Form 10-Q - Quarterly report [Sections 13 or 15(d)]
07 November 2024 - 8:27AM
Edgar (US Regulatory)
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
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☒ |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended September 30, 2024
OR
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☐ |
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: 001-39527
PRELUDE THERAPEUTICS INCORPORATED
(Exact Name of Registrant as Specified in its Charter)
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Delaware |
81-1384762 |
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer
Identification No.) |
175 Innovation Boulevard Wilmington, Delaware |
19805 |
(Address of principal executive offices) |
(Zip Code) |
Registrant’s telephone number, including area code: (302) 467-1280
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 |
Common Stock, par value $0.0001 per share |
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PRLD |
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Nasdaq Global Select Market |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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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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☒ |
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Smaller reporting company |
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☒ |
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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 November 4, 2024, the registrant had 55,035,170 shares of voting and non-voting common stock, $0.0001 par value per share, outstanding.
Table of Contents
PART I—FINANCIAL INFORMATION
Item 1. Financial Statements.
PRELUDE THERAPEUTICS INCORPORATED
BALANCE SHEETS
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(in thousands, except share data) |
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September 30,
2024 |
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December 31,
2023 |
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Assets |
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(unaudited) |
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Current assets: |
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Cash and cash equivalents |
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$ |
11,134 |
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$ |
25,291 |
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Marketable securities |
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142,492 |
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207,644 |
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Prepaid expenses and other current assets |
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2,761 |
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2,654 |
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Total current assets |
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156,387 |
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235,589 |
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Restricted cash |
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4,044 |
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4,044 |
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Property and equipment, net |
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7,202 |
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7,325 |
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Operating lease right-of-use asset |
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29,182 |
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30,412 |
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Other assets |
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405 |
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295 |
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Total assets |
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$ |
197,220 |
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$ |
277,665 |
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Liabilities and stockholders’ equity |
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Current liabilities: |
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Accounts payable |
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$ |
5,921 |
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$ |
4,580 |
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Accrued expenses and other current liabilities |
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13,579 |
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15,768 |
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Operating lease liability |
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2,365 |
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1,481 |
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Finance lease liability |
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359 |
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— |
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Total current liabilities |
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22,224 |
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21,829 |
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Other liabilities |
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3,153 |
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3,339 |
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Operating lease liability |
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15,412 |
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15,407 |
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Total liabilities |
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40,789 |
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40,575 |
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Commitments (Note 8) |
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Stockholders’ equity: |
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Voting common stock, $0.0001 par value: 487,149,741 shares authorized; 42,178,012 and 42,063,995 shares issued and outstanding at September 30, 2024 and December 31, 2023, respectively |
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4 |
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4 |
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Non-voting common stock, $0.0001 par value: 12,850,259 shares authorized; 12,850,259 shares issued and outstanding at both September 30, 2024 and December 31, 2023 |
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1 |
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1 |
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Additional paid-in capital |
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711,091 |
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693,252 |
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Accumulated other comprehensive income |
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167 |
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223 |
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Accumulated deficit |
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(554,832 |
) |
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(456,390 |
) |
Total stockholders’ equity |
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156,431 |
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237,090 |
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Total liabilities and stockholders’ equity |
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$ |
197,220 |
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$ |
277,665 |
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See accompanying notes to unaudited interim financial statements.
