JNCE Jounce Therapeutics Inc

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Registrant’s telephone number, including area code: (857) 259-3840

    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, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

    

    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 July 30, 2021, there were 51,232,029 shares of common stock, $0.001 par value per share, outstanding.

Table of Contents

						Page
PART I. FINANCIAL INFORMATION
Item 1.			Financial Statements (unaudited)			3
			Condensed Consolidated Balance Sheets as of June 30, 2021 and December 31, 2020			3
			Condensed Consolidated Statements of Operations and Comprehensive Loss for the Three and Six Months Ended June 30, 2021 and 2020			4
			Condensed Consolidated Statements of Stockholders’ Equity for the Three and Six Months Ended June 30, 2021 and 2020			5
			Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 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			17
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			28
Item 6.			Exhibits			29
SIGNATURES

References to Jounce

Throughout this Quarterly Report on Form 10-Q, the “Company,” “Jounce,” “Jounce Therapeutics,” “we,” “us,” and “our,” except where the context requires otherwise, refers to Jounce Therapeutics, Inc. and its consolidated subsidiary, and “board of directors” refers to the board of directors of Jounce Therapeutics, Inc.

Cautionary Note Regarding Forward-Looking Statements and Industry Data

This Quarterly Report on Form 10-Q contains forward-looking statements 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 operations, future financial position, future revenue, projected costs, prospects, plans, objectives of management and expected market growth, are forward-looking statements. These statements involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements.

The words “aim,” “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “goal,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “target,” “will” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. These forward-looking statements include, among other things, statements about:

•the timing, progress, and results of preclinical studies and clinical trials for our current and future product candidates, including statements regarding the timing of initiation and completion of studies or trials and related preparatory work, the period during which the results of the trials will become available, and our research and development programs;

•our plans and expectations in light of the COVID-19 pandemic and its impacts on our operations and global healthcare systems;

•the timing, scope, or likelihood of regulatory filings and approvals, including, as applicable, timing of our investigational new drug applications for, biologics license application filing for, and final Food and Drug Administration approval of our current and future product candidates;

•our ability to use our Translational Science Platform to identify targets for future product candidates and to match immunotherapies to select patient subsets;

•our ability to identify, develop and advance future product candidates into, and successfully complete, clinical studies;

•our ability to develop combination therapies, whether on our own or in collaboration with third parties, for our current and future product candidates;

•our expectations regarding the size of the patient populations for our product candidates, if approved for commercial use, and any product candidates we may develop;

•our commercialization and marketing capabilities and strategy;

•the pricing and reimbursement of our current and future product candidates, if approved;

•the implementation of our business model and our strategic plans for our business, our current and future product candidates, and our technology;

•our ability to develop and commercialize a companion diagnostic or complementary diagnostic for our current and future product candidates;

•the rate and degree of market acceptance and clinical utility of our current and future product candidates;

•the potential benefits of our exclusive license of JTX-1811 to Gilead Sciences, Inc.;

•our ability to establish or maintain future collaborations or strategic relationships or obtain additional funding;

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

•our intellectual property position, including the scope of protection we are able to establish and maintain for intellectual property rights covering our current and future product candidates, and our ability not to infringe, misappropriate or otherwise violate any third-party intellectual property rights;

•our competitive position, and developments and projections relating to our competitors and our industry;

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

•the impact of laws and regulations.

There are a number of important risks and uncertainties that could cause our actual results to differ materially from those indicated by forward-looking statements. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements we make. You should also read carefully the factors described in the sections “Summary of Risks Factors” and “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2020 to better understand the risks and uncertainties inherent in our business and underlying any forward-looking statements. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments that we may make.

You should read this Quarterly Report on Form 10-Q and the documents that we have filed as exhibits to this Quarterly Report on Form 10-Q completely and with the understanding that our actual future results may be materially different from what we expect. The forward-looking statements contained in this Quarterly Report on Form 10-Q are made as of the date of this Quarterly Report on Form 10-Q, and we do not assume any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law.

This Quarterly Report on Form 10-Q may include industry and market data, which we may obtain from our own internal estimates and research, as well as from industry and general publications and research, surveys, and studies conducted by third parties. Industry publications, studies, and surveys generally state that they have been obtained from sources believed to be reliable, although they do not guarantee the accuracy or completeness of such information. While we believe that such studies and publications are reliable, we have not independently verified market and industry data from third‑party sources.

