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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,
2022
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:
001-39575
ONCORUS, INC.
(Exact name of registrant as specified in its charter)
|
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Delaware
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47-3779757
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer
Identification No.)
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50 Hampshire Street,
Suite 401
Cambridge,
Massachusetts
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02139
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(Address of principal executive offices)
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(Zip Code)
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Registrant’s telephone number, including area code:
(857)
320-6400
Securities registered pursuant to Section 12(b) of the
Act:
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Title of each class
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Trading
Symbol(s)
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Name of each exchange
on which registered
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Common Stock, $0.0001 par value per share
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ONCR
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The Nasdaq Stock Market LLC
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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.
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Large accelerated filer
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☐
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Accelerated filer
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☐
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Non-accelerated filer
|
☒
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Smaller reporting company
|
☒
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Emerging growth company
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☒
|
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
April 29, 2022, the registrant had
25,884,023
shares
of common stock, $0.0001 par value per share,
outstanding.
Table of Contents
i
SPECIAL NOTE REGARDING FORWARD-LOOKING
STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking
statements within the meaning of the Private Securities Litigation
Reform Act of 1995. All statements other than statements of
historical facts contained in this Quarterly Report on Form 10-Q,
including statements regarding our future results of operations or
financial condition, business strategy and plans, and objectives of
management for future operations, are forward-looking statements.
In some cases, you can identify forward-looking statements because
they contain words such as “anticipate,” “believe,” “contemplate,”
“continue,” “could,” “estimate,” “expect,” “hope,” “intend,” “may,”
“might,” “objective,” “ongoing,” “plan,” “potential,” “predict,”
“project,” “should,” “target,” “will,” or “would” or the negative
of these words or other similar terms or expressions. These
forward-looking statements include, but are not limited to,
statements concerning the following:
•
the initiation, timing, progress and expected results of our
preclinical studies and clinical trials for product candidates from
our oncolytic HSV-1 platform, or HSV Platform, including our
ongoing Phase 1 clinical trial of ONCR-177 and the reporting of
additional clinical data from this trial;
•
the initiation, timing, progress and expected results of our
preclinical studies and planned clinical trials for product
candidates from our selectively self-amplifying viral RNA
immunotherapy platform, or vRNA Immunotherapy Platform, including
ONCR-021 and ONCR-788;
•
the potential therapeutic benefit of our therapies and their
ability to improve upon existing immuno-oncology therapies,
including other viral immunotherapies and immune checkpoint
inhibitors;
•
the ability of our HSV Platform to overcome the safety versus
potency trade-off and its ability to stimulate multiple arms of the
innate and adaptive immune system;
•
the ability of our selectively self-amplifying vRNA Immunotherapy
Platform to avoid the challenges associated with neutralizing
antibodies;
•
our manufacturing capabilities and the buildout of our good
manufacturing practices, or GMP, compliant facility and related
operational timelines, including the timeline associated with the
relocation of our operations to this facility;
•
the timing of certain regulatory milestones, including the
submission of investigational new drug applications, or INDs, and
our ability to receive the required regulatory approvals and
clearances to successfully market and sell our products in the
United States and certain other countries;
•
impact of the COVID-19 pandemic on our business, operations,
strategy, goals and anticipated timelines;
•
our ability to fund our working capital requirements;
•
our financial performance and our ability to effectively manage our
anticipated growth; and
•
the sufficiency of our existing funding and our ability to obtain
additional funding for our operations.
These forward-looking statements are based on our management’s
current expectations, estimates, forecasts and projections about
our business and the industry in which we operate, and management’s
beliefs and assumptions and are not guarantees of future
performance or development. These forward-looking statements are
subject to a number of risks, uncertainties and assumptions,
including those described under the section titled “Risk Factors”
under Part II, Item 1A, below and under "Item 1A. Risk Factors" in
our Annual Report on Form 10-K for the year ended December 31, 2021
and under similar captions in our periodic reports filed with the
SEC from time to time. Moreover, we operate in a very competitive
and rapidly changing environment, and new risks emerge from time to
time. It is not possible for our management to predict all risks,
nor can we assess the impact of all factors on our business or the
extent to which any factor, or combination of factors, may cause
actual results to differ materially from those contained in any
forward-looking statements we may make. In light of these risks,
uncertainties and assumptions, the forward-looking events and
circumstances discussed in this Quarterly Report on Form 10-Q may
not occur and actual results could differ materially and adversely
from those anticipated or implied in the forward-looking
statements.
1
In addition, statements that “we believe” and similar statements
reflect our beliefs and opinions on the relevant subject. These
statements are based on information available to us as of the date
of this report. While we believe that information provides a
reasonable basis for these statements, that information may be
limited or incomplete. Our statements should not be read to
indicate that we have conducted an exhaustive inquiry into, or
review of, all relevant information.
You should not rely upon forward-looking statements as predictions
of future events. Although we believe that the expectations
reflected in the forward-looking statements are reasonable, we
cannot guarantee that the future results, levels of activity,
performance, or events and circumstances reflected in the
forward-looking statements will be achieved or occur. We undertake
no obligation to update publicly any forward-looking statements for
any reason after the date of this Quarterly Report on Form 10-Q to
conform these statements to new information, actual results or
changes in our expectations, except as required by law.
2
PART I—FINANCIAL
INFORMATION
Item 1. Financial
Statements.
ONCORUS, INC.
