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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, 2024

OR

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

For the transition period from _____________ to ______________

Commission File Number: 001-40602

 

ERASCA, INC.

(Exact Name of Registrant as Specified in its Charter)

 

 

Delaware

83-1217027

(State or other jurisdiction of

incorporation or organization)

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

3115 Merryfield Row, Suite 300

San Diego, CA

92121

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: (858) 465-6511

 

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, $0.0001 par value per share

 

ERAS

 

Nasdaq Global Select Market

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

As of May 2, 2024, the registrant had 173,358,966 shares of common stock outstanding.

 

 

 


 

Table of Contents

 

Page

PART I.

FINANCIAL INFORMATION

Item 1.

Financial Statements (Unaudited)

1

Condensed Consolidated Balance Sheets as of March 31, 2024 and December 31, 2023

1

 

Condensed Consolidated Statements of Operations and Comprehensive Loss for the three months ended March 31, 2024 and 2023

2

Condensed Consolidated Statements of Stockholders’ Equity for the three months ended March 31, 2024 and 2023

3

Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2024 and 2023

4

Notes to Condensed Consolidated 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

29

Item 4.

Controls and Procedures

29

PART II.

OTHER INFORMATION

Item 1.

Legal Proceedings

31

Item 1A.

Risk Factors

31

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

31

Item 3.

Defaults Upon Senior Securities

31

Item 4.

Mine Safety Disclosures

31

Item 5.

Other Information

31

Item 6.

Exhibits

32

Signatures

33

 

 

i


 

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

Erasca, Inc.

Condensed Consolidated Balance Sheets

(In thousands, except share and par value amounts)

(Unaudited)

 

 

 

March 31,

 

 

December 31,

 

 

 

2024

 

 

2023

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

 

$

76,726

 

 

$

93,075

 

Short-term marketable securities

 

 

220,959

 

 

 

219,275

 

Prepaid expenses and other current assets

 

 

8,938

 

 

 

8,326

 

Total current assets

 

 

306,623

 

 

 

320,676

 

Long-term marketable securities

 

 

 

 

 

9,642

 

Property and equipment, net

 

 

21,358

 

 

 

22,327

 

Operating lease assets

 

 

37,177

 

 

 

37,861

 

Restricted cash

 

 

408

 

 

 

408

 

Other assets

 

 

4,456

 

 

 

4,383

 

Total assets

 

$

370,022

 

 

$

395,297

 

Liabilities and Stockholders' Equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

2,633

 

 

$

2,000

 

Accrued expenses and other current liabilities

 

 

16,577

 

 

 

20,186

 

Proceeds from prepayment of private placement

 

 

6,907

 

 

 

 

Operating lease liabilities

 

 

4,126

 

 

 

3,970

 

Total current liabilities

 

 

30,243

 

 

 

26,156

 

Operating lease liabilities, net of current portion

 

 

50,811

 

 

 

51,889

 

Other liabilities

 

 

559

 

 

 

566

 

Total liabilities

 

 

81,613

 

 

 

78,611

 

Commitments and contingencies (Note 11)

 

 

 

 

 

 

Stockholders' equity:

 

 

 

 

 

 

Preferred stock, $0.0001 par value; 80,000,000 shares authorized at March 31, 2024 and December 31, 2023; no shares issued and outstanding at March 31, 2024 and December 31, 2023

 

 

 

 

 

 

Common stock, $0.0001 par value; 800,000,000 shares authorized at March 31, 2024 and December 31, 2023; 151,497,138 and 151,462,103 shares issued at March 31, 2024 and December 31, 2023, respectively; 151,249,219 and 151,090,227 shares outstanding at March 31, 2024 and December 31, 2023, respectively

 

 

15

 

 

 

15

 

Additional paid-in capital

 

 

929,634

 

 

 

922,607

 

Accumulated other comprehensive (loss) income

 

 

(210

)

 

 

77

 

Accumulated deficit

 

 

(641,030

)

 

 

(606,013

)

Total stockholders' equity

 

 

288,409

 

 

 

316,686

 

Total liabilities and stockholders' equity

 