Website and Social Media Disclosure

From time to time, we may use our website (www.jouncetx.com), investor and media relations website (http://ir.jouncetx.com), Facebook page (https://www.facebook.com/jouncetx), LinkedIn page (https://www.linkedin.com/company/3494537/) and Twitter feed (https://twitter.com/JounceTx) as channels for the distribution of information. The information we post through these channels may be deemed material. Accordingly, investors should monitor these channels, in addition to following our press releases, Securities and Exchange Commission filings and public conference calls and webcasts. The contents of our website and social media channels are not, however, a part of this report.

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Jounce Therapeutics, Inc.

Condensed Consolidated Balance Sheets (unaudited)

(amounts in thousands, except par value amounts)

d

			June 30,						December 31,
			2021						2020
Assets:
Current assets:
Cash and cash equivalents			$	140,814					$	147,493
Short-term investments			79,319						58,985
Accounts receivable — related party			24,976						31
Prepaid expenses and other current assets			12,010						4,882
Total current assets			257,119						211,391
Property and equipment, net			6,026						7,336
Long-term investments			26,015						6,710
Operating lease right-of-use asset			13,403						14,856
Other non-current assets			3,597						3,943
Total assets			$	306,160					$	244,236
Liabilities and stockholders’ equity:
Current liabilities:
Accounts payable			$	2,476					$	2,036
Accrued expenses			9,853						12,044
Deferred revenue, current — related party			—						1,931
Operating lease liability, current			3,478						3,271
Other current liabilities			34						42
Total current liabilities			15,841						19,324
Operating lease liability, net of current portion			11,857						13,618
Total liabilities			27,698						32,942
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $0.001 par value: 5,000 shares authorized at June 30, 2021 and December 31, 2020; no shares issued or outstanding at June 30, 2021 or December 31, 2020			—						—
Common stock, $0.001 par value: 160,000 shares authorized at June 30, 2021 and December 31, 2020; 51,221 and 41,729 shares issued and outstanding at June 30, 2021 and December 31, 2020, respectively			51						42
Additional paid-in capital			459,982						362,270
Accumulated other comprehensive income			(24)						(17)
Accumulated deficit			(181,547)						(151,001)
Total stockholders’ equity			278,462						211,294
Total liabilities and stockholders’ equity			$	306,160					$	244,236

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

Jounce Therapeutics, Inc.

Condensed Consolidated Statements of Operations and Comprehensive Loss (unaudited)

(amounts in thousands, except per share amounts)

			Three Months Ended June 30,												Six Months Ended June 30,
			2021						2020						2021						2020
Revenue:
License and collaboration revenue — related party			$	25,368					$	—					$	26,907					$	—
Operating expenses:
Research and development			22,100						21,023						42,607						40,669
General and administrative			7,317						7,226						14,932						14,765
Total operating expenses			29,417						28,249						57,539						55,434
Operating loss			(4,049)						(28,249)						(30,632)						(55,434)
Other income, net			40						285						89						1,035
Loss before provision for income taxes			(4,009)						(27,964)						(30,543)						(54,399)
Provision for income taxes			2						4						3						12
Net loss			$	(4,011)					$	(27,968)					$	(30,546)					$	(54,411)
Net loss per share, basic and diluted			$	(0.08)					$	(0.82)					$	(0.63)					$	(1.60)
Weighted-average common shares outstanding, basic and diluted			51,212						34,053						48,601						34,041
Comprehensive loss:
Net loss			$	(4,011)					$	(27,968)					$	(30,546)					$	(54,411)
Other comprehensive income (loss):
Unrealized gain (loss) on available-for-sale securities			1						(11)						(7)						79
Comprehensive loss			$	(4,010)					$	(27,979)					$	(30,553)					$	(54,332)

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

Jounce Therapeutics, Inc.

Condensed Consolidated Statements of Stockholders’ Equity (unaudited)

(amounts in thousands)

