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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)

 

 

Delaware

 

47-3779757

(State or other jurisdiction of

incorporation or organization)

 

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

 

 

 

50 Hampshire Street, Suite 401

Cambridge, Massachusetts

 

02139

(Address of principal executive offices)

 

(Zip Code)

Registrant’s telephone number, including area code: (857) 320-6400

 

 

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

 

ONCR

 

The Nasdaq Stock Market LLC

 

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 April 29, 2022, the registrant had 25,884,023 shares of common stock, $0.0001 par value per share, outstanding.

 


 

Table of Contents

 

 

 

Page

 

 

 

PART I.

FINANCIAL INFORMATION

3

Item 1.

Financial Statements (Unaudited)

3

 

Condensed Consolidated Balance Sheets

3

 

Condensed Consolidated Statements of Operations and Comprehensive Loss

4

 

Condensed Consolidated Statements of Stockholders’ Equity

5

 

Condensed Consolidated Statements of Cash Flows

6

 

Notes to Condensed Consolidated Financial Statements

7

Item 2.

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

16

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

26

Item 4.

Controls and Procedures

26

 

 

 

PART II.

OTHER INFORMATION

27

Item 1.

Legal Proceedings

27

Item 1A.

Risk Factors

27

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

28

Item 3.

Defaults Upon Senior Securities

28

Item 4.

Mine Safety Disclosures

28

Item 5.

Other Information

28

Item 6.

Exhibits

29

Signatures

30

 

 

 

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)

 

 

 

MARCH 31,
2022

 

 

DECEMBER 31,
2021

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

75,509

 

 

$

100,752

 

Investments

 

 

23,156

 

 

 

23,173

 

Prepaid expenses and other current assets

 

 

3,943

 

 

 

5,185

 

Total current assets

 

 

102,608

 

 

 

129,110

 

Property and equipment, net

 

 

29,491

 

 

 

23,233

 

Right-of-use asset

 

 

40,183

 

 

 

45,218

 

Restricted cash

 

 

3,437

 

 

 

3,437

 

Other assets

 

 

849

 

 

 

589

 

Total assets

 

$

176,568

 

 

$

201,587

 

Liabilities and stockholders’ equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

3,582

 

 

$

13,009

 

Accrued expenses

 

 

6,885

 

 

 

6,281

 

Lease liability - current portion

 

 

1,678

 

 

 

1,684

 

Total current liabilities

 

 

12,145

 

 

 

20,974

 

Lease liability - net of current portion

 

 

49,921

 

 

 

50,388

 

Other long-term liabilities

 

 

244

 

 

 

203

 

Total liabilities

 

 

62,310

 

 

 

71,565

 

Stockholders’ equity:

 

 

 

 

 

 

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

 

 

 

 

 

 

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

 

 

3

 

 

 

3

 

Additional paid-in capital

 

 

326,662

 

 

 

324,620

 

Accumulated other comprehensive loss

 

 

(40

)

 

 

(14

)

Accumulated deficit

 

 

(212,367

)

 

 

(194,587

)

Total stockholders’ equity

 

 

114,258

 

 

 

130,022

 

Total liabilities and stockholders’ equity

 

$

176,568

 

 

$

201,587

 

 

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)

 

 

 

THREE MONTHS ENDED
MARCH 31,

 

 

 

2022

 

 

2021

 

Operating expenses:

 

 

 

 

 

 

Research and development

 

$

12,469

 

 

$

8,447

 

General and administrative

 

 

5,349

 

 

 

4,222

 

Total operating expenses

 

 

17,818

 

 

 

12,669

 

Loss from operations

 

 

(17,818

)

 

 

(12,669

)

Other income (expense):

 

 

 

 

 

 

Other expense

 

 

(38

)

 

 

 

Interest income

 

 

76

 

 

 

6

 

Total other income (expense), net

 

 

38

 

 

 

6

 

Net loss

 

$

(17,780

)

 

$

(12,663

)

Comprehensive loss:

 

 

 

 

 

 

Net unrealized loss on investments

 

 

(26

)

 

 

 

Comprehensive loss

 

$

(17,806

)

 

$

(12,663

)

Net loss per share—basic and diluted

 

$

(0.69

)

 

$

(0.53

)

Weighted-average number of common shares outstanding—basic and diluted

 

 

25,865

 

 

 

24,009

 

 

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)

 

 

COMMON STOCK

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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.

