rapt-10q_20210331.htm

  

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 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, 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: 001-38997

 

RAPT Therapeutics, Inc.

(Exact name of registrant as specified in its charter)

 

 

Delaware

 

47-3313701

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification Number)

561 Eccles Avenue

South San Francisco, California 94080

(Address of principal executive offices and zip code)

(650) 489-9000 

(Registrant’s telephone number, including area code)

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

RAPT

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

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

 

As of May 4, 2021, there were 25,009,007 shares of the registrants common stock outstanding.

 

 


 

RAPT THERAPEUTICS, INC.

TABLE OF CONTENTS

 

 

 

 

Page No.

PART I. FINANCIAL INFORMATION

 

 

 

 

 

 

Item 1.

Financial Statements (Unaudited)

 

3

 

Condensed Consolidated Balance Sheets as of March 31, 2021 and December 31, 2020

 

3

 

Condensed Consolidated Statements of Operations and Comprehensive Loss for the Three Months Ended March 31, 2021 and 2020

 

4

 

Condensed Consolidated Statements of Preferred Stock and Stockholders’ Equity for the Three Months Ended March 31, 2021 and 2020

 

5

 

Condensed Consolidated Statements of Cash Flows for the Three months Ended March 31, 2021 and 2020

 

6

 

Notes to Condensed Consolidated Financial Statements

 

7

Item 2.

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

 

14

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

 

19

Item 4.

Controls and Procedures

 

20

 

 

 

 

PART II. OTHER INFORMATION

 

 

 

 

 

 

Item 1.

Legal Proceedings

 

21

Item 1A.

Risk Factors

 

21

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

 

58

Item 3.

Defaults Upon Senior Securities

 

58

Item 4.

Mine Safety Disclosures

 

58

Item 5.

Other Information

 

58

Item 6.

Exhibits

 

59

Signatures

 

60

 

 


 

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements

 

RAPT THERAPEUTICS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

(Unaudited)

 

 

 

March 31,

 

 

December 31,

 

 

 

2021

 

 

2020

 

 

 

 

 

 

 

(Note 2)

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

24,720

 

 

$

24,918

 

Marketable securities

 

 

73,686

 

 

 

86,592

 

Prepaid expenses and other current assets

 

 

4,200

 

 

 

4,088

 

Total current assets

 

 

102,606

 

 

 

115,598

 

Property and equipment, net

 

 

2,929

 

 

 

2,982

 

Other assets

 

 

389

 

 

 

389

 

Total assets

 

$

105,924

 

 

$

118,969

 

Liabilities and stockholders' equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

3,131

 

 

$

2,383

 

Accrued expenses

 

 

4,539

 

 

 

4,935

 

Deferred revenue, current

 

 

3,135

 

 

 

4,096

 

Other current liabilities

 

 

338

 

 

 

328

 

Total current liabilities

 

 

11,143

 

 

 

11,742

 

Deferred rent, net of current portion

 

 

2,157

 

 

 

2,185

 

Deferred revenue, non-current

 

 

983

 

 

 

863

 

Total liabilities

 

 

14,283

 

 

 

14,790

 

Commitments

 

 

 

 

 

 

 

 

Stockholders' equity:

 

 

 

 

 

 

 

 

Preferred stock

 

 

 

 

 

 

Common stock

 

 

2

 

 

 

2

 

Additional paid-in capital

 

 

323,184

 

 

 

319,196

 

Accumulated other comprehensive loss

 

 

(189

)

 

 

(177

)

Accumulated deficit

 

 

(231,356

)

 

 

(214,842

)

Total stockholders' equity

 

 

91,641

 

 

 

104,179

 

Total liabilities and stockholders' equity

 

$

105,924

 

 

$

118,969

 

 

 

 

See accompanying notes to condensed consolidated financial statements.

