payable to stockholders

 

 

1,324,823

 

 

 

14,354

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock to Stanford University

 

 

 

 

 

 

 

 

 

45,889

 

 

 

 

 

 

7

 

 

 

 

 

 

7

 

Issuance of common stock upon exercise of stock options and restricted

   stock

 

 

 

 

 

 

 

 

 

149,350

 

 

 

 

 

 

 

 

 

 

 

 

 

Recognition of beneficial conversion feature related to convertible promissory

   notes payable to stockholders

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

9,122

 

 

 

 

 

 

 

9,122

 

Deemed dividend related to embedded derivative liability on Convertible

   Promissory Notes payable to stockholders

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(6,523

)

 

 

 

 

 

(6,523

)

Issuance of Series B redeemable convertible preferred stock, net of issuance

   costs of $125 and fair value of redeemable convertible preferred stock

   tranche liability of $64

 

 

1,476,715

 

 

 

15,811

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Vesting of restricted stock and early exercised options

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

18

 

 

 

 

 

 

18

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

385

 

 

 

 

 

 

385

 

Reacquisition of beneficial conversion feature related to Convertible

   Promissory Notes payable to stockholders

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(4,341

)

 

 

(10,013

)

 

 

(14,354

)

Gain on extinguishment of Convertible Promissory Notes payable to

   stockholders

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

7,436

 

 

 

 

 

 

7,436

 

Net loss and comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(8,876

)

 

 

(8,876

)

Balance—March 31, 2018

 

 

15,657,863

 

 

$

47,193

 

 

 

 

5,333,010

 

 

$

4

 

 

$

7,436

 

 

$

(33,421

)

 

$

(25,981

)

 

The accompanying notes are an integral part of these unaudited condensed financial statements .

 

 

 

3


 

EIDOS THERAPEUTICS, INC.

Condensed Statements of Cash Flows

(Unaudited)

(In thousands)

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2019

 

 

2018

 

Cash Flows From Operating Activities:

 

 

 

 

 

 

 

 

Net loss

 

$

(11,733

)

 

$

(8,876

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

15

 

 

 

10

 

Stock-based compensation expense

 

 

964

 

 

 

388

 

Accrued interest on Convertible Promissory Notes payable

 

 

 

 

 

48

 

Change in fair value of derivative liability

 

 

 

 

 

(100

)

Change in fair value of redeemable convertible preferred stock warrant

   liability

 

 

 

 

 

(37

)

Amortization of debt discount on Convertible Promissory Notes payable

 

 

 

 

 

963

 

Loss on disposal of property and equipment

 

 

(2

)

 

 

 

Changes in assets and liabilities:

 

 

 

 

 

 

 

 

Related party receivable

 

 

(38

)

 

 

(9

)

Prepaid expenses and other current assets

 

 

(371

)

 

 

(140

)

Other assets

 

 

(1,719

)

 

 

(741

)

Accounts payable

 

 

1,256

 

 

 

1,102

 

Accrued expenses and other liabilities

 

 

1,369

 

 

 

1,546

 

Related party payable

 

 

151

 

 

 

(45

)

Net cash used in operating activities

 

 

(10,108

)

 

 

(5,891

)

 

 

 

 

 

 

 

 

 

Cash Flows From Investing Activities:

 

 

 

 

 

 

 

 

Purchase of property and equipment

 

 

 

 

 

(114

)

Net cash used in investing activities

 

 

 

 

 

(114

)

 

 

 

 

 

 

 

 

 

Cash Flows From Financing Activities:

 

 

 

 

 

 

 

 

Proceeds from issuance of redeemable convertible

   preferred stock, net of issuance costs

 

 

 

 

 

15,875

 

Proceeds from issuance of Convertible Promissory Notes payable

 

 

 

 

 

10,000

 

Payment of deferred offering costs

 

 

 

 

 

(187

)

Proceeds from issuance of common stock upon exercise

   of stock options and restricted stock

 

 

25

 

 

 

89

 

Net cash provided by financing activities

 

 

25

 

 

 

25,777

 

Net (decrease) increase in cash and cash equivalents

 

 

(10,083

)

 

 

19,772

 

Cash and cash equivalents, beginning of period

 

 

157,147

 

 

 

5,497

 

Cash and cash equivalents, end of period

 

$

147,064

 

 

$

25,269

 

 

 

 

 

 

 

 

 

 

Supplemental disclosure of non-cash financing activities:

 

 

 

 

 

 

 

 

Lease liability arising from the right of use asset

 

$

1,187

 

 

$

 

Vesting of restricted stock and early exercised options

 

 

38

 

 

 

18

 

Conversion of Convertible Promissory Notes payable and accrued

   interest into redeemable convertible preferred stock

 

 

 

 

 

14,354

 

 

The accompanying notes are an integral part of these unaudited condensed financial statements .

