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0

 

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, 2020

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: 001-37609

MYOKARDIA, INC.

(Exact name of registrant as specified in its charter)

 

 

Delaware

 

44-5500552

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

1000 Sierra Point Parkway

Brisbane, CA

(Address of principal executive offices)

94005

(Zip Code)

(650) 741-0900

(Registrant’s telephone number, including area code)

 

 

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

 

Title of each class

Trading symbol(s)

Name of each exchange on which registered

Common Stock

MYOK

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 

 

The number of outstanding shares of the registrant’s common stock on May 1, 2020 was 46,680,808 shares.

 

 

 

 


 

MYOKARDIA, INC.

TABLE OF CONTENTS

 

 

Page

PART I—FINANCIAL INFORMATION

 

3

Item 1. Unaudited Condensed Consolidated Financial Statements

 

3

Condensed Consolidated Balance Sheets as of March 31, 2020 and December 31, 2019

 

3

Condensed Consolidated Statements of Operations and Comprehensive Loss for the Three Months Ended March 31, 2020 and 2019

 

4

Condensed Consolidated Statements of Stockholders’ Equity for the Three Months Ended March 31, 2020 and 2019

 

5

Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2020 and 2019

 

6

Notes to Condensed Consolidated Financial Statements

 

7

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

 

16

Item 3. Quantitative and Qualitative Disclosures About Market Risk

 

21

Item 4. Controls and Procedures

 

21

PART II—OTHER INFORMATION

 

23

Item 1. Legal Proceedings

 

23

Item 1A. Risk Factors

 

23

Item 6. Exhibits

 

55

SIGNATURES

 

56

 

 

 

2


 

PART I—FINANCIAL INFORMATION

 

 

Item 1.

Unaudited Condensed Consolidated Financial Statements

MYOKARDIA, INC.

Condensed Consolidated Balance Sheets

(In thousands, except share and per share amounts)

(Unaudited)

 

 

 

March 31,

2020

 

 

December 31,

2019

 

Assets

 

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

131,204

 

 

$

101,436

 

Short-term investments

 

 

218,809

 

 

 

314,691

 

Prepaid expenses and other current assets

 

 

7,486

 

 

 

7,709

 

Total current assets

 

 

357,499

 

 

 

423,836

 

Property and equipment, net

 

 

19,801

 

 

 

15,743

 

Operating lease right-of-use assets

 

 

51,981

 

 

 

417

 

Long-term investments

 

 

10,077

 

 

 

14,153

 

Restricted cash and other

 

 

1,968

 

 

 

1,945

 

Total assets

 

$

441,326

 

 

$

456,094

 

Liabilities and stockholders’ equity

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

Accounts payable

 

 

5,573

 

 

$

6,237

 

Accrued liabilities

 

 

32,236

 

 

 

41,292

 

Operating lease liabilities - current

 

 

7,851

 

 

 

383

 

Total current liabilities

 

 

45,660

 

 

 

47,912

 

Operating lease liability

 

 

44,658

 

 

 

 

Other long-term liabilities

 

 

1,908

 

 

 

1,908

 

Total liabilities

 

 

92,226

 

 

 

49,820

 

Commitments and contingencies (Note 7)

 

 

 

 

 

 

 

 

Stockholders’ equity

 

 

 

 

 

 

 

 

Preferred stock, $0.0001 par value; 5,000,000 shares authorized; none

   issued and outstanding

 

 

 

 

 

 

Common stock, $0.0001 par value, 150,000,000 shares authorized

   at March 31, 2020 and December 31, 2019; 46,612,186 and

   46,379,073 shares issued and outstanding at March 31, 2020

   and December 31, 2019, respectively

 

 

5

 

 

 

5

 

Additional paid-in capital

 

 

897,058

 

 

 

884,486

 

Accumulated other comprehensive income

 

 

671

 

 

 

549

 

Accumulated deficit

 

 

(548,634

)

 

 

(478,766

)

Total stockholders’ equity

 

 

349,100

 

 

 

406,274

 

Total liabilities and stockholders’ equity

 

$

441,326

 

 

$

456,094

 

 

 

 

 

 