3


RAPT THERAPEUTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(In thousands, except share and per share data)

(Unaudited)

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2021

 

 

2020

 

Revenue

 

$

1,222

 

 

$

935

 

Operating expenses:

 

 

 

 

 

 

 

 

Research and development

 

 

13,771

 

 

 

10,683

 

General and administrative

 

 

4,012

 

 

 

3,289

 

Total operating expenses

 

 

17,783

 

 

 

13,972

 

Loss from operations

 

 

(16,561

)

 

 

(13,037

)

Other income, net

 

 

47

 

 

 

135

 

Net loss before taxes

 

 

(16,514

)

 

 

(12,902

)

Provision for income taxes

 

 

 

 

 

237

 

Net loss

 

$

(16,514

)

 

$

(13,139

)

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

Foreign currency translation adjustment

 

 

38

 

 

 

204

 

Unrealized gain (loss) on marketable securities

 

 

(50

)

 

 

(217

)

Total comprehensive loss

 

$

(16,526

)

 

$

(13,152

)

Net loss per share, basic and diluted

 

$

(0.66

)

 

$

(0.56

)

Weighted average number of shares used in computing net loss

   per share, basic and diluted

 

 

24,844,946

 

 

 

23,266,063

 

 

 

 

See accompanying notes to condensed consolidated financial statements.

 

4


 

RAPT THERAPEUTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF PREFERRED STOCK AND STOCKHOLDERS’ EQUITY

(In thousands, except share amounts)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

 

Other

 

 

Total

 

 

 

Preferred Stock

 

 

Common Stock

 

 

Paid-In

 

 

Accumulated

 

 

Comprehensive

 

 

Stockholders'

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

(Loss)

 

 

Equity

 

Balance at December 31, 2020

 

 

 

 

$

 

 

 

24,773,361

 

 

$

2

 

 

$

319,196

 

 

$

(214,842

)

 

$

(177

)

 

$

104,179

 

Issuance of common stock, net of issuance costs

 

 

 

 

 

 

 

 

57,100

 

 

 

 

 

 

1,180

 

 

 

 

 

 

 

 

 

1,180

 

Issuance of common stock upon exercise of stock options, net of repurchase

 

 

 

 

 

 

 

 

17,495

 

 

 

 

 

 

121

 

 

 

 

 

 

 

 

 

121

 

Issuance of common stock, upon vesting of RSU

 

 

 

 

 

 

 

 

14,125

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,687

 

 

 

 

 

 

 

 

 

2,687

 

Foreign currency translation adjustment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

38

 

 

 

38

 

Unrealized loss on marketable securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(50

)

 

 

(50

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(16,514

)

 

 

 

 

 

(16,514

)

Balance at March 31, 2021

 

 

 

 

$

 

 

 

24,862,081

 

 

$

2

 

 

$

323,184

 

 

$

(231,356

)

 

$

(189

)

 

$

91,641

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

 

Other

 

 

Total

 

 

 

Preferred Stock

 

 

Common Stock

 

 

Paid-In

 

 

Accumulated

 

 

Comprehensive

 

 

Stockholders'

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Income

 

 

Equity

 

Balance at December 31, 2019

 

 

 

 

$

 

 

 

21,833,037

 

 

$

2

 

 

$

235,049

 

 

$

(161,950

)

 

$

20

 

 

$

73,121

 

Issuance of common stock, net of issuance costs

 

 

 

 

 

 

 

 

2,500,000

 

 

 

 

 

 

69,842

 

 

 

 

 

 

 

 

 

69,842

 

Issuance of common stock upon exercise of stock options, net of repurchase

 

 

 

 

 

 

 

 

970

 

 

 

 

 

 

30

 

 

 

 

 

 

 

 

 

30

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,088

 

 

 

 

 

 

 

 

 

2,088

 

Foreign currency translation adjustment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

204

 

 

 

204

 

Unrealized loss on marketable securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(217

)

 

 

(217

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(13,139

)

 

 

 

 

 

(13,139

)

Balance at March 31, 2020

 

 

 

 

$

 

 

 

24,334,007

 

 

$

2

 

 

$

307,009

 

 

$

(175,089

)

 

$

7

 

 

$

131,929

 

 

 

See accompanying notes to condensed consolidated financial statements.