4


 

EIDOS THERAPEUTICS, INC.

Notes to Unaudited Condensed Financial Statements (Unaudited)

Note 1. Organization and Description of Business

 

Eidos Therapeutics, Inc., or the Company, was incorporated as an S corporation in the state of Delaware on August 6, 2013. The Company was converted into a C corporation on April 4, 2016 in conjunction with its Series Seed redeemable convertible preferred stock financing. The Company is advancing a drug candidate to treat multiple forms of transthyretin, or TTR, amyloidosis, or ATTR, which leads to organ damage, loss of organ function and eventual death from abnormal buildup of protein deposits predominantly in the heart and peripheral nervous system. The Company has been primarily engaged in business planning, research and development, recruiting personnel, and raising capital. The Company is headquartered in San Francisco, California and it operates as one operating segment.

Stock Split

In June 2018, the Company’s board of directors approved an amendment to the Company’s amended and restated certificate of incorporation to effect a stock-split of the Company’s issued and outstanding common stock at a 1.196-for-1 ratio, which was effected on June 7, 2018. The par value of common stock and redeemable convertible preferred stock was not adjusted as a result of the stock split. All issued and outstanding common stock, options to purchase common stock and per share amounts contained in the financial statements have been adjusted to reflect the stock split for all periods presented.

Liquidity

The Company has incurred net losses from operations since inception and has an accumulated deficit of $77.0 million as of March 31, 2019. The Company’s ultimate success depends on the outcome of its research and development activities. The Company expects to incur additional losses in the future and it anticipates the need to raise additional capital to fully implement its business plan. Through March 31, 2019, the Company has financed its operations through private placements of redeemable convertible preferred stock, convertible promissory notes, and an initial public offering (IPO) of common stock.

On June 19, 2018, the Company’s registration statement on Form S-1 (File No. 333-225235) relating to its IPO of common stock became effective. The IPO closed on June 22, 2018, at which time the Company issued 7,187,500 shares of its common stock at a price of $17.00 per share, which included shares issued upon the underwriters’ exercise of their overallotment option to purchase 937,500 additional shares. In addition, upon closing the IPO, all outstanding shares of the redeemable convertible preferred stock and warrants converted into 24,231,517 shares of common stock. As of December 31, 2018, there are no shares of redeemable convertible preferred stock outstanding. Upon completion of the IPO, the Company received an aggregate of $111.0 million in cash, net of underwriting discounts and commissions, and after deducting offering costs paid by the Company.

The Company will need to obtain additional financing in the future and may seek financing through the issuance of our common stock, through other equity or debt financings or through collaborations or partnerships with other companies. The amount and timing of the Company’s future funding requirements will depend on many factors, including the pace and results of our clinical development efforts for AG10 and other research and development activities. The Company may not be able to raise additional capital on terms acceptable to the Company, or at all, and any failure to raise capital as and when needed would compromise the Company’s ability to execute on our business plan and the Company may have to significantly delay, scale back, or discontinue the development of AG10 or curtail any efforts to expand the Company’s product pipeline.

Note 2. Summary of Significant Accounting Policies

Basis of preparation

These unaudited condensed financial statements have been prepared in accordance with United States generally accepted accounting principles, or GAAP. These unaudited condensed financial statements include transactions with  BridgeBio Pharma LLC and its affiliates, or BBP LLC , a controlling stockholder in the Company. For the periods presented, BBP LLC has provided consulting and management services to the Company in the ordinary course of business, including certain executive personnel, facility related costs, advisory services, insurance costs, and other general corporate expenses. These allocations were made based on direct usage, when identifiable, with the remainder allocated primarily based on a proportional share of headcount. The Company’s historical financial statements do not purport to reflect what the Company’s results of operations, financial position, or cash flows would have been if the Company had operated as an independent entity during the periods presented. Management believes the basis on which the expenses have been allocated to be a reasonable reflection of the utilization of services provided to or the benefit received by the Company during the periods presented. For more information on the allocated costs and related party transactions, see Note 6.

5


 

Unaudited Interim Condensed Financial Statements

The accompanying unaudited condensed financial statements have been prepared in accordance with GAAP and applicable rules and regulations of the Securities and Exchange Commission, or the SEC, regarding interim financial reporting. As permitted under those rules, certain footnotes or other financial information that are normally required by GAAP have been condensed or omitted, and accordingly the balance sheet as of December 31, 2018 has been derived from the audited financial statements at that date but does not include all of the information required by GAAP for complete financial statements. These unaudited interim condensed financial statements have been prepared on the same basis as the Company’s annual financial statements and, in the opinion of management, reflect all adjustments (consisting only of normal recurring adjustments) that are necessary for a fair statement of the Company’s financial information. The results of operations for the three months ended March 31, 2019 are not necessarily indicative of the results to be expected for the year ending December 31, 2019 or for any future year or interim period.

The accompanying unaudited interim condensed financial statements and related financial information should be read in conjunction with the audited financial statements and the related notes thereto for the year ended December 31, 2018 included in the Company’s Annual Report on Form 10-K, filed with the SEC on April 15, 2019.

Use of estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of expenses during the reporting period. On an ongoing basis, management evaluates its estimates, including those related to the fair value of the redemption feature embedded derivative liability, the fair value of the redeemable convertible preferred stock tranche liability, the fair value of the redeemable convertible preferred stock warrant liability, the fair value of the Company’s common stock, stock-based compensation, the useful lives of fixed assets, accruals for research and development activities, and income taxes. Management bases its estimates on historical experience and on other relevant assumptions that management believes to be reasonable under the circumstances. Actual results could differ from those estimates.

Concentrations of credit risk

Financial instruments that potentially subject the Company to a concentration of credit risk consist of cash and cash equivalents and short-term investments. All the Company’s funds are held by one financial institution that management believes is of high credit quality. Such deposits may, at times, exceed federally insured limits.

 

Cash and cash equivalents

 

All highly-liquid investments with an original maturity date of three months or less when purchased that are readily convertible into cash and have an insignificant interest rate risk are considered to be cash equivalents. As of December 31, 2018 and March 31, 2019, the Company had cash and cash equivalents of $157.1 million and $147.1 million, respectively. The Company’s cash equivalents are invested in highly-rated money market funds.

Fair value of financial instruments

The carrying amount of the Company’s financial instruments, including accounts payable and accrued expenses and other payables approximate fair value due to their short-term maturities. See Note 3 Fair value measurements regarding the fair value of the Company’s embedded derivative liability related to its convertible promissory notes, redeemable convertible preferred stock tranche liability, and redeemable convertible preferred stock warrant liability.

Impairment of long-lived assets

The Company reviews long-lived assets, primarily comprised of property and equipment, for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability is measured by comparison of the carrying amount to the estimated undiscounted future cash flows which the assets or asset groups are expected to generate. If such assets are considered to be impaired, the impairment to be recognized is the amount by which the carrying amount of the assets or asset groups exceeds the estimated discounted future cash flows arising from the assets or asset groups. There have been no such impairments of long-lived assets for any of the periods presented.

6


 

Accrued repurchase liability for common stock

The Company records as a liability, within accrued expenses and other current liabilities, the purchase price of unvested common stock that the Company has a right to repurchase if and when the stockholder ceases to be a service provider to the Company before the end of the requisite service period. The proceeds are recorded as a liability and the proceeds related to the vested common stock are reclassified to additional paid-in-capital as the Company’s repurchase right lapses.

Redeemable convertible preferred stock tranche liability

The Company determined that its obligations to issue additional shares of preferred stock upon the achievement of certain milestones or at the option of the respective holders of such shares represent freestanding financial instruments. These instruments were initially measured at fair value and were subject to remeasurement with changes in fair value recognized in other income (expense), net in the statements of operations.

Embedded derivative liability and deemed dividend

The Company determined that the automatic conversion of the Note and Warrant Purchase Agreement with BBP LLC and the Board of Trustees of the Leland Stanford Junior University, or Stanford, (the Convertible Promissory Notes) payable issued in February 2018 into new shares of preferred stock at 70% of the issuance price of such shares upon the closing of a qualified financing was an embedded derivative liability to be measured at fair value. As this instrument was issued to stockholders, the Company treated the initial recognition as a deemed dividend included in additional paid-in-capital at its fair value of $6.5 million. The embedded derivative liability was subject to remeasurement with changes in fair value recognized in other income (expense), net in the statements of operations. The embedded derivative liability balance was settled upon the conversion of the convertible promissory notes into Series B redeemable convertible preferred stock (Series B Preferred Stock) in March 2018.

The deemed dividend impacted loss available to common stockholders and earnings per share for the three months ended March 31, 2018 .