$

370,022

 

 

$

395,297

 

 

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

 

1


 

Erasca, Inc.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(In thousands, except share and per share amounts)

(Unaudited)

 

 

 

Three Months Ended March 31,

 

 

 

2024

 

 

2023

 

Operating expenses:

 

 

 

 

Research and development

 

$

28,574

 

 

$

27,585

 

General and administrative

 

 

10,277

 

 

 

9,440

 

Total operating expenses

 

 

38,851

 

 

 

37,025

 

Loss from operations

 

 

(38,851

)

 

 

(37,025

)

Other income (expense)

 

 

 

 

 

 

Interest income

 

 

3,900

 

 

 

3,877

 

Other expense, net

 

 

(66

)

 

 

(51

)

Total other income (expense), net

 

 

3,834

 

 

 

3,826

 

Net loss

 

$

(35,017

)

 

$

(33,199

)

Net loss per share, basic and diluted

 

$

(0.23

)

 

$

(0.22

)

Weighted-average shares of common stock used in computing net loss per share, basic and diluted

 

 

151,161,741

 

 

 

149,504,216

 

Other comprehensive income (loss):

 

 

 

 

 

 

Unrealized (loss) gain on marketable securities, net

 

 

(287

)

 

 

527

 

Comprehensive loss

 

$

(35,304

)

 

$

(32,672

)

 

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

 

2


 

Erasca, Inc.

Condensed Consolidated Statements of Stockholders’ Equity

(In thousands, except share data)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

Other

 

 

 

 

 

Total

 

 

 

Common Stock

 

 

Paid-in

 

 

Comprehensive

 

 

Accumulated

 

 

Stockholders'

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

(Loss) Income

 

 

Deficit

 

 

Equity

 

Balance at December 31, 2023

 

 

151,462,103

 

 

$

15

 

 

$

922,607

 

 

$

77

 

 

$

(606,013

)

 

$

316,686

 

Exercise of stock options

 

 

35,035

 

 

 

 

 

 

24

 

 

 

 

 

 

 

 

 

24

 

Vesting of early exercised stock options

 

 

 

 

 

 

 

 

155

 

 

 

 

 

 

 

 

 

155

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

6,848

 

 

 

 

 

 

 

 

 

6,848

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(35,017

)

 

 

(35,017

)

Unrealized loss on marketable securities, net

 

 

 

 

 

 

 

 

 

 

 

(287

)

 

 

 

 

 

(287

)

Balance at March 31, 2024

 

 

151,497,138

 

 

$

15

 

 

$

929,634

 

 

$

(210

)

 

$

(641,030

)

 

$

288,409

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

Other

 

 

 

 

 

Total

 

 

 

Common Stock

 

 

Paid-in

 

 

Comprehensive

 

 

Accumulated

 

 

Stockholders'

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

(Loss) Income

 

 

Deficit

 

 

Equity

 

Balance at December 31, 2022

 

 

150,448,363

 

 

$

15

 

 

$

893,850

 

 

$

(1,041

)

 

$

(480,971

)

 

$

411,853

 

Exercise of stock options

 

 

199,344

 

 

 

 

 

 

183

 

 

 

 

 

 

 

 

 

183

 

Vesting of early exercised stock options

 

 

 

 

 

 

 

 

243

 

 

 

 

 

 

 

 

 

243

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

6,845

 

 

 

 

 

 

 

 

 

6,845

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(33,199

)

 

 

(33,199

)

Unrealized gain on marketable securities, net

 

 

 

 

 

 

 

 

 

 

 

527

 

 

 

 

 

 

527

 

Balance at March 31, 2023

 

 

150,647,707

 

 

$

15

 

 

$

901,121

 

 

$

(514

)

 

$

(514,170

)

 

$

386,452

 

 

 

 

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

 

3


 

Erasca, Inc.