			Common Stock												Additional Paid-In Capital						Accumulated Other Comprehensive Income						Accumulated Deficit						Total Stockholders’ Equity
			Shares						Amount
Balance at December 31, 2020			41,729						$	42					$	362,270					$	(17)					$	(151,001)					$	211,294
Issuance of common stock from at the market offering, net of issuance costs			3,156						3						30,218						—						—						30,221
Issuance of common stock from follow-on public offering, net of issuance costs			5,750						6						60,632						—						—						60,638
Exercises of common stock options			342						—						1,019						—						—						1,019
Vesting of restricted stock units			223						—						—						—						—						—
Stock-based compensation expense			—						—						2,825						—						—						2,825
Other comprehensive loss			—						—						—						(8)						—						(8)
Net loss			—						—						—						—						(26,535)						(26,535)
Balance at March 31, 2021			51,200						51						456,964						(25)						(177,536)						279,454
Exercises of common stock options			21						—						83						—						—						83
Stock-based compensation expense			—						—						2,935						—						—						2,935
Other comprehensive income			—						—						—						1						—						1
Net loss			—						—						—						—						(4,011)						(4,011)
Balance at June 30, 2021			51,221						$	51					$	459,982					$	(24)					$	(181,547)					$	278,462
			Common Stock												Additional Paid-In Capital						Accumulated Other Comprehensive (Loss) Income						Accumulated Deficit						Total Stockholders’ Equity
			Shares						Amount
Balance at December 31, 2019			33,738						$	34					$	281,664					$	54					$	(107,159)					$	174,593
Issuance of common stock from at the market offering, net of issuance cost			201						—						1,648						—						—						1,648
Exercise of common stock options			9						—						38						—						—						38
Vesting of restricted stock units			101						—						—						—						—						—
Stock-based compensation expense			—						—						2,618						—						—						2,618
Other comprehensive income			—						—						—						90						—						90
Net loss			—						—						—						—						(26,443)						(26,443)
Balance at March 31, 2020			34,049						34						285,968						144						(133,602)						152,544
Exercises of common stock options			16						—						61						—						—						61
Stock-based compensation expense			—						—						2,643						—						—						2,643
Other comprehensive loss			—						—						—						(11)						—						(11)
Net loss			—						—						—						—						(27,968)						(27,968)
Balance at June 30, 2020			34,065						$	34					$	288,672					$	133					$	(161,570)					$	127,269

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

			Six Months Ended June 30,
			2021						2020
Operating activities:
Net loss			$	(30,546)					$	(54,411)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation expense			5,760						5,261
Depreciation expense			1,501						1,795
Net amortization of premiums and discounts on investments			338						(95)
Other non-cash items			—						(4)
Changes in operating assets and liabilities:
Accounts receivable — related party			(24,945)						—
Prepaid expenses and other current assets			(7,126)						745
Other non-current assets			345						(128)
Accounts payable			473						741
Accrued expenses and other current liabilities			(2,232)						1,181
Deferred revenue — related party			(1,931)						—
Other liabilities			(101)						(61)
Net cash used in operating activities			(58,464)						(44,976)
Investing activities:
Purchases of investments			(78,565)						(30,752)
Proceeds from maturities of investments			38,581						95,387
Purchases of property and equipment			(157)						(50)
Net cash (used in) provided by investing activities			(40,141)						64,585
Financing activities:
Proceeds from at the market offering, net of issuance costs			90,826						1,514
Proceeds from exercise of stock options			1,100						99
Net cash provided by financing activities			91,926						1,613
Net increase (decrease) in cash, cash equivalents and restricted cash			(6,679)						21,222
Cash, cash equivalents and restricted cash, beginning of period			148,763						54,511
Cash, cash equivalents and restricted cash, end of period			$	142,084					$	75,733
Non-cash investing and financing activities:
Purchases of property and equipment in accounts payable and accrued expenses			$	33					$	—
Stock option exercise receivables in prepaid expenses and other current assets			$	2					$	—
Supplemental cash flow information:
Cash paid for lease liabilities			$	2,626					$	2,190
Cash paid for income taxes			$	8					$	45

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

Notes to Condensed Consolidated Financial Statements

(unaudited)

1. Nature of Business

Jounce Therapeutics, Inc. (the “Company”) is a clinical-stage immunotherapy company dedicated to transforming the treatment of cancer by developing therapies that enable the immune system to attack tumors and provide long-lasting benefits to patients through a biomarker-driven approach. The Company is subject to a number of risks similar to those of other clinical-stage companies, including dependence on key individuals; the need to develop commercially viable products; competition from other companies, many of which are larger and better capitalized; and the need to obtain adequate additional financing to fund the development of its products.

As of June 30, 2021, the Company had cash, cash equivalents and investments of $246.1 million. The Company expects that its existing cash, cash equivalents and investments will enable it to fund its expected operating expenses and capital expenditure requirements for at least 12 months from August 5, 2021, the filing date of this Quarterly Report on Form 10-Q. The Company expects to finance its future cash needs through a combination of equity or debt financings, collaborations, licensing arrangements and strategic alliances.

2. Basis of Presentation and Summary of Significant Accounting Policies

Basis of Presentation and Consolidation

The accompanying condensed consolidated financial statements as of June 30, 2021 and December 31, 2020, and for the three and six months ended June 30, 2021 and 2020, have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (the “SEC”) and generally accepted accounting principles in the United States of America (“GAAP”) as found in the Accounting Standards Codification (“ASC”) of the Financial Accounting Standards Board (“FASB”) for condensed consolidated financial information. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, these condensed consolidated financial statements reflect all normal recurring adjustments which are necessary for a fair presentation of the Company’s financial position and results of its operations, as of and for the periods presented. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 filed with the SEC on February 25, 2021 (the “Annual Report on Form 10-K”).