PRELUDE THERAPEUTICS INCORPORATED
STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(UNAUDITED)
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Three Months Ended September 30, |
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Nine Months Ended September 30, |
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(in thousands, except share and per share data) |
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2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
Revenue from license agreement |
|
$ |
3,000 |
|
|
$ |
— |
|
|
$ |
3,000 |
|
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
Research and development |
|
|
29,457 |
|
|
|
26,261 |
|
|
|
86,375 |
|
|
|
73,061 |
|
General and administrative |
|
|
7,919 |
|
|
|
7,124 |
|
|
|
22,508 |
|
|
|
21,837 |
|
Total operating expenses |
|
|
37,376 |
|
|
|
33,385 |
|
|
|
108,883 |
|
|
|
94,898 |
|
Loss from operations |
|
|
(34,376 |
) |
|
|
(33,385 |
) |
|
|
(105,883 |
) |
|
|
(94,898 |
) |
Other income, net |
|
|
2,105 |
|
|
|
2,777 |
|
|
|
7,441 |
|
|
|
6,141 |
|
Net loss |
|
$ |
(32,271 |
) |
|
$ |
(30,608 |
) |
|
$ |
(98,442 |
) |
|
$ |
(88,757 |
) |
Per share information: |
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per share of common stock, basic and diluted |
|
$ |
(0.43 |
) |
|
$ |
(0.45 |
) |
|
$ |
(1.30 |
) |
|
$ |
(1.55 |
) |
Weighted average common shares outstanding, basic
and diluted |
|
|
75,855,949 |
|
|
|
67,639,993 |
|
|
|
75,784,902 |
|
|
|
57,278,795 |
|
Comprehensive loss: |
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(32,271 |
) |
|
$ |
(30,608 |
) |
|
$ |
(98,442 |
) |
|
$ |
(88,757 |
) |
Unrealized gain (loss) on marketable securities, net of tax |
|
|
457 |
|
|
|
106 |
|
|
|
(56 |
) |
|
|
1,087 |
|
Comprehensive loss |
|
$ |
(31,814 |
) |
|
$ |
(30,502 |
) |
|
$ |
(98,498 |
) |
|
$ |
(87,670 |
) |
See accompanying notes to unaudited interim financial statements.
PRELUDE THERAPEUTICS INCORPORATED
STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(UNAUDITED)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Voting common stock |
|
|
Non-voting common
stock |
|
|
Additional paid-in |
|
|
Accumulated other comprehensive |
|
|
Accumulated |
|
|
|
|
(in thousands, except shares) |
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
capital |
|
|
loss |
|
|
deficit |
|
|
Total |
|
Balance at January 1, 2024 |
|
|
42,063,995 |
|
|
$ |
4 |
|
|
|
12,850,259 |
|
|
$ |
1 |
|
|
$ |
693,252 |
|
|
$ |
223 |
|
|
$ |
(456,390 |
) |
|
$ |
237,090 |
|
Issuance of common stock upon exercise of stock options & vesting of RSUs, net of 4,285 shares withheld for employee taxes |
|
|
7,510 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(14 |
) |
|
|
— |
|
|
|
— |
|
|
|
(14 |
) |
Unrealized loss on marketable securities, net of tax |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(458 |
) |
|
|
— |
|
|
|
(458 |
) |
Stock-based compensation expense |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
5,547 |
|
|
|
— |
|
|
|
— |
|
|
|
5,547 |
|
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(31,431 |
) |
|
|
(31,431 |
) |
Balance at March 31, 2024 |
|
|
42,071,505 |
|
|
$ |
4 |
|
|
|
12,850,259 |
|
|
$ |
1 |
|
|
$ |
698,785 |
|
|
$ |
(235 |
) |
|
$ |
(487,821 |
) |
|
$ |
210,734 |
|
Issuance of common stock upon exercise of stock options & vesting of RSU's, net of 3,722 shares withheld for employee taxes |
|
|
7,803 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(16 |
) |
|
|
— |
|
|
|
— |
|
|
|
(16 |
) |
Issuance of common stock under ESPP |
|
|
78,916 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
255 |
|
|
|
— |
|
|
|
— |
|
|
|
255 |
|
Unrealized loss on marketable securities, net of tax |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(55 |
) |
|
|
— |
|
|
|
(55 |
) |
Stock-based compensation expense |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
6,098 |
|
|
|
— |
|
|
|
— |
|
|
|
6,098 |
|
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(34,740 |
) |
|
|
(34,740 |
) |
Balance at June 30, 2024 |
|
|
42,158,224 |
|
|
$ |
4 |
|
|
|
12,850,259 |
|
|
$ |
1 |
|
|
$ |
705,122 |
|
|
$ |
(290 |
) |
|
$ |
(522,561 |
) |
|
$ |
182,276 |
|
Issuance of common stock upon exercise of stock options & vesting of RSU's, net of 3,722 shares withheld for employee taxes |
|
|
19,788 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
43 |
|
|
|
— |
|
|
|
— |
|
|
|
43 |
|
Unrealized gain on marketable securities |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
457 |
|
|
|
— |
|
|
|
457 |
|
Stock-based compensation expense |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
5,926 |
|
|
|
— |
|
|
|
— |
|
|
|
5,926 |
|
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(32,271 |
) |
|
|
(32,271 |
) |
Balance at September 30, 2024 |
|
|
42,178,012 |
|
|
$ |
4 |
|
|
|
12,850,259 |
|
|
$ |
1 |
|
|
$ |
711,091 |
|
|
$ |
167 |
|
|
$ |
(554,832 |
) |
|
$ |
156,431 |
|
See accompanying notes to unaudited interim financial statements.