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

 

 

 

Three Months Ended March 31,

 

 

 

2024

 

 

2023

 

Cash flows from operating activities:

 

 

 

 

 

 

Net loss

 

$

(35,017

)

 

$

(33,199

)

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

 

 

 

 

 

 

Depreciation and amortization

 

 

998

 

 

 

894

 

Stock-based compensation expense

 

 

6,848

 

 

 

6,845

 

Accretion on marketable securities, net

 

 

(2,342

)

 

 

(975

)

Changes in operating assets and liabilities:

 

 

 

 

 

 

      Prepaid expenses and other current and long-term assets

 

 

(507

)

 

 

670

 

      Accounts payable

 

 

633

 

 

 

446

 

      Accrued expenses and other current and long-term liabilities

 

 

(3,626

)

 

 

(4,363

)

      Operating lease assets and liabilities, net

 

 

(238

)

 

 

3,324

 

Net cash used in operating activities

 

 

(33,251

)

 

 

(26,358

)

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

Purchases of marketable securities

 

 

(43,987

)

 

 

(24,280

)

Maturities of marketable securities

 

 

54,000

 

 

 

60,200

 

In-process research and development

 

 

 

 

 

(20,000

)

Purchases of property and equipment

 

 

(42

)

 

 

(1,206

)

Net cash provided by investing activities

 

 

9,971

 

 

 

14,714

 

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

Proceeds from prepayment of private placement

 

 

6,907

 

 

 

 

Proceeds from the exercise of stock options

 

 

24

 

 

 

183

 

Net cash provided by financing activities

 

 

6,931

 

 

 

183

 

 

 

 

 

 

 

 

Net decrease in cash, cash equivalents and restricted cash

 

 

(16,349

)

 

 

(11,461

)

Cash, cash equivalents and restricted cash at beginning of the period

 

 

93,483

 

 

 

284,625

 

Cash, cash equivalents and restricted cash at end of the period

 

$

77,134

 

 

$

273,164

 

 

 

 

 

 

 

 

Supplemental disclosure of noncash investing and financing activities:

 

 

 

 

 

 

Amounts accrued for purchases of property and equipment

 

$

 

 

$

38

 

Amounts accrued for offering costs

 

$

178

 

 

$

 

Vesting of early exercised options

 

$

155

 

 

$

243

 

 

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

 

4


 

Erasca, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Note 1. Organization and basis of presentation

 

Organization and nature of operations

 

Erasca, Inc. (Erasca or the Company) is a clinical-stage precision oncology company singularly focused on discovering, developing, and commercializing therapies for RAS/MAPK pathway-driven cancers. The Company has assembled a wholly-owned or controlled RAS/MAPK pathway-focused pipeline comprising modality-agnostic programs aligned with its three therapeutic strategies of: (1) targeting key upstream and downstream signaling nodes in the RAS/MAPK pathway; (2) targeting RAS directly; and (3) targeting escape routes that emerge in response to treatment. The Company was incorporated under the laws of the State of Delaware on July 2, 2018, as Erasca, Inc., and is headquartered in San Diego, California. In September 2020, the Company established a wholly-owned Australian subsidiary, Erasca Australia Pty Ltd (Erasca Australia), in order to conduct clinical activities in Australia for its development candidates. In November 2020, the Company entered into an agreement and plan of merger with Asana BioSciences, LLC (Asana) and ASN Product Development, Inc. (ASN) (the Asana Merger Agreement), pursuant to which ASN became the Company's wholly-owned subsidiary. In March 2021, the Company established a wholly-owned subsidiary, Erasca Ventures, LLC (Erasca Ventures), to make equity investments in early-stage biotechnology companies that are aligned with the Company’s mission and strategy.

 

Since inception, the Company has devoted substantially all of its efforts and resources to organizing and staffing the Company, business planning, raising capital, identifying, acquiring and in-licensing the Company’s product candidates, establishing its intellectual property portfolio, conducting research, preclinical studies, and clinical trials, establishing arrangements with third parties for the manufacture of its product candidates and related raw materials, and providing general and administrative support for these operations. As of March 31, 2024, the Company had $297.7 million in cash, cash equivalents, and short-term marketable securities. As of March 31, 2024, the Company had an accumulated deficit of $641.0 million. The Company has incurred significant operating losses and negative cash flows from operations. From its inception through March 31, 2024, the Company’s financial support has primarily been provided from the sale of its convertible preferred stock and the sale of its common stock in its initial public offering (IPO) and underwritten offering (2022 Offering).