 

 

5


 

RAPT THERAPEUTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2021

 

 

2020

 

Operating activities

 

 

 

 

 

 

 

 

Net loss

 

$

(16,514

)

 

$

(13,139

)

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

 

 

 

 

 

 

 

 

Amortization of premium (accretion of discount) on marketable securities

 

 

218

 

 

 

(4

)

Depreciation and amortization

 

 

280

 

 

 

199

 

Stock-based compensation expense

 

 

2,687

 

 

 

2,088

 

Gain on foreign currency translation

 

 

38

 

 

 

204

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

 

 

 

(5,010

)

Prepaid expenses and other current assets

 

 

(112

)

 

 

(562

)

Accounts payable, accrued expenses, and other current liabilities

 

 

362

 

 

 

2,421

 

Deferred revenue

 

 

(841

)

 

 

5,065

 

Deferred rent

 

 

(28

)

 

 

(7

)

Net cash used in operating activities

 

 

(13,910

)

 

 

(8,745

)

Investing activities

 

 

 

 

 

 

 

 

Purchase of marketable securities

 

 

(15,734

)

 

 

(46,883

)

Proceeds from maturities of marketable securities

 

 

28,372

 

 

 

 

Purchase of property and equipment

 

 

(227

)

 

 

(98

)

Net cash provided by (used in) investing activities

 

 

12,411

 

 

 

(46,981

)

Financing activities

 

 

 

 

 

 

 

 

Proceeds from issuance of common stock, net of issuance costs

 

 

1,180

 

 

 

69,842

 

Proceeds from exercise of stock options, net of repurchases

 

 

121

 

 

 

30

 

Net cash provided by financing activities

 

 

1,301

 

 

 

69,872

 

Net increase (decrease) in cash and cash equivalents

 

 

(198

)

 

 

14,146

 

Cash and cash equivalents at beginning of period

 

 

24,918

 

 

 

77,383

 

Cash and cash equivalents at end of period

 

$

24,720

 

 

$

91,529

 

 

 

 

See accompanying notes to condensed consolidated financial statements.

6


RAPT THERAPEUTICS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. Organization

Description of the Business

RAPT Therapeutics, Inc. (“RAPT” or the “Company”) is a clinical-stage, immunology-based biopharmaceutical company focused on discovering, developing and commercializing oral small molecule therapies for patients with significant unmet needs in oncology and inflammatory diseases. Utilizing its proprietary drug discovery and development engine, the Company develops highly selective small molecules that are designed to modulate the critical immune responses underlying these diseases.

The Company is located in South San Francisco, California.

Equity Financing

During the three months ended March 31, 2021, the Company sold 57,100 shares of common stock in “at the market” offerings pursuant to a Controlled Equity OfferingSM Sales Agreement with Cantor Fitzgerald & Co. and Stifel, Nicolaus & Company, Incorporated (the “ATM Sales Agreement”), for net proceeds of $1.2 million after deducting underwriting discounts and commissions and other offering related costs. As of March 31, 2021, there was up to $94.5 million available for future issuance of shares of common stock under the ATM Sales Agreement.

2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (U.S. GAAP) for interim financial information and pursuant to Article 10 of Regulation S‑X of the Securities Act of 1933, as amended (the “Securities Act”). Accordingly, they do not include all of the information and notes required by U.S. GAAP for complete financial statements. These unaudited condensed consolidated financial statements include only normal and recurring adjustments that the Company believes are necessary to fairly state the Companys financial position and the results of its operations and cash flows. Interim-period results are not necessarily indicative of results of operations or cash flows for a full year or any subsequent interim period. The condensed consolidated balance sheet at December 31, 2020 has been derived from the audited financial statements at that date but does not include all disclosures required by U.S. GAAP for complete financial statements. Because all of the disclosures required by U.S. GAAP for complete financial statements are not included herein, these unaudited condensed consolidated financial statements and the notes accompanying them should be read in conjunction with the Company’s audited consolidated financial statements included in its Annual Report on Form 10-K for the year ended December 31, 2020 filed on March 11, 2021 with the Securities and Exchange Commission.