Use of Estimates

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


 

 

 

DECEMBER 31, 2021

 

 

 

AMORTIZED COST BASIS

 

 

GROSS UNREALIZED GAINS

 

 

GROSS UNREALIZED LOSSES

 

 

ESTIMATED FAIR VALUE

 

Cash Equivalents

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

$

98,900

 

 

$

 

 

$

 

 

$

98,900

 

Total Cash Equivalents

 

$

98,900

 

 

$

 

 

$

 

 

$

98,900

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investments

 

 

 

 

 

 

 

 

 

 

 

 

Commercial paper

 

$

11,084

 

 

$

 

 

$

 

 

$

11,084

 

Asset-backed securities

 

 

2,020

 

 

 

 

 

 

(2

)

 

 

2,018

 

U.S. treasury securities

 

 

4,812

 

 

 

 

 

 

(8

)

 

 

4,804

 

Corporate bonds

 

 

5,271

 

 

 

 

 

 

(4

)

 

 

5,267

 

Total Investments

 

$

23,187

 

 

$

 

 

$

(14

)

 

$

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):

 

 

 

FAIR VALUE MEASUREMENTS
AS OF MARCH 31, 2022

 

 

 

LEVEL 1

 

 

LEVEL 2

 

 

LEVEL 3

 

 

TOTAL

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

$

72,915

 

 

$

 

 

$

 

 

$

72,915

 

U.S. treasury securities

 

 

4,783

 

 

 

 

 

 

 

 

 

4,783

 

Commercial paper

 

 

 

 

 

11,104

 

 

 

 

 

 

11,104

 

Asset-backed securities

 

 

 

 

 

2,005

 

 

 

 

 

 

2,005

 

Corporate bonds

 

 

 

 

 

5,264

 

 

 

 

 

 

5,264

 

Total Assets

 

$

77,698

 

 

$

18,373

 

 

$

 

 

$

96,071

 

 

 

 

FAIR VALUE MEASUREMENTS
AS OF DECEMBER 31, 2021

 

 

 

LEVEL 1

 

 

LEVEL 2

 

 

LEVEL 3

 

 

TOTAL

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

$

98,900

 

 

$

 

 

$

 

 

$

98,900

 

U.S. treasury securities

 

 

4,804

 

 

 

 

 

 

 

 

 

4,804

 

Commercial paper

 

 

 

 

 

11,084

 

 

 

 

 

 

11,084

 

Asset-backed securities

 

 

 

 

 

2,018

 

 

 

 

 

 

2,018

 

Corporate bonds

 

 

 

 

 

5,267

 

 

 

 

 

 

5,267

 

Total Assets

 

$

103,704

 

 

$

18,369

 

 

$

 

 

$

122,073

 

 

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:

 

 

AS OF AND FOR
THREE MONTHS ENDED
MARCH 31,

 

2022

 

2021

Weighted average remaining lease term

13.5 years

 

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):

 

Year

 

Amount

 

2022

 

$

4,198

 

2023

 

 

6,380

 

2024

 

 

4,995

 

2025

 

 

5,145

 

2026

 

 

5,299

 

Thereafter

 

 

62,575

 

Total lease payments

 

 

88,592

 

Less imputed interest

 

 

(36,993

)

Total lease liabilities

 

$

51,599

 

 

 

 

 

Current portion

 

 

1,678

 

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):

 

 

 

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