Condensed Consolidated
Balance Sheets
(in thousands, except for par value data)
(unaudited)
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MARCH 31,
2022
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|
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DECEMBER 31,
2021
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Assets
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|
|
|
|
|
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Current assets:
|
|
|
|
|
|
|
|
Cash and cash equivalents
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$
|
75,509
|
|
|
$
|
100,752
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|
|
Investments
|
|
|
23,156
|
|
|
|
23,173
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|
|
Prepaid expenses and other current assets
|
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3,943
|
|
|
|
5,185
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|
|
Total current assets
|
|
|
102,608
|
|
|
|
129,110
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|
|
Property and equipment, net
|
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29,491
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|
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23,233
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|
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Right-of-use asset
|
|
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40,183
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|
|
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45,218
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|
|
Restricted cash
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3,437
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3,437
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Other assets
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|
849
|
|
|
|
589
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Total assets
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$
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176,568
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$
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201,587
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Liabilities and stockholders’ equity
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Current liabilities:
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Accounts payable
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$
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3,582
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|
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$
|
13,009
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Accrued expenses
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6,885
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|
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6,281
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Lease liability - current portion
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1,678
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|
|
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1,684
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Total current liabilities
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12,145
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|
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20,974
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Lease liability - net of current portion
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49,921
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|
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50,388
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Other long-term liabilities
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244
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203
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Total liabilities
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62,310
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71,565
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Stockholders’ equity:
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Preferred stock, $0.0001 par
value; authorized —
10,000 shares
at March 31, 2022 and December 31, 2021; issued and outstanding
—
no shares
at March 31, 2022 and December 31, 2021
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—
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—
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Common stock, $0.0001 par
value; authorized —
100,000 shares
at March 31, 2022 and December 31, 2021; issued and outstanding
—
25,883 and
25,848 shares
at March 31, 2022 and December 31, 2021, respectively
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3
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|
|
3
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Additional paid-in capital
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326,662
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324,620
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Accumulated other comprehensive loss
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(40
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)
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|
|
(14
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)
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Accumulated deficit
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(212,367
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)
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(194,587
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)
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Total stockholders’ equity
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114,258
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130,022
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Total liabilities and stockholders’ equity
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$
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176,568
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$
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201,587
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The accompanying notes are an integral part of these interim
condensed consolidated financial statements.
3
ONCORUS, INC.
Condensed Consolidated Statements of
Operations and Comprehensive Loss
(in thousands, except per share data)
(unaudited)
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THREE MONTHS ENDED
MARCH 31,
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2022
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2021
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Operating expenses:
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Research and development
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$
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12,469
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$
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8,447
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General and administrative
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5,349
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4,222
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Total operating expenses
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17,818
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12,669
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Loss from operations
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(17,818
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)
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(12,669
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)
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Other income (expense):
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|
|
|
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Other expense
|
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|
(38
|
)
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|
—
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Interest income
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|
76
|
|
|
|
6
|
|
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Total other income (expense), net
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38
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|
|
|
6
|
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Net loss
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$
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(17,780
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)
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$
|
(12,663
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)
|
|
Comprehensive loss:
|
|
|
|
|
|
|
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Net unrealized loss on investments
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(26
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)
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|
|
—
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Comprehensive loss
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$
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(17,806
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)
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$
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(12,663
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)
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Net loss per share—basic and diluted
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$
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(0.69
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)
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$
|
(0.53
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)
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Weighted-average number of common shares outstanding—basic and
diluted
|
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25,865
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|
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24,009
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|
The accompanying notes are an integral part of these interim
condensed consolidated financial statements.
4
ONCORUS, INC.
Condensed Consolidated Statements
of Stockholders’ Equity
(in thousands, except share amounts)
(unaudited)
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
COMMON STOCK
|
|
|
|
|
|
|
|
|
|
|
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SHARES
|
|
|
AMOUNT
|
|
|
ADDITIONAL
PAID-IN
CAPITAL
|
|
|
ACCUMULATED OTHER COMPREHENSIVE LOSS
|
|
|
ACCUMULATED
DEFICIT
|
|
|
TOTAL
STOCKHOLDERS’
EQUITY
|
|
|
Balance at December 31, 2020
|
|
25,599,048
|
|
|
$
|
2
|
|
|
$
|
264,487
|
|
|
$
|
—
|
|
|
$
|
(129,825
|
)
|
|
$
|
134,664
|
|
|
Proceeds from issuance of common stock, net of issuance costs of
$4,017
|
|
3,000,000
|
|
|
|
—
|
|
|
|
52,983
|
|
|
|
—
|
|
|
|
—
|
|
|
|
52,983
|
|
|
Stock-based compensation expense
|
|
—
|
|
|
|
—
|
|
|
|
1,172
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,172
|
|
|
Vesting of restricted common stock
|
|
5,171
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Exercise of options to purchase common stock
|
|
22,470
|
|
|
|
—
|
|
|
|
98
|
|
|
|
—
|
|
|
|
—
|
|
|
|
98
|
|
|
Net loss
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(12,663
|
)
|
|
|
(12,663
|
)
|
|
Balance at March 31, 2021
|
|
28,626,689
|
|
|
$
|
3
|
|
|
$
|
318,740
|
|
|
$
|
—
|
|
|
$
|
(142,488
|
)
|
|
$
|
176,255
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2021
|
|
25,848,229
|
|
|
$
|
3
|
|
|
$
|
324,620
|
|
|
$
|
(14
|
)
|
|
$
|
(194,587
|
)
|
|
$
|
130,022
|
|
|
Stock-based compensation expense
|
|
—
|
|
|
|
—
|
|
|
|
1,980
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,980
|
|
|
Exercise of options to purchase common stock
|
|
34,967
|
|
|
|
—
|
|
|
|
62
|
|
|
|
—
|
|
|
|
—
|
|
|
|
62
|
|
|
Other comprehensive loss
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(26
|
)
|
|
|
—
|
|
|
|
(26
|
)
|
|
Net loss
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(17,780
|
)
|
|
|
(17,780
|
)
|
|
Balance at March 31, 2022
|
|
25,883,196
|
|
|
$
|
3
|
|
|
$
|
326,662
|
|
|
$
|
(40
|
)
|
|
$
|
(212,367
|
)
|
|
$
|
114,258
|
|
The accompanying notes are an integral part of these interim
condensed consolidated financial statements.