 

The Company expects to use its cash, cash equivalents, and short-term marketable securities to fund research and development, working capital, and other general corporate purposes. The Company does not expect to generate any revenues from product sales unless and until the Company successfully completes development and obtains regulatory approval for any of its product candidates, which will not be for at least the next several years, if ever. Accordingly, until such time as the Company can generate significant revenue from sales of its product candidates, if ever, the Company expects to finance its cash needs through equity offerings, debt financings, or other capital sources, including potential collaborations, licenses or other similar arrangements. However, the Company may not be able to secure additional financing or enter into such other arrangements in a timely manner or on favorable terms, if at all. The Company’s failure to raise capital or enter into such other arrangements when needed would have a negative impact on the Company’s financial condition and could force the Company to delay, limit, reduce or terminate its research and development programs or other operations, or grant rights to develop and market product candidates that the Company would otherwise prefer to develop and market itself. The Company believes its cash, cash equivalents, and short-term marketable securities as of March 31, 2024, plus the net proceeds received in April 2024 from the Company's private placement, which closed on April 2, 2024, will be sufficient for the Company to fund operations for at least one year from the issuance date of these condensed consolidated financial statements.

2024 Private Placement

In March 2024, the Company entered into a stock purchase agreement with the purchasers named therein for the private placement of 21,844,660 shares of its common stock at a price of $2.06 per share (the 2024 Private Placement). On April 2, 2024, the 2024 Private Placement closed and the net proceeds were $43.7 million, after deducting placement agent fees and estimated expenses of approximately $1.3 million. The Company received $6.9 million of the proceeds in March 2024 prior to the closing of the 2024 Private Placement, which is recorded in cash and cash equivalents and as a liability in proceeds from prepayment of private placement on the condensed consolidated balance sheets.

 

5


 

Basis of presentation

 

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with US generally accepted accounting principles (US GAAP) for interim financial information and pursuant to Form 10-Q and Article 10 of Regulation S-X of the Securities and Exchange Commission (SEC). Accordingly, they do not include all of the information and notes required by US GAAP for complete financial statements. Any reference in these notes to applicable guidance is meant to refer to US GAAP as found in the Accounting Standards Codification (ASC) and Accounting Standards Updates (ASU) promulgated by the Financial Accounting Standards Board (FASB). The Company’s condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Erasca Australia, ASN, and Erasca Ventures. All intercompany balances and transactions have been eliminated.

Note 2. Summary of significant accounting policies

 

Use of estimates

 

The preparation of the Company’s condensed consolidated financial statements in conformity with US GAAP requires the Company to make estimates and assumptions that impact the reported amounts of assets, liabilities, expenses, and the disclosure of contingent assets and liabilities in the condensed consolidated financial statements and accompanying notes. Accounting estimates and management judgments reflected in the condensed consolidated financial statements include, but are not limited to, the accrual of research and development expenses, stock-based compensation expense, and the incremental borrowing rate for determining the operating lease asset and liability. Management evaluates its estimates on an ongoing basis. Although estimates are based on the Company’s historical experience, knowledge of current events, and actions it may undertake in the future, actual results may ultimately materially differ from these estimates and assumptions.

Unaudited interim financial information

 

The accompanying condensed consolidated balance sheet as of March 31, 2024, the condensed consolidated statements of operations and comprehensive loss for the three months ended March 31, 2024 and 2023, the condensed consolidated statements of stockholders’ equity for the three months ended March 31, 2024 and 2023 and the condensed consolidated statements of cash flows for the three months ended March 31, 2024 and 2023 are unaudited. The unaudited condensed consolidated interim financial statements have been prepared on the same basis as the audited annual consolidated financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary for the fair statement of the Company’s condensed consolidated financial position as of March 31, 2024 and the condensed consolidated results of its operations and cash flows for the three months ended March 31, 2024 and 2023. The condensed consolidated financial data and other information disclosed in these notes related to the three months ended March 31, 2024 and 2023 are unaudited. The condensed consolidated results for the three months ended March 31, 2024 are not necessarily indicative of results to be expected for the year ending December 31, 2024, any other interim periods, or any future year or period. These unaudited condensed consolidated financial statements should be read in conjunction with the Company's audited consolidated financial statements included in its Annual Report on Form 10-K for the year ended December 31, 2023 filed with the SEC on March 27, 2024.