Gain on extinguishment of convertible promissory notes payable

In March 2018, upon the conversion of the Convertible Promissory Notes into Series B Preferred Stock the Company recognized a $7.4 million gain on debt extinguishment. As the Convertible Promissory Notes were issued to stockholders, we treated the gain on debt extinguishment as a capital contribution included in additional paid-in-capital.

The $7.4 million gain on extinguishment of convertible promissory notes payable impacted loss available to common stockholders and net loss per share for the three months ended March 31, 2018.

Net Loss per Attributable to Common Stockholders and Net Loss per Share

Basic net loss per common share is calculated by dividing net loss attributable to common stockholders, taking into account the deemed dividend and gain on extinguishment of Convertible Promissory Notes payable, by the weighted-average number of shares of common stock outstanding during the period, less shares subject to repurchase and without consideration for potentially dilutive securities. Diluted net loss per common share is the same as basic net loss attributable to common stockholders per share since the effects of potentially dilutive securities are antidilutive given the Company’s loss position.

 

Rec ently Issued Accounting Standards Adopted

 

Effective January 1, 2019, the Company adopted Accounting Standards Update (“ASU”) No. 2016-02, Leases (“ASU 2016-02”) using the required modified retrospective approach. ASU 2016-02 requires lessees to record most leases on their balance sheets but recognize expenses on their income statements in a manner similar to current accounting. Upon transition under ASU 2016-02, the Company elected the suite of practical expedients as a package applied to all of its leases, including (i) not reassessing whether any expired or existing contracts are or contain leases, (ii) not reassessing the lease classification for any expired or existing leases, and (iii) not reassessing initial direct costs for any existing leases. For new leases, the Company will determine if an arrangement is or contains a lease at inception. Leases are included as right-of-use (“ROU”) assets within other assets and ROU liabilities within accrued expenses and other liabilities and within other long-term liabilities on the Company’s condensed balance sheets. In addition, the Company elected to exclude from its balance sheets recognition of leases having a term of 12 months or less (short-term leases) and elected to not separate lease components and non-lease components for its long-term real estate leases.

7


 

ROU liabilities are recognized at the commenceme nt date based on the present value of lease payments over the lease term and ROU assets are based on the liabilities adjusted for any prepaid or deferred rent. The Company’s leases do not provide an implicit rate. The Company uses its incremental borrowing rate based on the information available at the adoption date in determining the present value of lease payments. The ROU asset also includes any lease payments made and excludes lease incentives. Lease expense for lease payments is recognized on a straigh t-line basis over the lease term and is included in operating expenses on the condensed statements of operations. Variable lease payments include lease operating expenses. The lease term at the commencement date is determined by considering whether renewal options and termination options are reasonably assured of exercise. See discussion below under the caption “Leases” in this Note 2 and in Note 12 for more detail on the Company's accounting policy with respect to lease accounting.

 

Effective January 1, 2019, the Company adopted ASU No. 2018-07, Compensation - Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting (“ASU 2018-07”), which aligns accounting for share-based payments issued to nonemployees to that of employees under the existing guidance of Topic 718, with certain exceptions. This update supersedes previous guidance for equity-based payments to nonemployees under Subtopic 505-50, Equity - Equity-Based Payments to Non-Employees. The adoption of ASU 2018-07 did not have a material impact on the Company’s condensed financial statements.

 

Recently Issued Accounting Standards Not Yet Adopted

 

In August 2018, the FASB issued ASU No. 2018-13, Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement , which amends ASC 820, Fair Value Measurement. This ASU modifies the disclosure requirements for fair value measurements by removing, modifying, or adding certain disclosures. The effective date is the first quarter of fiscal year 2020, with early adoption permitted for the removed disclosures and delayed adoption until fiscal year 2020 permitted for the new disclosures. The removed and modified disclosures will be adopted on a retrospective basis and the new disclosures will be adopted on a prospective basis. The Company is currently evaluating the impact that ASU 2018-07 will have on its financial statements.

 

Note 3. Fair value measurements

Financial assets and liabilities are recorded at fair value. The accounting guidance for fair value provides a framework for measuring fair value, clarifies the definition of fair value and expands disclosures regarding fair value measurements. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the reporting date. The accounting guidance establishes a three-tiered hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value as follows:

Level 1—Quoted prices in active markets for identical assets or liabilities;

Level 2—Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities; and

Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

In determining fair value, the Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible as well as considers counterparty credit risk in its assessment of fair value.