5
ONCORUS, INC.
Condensed Consolidated Statements
of Cash Flows
(in thousands)
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
THREE MONTHS ENDED
MARCH 31,
|
|
|
|
|
2022
|
|
|
2021
|
|
|
Operating activities:
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(17,780
|
)
|
|
$
|
(12,663
|
)
|
|
Adjustments to reconcile net loss to net cash used in operating
activities:
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
583
|
|
|
|
396
|
|
|
Stock-based compensation
|
|
|
1,980
|
|
|
|
1,172
|
|
|
Amortization of premium/discount on investments
|
|
|
51
|
|
|
|
—
|
|
|
Non-cash interest income
|
|
|
(59
|
)
|
|
|
—
|
|
|
Changes in:
|
|
|
|
|
|
|
|
Prepaid expenses and other assets
|
|
|
975
|
|
|
|
176
|
|
|
Operating lease right-of-use asset
|
|
|
523
|
|
|
|
525
|
|
|
Tenant improvement allowance reimbursements
|
|
|
4,511
|
|
|
|
—
|
|
|
Accounts payable
|
|
|
(11,940
|
)
|
|
|
843
|
|
|
Accrued expenses and other current liabilities
|
|
|
(1,807
|
)
|
|
|
(1,340
|
)
|
|
Operating lease liability
|
|
|
(474
|
)
|
|
|
512
|
|
|
Net cash used in operating activities
|
|
|
(23,437
|
)
|
|
|
(10,379
|
)
|
|
Investing activities
|
|
|
|
|
|
|
|
Purchase of property and equipment
|
|
|
(1,868
|
)
|
|
|
(385
|
)
|
|
Net cash used in investing activities
|
|
|
(1,868
|
)
|
|
|
(385
|
)
|
|
Financing activities
|
|
|
|
|
|
|
|
Proceeds from exercise of options to purchase common
stock
|
|
|
62
|
|
|
|
98
|
|
|
Proceeds from issuance of conmon stock, net of issuance
costs
|
|
|
—
|
|
|
|
52,983
|
|
|
Net cash provided by financing activities
|
|
|
62
|
|
|
|
53,081
|
|
|
Increase (Decrease) in cash and cash equivalents
|
|
|
(25,243
|
)
|
|
|
42,317
|
|
|
Cash, cash equivalents and restricted cash at beginning of
period
|
|
|
104,189
|
|
|
|
133,182
|
|
|
Cash, cash equivalents and restricted cash at end of
period
|
|
$
|
78,946
|
|
|
$
|
175,499
|
|
|
Supplemental disclosure of non-cash investing and financing
activities
|
|
|
|
|
|
|
|
Purchase of property and equipment in accrued expenses and accounts
payable
|
|
$
|
4,965
|
|
|
$
|
1,238
|
|
The accompanying notes are an integral part of these interim
condensed consolidated financial statements.
6
ONCORUS, INC.
Notes to Unaudited Interim Condensed
Consolidated Financial Statements
(in thousands, except share and per share amounts, unless otherwise
noted)
1. Nature of the Business and Liquidity
Oncorus, Inc. (the “Company”) is a clinical-stage biopharmaceutical
company focused on developing next-generation viral immunotherapies
to transform outcomes for cancer patients. Using its two platforms,
the Company is developing a pipeline of intratumorally and
intravenously administered product candidates designed to
selectively attack and kill tumor cells.
The Company’s operations to date have focused on organization and
staffing, business planning, raising capital, acquiring and
developing the Company’s technology, establishing the Company’s
intellectual property portfolio, identifying potential product
candidates and undertaking preclinical studies, commencing a
clinical trial and manufacturing scale-up activities. The Company
does not have any product candidates approved for sale and has not
generated any revenue from product sales. The Company’s product
candidates are subject to long development cycles and the Company
may be unsuccessful in its efforts to develop, obtain regulatory
approval for or market its product candidates.
On October 6, 2020, the Company completed an initial public
offering (“IPO”), in which the Company issued and sold
5,800,000
shares of its common stock at a public offering price of
$15.00
per share. On October 14, 2020, the Company sold an
additional
757,991
shares of common stock at $15.00
per share pursuant to the underwriters’ partial exercise of their
option to purchase additional shares of common stock. The total
gross proceeds from the IPO were $98.4
million and the Company raised $88.3
million in net proceeds after deducting underwriting discounts and
commissions and offering expenses payable by the
Company.
Upon the closing of the IPO, all of the outstanding shares of
convertible preferred stock automatically converted into
14,951,554
shares of common stock at the applicable conversion ratio then in
effect. Subsequent to the closing of the IPO, there were
no
shares of preferred stock outstanding.
In February 2021, the Company completed a follow-on public offering
of its common stock in which it sold
3,000,000
shares at an offering price of $19.00
per share, resulting in gross proceeds of $57.0
million and net proceeds of $53.0
million, after deducting underwriting discounts and commissions and
offering expenses payable by the Company.
In November 2021, the Company entered into an open market sale
agreement pursuant to which the Company may issue and sell shares
of its common stock from time to time for aggregate gross proceeds
of up to $50.0 million. There have been no sales related to this
agreement as of March 31, 2022.