The information presented in the condensed consolidated financial statements and related notes as of June 30, 2021, and for the three and six months ended June 30, 2021 and 2020, is unaudited. The December 31, 2020 condensed consolidated balance sheet included herein was derived from the audited financial statements as of that date, but does not include all disclosures, including notes, required by GAAP for complete financial statements.

Interim results for the six months ended June 30, 2021 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2021, or any future period.

The accompanying condensed consolidated financial statements include the accounts of Jounce Therapeutics, Inc. and its wholly-owned subsidiary, Jounce Mass Securities, Inc. All intercompany transactions and balances have been eliminated in consolidation.

Summary of Significant Accounting Policies

The significant accounting policies and estimates used in the preparation of the condensed consolidated financial statements are described in the Company’s audited financial statements as of and for the year ended December 31, 2020, and the notes thereto, which are included in the Annual Report on Form 10-K. There have been no material changes in the Company’s significant accounting policies during the six months ended June 30, 2021.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. On an ongoing basis, the Company’s management evaluates its estimates which include, but are not limited to, accrued expenses, stock-based compensation expense and income taxes. The Company bases its estimates on historical experience and other market specific or other relevant assumptions it believes to be reasonable under the circumstances. Actual results could differ from those estimates.

Recent Accounting Pronouncements, Not Yet Adopted

In June 2016, the FASB issued Accounting Standards Update (“ASU”) 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. This standard requires that credit losses be reported using an expected losses model rather than the incurred losses model that is currently used, and it establishes additional disclosure requirements related to credit risks. For available-for-sale debt securities with expected credit losses, this standard now requires allowances to be recorded instead of reducing the amortized cost of the investment. This guidance was originally effective for annual reporting periods beginning after December 15, 2019, including interim periods within those annual reporting periods, and early adoption was permitted. In November 2019, the FASB subsequently issued ASU 2019-10, Financial Instruments—Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842): Effective Dates, whereby the effective date of this standard for smaller reporting companies was deferred to annual reporting periods beginning after December 15, 2022, including interim periods within those annual reporting periods, and early adoption is still permitted. Accordingly, the Company will now adopt this standard effective January 1, 2023, and it is currently evaluating the potential impact that ASU 2016-13 may have on the consolidated financial statements.

3.     License and Collaboration Revenue

Gilead License Agreement

On August 31, 2020, the Company and Gilead Sciences, Inc. (“Gilead”) entered into an exclusive license agreement (the “Gilead License Agreement”) to license the Company’s JTX-1811 program to Gilead, which will be referred to as GS-1811 in Gilead’s pipeline. Concurrently with the license agreement, the Company and Gilead entered into a stock purchase agreement (the “Stock Purchase Agreement”) and a registration rights agreement (the “Registration Rights Agreement”, and together with the License Agreement and the Stock Purchase Agreement, the “Transaction Agreements”). Pursuant to the Gilead License Agreement, the Company granted to Gilead a worldwide and exclusive license to develop, manufacture and commercialize JTX-1811 and certain derivatives thereof (the “Licensed Products”). Gilead paid the Company a one-time, non-refundable upfront payment of $85.0 million pursuant to the Gilead License Agreement and the Company sold Gilead 5,539,727 shares of common stock pursuant to the Stock Purchase Agreement for proceeds of $35.0 million upon the closing in October 2020. The Company continued to develop JTX-1811 during the initial development term, which included conducting activities defined within the agreement to advance JTX-1811 through the clearance of an investigational new drug application (“IND”), which occurred in June 2021, at which time the program transitioned to Gilead.

Milestone and Royalties

The Company is entitled to receive payments from Gilead upon the achievement of specified clinical, regulatory and sales milestones, including potential clinical development and regulatory milestone payments up to an aggregate total of $510.0 million and potential sales milestone payments up to an aggregate total of $175.0 million.

The Company is also eligible to receive tiered royalty payments based on a percentage of annual worldwide net sales ranging from the high-single digits to mid-teens, based on future annual net sales of the Licensed Products, on a Licensed Product-by-Licensed Product and country-by-country basis.

In June 2021, the Company received clearance of the IND for JTX-1811 from the U.S. Food and Drug Administration (“FDA”) and achieved a $25.0 million milestone under the Gilead License Agreement. Payment for this milestone was received in July 2021.

