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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 June 30, 2021

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: 001-40335

 

Biomea Fusion, Inc.

(Exact Name of Registrant as Specified in its Charter)

 

 

Delaware

82-2520134

( State or other jurisdiction of

incorporation or organization)

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

726 Main Street

Redwood City, California 94063

94063

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: (650) 980-9099

 

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

 

BMEA

 

The Nasdaq Global Select Market

 

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

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

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

 

Large accelerated filer

 

  

Accelerated filer

 

 

 

 

 

Non-accelerated filer

 

  

Smaller reporting company

 

 

 

 

 

 

 

 

Emerging growth company

 

 

 

 

 

 

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

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

As of August 5, 2021, the registrant had 28,998,352 shares of common stock, $0.0001 par value per share, outstanding.

 

 

 


 

Table of Contents

 

 

 

Page

PART I.

FINANCIAL INFORMATION

 

Item 1.

Financial Statements (Unaudited)

1

 

Condensed Balance Sheets

1

 

Condensed Statements of Operations and Comprehensive Loss

2

 

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

3

 

Condensed Consolidated Statements of Cash Flows

5

 

Notes to Unaudited Condensed Financial Statements

6

Item 2.

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

19

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

26

Item 4.

Controls and Procedures

26

PART II.

OTHER INFORMATION

 

Item 1.

Legal Proceedings

27

Item 1A.

Risk Factors

27

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

80

Item 3.

Defaults Upon Senior Securities

80

Item 4.

Mine Safety Disclosures

80

Item 5.

Other Information

80

Item 6.

Exhibits

81

Signatures

82

 

i


 

Special Note Regarding Forward Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements about us and our industry that involve substantial risks and uncertainties. All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q, including statements regarding our strategy, future financial condition, future operations, projected costs, prospects, plans, objectives of management and expected market growth, are forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “aim,” “anticipate,” “assume,” “believe,” “contemplate,” “continue,” “could,” “design,” “due,” “estimate,” “expect,” “goal,” “intend,” “may,” “objective,” “plan,” “positioned,” “potential,” “predict,” “seek,” “should,” “target,” “will,” “would” and other similar expressions that are predictions of or indicate future events and future trends, or the negative of these terms or other comparable terminology. These forward-looking statements include, but are not limited to, statements about:

our financial performance;

the sufficiency of our existing cash and cash equivalents to fund our future operating expenses and capital expenditure requirements;

our estimates regarding expenses, future revenue, capital requirements and needs for additional financing;

our anticipated use of our existing cash and cash equivalents and the proceeds from our initial public offering (“IPO”);

the implementation of our strategic plans for our business and product candidates;

the size of the market opportunity for our product candidates and our ability to maximize those opportunities;

the initiation, timing, progress and results of our research and development programs, preclinical studies, any clinical trials and, INDs, and other regulatory submissions;

the beneficial characteristics, safety, efficacy and therapeutic effects of our product candidates;

our estimates of the patient populations addressable by BMF-219, if approved, and the number of participants that will enroll in our planned clinical trials;

the ability of our clinical trials to demonstrate safety and efficacy of our product candidates, and other favorable results;

our plans relating to the clinical development of our product candidates, including the disease areas to be evaluated;

the timing, progress and focus of our future clinical trials, and the reporting of data from those trials;

our ability to obtain and maintain regulatory approval of our product candidates;

our plans relating to commercializing our product candidates, if approved;

the expected benefits of potential future strategic collaborations with third parties and our ability to attract collaborators with development, regulatory and commercialization expertise;

the success of competing therapies that are or may become available;

the timing or likelihood of regulatory filings and approvals, including our expectation to seek special designations, such as orphan drug designation, for our product candidates;

our plans relating to the further development and manufacturing of our product candidates, including for additional indications that we may pursue;

existing regulations and regulatory developments in the United States and other jurisdictions;

our plans and ability to obtain or protect intellectual property rights, including extensions of existing patent terms where available;

our plan to rely on third parties to conduct and support preclinical and clinical development;

our ability to retain the continued service of our key personnel and to identify, hire and then retain additional qualified personnel;

the impact of the ongoing COVID-19 pandemic or other related disruptions on our business; and

our expectations regarding the period during which we will qualify as an emerging growth company under the Jumpstart Our Business Startups Act of 2012, as amended.

ii


We have based these forward-looking statements largely on our current expectations, estimates, forecasts and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs. In light of the significant uncertainties in these forward-looking statements, you should not rely upon forward-looking statements as predictions of future events. Although we believe that we have a reasonable basis for each forward-looking statement contained in this Quarterly Report on Form 10-Q, 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 at all. You should refer to the section titled “Risk factors” for a discussion of important factors that may cause our actual results to differ materially from those expressed or implied by our forward-looking statements. Furthermore, if our forward-looking statements prove to be inaccurate, the inaccuracy may be material. Except as required by law, we undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise. We qualify all of the forward-looking statements in this Quarterly Report on Form 10-Q by these cautionary statements.