The Company is subject to risks and uncertainties common to
early-stage companies in the biotechnology industry, including, but
not limited to, possible failure of preclinical studies or clinical
trials, the need to obtain marketing approval for its product
candidates, development by competitors of new technological
innovations, dependence on key personnel, protection of proprietary
technology, compliance with government regulations, the need to
successfully commercialize and gain market acceptance of any of the
Company’s products that are approved and the ability to secure
additional capital to fund operations. Product candidates currently
under development will require significant additional research and
development efforts, including extensive preclinical and clinical
testing, and regulatory approval prior to commercialization. These
efforts require significant amounts of additional capital, adequate
personnel and infrastructure, and extensive compliance-reporting
capabilities. Even if the Company’s drug development efforts are
successful, it is uncertain when, if ever, the Company will realize
significant revenue from product sales. The Company expects to
continue to incur losses from operations for the foreseeable future
and additional capital will be required to fund future operations.
The Company expects that its cash and cash equivalents as of March
31, 2022 will be sufficient to fund its operating expenses and
capital expenditure requirements through at least the next 12
months from the date these financial statements were
issued.
2. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited interim condensed consolidated financial
statements have been prepared in conformity with U.S. generally
accepted accounting principles (“GAAP”). Any reference in these
notes to applicable guidance is meant to refer to authoritative
United States generally accepted accounting principles as found in
the Accounting Standards Codification (“ASC”) and as amended by
Accounting Standards Updates (“ASU”) of the Financial Accounting
Standards Board (“FASB”).
In the opinion of management, the accompanying unaudited interim
condensed consolidated financial statements include all normal and
recurring adjustments (which consist primarily of accruals and
estimates that impact the financial statements) which are
considered necessary to present fairly the Company’s financial
position as of March 31, 2022, its results of operations for the
three
7
months ended March 31, 2022 and 2021, its changes in stockholders’
equity for the three months ended March 31, 2022 and 2021 and its
cash flows for the three months ended March 31, 2022 and
2021.
The results of operations for the interim periods are not
necessarily indicative of the results of operations to be expected
for the full year. These unaudited interim condensed consolidated
financial statements should be read in conjunction with the audited
consolidated financial statements as of and for the year ended
December 31, 2021, and the notes thereto, which are included in the
Company’s Annual Report on Form 10-K (the "Annual Report") filed
with the Securities and Exchange Commission (the “SEC”) on March 9,
2022. The condensed consolidated balance sheet data as of December
31, 2021 presented for comparative purposes was derived from the
Company’s audited consolidated financial statements but does not
include all disclosures required by GAAP. The results for the three
months ended March 31, 2022 are not necessarily indicative of the
operating results to be expected for the full year or for any other
subsequent interim period.
The Company’s significant accounting policies are disclosed in the
audited consolidated financial statements for the year ended
December 31, 2021, included in its Annual Report. Any changes to
the Company’s significant accounting policies are further discussed
below.
COVID-19 Pandemic
With the ongoing COVID-19 global pandemic, the Company has
implemented business continuity plans designed to address and
mitigate the impact of the COVID-19 pandemic on its employees and
its business, including its preclinical studies, its ongoing
clinical trial, and its regulatory filings. The Company has taken
measures to secure its research and development activities, while
work in its laboratories and facilities has been re-organized to
reduce risks of COVID-19 transmission. Given the global impact and
the other risks and uncertainties associated with the pandemic, the
Company’s business, financial condition and results of operations
could be materially adversely affected. The Company continues to
closely monitor the COVID-19 pandemic and evolve its business
continuity plans, clinical development plans and response strategy
to mitigate any potential impact. As of the date of issuance of
these financial statements, the Company is not aware of any
specific event or circumstance that would require the Company to
update its estimates, assumptions and judgments or revise the
carrying value of its assets or liabilities. Actual results could
differ from those estimates, and any such differences may be
material to the Company’s financial statements.
Going Concern
At each reporting period, the Company evaluates whether there are
conditions or events that raise substantial doubt about the
Company’s ability to continue as a going concern within one year
after the date that the financial statements are issued. The
Company is required to make certain additional disclosures if it
concludes substantial doubt exists and it is not alleviated by the
Company’s plans or when its plans alleviate substantial doubt about
the Company’s ability to continue as a going concern.
Principles of Consolidation
The accompanying unaudited interim condensed consolidated financial
statements of the Company include the accounts of its wholly owned
subsidiary, Oncorus Securities Corporation. All intercompany
transactions have been eliminated in consolidation. The Company
has
one
operating segment.
The preparation of financial statements in conformity with GAAP
requires management to make estimates and assumptions that affect
the amounts reported in the consolidated financial statements and
accompanying notes. On an ongoing basis, the Company’s management
evaluates its estimates, which include, but are not limited to, the
estimated fair value of the Company’s common stock and share-based
awards utilized for stock-based compensation purposes, accrued
expenses, and amounts of expenses during the reported period. The
Company bases its estimates on historical experience and other
market-specific or other relevant assumptions that it believes to
be reasonable under the circumstances. Actual results may differ
from those estimates or assumptions.
Deferred Offering Costs
The Company capitalizes certain legal, professional, accounting and
other third-party fees that are directly associated with in-process
equity issuances or debt financings as deferred offering costs
until such equity issuances or debt financings are consummated.
After consummation, these costs are recorded as a reduction in the
capitalized amount associated with the equity issuance or debt
financing.