Concentration of credit risk and off-balance sheet risk

 

Financial instruments which potentially subject the Company to significant concentration of credit risk consist of cash and cash equivalents and marketable securities. The Company maintains deposits in federally insured financial institutions in excess of federally insured limits. The Company has not experienced any losses in such accounts, and management believes that the Company is not exposed to significant credit risk due to the financial position of the depository institutions in which those deposits are held. The Company’s investment policy includes guidelines for the quality of the related institutions and financial instruments and defines allowable investments that the Company may invest in, which the Company believes minimizes the exposure to concentration of credit risk.

Cash, cash equivalents and restricted cash

 

Cash and cash equivalents include cash in readily available checking and savings accounts, money market funds and commercial paper. The Company considers all highly liquid investments with an original maturity of three months or less from the date of purchase to be cash equivalents.

 

6


 

 

The Company had deposited cash of $408,000 as of March 31, 2024 and December 31, 2023 to secure a letter of credit in connection with the lease of the Company’s facilities (see Note 10). The Company has classified the restricted cash as a noncurrent asset on its condensed consolidated balance sheets.

 

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the condensed consolidated balance sheets that sum to the total of the same amounts shown in the condensed consolidated statements of cash flows (in thousands):

 

 

March 31,

 

 

2024

 

 

2023

 

Cash and cash equivalents

$

76,726

 

 

$

272,756

 

Restricted cash

 

408

 

 

 

408

 

Total cash, cash equivalents and restricted cash

$

77,134

 

 

$

273,164

 

Marketable securities and investments

 

The Company classifies all marketable securities as available-for-sale, as the sale of such securities may be required prior to maturity. Management determines the appropriate classification of its marketable securities at the time of purchase. Marketable securities with original maturities beyond three months at the date of purchase and which mature at, or less than 12 months from, the balance sheet date are classified as short-term marketable securities. Available-for-sale securities are carried at fair value, with the unrealized gains and losses reported as accumulated other comprehensive income (loss) until realized. The amortized cost of available-for-sale debt securities is adjusted for amortization of premiums and accretion of discounts to maturity. Such amortization and accretion are included in interest income. The Company regularly reviews all of its marketable securities for declines in fair value. The review includes the consideration of the cause of the impairment, including the creditworthiness of the security issuers, the number of securities in an unrealized loss position, the severity of the unrealized loss(es), whether the Company has the intent to sell the securities and whether it is more likely than not that the Company will be required to sell the securities before the recovery of their amortized cost basis. If the decline in fair value is due to credit-related factors, a loss is recognized in net income; whereas, if the decline in fair value is not due to credit-related factors, the loss is recorded in other comprehensive income (loss). Realized gains and losses on available-for-sale securities are included in other income or expense. The cost of securities sold is based on the specific identification method. Interest and dividends on securities classified as available-for-sale are included in interest income.

 

Through its wholly-owned subsidiary, Erasca Ventures, the Company has also invested in equity securities of a company whose securities are not publicly traded and whose fair value is not readily available (see Notes 3 and 14). This investment is recorded using cost minus impairment, plus or minus changes in its estimated fair value resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. Investments in equity securities without readily determinable fair values are assessed for potential impairment on a quarterly basis based on qualitative factors. This investment is included in other assets in the Company's condensed consolidated balance sheets.

Fair value measurements

 

Certain assets and liabilities are carried at fair value under US GAAP. Fair value is defined as an 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 such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. Financial assets and liabilities carried at fair value are classified and disclosed in one of the following three levels of the fair value hierarchy, of which the first two are considered observable and the last is considered unobservable:

 

Level 1—Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.

 

Level 2—Quoted prices for similar assets and liabilities in active markets, quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability.