 

 

 

iii


 

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

Biomea Fusion, Inc.

Condensed Balance Sheets

(Unaudited)

(in thousands, except share and per share data)

 

 

 

June 30,

 

 

December 31,

 

 

 

2021

 

 

2020

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

166,037

 

 

$

61,695

 

Short-term investments

 

 

32,535

 

 

 

 

Prepaid expenses and other current assets

 

 

1,949

 

 

 

528

 

Total current assets

 

 

200,521

 

 

 

62,223

 

Property and equipment, net

 

 

1,495

 

 

 

81

 

Restricted cash

 

 

216

 

 

 

 

Prepaid and other long term assets

 

 

 

 

 

12

 

Long-term investments

 

 

4,256

 

 

 

 

Right-of-use asset

 

 

3,045

 

 

 

210

 

Total assets

 

$

209,533

 

 

$

62,526

 

Liabilities and Stockholders' Equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

1,350

 

 

$

727

 

Accrued expenses and other current liabilities

 

 

3,116

 

 

 

633

 

Loan payable

 

 

 

 

 

36

 

Short-term operating lease liability

 

 

476

 

 

 

223

 

Total current liabilities

 

 

4,942

 

 

 

1,619

 

Long-term operating lease liability

 

 

2,575

 

 

 

 

Total liabilities

 

 

7,517

 

 

 

1,619

 

Commitments and contingencies (Note 9)

 

 

 

 

 

 

 

 

Series A convertible preferred stock, $0.0001 par value; 0 and 7,064,925 shares authorized as of June 30, 2021 and December 31, 2020; 0 and 7,064,925 shares issued and outstanding as of June 30, 2021 and December 31, 2020, respectively

 

 

 

 

 

55,738

 

Stockholders' equity

 

 

 

 

 

 

 

 

Preferred stock, $0.0001 par value; 10,000,000 and 0 shares authorized as of June 30, 2021 and December 31, 2020; 0 and 0 shares issued and outstanding as of June 30, 2021 and December 31, 2020, respectively

 

 

 

 

 

 

Common stock, $0.0001 par value; 300,000,000 and 25,300,080 shares authorized as of June 30, 2021 and December 31, 2020, respectively; 28,990,180 and 11,953,107 shares issued and outstanding as of June 30, 2021 and  December 31, 2020, respectively

 

 

2

 

 

 

1

 

Additional paid-in capital

 

 

224,438

 

 

 

13,343

 

Accumulated other comprehensive income

 

 

2

 

 

 

 

Accumulated deficit

 

 

(22,426

)

 

 

(8,175

)

Total stockholders' equity

 

 

202,016

 

 

 

5,169

 

Total liabilities and stockholders' equity

 

$

209,533

 

 

$

62,526

 

 

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

1


Biomea Fusion, Inc.

Condensed Statements of Operations and Comprehensive Loss

(Unaudited)

(in thousands, except share and per share data)

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

June 30,

 

 

June 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

$

5,224

 

 

$

216

 

 

$

9,022

 

 

$

550

 

General and administrative

 

 

3,211

 

 

 

79

 

 

 

5,270

 

 

 

143

 

Total operating expenses

 

 

8,435

 

 

 

295

 

 

 

14,292

 

 

 

693

 

Loss from operations

 

 

(8,435

)

 

 

(295

)

 

 

(14,292

)

 

 

(693

)

Interest and other income, net

 

 

36

 

 

 

2

 

 

 

41

 

 

 

2

 

Net loss

 

$

(8,399

)

 

$

(293

)

 

$

(14,251

)

 

$

(691

)

Other comprehensive loss:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Changes in unrealized gain on short term investments, net

 

 

17

 

 

 

 

 

 

2

 

 

 

 

Comprehensive loss

 

$

(8,382

)

 

$

(293

)

 

$

(14,249

)

 

$

(691

)

Net loss per common share, basic and diluted

 

 

(0.33

)

 

 

(0.03

)

 

 

(0.77

)

 

 

(0.07

)

Weighted-average number of common shares used to

   compute basic and diluted net loss per common share

 

 

25,161,038

 

 

 

9,746,868

 

 

 

18,598,521

 

 

 

9,252,931

 

 

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

 

 

 

2


 

Biomea Fusion, Inc.