The accompanying consolidated financial statements have been prepared in accordance with U.S. GAAP and include the consolidated accounts of the Company and its wholly-owned subsidiary, RAPT Therapeutics Australia Pty Ltd. All intercompany balances and transactions have been eliminated in consolidation.

Revenue

License and collaborative agreement revenue consists of license, milestone and royalty payments generated through agreements with strategic partners for the development and commercialization of certain product candidates. The terms of an agreement may include a non-refundable upfront fee, payments based upon achievement of milestones and royalties on net product sales. If a portion of the nonrefundable upfront fee or other payments received is allocated to continuing performance obligations under the terms of an agreement, such portion is recorded as deferred revenue and recognized as revenue when or as the underlying performance obligation is satisfied.

The Company recognizes revenue when it transfers promised goods or services to customers or counterparties in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services. In determining the appropriate amount of revenue to be recognized, the Company performs the following steps: (i) identification of the promised goods or services in the agreement; (ii) determination of whether the promised goods or services are performance obligations, including whether they are distinct in the context of the agreement; (iii) measurement of the transaction price, including any constraint on variable consideration; (iv) allocation of the transaction price to performance obligations based on estimated selling prices; and (v) recognition of revenue when or as the Company satisfies each performance obligation.

7


Licenses: If a license to the Company’s intellectual property is determined to be distinct from the other performance obligations identified in an agreement, the Company will recognize revenue from the nonrefundable, upfront fee allocated to the license when the license is transferred to the licensee and the licensee is able to use and benefit from the license. If a license is bundled with other performance obligations, the Company utilizes judgment to assess the nature of the combined performance obligations to determine whether the combined performance obligations are satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress for purposes of recognizing revenue. The Company evaluates the measure of progress each reporting period and, if necessary, adjusts the measure of performance and related revenue recognition.

Milestone payments: If an agreement includes event-based or milestone payments, the Company evaluates whether the events or milestones are considered likely to be achieved and estimates the amount to be included in the transaction price using the most likely amount method. If it is unlikely that a significant revenue reversal would occur, the value of the associated event-based or milestone payments is included in the transaction price. Event-based or milestone payments that are not within the control of the Company are not included in the transaction price until they become likely to be achieved.

Royalties: If an agreement includes sales-based royalties and the license is deemed to be the predominant item to which the royalties relate, the Company will recognize revenue at the later of (i) when the related sales occur or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied or partially satisfied.

Stock-Based Compensation

The Company measures stock-based compensation expense for all employee and non-employee stock-based awards based on their grant date fair value using the Black-Scholes option-pricing model. Subsequent to the adoption of ASU 2018-07, Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting, stock-based compensation expense for non-employee stock-based awards is also measured based on the grant date fair value with the estimated fair value expensed over the period for which the non-employee is required to provide service in exchange for the award. For stock-based awards with service conditions only, stock-based compensation expense is recognized over the requisite service period using the straight-line method. For awards with performance conditions, the Company evaluates the probability of achieving performance conditions at each reporting date. The Company recognizes stock-based compensation expense using an accelerated attribution method when it is deemed probable that the performance condition will be met. Forfeitures are recognized as they occur.

Stock-based compensation expense related to restricted stock awards is determined using the estimated fair value of the Company’s common stock on the date of grant for the period prior to the Company’s initial public offering (“IPO”) in November 2019. The fair value of restricted stock awards granted after the IPO is determined based on the stock price on the date of grant. The estimated fair value is amortized as compensation expense over the service period of the award.

Stock-based compensation expense related to the Company’s employee stock purchase plan is recognized based on the fair value of each award estimated on the first day of the offering period using the Black‑Scholes option-pricing model and recorded as expense over the service period using the straight‑line method.

Net Loss Per Share

Basic net loss per share is computed by dividing the net loss by the weighted average number of common shares outstanding during the period, without consideration of potential dilutive securities. Diluted net loss per share is computed by dividing the net loss by the sum of the weighted average number of common shares outstanding during the period plus the number of potential dilutive securities outstanding during the period calculated in accordance with the treasury stock method. Diluted net loss per share is the same as basic net loss per share for all periods presented since the effect of including potential dilutive securities is anti-dilutive.