 

Level 3—Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported by little or no market activity).

 

7


 

Recently issued accounting pronouncements not yet adopted

 

From time to time, new accounting pronouncements are issued by the FASB or other standard setting bodies that the Company adopts as of the specified effective date. The Company qualifies as an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012 (JOBS Act) and has elected not to “opt out” of the extended transition related to complying with new or revised accounting standards, which means that when a standard is issued or revised and it has different application dates for public and nonpublic companies, the Company can adopt the new or revised standard at the time nonpublic companies adopt the new or revised standard and can do so until such time that the Company either (i) irrevocably elects to “opt out” of such extended transition period or (ii) no longer qualifies as an emerging growth company.

 

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which is intended to provide enhancements to segment disclosures, even for entities with only one reportable segment. In particular, the standard will require disclosures of significant segment expenses regularly provided to the chief operating decision maker and included within each reported measure of segment profit and loss. The standard will also require disclosure of all other segment items by reportable segment and a description of its composition. Finally, the standard will require disclosure of the title and position of the chief operating decision maker and an explanation of how the chief operating decision maker uses the reported measure(s) of segment profit or loss in assessing segment performance and deciding how to allocate resources. The standard is effective for annual periods beginning after December 15, 2023, and interim periods within annual periods beginning after December 15, 2024. Early adoption is permitted. Retrospective application to all prior periods presented in the financial statements is required. The Company is currently evaluating the impact of the standard on the presentation of its consolidated financial statements and related disclosures.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which is intended to provide enhancements to annual income tax disclosures. In particular, the standard will require more detailed information in the income tax rate reconciliation, as well as the disclosure of income taxes paid disaggregated by jurisdiction, among other enhancements. The standard is effective for the Company in its annual period beginning after December 15, 2025 and early adoption is permitted. The standard allows for adoption on a prospective basis, with a retrospective option. The Company is currently evaluating the impact of the standard on the presentation of its consolidated financial statements and related disclosures.

Note 3. Fair value measurements

 

The following tables summarize the Company’s financial assets measured at fair value on a recurring basis and their respective input levels based on the fair value hierarchy (in thousands):

 

 

 

 

 

 

Fair value measurements as of March 31, 2024 using

 

 

 

 

 

 

Quoted prices in

 

 

Significant

 

 

Significant

 

 

 

 

 

 

active markets

 

 

other

 

 

unobservable

 

 

 

March 31,

 

 

for identical

 

 

observable

 

 

inputs

 

 

 

2024

 

 

assets (level 1)

 

 

inputs (level 2)

 

 

(level 3)

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds(1)

 

$

58,324

 

 

$

58,324

 

 

$

 

 

$

 

Commercial paper(1)

 

 

1,492

 

 

 

 

 

 

1,492

 

 

 

 

US treasury securities(2)

 

 

73,644

 

 

 

73,644

 

 

 

 

 

 

 

US government agency securities(2)

 

 

23,856

 

 

 

 

 

 

23,856

 

 

 

 

Corporate debt securities(2)

 

 

22,926

 

 

 

 

 

 

22,926

 

 

 

 

Commercial paper(2)

 

 

100,533

 

 

 

 

 

 

100,533

 

 

 

 

Total fair value of assets

 

$

280,775

 

 

$

131,968

 

 

$

148,807

 

 

$

 

 

(1)
Included as cash and cash equivalents on the condensed consolidated balance sheets.
(2)
Included as short-term marketable securities on the condensed consolidated balance sheets.

 

8


 

 

 

 

 

 

Fair value measurements as of December 31, 2023 using

 

 

 

 

 

 

Quoted prices in

 

 

Significant

 

 

Significant

 

 

 

 

 

 

active markets

 

 

other

 

 

unobservable

 

 

 

December 31,

 

 

for identical

 

 

observable

 

 

inputs

 

 

 

2023

 

 

assets (level 1)

 

 

inputs (level 2)

 

 

(level 3)

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds(1)

 

$

83,101

 

 

$

83,101

 

 

$

 

 

$

 

US treasury securities(2)

 

 

93,303

 

 

 

93,303

 