There were no transfers between Level 1, Level 2 and Level 3 categories during the periods presented.

Financial assets measured and recognized at fair value are as follows (in thousands):

 

 

 

December 31, 2018

 

 

 

Total

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money Market Funds

 

$

157,147

 

 

$

157,147

 

 

$

 

 

$

 

Total

 

$

157,147

 

 

$

157,147

 

 

$

 

 

$

 

 

8


 

 

 

March 31, 2019

 

 

 

Total

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money Market Funds

 

$

147,064

 

 

$

147,064

 

 

$

 

 

$

 

Total

 

$

147,064

 

 

$

147,064

 

 

$

 

 

$

 

 

In determining fair value, the Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible as well as considers counterparty credit risk in its assessment of fair value.

 

There were no financial assets outside of cash in an operating account as of December 31, 2018 and March 31, 2019. There were no transfers between Level 1, Level 2 and Level 3 categories during the periods presented.

There were no financial liabilities measured at fair value as of December 31, 2018 and March 31, 2019. There were no transfers between Level 1, Level 2 and Level 3 categories during the periods presented.      

 

Following is the activity related to Level 3 financial liabilities of the Company.

 

Embedded derivative liability in the convertible promissory notes payable

The Convertible Promissory Notes payable issued in February 2018 had a redemption feature which was determined to be an embedded derivative requiring bifurcation and separate accounting. The fair value of the derivative was determined based on an income approach that identified the cash flows using a  “with-and-without” valuation methodology. The inputs used to determine the estimated fair value of the derivative instrument were based primarily on the probability of an underlying event triggering the embedded derivative occurring and the timing of such event. The following table sets forth a summary of the changes in the fair value of the Company’s embedded derivative liability in the Convertible Promissory Notes payable (in thousands):

 

 

 

Three Months Ended March 31,

 

 

 

2019

 

 

2018

 

Derivative instrument:

 

 

 

 

 

 

 

 

Beginning balance

 

$

 

 

$

 

Initial fair value of the embedded derivative liability issued with the

   Convertible Promissory Notes payable

 

 

 

 

 

6,523

 

Change in fair value upon revaluation recognized in other income

   (expense), net

 

 

 

 

 

(100

)

Settlement of the embedded derivative liability

 

 

 

 

 

(6,423

)

Ending balance

 

$

 

 

$

 

 

Redeemable convertible preferred stock tranche liability

 

Series B redeemable convertible preferred stock tranche liability

The fair value of the Series B redeemable convertible preferred stock tranche liability was based on significant inputs not observed in the market and thus represents a Level 3 measurement. The Company estimated the fair value of the redeemable convertible preferred stock warrant liability using a probability-weighted expected return method ( PWERM) that included probabilities of three scenarios. The PWERM included probabilities of three scenarios, including a scenario in which an IPO occurs in June 2018. The scenarios were weighted based on the Company’s estimate of each event occurring in deriving the estimated fair value. The redeemable convertible preferred stock warrant liability was remeasured upon the IPO using the value of the underlying share based on the IPO price less the warrant strike price.

9


 

The following table sets forth a summary of the changes in the fair value of the Company’s Series B redeemable convertible preferred stock tranche liability as follows (in thousands):

 

 

 

Three Months Ended March 31,

 

 

 

2019

 

 

2018

 

Redeemable convertible preferred stock tranche liability:

 

 

 

 

 

 

 

 

Beginning balance

 

$

 

 

$

 

Issuance of Series B redeemable convertible preferred stock

   tranche liability

 

 

 

 

 

64

 

Ending balance

 

$

 

 

$

64

 

 

Redeemable convertible preferred stock warrant liability

The fair value of the redeemable convertible preferred stock warrant liability (see Note 5) is based on significant inputs not observed in the market and thus represents a Level 3 measurement. The Company estimated the fair value of the redeemable convertible preferred stock warrant liability using the Black-Scholes option pricing model (see Note 8). The following table sets forth a summary of the changes in the fair value of the Company’s redeemable convertible preferred stock warrant liability (in thousands):

 

 

 

Three Months Ended March 31,

 

 

 

2019

 

 

2018

 

Redeemable convertible preferred stock warrant liability:

 

 

 

 

 

 

 

 

Beginning balance

 

$

 

 

$

 

Issuance of redeemable convertible preferred stock warrant liability

 

 

 

 

 

878

 

Change in fair value upon revaluation recognized in other income

   (expense), net

 

 

 

 

 

(37

)

Ending balance

 

$

 

 

$

841

 

  