Termination

Gilead may terminate the License Agreement for convenience, at its sole discretion, in its entirety or on a Licensed Product-by-Licensed Product or region-by-region basis, at any time with prior written notice to the Company. Unless terminated earlier in accordance with its terms, the Gilead License Agreement provides that it will expire (i) on a Licensed Product-by-Licensed Product and country-by-country basis on the date of the expiration of the royalty term with respect to such Licensed Product in such country and (ii) in its entirety upon the expiration of all applicable royalty terms with respect to the Licensed Products in all countries, following which the applicable licenses under the Gilead License Agreement will become fully paid-up, perpetual, irrevocable and royalty-free.

Accounting Analysis

Identification of the Contract(s)

The Company assessed the Gilead License Agreement and concluded that it represents a contract with a customer within the scope of ASC 606, Revenue from Contracts with Customers (“ASC 606”). In addition, the Company determined that the Gilead License Agreement and Stock Purchase Agreement should be evaluated as a combined contract in accordance with ASC 606 given that the agreements were executed contemporaneously, negotiated as a package and have the same commercial objective to provide funding to further the Company’s research and development activities.

Identification of Promises and Performance Obligations

The Company determined that the Gilead License Agreement contains the following promises: (i) delivery of a worldwide and exclusive license to develop, manufacture and commercialize JTX-1811 (the “JTX-1811 License”), (ii) provision of certain research transition activities, specifically outlined within the Gilead License Agreement, related to the advancement of JTX-1811 through the clearance of an IND and transition of the JTX-1811 program to Gilead (the “Research and Transition Services”), (iii) appointment of an individual to act as an alliance manager and primary point of contact for Gilead, (iv) appointment of individuals to participate on the Joint Steering Committee (“JSC”), and (v) optional assistance by Jounce after completion of Research and Transition Services upon the request of Gilead.

The Company assessed the above promises and concluded that each of the JTX-1811 License and Research and Transition Services is capable of being distinct and distinct within the context of the Gilead License Agreement. Based upon this evaluation, the Company concluded that its promise to deliver the JTX-1811 License and promise to perform Research and Transition Services represent separate performance obligations in the Gilead License Agreement.

The Company determined that the appointment of an individual to act as an alliance manager and primary point of contact for Gilead, participation in alliance management meetings and the appointment of individuals to participate on the JSC do not constitute the transfer of a good or service to Gilead and as such, do not represent performance obligations under the contract.

Finally, the Company assessed Gilead’s ability to request optional assistance by Jounce after completion of Research and Transition Services and determined that it was both quantitatively and qualitatively immaterial in the context of the Gilead License Agreement. Accordingly, the Company did not assess the optional assistance as a performance obligation.

Determination of Transaction Price

As noted above, the Company received a non-refundable upfront payment of $85.0 million upon the closing of the Gilead License Agreement. This upfront payment represents an element of fixed consideration under the Gilead License Agreement.

The Company also evaluated as possible variable consideration the milestones and royalties discussed above. With respect to clinical development and regulatory milestones, based upon the high degree of uncertainty and risk associated with these potential payments, the Company concluded that all such amounts should be fully constrained and are not included in the initial transaction price. As part of the evaluation of the constraint the Company considered certain factors, including that receipt of such milestones is outside the control of the Company and the probability of success criteria is estimated. Each of these variable consideration items was evaluated under the most-likely amount method. As for royalties and sales milestones, the Company determined that the royalties and milestones relate solely to the JTX-1811 License, which is a license of intellectual property (“IP”). Accordingly, the Company did not include any potential royalty or sales milestone amounts in the initial transaction price, and the Company will not recognize revenue related to these royalties and sales milestones until the associated sales occur and relevant thresholds are met. The Company will re-evaluate the transaction price in each reporting period as uncertain events are resolved or as other changes in circumstances occur, and if necessary, will adjust its estimate of the transaction price to include milestones as they become probable of occurrence.

The Company assessed proceeds of $35.0 million received under the Stock Purchase Agreement and determined that the fair value of the equity component was $55.7 million based on the closing price of $10.06 per share in October 2020. Pursuant to the agreement, the Company sold 5,539,727 shares of common stock for aggregate cash consideration of $35.0 million, or $6.32 per share, which is equal to the daily volume weighted average per share intraday price of the Common Stock on Nasdaq over the 30-trading day period ending on and including August 28, 2020 plus a 30% premium. As a result, the Company determined that the gross proceeds of $35.0 million received under the Stock Purchase Agreement included a discount to the fair value of the Company’s stock as of October 16, 2020 equal to $20.7 million. In accordance with ASC 606, the discount amount will be included in the transaction price for revenue recognition, resulting in an initial transaction price of $64.3 million.