 

 

 

 

 

 

US government agency securities(2)

 

 

26,824

 

 

 

 

 

 

26,824

 

 

 

 

Corporate debt securities(2)

 

 

10,734

 

 

 

 

 

 

10,734

 

 

 

 

Commercial paper(2)

 

 

88,414

 

 

 

 

 

 

88,414

 

 

 

 

US treasury securities(3)

 

 

9,642

 

 

 

9,642

 

 

 

 

 

 

 

Total fair value of assets

 

$

312,018

 

 

$

186,046

 

 

$

125,972

 

 

$

 

 

(1)
Included as cash and cash equivalents on the condensed consolidated balance sheets.
(2)
Included as short-term marketable securities on the condensed consolidated balance sheets.
(3)
Included as long-term marketable securities on the condensed consolidated balance sheets.

 

The carrying amounts of the Company’s financial instruments, including cash, prepaid expenses and other current assets, accounts payable, accrued expenses and other current liabilities and proceeds from prepayment of private placement, approximate fair value due to their short maturities. As of March 31, 2024 and December 31, 2023, the Company held a $2.0 million equity investment in Affini-T Therapeutics, Inc. (Affini-T) at cost. No adjustments have been made to the value of the Company’s investment in Affini-T since its initial measurement either due to impairment or based on observable price changes. None of the Company’s non-financial assets or liabilities are recorded at fair value on a non-recurring basis. No transfers between levels have occurred during the periods presented.

 

Cash equivalents consist of money market funds and commercial paper, short-term marketable securities consist of US treasury securities, US government agency securities, corporate debt securities and commercial paper, and long-term marketable securities consist of US treasury securities. The Company obtains pricing information from its investment manager and generally determines the fair value of marketable securities using standard observable inputs, including benchmark yields, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, and bid and/or offers.

Note 4. Marketable securities

 

The following tables summarize the Company’s marketable securities accounted for as available-for-sale securities (in thousands, except years):

 

 

 

March 31, 2024

 

 

 

Maturity

 

Amortized

 

 

Unrealized

 

 

Unrealized

 

 

Estimated

 

 

 

(in years)

 

cost

 

 

gains

 

 

losses

 

 

fair value

 

US treasury securities

 

1 or less

 

$

73,753

 

 

$

8

 

 

$

(117

)

 

$

73,644

 

US government agency securities

 

1 or less

 

 

23,859

 

 

 

11

 

 

 

(14

)

 

 

23,856

 

Corporate debt securities

 

1 or less

 

 

22,967

 

 

 

 

 

 

(41

)

 

 

22,926

 

Commercial paper

 

1 or less

 

 

100,590

 

 

 

16

 

 

 

(73

)

 

 

100,533

 

Total

 

 

 

$

221,169

 

 

$

35

 

 

$

(245

)

 

$

220,959

 

 

 

 

 

December 31, 2023

 

 

 

Maturity

 

Amortized

 

 

Unrealized

 

 

Unrealized

 

 

Estimated

 

 

 

(in years)

 

cost

 

 

gains

 

 

losses

 

 

fair value

 

US treasury securities

 

1 or less

 

$

93,377

 

 

$

74

 

 

$

(148

)

 

$

93,303

 

US government agency securities

 

1 or less

 

 

26,783

 

 

 

45

 

 

 

(4

)

 

 

26,824

 

Corporate debt securities

 

1 or less

 

 

10,719

 

 

 

15

 

 

 

 

 

 

10,734

 

Commercial paper

 

1 or less

 

 

88,356

 

 

 

68

 

 

 

(10

)

 

 

88,414

 

US treasury securities

 

1-2

 

 

9,605

 

 

 

37

 

 

 

 

 

 

9,642

 

Total

 

 

 

$

228,840

 

 

$

239

 

 

$

(162

)

 

$

228,917

 

 

 

9


 

The following tables present fair values and gross unrealized losses for those available-for-sale securities that were in an unrealized loss position as of March 31, 2024 and December 31, 2023, aggregated by category and the length of time that the securities have been in a continuous loss position (in thousands):

 

 

 

March 31, 2024

 

