nktx-10q_20210331.htm

  

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

 

FORM 10-Q

 

 

(Mark One)

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended March 31, 2021

OR

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from                      to                       

Commission File Number: 001-39370

 

 

Nkarta, Inc.

(Exact Name of Registrant as Specified in its Charter)

 

 

Delaware

47-4515206

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

6000 Shoreline Court, Suite 102

South San Francisco, CA

94080

(Address of principal executive offices)

(Zip Code)

 

(415) 582-4923

(Registrant’s telephone number, including area code)

 

Not applicable

(Former name, former address and former fiscal year, if changed since last report)

 

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange on which registered

Common Stock, $0.0001 par value per share

 

NKTX

 

 

The Nasdaq Stock Market LLC

(Nasdaq Global Select Market)

 

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

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

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

 

Large accelerated filer

 

  

Accelerated filer

 

 

 

 

 

Non-accelerated filer

 

  

Smaller reporting company

 

 

 

 

 

 

 

 

Emerging growth company

 

 

 

 

 

 

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

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

As of May 10, 2021, the registrant had 32,822,550 shares of common stock, par value $0.0001 per share, outstanding.

 

 

 


 

Table of Contents

 

 

 

Page

PART I.

FINANCIAL INFORMATION

 

Item 1.

Financial Statements:

1

 

Condensed Balance Sheets as of March 31, 2021 (unaudited) and December 31, 2020

1

 

Condensed Statements of Operations and Comprehensive Loss for the three months ended March 31, 2021 and 2020 (unaudited)

2

 

Condensed Statements of Convertible Preferred Stock and Stockholders’ Equity (Deficit) for the three months ended March 31, 2021 and 2020 (unaudited)

3

 

Condensed Statements of Cash Flows for the three months ended March 31, 2021 and 2020 (unaudited)

4

 

Notes to Unaudited Condensed Financial Statements

5

Item 2.

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

14

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

24

Item 4.

Controls and Procedures

24

PART II.

OTHER INFORMATION

 

Item 1.

Legal Proceedings

25

Item 1A.

Risk Factors

25

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

68

Item 3.

Defaults Upon Senior Securities

68

Item 4.

Mine Safety Disclosures

68

Item 5.

Other Information

68

Item 6.

Exhibits

69

Signatures

71

 

 

 

i


 

 

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS


This Quarterly Report on Form 10-Q, and the information incorporated herein by reference, particularly in the sections captioned “Risk Factors” under Part II, Item 1A, and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” under Part I, Item 2, contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act, that are based on our management’s beliefs and assumptions and on information currently available to our management. Forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified. All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q are forward-looking statements, including statements about:

 

 

the success, cost, timing and potential indications of our product candidate development activities and clinical trials, including our currently planned and potential future clinical trials of NKX101 and NKX019;

 

our ability to achieve our milestones for development of our product candidates, including the timely conduct of our clinical trials and the availability of clinical data from those trials;

 

our ability to obtain and maintain regulatory approval of our product candidates, including NKX101 and NKX019, for any of the indications for which we plan to develop them, and any related restrictions, limitations and/or warnings in the label of an approved product;

 

the future results of ongoing or later clinical trials, including of NKX101 and NKX019;

 

our ability to obtain funding for our operations, including funding necessary to complete the clinical trials of any of our product candidates;

 

our ability to develop, characterize, and control manufacturing processes for our product candidates;

 

risks associated with the COVID-19 pandemic, which may adversely impact our business, preclinical studies and clinical trials;

 

our plans to research, develop and commercialize our product candidates;

 

our ability to complete construction and qualification of manufacturing facilities to produce clinical and commercial products;

 

the size and growth potential of the markets for our products, and our ability to identify target patient populations and serve those markets, especially for diseases with low prevalence;

 

our ability to successfully commercialize our products, including obtaining reimbursement on favorable terms;

 

our ability to develop and maintain sales and marketing capabilities;

 

the rate and degree of market acceptance of our products;

 

our ability to obtain and maintain insurance coverage and reimbursement for our product candidates;

 

our ability to grow our organization and increase the size of our facilities to meet our anticipated growth;

 

our ability to contract with third-party suppliers and manufacturers and their ability to perform adequately;

 

our ability to attract and retain strategic partners with development, regulatory and commercialization expertise;

 

the success of competing therapies that are or become available;

 

our expectations regarding our ability to obtain and maintain intellectual property protection for our products and our ability to operate our business without infringing on the intellectual property rights of others;

 

our ability to maintain our license agreement with National University of Singapore and St. Jude Children’s Research Hospital with respect to certain rights to our product candidates, including NKX101 and NKX019;

 

our ability to attract and retain key scientific, commercial or management personnel;

 

our expectations regarding the period during which we qualify under the Jumpstart Our Business Startups Act, or the JOBS Act, as an emerging growth company or a smaller reporting company;

 

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

 

regulatory developments in the United States and foreign countries; and

 

other risks and factors listed under “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q.

 

In some cases, you can identify forward-looking statements by the words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “objective,” “ongoing,” “plan,” “predict,” “project,” “potential,” “should,” “will,” or “would,” or the negative of these terms, or other comparable terminology intended to identify statements about the future. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from the information expressed or implied by these forward-looking statements.

 

i


 

In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this report, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements.

 

You should read the sections titled “Risk Factor Summary” below and “Risk Factors” set forth in Part II, Item 1A of this Quarterly Report on Form 10-Q for a discussion of important factors that may cause our actual results to differ materially from those expressed or implied by our forward-looking statements. Moreover, we operate in an evolving environment. New risk factors and uncertainties may emerge from time to time, and it is not possible for management to predict all risk factors and uncertainties. As a result of these factors, we cannot assure you that the forward-looking statements in this Quarterly Report on Form 10-Q will prove to be accurate. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained herein, whether as a result of any new information, future events, changed circumstances or otherwise.

 

You should read 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. We qualify all of our forward-looking statements by these cautionary statements.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ii


 

RISK FACTOR SUMMARY

 

Below is a summary of material factors that make an investment in our common stock speculative or risky. Importantly, this summary does not address all the risks and uncertainties that we face. Additional discussion of the risks and uncertainties summarized in this risk factor summary, as well as other risks and uncertainties that we face, can be found under “Cautionary Note Regarding Forward-Looking Statements” and Part II, Item 1A, “Risk Factors” in this Quarterly Report on Form 10-Q. The below summary is qualified in its entirety by those more complete discussions of such risks and uncertainties. You should consider carefully the risks and uncertainties described under Part II, Item 1A, “Risk Factors” in this Quarterly Report on Form 10-Q as part of your evaluation of an investment in our common stock.

 

 

We have a limited operating history and do not have any products approved for sale.

 

We have incurred significant losses since our inception and we expect to continue to incur significant losses for the foreseeable future.

 

We have never generated revenue from product sales and may never achieve or maintain profitability.

 

We will require additional capital, which, if available, may cause dilution to our stockholders, restrict our operations or require us to relinquish rights to our product candidates.

 

Our business and the business or operations of our research partners, including CRISPR, and other third parties with whom we conduct business could be adversely affected by the effects of health epidemics, including the recent COVID-19 pandemic, in regions where we or third parties on which we rely have business operations.

 

Our business depends upon the success of our chimeric antigen receptor-natural killer cell, or CAR-NK, cell technology platform.

 

Utilizing CAR-NK cells represents a novel approach to the treatment of cancer, and we must overcome significant challenges in order to develop, commercialize and manufacture our product candidates.

 

Clinical development involves a lengthy and expensive process with an uncertain outcome, and we may encounter substantial delays due to a variety of reasons outside our control.

 

Our business is highly dependent on the success of our product candidates, and on the success of NKX101 and NKX019 in particular, and we may fail to develop NKX101, NKX019 and/or our other product candidates successfully or be unable to obtain regulatory approval for them.

 

Our preclinical programs may experience delays or may never advance to clinical trials, which would adversely affect our ability to obtain regulatory approvals or commercialize these programs on a timely basis or at all.

 

The results of preclinical studies and early-stage clinical trials may not be predictive of future results. Initial success in any clinical trials may not be indicative of results obtained when these trials are completed or in later stage trials.

 

If any of our product candidates, or any competing product candidates, demonstrate relevant, serious adverse events, we may be required to halt or delay further clinical development.

 

If we fail to compete effectively with academic institutions and other biopharmaceutical companies that develop similar or alternatives to cellular immunotherapy product candidates, our business will be materially adversely affected.

 

Our manufacturing process is novel and complex, and we may encounter difficulties in production, or difficulties with internal manufacturing, which would delay or prevent our ability to provide a sufficient supply of our product candidates for clinical trials or our products for patients, if approved.

 

We rely on third parties to manufacture certain of our product candidates, and certain materials for use in the production of our product candidates, which increases the risk that we will not have sufficient quantities of such product candidates or materials, or such quantities at an acceptable cost, which could delay, prevent or impair our development or commercialization efforts.

 

We are reliant on a sole supplier for certain steps of our manufacturing process.

 

Delays in commissioning and receiving regulatory approvals for our manufacturing facilities could delay our development plans and thereby limit our ability to develop our product candidates and generate revenues.

 

If our license agreement with National University of Singapore and St. Jude’s Children’s Research Hospital, Inc. is terminated, we could lose our rights to key components enabling our NK cell engineering platform.

iii


 

If any patent protection we obtain is not sufficiently robust, our competitors could develop and commercialize products and technology similar or identical to ours.

 

If any of our product candidates are approved for marketing and commercialization and we have not developed or secured marketing, sales and distribution capabilities, either internally or from third parties, we will be unable to successfully commercialize such products and may not be able to generate product revenue.

 

Our product candidates, including NKX101 and NKX019, could be subject to regulatory limitations following approval, if and when such approval is granted.

 

The market price for our common stock may be volatile, which could contribute to the loss of all or part of your investment.

 

Concentration of ownership of our shares of common stock among our existing executive officers, directors and principal stockholders may prevent new investors from influencing significant corporate decisions.

 

 

 

 

 

iv


 

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

NKARTA, INC.

CONDENSED BALANCE SHEETS

(Unaudited, in thousands, except share data)

 

 

 

March 31,

2021

 

 

December 31,

2020

 

Assets

 

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

62,608

 

 

$

96,692

 

Short-term investments, available-for-sale

 

 

236,655

 

 

 

218,221

 

Prepaid expenses and other current assets

 

 

2,971

 

 

 

3,922

 

Total current assets

 

 

302,234

 

 

 

318,835

 

Restricted cash

 

 

413

 

 

 

413

 

Property and equipment, net

 

 

10,498

 

 

 

9,350

 

Operating lease right-of-use assets

 

 

11,873

 

 

 

8,505

 

Other long-term assets

 

 

674

 

 

 

547

 

Total assets

 

$

325,692

 

 

$

337,650

 

Liabilities and stockholders’ equity

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

Accounts payable

 

$

2,010

 

 

$

1,176

 

Operating lease liabilities, current portion

 

 

2,151

 

 

 

1,402

 

Accrued and other current liabilities

 

 

5,192

 

 

 

6,253

 

Total current liabilities

 

 

9,353

 

 

 

8,831

 

Operating lease liabilities, net of current portion

 

 

10,274

 

 

 

7,517

 

Other long-term liabilities

 

 

75

 

 

 

82

 

Total liabilities

 

 

19,702

 

 

 

16,430

 

Commitments and contingencies (Note 7)

 

 

 

 

 

 

 

 

Stockholders’ equity

 

 

 

 

 

 

 

 

Preferred stock

 

 

 

 

 

 

Common stock

 

 

3

 

 

 

3

 

Additional paid-in capital

 

 

443,347

 

 

 

439,235

 

Accumulated other comprehensive income

 

 

34

 

 

 

3

 

Accumulated deficit

 

 

(137,394

)

 

 

(118,021

)

Total stockholders’ equity

 

 

305,990

 

 

 

321,220

 

Total liabilities and stockholders’ equity

 

$

325,692

 

 

$

337,650

 

 

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

1


NKARTA, INC.

CONDENSED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(Unaudited, in thousands, except share and per share data)

 

 

 

Three Months Ended

March 31,

 

 

 

2021

 

 

2020

 

Operating expenses

 

 

 

 

 

 

 

 

Research and development

 

 

13,539

 

 

 

7,260

 

General and administrative

 

 

5,942

 

 

 

2,148

 

Total operating expenses

 

 

19,481

 

 

 

9,408

 

Loss from operations

 

 

(19,481

)

 

 

(9,408

)

Other income (expense), net:

 

 

 

 

 

 

 

 

Change in fair value of preferred stock

   purchase right liability

 

 

 

 

 

578

 

Interest income

 

 

110

 

 

 

124

 

Other expense, net

 

 

(2

)

 

 

 

Total other income (expense), net

 

 

108

 

 

 

702

 

Net loss

 

$

(19,373

)

 

$

(8,706

)

Comprehensive loss:

 

 

 

 

 

 

 

 

Net loss

 

$

(19,373

)

 

$

(8,706

)

Other comprehensive gain (loss)

 

 

31

 

 

 

(1

)

Comprehensive loss

 

$

(19,342

)

 

$

(8,707

)

Net loss per share, basic and diluted

 

$

(0.59

)

 

$

(5.41

)

Weighted average shares used to compute net loss

   per share, basic and diluted

 

 

32,739,610

 

 

 

1,609,184

 

 

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

2


NKARTA, INC.

CONDENSED STATEMENTS OF CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT)

(Unaudited, in thousands, except share data)

 

 

 

Convertible

Preferred Stock

 

 

 

Common Stock

 

 

Additional

Paid-in

 

 

Accumulated

Other

Comprehensive

 

 

Accumulated

 

 

Total

Stockholders'

 

 

 

Shares

 

 

Amount

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Income

 

 

Deficit

 

 

Equity

 

Balance, December 31, 2020

 

 

 

 

$

 

 

 

 

32,627,963

 

 

$

3

 

 

$

439,235

 

 

$

3

 

 

$

(118,021

)

 

$

321,220

 

Vesting of shares of common

   stock subject to repurchase

 

 

 

 

 

 

 

 

 

15,802

 

 

 

 

 

 

9

 

 

 

 

 

 

 

 

 

9

 

Issuance of common stock upon

   exercise of stock option,

   net of repurchase

 

 

 

 

 

 

 

 

 

154,489

 

 

 

 

 

 

756

 

 

 

 

 

 

 

 

 

756

 

Share-based compensation

   expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3,347

 

 

 

 

 

 

 

 

 

3,347

 

Unrealized gain on short-term

   investments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

31

 

 

 

 

 

 

31

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(19,373

)

 

 

(19,373

)

Balance, March 31, 2021

 

 

 

 

$

 

 

 

 

32,798,254

 

 

$

3

 

 

$

443,347

 

 

$

34

 

 

$

(137,394

)

 

$

305,990

 

 

 

 

 

Convertible

Preferred Stock

 

 

 

Common Stock

 

 

Additional

Paid-in

 

 

Accumulated

Other

Comprehensive

 

 

Accumulated

 

 

Total

Stockholders'

 

 

 

Shares

 

 

Amount

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Loss

 

 

Deficit

 

 

Deficit

 

Balance, December 31, 2019

 

 

27,283,973

 

 

$

59,815

 

 

 

 

1,600,601

 

 

$

1

 

 

$

1,179

 

 

$

(2

)

 

$

(26,660

)

 

$

(25,482

)

Vesting of shares of common

   stock subject to repurchase

 

 

 

 

 

 

 

 

 

17,494

 

 

 

 

 

 

13

 

 

 

 

 

 

 

 

 

13

 

Stock option exercises

 

 

 

 

 

 

 

 

 

 

 

2,871

 

 

 

 

 

 

1

 

 

 

 

 

 

 

 

 

 

 

1

 

Share-based compensation

   expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

482

 

 

 

 

 

 

 

 

 

482

 

Unrealized loss on short-term

   investments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2

)

 

 

 

 

 

 

(2

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(8,706

)

 

 

(8,706

)

Balance, March 31, 2020

 

 

27,283,973

 

 

$

59,815

 

 

 

 

1,620,966

 

 

$

1

 

 

$

1,675

 

 

$

(4

)

 

$

(35,366

)

 

$

(33,694

)

 

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

3


NKARTA, INC.

CONDENSED STATEMENT OF CASH FLOWS

(Unaudited, in thousands)

 

 

 

Three Months Ended

March 31,

 

 

 

2021

 

 

2020

 

Cash flows from operating activities

 

 

 

 

 

 

 

 

Net loss

 

$

(19,373

)

 

$

(8,706

)

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

 

 

 

 

 

 

 

 

Share-based compensation expense

 

 

3,347

 

 

 

482

 

Depreciation and amortization

 

 

301

 

 

 

141

 

Accretion and amortization of premium on investments, net

 

 

758

 

 

 

(28

)

Non-cash lease expense

 

 

137

 

 

 

139

 

Change in fair value of preferred stock purchase right liability

 

 

 

 

 

(578

)

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Prepaid expenses and other assets

 

 

825

 

 

 

(163

)

Accounts payable and accrued and other liabilities

 

 

(642

)

 

 

426

 

Net cash used in operating activities

 

 

(14,647

)

 

 

(8,287

)

Cash flows from investing activities

 

 

 

 

 

 

 

 

Purchases of property and equipment

 

 

(1,033

)

 

 

(2,325

)

Purchases of short-term investments

 

 

(35,161

)

 

 

(3,578

)

Maturities of short-term investments

 

 

16,000

 

 

 

10,800

 

Net cash provided by (used in) investing activities

 

 

(20,194

)

 

 

4,897

 

Cash flows from financing activities

 

 

 

 

 

 

 

 

Proceeds from stock option exercises

 

 

756

 

 

 

1

 

Proceeds from early exercise of stock options

 

 

1

 

 

 

1

 

Payments of deferred offering costs

 

 

 

 

 

(711

)

Net cash provided by (used in) financing activities

 

 

757

 

 

 

(709

)

Net decrease in cash and cash equivalents

 

 

(34,084

)

 

 

(4,099

)

Cash, cash equivalents, and restricted cash beginning of period

 

 

97,105

 

 

 

20,875

 

Cash, cash equivalents, and restricted cash end of period

 

$

63,021

 

 

$

16,776

 

Reconciliation of cash, cash equivalents and restricted cash to the balance sheet:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

 

62,608

 

 

$

16,507

 

Restricted cash

 

 

413

 

 

 

269

 

Total cash, cash equivalents and restricted cash

 

$

63,021

 

 

$

16,776

 

 

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

4


NKARTA, INC.

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

1. Organization and Description of Business

Description of the Business

Nkarta, Inc. (“Nkarta” or the “Company”) was incorporated in the State of Delaware in July 2015. The Company is a biopharmaceutical company developing engineered natural killer (“NK”) cells to fight cancer. The Company is focused on leveraging the natural potent power of NK cells to identify and kill abnormal cells and recruit adaptive immune effectors to generate responses that are specific and durable. Nkarta is combining its NK expansion platform technology with proprietary cell engineering technologies to generate an abundant supply of NK cells, engineer enhanced NK cell recognition of tumor targets, and improve persistence for sustained activity in the body for the treatment of cancer. Nkarta’s goal is to develop off-the-shelf NK cell therapy product candidates to improve outcomes for patients. The Company’s operations are based in South San Francisco, California and it operates in one segment.

Liquidity and Management Plans

The accompanying unaudited condensed financial statements have been prepared assuming that the Company will continue as a going concern. However, since inception, the Company has devoted substantially all of its efforts to organizing and staffing, business planning, raising capital, conducting preclinical studies and initiating clinical studies, and has not realized substantial revenues from its planned principal operations. In addition, the Company has a limited operating history, has incurred operating losses since inception and expects that it will continue to incur net losses into the foreseeable future as it continues its research and development activities. As of March 31, 2021, the Company had an accumulated deficit of $137.4 million and cash, cash equivalents, restricted cash and short-term investments of $299.7 million.

Management plans to continue to incur substantial costs in order to conduct research and development activities and additional capital will be needed to undertake these activities. The Company intends to raise such capital through debt or equity financings or other arrangements to fund operations. Management believes that the Company’s current cash, cash equivalents, restricted cash and short-term investments will provide sufficient funds to enable the Company to meet its obligations for at least twelve months from the filing date of this report.

2. Basis of Presentation and Significant Accounting Policies

Basis of Presentation

The accompanying unaudited condensed financial statements as of March 31, 2021 and for the three months ended March 31, 2021 and 2020 have been prepared in accordance with U.S. generally accepted accounting principle (“U.S. GAAP”) for interim financial information and pursuant to Article 10 of Regulation S-X of the Securities Act of 1933, as amended (the “Securities Act”). Accordingly, they do not include all of the information and notes required by U.S. GAAP for complete financial statements. These unaudited condensed financial statements include only normal and recurring adjustments that the Company believes are necessary to fairly state the Company’s financial position and the results of its operations and cash flows.

The results for the three months ended March 31, 2021 are not necessarily indicative of the results expected for the full year or any subsequent interim period. The condensed balance sheet at December 31, 2020 has been derived from the audited financial statements at that date but does not include all disclosures required by U.S. GAAP for complete financial statements. Because all of the disclosures required by U.S. GAAP for complete financial statements are not included herein, these unaudited condensed financial statements and the notes accompanying them should be read in conjunction with the Company’s audited financial statements for the year ended December 31, 2020, contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 filed by the Company with the SEC on March 25, 2021.

Reverse Stock Split

On July 1, 2020, the Company effected a 1-for-3.7 reverse stock split (the “Reverse Stock Split”) of its issued and outstanding common stock. Accordingly, the conversion ratio for the Company’s outstanding convertible preferred stock was proportionately adjusted such that the common stock issuable upon conversion of such preferred stock was decreased in proportion to the Reverse Stock Split. The par value of the common stock was not adjusted as a result of the Reverse Stock Split. All references to common stock, options to purchase common stock, early exercised options, share data, per share data, convertible preferred stock (to the extent

5


presented on an as-converted to common stock basis) and related information contained in these financial statements have been retrospectively adjusted to reflect the effect of the Reverse Stock Split for all periods presented.

COVID-19 Pandemic

On March 11, 2020, the World Health Organization declared the outbreak of a novel strain of coronavirus, COVID-19, as a global pandemic, which continued to spread throughout the United States and around the world in the first quarter of 2021. Multiple variants of the virus that causes COVID-19 are also circulating globally. The COVID-19 pandemic is contributing to a general slowdown in the global economy and may affect the Company’s business, results of operations, financial condition, and future strategic plans. The extent of the impact of the COVID-19 pandemic on the Company’s operational and financial performance will depend on certain developments, including the duration and spread of the outbreak, the effectiveness of actions taken in the United States and other countries to contain, vaccinate against, and treat the disease, and its impact on the Company’s planned preclinical studies and clinical trials, employees and vendors, all of which are uncertain and cannot be predicted. At this time, the extent to which the COVID-19 pandemic may impact the Company’s financial condition or results of operations is uncertain. In response to the pandemic, the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”) was signed into law on March 27, 2020. The CARES Act, among other things, includes tax provisions relating to refundable payroll tax credits, deferment of employer’s social security payments, net operating loss utilization and carryback periods, modifications to the net interest deduction limitations and technical corrections to tax depreciation methods for qualified improvement property. The CARES Act had no impact on the Company’s income tax provision for the year ended December 31, 2020. The Company continues to evaluate the impact of the CARES Act on its financial position, results of operations and cash flows. The Company currently does not expect to apply for loans or grants under the CARES Act.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the Company’s financial statements and accompanying notes. On an ongoing basis, management evaluates its estimates, including those related to preclinical studies, fair value of assets and liabilities, share-based compensation and income taxes. Management bases its estimates on historical experience, knowledge of current events and actions it may undertake in the future that management believes to be reasonable under the circumstances. Actual results may differ from these estimates and assumptions.

Net Loss Per Share

Basic net loss per share is calculated by dividing the net loss by the weighted-average number of common shares outstanding for the period, without consideration of potential dilutive securities. Diluted net loss per share is computed by dividing the net loss by the sum of the weighted average number of common shares plus the potential dilutive effects of potential dilutive securities outstanding during the period. Potential dilutive securities are excluded from diluted earnings or loss per share if the effect of such inclusion is antidilutive. The Company’s potentially dilutive securities, which include convertible preferred stock prior to the conversion of such shares to common stock, unvested common stock, and outstanding stock options under the Company’s equity incentive plan, have been excluded from the computation of diluted net loss per share as they would be anti-dilutive to the net loss per share. For all periods presented, there is no difference in the number of shares used to calculate basic and diluted shares outstanding due to the Company’s net loss position.

Recent Accounting Pronouncements

Income Taxes. In December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2019-12—Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which simplifies the accounting for income taxes by eliminating certain exceptions to the guidance in Topic 740 related to the approach for intra-period tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. The new guidance also simplifies aspects of the accounting for franchise taxes and enacted changes in tax laws or rates. This standard is effective for fiscal years beginning after December 15, 2020, with early adoption permitted. The Company adopted this standard in the first quarter of 2021 using the prospective method and the adoption did not have a material impact on the Company’s financial statements.

There were no other significant updates to the recently issued accounting standards other than as disclosed herewith for the three months ended March 31, 2021. Although there are several other new accounting pronouncements issued or proposed by the FASB, the Company does not believe any of those accounting pronouncements have had or will have a material impact on its financial position or operating results.

6


3. Net Loss Per Share

The following tables summarize the computation of the basic and diluted net loss per share (in thousands except share and per share data):

 

 

 

Three Months Ended

March 31,

 

 

 

2021

 

 

2020

 

Numerator:

 

 

 

 

 

 

 

 

Net loss

 

$

(19,373

)

 

$

(8,706

)

Denominator:

 

 

 

 

 

 

 

 

Weighted average common shares outstanding

 

 

32,806,880

 

 

 

1,735,238

 

Less: weighted average unvested common stock issued

   upon early exercise of common stock options

 

 

(67,270

)

 

 

(126,054

)

Weighted average shares used to compute net loss per share,

   basic and diluted

 

 

32,739,610

 

 

 

1,609,184

 

Net loss per share, basic and diluted

 

$

(0.59

)

 

$

(5.41

)

 

The following table summarizes the outstanding potentially dilutive securities that have been excluded in the calculation of diluted net loss per share because their inclusion would be anti-dilutive:

 

 

 

As of March 31,

 

 

 

2021

 

 

2020

 

Common stock options

 

 

4,185,431

 

 

 

2,487,763

 

Unvested common stock upon early exercise of common stock options

 

 

62,424

 

 

 

117,356

 

Convertible preferred stock

 

 

 

 

 

7,374,034

 

 

 

 

4,247,855

 

 

 

9,979,153

 

 

 

4. Fair Value of Financial Instruments

The following tables summarize the fair value of the Company’s financial instruments (in thousands):

 

 

 

 

 

 

 

Fair Value Measurements Using

 

 

 

March 31,

2021

 

 

Quoted Prices

in Active

Markets for

Identical Assets

(Level 1)

 

 

Significant

Other

Observable

Inputs

(Level 2)

 

 

Significant

Unobservable

Inputs

(Level 3)

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

$

61,564

 

 

$

61,564

 

 

$

 

 

$

 

Short-term investments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate debt securities

 

$

55,299

 

 

$

 

 

$

55,299

 

 

 

 

Commercial paper

 

 

60,462

 

 

 

 

 

 

60,462

 

 

 

 

U.S. Government securities

 

 

120,894

 

 

 

 

 

 

120,894

 

 

 

 

Total short-term investments

 

 

236,655

 

 

 

 

 

 

236,655

 

 

 

 

Total

 

$

298,219

 

 

$

61,564

 

 

$

236,655

 

 

$

 

 

7


 

 

 

 

 

 

 

Fair Value Measurements Using

 

 

 

December 31,

2020

 

 

Quoted Prices

in Active

Markets for

Identical Assets

(Level 1)

 

 

Significant

Other

Observable

Inputs

(Level 2)

 

 

Significant

Unobservable

Inputs

(Level 3)

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

$

94,631

 

 

$

94,631

 

 

$

 

 

$

 

Short-term investments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate debt securities

 

$

48,614

 

 

$

 

 

$

48,614

 

 

 

 

Commercial paper

 

 

63,445

 

 

 

 

 

 

63,445

 

 

 

 

U.S. Government securities

 

 

106,162

 

 

 

 

 

 

106,162

 

 

 

 

Total short-term investments

 

 

218,221

 

 

 

 

 

 

218,221

 

 

 

 

Total

 

$

312,852

 

 

$

94,631

 

 

$

218,221

 

 

$

 

Cash Equivalents and Short-Term Investments

Financial assets measured at fair value on a recurring basis consist of the Company’s cash equivalents and short-term investments. Cash equivalents consisted of money market funds and short-term investments consisted of commercial paper, U.S. Government securities and corporate bonds. The Company obtains pricing information from its investment manager and generally determines the fair value of investment securities using standard observable inputs, including reported trades, broker/dealer quotes, and bids and/or offers.

Investments are classified as Level 1 within the fair value hierarchy if their quoted prices are available in active markets for identical securities. Investments in money market funds of $61.6 million and $94.6 million as of March 31, 2021 and December 31, 2020, respectively, were classified as Level 1 instruments and were included in cash and cash equivalents.

Investments in marketable securities are valued using Level 2 inputs. Level 2 securities are initially valued at the transaction price and subsequently valued and reported upon utilizing inputs other than quoted prices that are observable either directly or indirectly, such as quotes from third-party pricing vendors. Fair values determined by Level 2 inputs, which utilize data points that are observable such as quoted prices, interest rates and yield curves, require the exercise of judgment and use of estimates, that if changed, could significantly affect the Company’s financial position and results of operations. The marketable securities of $236.7 million and $218.2 million as of March 31, 2021 and December 31, 2020, respectively, were classified as Level 2 instruments and were included in short-term investments. Accrued interest receivable related to short-term investments were $0.8 million and $1.1 million as of March 31, 2021 and December 31, 2020, respectively, and included as part of prepaid expenses and other current assets in the balance sheets.

The following tables summarize the Company’s short-term investments accounted for as available-for-sale securities as of March 31, 2021 and December 31, 2020 (in thousands):

 

 

 

 

 

March 31, 2021

 

 

 

Maturity

(in years)

 

Amortized

Cost

 

 

Unrealized

Losses

 

 

Unrealized

Gains

 

 

Estimated

Fair Value

 

Corporate debt securities

 

1 year or less

 

$

55,308

 

 

$

(12

)

 

$

3

 

 

$

55,299

 

Commercial paper

 

1 year or less

 

 

60,462

 

 

 

 

 

 

 

 

 

60,462

 

U.S. Government securities

 

1 year or less

 

 

120,851

 

 

 

 

 

 

 

43

 

 

 

120,894

 

Total

 

 

 

$

236,621

 

 

$

(12

)

 

$

46

 

 

$

236,655

 

 

 

 

 

 

December 31, 2020

 

 

 

Maturity

(in years)

 

Amortized

Cost

 

 

Unrealized

Losses

 

 

Unrealized

Gains

 

 

Estimated

Fair Value

 

Corporate debt securities

 

1 year or less

 

$

48,616

 

 

$

(6

)

 

$

4

 

 

$

48,614

 

Commercial paper

 

1 year or less

 

 

63,445

 

 

 

 

 

 

 

 

 

63,445

 

U.S. Government securities

 

1 year or less

 

 

106,157

 

 

 

(7

)

 

 

12

 

 

$

106,162

 

Total

 

 

 

$

218,218

 

 

$

(13

)

 

$

16

 

 

$

218,221

 

 

The Company has classified all of its available-for-sale investment securities as current assets on the balance sheet based on the highly liquid nature of these investment securities and because these investment securities are considered available for use in current operations.

8


The Company considers whether unrealized losses have resulted from a credit loss or other factors. The unrealized losses on the Company’s available-for-sale securities as of March 31, 2021 and December 31, 2020 were caused by fluctuations in market value and interest rates as a result of the economic environment. The Company concluded that an allowance for credit losses was unnecessary as of March 31, 2021 and that there were no impairments as of December 31, 2020. It is neither management’s intention to sell nor is it more likely than not that the Company will be required to sell these investments prior to recovery of their cost basis or recovery of fair value. Unrealized gains and losses are included in accumulated other comprehensive income.

There was no realized gain or loss on available-for-sale securities in the periods presented. The Company uses the specific identification method to determine the cost basis of investments sold.

 

5. Balance Sheet Components

Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets are comprised of the following (in thousands):

 

 

 

March 31,

2021

 

 

December 31,

2020

 

Prepaid expenses

 

$

1,886

 

 

$

2,586

 

Other current assets

 

 

1,085

 

 

 

1,336

 

Total prepaid expenses and other current assets

 

$

2,971

 

 

$

3,922

 

 

Property and Equipment, Net

Property and equipment, net is comprised of the following (in thousands):

 

 

 

March 31,

2021

 

 

December 31,

2020

 

Leasehold improvements

 

$

1,990

 

 

$

1,984

 

Furniture and fixtures

 

 

480

 

 

 

322

 

Research equipment

 

 

5,538

 

 

 

4,892

 

Computers and software

 

 

124

 

 

 

124

 

Construction in progress

 

 

4,098

 

 

 

3,459

 

Total property and equipment

 

 

12,230

 

 

 

10,781

 

Less accumulated depreciation and amortization

 

 

(1,732

)

 

 

(1,431

)

Total property and equipment, net

 

$

10,498

 

 

$

9,350

 

 

Depreciation and amortization expense were $0.3 million and $0.1 million for the three months ended March 31, 2021 and 2020, respectively.

Accrued and Other Current Liabilities

Accrued other current liabilities are comprised of the following (in thousands):

 

 

 

March 31,

2021

 

 

December 31,

2020

 

Accrued compensation

 

$

2,086

 

 

$

3,534

 

Accrued research and development costs

 

 

1,878

 

 

 

1,675

 

Accrued property and equipment

 

 

164

 

 

 

117

 

Other accrued and current liabilities

 

 

1,064

 

 

 

927

 

Total accrued and other liabilities

 

$

5,192

 

 

$