Note 4. Condensed balance sheet components

Property and equipment, net

Property and equipment, net consisted of the following (in thousands):

 

 

 

March 31,

 

 

December 31,

 

 

 

2019

 

 

2018

 

Leasehold improvements

 

$

86

 

 

$

86

 

Computer equipment

 

 

85

 

 

 

87

 

Office furniture and equipment

 

 

96

 

 

 

96

 

Total Property and equipment, cost

 

 

267

 

 

 

269

 

Less: Accumulated depreciation and amortization

 

 

(71

)

 

 

(60

)

Total property and equipment, net

 

$

196

 

 

$

209

 

 

The Company recognized $14,000 of depreciation and amortization expense during the three months ended March 31, 2019, and $10,000 of depreciation and amortization expense during the three months ended March 31, 2018.

Accrued expenses and other current liabilities

Accrued expenses and other current liabilities consisted of the following (in thousands):

 

 

 

March 31,

 

 

December 31,

 

 

 

2019

 

 

2018

 

Accrued research and development costs

 

$

2,808

 

 

$

2,055

 

Accrued employee related expenses

 

 

670

 

 

 

78

 

Liability for unvested stock, short-term

 

 

147

 

 

 

142

 

Accrued other current liabilities

 

 

328

 

 

 

302

 

Total accrued expenses and other current liabilities

 

$

3,953

 

 

$

2,577

 

10


 

 

As of March 31, 2019, and December 31, 2018, $201,000 and $244,000, respectively, related to the long-term liability for unvested stock were recorded in other liabilities.

 

Lease Liabilities

 

Lease liabilities consisted of the following (in thousands):

 

 

 

March 31,

 

 

December 31,

 

 

 

2019

 

 

2018

 

Lease liabilities

 

$

269

 

 

$

 

Lease liabilities, non-current

 

 

854

 

 

 

 

Total lease liabilities

 

$

1,123

 

 

$

 

 

Note 5. Convertible promissory notes

In February 2018, the Company entered into a Note and Warrant Purchase Agreement with BBP LLC and Stanford (the Convertible Promissory Notes). The Company issued two Convertible Promissory Notes in an aggregate principal amount of $10.0 million. The Convertible Promissory Notes had a maturity date of the earliest of a qualified financing, a deemed liquidation event, a qualified initial public offering, or February 2019. The Convertible Promissory Notes had an annual interest rate of 5.0%. The Convertible Promissory Notes were convertible into future preferred stock at a 30% discount to the price paid by investors in the Company’s next preferred equity financing of at least $10.0 million or convertible into common stock at the price per share in an IPO with aggregate proceeds of at least $30.0 million.

In connection with the Convertible Promissory Notes, the Company issued warrants for the purchase of $4.0 million in shares of the Company’s Series Seed redeemable convertible preferred stock or the Company’s preferred stock in the next equity financing. The warrant exercise period commenced upon the earlier of the closing of the next qualified financing and the consummation of a deemed liquidation event. The exercise price of the warrant was the price per share in the next equity financing if the warrant was exercisable for the Company’s redeemable convertible preferred stock in the next qualified financing, or $1.3248 per share if the warrant was exercisable for shares of Series Seed redeemable convertible preferred stock.

Upon issuance of the Convertible Promissory Notes, the Company recorded the fair value of the warrants of $0.9 million as a debt discount and redeemable convertible preferred stock warrant liability.

The Company also determined that a beneficial conversion feature existed at the time the Convertible Promissory Notes were issued because the fair value of the securities into which the Convertible Promissory Notes were convertible at the time of issuance, Series Seed redeemable convertible preferred stock, was greater than the effective conversion price on the borrowing date. Accordingly, the Company recorded a beneficial conversion feature of $9.1 million. The beneficial conversion feature was recorded as a debt discount with an offset to additional paid-in-capital.

The discounts associated with both the warrants and beneficial conversion feature were amortized to interest expense using the effective interest method through February 2018, the contractual maturity date of the Convertible Promissory Notes. During the three months ended March 31, 2018, the Company recognized interest expense of $1.0 million.

The Convertible Promissory Notes also contained a redemption feature that was determined to be an embedded derivative requiring bifurcation. The fair value of the embedded derivative liability at issuance was determined to be $6.5 million and was recorded as a deemed dividend as the transaction was with stockholders.

Changes in the fair value of the redeemable convertible preferred stock warrant liability and embedded derivative liability have been recorded within other income (expense), net, in the statement of operations.