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

(Unaudited)

(in thousands, except share amounts)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Series A Convertible

Preferred Stock

 

 

 

Common Stock

 

 

Additional

Paid-In

 

 

Accumulated Other

Comprehensive

 

 

Accumulated

 

 

Total

Stockholders'

 

 

 

Shares

 

 

Amount

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Gain (Loss)

 

 

Deficit

 

 

Equity

 

Balance at

   December 31, 2020

 

 

7,064,925

 

 

$

55,738

 

 

 

 

11,953,107

 

 

$

1

 

 

$

13,343

 

 

$

 

 

$

(8,175

)

 

$

5,169

 

Series A financing costs

 

 

 

 

 

(3

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of restricted stock

 

 

 

 

 

 

 

 

 

51,526

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

919

 

 

 

 

 

 

 

 

 

919

 

Unrealized loss on investments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(15

)

 

 

 

 

 

(15

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(5,852

)

 

 

(5,852

)

Balance at

    March 31, 2021

 

 

7,064,925

 

 

 

55,735

 

 

 

 

12,004,633

 

 

 

1

 

 

 

14,262

 

 

 

(15

)

 

 

(14,027

)

 

 

221

 

Issuance of common stock from initial public offering, net of offering costs

 

 

 

 

 

 

 

 

 

9,823,532

 

 

 

1

 

 

 

152,753

 

 

 

 

 

 

 

 

 

152,754

 

Issuance of restricted stock

 

 

 

 

 

 

 

 

 

53,240

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,463

 

 

 

 

 

 

 

 

 

1,463

 

Exercise of stock options

 

 

 

 

 

 

 

 

 

43,850

 

 

 

 

 

 

225

 

 

 

 

 

 

 

 

 

225

 

Conversion of preferred stock to common stock

 

 

(7,064,925

)

 

 

(55,735

)

 

 

 

7,064,925

 

 

 

 

 

 

55,735

 

 

 

 

 

 

 

 

 

55,735

 

Unrealized gain on investments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

17

 

 

 

 

 

 

17

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(8,399

)

 

 

(8,399

)

Balance at

   June 30, 2021

 

 

 

 

$

 

 

 

 

28,990,180

 

 

$

2

 

 

 

224,438

 

 

$

2

 

 

$

(22,426

)

 

$

202,016

 

 

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

 

3


 

Biomea Fusion, Inc.

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

(Unaudited)

(in thousands, except share amounts)

 

 

 

Series A Convertible

Preferred Stock

 

 

 

Common Stock

 

 

Additional

Paid-In

 

 

Accumulated

 

 

Total

Stockholders'

 

 

 

Shares

 

 

Amount

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Equity (Deficit)

 

Balance at

   December 31, 2019

 

 

 

 

$

 

 

 

 

8,703,234

 

 

$

1

 

 

$

2,829

 

 

$

(2,851

)

 

$

(21

)

Issuance of common stock

 

 

 

 

 

 

 

 

 

230,650

 

 

 

 

 

 

50

 

 

 

 

 

 

50

 

Net loss and comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(398

)

 

 

(398

)

Balance at

   March 31, 2020

 

 

 

 

 

 

 

 

 

8,933,884

 

 

 

1

 

 

 

2,879

 

 

 

(3,249

)

 

 

(369

)

Issuance of common stock

 

 

 

 

 

 

 

 

 

2,790,216

 

 

 

 

 

 

9,492

 

 

 

 

 

 

9,492

 

Net loss and comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(293

)

 

 

(293

)

Balance at

   June 30, 2020

 

 

 

 

$

 

 

 

 

11,724,100

 

 

$

1

 

 

$

12,371

 

 

$

(3,542

)

 

$

8,830

 

 

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

 

 

4


 

Biomea Fusion, Inc.