Concentration of Credit Risk and of Significant
Suppliers
Financial instruments that potentially expose the Company to
concentrations of credit risk consist primarily of cash and cash
equivalents and short-term investments. The Company has all of its
cash at one financial institution that management believes to be of
high credit quality, in amounts that exceed federally insured
limits.
The Company invests its excess cash, in line with its investment
policy, primarily in money market funds and high credit quality
debt instruments.
8
The Company is dependent upon a third-party contract manufacturer
and third-party contract research organizations for the performance
of portions of its testing for pre-clinical and clinical studies.
The Company believes that its relationships with these
organizations are satisfactory, and that alternative suppliers of
these services are available in the event of the loss of one or
more of these suppliers.
Restricted Cash
The Company maintains a balance in a segregated bank account in
connection with a letter of credit for the benefit of the landlord
in connection with an operating lease. As of March 31, 2022,
restricted cash consisted of $3.4
million held for the benefit of the landlord. This amount has been
classified as part of non-current assets on the Company's unaudited
interim condensed consolidated balance sheets.
The Company includes its restricted cash balance in the cash, cash
equivalents and restricted cash reconciliation of operating,
investing, and financing activities in the unaudited interim
condensed consolidated statements of cash flows.
The following table provides a reconciliation of cash, cash
equivalents and restricted cash in the unaudited interim condensed
consolidated balance sheets that sum to the total of the same such
amounts shown in the unaudited interim condensed consolidated
statements of cash flows:
|
|
|
|
|
|
|
|
|
|
|
|
MARCH 31,
|
|
|
|
|
2022
|
|
|
2021
|
|
|
|
|
(in thousands)
|
|
|
Cash and cash equivalents
|
|
$
|
75,509
|
|
|
$
|
172,622
|
|
|
Restricted cash
|
|
|
3,437
|
|
|
|
2,877
|
|
|
Total cash, cash equivalents and restricted cash shown in the
unaudited interim consolidated statements of cash flows
|
|
$
|
78,946
|
|
|
$
|
175,499
|
|
Investments
Short-term investments consist of commercial paper, corporate
bonds, asset-backed securities, and U.S. Treasury securities with
original maturities greater than three months. The Company may sell
investments at any time for use in current operations even if the
investments have not yet reached maturity. As a result, the Company
classifies its investments, including securities with maturities
beyond twelve months, as current assets. As of
March
31, 2022,
all investments are classified as available-for-sale securities,
which are recorded at fair value. Unrealized holding gains and
losses on available-for-sale securities are reported as a net
amount in accumulated other comprehensive income or loss in
stockholders’ equity until realized. Purchase premiums and
discounts are amortized to interest income over the terms of the
related securities. Realized gains and losses and declines in fair
value that are deemed to be other than temporary are reflected in
the statements of operations and comprehensive loss using the
specific-identification method. The Company periodically reviews
all available-for-sale securities for other than temporary declines
in fair value below the cost basis whenever events or changes in
circumstances indicate that the carrying amount of an asset may not
be recoverable. The Company also evaluates whether it has plans or
is required to sell short-term investments before recovery of their
amortized cost bases. For the
three months
ended
March
31, 2022,
the Company has not identified any other than temporary declines in
fair value of its short-term investments.
Fair Value Measurements
Certain assets and liabilities of the Company are carried at fair
value under GAAP. Financial assets and liabilities carried at fair
value are to be 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—Valuations
based on quoted prices in active markets for identical assets or
liabilities that the Company has the ability to access at the
measurement date.
Level 2—Valuations
based on quoted prices for similar assets or liabilities in markets
that are not active or for which all significant inputs are
observable, either directly or indirectly, such as quoted market
prices, interest rates, and yield curves.
Level 3—Valuations
that require inputs that reflect the Company’s own assumptions that
are both significant to the fair value measurement and
unobservable.
To the extent a valuation is based on models or inputs that are
less observable or unobservable in the market, the determination of
fair values requires more judgment. Accordingly, the degree of
judgment exercised by the Company in determining fair value is
greatest for instruments categorized as Level 3. A financial
instrument’s level within the fair value hierarchy is based on the
lowest level of any input that is significant to the fair value
measurement.
The Company believes that the carrying amounts of prepaid expenses,
other current assets, accounts payable, and accrued expenses
approximate their fair value due to the short-term nature of those
instruments.
9
Operating Leases
At the inception of an arrangement, the Company determines whether
the arrangement is or contains a lease based on specific facts and
circumstances, the existence of an identified asset(s), if any, and
the Company’s control over the use of the identified asset(s), if
applicable. The lease liability is measured at the present value of
future lease payments, discounted using the discount rate as of the
lease commencement date. Future lease payments may include payments
that depend on an index or a rate (such as the consumer price index
or other market index). The Company initially measures payments
based on an index or rate by using the applicable rate at lease
commencement and subsequent changes in such rates are recognized as
variable lease costs. Variable payments that do not depend on a
rate or index are not included in the lease liability and are
recognized as they are incurred. The Company’s contracts typically
do not have variable payments based on index or rate. The Company’s
contracts that include a lease component generally include
additional services that are transferred to the lessee (e.g.,
common-area maintenance services), which are non-lease components.
Contracts typically also include other costs and fees that do not
provide a separate service to the lessee, such as costs paid by the
lessee to reimburse the lessor for administrative costs or payment
for the lessor’s costs for property taxes, insurance related to the
leased asset, and other lessor costs. The Company elected the
practical expedient to account for the lease and its associated
non-lease components as a single lease component for its real
estate leases, including the office, lab, and its manufacturing
space.