PRELUDE THERAPEUTICS INCORPORATED
STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (CONTINUED)
(UNAUDITED)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Voting common stock |
|
|
Non-voting common stock |
|
|
Additional paid-in |
|
|
Accumulated other comprehensive |
|
|
Accumulated |
|
|
|
|
(in thousands, except shares) |
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
capital |
|
|
loss |
|
|
deficit |
|
|
Total |
|
Balance at January 1, 2023 |
|
|
36,496,994 |
|
|
$ |
4 |
|
|
|
11,402,037 |
|
|
$ |
1 |
|
|
$ |
531,682 |
|
|
$ |
(1,692 |
) |
|
$ |
(334,558 |
) |
|
$ |
195,437 |
|
Issuance of common stock upon exercise of stock options & vesting of RSUs |
|
|
17,224 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
28 |
|
|
|
— |
|
|
|
— |
|
|
|
28 |
|
Unrealized gain on marketable securities, net of tax |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
1,294 |
|
|
|
— |
|
|
|
1,294 |
|
Stock-based compensation expense |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
6,256 |
|
|
|
— |
|
|
|
— |
|
|
|
6,256 |
|
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(27,718 |
) |
|
|
(27,718 |
) |
Balance at March 31, 2023 |
|
|
36,514,218 |
|
|
$ |
4 |
|
|
|
11,402,037 |
|
|
$ |
1 |
|
|
$ |
537,966 |
|
|
$ |
(398 |
) |
|
$ |
(362,276 |
) |
|
$ |
175,297 |
|
Issuance of common stock and prefunded warrants, net of issuance costs of $2.6 million |
|
|
5,312,978 |
|
|
|
— |
|
|
|
1,448,222 |
|
|
|
— |
|
|
|
110,423 |
|
|
|
— |
|
|
|
— |
|
|
|
110,423 |
|
Issuance of common stock upon exercise of stock options & vesting of RSU's |
|
|
40,461 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
3 |
|
|
|
— |
|
|
|
— |
|
|
|
3 |
|
Issuance of common stock under ESPP |
|
|
90,799 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
348 |
|
|
|
— |
|
|
|
— |
|
|
|
348 |
|
Unrealized loss on marketable securities, net of tax |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(313 |
) |
|
|
— |
|
|
|
(313 |
) |
Stock-based compensation expense |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
6,733 |
|
|
|
— |
|
|
|
— |
|
|
|
6,733 |
|
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(30,431 |
) |
|
|
(30,431 |
) |
Balance at June 30, 2023 |
|
|
41,958,456 |
|
|
$ |
4 |
|
|
|
12,850,259 |
|
|
$ |
1 |
|
|
$ |
655,473 |
|
|
$ |
(711 |
) |
|
$ |
(392,707 |
) |
|
$ |
262,060 |
|
Issuance of common stock upon vesting of RSU's, net of 3,609 shares withheld for employee taxes |
|
|
7,016 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(16 |
) |
|
|
— |
|
|
|
— |
|
|
|
(16 |
) |
Unrealized gain on marketable securities |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
106 |
|
|
|
— |
|
|
|
106 |
|
Stock-based compensation expense, net of forfeitures of restricted stock awards |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
6,715 |
|
|
|
— |
|
|
|
— |
|
|
|
6,715 |
|
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(30,608 |
) |
|
|
(30,608 |
) |
Balance at September 30, 2023 |
|
|
41,965,472 |
|
|
$ |
4 |
|
|
|
12,850,259 |
|
|
$ |
1 |
|
|
$ |
662,172 |
|
|
$ |
(605 |
) |
|
$ |
(423,315 |
) |
|
$ |
238,257 |
|
See accompanying notes to unaudited interim financial statements.