Marketable securities

Marketable securities primarily consist of commercial paper, corporate bonds and U.S. government agency securities. The Company has classified its marketable securities as available-for-sale and may sell these securities prior to their stated maturities. The Company views these marketable securities as available to support current operations and classifies marketable securities with maturities beyond 12 months as current assets. The Company’s marketable securities are carried at estimated fair value, which is derived from independent pricing sources based on quoted prices in active markets for similar securities. Unrealized gains and losses are reported as a component of accumulated other comprehensive loss, net of tax. The amortized cost of marketable securities is adjusted for amortization of premiums and accretion of discounts to maturity, which is included in other income, net on the condensed consolidated statements of operations.

8


Recent Accounting Pronouncements

From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (the “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 our condensed consolidated financial statements upon adoption. Under the Jumpstart Our Business Startups Act of 2012, as amended (the “JOBS Act”), the Company meets the definition of an emerging growth company and has elected the extended transition period for complying with new or revised accounting standards pursuant to Section 107(b) of the JOBS Act.

In February 2016, the FASB issued ASU No. 2016-02, Leases. ASU 2016-02 requires lessees to record most leases on their balance sheet while recognizing expense in a manner similar to the accounting under the original lease guidance (Topic 840). ASU 2016‑02 states that a lessee would recognize a lease liability for the obligation to make lease payments as well as a right-to-use asset for the right to use the underlying asset for the lease term. ASU 2016-02 is effective for the Company’s fiscal year beginning after December 15, 2021 and early adoption is permitted. The Company intends to adopt the new guidance as of January 1, 2022. The Company is currently evaluating the impact of adopting ASU 2016-02.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. ASU 2016-13 amended the guidance on reporting credit losses for assets held at amortized cost basis and available-for-sale debt securities. For available-for-sale debt securities, credit losses will be presented as an allowance rather than as a write-down. In April 2019, the FASB issued ASU No. 2019-04, Codification Improvements to Topic 326, Financial Instruments—Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments, to increase awareness of the amendments and to expedite improvements to Topic 326. In May 2019, the FASB issued ASU No. 2019-05, Financial Instruments—Credit Losses, Topic 326, which provided companies an option to irrevocably elect the fair value option for certain financial assets previously measured at amortized cost basis. These ASUs do not change the core principle of the guidance in ASU 2016-13; instead, these amendments are intended to clarify and improve operability of certain topics. In November 2019, the FASB issued ASU No. 2019-10, Financial Instruments—Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842): Effective Dates and ASU No. 2019-11, Codification Improvements to Topic 326, Financial Instruments—Credit Losses, which defer the effective date of the new credit loss standard. ASU 2016-13 and its related amendments are effective for the Company’s fiscal year beginning after December 15, 2022 and early adoption is permitted. The Company is currently assessing when it will adopt ASU 2016-13 and the impact that adoption will have on its condensed consolidated financial statements and related disclosures.

3. Fair Value Measurements

Fair value accounting is applied for all financial assets and liabilities that are recognized or disclosed at fair value in the financial statements on a recurring basis. Financial instruments such as cash and cash equivalents, accounts payable and accrued liabilities approximate fair value due to their relatively short maturities.

Assets and liabilities recorded at fair value on a recurring basis in the balance sheet are categorized based upon the level of judgment associated with the inputs used to measure their fair values. Fair value is defined as the exchange price that would be received for an asset or an exit price that would be paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The authoritative guidance on fair value measurements establishes a three-tier fair value hierarchy for disclosure of fair value measurements as follows:

Level 1Inputs are unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date;

Level 2Inputs are observable, unadjusted quoted prices in active markets for similar assets or liabilities, unadjusted quoted prices for identical or similar assets or liabilities 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 related assets or liabilities; and

Level 3Unobservable inputs that are significant to the measurement of the fair value of the assets or liabilities that are supported by little or no market data.