Allocation of Transaction Price to Performance Obligations

The Company allocated the transaction price to each performance obligation on a relative estimated standalone selling price basis. The Company developed the estimated standalone selling price for the JTX-1811 License based on the present value of expected future cash flows associated with the license and related clinical development and regulatory milestones. In developing such estimate, the Company applied judgement in determining the timing needed to develop the Licensed Product, the probability of success, and the discount rate. The Company developed the estimated standalone selling price for the Research and Transition Services obligation based on the nature of the services to be performed and the Company’s best estimate of the length of time required to perform the services necessary to achieve clearance of an IND for the JTX-1811 program.

Based on the above considerations, $60.8 million of the initial transaction price was allocated to the JTX-1811 License performance obligation and $3.5 million was allocated to the Research and Transition Services performance obligation.

Recognition of Revenue

The Company determined that the JTX-1811 License is a functional license as the underlying IP has significant standalone functionality. In addition, the Company determined that the JTX-1811 License represents a right to use certain of the Company’s IP as it exists at a point in time. Finally, the Company determined that October 16, 2020 represents (i) the date at which the Company made available the IP to Gilead and (ii) the beginning of the period during which Gilead is able to use and benefit from its right to use the IP. Based upon these considerations, the Company recognized the entirety of the initial transaction price allocated to the JTX-1811 License performance obligation during the year ended December 31, 2020.

Further, the Company determined the input method under ASC 606 is the most appropriate method of revenue recognition for the Research and Transition Services performance obligation. The method of measuring progress towards delivery of the services incorporated actual internal and external costs incurred, relative to total internal and external costs expected to be incurred to satisfy the performance obligation. The period over which total costs were estimated reflected the Company’s best estimate of the period over which it would perform the research and transition services to achieve clearance of an IND of the JTX-1811 program and transition the program to Gilead.

During the three months ended June 30, 2021, the Company recognized $25.4 million in collaboration and license revenue under the Gilead License Agreement, $25.0 million of which was recognized related to the achievement of a clinical development and regulatory milestone for FDA clearance of the IND for JTX-1811 and $0.4 million of which related to the performance of research and transition services. No revenue was recognized during the three months ended June 30, 2020.

During the six months ended June 30, 2021, the Company recognized $26.9 million in collaboration and license revenue under the Gilead License Agreement, $25.0 million of which related to the achievement of a clinical development and regulatory milestone for FDA clearance of the IND for JTX-1811 and $1.9 million of which related to the performance of research and transition services. No revenue was recognized during the six months ended June 30, 2020.

As of June 30, 2021 and December 31, 2020, receivables due from Gilead of $25.0 million and less than $0.1 million, respectively, were included in “Accounts receivable — related party”. The Company subsequently received payment for the $25.0 million milestone in July 2021.

The following table presents changes in the Company’s contract liabilities related to the Gilead License Agreement during the six months ended June 30, 2021 (in thousands):

The reductions to deferred revenue - related party during the six months ended June 30, 2021 were comprised of revenue recognized for research and transition services performed during the period.

4.    Fair Value Measurements

Fair value is an exit price, representing the amount that would be received from the sale of an asset or paid to transfer a liability in an orderly transaction between market participants. Fair value is determined based on observable and unobservable inputs. Observable inputs reflect readily obtainable data from independent sources, while unobservable inputs reflect certain market assumptions. As a basis for considering such assumptions, GAAP establishes a three-tier value hierarchy, which prioritizes the inputs used to develop the assumptions and for measuring fair value as follows: (Level 1) observable inputs such as quoted prices in active markets for identical assets; (Level 2) inputs other than the quoted prices in active markets that are observable either directly or indirectly; and (Level 3) unobservable inputs in which there is little or no market data, which requires the Company to develop its own assumptions. This hierarchy requires the Company to use observable market data, when available, and to minimize the use of unobservable inputs when determining fair value.

The Company measures the fair value of money market funds, U.S. Treasuries and government agency securities based on quoted prices in active markets for identical securities. Investments also include corporate debt securities which are valued either based on recent trades of securities in inactive markets or based on quoted market prices of similar instruments and other significant inputs derived from or corroborated by observable market data.

The carrying amounts reflected in the condensed consolidated balance sheets for cash, prepaid expenses and other current assets, accounts payable and accrued expenses approximate their fair values, due to their short-term nature.

Assets measured at fair value on a recurring basis as of June 30, 2021 were as follows (in thousands):

Assets measured at fair value on a recurring basis as of December 31, 2020 were as follows (in thousands):

There were no changes in valuation techniques during the six months ended June 30, 2021 or during the year ended December 31, 2020. There were no liabilities measured at fair value on a recurring basis as of June 30, 2021 or December 31, 2020.