PRELUDE THERAPEUTICS INCORPORATED
STATEMENTS OF CASH FLOWS
(UNAUDITED)
|
|
|
|
|
|
|
|
|
|
|
Nine months ended September 30, |
|
(in thousands) |
|
2024 |
|
|
2023 |
|
Cash flows used in operating activities: |
|
|
|
|
|
|
Net loss |
|
$ |
(98,442 |
) |
|
$ |
(88,757 |
) |
Adjustments to reconcile net loss to net cash used in operating activities: |
|
|
|
|
|
|
Depreciation and amortization |
|
|
1,283 |
|
|
|
838 |
|
Noncash lease expense |
|
|
1,203 |
|
|
|
1,328 |
|
Stock-based compensation |
|
|
17,571 |
|
|
|
19,704 |
|
Amortization of premium and discount on marketable securities, net |
|
|
(3,688 |
) |
|
|
(2,402 |
) |
Changes in operating assets and liabilities: |
|
|
|
|
|
|
Prepaid expenses and other current assets |
|
|
(107 |
) |
|
|
(2,053 |
) |
Accounts payable |
|
|
1,495 |
|
|
|
(1,805 |
) |
Accrued expenses and other liabilities |
|
|
(2,375 |
) |
|
|
(1,873 |
) |
Long-term prepaid expenses and other long-term assets |
|
|
— |
|
|
|
(7,108 |
) |
Operating lease liabilities |
|
|
916 |
|
|
|
(1,357 |
) |
Net cash used in operating activities |
|
|
(82,144 |
) |
|
|
(83,485 |
) |
Cash flows provided by investing activities: |
|
|
|
|
|
|
Purchases of marketable securities |
|
|
(45,366 |
) |
|
|
(162,248 |
) |
Proceeds from maturities of marketable securities |
|
|
114,150 |
|
|
|
122,250 |
|
Purchases of property and equipment |
|
|
(711 |
) |
|
|
(2,384 |
) |
Net cash provided by (used in) investing activities |
|
|
68,073 |
|
|
|
(42,382 |
) |
Cash flows used in financing activities: |
|
|
|
|
|
|
Payment of offering costs |
|
|
(110 |
) |
|
|
— |
|
Proceeds from issuance of common stock and pre-funded warrants, net of offering costs |
|
|
— |
|
|
|
110,795 |
|
Proceeds from the issuance of common stock under ESPP |
|
|
255 |
|
|
|
348 |
|
Proceeds from the issuance of common stock in connection with the exercise of stock options |
|
|
60 |
|
|
|
31 |
|
Payment of withholding taxes related to stock-based compensation to employees |
|
|
(47 |
) |
|
|
(16 |
) |
Principal payments on finance lease liabilities |
|
|
(244 |
) |
|
|
— |
|
Net cash (used in) provided by financing activities |
|
|
(86 |
) |
|
|
111,158 |
|
Net decrease in cash, cash equivalents and restricted cash |
|
|
(14,157 |
) |
|
|
(14,709 |
) |
Cash, cash equivalents, and restricted cash at beginning of period |
|
|
29,335 |
|
|
|
34,649 |
|
Cash, cash equivalents, and restricted cash at end of period |
|
$ |
15,178 |
|
|
$ |
19,940 |
|
|
|
|
|
|
|
|
Supplemental disclosures of non-cash activities: |
|
|
|
|
|
|
Property and equipment in accounts payable and accrued expenses and other current liabilities |
|
$ |
9 |
|
|
$ |
254 |
|
Offering costs in accrued expenses and other current liabilities |
|
$ |
— |
|
|
$ |
28 |
|
Offering costs in accounts payable |
|
$ |
— |
|
|
$ |
34 |
|
Unrealized (loss) gain on marketable securities |
|
$ |
(56 |
) |
|
$ |
1,087 |
|
|
|
|
|
|
|
|
See accompanying notes to unaudited interim financial statements.
PRELUDE THERAPEUTICS INCORPORATED
NOTES TO UNAUDITED INTERIM FINANCIAL STATEMENTS
1. Background
Prelude Therapeutics Incorporated (the “Company”) is a clinical-stage fully integrated oncology company built on a foundation of drug discovery excellence to deliver novel precision cancer medicines to underserved patients. Since beginning operations in 2016, the Company has devoted substantially all its efforts to research and development, conducting preclinical and clinical studies, recruiting management and technical staff, administration, and raising capital.