Upon completion of the Series B redeemable convertible preferred stock (Series B Preferred Stock) financing in March 2018, the Convertible Promissory Notes were redeemed under their qualified financing redemption feature whereby the aggregate of the outstanding principal and accrued interest balance of the Convertible Promissory Notes of $10.0 million was converted into 1,324,823 shares of Series B preferred stock at a conversion price of $7.5844 per share resulting in issuance of $14.4 million of Series B Preferred Stock. The redemption of the Convertible Promissory Notes was accounted for as a debt extinguishment, which resulted in a gain of $7.4 million. The extinguishment gain was recognized in equity and included the reacquisition of the beneficial conversion feature which was measured using the intrinsic value of the conversion option at the extinguishment date of $14.4 million and the settlement of the embedded derivative liability of $6.5 million. This gain was recorded in additional paid-in-capital since the holders of the Convertible Promissory Notes were stockholders and the arrangement was considered a capital transaction.

11


 

Note 6. Related party transactions

BridgeBio Pharma LLC

BridgeBio Pharma LLC and its affiliates, or BBP LLC, is a controlling stockholder in the Company, as it owned 61% and 61% of the Company’s total outstanding shares as of March 31, 2019 and December 31, 2018, respectively. In April 2016, the Company began receiving consulting, management, facility and infrastructure services pursuant to a services agreement with BBP LLC. The initial agreement was entered into on March 1, 2016 and was superseded by the subsequent agreement that was effective as of May 1, 2017.

The Company incurred the following expenses under the agreement with BBP LLC (in thousands):

 

 

 

Three Months   Ended

 

 

 

 

March 31,

 

 

 

 

2019

 

 

2018

 

 

Rent

 

$

(3

)

 

$

8

 

 

Facility

 

 

79

 

 

 

45

 

 

Consulting

 

 

97

 

 

 

277

 

 

 

 

$

173

 

 

$

330

 

 

 

As of March 31, 2019, and December 31, 2018, the Company had outstanding receivables from BBP LLC of $72,000 and $34,000, respectively, related to providing services to other related companies of BBP LLC. As of March 31, 2019, and December 31, 2018, the Company had outstanding liabilities due to BBP LLC of $0.4 million and $0.3 million, respectively.

Dr. Graef Consulting Agreement

In April 2016, the Company entered into a consulting agreement with Dr. Graef, one of the Company’s founders. Pursuant to the consulting agreement, Dr. Graef agreed to provide consulting services in connection with the discovery and development of novel TTR stabilizers. As compensation for these services, Dr. Graef is entitled to an annual fee in the amount of up to $150,000 and reimbursement by the Company for pre-approved expenses. The consulting agreement has a term of four years but may be terminated by either party for any reason with thirty days’ prior notice.

As of June 20, 2018, in connection with the Company’s initial public offering, the ownership percentage of Eidos stock held by Dr. Graef decreased, whereby the Company no longer considered Dr. Graef a related party.

Dr. Alhamadsheh Consulting Agreement

In August 2016, the Company entered into a consulting agreement with Dr. Alhamadsheh, one of the Company’s founders. Pursuant to the consulting agreement, Dr. Alhamadsheh agreed to provide consulting services in connection with the discovery and development of novel TTR stabilizers. As compensation for these services, Dr. Alhamadsheh is entitled to an annual fee in the amount of up to $115,000 and reimbursement by the Company for pre-approved expenses. The consulting agreement has a term of four years but may be terminated by either party for any reason with thirty days’ prior notice.

As of June 20, 2018, in connection with the Company’s initial public offering, the ownership percentage of Eidos stock held by Dr. Alhamadsheh decreased, whereby the Company no longer considered Dr. Alhamadsheh a related party.

The Company incurred the following expenses (benefit) for services under these consulting agreements and stock-based compensation (in thousands):

 

 

 

Three Months   Ended

 

 

 

 

March 31,

 

 

 

 

2019

 

 

2018

 

 

Dr. Graef

 

$

38

 

 

$

38

 

 

Dr. Alhamadsheh

 

 

29

 

 

 

29

 

 

 

 

$

67

 

 

$

67

 

 

 

12


 

Option Award to Dr. Huh

In May 2018, our board of directors approved a grant to Dr. Huh (a member of our board of directors) of an option to purchase 83,720 shares of our common stock pursuant to the Company’s 2018 Stock Option and Incentive Plan (the “2018 Plan”). The option was subject to vesting in equal annual installments over three years from the grant date, subject to Dr. Huh’s continued service as a director through the applicable vesting dates. The award is subject to full accelerated vesting upon a “sale event,” as defined in the 2018 Plan. Dr. Huh resigned from the Company’s board of directors in December 2018, at which time all options were cancelled. For the three months ended March 31, 2019 and 2018 the Company recorded no expense related to these awards.