 

 

 

 

 

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

 

 

3


 

MYOKARDIA, INC.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(In thousands, except share and per share amounts)

(Unaudited)

 

 

 

Three Months Ended

March 31,

 

 

 

2020

 

 

2019

 

Operating expenses:

 

 

 

 

 

 

 

 

Research and development

 

$

51,878

 

 

$

26,190

 

Selling, general and administrative

 

 

19,902

 

 

 

13,551

 

Total operating expenses

 

 

71,780

 

 

 

39,741

 

Loss from operations

 

 

(71,780

)

 

 

(39,741

)

Interest and other income, net

 

 

1,912

 

 

 

2,271

 

Net loss

 

 

(69,868

)

 

 

(37,470

)

Other comprehensive income

 

 

122

 

 

 

363

 

Comprehensive loss

 

$

(69,746

)

 

$

(37,107

)

Net loss per share, basic and diluted

 

$

(1.50

)

 

$

(0.93

)

Weighted average number of shares used to compute net loss

   per share, basic and diluted

 

 

46,566,995

 

 

 

40,506,313

 

 

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

 

4


 

MYOKARDIA, INC.

Condensed Consolidated Statements of Stockholders’ Equity

(In thousands, except share and per share amounts)

(Unaudited)

 

For the three months ended March 31, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

Accumulated

other

 

 

 

 

 

 

Total

 

 

 

Common Stock

 

 

Paid-In

 

 

comprehensive

 

 

Accumulated

 

 

Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

income

 

 

Deficit

 

 

Equity

 

BALANCE—December 31, 2019

 

 

46,379,073

 

 

$

5

 

 

$

884,486

 

 

$

549

 

 

$

(478,766

)

 

$

406,274

 

Issuance of common stock upon the exercise of options

   and release of stock awards

 

 

233,113

 

 

 

 

 

 

1,820

 

 

 

 

 

 

 

 

 

1,820

 

Stock-based compensation

 

 

 

 

 

 

 

 

10,752

 

 

 

 

 

 

 

 

 

10,752

 

Unrealized gains

 

 

 

 

 

 

 

 

 

 

 

122

 

 

 

 

 

 

122

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(69,868

)

 

 

(69,868

)

BALANCE—March 31, 2020

 

 

46,612,186

 

 

$

5

 

 

$

897,058

 

 

$

671

 

 

$

(548,634

)

 

$

349,100

 

 

For the three months ended March 31, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

Accumulated

other

 

 

 

 

 

 

Total

 

 

 

Common Stock

 

 

Paid-In

 

 

comprehensive

 

 

Accumulated

 

 

Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

income/ (loss)

 

 

Deficit

 

 

Equity

 

BALANCE—December 31, 2018

 

 

40,288,949

 

 

$

4

 

 

$

573,183

 

 

$

(67

)

 

$

(202,553

)

 

$

370,567

 

Issuance of common stock in connection with the

   2019 follow-on offering, net of issuance costs of $17,638

 

 

5,663,750

 

 

 

1

 

 

 

271,212

 

 

 

 

 

 

 

 

 

271,213

 

Issuance of common stock upon the exercise of options

   and release of stock awards

 

 

49,076

 

 

 

 

 

 

280

 

 

 

 

 

 

 

 

 

280

 

Vesting of early exercised stock options

 

 

 

 

 

 

 

 

8

 

 

 

 

 

 

 

 

 

8

 

Stock-based compensation

 

 

 

 

 

 

 

 

6,981

 

 

 

 

 

 

 

 

 

6,981

 

Unrealized gains

 

 

 

 

 

 

 

 

 

 

 

363

 

 

 

 

 

 

363

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(37,470

)

 

 

(37,470

)

BALANCE—March 31, 2019

 

 

46,001,775

 

 

$

5

 

 

$

851,664

 

 

$

296

 

 

$

(240,023

)

 

$

611,942

 

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

5


 

MYOKARDIA, INC.

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

 

 

 

Three Months Ended

March 31,

 

 

 

2020

 

 

2019

 

Cash flow from operating activities:

 

 

 

 

 

 

 

 

Net loss

 

$

(69,868

)

 

$

(37,470

)

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

 

 

 

 

 

 

 

 

Stock-based compensation expense

 

 

10,752

 

 

 

6,981

 

Depreciation

 

 

779

 

 

 

461

 

Amortization of discount on investments

 

 

(418

)

 

 

(292

)

Loss on disposal of equipment

 

 

49

 

 

 

 

Change in operating assets and liabilities:

 

 

 

 

 

 

 

 

Prepaid expenses and other current assets

 

 

226

 

 

 

448

 

Operating lease right-of-use assets

 

 

1,066

 

 

 

635

 

Other long-term assets

 

 

 

 

 

(13

)

Accounts payable

 

 

(467

)

 

 

1,950

 

Accrued liabilities

 

 

(1,512

)

 

 

(180

)

Prepayment from collaboration partner

 

 

 

 

 

(9,874

)

Operating lease liabilities

 

 

(504

)

 

 

 

Other long-term liabilities

 

 

 

 

 

(692

)

Net cash used in operating activities

 

 

(59,897

)

 

 

(38,046

)

Cash flow from investing activities:

 

 

 

 

 

 

 

 

Purchases of investments

 

 

 

 

 

(32,697

)

Sales of investments

 

 

4,000

 

 

 

4,000

 

Maturities of investments

 

 

96,475

 

 

 

16,000

 

Purchases of property and equipment

 

 

(12,627

)

 

 

(813

)

Net cash provided by (used in) investing activities

 

 

87,848

 

 

 

(13,510

)

Cash flow from financing activities:

 

 

 

 

 

 

 

 

Proceeds from issuance of common stock in follow-on offerings,

   net of issuance and financing costs

 

 

 

 

 

271,485

 

Proceeds from exercise of stock options and employee stock purchase plan

 

 

1,817

 

 

 

280

 

Net cash provided by financing activities

 

 

1,817

 

 

 

271,765

 

Net increase in cash, cash equivalents and restricted cash

 

 

29,768

 

 

 

220,209

 

Cash, cash equivalents and restricted cash, beginning of period

 

 

103,630

 

 

 

248,265

 

Cash, cash equivalents and restricted cash, end of period

 

$

133,398

 

 

$

468,474

 

Non-cash investing and financing activities:

 

 

 

 

 

 

 

 

Unpaid portion of property and equipment purchases included in

   period-end accounts payable and accrued liabilities

 

$

2,015

 

 

$

570

 

Vesting of early exercised options and restricted stock

 

$

 

 

$

8

 

Unpaid financing-related costs

 

$

 

 

$

262

 

 

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

 

 

 

 

6


 

MYOKARDIA, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

 

 

1. Organization

MyoKardia, Inc. (the Company) is a clinical-stage biopharmaceutical company pioneering a precision medicine approach to discover, develop and commercialize targeted therapies for the treatment of serious and neglected rare cardiovascular diseases. The Company’s initial focus is on the treatment of cardiomyopathies, a group of diseases of the heart muscle. MyoKardia’s pipeline includes: mavacamten and MYK-224, which are being studied for the treatment of hypertrophic cardiomyopathy; LUS-1, being studied for the treatment of diseases of diastolic dysfunction; and danicamtiv (formerly MYK-491) and ACT-1, being studied for the treatment of diseases of systolic dysfunction.  

MyoKardia’s most advanced programs are: mavacamten, which is in four clinical trials including a Phase 3 study in patients with hypertrophic cardiomyopathy (HCM); danicamtiv, which recently completed a Phase 2a multiple-ascending dose study in patients with stable systolic heart failure and is being advanced to a Phase 2 study in patients with genetic dilated cardiomyopathy; and MYK-224, which is in a Phase 1 randomized, placebo-controlled study in healthy volunteers.

The Company was incorporated on June 8, 2012 in Delaware and its corporate headquarters and operations are in Brisbane, California.

 

Liquidity

 

The Company has incurred significant operating losses since inception and has an accumulated deficit of $548.6 million as of March 31, 2020. The Company has relied on its ability to fund its operations through private and public equity financings and to a lesser extent, through a license and collaboration arrangement with a collaboration partner, Sanofi S.A. (Sanofi) via its subsidiary, Aventis Inc. The collaboration agreement ended on December 31, 2018 and the Company had no revenues relating to its Sanofi collaboration after December 31, 2018, nor has it received reimbursements of research and development expenses after June 30, 2019. The Company has not yet received regulatory approval to commercialize or sell any product and does not have customers. Management expects operating losses and negative operating cash flows to continue for the foreseeable future. As the Company continues to incur losses, a transition to profitability is dependent upon the successful development, approval, and commercialization of the Company’s products and product candidates and the achievement of a level of revenues adequate to support its cost structure. The Company’s ultimate success depends on the outcome of its research and development activities and anticipates the need to raise additional capital to fully implement its business plan.  The Company intends to raise such capital through the issuance of additional equity, debt and/or strategic alliances with partner companies. There is no assurance that such financing will be available or that such strategic alliances will be executed on terms acceptable to the Company, or at all.   

As of March 31, 2020, the Company had $360.1 million of cash, cash equivalents and short and long-term investments, which management believes will be sufficient to meet the Company’s anticipated operating and capital expenditure requirements for the twelve months following the date of issuance of these financial statements.  Management’s belief with respect to its ability to fund operations is based on estimates that are subject to risks and uncertainties. If actual results are different from management’s estimates, the Company may need to seek additional funding. In addition, the Company is closely monitoring ongoing developments in connection with the COVID-19 pandemic, which may negatively impact its financial and operating results.

The Company will continue to assess its operating expenses and cash and cash equivalents and, if circumstances warrant, the Company will make appropriate adjustments to its operating plan.

 

 

2. Basis of Presentation and Summary of Significant Accounting Policies

Basis of Presentation

The accompanying condensed consolidated financial statements are unaudited, include the Company’s accounts and those of its wholly-owned subsidiaries MyoKardia Australia Pty Ltd and MyoKardia Netherlands B.V., and have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”).

The condensed consolidated balance sheet at December 31, 2019, has been derived from the audited consolidated financial statements as of that date but does not include all of the information and footnotes required by U.S. GAAP for complete financial statements. The results of operations for the interim periods are not necessarily indicative of the results of operations to be expected for the full fiscal year or any interim period and should be read in conjunction with the audited financial statements for the year ended

7


 

December 31, 2019 and the notes thereto, which are included in the Company’s Annual Report on Form 10-K as of and for the year ended December 31, 2019. The significant accounting policies used in preparation of these condensed consolidated financial statements for the periods shown are consistent with those discussed in notes to the consolidated financial statements in the Company’s 2019 Annual Report on Form 10-K and are updated below as necessary.

The Company currently operates in one business segment, which is the identification, development and commercialization of therapies for the treatment of serious and neglected rare cardiovascular diseases and has a single reporting unit and operating segment. These interim statements, in the opinion of management, reflect all normal recurring adjustments necessary for the fair statement of the Company’s financial position and results of operations for the interim periods ended March 31, 2020 and 2019, respectively.

Reconciliation of Cash, Cash Equivalents, and Restricted Cash as Reported in Consolidated Statements of Cash Flows

Cash as reported in the consolidated statements of cash flows includes the aggregate amounts of cash, cash equivalents and restricted cash as presented on the consolidated balance sheets. Restricted cash at March 31, 2020 and December 31, 2019 represents cash balances held as security in connection with the Company’s facility lease agreements. The following table provides a reconciliation of cash, cash equivalents and restricted cash within the consolidated balance sheets to the total shown in the consolidated statements of cash flows (in thousands):

 

 

 

March 31,

2020

 

 

December 31,

2019

 

Cash and cash equivalents

 

$

131,204

 

 

$

101,436

 

Restricted cash included in prepaid expenses and other current assets

 

 

337

 

 

 

337

 

Restricted cash included in restricted cash and other

 

 

1,857

 

 

 

1,857

 

Total cash, cash equivalents and restricted cash shown in the consolidated statements

   of cash flows

 

$

133,398

 

 

$

103,630

 

Use of Estimates

 

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities and the reported amounts of revenues and expenses in the consolidated financial statements and the accompanying notes. On an ongoing basis, management evaluates its estimates, including those related to clinical trials accrued liabilities, income tax valuation allowance and stock-based compensation. Management bases its estimates on historical experience and on various other market-specific and relevant assumptions that management believes to be reasonable under the circumstances. Actual results could differ from those estimates.

Recently Adopted Accounting Pronouncements

In November 2018, the Financial Accounting Standards Board (FASB) issued ASU 2018-18 (Topic 808), Clarifying the Interaction Between Topic 808 and Topic 606, which provides guidance on how to assess whether certain transactions between collaborative arrangement participants should be accounted for within the revenue recognition standard. The ASU also provides more comparability in the presentation of revenue for certain transactions between collaborative arrangement participants. It accomplishes this by allowing organizations to only present units of account in collaborative arrangements that are within the scope of the revenue recognition standard together with revenue accounted for under the revenue recognition standard. The parts of the collaborative arrangement that are not in the scope of the revenue recognition standard should be presented separately from revenue accounted for under the revenue recognition standard. The Company adopted this amendment in the first quarter of 2020 and the adoption did not have a material impact to the Company’s financial statements.

In August 2018, the FASB issued ASU 2018-13 (Topic 820), Fair Value Measurement, which modifies the disclosure requirements in Topic 820 by removing requirements for disclosing (i) amounts of and reasons for transfers between the Level 1 and Level 2 hierarchies, (ii) the policy for timing of transfers between levels and (iii) the valuation processes for Level 3 fair value measurements. The ASU 2018-13 amendment also adds requirements for disclosure of changes in unrealized gains and losses for the period relating to Level 3 fair value measurements and other factors considered in the valuation of Level 3 investments. The Company adopted this amendment in the first quarter of 2020 and the adoption did not have a material impact to the Company’s financial statements.

In June 2016, the FASB issued ASU No. 2016-13 (Topic 326), Financial Instruments –Measurement of Credit Losses on Financial Instruments, which requires measurement and recognition of expected credit losses for financial assets by requiring an allowance to be recorded as an offset to the amortized cost of such assets. For available-for-sale debt securities, expected credit losses

8


 

should be estimated when the fair value of the debt securities is below their associated amortized costs. The Company adopted this amendment in the first quarter of 2020 and the adoption did not have a material impact to the Company’s financial statements. 

 

 

3. Sanofi License and Collaboration Agreement

Sanofi (Aventis Inc.)

Agreement Overview, Termination and Repurchase of Royalty Rights

Until December 31, 2018 the Company had an exclusive license and collaboration agreement (Collaboration Agreement) with Aventis Inc., a wholly-owned subsidiary of Sanofi S.A. (Sanofi). On December 31, 2018, Sanofi notified the Company of its intent to terminate the collaboration, specifically, Sanofi elected not to continue with the mavacamten, MYK-224 and danicamtiv programs.  As a result, cost sharing and Sanofi’s reimbursement of our research and development costs for mavacamten and MYK-224 ended in the first half of 2019.  At that time Sanofi had continuing rights to royalties in the event of commercialization of the mavacamten and MYK-224 programs. In July 2019, the Company repurchased those rights from Sanofi for $80.0 million.  Neither the Company nor Sanofi have any material continuing rights or obligations under the Collaboration Agreement.

 

4. Fair Value Measurements

Fair value accounting is applied for all financial assets and liabilities, including short-term and long-term investments and non-financial assets and liabilities that are recognized or disclosed at fair value in the consolidated financial statements on a recurring basis (at least annually). The carrying amount of the Company’s financial instruments, including accounts payable and accrued liabilities and other current liabilities approximate fair value due to their short-term maturities.

Marketable securities are stated at their estimated fair values. The counterparties to the agreements relating to the Company’s investment securities consist of the U.S. Treasury, governmental agencies, various major corporations and financial institutions with high credit standing. The carrying amounts for financial instruments consisting of cash and cash equivalents, receivable from collaboration partner, accounts payable and accrued liabilities approximate fair value due to their short maturities.

The accounting guidance for fair value provides a framework for measuring fair value, clarifies the definition of fair value and expands disclosures regarding fair value measurements. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the reporting date. The accounting guidance establishes a three-tiered hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value as follows:

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

Level 2—Inputs other than quoted market prices included in Level 1 are either directly or indirectly observable for the asset or liability through correlation with market data at the measurement date and for the duration of the instrument’s anticipated life.

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

9


 

The following table sets forth the Company’s financial instruments that were measured at fair value on a recurring basis by level within the fair value hierarchy (in thousands):

 

 

Fair Value Measurements at March 31, 2020

 

 

 

Total

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

$

130,176

 

 

$

130,176

 

 

$

 

 

$

 

U.S. government agency obligations

 

 

107,657

 

 

 

 

 

 

107,657

 

 

 

 

Corporate securities

 

 

121,229

 

 

 

 

 

 

121,229

 

 

 

 

Total

 

$

359,062

 

 

$

130,176

 

 

$

228,886

 

 

$

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fair Value Measurements at December 31, 2019

 

 

 

Total

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

$

100,441

 

 

$

100,441

 

 

$

 

 

$

 

U.S. government agency obligations

 

 

134,055

 

 

 

 

 

 

134,055

 

 

 

 

Corporate securities

 

 

194,789

 

 

 

 

 

 

194,789

 

 

 

 

Total

 

$

429,285

 

 

$

100,441

 

 

$

328,844

 

 

$

 

The following table is a summary of amortized cost, unrealized gain and loss, and fair value of the Company’s marketable securities by contractual maturities (in thousands):

 

 

Fair Value Measurements at March 31, 2020

 

 

 

Amortized Cost

 

 

Unrealized Gain

 

 

Unrealized Loss

 

 

Fair Value

 

Cash equivalents (due within 90 days)

 

$

130,153

 

 

$

23

 

 

$

 

 

$

130,176

 

Short-term investments (due within one year)

 

 

218,129

 

 

 

827

 

 

 

(147

)

 

 

218,809

 

Long-term investments (due between one and two years)

 

 

10,104

 

 

 

27

 

 

 

(54

)

 

 

10,077

 

Total

 

$

358,386

 

 

$

877

 

 

$

(201

)

 

$

359,062

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fair Value Measurements at December 31, 2019

 

 

 

Amortized Cost

 

 

Unrealized Gain

 

 

Unrealized Loss

 

 

Fair Value

 

Cash equivalents (due within 90 days)

 

$

100,440

 

 

$

1

 

 

$

 

 

$

100,441

 

Short-term investments (due within one year)

 

 

314,181

 

 

 

523

 

 

 

(13

)

 

 

314,691

 

Long-term investments (due between one and two years)

 

 

14,110

 

 

 

47

 

 

 

(4

)

 

 

14,153

 

Total

 

$

428,731

 

 

$

571

 

 

$

(17

)

 

$

429,285

 

 

5. Leases

The Company determines if an arrangement is or contains a lease at inception. Operating lease right-of-use (ROU) assets and liabilities are presented separately on our consolidated balance sheets. The Company does not have any finance leases.

Operating lease ROU assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term beginning at the commencement date. As the Company’s leases do not provide enough information to determine an implicit interest rate, the Company determines its incremental borrowing rate based on the rate of interest that the Company would have to pay to borrow on a collateralized basis over a similar term in a similar economic environment. The operating lease ROU assets also include any lease payments made and excludes lease incentives and initial direct costs incurred. Lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term.

In September 2018, the Company entered into a lease agreement (the “Lease”) for approximately 129,800 square feet of office and laboratory space in Brisbane, California, which is now the Company’s corporate headquarters. The Company performed an evaluation of the Lease and determined it is an operating lease. The lease commencement date was in January 2020 and on the commencement date, the Company recognized $52.6 million of ROU asset and lease liability on its consolidated balance sheet in accordance with ASC 842. The Lease grants the Company an option to extend the Lease for an additional 10-year period. This optional period was not included in the measurement of the ROU asset or lease liability as it was not reasonably certain that the Company would exercise the option. The Lease requires the Company to share in prorated operating expenses and property taxes based upon actual amounts incurred. These expenses were classified as variable lease costs due to the Company’s election to account for each separate lease component and the non-lease components associated with that lease component as a single lease component.

10


 

The Lease provides for annual base rent of approximately $5.5 million in the first year of the lease term. The annual base rent for the second twelve months will be approximately $8.5 million, which will increase on an annual basis beginning from the 25th month to approximately $11.1 million for the tenth year of the lease.

As of March 31, 2020, the Company has capitalized $10.6 million of leasehold improvements within property and equipment and amortizes it over the lease term.

Supplemental balance sheet information related to operating leases was as follows (in thousands, except lease term and discount rate).

 

 

 

March 31,

2020

 

 

December 31,

2019

 

Assets

 

 

 

 

 

 

 

 

Operating lease right-of-use assets

 

$

51,981

 

 

$

417

 

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

Operating lease liabilities - current

 

$

7,851

 

 

$

383

 

Operating lease liabilities - noncurrent

 

 

44,658

 

 

 

 

 

 

$

52,509

 

 

$

383

 

 

 

 

 

 

 

 

 

 

Weighted average remaining lease term (years)

 

 

9.8

 

 

 

0.3

 

Weighted average discount rate

 

 

13.5

%

 

 

6.0

%

 

Information related to operating lease activity during the three months ended March 31, 2020 and 2019 was as follows (in thousands):

 

 

 

Three Months Ended March 31,

 

 

 

2020

 

 

2019

 

Operating lease cost

 

$

2,738

 

 

$

669

 

Variable lease cost

 

 

532

 

 

 

 

Total lease cost

 

$

3,270

 

 

$

669

 

 

 

 

 

 

 

 

 

 

Operating lease right-of-use assets obtained in exchange for lease obligations

 

$

52,630

 

 

$

1,095

 

 

 

 

 

 

 

 

 

 

Operating lease payments

 

$

2,174

 

 

$

727

 

 

Future annual payments of operating lease liabilities as of March 31, 2020 are as follows (in thousands):

 

Year ending December 31:

 

Amount

 

2020 (nine months remaining)

 

$

6,185

 

2021

 

 

8,449

 

2022

 

 

8,745

 

2023

 

 

9,051

 

2024

 

 

9,368

 

Thereafter

 

 

52,442

 

Total future lease payments

 

 

94,240

 

Less: imputed interest

 

 

(41,731

)

Total operating lease liabilities

 

$

52,509

 

 

 The operating leases require the Company to share in prorated operating expenses and property taxes based upon actual amounts incurred; those amounts are not fixed for future periods and, therefore, are not included in the future commitments listed above.

 

11


 

6. Balance Sheet Components

Property and Equipment

Property and equipment are stated at cost and depreciated using the straight-line method over the estimated useful lives of the assets, ranging from two to five years. Leasehold improvements are amortized over the shorter of their estimated useful lives or the related lease term. Upon retirement or sale, the cost and related accumulated depreciation are removed from the consolidated balance sheet and the resulting gain or loss is reflected in the consolidated statement of operations and comprehensive loss.

 

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

 

 

 

March 31,

2020

 

 

December 31,

2019

 

Scientific equipment

 

$

12,430

 

 

$

10,642

 

Furniture and equipment

 

 

3,185

 

 

 

2,572

 

Capitalized software

 

 

389

 

 

 

389

 

Leasehold improvements

 

 

12,272

 

 

 

509

 

Construction in progress

 

 

 

 

 

9,568

 

Total

 

 

28,276

 

 

 

23,680

 

Less: Accumulated depreciation

 

 

(8,475

)

 

 

(7,937

)

Property and equipment, net

 

$

19,801

 

 

$

15,743

 

 

Depreciation expense was $0.8 million and $0.5 million for the three months ended March 31, 2020 and 2019, respectively.

Accrued Liabilities

Accrued liabilities consist of the following (in thousands):

 

 

 

March 31,

2020

 

 

December 31,

2019

 

Clinical research and development

 

$

12,946

 

 

$

11,494

 

Outside services

 

 

8,164

 

 

 

6,592

 

Payroll-related liabilities