2. Risks and liquidity
The Company faces a number of risks common to early-stage companies in the biotechnology industry. Principal among these risks are the uncertainties in the development process, development of the same or similar technological innovations by competitors, protection of proprietary technology, dependence on key personnel, compliance with government regulations and approval requirements, and the need to obtain additional financing 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 infrastructure, and extensive compliance-reporting capabilities. There can be no assurance that the Company’s research and development will be successfully completed, adequate protection for the Company’s technology will be obtained, any products developed will obtain necessary government regulatory approval, or any approved products will be commercially viable. The Company operates in an environment of rapid change in technology and substantial competition from pharmaceutical and biotechnology companies.
Since its inception, the Company has incurred operating losses and had an accumulated deficit of $554.8 million at September 30, 2024. The Company has no product revenue to-date and devotes its efforts to research and development. The Company anticipates incurring additional losses until such time, if ever, that it can generate significant sales of its product candidates currently in development.
The Company believes its cash, cash equivalents, and marketable securities as of September 30, 2024 will be sufficient to fund its operating expenses and capital expenditure requirements for at least the next twelve months from the filing date of this Quarterly Report on Form 10-Q.
To fund its operating expenses and capital expenditure requirements after that date, the Company plans to seek additional funding through public or private equity offerings, debt financings, collaborations, strategic alliances and licensing arrangements. The Company may not be able to obtain financing on acceptable terms, or at all, and the Company may not be able to enter into strategic alliances or other arrangements on favorable terms, or at all. The terms of any financing may adversely affect the holdings or the rights of the Company’s stockholders. If the Company is unable to obtain funding, it could be required to delay, reduce or eliminate research and development programs, product portfolio expansion or future commercialization efforts, which could adversely affect its business prospects.
3. Summary of significant accounting policies
The complete summary of significant accounting policies included in the Company’s financial statements for the year ended December 31, 2023 can be found in “Note 3. Summary of significant accounting policies” of the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”) on February 15, 2024.
Basis of presentation
The accompanying unaudited interim financial statements have been prepared in accordance with generally accepted accounting principles (“GAAP”) for interim financial information, the instructions to Form 10-Q and Article 10 of Regulation S-X. They do not include all of the information and notes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and nine months ended September 30, 2024 are not necessarily indicative of the results that may be expected for the year ending December 31, 2024. The accompanying unaudited interim financial statements should be read in conjunction with the annual audited financial statements and related notes as of and for the year ended December 31, 2023 found in the Company's Annual Report on Form 10-K filed with the SEC on February 15, 2024. Any reference in these notes to applicable guidance is meant to refer to GAAP as found in the Accounting Standards Codification (“ASC”) and Accounting Standards Updates (“ASU”) of the Financial Accounting Standards Board (“FASB”).
Use of estimates
The preparation of the unaudited interim financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and contingent liabilities at the date of the unaudited interim financial statements and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates.
Estimates and assumptions are periodically reviewed, and the effects of the revisions are reflected in the accompanying unaudited interim financial statements in the period they are determined to be necessary. The most significant estimate relates to accrued clinical trial expenses.
Income taxes
Based upon the historical and anticipated future losses, management has determined that the deferred tax assets generated by net operating losses and research and development credits do not meet the more likely than not threshold for realizability. Accordingly, a full valuation allowance has been recorded against the Company’s net deferred tax assets as of September 30, 2024 and December 31, 2023.
Cash, Cash Equivalents and Restricted cash
The Company’s cash equivalents include short-term highly liquid investments with an original maturity of 90 days or less when purchased and are carried at fair value in the accompanying balance sheets.
Restricted cash consists of a letter of credit for the benefit of the landlord in connection with the Company’s Chestnut Run Lease. See Note 8 for further details.