Condensed Statements of Cash Flows

(Unaudited)

(in thousands)

 

 

 

Six Months Ended

 

 

 

June 30,

 

 

 

2021

 

 

2020

 

Operating Activities

 

 

 

 

 

 

 

 

Net loss

 

$

(14,251

)

 

$

(691

)

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

 

 

 

 

 

 

 

 

Depreciation

 

 

34

 

 

 

 

Non-cash operating lease expense

 

 

381

 

 

 

 

Stock-based compensation expense

 

 

2,382

 

 

 

 

Net amortization of premiums and accretion of discounts on investments

 

 

204

 

 

 

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Prepaid expenses and other current assets

 

 

(1,421

)

 

 

6

 

Other assets

 

 

12

 

 

 

 

Accounts payable

 

 

237

 

 

 

72

 

Accrued expenses and other current liabilities

 

 

2,259

 

 

 

(8

)

Lease liabilities

 

 

(388

)

 

 

 

Net cash used in operating activities

 

 

(10,551

)

 

 

(621

)

Investing Activities

 

 

 

 

 

 

 

 

Purchase of property and equipment

 

 

(838

)

 

 

 

Purchase of short-term and long-term investments

 

 

(38,492

)

 

 

 

Maturities of short-term and long-term investments

 

 

1,500

 

 

 

 

Net cash used in investing activities

 

 

(37,830

)

 

 

 

Financing Activities

 

 

 

 

 

 

 

 

Proceeds from issuance of common stock from series seed

 

 

 

 

 

9,610

 

Series A financing costs incurred

 

 

(3

)

 

 

(68

)

Net proceeds from issuance of common stock from initial public offering

 

 

152,753

 

 

 

 

Proceeds from stock option exercise

 

 

225

 

 

 

 

Proceeds (payments) from Paycheck Protection Program loan

 

 

(36

)

 

 

36

 

Net cash provided by financing activities

 

 

152,939

 

 

 

9,578

 

Net increase in cash, cash equivalents, and restricted cash

 

 

104,558

 

 

 

8,957

 

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

 

 

61,695

 

 

 

239

 

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

 

$

166,253

 

 

$

9,196

 

Non-cash financing and investing activities:

 

 

 

 

 

 

 

 

Acquisition of fixed assets in accounts payable and accrued liabilities

 

$

610

 

 

$

 

Acquisition of right of use asset

 

 

3,216

 

 

 

 

Change in unrealized gain on investments

 

 

2

 

 

 

 

Conversion of convertible preferred stock into common stock

 

 

55,735

 

 

 

 

Reconciliation of cash and cash equivalents and restricted cash:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

 

166,037

 

 

 

9,196

 

Restricted cash

 

 

216

 

 

 

 

Total cash and cash equivalents and restricted cash - end of period

 

$

166,253

 

$

 

9,196

 

 

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

 

5


 

 

 

Biomea Fusion, Inc.

Notes to Unaudited Condensed Financial Statements

Note 1. Organization

Organization

Biomea Fusion, Inc., (the “Company”), was established in the state of Delaware in August 2017 as Biomea Fusion, LLC. In December 2020, all outstanding membership interests in Biomea Fusion, LLC were converted into equity interests in the Company. The capitalization information included in these financial statements is consistently presented as if it is that of Biomea Fusion, Inc., even during the prior period when investors held their equity interests in Biomea Fusion, LLC.

The Company is a biopharmaceutical company focused on the discovery and development of irreversible small molecules to treat patients with genetically defined cancers. Since its inception in 2017, the Company has built its proprietary FUSION System platform to design and develop a pipeline of novel irreversible therapies.

Basis of presentation

The accompanying interim condensed financial statements as of June 30, 20201 and for the three and six months ended June 30, 2021, and the related interim information contained within the notes to the financial statements, are unaudited. The unaudited interim condensed financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”) for interim financial information and on the same basis as the audited financial statements included on the Company’s annual financial statements filed with the Securities and Exchange Commission (“SEC”) within the Company’s Prospectus dated April 15, 2021 (the “Prospectus”). In the opinion of management, the accompanying unaudited interim condensed financial statements contain all adjustments (consisting of normal recurring adjustments) necessary to state fairly the Company’s financial position as of June 30, 2021, and the results of its operations and cash flows for the three and six months ended June 30, 2021. All such adjustments are of a normal and recurring nature. The interim financial data as of June 30, 2021 is not necessarily indicative of the results to be expected for the year ending December 31, 2021, or for any future period.

The accompanying condensed financial statements and related financial information should be read in conjunction with the audited financial statements and the related notes thereto for the year ended December 31, 2020.

Forward stock split

In April 2021, the Company’s board of directors approved an amended and restated certificate of incorporation to effect a split of shares of the Company’s outstanding capital at a ratio of 8.84-for-1 (the “Forward Stock Split”) effective as of April 12, 2021. The number of authorized shares and the par values of the common stock and convertible preferred stock were not adjusted as a result of the Forward Stock Split. All references to common stock, options to purchase common stock, convertible preferred stock, share data, per share data and related information contained in the financial statements have been retrospectively adjusted to reflect the effect of the Forward Stock Split for all periods presented.