Note 7. Redeemable convertible preferred stock

In March 2018, the Company sold an aggregate of 1,476,715 shares of Series B redeemable convertible preferred stock financing in an initial closing for total gross proceeds of $16.0 million. An additional 4,430,162 shares of Series B Preferred Stock in an additional closing was contingent upon the release of specified data study either upon the request of the Company for investors to purchase the shares or the investors to call for the purchase of such shares. The Company determined that right to cause the Series B stockholders to purchase additional shares of redeemable convertible preferred stock upon the achievement of the specified milestone represents a freestanding financial instrument that was recorded as a redeemable convertible preferred stock tranche liability.

The Company recorded the redeemable convertible preferred stock tranche liability incurred in connection with its Series B Preferred Stock at fair value of $0.1 million on the date of issuance and remeasured the liability on each subsequent balance sheet date and prior to settlement and issuance of the additional shares. Changes in fair value are recognized as a gain or loss within other income (expense), net in the statements of operations.

In May 2018, the Company issued 4,430,162 shares of Series B Preferred Stock at a purchase price of $10.8348 per share, for total proceeds of $48.0 million. The Company exercised its option to issue the Series B Preferred Stock and at the time the tranche liability was remeasured at $0.7 million and then was reclassified to Series B redeemable convertible preferred stock upon the closing of the sale of additional shares.

Following the closing of the IPO, all outstanding shares of the Series Seed and Series B Preferred Stock converted into 24,025,270 shares of common stock and the related carrying value was reclassified to common stock and additional paid-in-capital. There were no shares of redeemable convertible preferred stock outstanding as of March 31, 2019.

 

Note 8. Redeemable convertible preferred stock tranche liability

In March 2018, the Company entered into a Series B Preferred Stock Purchase Agreement, or the Series B Agreement, for the issuance of up to 7,231,700 shares of Series B redeemable convertible preferred stock at a price of $10.8348 per share in two closings. Upon the initial closing on March 29, 2018, 1,476,715 shares of Series B redeemable convertible preferred stock were issued for gross proceeds of $16.0 million and 1,324,823 shares were issued upon conversion of the outstanding Convertible Promissory Notes principal balance and accrued interest of $10.0 million into $14.4 million of Series B Preferred Stock.

The Series B Agreement provided that the Company could issue an additional 4,430,162 shares under the same terms as the initial closing, in an additional closing contingent upon the achievement of certain milestone. Either the investors or the Company could provide written notice for the additional closing to occur.

The Company determined that its obligation to issue additional shares of its redeemable convertible preferred stock and the Company’s right to request investors to purchase additional shares of its redeemable convertible preferred stock represents a freestanding financial instrument. The freestanding redeemable convertible preferred stock tranche liability (Series B Tranche Liability) was initially recorded at fair value, with fair value changes recorded within other income (expense), net in the statement of operations.

The Company continued to adjust the Series B Tranche Liability for changes in the fair value until the settlement of the redeemable convertible preferred stock additional closing in May 2018. The Company recorded a Series B Tranche Liability in March 2018 of $0.1 million related to the Series B Preferred Stock. The Company exercised its option to issue the Series B Preferred Stock and at the time the tranche liability was remeasured at $0.7 million in May 2018, and then reclassified to Series B redeemable convertible preferred stock upon the closing of the sale of additional shares.

13


 

Note 9.  Stockholders’ e quity and s tock- b ased c ompensation

Common stock

The Company has reserved shares of common stock for issuance as follows:

 

 

 

As of March 31,

 

 

 

2019

 

 

2018

 

Redeemable convertible preferred stock outstanding, as converted

 

 

 

 

 

18,726,796

 

Options issued and outstanding

 

 

1,307,729

 

 

 

560,128

 

Options available for future grants

 

 

718,557

 

 

 

807,682

 

Employee Stock Purchase Plan shares available for future grants

 

 

130,166

 

 

 

 

Total

 

 

2,156,452

 

 

 

20,094,606

 

Stock Options

The following table summarizes the Company’s stock option activity for the three months ended March 31, 2019:

 

 

 

 

 

 

 

 

 

 

 

Weighted-

Average

 

 

Weighted-

Average

 

 

Aggregate

 

 

 

Options

 

 

 

 

 

 

Exercise

 

 

Remaining

 

 

Intrinsic

 

 

 

Available for