Form 10-Q - Quarterly report [Sections 13 or 15(d)]
August 12 2024 - 7:20AM
Edgar (US Regulatory)
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
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☒ |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended June 30, 2024
OR
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☐ |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number: 001-39527
PRELUDE THERAPEUTICS INCORPORATED
(Exact Name of Registrant as Specified in its Charter)
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Delaware |
81-1384762 |
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer
Identification No.) |
175 Innovation Boulevard Wilmington, Delaware |
19805 |
(Address of principal executive offices) |
(Zip Code) |
Registrant’s telephone number, including area code: (302) 467-1280
Securities registered pursuant to Section 12(b) of the Act:
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Title of each class |
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Trading Symbol(s) |
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Name of each exchange on which registered |
Common Stock, par value $0.0001 per share |
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PRLD |
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Nasdaq Global Select Market |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Large accelerated filer |
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☐ |
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Accelerated filer |
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☐ |
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Non-accelerated filer |
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☒ |
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Smaller reporting company |
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☒ |
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Emerging growth company |
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☒ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of August 7, 2024, the registrant had 55,024,470 shares of voting and non-voting common stock, $0.0001 par value per share, outstanding.
Table of Contents
PART I—FINANCIAL INFORMATION
Item 1. Financial Statements.
PRELUDE THERAPEUTICS INCORPORATED
BALANCE SHEETS
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(in thousands, except share data) |
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June 30,
2024 |
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December 31,
2023 |
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Assets |
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(unaudited) |
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Current assets: |
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Cash and cash equivalents |
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$ |
27,828 |
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$ |
25,291 |
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Marketable securities |
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152,016 |
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207,644 |
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Prepaid expenses and other current assets |
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2,870 |
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2,654 |
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Total current assets |
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182,714 |
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235,589 |
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Restricted cash |
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4,044 |
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4,044 |
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Property and equipment, net |
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7,554 |
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7,325 |
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Operating lease right-of-use asset |
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29,574 |
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30,412 |
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Other assets |
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405 |
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295 |
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Total assets |
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$ |
224,291 |
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$ |
277,665 |
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Liabilities and stockholders’ equity |
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Current liabilities: |
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Accounts payable |
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$ |
6,170 |
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$ |
4,580 |
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Accrued expenses and other current liabilities |
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11,426 |
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15,768 |
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Deferred revenue |
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3,000 |
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— |
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Operating lease liability |
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2,232 |
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1,481 |
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Finance lease liability |
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507 |
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— |
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Total current liabilities |
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23,335 |
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21,829 |
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Other liabilities |
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3,215 |
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3,339 |
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Operating lease liability |
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15,465 |
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15,407 |
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Total liabilities |
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42,015 |
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40,575 |
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Commitments (Note 8) |
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Stockholders’ equity: |
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Voting common stock, $0.0001 par value: 487,149,741 shares authorized; 42,158,224 and 42,063,995 shares issued and outstanding at June 30, 2024 and December 31, 2023, respectively |
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4 |
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4 |
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Non-voting common stock, $0.0001 par value: 12,850,259 shares authorized; 12,850,259 shares issued and outstanding at both June 30, 2024 and December 31, 2023 |
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1 |
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1 |
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Additional paid-in capital |
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705,122 |
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693,252 |
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Accumulated other comprehensive (loss) income |
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(290 |
) |
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223 |
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Accumulated deficit |
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(522,561 |
) |
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(456,390 |
) |
Total stockholders’ equity |
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182,276 |
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237,090 |
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Total liabilities and stockholders’ equity |
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$ |
224,291 |
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$ |
277,665 |
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See accompanying notes to unaudited interim financial statements.
PRELUDE THERAPEUTICS INCORPORATED
STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(UNAUDITED)
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Three Months Ended June 30, |
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Six Months Ended June 30, |
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(in thousands, except share and per share data) |
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2024 |
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2023 |
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2024 |
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2023 |
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Operating expenses: |
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Research and development |
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$ |
29,509 |
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$ |
24,966 |
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$ |
56,918 |
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$ |
46,800 |
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General and administrative |
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7,655 |
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7,432 |
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14,589 |
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14,713 |
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Total operating expenses |
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37,164 |
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32,398 |
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71,507 |
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61,513 |
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Loss from operations |
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(37,164 |
) |
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(32,398 |
) |
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(71,507 |
) |
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(61,513 |
) |
Other income, net |
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2,424 |
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1,967 |
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5,336 |
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3,364 |
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Net loss |
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$ |
(34,740 |
) |
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$ |
(30,431 |
) |
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$ |
(66,171 |
) |
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$ |
(58,149 |
) |
Per share information: |
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Net loss per share of common stock, basic and diluted |
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$ |
(0.46 |
) |
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$ |
(0.54 |
) |
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$ |
(0.87 |
) |
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$ |
(1.12 |
) |
Weighted average common shares outstanding, basic
and diluted |
|
|
75,762,152 |
|
|
|
56,240,491 |
|
|
|
75,748,989 |
|
|
|
52,012,330 |
|
Comprehensive loss: |
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(34,740 |
) |
|
$ |
(30,431 |
) |
|
$ |
(66,171 |
) |
|
$ |
(58,149 |
) |
Unrealized (loss) gain on marketable securities, net of tax |
|
|
(55 |
) |
|
|
(313 |
) |
|
|
(513 |
) |
|
|
981 |
|
Comprehensive loss |
|
$ |
(34,795 |
) |
|
$ |
(30,744 |
) |
|
$ |
(66,684 |
) |
|
$ |
(57,168 |
) |
See accompanying notes to unaudited interim financial statements.
PRELUDE THERAPEUTICS INCORPORATED
STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(UNAUDITED)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Voting common stock |
|
|
Non-voting common
stock |
|
|
Additional paid-in |
|
|
Accumulated other comprehensive |
|
|
Accumulated |
|
|
|
|
(in thousands, except shares) |
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
capital |
|
|
loss |
|
|
deficit |
|
|
Total |
|
Balance at January 1, 2024 |
|
|
42,063,995 |
|
|
$ |
4 |
|
|
|
12,850,259 |
|
|
$ |
1 |
|
|
$ |
693,252 |
|
|
$ |
223 |
|
|
$ |
(456,390 |
) |
|
$ |
237,090 |
|
Issuance of common stock upon exercise of stock options & vesting of RSUs, net of 4,285 shares withheld for employee taxes |
|
|
7,510 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(14 |
) |
|
|
— |
|
|
|
— |
|
|
|
(14 |
) |
Unrealized loss on marketable securities, net of tax |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(458 |
) |
|
|
— |
|
|
|
(458 |
) |
Stock-based compensation expense |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
5,547 |
|
|
|
— |
|
|
|
— |
|
|
|
5,547 |
|
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(31,431 |
) |
|
|
(31,431 |
) |
Balance at March 31, 2024 |
|
|
42,071,505 |
|
|
$ |
4 |
|
|
|
12,850,259 |
|
|
$ |
1 |
|
|
$ |
698,785 |
|
|
$ |
(235 |
) |
|
$ |
(487,821 |
) |
|
$ |
210,734 |
|
Issuance of common stock upon exercise of stock options & vesting of RSU's, net of 3,722 shares withheld for employee taxes |
|
|
7,803 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(16 |
) |
|
|
— |
|
|
|
— |
|
|
|
(16 |
) |
Issuance of common stock under ESPP |
|
|
78,916 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
255 |
|
|
|
— |
|
|
|
— |
|
|
|
255 |
|
Unrealized loss on marketable securities, net of tax |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(55 |
) |
|
|
— |
|
|
|
(55 |
) |
Stock-based compensation expense |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
6,098 |
|
|
|
— |
|
|
|
— |
|
|
|
6,098 |
|
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(34,740 |
) |
|
|
(34,740 |
) |
Balance at June 30, 2024 |
|
|
42,158,224 |
|
|
$ |
4 |
|
|
|
12,850,259 |
|
|
$ |
1 |
|
|
$ |
705,122 |
|
|
$ |
(290 |
) |
|
$ |
(522,561 |
) |
|
$ |
182,276 |
|
See accompanying notes to unaudited interim financial statements.
PRELUDE THERAPEUTICS INCORPORATED
STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (CONTINUED)
(UNAUDITED)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Voting common stock |
|
|
Non-voting common stock |
|
|
Additional paid-in |
|
|
Accumulated other comprehensive |
|
|
Accumulated |
|
|
|
|
(in thousands, except shares) |
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
capital |
|
|
loss |
|
|
deficit |
|
|
Total |
|
Balance at January 1, 2023 |
|
|
36,496,994 |
|
|
$ |
4 |
|
|
|
11,402,037 |
|
|
$ |
1 |
|
|
$ |
531,682 |
|
|
$ |
(1,692 |
) |
|
$ |
(334,558 |
) |
|
$ |
195,437 |
|
Issuance of common stock upon exercise of stock options & vesting of RSUs |
|
|
17,224 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
28 |
|
|
|
— |
|
|
|
— |
|
|
|
28 |
|
Unrealized gain on marketable securities, net of tax |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
1,294 |
|
|
|
— |
|
|
|
1,294 |
|
Stock-based compensation expense |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
6,256 |
|
|
|
— |
|
|
|
— |
|
|
|
6,256 |
|
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(27,718 |
) |
|
|
(27,718 |
) |
Balance at March 31, 2023 |
|
|
36,514,218 |
|
|
$ |
4 |
|
|
|
11,402,037 |
|
|
$ |
1 |
|
|
$ |
537,966 |
|
|
$ |
(398 |
) |
|
$ |
(362,276 |
) |
|
$ |
175,297 |
|
Issuance of common stock and prefunded warrants, net of issuance costs of $2.6 million |
|
|
5,312,978 |
|
|
|
— |
|
|
|
1,448,222 |
|
|
|
— |
|
|
|
110,423 |
|
|
|
— |
|
|
|
— |
|
|
|
110,423 |
|
Issuance of common stock upon exercise of stock options & vesting of RSU's |
|
|
40,461 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
3 |
|
|
|
— |
|
|
|
— |
|
|
|
3 |
|
Issuance of common stock under ESPP |
|
|
90,799 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
348 |
|
|
|
— |
|
|
|
— |
|
|
|
348 |
|
Unrealized loss on marketable securities, net of tax |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(313 |
) |
|
|
— |
|
|
|
(313 |
) |
Stock-based compensation expense |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
6,733 |
|
|
|
— |
|
|
|
— |
|
|
|
6,733 |
|
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(30,431 |
) |
|
|
(30,431 |
) |
Balance at June 30, 2023 |
|
|
41,958,456 |
|
|
$ |
4 |
|
|
|
12,850,259 |
|
|
$ |
1 |
|
|
$ |
655,473 |
|
|
$ |
(711 |
) |
|
$ |
(392,707 |
) |
|
$ |
262,060 |
|
See accompanying notes to unaudited interim financial statements.
PRELUDE THERAPEUTICS INCORPORATED
STATEMENTS OF CASH FLOWS
(UNAUDITED)
|
|
|
|
|
|
|
|
|
|
|
Six months ended June 30, |
|
(in thousands) |
|
2024 |
|
|
2023 |
|
Cash flows used in operating activities: |
|
|
|
|
|
|
Net loss |
|
$ |
(66,171 |
) |
|
$ |
(58,149 |
) |
Adjustments to reconcile net loss to net cash used in operating activities: |
|
|
|
|
|
|
Depreciation and amortization |
|
|
878 |
|
|
|
559 |
|
Noncash lease expense |
|
|
811 |
|
|
|
874 |
|
Stock-based compensation |
|
|
11,645 |
|
|
|
12,989 |
|
Amortization of premium and discount on marketable securities, net |
|
|
(2,873 |
) |
|
|
(805 |
) |
Changes in operating assets and liabilities: |
|
|
|
|
|
|
Prepaid expenses and other current assets |
|
|
(216 |
) |
|
|
(2,540 |
) |
Accounts payable |
|
|
1,708 |
|
|
|
(1,333 |
) |
Deferred revenue |
|
|
3,000 |
|
|
|
— |
|
Accrued expenses and other liabilities |
|
|
(4,466 |
) |
|
|
(4,493 |
) |
Long-term prepaid expenses and other long-term assets |
|
|
— |
|
|
|
(4,010 |
) |
Operating lease liabilities |
|
|
836 |
|
|
|
(894 |
) |
Net cash used in operating activities |
|
|
(54,848 |
) |
|
|
(57,802 |
) |
Cash flows provided by investing activities: |
|
|
|
|
|
|
Purchases of marketable securities |
|
|
(13,372 |
) |
|
|
(128,134 |
) |
Proceeds from maturities of marketable securities |
|
|
71,360 |
|
|
|
72,500 |
|
Purchases of property and equipment |
|
|
(648 |
) |
|
|
(1,793 |
) |
Net cash provided by (used in) investing activities |
|
|
57,340 |
|
|
|
(57,427 |
) |
Cash flows used in financing activities: |
|
|
|
|
|
|
Payment of offering costs |
|
|
(84 |
) |
|
|
— |
|
Proceeds from issuance of common stock and pre-funded warrants, net of offering costs |
|
|
— |
|
|
|
110,691 |
|
Proceeds from the issuance of common stock under ESPP |
|
|
255 |
|
|
|
348 |
|
Proceeds from the issuance of common stock in connection with the exercise of stock options |
|
|
4 |
|
|
|
31 |
|
Payment of withholding taxes related to stock-based compensation to employees |
|
|
(34 |
) |
|
|
— |
|
Principal payments on finance lease liabilities |
|
|
(96 |
) |
|
|
— |
|
Net cash provided by financing activities |
|
|
45 |
|
|
|
111,070 |
|
Net increase (decrease) in cash, cash equivalents and restricted cash |
|
|
2,537 |
|
|
|
(4,159 |
) |
Cash, cash equivalents, and restricted cash at beginning of period |
|
|
29,335 |
|
|
|
34,649 |
|
Cash, cash equivalents, and restricted cash at end of period |
|
$ |
31,872 |
|
|
$ |
30,490 |
|
|
|
|
|
|
|
|
Supplemental disclosures of non-cash activities: |
|
|
|
|
|
|
Property and equipment in accounts payable and accrued expenses and other current liabilities |
|
$ |
19 |
|
|
$ |
30 |
|
Offering costs in accrued expenses and other current liabilities |
|
$ |
— |
|
|
$ |
67 |
|
Offering costs in accounts payable |
|
$ |
26 |
|
|
$ |
201 |
|
Unrealized (loss) gain on marketable securities |
|
$ |
(513 |
) |
|
$ |
981 |
|
|
|
|
|
|
|
|
See accompanying notes to unaudited interim financial statements.
PRELUDE THERAPEUTICS INCORPORATED
NOTES TO UNAUDITED INTERIM FINANCIAL STATEMENTS
1. Background
Prelude Therapeutics Incorporated (the “Company”) is a clinical-stage fully integrated oncology company built on a foundation of drug discovery excellence to deliver novel precision cancer medicines to underserved patients. Since beginning operations in 2016, the Company has devoted substantially all its efforts to research and development, conducting preclinical and clinical studies, recruiting management and technical staff, administration, and raising capital.
2. Risks and liquidity
The Company faces a number of risks common to early-stage companies in the biotechnology industry. Principal among these risks are the uncertainties in the development process, development of the same or similar technological innovations by competitors, protection of proprietary technology, dependence on key personnel, compliance with government regulations and approval requirements, and the need to obtain additional financing to fund operations. Product candidates currently under development will require significant additional research and development efforts, including extensive preclinical and clinical testing and regulatory approval, prior to commercialization. These efforts require significant amounts of additional capital, adequate personnel infrastructure, and extensive compliance-reporting capabilities. There can be no assurance that the Company’s research and development will be successfully completed, adequate protection for the Company’s technology will be obtained, any products developed will obtain necessary government regulatory approval, or any approved products will be commercially viable. The Company operates in an environment of rapid change in technology and substantial competition from pharmaceutical and biotechnology companies.
Since its inception, the Company has incurred operating losses and had an accumulated deficit of $522.6 million at June 30, 2024. The Company has no product revenue to-date and devotes its efforts to research and development. The Company anticipates incurring additional losses until such time, if ever, that it can generate significant sales of its product candidates currently in development.
The Company believes its cash, cash equivalents, and marketable securities as of June 30, 2024 will be sufficient to fund its operating expenses and capital expenditure requirements for at least the next twelve months from the filing date of this Quarterly Report on Form 10-Q.
To fund its operating expenses and capital expenditure requirements after that date, the Company plans to seek additional funding through public or private equity offerings, debt financings, collaborations, strategic alliances and licensing arrangements. The Company may not be able to obtain financing on acceptable terms, or at all, and the Company may not be able to enter into strategic alliances or other arrangements on favorable terms, or at all. The terms of any financing may adversely affect the holdings or the rights of the Company’s stockholders. If the Company is unable to obtain funding, it could be required to delay, reduce or eliminate research and development programs, product portfolio expansion or future commercialization efforts, which could adversely affect its business prospects.
3. Summary of significant accounting policies
The complete summary of significant accounting policies included in the Company’s financial statements for the year ended December 31, 2023 can be found in “Note 3. Summary of significant accounting policies” of the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”) on February 15, 2024.
Basis of presentation
The accompanying unaudited interim financial statements have been prepared in accordance with generally accepted accounting principles (“GAAP”) for interim financial information, the instructions to Form 10-Q and Article 10 of Regulation S-X. They do not include all of the information and notes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and six months ended June 30, 2024 are not necessarily indicative of the results that may be expected for the year ending December 31, 2024. The accompanying unaudited interim financial statements should be read in conjunction with the annual audited financial statements and related notes as of and for the year ended December 31, 2023 found in the Company's Annual Report on Form 10-K filed with the SEC on February 15, 2024. Any reference in these notes to applicable guidance is meant to refer to GAAP as found in the Accounting Standards Codification (“ASC”) and Accounting Standards Updates (“ASU”) of the Financial Accounting Standards Board (“FASB”).
Use of estimates
The preparation of the unaudited interim financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and contingent liabilities at the date of the unaudited interim financial statements and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates.
Estimates and assumptions are periodically reviewed, and the effects of the revisions are reflected in the accompanying unaudited interim financial statements in the period they are determined to be necessary. The most significant estimate relates to accrued clinical trial expenses.
Income taxes
Based upon the historical and anticipated future losses, management has determined that the deferred tax assets generated by net operating losses and research and development credits do not meet the more likely than not threshold for realizability. Accordingly, a full valuation allowance has been recorded against the Company’s net deferred tax assets as of June 30, 2024 and December 31, 2023.
Cash, Cash Equivalents and Restricted cash
The Company’s cash equivalents include short-term highly liquid investments with an original maturity of 90 days or less when purchased and are carried at fair value in the accompanying balance sheets.
Restricted cash consists of a letter of credit for the benefit of the landlord in connection with the Company’s Chestnut Run Lease. See Note 8 for further details.
The following table provides a reconciliation of cash and cash equivalents and restricted cash reported within the balance sheet that total to the amounts shown in the statement of cash flows:
|
|
|
|
|
|
|
|
|
(in thousands) |
|
June 30,
2024 |
|
|
December 31,
2023 |
|
Cash and cash equivalents |
|
$ |
27,828 |
|
|
$ |
25,291 |
|
Restricted cash |
|
|
4,044 |
|
|
|
4,044 |
|
Total cash, cash equivalents, and restricted cash shown in statement of cash flows |
|
$ |
31,872 |
|
|
$ |
29,335 |
|
Marketable Securities
The Company’s marketable securities consist of investments in corporate debt securities, United States (“U.S.”) government debt securities, and agency securities that are classified as available-for-sale. The securities are carried at fair value with the unrealized gains and losses, net of tax, included in accumulated other comprehensive loss, a component of stockholders’ equity. Realized gains and losses as well as credit losses, if any, on marketable securities are included in the Company’s statements of operations. The Company classifies marketable securities that are available for use in current operations as current assets on the balance sheets.
Revenue Recognition
In May 2024, the Company and Pathos AI, Inc. (“Pathos”) entered into a license agreement under which the Company granted to Pathos an exclusive, sublicensable, world-wide license to its selective, brain-penetrant PRMT5 inhibitor, PRT811 which is being accounted for under Accounting Standard Codification 606 – Revenue from Contracts with Customers. Under ASC 606, the Company recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration which the Company expects to receive in exchange for those goods or services. The Company's revenue recognition analysis consists of the following steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations; and (v) recognition of revenue as we satisfy each performance obligation.
The Company evaluates all promised goods and services within a customer contract and determines which goods and services are separate performance obligations. This evaluation includes an assessment of whether the good or service is capable of being distinct and whether the good or service is separable from other promises in the contract.
The transaction price is determined based on the amount of consideration to which the Company expects to be entitled in exchange for transferring promised goods or services to a customer. The Company recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligations when (or as) the performance obligations are satisfied. The Company recognizes a liability when the Company has received payment but has not yet satisfied the related performance obligations.
Net Loss Per Share
Basic net loss per share of common stock is computed by dividing net loss by the weighted-average number of shares of common stock outstanding during each period, including pre-funded warrants to purchase shares of common stock. The weighted-average number of shares of common stock outstanding used in the basic net loss per share calculation does not include unvested restricted stock awards as these instruments are considered contingently issuable shares until they vest. Diluted net loss per share of common stock includes the effect, if any, from the potential exercise of securities, such as stock options, and the effect from unvested restricted stock awards and restricted stock units which would result in the issuance of incremental shares of common stock. For diluted net loss per share, the weighted-average number of shares of common stock is the same for basic net loss per share due to the fact that when a net loss exists, dilutive securities are not included in the calculation as the impact is anti-dilutive. The Company’s unvested restricted stock awards entitle the holder to participate in dividends and earnings of the Company, and, if the Company were to recognize net income, it would have to use the two-class method to calculate earnings per share. The two-class method is not applicable during periods with a net loss, as the holders of the unvested restricted stock awards have no obligation to fund losses.
The following potentially dilutive securities have been excluded from the computation of diluted weighted-average shares of common stock outstanding, as they would be anti-dilutive:
|
|
|
|
|
|
|
|
|
|
|
June 30, |
|
|
|
2024 |
|
|
2023 |
|
Unvested restricted stock awards |
|
|
— |
|
|
|
81,044 |
|
Unvested restricted stock units |
|
|
82,500 |
|
|
|
125,000 |
|
Stock options |
|
|
15,180,727 |
|
|
|
12,083,788 |
|
|
|
|
15,263,227 |
|
|
|
12,289,832 |
|
Amounts in the above table reflect the common stock equivalents.
Recently Issued Accounting Pronouncements
Emerging Growth Company Status
The Company is an emerging growth company, as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act, until such time as those standards apply to private companies. The Company has elected to use this extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date that it (i) is no longer an emerging growth company or (ii) affirmatively and irrevocably opts out of the extended transition period provided in the JOBS Act. As a result, these unaudited interim financial statements may not be comparable to companies that comply with the new or revised accounting pronouncements as of public company effective dates.
Accounting guidance not yet adopted
In November 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU"), 2023-07, Segment Reporting (Topic 280) – Improvements to Reportable Segment Disclosures. This ASU expands segment disclosures by requiring disclosure of significant segment expenses that are regularly provided to the chief operating decision maker and included within each reported measure of segment profit or loss, an amount for other segment items and a description of its composition, and interim disclosures of a reportable segment’s profit or loss and assets. The disclosures required under ASU 2023-07 are also required for public entities with a single reportable segment. The amendments in this ASU are effective for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The Company is currently evaluating the impact of this standard but does not expect that it will have a material impact on the financial statements and related disclosures.
In December 2023, the FASB issued ASU 2023-09, Income Taxes - Improvements to Income Tax Disclosures. ASU 2023-09 requires enhanced income tax disclosures related to the rate reconciliation and income taxes paid information. For public business entities, the amendments in this ASU are effective for annual periods beginning after December 15, 2024 with early adoption permitted. The Company is currently evaluating the impact of this standard but does not expect that it will have a material impact on the financial statements and related disclosures.
4. Marketable Securities
The following provides detail of the Company's marketable securities.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands) |
|
Amortized Cost |
|
|
Gross unrealized gain |
|
|
Gross unrealized loss |
|
|
Fair Value |
|
June 30, 2024 |
|
|
|
|
|
|
|
|
|
|
|
|
Marketable securities: |
|
|
|
|
|
|
|
|
|
|
|
|
Agency securities |
|
$ |
8,463 |
|
|
$ |
— |
|
|
$ |
(10 |
) |
|
$ |
8,453 |
|
Corporate debt securities |
|
|
56,665 |
|
|
|
7 |
|
|
|
(141 |
) |
|
|
56,531 |
|
U.S. government securities |
|
|
87,178 |
|
|
|
— |
|
|
|
(146 |
) |
|
|
87,032 |
|
Total marketable securities |
|
$ |
152,306 |
|
|
$ |
7 |
|
|
$ |
(297 |
) |
|
$ |
152,016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2023 |
|
|
|
|
|
|
|
|
|
|
|
|
Marketable securities: |
|
|
|
|
|
|
|
|
|
|
|
|
Agency securities |
|
$ |
10,431 |
|
|
$ |
19 |
|
|
$ |
— |
|
|
$ |
10,450 |
|
Corporate debt securities |
|
|
67,806 |
|
|
|
193 |
|
|
|
(20 |
) |
|
|
67,979 |
|
U.S. government securities |
|
|
129,184 |
|
|
|
72 |
|
|
|
(41 |
) |
|
|
129,215 |
|
Total marketable securities |
|
$ |
207,421 |
|
|
$ |
284 |
|
|
$ |
(61 |
) |
|
$ |
207,644 |
|
The Company’s marketable securities generally have contractual maturity dates of 19 months or less. As of June 30, 2024, the Company had 39 securities with a total fair market value of $144.8 million in an unrealized loss position. The Company believes any unrealized losses associated with the decline in value of its securities is temporary and is primarily related to market factors. Furthermore, the Company believes it is more likely than not that it will be able to hold its marketable securities to maturity. Therefore, the Company anticipates a full recovery of the amortized cost basis of its marketable securities at maturity and an allowance for credit losses was not recognized.
5. Fair Value of Financial Instruments
Fair value is the price that could be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. Fair value determination in accordance with applicable accounting guidance requires that a number of significant judgments be made. Additionally, fair value is used on a nonrecurring basis to evaluate assets for impairment or as required for disclosure purposes by applicable accounting guidance on disclosures about fair value of financial instruments. Depending on the nature of the assets and liabilities, various valuation techniques and assumptions are used when estimating fair value. The Company follows the provisions of ASC 820, Fair Value Measurement, for financial assets and liabilities measured on a recurring basis. The guidance requires fair value measurements be classified and disclosed in one of the following three categories:
•Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.
•Level 2: Quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liabilities.
•Level 3: Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported by little or no market activity).
The following fair value hierarchy table presents information about the Company’s assets and liabilities measured at fair value on a recurring basis:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value measurement at reporting date using |
|
(in thousands) |
|
Quoted prices
in active
markets for
identical
assets
(Level 1) |
|
|
Significant
other
observable
inputs
(Level 2) |
|
|
Significant
unobservable
inputs
(Level 3) |
|
June 30, 2024 |
|
|
|
|
|
|
|
|
|
Assets |
|
|
|
|
|
|
|
|
|
Cash equivalents: |
|
|
|
|
|
|
|
|
|
Money Market Funds |
|
$ |
5,164 |
|
|
$ |
— |
|
|
$ |
— |
|
U.S. government securities |
|
|
— |
|
|
|
21,383 |
|
|
|
— |
|
Total cash equivalents |
|
|
5,164 |
|
|
|
21,383 |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
Marketable securities: |
|
|
|
|
|
|
|
|
|
Agency securities |
|
|
— |
|
|
|
8,453 |
|
|
|
— |
|
Corporate debt securities |
|
|
— |
|
|
|
56,531 |
|
|
|
— |
|
U.S. government securities |
|
|
— |
|
|
|
87,032 |
|
|
|
— |
|
Total marketable securities |
|
|
— |
|
|
|
152,016 |
|
|
|
— |
|
Total financial assets |
|
$ |
5,164 |
|
|
$ |
173,399 |
|
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
|
December 31, 2023 |
|
|
|
|
|
|
|
|
|
Assets |
|
|
|
|
|
|
|
|
|
Cash equivalents: |
|
|
|
|
|
|
|
|
|
Money Market Funds |
|
$ |
24,369 |
|
|
$ |
— |
|
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
|
Marketable securities: |
|
|
|
|
|
|
|
|
|
Agency securities |
|
$ |
— |
|
|
$ |
10,450 |
|
|
$ |
— |
|
Corporate debt securities |
|
|
— |
|
|
|
67,979 |
|
|
|
— |
|
U.S. government securities |
|
|
— |
|
|
|
129,215 |
|
|
|
— |
|
Total marketable securities |
|
|
— |
|
|
|
207,644 |
|
|
|
— |
|
Total financial assets |
|
$ |
24,369 |
|
|
$ |
207,644 |
|
|
$ |
— |
|
6. Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities consisted of the following:
|
|
|
|
|
|
|
|
|
(in thousands) |
|
June 30,
2024 |
|
|
December 31,
2023 |
|
Compensation and related benefits |
|
$ |
5,639 |
|
|
$ |
9,157 |
|
Research and development |
|
|
5,332 |
|
|
|
5,666 |
|
Other |
|
|
455 |
|
|
|
945 |
|
|
|
$ |
11,426 |
|
|
$ |
15,768 |
|
7. Common Stock
The Company has two classes of common stock: “voting common stock” and “non-voting common stock.” The holders of the voting common stock are entitled to one vote for each share of voting common stock held at all meetings of stockholders. Except as otherwise required by law, the holders of non-voting common stock shall not be entitled to vote at any meetings of stockholders (or written actions in lieu of meetings) and the shares of non-voting common stock shall not be included in determining the number of shares voting or entitled to vote on any matter. Unless required by law, there shall be no cumulative voting. Any holder of non-voting common stock may elect to convert each share of non-voting common stock into one fully paid and non-assessable share of voting common stock at any time by providing written notice to the Company; provided that as a result of such conversion, such holder, together with its affiliates and any members of a Schedule 13(d) group with such holder, would not beneficially own in excess of 9.99% of the Company’s common stock immediately prior to and following such conversion, unless otherwise as expressly provided for in the Company’s restated certificate of incorporation. However, this ownership limitation may be increased (not to exceed 19.99%) or decreased to any other percentage designated by such holder of non-voting common stock upon 61 days’ notice to the Company.
Shelf Registration Statements
In November 2021, the Company filed a shelf registration statement (the "2021 Shelf Registration Statement") which permits the offering of up to $400.0 million aggregate dollar amount of shares of our common stock or preferred stock, debt securities, warrants to purchase our common stock, preferred stock or debt securities, subscription rights to purchase our common stock, preferred stock or debt securities and/or units consisting of some or all of these securities, in one or more offerings and in any combination. The 2021 Shelf Registration Statement expiries in November 2024, and as of June 30, 2024, there was $187.0 million remaining under the 2021 Shelf Registration Statement.
In May 2024, the Company filed a shelf registration statement (the "2024 Shelf Registration Statement") with the SEC for the issuance of common stock, preferred stock, debt securities, warrants, subscription rights and units up to an aggregate amount of $400 million. The 2024 Shelf Registration statement was declared effective on June 10, 2024. The 2024 Shelf Registration statement expiries in May 2027, and as of June 30, 2024, there was $400.0 million remaining under the 2024 Shelf Registration statement.
Open Market Sales Agreement
In March 2023, in connection with filing a prospectus supplement to its 2021 Shelf Registration Statement, the Company entered into an Open Market Sales Agreement (the "Sales Agreement") with Jefferies LLC, as the sales agent, pursuant to which the Company may offer and sell shares of its common stock having an aggregate offering amount of up to $75.0 million. The $75.0 million of common stock that may be issued and sold pursuant to the Sales Agreement is included in the $400.0 million of securities that may be issued and sold pursuant to the 2021 Shelf Registration Statement. The Company will pay Jefferies LLC a commission rate of up to 3.0% of the aggregate gross proceeds from the sale of any shares of common stock pursuant to the Sales Agreement. At June 30, 2024, there was $75.0 million remaining under the Sales Agreement.
2023 Financings
During the second quarter of 2023, the Company sold 6,761,200 shares of its common stock which comprised of (i) 5,312,978 shares of its voting common stock and (ii) 1,448,222 shares of its non-voting common stock at a price of $5.75 per share and to certain investors in lieu of common stock, the Company sold pre-funded warrants to purchase 12,895,256 shares of voting common stock at a price of $5.7499 per pre-funded warrant, resulting in gross proceeds to the Company of $113.0 million. Of the voting common stock issued, 2,264,456 shares were purchased by the Company’s underwriters in connection with a 30-day option at a price of $5.75 per share. Offering costs of $2.6 million, of which $0.3 million were previously paid and deferred, were recorded to additional paid-in capital in the accompanying balance sheets, resulting in net proceeds of $110.4 million.
During the fourth quarter of 2023, the Company sold in a private placement pre-funded warrants to purchase 7,936,759 shares of voting common stock at a price of $3.1499 per pre-funded warrant, resulting in net proceeds of $24.8 million after deducting offering costs of $0.2 million.
The purchase price per share of each pre-funded warrant represents the per share offering price for the common stock, minus the $0.0001 per share exercise price of such pre-funded warrant. As of June 30, 2024, no pre-funded warrants had been exercised.
The pre-funded warrants were classified as a component of permanent stockholders’ equity within additional paid-in capital and were recorded at the issuance date using a relative fair value allocation method. The pre-funded warrants are equity classified because they (i) are freestanding financial instruments that are legally detachable and separately exercisable from the equity instruments, (ii) are immediately exercisable, (iii) do not embody an obligation for the Company to repurchase its shares, (iv) permit the holders to receive a fixed number of shares of common stock upon exercise, (v) are indexed to the Company’s common stock and (vi) meet the equity classification criteria. In addition, such pre-funded warrants do not provide any guarantee of value or return.
The Company did not conduct any financings during the first six months of 2024.
8. Commitments
Leases
The Company leases office and laboratory space in Wilmington, Delaware under a noncancelable lease (the “Chestnut Run Lease”). The premises include approximately 81,000 rentable square feet and has an initial term of 162 months with 3 five-year extension options and certain expansion rights. Neither the option to extend nor the expansion rights were recognized as part of the Company's measurement of the right-of-use ("ROU") asset and operating lease liability as of June 30, 2024. Under the terms of the Chestnut Run Lease, the landlord provided an allowance towards the cost of completing tenant improvements for the premises. The Company concluded that the improvements resulting from both the landlord's build-out and the tenant improvements are the landlord's assets for accounting purposes. Costs incurred by the Company related to tenant improvements in excess of the landlord's allowance were treated as prepaid rent and increased the right-of-use asset on the commencement date.
In April 2024, the Company entered into a 12 month finance lease for equipment.
Our operating lease costs for the three and six months ended June 30, 2024 were $1.0 million and $2.1 million, respectively. Our operating lease costs for the three and six months ended June 30, 2023 were $0.4 million and $0.9 million, respectively.