Initial Public Offering

On April 16, 2021, the Company’s registration statement on Form S-1 (File No. 333-254793) relating to its initial public offering (“IPO”) of common stock became effective. The IPO closed on April 20, 2021 at which time the Company issued an aggregate of 9,000,000 shares of its common stock at a price of $17.00 per share. Subsequent to the close, an additional 823,532 shares were issued in connection with the partial exercise by the underwriters of their option to purchase additional shares of common stock. In addition, immediately prior to the closing of the IPO, all outstanding shares of the Company’s convertible preferred stock automatically converted into 7,064,925 shares of common stock. In connection with the completion of its IPO, on April 20, 2021, the Company’s certificate of incorporation was amended and restated to provide for 300,000,000 authorized shares of common stock with a par value of $0.0001 per share and 10,000,000 authorized shares of preferred stock with a par value of $0.0001 per share. Proceeds from the IPO, net of underwriting discounts and commissions and offering costs, were approximately $152.8 million.

Liquidity and capital resources

The Company has incurred net operating losses and negative cash flows from operations since its inception and had an accumulated deficit of $22.4 million at June 30, 2021. As of June 30, 2021, the Company had cash, cash equivalents, restricted cash, and investments of $203.0 million. To date, none of the Company’s product candidates have been approved for sale, and the Company has not generated any revenue since inception. Management expects operating losses to continue and increase for the foreseeable future, as the Company progresses into clinical development activities

6


 

 

for its lead product candidate. The Company’s prospects are subject to risks, expenses and uncertainties frequently encountered by companies in the biotechnology industry as discussed below. While the Company has been able to raise multiple rounds of financing, there can be no assurance that in the event the Company requires additional financing, such financing will be available on terms which are favorable or at all. Failure to generate sufficient cash flows from operations, raise additional capital or reduce certain discretionary spending would have a material adverse effect on the Company’s ability to achieve its intended business objectives.

Note 2. Summary of Significant Accounting Policies

Use of estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. On an ongoing basis, the Company evaluates its estimates, including, but not limited to, those related to accrued research and development expenses, the fair value of common stock, stock-based compensation expense, income taxes and uncertain tax positions. The Company bases its estimates on its historical experience and also on assumptions that it believes are reasonable; however, actual results could significantly differ from those estimates.

Segments

The Company operates and manages its business as one reportable and operating segment, which is the business of developing clinical product candidates for the treatment of cancer patients. The Company’s chief executive officer, who is the chief operating decision maker, reviews financial information on an aggregate basis for allocating resources and evaluating financial performance. All long-lived assets are maintained in, and all losses are attributable to, the United States.

Cash, cash equivalents, and restricted cash

The Company considers all highly liquid investments with original maturities of three months or less from the date of purchase to be cash and cash equivalents. Cash equivalents consist of amounts invested in money market accounts and are stated at fair value.

Restricted cash as of June 30, 2021 included a $216,000 stand-by letter of credit issued in favor of the landlord in connection with a new lease of lab space located in San Carlos, California, which is classified in noncurrent assets. There was no restricted cash as of December 31, 2020.

Investments

The Company’s investments have been classified and accounted for as available-for-sale securities. Fixed income securities consist of U.S. Treasury securities, U.S. government agency securities, corporate debt, and commercial paper. The specific identification method is used to determine the cost basis of fixed income securities sold. These securities are recorded on the condensed balance sheets at fair value. Unrealized gains and losses on these securities are included as a separate component of accumulated other comprehensive loss. The cost of investment securities is adjusted for amortization of premiums and accretion of discounts to maturity. Such amortization and accretion are included in other income (expense), net. Realized gains and losses and declines in fair value judged to be other-than-temporary, if any, are also included in other income (expense), net. The Company evaluates securities for other-than-temporary impairment at the balance sheet date. Declines in fair value determined to be other-than-temporary are also included in other income (expense), net. The Company classifies its investments as short or long-term primarily based on the remaining contractual maturity of the securities. Long term investments consist of asset backed securities and corporate debt.

Concentration of credit risk and other risks and uncertainties

Financial instruments that potentially subject the Company to a concentration of credit risk, consist primarily of cash and cash equivalents. The Company maintains bank deposits in federally insured financial institutions and these deposits may exceed federally insured limits. The Company is exposed to credit risk in the event of default by the financial institutions holding its cash and cash equivalents to the extent recorded in the balance sheet. The Company has not experienced any losses on its deposits of cash and cash equivalents.