 

 

Unrealized losses less than 12 months

 

 

Unrealized losses 12 months or greater

 

 

Total

 

 

 

Fair value

 

 

Unrealized losses

 

 

Fair value

 

 

Unrealized losses

 

 

Fair value

 

 

Unrealized losses

 

US treasury securities

 

$

55,139

 

 

$

(117

)

 

$

 

 

$

 

 

$

55,139

 

 

$

(117

)

US government agency securities

 

 

18,845

 

 

 

(14

)

 

 

 

 

 

 

 

 

18,845

 

 

 

(14

)

Corporate debt securities

 

 

22,926

 

 

 

(41

)

 

 

 

 

 

 

 

 

22,926

 

 

 

(41

)

Commercial paper

 

 

65,574

 

 

 

(73

)

 

 

 

 

 

 

 

 

65,574

 

 

 

(73

)

Total

 

$

162,484

 

 

$

(245

)

 

$

 

 

$

 

 

$

162,484

 

 

$

(245

)

 

 

 

December 31, 2023

 

 

 

Unrealized losses less than 12 months

 

 

Unrealized losses 12 months or greater

 

 

Total

 

 

 

Fair value

 

 

Unrealized losses

 

 

Fair value

 

 

Unrealized losses

 

 

Fair value

 

 

Unrealized losses

 

US treasury securities

 

$

74,912

 

 

$

(148

)

 

$

 

 

$

 

 

$

74,912

 

 

$

(148

)

US government agency securities

 

 

6,950

 

 

 

(4

)

 

 

 

 

 

 

 

 

6,950

 

 

 

(4

)

Corporate debt securities

 

 

748

 

 

 

 

 

 

 

 

 

 

 

 

748

 

 

 

 

Commercial paper

 

 

22,944

 

 

 

(10

)

 

 

 

 

 

 

 

 

22,944

 

 

 

(10

)

Total

 

$

105,554

 

 

$

(162

)

 

$

 

 

$

 

 

$

105,554

 

 

$

(162

)

As of March 31, 2024, there were 28 available-for-sale securities with an estimated fair value of $162.5 million in gross unrealized loss positions, none of which were in an unrealized loss position for more than 12 months. As of December 31, 2023, there were 22 available-for-sale securities with an estimated fair value of $105.6 million in gross unrealized loss positions, none of which were in an unrealized loss position for more than 12 months.

 

As of March 31, 2024 and December 31, 2023, unrealized losses on available-for-sale securities are not attributed to credit risk. The Company believes that an allowance for credit losses is unnecessary because the unrealized losses on certain of the Company’s available-for-sale securities are due to market factors and interest rate increases. Additionally, the Company does not intend to sell the securities nor is it more likely than not that the Company will be required to sell the securities before recovery of their amortized cost basis.

 

Accrued interest on the Company’s available-for-sale securities was $871,000 and $1.1 million as of March 31, 2024 and December 31, 2023, respectively, and was included in prepaid expenses and other current assets on the condensed consolidated balance sheets.

Note 5. Property and equipment, net

 

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

 

 

 

March 31,

 

 

December 31,

 

 

 

2024

 

 

2023

 

Laboratory equipment

 

$

5,621

 

 

$

5,620

 

Furniture and fixtures

 

 

4,099

 

 

 

4,099

 

Leasehold improvements

 

 

18,173

 

 

 

18,173

 

Computer equipment and software

 

 

1,695

 

 

 

1,667

 

      Property and equipment

 

 

29,588

 

 

 

29,559

 

Less accumulated depreciation and amortization

 

 

(8,230

)

 

 

(7,232

)

      Property and equipment, net

 

$

21,358

 

 

$

22,327

 

 

 

10


 

Depreciation and amortization expense related to property and equipment was $998,000 and $894,000 for the three months ended March 31, 2024 and 2023, respectively.

Note 6. Accrued expenses and other current liabilities

 

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

 

 

 

March 31,

 

 

December 31,

 

 

 

2024

 

 

2023

 

Accrued research and development expenses

 

$

9,247

 

 

$

8,803

 

Accrued compensation