5.     Investments

Short-term investments consist of investments with maturities greater than ninety days and less than one year from the balance sheet date. Long-term investments consist of investments with maturities of greater than one year that are not expected to be used to fund current operations. The Company classifies all of its investments as available-for-sale securities. Accordingly, these investments are recorded at fair value. Realized gains and losses, amortization and accretion of discounts and premiums are included in other income, net. Unrealized gains and losses on available-for-sale securities are included in other comprehensive income as a component of stockholders’ equity until realized.

Cash equivalents, short-term investments and long-term investments as of June 30, 2021 were comprised as follows (in thousands):

Cash equivalents, short-term investments and long-term investments as of December 31, 2020 were comprised as follows (in thousands):

As of June 30, 2021 and December 31, 2020, the aggregate fair value of securities that were in an unrealized loss position for less than twelve months was $39.8 million and $28.3 million, respectively. There were no securities that were in an unrealized loss position for more than twelve months as of either June 30, 2021 or December 31, 2020. As of June 30, 2021, the Company did not intend to sell, and would not be more likely than not required to sell, the securities in an unrealized loss position before recovery of their amortized cost bases. Furthermore, the Company determined that there was no material change in the credit risk of these securities. As a result, the Company determined it did not hold any securities with any other-than-temporary impairment as of June 30, 2021.

There were no realized gains or losses on available-for-sale securities during the three or six months ended June 30, 2021. There were immaterial realized gains on available-for-sale securities during the three and six months ended June 30, 2020.

6.     Restricted Cash

As of both June 30, 2021 and December 31, 2020, the Company maintained non-current restricted cash of $1.3 million. This amount is included within “Other non-current assets” in the accompanying condensed consolidated balance sheets and is comprised solely of a letter of credit required pursuant to the lease for the Company’s corporate headquarters.

The following table provides a reconciliation of cash, cash equivalents and restricted cash that sums to the total of the same such amounts shown in the condensed consolidated statements of cash flows (in thousands):

7.     Accrued Expenses

Accrued expenses as of June 30, 2021 and December 31, 2020 were comprised as follows (in thousands):

The Company is authorized to issue 160,000,000 shares of common stock. Holders of common stock are entitled to one vote per share. Holders of common stock are entitled to receive dividends, if and when declared by the board of directors.

On December 17, 2019, the Company entered into a Sales Agreement with Cowen and Company, LLC, or Cowen, pursuant to which the Company offered and sold shares of its common stock with an aggregate offering price of up to $50.0 million under an “at the market” offering program (the “ATM Offering”). The Sales Agreement provided that Cowen would be entitled to a sales commission equal to 3.0% of the gross sales price per share of all shares sold under the ATM Offering. During the first quarter of 2021, the Company sold an aggregate of 3,156,200 shares of common stock at an average price of $9.87 per share under the ATM Offering for net proceeds of $30.2 million, which completed the sale of all available amounts under the ATM Offering.

In addition, during the first quarter of 2021, the Company completed a follow-on public offering of its common stock, selling an aggregate of 5,750,000 shares of common stock at a public offering price of $11.25 per share for net proceeds of $60.6 million, after deducting underwriting discounts and commissions and offering fees.

Preferred Stock

The Company is authorized to issue 5,000,000 shares of undesignated preferred stock in one or more series. As of June 30, 2021, no shares of preferred stock were issued or outstanding.

Shares Reserved for Future Issuance

As of June 30, 2021 and December 31, 2020, the Company had reserved for future issuance the following number of shares of common stock (in thousands):

9.   Stock-based Compensation

2013 Stock Option and Grant Plan

In February 2013, the board of directors adopted and the Company’s stockholders approved the 2013 Stock Option and Grant Plan (the “2013 Plan”), as amended and restated, under which it could grant incentive stock options (“ISOs”), non-qualified stock options, restricted stock awards (“RSAs”) and restricted stock units (“RSUs”) to eligible employees, officers, directors, and consultants. The 2013 Plan was subsequently amended in January 2015, April 2015, July 2015, March 2016 and October 2016 to allow for the issuance of additional shares of common stock.

2017 Stock Option and Incentive Plan

In January 2017, the board of directors adopted and the Company’s stockholders approved the 2017 Stock Option and Incentive Plan (the “2017 Plan”). Upon the adoption of the 2017 Plan, no further awards will be granted under the 2013 Plan.

The 2017 Plan provides for the grant of ISOs, non-qualified stock options, RSAs, RSUs, stock appreciation rights and other stock-based awards. The Company’s employees, officers, directors and consultants and advisors are eligible to receive awards under the 2017 Plan. The terms of awards, including vesting requirements, are determined by the board of directors, subject to the provisions of the 2017 Plan.

The Company initially registered on Form S-8 1,753,758 shares of common stock under the 2017 Plan, which was comprised of (i) 1,510,000 shares of common stock reserved for issuance under the 2017 Plan, plus (ii) 243,758 shares of common stock originally reserved for issuance under the 2013 Plan that became available for issuance under the 2017 Plan upon the completion of the Company’s IPO. The 2017 Plan also provides that an additional number of shares will automatically be added to the shares authorized for issuance under the 2017 Plan on January 1, 2018 and each January 1st thereafter. The number of shares added each year will be equal to the lesser of (i) 4% of the outstanding shares on the immediately preceding December 31st or (ii) such amount as determined by the compensation committee of the board of directors. Effective January 1, 2020 and 2021, 1,349,526 and 1,669,162 additional shares, respectively, were automatically added to the shares authorized for issuance under the 2017 Plan.

As of June 30, 2021, there were 1,485,743 shares available for future issuance under the 2017 Plan.

Inducement Stock Options

The Company may grant, upon approval by the compensation committee of the board of directors, options to purchase shares of common stock as an inducement to employment in accordance with Nasdaq Listing Rule 5635(c)(4). The securities are issued pursuant to Section 4(a)(2) under the Securities Act of 1933, as amended, relating to transactions by an issuer not involving any public offering. These options are subject to substantially the same terms of the 2017 Plan. During the three months ended June 30, 2021, the Company granted an option to purchase 225,000 shares of common stock as an inducement award.

2017 Employee Stock Purchase Plan

In January 2017, the board of directors adopted and the Company’s stockholders approved the 2017 Employee Stock Purchase Plan (the “2017 ESPP”). The Company initially reserved 302,000 shares of common stock for future issuance under the 2017 ESPP. The 2017 ESPP also provides that an additional number of shares will automatically be added to the shares authorized for issuance under the 2017 ESPP on January 1, 2018 and each January 1st thereafter through January 1, 2027. The number of shares added each year will be equal to the lesser of (i) 1% of the outstanding shares on the immediately preceding December 31st, (ii) 603,000 shares or (iii) such amount as determined by the compensation committee of the board of directors. Effective January 1, 2020 and 2021, 337,381 and 417,291 additional shares, respectively, were automatically added to the shares authorized for issuance under the 2017 ESPP. No offering periods under the 2017 ESPP had been initiated as of June 30, 2021.

No RSUs vested during the three months ended June 30, 2021 or 2020. The aggregate fair value of RSUs that vested during the six months ended June 30, 2021 and 2020, based upon the fair values of the stock underlying the RSUs on the day of vesting, was $1.5 million and $0.8 million, respectively.

As of June 30, 2021, there was unrecognized stock-based compensation expense related to unvested RSUs of $6.0 million, which the Company expects to recognize over a weighted-average period of approximately 2.0 years.

Stock Option Activity

The fair value of stock options granted during the three and six months ended June 30, 2021 and 2020 was calculated on the date of grant using the following weighted-average assumptions:

Using the Black-Scholes option pricing model, the weighted-average grant date fair value of stock options granted during the three months ended June 30, 2021 and 2020 was $6.21 per share and $4.15 per share, respectively. The weighted-average grant date fair value of stock options granted during the six months ended June 30, 2021 and 2020 was $7.63 per share and $4.22 per share, respectively.

The following table summarizes stock option activity during the six months ended June 30, 2021 (in thousands, except per share amounts):

The aggregate intrinsic value of stock options exercised during each of the three months ended June 30, 2021 and 2020 was less than $0.1 million. The aggregate intrinsic value of stock options exercised during each of the six months ended June 30, 2021 and 2020 was $2.9 million and less than $0.1 million, respectively.

As of June 30, 2021, there was unrecognized stock-based compensation expense related to unvested stock options of $15.6 million, which the Company expects to recognize over a weighted-average period of approximately 2.5 years.

10.   Related-party Transactions

In August 2020, the Company entered into the Gilead License Agreement and Stock Purchase Agreement under which it received a non-refundable upfront payment of $85.0 million and cash consideration of $35.0 million for Gilead’s purchase of 5,539,727 shares of the Company’s common stock. As of June 30, 2021, the Company had a $25.0 million receivable due from Gilead for the achievement of a clinical development and regulatory milestone under the Gilead License Agreement during the period and payment was subsequently received in July 2021. As of December 31, 2020, the Company had recorded less than $0.1 million of reimbursable expenses due from Gilead within accounts receivable in the accompanying consolidated balance sheets.

11.   Net Loss per Share

For purposes of the diluted net loss per share calculation, outstanding stock options and unvested RSUs are considered to be potentially dilutive securities, however the following weighted-average amounts were excluded from the calculation of diluted net loss per share because their effect would be anti-dilutive (in thousands):