The Company’s future results of operations involve a number of other risks and uncertainties. Factors that could affect the Company’s future operating results and cause actual results to vary materially from expectations include, but are not limited to, uncertainty of results of clinical trials and reaching milestones, uncertainty of regulatory approval of the

7


 

 

Company’s potential product candidates, uncertainty of market acceptance of the Company’s product candidates, competition from substitute products and larger companies, securing and protecting proprietary technology, strategic relationships and dependence on key individuals or sole source suppliers. The Company’s product candidates require approvals from the U.S. Food and Drug Administration and comparable foreign regulatory agencies prior to commercial sales in their respective jurisdictions. There can be no assurance that any product candidates will receive the necessary approvals. If the Company is denied approval, approval is delayed or the Company is unable to maintain approval for any product candidate, it could have a materially adverse impact on the Company.

Property and equipment, net

Property and equipment are recorded at cost net of accumulated depreciation and amortization. Property and equipment are depreciated using the straight-line method over the estimated useful lives of the assets. The useful lives of property and equipment are as follows:

 

 

 

 

Laboratory equipment

  

3-5 years

Furniture and fixtures

  

5 years

Leasehold improvements

  

Shorter of remaining lease term or estimated useful life

Computer equipment

 

3 years

 

 

Upon retirement or sale of the assets, the cost and related accumulated depreciation and amortization are removed from the balance sheet and the resulting gain or loss is recorded to the statements of operations. Repairs and maintenance are expensed as incurred.

Impairment of long-lived assets

Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future net cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset. There have been no such impairments of long-lived assets for any of the periods presented.  

Convertible preferred stock

The Company records shares of convertible preferred stock at fair value on the dates of issuances, net of issuance costs. The Company classifies convertible preferred stock outside of stockholders’ equity (deficit) because the shares contain liquidation features that are not solely within the Company’s control. The Company analyzed all embedded derivatives and beneficial conversion features for its convertible preferred stock and concluded that none requires bifurcation. The Company has elected not to adjust the carrying values of the convertible preferred stock to the liquidation preferences of such shares because it is uncertain whether or when an event would occur that would obligate the Company to pay the liquidation preferences to holders of convertible preferred stock. Subsequent adjustments to the carrying values to the liquidation preferences will be made only when it becomes probable that such a liquidation event will occur.

Research and development expenses

The Company’s research and development expenses consist primarily of external and internal costs incurred in connection with the research and development of its research programs and product candidates.

External costs include:

expenses incurred under agreements with third-party contract manufacturing organizations (“CMOs”), contract research organizations (“CROs”), research and development service providers, academic research institutions and consulting costs; and

laboratory expenses, including supplies and services.

Internal costs include:

personnel-related expenses, including salaries, benefits and stock-based compensation for personnel in research and product development roles; and

8


 

 

facilities and other allocated expenses, including expenses for rent and facilities maintenance, and amortization.

The Company expenses research and development costs in the periods in which they are incurred. Nonrefundable advance payments for goods or services to be received in future periods for use in research and development activities are deferred and capitalized. The capitalized amounts are then expensed as the related goods are delivered and as services are performed. The Company tracks direct costs by stage of program, clinical or preclinical. However, it does not track indirect costs on a stage of program basis because these costs are deployed across multiple programs and, as such, are not separately classified.

Accrued research and development expenses

The Company records accruals for estimated costs of research, preclinical, and manufacturing development, which are significant components of research and development expenses. A substantial portion of the Company’s ongoing research and development activities is conducted by third-party service providers, CROs and CMOs. The Company’s contracts with the CROs and CMOs generally include fees such as initiation fees, reservation fees, costs related to animal studies and safety tests, verification run costs, materials and reagents expenses, taxes, etc. The financial terms of these contracts are subject to negotiations, which vary from contract to contract and may result in payment flows that do not match the periods over which materials or services are provided to the Company under such contracts. The Company accrues the costs incurred under agreements with these third parties based on estimates of actual work completed in accordance with the respective agreements. The Company determines the estimated costs through discussions with internal personnel and external service providers as to the progress, or stage of completion and actual timeline (start- date and end-date) of the services and the agreed-upon fees to be paid for such services. Through June 30, 2021, there have been no material differences from the Company’s estimated accrued research and development expenses to actual expenses.

Patent costs

All patent-related costs incurred in connection with filing and prosecuting patent applications are expensed as incurred due to the uncertainty about the recovery of the expenditure. Amounts incurred are classified as general and administrative expenses in the accompanying statements of operations.

Stock-based compensation

The Company’s measures stock options and other stock-based awards granted to directors, employees and non-employees based on their fair value on the date of the grant and recognizes the corresponding compensation expense of those awards over the requisite service period, which is generally the vesting period of the respective award, and estimates the fair value of share-based awards to employees and directors using the Black-Scholes option-pricing valuation model. The Company has only issued stock options and restricted share awards with service-based vesting conditions and records the expense for these awards using the straight-line method. The Company accounts for the forfeitures as they occur.

Leases

On January 1, 2020, the Company early adopted ASC 842, Leases (“ASC 842”) and its associated amendments using the modified retrospective transition approach. The Company elected to take the practical expedient to not separate the lease and non-lease components as part of the adoption. There was no cumulative-effect adjustment recorded to accumulated deficit upon adoption. The Company recorded right-of-use assets and lease liabilities of $0.3 million upon adoption.

Under ASC 842, the Company determines if an arrangement is a lease at inception. Lease liabilities and their corresponding right-of-use assets are recorded based on the present value of lease payments over the expected lease term. In determining the present value of lease payments, the Company uses its incremental borrowing rate based on the information available at the lease commencement date. The Company’s operating leases have one single component. The lease component results in a right-of-use asset being recorded on the balance sheet and expensed as lease expense on a straight-line basis in the Company’s statements of operations.

Building improvements are paid for by the tenant and are capitalized as leasehold improvements and included in property and equipment, net in the balance sheet.

Income taxes

The Company began providing for income taxes under the asset and liability method in December 2020 upon conversion from a limited liability company into a corporation. Current income tax expense or benefit represents the amount of income taxes expected to be payable or refundable for the current year. Deferred income tax assets and liabilities are

9


 

 

determined based on differences between the financial statement reporting and tax basis of assets and liabilities and net operating loss and credit carryforwards and are measured using the enacted tax rates and laws that will be in effect when such items are expected to reverse. Deferred income tax assets are reduced, as necessary, by a valuation allowance when management determines it is more likely than not that some or all the tax benefits will not be realized.

The Company accounts for uncertain tax positions in accordance with ASC No. 740 Income Taxes. The Company assesses all material positions taken in any income tax return, including all significant uncertain positions, in all tax years that are still subject to assessment or challenge by relevant taxing authorities. Assessing an uncertain tax position begins with the initial determination of the position’s sustainability and is measured at the largest amount of benefit that is greater than fifty percent likely of being realized upon ultimate settlement. As of each balance sheet date, unresolved uncertain tax positions must be reassessed, and the Company will determine whether (i) the factors underlying the sustainability assertion have changed and (ii) the amount of the recognized tax benefit is still appropriate. The recognition and measurement of tax benefits requires significant judgment. Judgments concerning the recognition and measurement of a tax benefit might change as new information becomes available.

The Company includes any penalties and interest expense related to income taxes as a component of income tax expense, as necessary.

Comprehensive loss

Other comprehensive loss represents the changes in stockholders’ equity except those resulting from distributions to stockholders. The Company’s unrealized losses on short term available-for-sale investment securities represent components of other comprehensive loss that are excluded from the reported net loss and are presented in the consolidated statements of operations and comprehensive loss.

Net loss per share

Basic net loss per share is calculated by dividing the net loss by the weighted-average number of shares of common stock outstanding during the periods, without consideration for common stock equivalents. Diluted net loss per share is the same as basic net loss per share, since the effects of potentially dilutive securities are antidilutive given the net loss for the periods presented.

 

 

Recent accounting pronouncements

The Company is an emerging growth company (“EGC”), as defined in the Jumpstart Our Business Startups Act of 2012 (“JOBS Act”), and may take advantage of reduced reporting requirements that are otherwise applicable to public companies. Section 107 of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies are required to comply with those standards. The Company has elected to use the extended transition period for complying with new or revised accounting standards; and as a result of this election, its financial statements may not be comparable to companies that comply with public company effective dates. The JOBS Act also exempts the Company from having to provide an auditor attestation of internal controls over financial reporting under Sarbanes-Oxley Act Section 404(b). The Company will remain an EGC until the earliest of (i) the last day of the fiscal year in which it has total annual gross revenues of $1.07 billion or more, (ii) the last day of the fiscal year following the fifth anniversary of the completion of its IPO, (iii) the date on which it has issued more than $1.0 billion in nonconvertible debt during the previous three years or (iv) the date on which it is deemed to be a large accelerated filer under the rules of the Securities and Exchange Commission (“SEC”), which generally is when it has more than $700 million in market value of its stock held by non-affiliates, has been a public company for at least 12 months and has filed one annual report on Form 10-K.