When readily determinable, the discount rate used to calculate the
lease liability is the rate implicit in the lease. As the Company's
leases typically do not provide an implicit rate, the Company uses
its incremental borrowing rate based on the lease term and economic
environment at the lease commencement date. The lease term used to
calculate the lease liability includes options to extend or
terminate the lease when it is reasonably certain that the Company
will exercise that option. With limited exceptions, the nature of
the Company's facility leases is such that there are no economic or
other conditions that would indicate that it is reasonably certain
at lease commencement that the Company will exercise options to
extend the term.
The Company recognizes a corresponding lease right of use (“ROU”)
asset, initially measured as the amount of lease liability,
adjusted for any initial lease costs or lease payments made before
or at the commencement of the lease, and reduced by any lease
incentives. In certain instances when there is unpredictability of
payout of leasehold improvement reimbursements, the right-of-use
asset and lease liability will be adjusted on a prospective basis
as construction related to leasehold improvements is performed over
the life of the lease.
The Company’s leases consist of only operating leases. Operating
leases are recognized on the balance sheet as ROU lease assets,
lease liabilities current and lease liabilities non-current. Fixed
rents are included in the calculation of the lease balances while
certain variable costs paid for certain operating and pass-through
costs are excluded. Lease expense is recognized over the expected
lease term on a straight-line basis. For leases with a term of one
year or less, or short-term leases, the Company has elected to not
recognize the lease liability for these arrangements and the lease
payments are recognized in the consolidated statements of
operations and comprehensive loss.
Recently Issued Accounting Pronouncements
There have been no recently issued accounting pronouncements other
than those described in the Company’s audited financial statements
as of and for the year ended December 31, 2021, and the notes
thereto, which are included in the Annual Report.
3. Cash Equivalents and Investments
The following tables summarize the amortized cost and fair value
of
the Company's
cash equivalents and investments (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MARCH 31, 2022
|
|
|
|
|
AMORTIZED COST BASIS
|
|
|
GROSS UNREALIZED GAINS
|
|
|
GROSS UNREALIZED LOSSES
|
|
|
ESTIMATED FAIR VALUE
|
|
|
Cash Equivalents
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Money market funds
|
|
$
|
72,915
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
72,915
|
|
|
Total Cash Equivalents
|
|
$
|
72,915
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
72,915
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial paper
|
|
$
|
11,104
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
11,104
|
|
|
Asset-backed securities
|
|
|
2,013
|
|
|
|
—
|
|
|
|
(8
|
)
|
|
|
2,005
|
|
|
U.S. treasury securities
|
|
|
4,815
|
|
|
|
—
|
|
|
|
(32
|
)
|
|
|
4,783
|
|
|
Corporate bonds
|
|
|
5,264
|
|
|
|
—
|
|
|
|
—
|
|
|
|
5,264
|
|
|
Total Investments
|
|
$
|
23,196
|
|
|
$
|
—
|
|
|
$
|
(40
|
)
|
|
$
|
23,156
|
|
10
|
|
|
|
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DECEMBER 31, 2021
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AMORTIZED COST BASIS
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|
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GROSS UNREALIZED GAINS
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|
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GROSS UNREALIZED LOSSES
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ESTIMATED FAIR VALUE
|
|
|
Cash Equivalents
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Money market funds
|
|
$
|
98,900
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
98,900
|
|
|
Total Cash Equivalents
|
|
$
|
98,900
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
98,900
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments
|
|
|
|
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|
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|
|
|
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Commercial paper
|
|
$
|
11,084
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|
|
$
|
—
|
|
|
$
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—
|
|
|
$
|
11,084
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|
|
Asset-backed securities
|
|
|
2,020
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|
|
|
—
|
|
|
|
(2
|
)
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|
|
2,018
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|
|
U.S. treasury securities
|
|
|
4,812
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|
|
|
—
|
|
|
|
(8
|
)
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|
|
4,804
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|
|
Corporate bonds
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|
|
5,271
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|
|
|
—
|
|
|
|
(4
|
)
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|
|
5,267
|
|
|
Total Investments
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|
$
|
23,187
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|
|
$
|
—
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|
|
$
|
(14
|
)
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|
$
|
23,173
|
|
As of March 31, 2022, the Company held two investments with
unrealized losses. All investments in an unrealized loss position
were in this position for less than 12 months. The Company
evaluated its securities for potential other-than-temporary
impairment and considered the decline in market value to be
primarily attributable to current economic and market conditions.
Additionally, the Company does not intend to sell the securities in
an unrealized loss position and does not expect it will be required
to sell the securities before recovery of the unamortized cost
basis. Given the Company's intent and ability to hold such
securities until recovery, and the lack of a significant change in
credit risk for these investments, the Company does not consider
these investments to be impaired as of March 31, 2022.
There were
no
realized gains or losses recognized on investments as of March 31,
2022. Interest on investments is recognized as interest income in
the consolidated statements of operations and comprehensive
loss.
All investments held as of March 31, 2022 were classified as
available-for-sale securities and had contractual maturities of
less than two years.
4. Fair Value Measurements
The following table presents information about the Company’s
financial assets and liabilities measured at fair value on a
recurring basis (in thousands):
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FAIR VALUE MEASUREMENTS
AS OF MARCH 31, 2022
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LEVEL 1
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LEVEL 2
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LEVEL 3
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TOTAL
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|
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Assets:
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|
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|
Money market funds
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|
$
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72,915
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|
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$
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—
|
|
|
$
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—
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|
|
$
|
72,915
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|
|
U.S. treasury securities
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|
|
4,783
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|
|
|
—
|
|
|
|
—
|
|
|
|
4,783
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|
|
Commercial paper
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|
|
—
|
|
|
|
11,104
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|
|
|
—
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|
|
|
11,104
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|
|
Asset-backed securities
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|
|
—
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|
|
|
2,005
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|
|
|
—
|
|
|
|
2,005
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|
|
Corporate bonds
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|
|
—
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|
|
|
5,264
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|
|
|
—
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|
|
|
5,264
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|
|
Total Assets
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|
$
|
77,698
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|
|
$
|
18,373
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|
|
$
|
—
|
|
|
$
|
96,071
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FAIR VALUE MEASUREMENTS
AS OF DECEMBER 31, 2021
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|
|
|
LEVEL 1
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|
|
LEVEL 2
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|
|
LEVEL 3
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|
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TOTAL
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|
|
Assets:
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|
|
|
|
|
|
|
|
|
|
|
|
|
Money market funds
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|
$
|
98,900
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|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
98,900
|
|
|
U.S. treasury securities
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|
|
4,804
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|
|
|
—
|
|
|
|
—
|
|
|
|
4,804
|
|
|
Commercial paper
|
|
|
—
|
|
|
|
11,084
|
|
|
|
—
|
|
|
|
11,084
|
|
|
Asset-backed securities
|
|
|
—
|
|
|
|
2,018
|
|
|
|
—
|
|
|
|
2,018
|
|
|
Corporate bonds
|
|
|
—
|
|
|
|
5,267
|
|
|
|
—
|
|
|
|
5,267
|
|
|
Total Assets
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|
$
|
103,704
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|
|
$
|
18,369
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|
|
$
|
—
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|
|
$
|
122,073
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|
The Company classifies its money market funds and U.S. treasury
securities as Level 1 assets since it measures fair value using
quoted prices in active markets for identical assets. The Level 2
assets include commercial paper, asset-backed securities, and
corporate bonds and are valued based on quoted prices for similar
assets in active markets and inputs other than quoted prices that
are derived from observable market data. The Company did not hold
any Level 3 assets during the periods presented.
11
The Company evaluates transfers between levels at the end of each
reporting period. There were no transfers between Level 1 and Level
2 assets during the periods presented.
5. Leases
The Company has an operating lease in Cambridge, Massachusetts for
its corporate headquarters.
The lease will expire in January 2024 and includes an optional
extension for an additional three year period.
The Company also has an operating lease for approximately
33,518
square feet (the “Pod 4 Portion”), approximately
54,666
square feet (the “Pod 5 Portion”), and approximately
17,150
square feet ("Pod 3 Portion") of a manufacturing facility located
in Andover, Massachusetts that expires in December 2036.
The Company has two options to extend the term of the lease for a
period of ten years each.
As of March 31, 2022, the Company had not exercised its options to
extend the lease term for either lease and it does not deem it
reasonably certain that these options will be exercised. The
Company agreed to provide the landlord with a $3.4
million letter of credit as support for its obligations under the
Andover facility lease. The lease provides a lease incentive in the
form of reimbursable leasehold improvements of approximately
$14.9
million. Due to the unpredictability of the payout of leasehold
improvement reimbursements, the right-of-use asset will be adjusted
on a prospective basis to reflect any payments relating to the
lease incentive as construction related to these improvements is
performed over the life of the lease. As of March 31,
2022, the Company capitalized $23.1
million of leasehold improvement costs, of which
$6.2
million was reimbursed through the lease incentive. The lease
payments include fixed base rent payments and variable rents for
certain shared facility operating and other costs.
During the three months ended March 31, 2022 and 2021, the Company
recognized total rent expense of
$1.6
million and $1.4
million, respectively, related to the leases described above. The
amount of variable rent expense and rent for short-term leases for
the three months ended March 31, 2022 and 2021, was
$0.9
million and $0.3
million, respectively.
Other supplemental information related to leases was as
follows:
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|
|
|
AS OF AND FOR
THREE MONTHS ENDED
MARCH 31,
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|
2022
|
|
2021
|
|
Weighted average remaining lease term
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13.5 years
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|
14.3
years
|
|
Weighted average discount rate
|
8.1%
|
|
8.5%
|
|
Cash paid for amounts included in the measurement of lease
liabilities (in thousands)
|
$1,505
|
|
$381
|
Maturities of operating lease liabilities were as follows as of
March 31, 2022 (in thousands):
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Year
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Amount
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|
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2022
|
|
$
|
4,198
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|
|
2023
|
|
|
6,380
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|
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2024
|
|
|
4,995
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|
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2025
|
|
|
5,145
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2026
|
|
|
5,299
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|
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Thereafter
|
|
|
62,575
|
|
|
Total lease payments
|
|
|
88,592
|
|
|
Less imputed interest
|
|
|
(36,993
|
)
|
|
Total lease liabilities
|
|
$
|
51,599
|
|
|
|
|
|
|
|
Current portion
|
|
|
1,678
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|
|
Long-term portion
|
|
|
49,921
|
|
12
6. Accrued Expenses and Other Long-Term Liabilities
Accrued expenses and other long-term liabilities consisted of the
following (in thousands):
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|
|
|
|
|
|
|
|
|
|
|
MARCH 31,
2022
|
|
|
DECEMBER 31,
2021
|
|
|
Accrued research and development costs
|
|
$
|
2,104
|
|
|
$
|
1,474
|
|
|
Accrued leasehold improvement costs
|
|
|
2,382
|
|
|
|
999
|
|
|
Accrued compensation
|
|
|
1,444
|
|
|
|
2,697
|
|
|
Accrued professional fees
|
|
|
821
|
|
|
|
846
|
|
|
Miscellaneous accrued expenses
|
|
|
378
|
|
|
|
468
|
|
|
Total accrued expenses and other long-term liabilities
|
|
$
|
7,129
|
|
|
$
|
6,484
|
|
As of March 31, 2022, other long-term liabilities of
$0.2
million were primarily represented by the value of
unmet conditions associated with a governmental grant received in
2021. The Company anticipates meeting these conditions between 2024
and 2026 and, upon satisfaction, will reduce these liabilities with
a corresponding reduction to research and development
expenses.
7. Common Stock
Each share of the Company's common stock is entitled to one
vote.
The holders of shares of common stock are entitled to receive
dividends, if and when declared by the Board of Directors. Prior to
the IPO, the voting, dividend, and liquidation rights of the
holders of common stock were subject to, and qualified by, the
rights, powers, and preferences of the holders of Series B and
Series A-1.
Upon the closing of the IPO, the Company amended and restated its
certificate of incorporation to provide for
100,000,000
shares designated as common stock with a par value of
$0.0001
per share as part of its authorized capital.
Restricted Stock
The Company issued restricted stock to its founders and certain
officers of the Company. In general, the shares of restricted stock
vest over a
four-year
period, with
25%
of the shares vesting after one year, followed by monthly vesting
over the remaining three years. As of March 31, 2022, all
restricted stock awards were fully vested.
Common Stock Warrants
The Company issued warrants to purchase common stock (the “Common
Stock Warrants”) in connection with a preferred stock financing in
March 2016. The Common Stock Warrants allow for the holders to
purchase
71,544
shares of common stock at $1.21
per share. As of March 31, 2022, all of the Common Stock Warrants
were fully exercisable. The Common Stock Warrants expire in
2031.
Reserved Shares
The Company has reserved the following shares of common stock for
the conversion or exercise of the following securities:
|
|
|
|
|
|
|
|
|
|
|
|
MARCH 31,
2022
|
|
|
DECEMBER 31,
2021
|
|
|
Exercise of Common Stock Warrants
|
|
|
71,544
|
|
|
|
71,544
|
|
|
Exercise of options to purchase common stock
|
|
|
4,584,601
|
|
|
|
3,681,793
|
|
|
Shares available for issuance under employee stock purchase
plan
|
|
|
280,000
|
|
|
|
—
|
|
|
Shares available for issuance under equity incentive
plans
|
|
|
2,486,854
|
|
|
|
2,132,067
|
|
|
Total
|
|
|
7,422,999
|
|
|
|
5,885,404
|
|
8. Equity Incentive Plans
The Company adopted the 2016 Equity Incentive Plan, as amended,
(the “2016 Plan”) on March 31, 2016. The 2016 Plan provided for the
granting of stock options, restricted stock awards, restricted
stock units, stock appreciation rights and other stock awards to
employees, directors and non-employees. All option awards were
granted with an exercise price equal to or greater than the market
price of the Company’s stock at the date of grant. Option awards
generally vest over
three
to
four years.
Certain option awards provide for accelerated vesting if there is a
change in control as defined in the 2016 Plan. The provisions of
the 2016 Plan allow for early exercises for options that have not
yet vested. Early exercises have historically been for a de minimis
number of shares.
On
September 23, 2020, the Company adopted the 2020 Equity Incentive
Plan (the “2020 Plan”), which became effective upon the execution
of the underwriting agreement related to the IPO and serves as the
successor to the 2016 Plan. The 2020 Plan authorizes the
13
award
of stock options, restricted stock awards, stock appreciation
rights, restricted stock units, cash awards, performance awards and
stock bonus awards.
The number of shares reserved for issuance under the 2020 Plan will
increase automatically on January 1 of each fiscal year, starting
on January 1, 2021 and ending on and including January 1, 2030, by
the number of shares equal to
5%
of the aggregate number of outstanding shares of common stock as of
the immediately preceding December 31, or a lesser number of shares
as may be determined by the board of directors (or an authorized
committee thereof).
On January 1, 2022, the number of shares reserved for issuance
under the 2020 Plan automatically increased by
1,292,458
shares of common stock.
At March 31, 2022, there
were
2,486,854
shares
of common stock available for issuance under the 2020
Plan.
On September 23, 2020, the Company adopted the 2020 Employee Stock
Purchase Plan (the "ESPP"), which became effective upon the
execution of the underwriting agreement related to the IPO. The
Company initially reserved
280,000
shares of common stock for sale under the ESPP.
The aggregate number of shares reserved for sale under the ESPP
will increase automatically on January 1st of each fiscal year
starting on January 1, 2021 and ending on and including January 1,
2030, by the number of shares equal to the lesser of (a) 1% of the
total number of shares of common stock outstanding on the last day
of the fiscal year prior to the date of such automatic increase and
(b)
560,000
shares, provided that prior to the date of any such increase, the
board of directors may determine a lesser number of shares for such
increase.
In December 2021, the board of directors determined that there
would be
no
automatic increase in the number of shares of common stock reserved
under the ESPP on January 1, 2022. The ESPP provides for six-month
option periods commencing on January 1 and ending on June 30 and
commencing on July 1 and ending on December 31 of each calendar
year. The first offering under the ESPP began on January 1,
2022.
Total stock-based compensation was classified as follows on the
unaudited interim condensed consolidated statements of operations
(in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
THREE MONTHS ENDED
MARCH 31,
|
|
|
|
|
2022
|
|
|
2021
|
|
|
|
|
|
|
|
General and administrative
|
|
$
|
1,262
|
|
|
$
|
739
|
|
|
Research and development
|
|
|
718
|
|
|
|
433
|
|
|
|