The following table provides a reconciliation of cash and cash equivalents and restricted cash reported within the balance sheet that total to the amounts shown in the statement of cash flows:
|
|
|
|
|
|
|
|
|
(in thousands) |
|
September 30,
2024 |
|
|
December 31,
2023 |
|
Cash and cash equivalents |
|
$ |
11,134 |
|
|
$ |
25,291 |
|
Restricted cash |
|
|
4,044 |
|
|
|
4,044 |
|
Total cash, cash equivalents, and restricted cash shown in statement of cash flows |
|
$ |
15,178 |
|
|
$ |
29,335 |
|
Marketable Securities
The Company’s marketable securities consist of investments in corporate debt securities, United States (“U.S.”) government debt securities, and agency securities that are classified as available-for-sale. The securities are carried at fair value with the unrealized gains and losses, net of tax, included in accumulated other comprehensive loss, a component of stockholders’ equity. Realized gains and losses as well as credit losses, if any, on marketable securities are included in the Company’s statements of operations. The Company classifies marketable securities that are available for use in current operations as current assets on the balance sheets.
Revenue Recognition
The Company recognizes revenue under Accounting Standard Codification 606 – Revenue from Contracts with Customers. Under ASC 606, the Company recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration which the Company expects to receive in exchange for those goods or services. The Company's revenue recognition analysis consists of the following steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations; and (v) recognition of revenue as we satisfy each performance obligation.
The Company evaluates all promised goods and services within a customer contract and determines which goods and services are separate performance obligations. This evaluation includes an assessment of whether the good or service is capable of being distinct and whether the good or service is separable from other promises in the contract.
The transaction price is determined based on the amount of consideration to which the Company expects to be entitled in exchange for transferring promised goods or services to a customer. The Company recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligations when (or as) the performance obligations are satisfied. The Company recognizes a liability when the Company has received payment but has not yet satisfied the related performance obligations.
Net Loss Per Share
Basic net loss per share of common stock is computed by dividing net loss by the weighted-average number of shares of common stock outstanding during each period, including pre-funded warrants to purchase shares of common stock. The weighted-average number of shares of common stock outstanding used in the basic net loss per share calculation does not include unvested restricted stock awards as these instruments are considered contingently issuable shares until they vest. Diluted net loss per share of common stock includes the effect, if any, from the potential exercise of securities, such as stock options, and the effect from unvested restricted stock awards and restricted stock units which would result in the issuance of incremental shares of common stock. For diluted net loss per share, the weighted-average number of shares of common stock is the same for basic net loss per share due to the fact that when a net loss exists, dilutive securities are not included in the calculation as the impact is anti-dilutive. The Company’s unvested restricted stock awards entitle the holder to participate in dividends and earnings of the Company, and, if the Company were to recognize net income, it would have to use the two-class method to calculate earnings per share. The two-class method is not applicable during periods with a net loss, as the holders of the unvested restricted stock awards have no obligation to fund losses.
The following potentially dilutive securities have been excluded from the computation of diluted weighted-average shares of common stock outstanding, as they would be anti-dilutive:
|
|
|
|
|
|
|
|
|
|
|
September 30, |
|
|
|
2024 |
|
|
2023 |
|
Unvested restricted stock awards |
|
|
— |
|
|
|
54,026 |
|
Unvested restricted stock units |
|
|
71,875 |
|
|
|
114,375 |
|
Stock options |
|
|
15,036,871 |
|
|
|
12,134,205 |
|
Employee stock purchase plan |
|
|
99,150 |
|
|
|
74,248 |
|
|
|
|
15,207,896 |
|
|
|
12,376,854 |
|
Amounts in the above table reflect the common stock equivalents.
Recently Issued Accounting Pronouncements
Emerging Growth Company Status
The Company is an emerging growth company, as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act, until such time as those standards apply to private companies. The Company has elected to use this extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date that it (i) is no longer an emerging growth company or (ii) affirmatively and irrevocably opts out of the extended transition period provided in the JOBS Act. As a result, these unaudited interim financial statements may not be comparable to companies that comply with the new or revised accounting pronouncements as of public company effective dates.
Accounting guidance not yet adopted
In November 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU"), 2023-07, Segment Reporting (Topic 280) – Improvements to Reportable Segment Disclosures. This ASU expands segment disclosures by requiring disclosure of significant segment expenses that are regularly provided to the chief operating decision maker and included within each reported measure of segment profit or loss, an amount for other segment items and a description of its composition, and interim disclosures of a reportable segment’s profit or loss and assets. The disclosures required under ASU 2023-07 are also required for public entities with a single reportable segment. The amendments in this ASU are effective for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The Company is currently evaluating the impact of this standard but does not expect that it will have a material impact on the financial statements and related disclosures.
In December 2023, the FASB issued ASU 2023-09, Income Taxes - Improvements to Income Tax Disclosures. ASU 2023-09 requires enhanced income tax disclosures related to the rate reconciliation and income taxes paid information. For public business entities, the amendments in this ASU are effective for annual periods beginning after December 15, 2024 with early adoption permitted. The Company is currently evaluating the impact of this standard but does not expect that it will have a material impact on the financial statements and related disclosures.
4. Marketable Securities
The following provides detail of the Company's marketable securities.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands) |
|
Amortized Cost |
|
|
Gross unrealized gain |
|
|
Gross unrealized loss |
|
|
Fair Value |
|
September 30, 2024 |
|
|
|
|
|
|
|
|
|
|
|
|
Marketable securities: |
|
|
|
|
|
|
|
|
|
|
|
|
Agency securities |
|
$ |
8,570 |
|
|
$ |
6 |
|
|
$ |
— |
|
|
$ |
8,576 |
|
Corporate debt securities |
|
|
68,170 |
|
|
|
128 |
|
|
|
(7 |
) |
|
|
68,291 |
|
U.S. government securities |
|
|
65,585 |
|
|
|
41 |
|
|
|
(1 |
) |
|
|
65,625 |
|
Total marketable securities |
|
$ |
142,325 |
|
|
$ |
175 |
|
|
$ |
(8 |
) |
|
$ |
142,492 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2023 |
|
|
|
|
|
|
|
|
|
|
|
|
Marketable securities: |
|
|
|
|
|
|
|
|
|
|
|
|
Agency securities |
|
$ |
10,431 |
|
|
$ |
19 |
|
|
$ |
— |
|
|
$ |
10,450 |
|
Corporate debt securities |
|
|
67,806 |
|
|
|
193 |
|
|
|
(20 |
) |
|
|
67,979 |
|
U.S. government securities |
|
|
129,184 |
|
|
|
72 |
|
|
|
(41 |
) |
|
|
129,215 |
|
Total marketable securities |
|
$ |
207,421 |
|
|
$ |
284 |
|
|
$ |
(61 |
) |
|
$ |
207,644 |
|
The Company’s marketable securities generally have contractual maturity dates of 16 months or less. As of September 30, 2024, the Company had 9 securities with a total fair market value of $23.0 million in an unrealized loss position. The Company believes any unrealized losses associated with the decline in value of its securities is temporary and is primarily related to market factors. Furthermore, the Company believes it is more likely than not that it will be able to hold its marketable securities to maturity. Therefore, the Company anticipates a full recovery of the amortized cost basis of its marketable securities at maturity and an allowance for credit losses was not recognized.
5. Fair Value of Financial Instruments
Fair value is the price that could be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. Fair value determination in accordance with applicable accounting guidance requires that a number of significant judgments be made. Additionally, fair value is used on a nonrecurring basis to evaluate assets for impairment or as required for disclosure purposes by applicable accounting guidance on disclosures about fair value of financial instruments. Depending on the nature of the assets and liabilities, various valuation techniques and assumptions are used when estimating fair value. The Company follows the provisions of ASC 820, Fair Value Measurement, for financial assets and liabilities measured on a recurring basis. The guidance requires fair value measurements be classified and disclosed in one of the following three categories:
•Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.
•Level 2: Quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liabilities.
•Level 3: Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported by little or no market activity).
The following fair value hierarchy table presents information about the Company’s assets and liabilities measured at fair value on a recurring basis:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value measurement at reporting date using |
|
(in thousands) |
|
Quoted prices
in active
markets for
identical
assets
(Level 1) |
|
|
Significant
other
observable
inputs
(Level 2) |
|
|
Significant
unobservable
inputs
(Level 3) |
|
September 30, 2024 |
|
|
|
|
|
|
|
|
|
Assets |
|
|
|
|
|
|
|
|
|
Cash equivalents: |
|
|
|
|
|
|
|
|
|
Money Market Funds |
|
$ |
6,149 |
|
|
$ |
— |
|
|
$ |
— |
|
U.S. government securities |
|
|
— |
|
|
|
3,499 |
|
|
|
— |
|
Total cash equivalents |
|
|
6,149 |
|
|
|
3,499 |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
Marketable securities: |
|
|
|
|