To date, the Company has not recorded any impairment charges on marketable securities due to other-than-temporary declines in market value. In determining whether a decline is other than temporary, the Company considers various factors, including the length of time and extent to which the market value has been less than amortized cost, the financial condition and near-term prospects of the issuer and the Company’s intent and ability to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in market value.

9


The Company estimates the fair values of investments in corporate debt securities, commercial paper and U.S. government agency securities using valuations obtained from third-party pricing services. The pricing services utilize industry standard valuation models, including both income and market-based approaches, for which all significant inputs are observable, either directly or indirectly, to estimate fair value. These inputs include reported trades of and broker/dealer quotes on the same or similar securities, issuer credit spreads, benchmark securities, prepayment/default projections based on historical data and other observable inputs.

Cash equivalents and marketable securities, all of which are classified as available-for-sale securities and measured at fair value on a recurring basis, consisted of the following (in thousands):

 

 

 

 

 

As of March 31, 2021

 

 

 

Fair Value

Hierarchy

Level

 

Amortized

Cost

 

 

Unrealized

Gains

 

 

Unrealized

Losses

 

 

Fair

Value

 

Financial assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds—classified

   as cash equivalents

 

Level 1

 

$

22,561

 

 

$

 

 

$

 

 

$

22,561

 

Corporate debt

 

Level 2

 

 

36,883

 

 

 

16

 

 

 

(17

)

 

 

36,882

 

Commercial paper

 

Level 2

 

 

25,483

 

 

 

 

 

 

 

 

 

25,483

 

U.S. government agency securities

 

Level 2

 

 

11,318

 

 

 

3

 

 

 

 

 

 

11,321

 

Total

 

 

 

$

96,245

 

 

$

19

 

 

$

(17

)

 

$

96,247

 

 

 

 

 

 

As of March 31, 2020

 

 

 

Fair Value

Hierarchy

Level

 

Amortized

Cost

 

 

Unrealized

Gains

 

 

Unrealized

Losses

 

 

Fair

Value

 

Financial assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds—classified

   as cash equivalents

 

Level 1

 

$

89,979

 

 

$

 

 

$

 

 

$

89,979

 

Corporate debt

 

Level 2

 

 

26,974

 

 

 

 

 

 

(217

)

 

 

26,757

 

Commercial paper

 

Level 2

 

 

19,913

 

 

 

 

 

 

 

 

 

19,913

 

Total

 

 

 

$

136,866

 

 

$

 

 

$

(217

)

 

$

136,649

 

 

The Company does not intend to sell the securities that are in an unrealized loss position and the Company believes it is more likely than not that the investments will be held until recovery of the amortized cost bases. The Company has determined that the gross unrealized losses on marketable securities as of March 31, 2021 were temporary in nature.

The following table presents the remaining contractual maturities of the Company’s marketable securities as of March 31, 2021 (in thousands):

 

 

March 31, 2021

 

Due in less than one year

 

$

82,079

 

Due in more than one year

 

 

14,168

 

Total

 

$

96,247

 

 

4. Property and Equipment

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

 

 

 

March 31,

 

 

December 31,

 

 

 

2021

 

 

2020

 

Laboratory equipment

 

$

6,187

 

 

$

5,966

 

Leasehold improvements

 

 

3,294

 

 

 

3,294

 

Computer equipment

 

 

416

 

 

 

447

 

Furniture and fixtures

 

 

394

 

 

 

357

 

Total property and equipment

 

 

10,291

 

 

 

10,064

 

Less accumulated depreciation and amortization

 

 

(7,362

)

 

 

(7,082

)

Property and equipment, net

 

$

2,929

 

 

$

2,982

 

10


 

Depreciation and amortization expense was $0.3 million and $0.2 million for the three months ended March 31, 2021 and 2020, respectively.