From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (FASB), or other standard setting bodies and adopted by the Company as of the specified effective date. Unless otherwise discussed, the impact of recently issued standards that are not yet effective will not have a material impact on the Company’s financial position or results of operations upon adoption.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which requires that financial assets measured at amortized cost be presented at the net amount expected to be collected. The measurement of expected credit losses is based on historical experience, current conditions, and reasonable and supportable forecasts that affect collectability. This ASU also eliminates the concept of “other-than-temporary” impairment when evaluating available-for-sale debt securities and instead focuses on determining whether any impairment is a result of a credit loss or other factors. An entity will recognize an allowance for credit losses

10


 

 

on available-for-sale debt securities rather than an other-than-temporary impairment that reduces the cost basis of the investment. This ASU is effective for fiscal years beginning after December 15, 2022 and interim periods within those fiscal years. Early adoption is permitted. The Company is currently assessing the impact of this standard on its financial statements and related disclosures.

In December 2019, the Financial Accounting Standards Board issued ASU No 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes” (“ASU 2019-12”). ASU 2019-12 removes certain exceptions to the general principles in Topic 740 in Generally Accepted Accounting Principles. ASU 2019-12 is effective for public entities for fiscal years beginning after December 15, 2020, with early adoption permitted. The Company does not expect ASU 2019-12 to have a material effect on the Company’s current financial position, results of operations or financial statement disclosures.

Note 3. Fair Value Measurement

The Company applies fair value accounting for all financial assets and liabilities and non-financial assets and liabilities that are recognized or disclosed at fair value in the financial statements on a recurring basis. Fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, a three-tier fair value hierarchy has been established, which prioritizes the inputs used in measuring fair value as follows:

Level 1—Observable inputs, such as quoted prices in active markets for identical assets or liabilities at the measurement date.

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

Level 3—Unobservable inputs which reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date. Consideration is given to the risk inherent in the valuation technique and the risk inherent in the inputs to the model.

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

The Company’s cash equivalents includes investments in money market funds that are classified as Level 1 of the fair value hierarchy.  The Company values the funds at $1 stable net asset value, which is the quoted price in active markets for identical assets that the Company has the ability to access.  The Company’s cash equivalents and short-term investments also include commercial paper, asset backed securities, and corporate notes, which have been classified within Level 2 of the fair value of the hierarchy because of the sufficient observable inputs for revaluation.

Financial instruments classified within Level 2 of the fair value hierarchy are valued based on other observable inputs, including broker or dealer quotations or alternative pricing sources. When quoted prices in active markets for identical assets or liabilities are not available, the Company relies on non-binding quotes from its investment managers, which are based on proprietary valuation models of independent pricing services. These models generally use inputs such as observable market data, quoted market prices for similar instruments, or historical pricing trends of a security relative to its peers. To validate the fair value determination provided by its investment managers, the Company reviews the pricing movement in the context of overall market trends and trading information from its investment managers. In addition, the Company assesses the inputs and methods used in determining the fair value in order to determine the classification of securities in the fair value hierarchy.

As of June 30, 2021 and December 31, 2020, there were no financial instruments classified as Level 3.

11


 

 

The fair value of the Company’s cash equivalents and short-term investments approximates their respective carrying amounts due to their short-term maturity. The following tables set forth the fair value of the Company’s financial assets, which consist of investments measured and recognized at fair value (in thousands):

 

 

 

 

 

June 30, 2021

 

 

 

Fair Value

Hierarchy

Level

 

Amortized

Cost

 

 

Gross

Unrealized

Gains

 

 

Gross

Unrealized

Losses

 

 

 

Fair Value

 

Money market funds(1)

 

Level 1

 

$

 

18,036

 

 

$

 

 

 

$

 

 

 

$

 

18,036

 

Investments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate notes

 

Level 2

 

 

 

20,724

 

 

 

 

 

 

 

 

 

 

 

 

20,724

 

Commercial paper

 

Level 2

 

 

 

10,491

 

 

 

 

4

 

 

 

 

 

 

 

 

10,495

 

Asset backed securities

 

Level 2

 

 

 

5,574

 

 

 

 

 

 

 

 

(2

)

 

 

 

5,572

 

Total

 

 

 

$

 

54,825

 

 

$

 

4

 

 

$

 

(2

)

 

$