5. Accrued Expenses

Accrued expenses consisted of the following (in thousands):

 

 

 

March 31,

 

 

December 31,

 

 

 

2021

 

 

2020

 

Accrued research and development expenses

 

$

2,060

 

 

$

1,576

 

Accrued compensation

 

 

2,167

 

 

 

2,967

 

Accrued professional and consulting services

 

 

248

 

 

 

129

 

Other

 

 

64

 

 

 

263

 

Total accrued expenses

 

$

4,539

 

 

$

4,935

 

 

6. Collaboration Agreements

Collaboration and License Agreement with Hanmi

In December 2019, the Company entered into a Collaboration and License Agreement (the “Hanmi Agreement”) with Hanmi Pharmaceutical Ltd. (“Hanmi”), pursuant to which the Company granted Hanmi an exclusive license to develop, manufacture and commercialize FLX475 and related compounds and products with respect to human cancers in the Republic of Korea, the Republic of China (Taiwan) and the People’s Republic of China, including the special administrative regions of Macau and Hong Kong (the “Hanmi Territory”), and certain sublicense rights.

In consideration of the rights granted under the Hanmi Agreement, the Company was entitled to $10.0 million in an upfront payment of $4.0 million and a near-term milestone payment of $6.0 million. The milestone payment was received in April 2020. Additionally, the Company will be eligible to receive contingent payments of up to $108.0 million upon the achievement of specified milestones, as well as double-digit royalties on future net sales of FLX475 in the Hanmi Territory.

The transaction price as of March 31, 2021 was $10.4 million, consisting of the upfront fee of $4.0 million, the near-term milestone payment of $6.0 million, and $0.4 million related to the supply of FLX475 to Hanmi. The Company recognizes revenue for the performance obligation by applying the cost-based input method over the estimated service period. The Company determined that this method most faithfully depicts the transfer of its performance obligations to Hanmi as it reflects the progress made towards providing Hanmi with the necessary know-how to continue developing FLX475 in the Hanmi Territory.

For the three months ended March 31, 2021, the Company recognized $1.2 million as revenue pursuant to the Hanmi Agreement. As of March 31, 2021 and December 31, 2020, deferred revenue related to the Hanmi Agreement was $4.1 million and $5.0 million, respectively. The deferred revenue is expected to be recognized over the remaining period of the Company’s Phase 1/2 clinical trial of FLX475.

7. Common Stock

As of March 31, 2021, the Company had reserved the following shares of common stock for future issuance:

 

Options issued and outstanding under the 2019 Equity Incentive Plan and 2015 Stock Plan

 

 

1,967,417

 

Restricted stock units issued and outstanding under the 2019 Equity Incentive Plan

 

 

40,500

 

Options available for future grants

 

 

2,902,832

 

Shares reserved under the 2019 Employee Stock Purchase Plan

 

 

393,347

 

Total

 

 

5,304,096

 

 

11


 

8. Stock-based Compensation

Stock option activity under the 2019 Equity Incentive Plan (the “2019 Plan”) is set forth below for the three months ended March 31, 2021:

 

 

 

 

 

 

 

 

 

 

 

Weighted

 

 

Average

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average

 

 

Remaining

 

 

Aggregate

 

 

 

 

 

 

 

Number of

 

 

Exercise

 

 

Contractual

 

 

Intrinsic

 

 

 

Shares

 

 

Shares

 

 

Price Per

 

 

Term

 

 

Value

 

 

 

Available

 

 

Outstanding

 

 

Share

 

 

(Years)

 

 

(in thousands)

 

Balances at December 31, 2020

 

 

2,415,710

 

 

 

1,481,100

 

 

$

16.13

 

 

 

8.36

 

 

$

11,123

 

Stock options authorized

 

 

990,934

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock options granted

 

 

(557,895

)

 

 

557,895

 

 

 

19.52

 

 

 

 

 

 

 

 

 

Stock options exercised

 

 

 

 

 

(17,495

)

 

 

6.56

 

 

 

 

 

 

 

 

 

Stock options forfeited

 

 

54,083

 

 

 

(54,083

)

 

 

19.37

 

 

 

 

 

 

 

 

 

Balances at March 31, 2021

 

 

2,902,832

 

 

 

1,967,417

 

 

$

16.91

 

 

8.58

 

 

$

11,875

 

 

Restricted stock unit (“RSU”) activity under the 2019 Plan is set forth below for the three months ended March 31, 2021:

 

 

 

 

 

 

 

Weighted

 

 

 

 

 

 

 

Average

 

 

 

Number of

 

 

Grant Date

 

 

 

Shares

 

 

Fair Value

 

 

 

Outstanding

 

 

Per Share

 

Balances at December 31, 2020

 

 

56,500

 

 

$

44.66

 

RSUs granted

 

 

 

 

 

 

RSUs vested and settled

 

 

(14,125

)

 

 

44.66

 

RSUs forfeited

 

 

(1,875

)

 

 

44.66

 

Balances at March 31, 2021

 

 

40,500

 

 

$

44.66

 

 

Stock-based compensation expense

Total stock-based compensation expense recognized for options and RSUs granted to both employees and non-employees and for the employee stock purchase plan was as follows (in thousands):

 

 

 

For the Three Months Ended March 31,

 

 

 

2021

 

 

2020

 

Research and development

 

$

1,474

 

 

$

1,082

 

General and administrative

 

 

1,213

 

 

 

1,006

 

Total stock-based compensation expense

 

$

2,687

 

 

$

2,088

 

 

As of March 31, 2021, unrecognized stock-based compensation expense related to outstanding unvested stock options and RSUs that are expected to vest was $18.0 million. This unrecognized stock-based compensation expense is expected to be recognized over 3.0 years.

2019 Employee Stock Purchase Plan

In October 2019, the Company adopted the 2019 Employee Stock Purchase Plan (the “2019 ESPP”). The Company reserved 240,336 shares of common stock pursuant to purchase rights to be granted to the Company’s employees. The 2019 ESPP provides that the number of shares reserved and available for issuance will automatically increase on January 1 of each calendar year, beginning January 1, 2020, by the lesser of (1) 1.0% of the total number of shares of common stock outstanding on December 31 of the preceding calendar year, (2) 240,336 shares or (3) a number determined by the board of directors that is less than (1) and (2).

Under the 2019 ESPP, eligible employees are granted rights to purchase shares of common stock, which can be funded through payroll deductions that cannot exceed 15% of each employee’s compensation. The 2019 ESPP generally provides for a 24-month offering period, which includes four six-month purchase periods. At the end of each purchase period, eligible employees are permitted to purchase shares of common stock at 85% of the lower of fair market value at the beginning of the offering period or fair market value at the end of the purchase period. The 2019 ESPP is considered a compensatory plan and the Company recorded stock-based compensation expense of $0.8 million and $0.5 million for the three months ended March 31, 2021 and 2020, respectively.

12


9. Net Loss Per Share

Net loss per share

The following table sets forth the computation of the basic and diluted net loss per share for the three months ended March 31, 2021 and 2020 (in thousands, except share and per share data):

 

 

 

Three Months Ended

March 31,

 

 

 

2021

 

 

2020

 

Numerator:

 

 

 

 

 

 

 

 

Net loss

 

$

(16,514

)

 

$

(13,139

)

Denominator:

 

 

 

 

 

 

 

 

Weighted average common shares outstanding

 

 

24,844,946

 

 

 

23,317,161

 

Less: weighted-average unvested common shares

   subject to repurchase

 

 

 

 

 

(51,098

)

Weighted-average shares used to compute net loss per

   share, basic and diluted

 

 

24,844,946

 

 

 

23,266,063

 

Net loss per share, basic and diluted

 

$

(0.66

)

 

$

(0.56

)

 

Potential dilutive securities that were not included in the diluted per share calculations because they would be anti-dilutive were as follows:

 

 

 

As of March 31,

 

 

 

2021

 

 

2020

 

Stock options issued and outstanding under the 2019

   Equity Incentive Plan and 2015 Stock Plan

 

 

1,967,417

 

 

 

1,579,037

 

Estimated shares issuable under the 2019 ESPP

 

 

52,468

 

 

 

32,918

 

RSUs subject to future vesting

 

 

40,500

 

 

 

 

Total

 

 

2,060,385

 

 

 

1,611,955

 

 

 

 

 

 

13


 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations