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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

 

Commission File Number: 001-38533

 

EIDOS THERAPEUTICS, INC.

(Exact Name of Registrant as Specified in its Charter)

 

 

Delaware

 

46-3733671

( State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

101 Montgomery Street, Suite 2000

San Francisco, CA

 

94104

   

N/A  

 

N/A

(Former address, if changed since last report)

 

(Former Zip Code)

Registrant’s telephone number, including area code: (415) 887-1471

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

EIDX

The 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 5, 2020, the registrant had 38,537,341 shares of common stock, $0.001 par value per share, outstanding.

 

 

 

 


Table of Contents

 

 

 

 

 

Page

PART I.

 

FINANCIAL INFORMATION

 

 

Item 1.

 

Financial Statements (Unaudited)

 

1

 

 

Condensed Balance Sheets

 

1

 

 

Condensed Statements of Operations and Comprehensive Loss

 

2

 

 

Condensed Statements of Stockholders’ Equity

 

3

 

 

Condensed Statements of Cash Flows

 

5

 

 

Notes to Unaudited Condensed Financial Statements

 

6

Item 2.

 

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

 

19

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

 

25

Item 4.

 

Controls and Procedures

 

25

PART II.

 

OTHER INFORMATION

 

 

Item 1.

 

Legal Proceedings

 

26

Item 1A.

 

Risk Factors

 

26

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

 

64

Item 3.

 

Defaults Upon Senior Securities

 

64

Item 4.

 

Mine Safety Disclosures

 

64

Item 5.

 

Other Information

 

64

Item 6.

 

Exhibits

 

65

Signatures

 

66

 

 

 

i


 

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

EIDOS THERAPEUTICS, INC.

Condensed Balance Sheets

(Unaudited)

(In thousands, except share and per share data)

 

 

 

March 31,

 

 

December 31,

 

 

 

2020

 

 

2019

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

196,515

 

 

$

191,157

 

Related party receivable

 

 

125

 

 

 

85

 

Prepaid expenses and other current assets

 

 

3,952

 

 

 

4,678

 

Total current assets

 

 

200,592

 

 

 

195,920

 

Property and equipment, net

 

 

1,283

 

 

 

1,259

 

Operating lease, right of use asset

 

 

3,897

 

 

 

4,010

 

Other assets

 

 

2,825

 

 

 

2,631

 

Total assets

 

$

208,597

 

 

$

203,820

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

3,972

 

 

$

3,151

 

Related party payable

 

 

323

 

 

 

316

 

Lease liabilities

 

 

569

 

 

 

554

 

Accrued expenses and other current liabilities

 

 

6,956

 

 

 

6,409

 

Total current liabilities

 

 

11,820

 

 

 

10,430

 

Debt, non-current

 

 

16,316

 

 

 

16,112

 

Lease liabilities, non-current

 

 

4,443

 

 

 

4,591

 

Embedded derivative

 

 

1,103

 

 

 

1,165

 

Other liabilities

 

 

63

 

 

 

95

 

Total liabilities

 

 

33,745

 

 

 

32,393

 

Commitments and contingencies

 

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

 

 

Preferred stock, $0.001 par value, 5,000,000 shares authorized; no shares

   issued and outstanding

 

 

-

 

 

 

-

 

Common stock, $0.001 par value; 150,000,000 shares

   authorized as of March 31, 2020 and December 31, 2019,

   respectively; 38,528,841 and 38,040,693 shares issued and

   outstanding as of March 31, 2020 and December 31, 2019,

   respectively

 

 

39

 

 

 

38

 

Additional paid-in-capital

 

 

300,742

 

 

 

274,494

 

Accumulated deficit

 

 

(125,929

)

 

 

(103,105

)

Total stockholders’ equity

 

 

174,852

 

 

 

171,427

 

Total liabilities and stockholders' equity

 

$

208,597

 

 

$

203,820

 

 

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

1


 

EIDOS THERAPEUTICS, INC.

Condensed Statements of Operations and Comprehensive Loss

(Unaudited)

(In thousands, except share and per share data)

 

 

 

Three Months Ended

 

 

 

 

March 31,

 

 

 

 

2020

 

 

2019

 

 

Research and development (includes related party

   expense (benefit) of $(242) and $94 for the three

   months ended March 31, 2020 and 2019, respectively)

 

$

17,575

 

 

$

8,549

 

 

General and administrative (includes related party

   expense of $285 and $79 for the three months ended

   March 31, 2020 and 2019, respectively)

 

 

5,311

 

 

 

4,035

 

 

Total operating expenses

 

 

22,886

 

 

 

12,584

 

 

Loss from operations

 

 

(22,886

)

 

 

(12,584

)

 

Interest expense

 

 

(518

)

 

 

-

 

 

Other income (expense), net

 

 

580

 

 

 

851

 

 

Net and comprehensive loss

 

$

(22,824

)

 

$

(11,733

)

 

Net loss per share - basic and diluted

 

$

(0.60

)

 

$

(0.32

)

 

Weighted-average shares used in computing net loss

   per share - basic and diluted

 

 

38,009,621

 

 

 

36,175,523

 

 

 

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

 

 

 

2


 

EIDOS THERAPEUTICS, INC.

Condensed Statements of Stockholders’ Equity

For the three months ended March 31, 2020 (Unaudited)

(in thousands, except for share amounts)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

 

Total

 

 

 

Common stock

 

 

paid-in-

 

 

Accumulated

 

 

stockholders'

 

 

 

Share

 

 

Amount

 

 

capital

 

 

deficit

 

 

equity

 

Balance—December 31, 2019

 

 

38,040,693

 

 

$

38

 

 

$

274,494

 

 

$

(103,105

)

 

$

171,427

 

Issuance of common stock upon exercise of stock options and restricted

   stock

 

 

39,393

 

 

 

 

 

 

192

 

 

 

 

 

 

192

 

Issuance of common stock in at-the-market offering, net offering cost of $24

 

 

448,755

 

 

 

1

 

 

 

24,093

 

 

 

 

 

 

24,094

 

Vesting of restricted stock and early exercised options

 

 

 

 

 

 

 

 

36

 

 

 

 

 

 

36

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

1,927

 

 

 

 

 

 

1,927

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(22,824

)

 

 

(22,824

)

Balance—March 31, 2020

 

 

38,528,841

 

 

$

39

 

 

$

300,742

 

 

$

(125,929

)

 

$

174,852

 

 

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

 

 

 

3


 

EIDOS THERAPEUTICS, INC.

Condensed Statements of Stockholders’ Equity

For the three months ended March 31, 2019 (Unaudited)

(in thousands, except for share amounts)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

 

Total

 

 

 

Common stock

 

 

paid-in-

 

 

Accumulated

 

 

stockholders'

 

 

 

Share

 

 

Amount

 

 

capital

 

 

deficit

 

 

equity

 

Balance—December 31, 2018

 

 

36,760,536

 

 

37

 

 

$

220,240

 

 

$

(65,270

)

 

$

155,007

 

Issuance of common stock upon exercise of stock options and restricted

   stock

 

 

50,533

 

 

 

 

 

25

 

 

 

 

 

25

 

Vesting of restricted stock and early exercised options

 

 

 

 

 

 

38

 

 

 

 

 

38

 

Stock-based compensation expense

 

 

 

 

 

 

964

 

 

 

 

 

964

 

Net loss

 

 

 

 

 

 

 

 

(11,733

)

 

 

(11,733

)

Balance—March 31, 2019

 

 

36,811,069

 

 

$

37

 

 

$

221,267

 

 

$

(77,003

)

 

$

144,301

 

 

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

 

 

 

 

 

4


 

EIDOS THERAPEUTICS, INC.

Condensed Statements of Cash Flows

(Unaudited)

(In thousands)

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2020

 

 

2019

 

Cash Flows From Operating Activities:

 

 

 

 

 

 

 

 

Net loss

 

$

(22,824

)

 

$

(11,733

)

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

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

27

 

 

 

15

 

Stock-based compensation expense

 

 

1,927

 

 

 

964

 

Amortization of debt discount and issuance costs

 

 

204

 

 

 

 

Change in fair value of derivative liability

 

 

(62

)

 

 

 

Loss on disposal of asset

 

 

 

 

 

(2

)

Changes in assets and liabilities:

 

 

 

 

 

 

 

 

Related party receivable

 

 

(40

)

 

 

(38

)

Prepaid expenses and other current assets

 

 

726

 

 

 

(371

)

Other assets

 

 

(81

)

 

 

(1,719

)

Accounts payable

 

 

821

 

 

 

1,256

 

Accrued expenses and other liabilities

 

 

418

 

 

 

1,369

 

Related party payable

 

 

7

 

 

 

151

 

Net cash used in operating activities

 

 

(18,877

)

 

 

(10,108

)

 

 

 

 

 

 

 

 

 

Cash Flows From Investing Activities:

 

 

 

 

 

 

 

 

Purchases of property and equipment

 

 

(51

)

 

 

 

Net cash used in investing activities

 

 

(51

)

 

 

 

 

 

 

 

 

 

 

 

 

Cash Flows From Financing Activities:

 

 

 

 

 

 

 

 

Proceeds from issuance of common stock upon exercise of stock options and

   restricted stock

 

 

192

 

 

 

25

 

Proceeds from the issuance of common stock in at-the-market offering

 

 

24,094

 

 

 

 

Net cash provided by financing activities

 

 

24,286

 

 

 

25

 

Net increase (decrease) in cash and cash equivalents

 

 

5,358

 

 

 

(10,083

)

Cash and cash equivalents, beginning of period

 

 

191,157

 

 

 

157,147

 

Cash and cash equivalents, end of period

 

$

196,515

 

 

$

147,064

 

 

 

 

 

 

 

 

 

 

Other supplemental information

 

 

 

 

 

 

 

 

Interest paid

 

$

518

 

 

$

 

 

 

 

 

 

 

 

 

 

Supplemental disclosure of non-cash activities:

 

 

 

 

 

 

 

 

Lease liability arising from the right of use asset

 

$

 

 

$

1,187

 

Vesting of restricted stock and early exercised options

 

 

36

 

 

 

38

 

 

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

5


 

EIDOS THERAPEUTICS, INC.

Notes to Unaudited Condensed Financial Statements (Unaudited)

Note 1. Organization and description of business

 

Eidos Therapeutics, Inc., or the Company, was incorporated as an S corporation in the state of Delaware on August 6, 2013. The Company is advancing a drug candidate, AG10 to treat transthyretin, or TTR, amyloidosis, or ATTR, which leads to organ damage, loss of organ function and eventual death from abnormal buildup of protein deposits predominantly in the heart and peripheral nervous system. AG10 is an orally-administered small molecule designed to potently stabilize tetrameric TTR, thereby halting at its outset the series of molecular events that give rise to ATTR. The Company has been primarily engaged in business planning, research and development, recruiting personnel, and raising capital. The Company is headquartered in San Francisco, California and it operates as one operating segment.

 

The Company is currently enrolling patients in a Phase 3 clinical trial of AG10 in patients with ATTR cardiomyopathy and planning a second Phase 3 clinical trial in patients with ATTR polyneuropathy. Due to the global outbreak of SARS-CoV-2, the novel strain of coronavirus that causes Coronavirus disease 19 (COVID-19), the Company has experienced impacts on its clinical trials, including delays in clinical site activations and enrollment of patients. The Company continues to actively monitor the situation and may take further precautionary and preemptive actions as may be required by federal, state or local authorities or that the Company determines are in the best interests of public health and safety and that of its patient community, employees, partners, suppliers and stockholders. Depending on the full impact and prevalence of COVID-19 over time, the Company currently expects enrollment of the Phase 3 clinical trial in ATTR-CM to be completed in the first half of 2021 and initiation of the Phase 3 clinical trial in ATTR-PN to occur in the second half of 2020.

 

Liquidity

The Company has incurred net losses from operations since inception and has an accumulated deficit of $125.9 million as of March 31, 2020. The Company’s ultimate success depends on the outcome of its research and development activities. The Company expects to incur additional losses in the future and it anticipates the need to raise additional capital to fully implement its business plan. Through March 31, 2020, the Company has financed its operations through private placements of redeemable convertible preferred stock, convertible promissory notes, an initial public offering (IPO) of common stock, at-the-market offerings of common stock and a licensing agreement with a third-party.

On August 2, 2019, the Company filed a Registration Statement on Form S-3, as amended (the “2019 Shelf”) with the SEC in relation to the registration of common stock, preferred stock, warrants and units of any combination thereof. The Company also simultaneously entered into an Open Market Sale Agreement (“2019 Sales Agreement”) with Jefferies and SVB Leerink LLC (“Sales Agent”), to provide for the offering, issuance and sale by the Company of up to an aggregate offering price of $100.0 million of its common stock from time to time in “at-the-market” offerings under the 2019 Shelf and subject to the limitations thereof.  The Company will pay to the Sales Agent cash commissions of up to 3.0 percent of the gross proceeds of sales of common stock under the 2019 Sales Agreement.  The Company issued 448,755 shares and received $24.1 million in net proceeds under the 2019 Sales Agreement as of March 31, 2020.

 

     

Based on current business plans and assuming no additional financing, the Company believes that its existing cash and cash equivalents will be sufficient to fund its cash requirements through at least the next twelve months from the date of these financial statements. The Company will need to obtain additional financing in the future and may seek financing through the issuance of its common stock, through other equity or debt financings or through collaborations or partnerships with other companies. The amount and timing of the Company’s future funding requirements will depend on many factors, including the pace and results of the Company’s clinical development efforts for AG10 and other research and development activities.  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. The Company may not be able to raise additional capital on terms acceptable to the Company, or at all, and any failure to raise capital as and when needed would compromise the Company’s ability to execute on our business plan and the Company may have to significantly delay, scale back, or discontinue the development of AG10 or curtail any efforts to expand the Company’s product pipeline.

 

6


 

Note 2. Summary of significant accounting policies

Basis of preparation

These unaudited condensed financial statements have been prepared in accordance with United States generally accepted accounting principles, or GAAP. These unaudited condensed financial statements include transactions with BridgeBio Pharma LLC and its affiliates (“BBP LLC”), a controlling stockholder in the Company. Upon the closing of the BBP LLC IPO on July 1, 2019, all unitholders of BridgeBio Pharma LLC exchanged their units for shares of common stock of BridgeBio Pharma, Inc.(“BridgeBio” or “BBP, Inc.”), and BridgeBio Pharma LLC became a wholly-owned subsidiary of BBP, Inc. (the “Reorganization”). As the sole managing member, BBP, Inc. will operate and control all of BridgeBio Pharma LLC’s businesses and affairs after the Reorganization.

For the periods presented, BBP LLC has provided consulting and management services to the Company in the ordinary course of business, including certain executive personnel, facility related costs, advisory services, insurance costs, and other general corporate expenses and the Company has provided consulting and management services to BBP LLC and affiliates. These allocations were made based on direct usage, when identifiable, with the remainder allocated primarily based on a proportional share of headcount. The Company’s historical financial statements do not purport to reflect what the Company’s results of operations, financial position, or cash flows would have been if the Company had operated as an independent entity during the periods presented. Management believes the basis on which the expenses have been allocated to be a reasonable reflection of the utilization of services provided to or the benefit received by the Company during the periods presented. For more information on the allocated costs and related party transactions, see Note 7.

Unaudited interim condensed financial statements

The accompanying unaudited interim condensed financial statements have been prepared in accordance with GAAP and applicable rules and regulations of the Securities and Exchange Commission, or the SEC, regarding interim financial reporting. As permitted under those rules, certain footnotes or other financial information that are normally required by GAAP have been condensed or omitted, and accordingly the balance sheet as of December 31, 2019 has been derived from the audited financial statements at that date but does not include all of the information required by GAAP for complete financial statements. These unaudited interim condensed financial statements have been prepared on the same basis as the Company’s annual financial statements and, in the opinion of management, reflect all adjustments (consisting only of normal recurring adjustments) that are necessary for a fair statement of the Company’s financial information. The results of operations for the three months ended March 31, 2020 are not necessarily indicative of the results to be expected for the year ending December 31, 2020 or for any future year or interim period.

The accompanying unaudited interim condensed financial statements and related financial information should be read in conjunction with the audited financial statements and the related notes thereto for the year ended December 31, 2019 included in the Company’s Annual Report on Form 10-K, filed with the SEC on February 26, 2020.

Use of estimates

The preparation of 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 liabilities as of the date of the financial statements and the reported amounts of expenses during the reporting period. On an ongoing basis, management evaluates its estimates, including, but not limited to, those related to revenue recognition, including deductions from revenues (cost of license revenues), the period of performance, identification of deliverables and evaluation of regulatory and royalty milestones with respect to our license agreement, the fair value of the embedded derivative liability, the assumptions used to estimate the fair value of stock-based compensation, useful lives of fixed assets, accruals for research and development activities, and income taxes. Management bases its estimates on historical experience and on other relevant assumptions that management believes to be reasonable under the circumstances. Actual results could differ from those estimates.

Concentrations of credit risk

Financial instruments that potentially subject the Company to a concentration of credit risk consist of cash and cash equivalents. All the Company’s funds are held by one financial institution that management believes is of high credit quality. Such deposits may, at times, exceed federally insured limits.

 

7


 

 

Cash and cash equivalents

 

All highly-liquid investments with an original maturity date of three months or less when purchased that are readily convertible into cash and have an insignificant interest rate risk are considered to be cash equivalents. As of March 31, 2020 and December 31, 2019, the Company had cash and cash equivalents of $196.5 million and $191.2 million, respectively. The Company’s cash equivalents are invested in highly-rated money market funds.

Fair value of financial instruments

The carrying amount of the Company’s short-term financial instruments, including accounts payable and accrued expenses and other payables, approximate fair value due to their short-term maturities. See Note 3 Fair value measurements regarding the fair value of the Company’s embedded derivative liability related to its convertible promissory notes.

Impairment of long-lived assets

The Company reviews long-lived assets, primarily comprised of property and equipment, for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability is measured by comparison of the carrying amount to the estimated undiscounted future cash flows which the assets or asset groups are expected to generate. If such assets are considered to be impaired, the impairment to be recognized is the amount by which the carrying amount of the assets or asset groups exceeds the estimated discounted future cash flows arising from the assets or asset groups. There have been no such impairments of long-lived assets for any of the periods presented.

Research and development costs and accrued research and development

Research and development costs are expensed as incurred and consist of salaries and benefits, stock-based compensation expense, lab supplies and facility costs, as well as fees paid to others that conduct certain research and development activities on the Company’s behalf.

The Company accrues for estimated costs of research and development activities conducted by third-party service providers, which include the conduct of preclinical studies and clinical trials, and contract manufacturing activities.

The Company records the estimated costs of research and development activities based upon the estimated amount of services provided but not yet invoiced and includes these costs in accrued expenses and other payables in the balance sheets and within research and development expense in the statements of operations. These costs are a significant component of the Company’s research and development expenses. The Company accrues for these costs based on factors such as estimates of the work completed and in accordance with agreements established with its third-party service providers. The Company makes significant judgments and estimates in determining the accrued liabilities balance at each reporting date. As actual costs become known, the Company adjusts its accrued liabilities. The Company has not experienced any material differences between accrued costs and actual costs incurred. However, the status and timing of actual services performed, number of patients enrolled, and the rate of patient enrollments may vary from the Company’s estimates, resulting in adjustments to expense in future periods. Changes in these estimates that result in material changes to the Company’s accruals could materially affect the Company’s results of operations.

Accrued repurchase liability for common stock

The Company records as a liability, within accrued expenses and other current liabilities, the purchase price of unvested common stock that the Company has a right to repurchase if and when the stockholder ceases to be a service provider to the Company before the end of the requisite service period. The proceeds are recorded as a liability and the proceeds related to the vested common stock is reclassified to additional paid-in capital as the Company’s repurchase right lapses.

Embedded derivative liability on Loan Agreement

For the SVB and Hercules Loan Agreement entered into in November 2019 (see Note 5), the Company elected to pay a fee (“Success Fee”) upon certain events which is recorded as an embedded derivative liability to be measured at fair value. The Success Fee amount is $1.0 million if conditions are met prior to November 13, 2021 and $2.0 million if conditions are met after November 13, 2021. The Company also determined that certain events of default provisions resulting in the prepayment of the loan or a change in the default rate of interest should also be recorded as an embedded derivative liability but were deemed immaterial for all periods presented due to the triggers being deemed unlikely. The

8


 

compound embedded derivative related to the SVB and Hercules Loan Agreement is subject to remeasurement with changes in fair value recognized in other income (expense), net in the statements of operations.

Net income (loss) attributable to common stockholders and net income (loss) per share

Basic net loss per common share is calculated by dividing net loss attributable to common stockholders, by the weighted-average number of shares of common stock outstanding during the period, less shares subject to repurchase and without consideration for potentially dilutive securities. Diluted net loss per common share is the same as basic net loss attributable to common stockholders per share since the effects of potentially dilutive securities are antidilutive given the Company’s loss position.

Recently issued accounting standards adopted

In August 2018, the FASB issued ASU No. 2018-13, Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement (“ASU 2018-13”), which amends ASC 820, Fair Value Measurement. This ASU modifies the disclosure requirements for fair value measurements by removing, modifying, or adding certain disclosures. The effective date is the first quarter of fiscal year 2020, with early adoption permitted for the removed disclosures and delayed adoption until fiscal year 2020 permitted for the new disclosures. The Company has adopted this disclosure requirement for the quarter ended March 31, 2020 (see Note 3 below).  

Recently issued accounting standards not yet adopted

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). ASU 2016-13 requires an entity to utilize a new impairment model that requires measurement and recognition of expected credit losses for most financial assets and certain other instruments, including but not limited to available-for-sale debt securities. Credit losses relating to available-for-sale debt securities will be recorded through an allowance for credit losses rather than as a direct write-down to the security. The standard is effective for fiscal years, and interim periods within those years, beginning after December 15, 2019. In November 2019, the FASB issued ASU No. 2019-10, Financial Instruments—Credit Losses (Topic 326), Derivatives and Hedging (Topic 815) and Leases (Topic 842): Effective Dates, which defers the effective date of this ASU to fiscal years beginning after December 15, 2022 for all entities except SEC reporting companies that are not smaller reporting companies. As a smaller reporting company, this ASU will now be effective for the Company beginning January 1, 2023; however, early adoption is permitted. The Company is currently evaluating the impact of adopting the updated provisions and does not anticipate that the adoption of this standard will have a material impact on its condensed financial statements.

 

 

Note 3. Fair value measurements

Financial assets and liabilities are recorded at fair value. 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—Quoted prices in active markets for identical assets or liabilities;

Level 2—Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities; and

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

In determining fair value, the Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible as well as considers counterparty credit risk in its assessment of fair value.

9


 

Financial assets and liabilities measured and recognized at fair value are as follows (in thousands):

 

 

 

March 31, 2020

 

 

 

Total

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

$

196,515

 

 

$

196,515

 

 

$

 

 

$

 

Total financial assets

 

$

196,515

 

 

$

196,515

 

 

$

 

 

$

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Embedded derivative

 

$

1,103

 

 

$

 

 

$

 

 

$

1,103

 

Total financial liabilities

 

$

1,103

 

 

$

 

 

$

 

 

$

1,103

 

 

 

 

December 31, 2019

 

 

 

Total

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

$

191,157

 

 

$

191,157

 

 

$

 

 

$

 

Total financial assets

 

$

191,157

 

 

$

191,157

 

 

$

 

 

$

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Embedded derivative

 

$

1,165

 

 

$

 

 

$

 

 

$

1,165

 

Total financial liabilities

 

$

1,165

 

 

$

 

 

$

 

 

$

1,165

 

 

Since the embedded derivative liability is the Company’s only Level 3 financial instrument, the following disclosure regarding the embedded derivative liability outlines the activity related to Level 3 financial liabilities of the Company.   

Embedded derivative liability in the loan payable

For the SVB and Hercules Loan Agreement entered into in November 2019 (see Note 5), the Company determined that the requirement to pay a Success Fee upon certain events is an embedded derivative liability to be measured at fair value. The fair value of the derivative was determined based on an income approach that identified the cash flows using a “with-and-without” valuation methodology. The inputs used to determine the estimated fair value of the derivative instrument were based primarily on the probability of an underlying event triggering the embedded derivative occurring and the timing of such event. The embedded derivative liability was $1.1 million at inception in November 2019 and $1.2 million for the year ended December 31, 2019. The following table sets forth a summary of the changes in the fair value of the Company’s embedded derivative liability in the loan payable during the quarter ended March 31, 2020 (in thousands):

 

 

 

March 31,

 

 

 

2020

 

Derivative instrument:

 

 

 

 

Beginning balance

 

$

1,165

 

Change in fair value upon revaluation recognized in other income

   (expense), net

 

 

(62

)

Ending balance

 

$

1,103

 

  

 

 

Quantitative Information about Level 3 Fair Value Measurements

 

 

Fair Value Estimate

 

 

Valuation Technique

 

Unobservable Input

 

Range of probability

Dollars in thousands

 

 

 

 

 

 

 

 

 

 

March 31, 2020

 

$

1,103

 

 

Appraisal

 

Appraisal adjustments

 

0%-75%

December 31, 2019

 

$

1,165

 

 

Appraisal

 

Appraisal adjustments

 

0%-75%

 

10


 

Note 4. Condensed balance sheet components

Property and equipment, net

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

 

 

 

March 31,

 

 

December 31,

 

 

 

2020

 

 

2019

 

Leasehold improvements

 

$

1,114

 

 

$

1,112

 

Computer equipment

 

 

166

 

 

 

139

 

Office furniture and equipment

 

 

131

 

 

 

109

 

Total property and equipment, cost

 

 

1,411

 

 

 

1,360

 

Less: accumulated depreciation and amortization

 

 

(128

)

 

 

(101

)

Total property and equipment, net

 

$

1,283

 

 

$

1,259

 

 

The Company recognized $27,000 and $15,000 of depreciation and amortization expense during the three months ended March 31, 2020 and 2019.

Accrued expenses and other current liabilities

Accrued expenses and other current liabilities consist of the following (in thousands):

 

 

 

March 31,

 

 

December 31,

 

 

 

2020

 

 

2019

 

Accrued research and development costs

 

$

5,504

 

 

$

3,968

 

Accrued employee related expenses

 

 

730

 

 

 

1,865

 

Liability for unvested stock, short-term

 

 

138

 

 

 

143

 

Accrued other current liabilities

 

 

584

 

 

 

433

 

Total accrued expenses and other current liabilities

 

$

6,956

 

 

$

6,409

 

 

As of March 31, 2020 and December 31, 2019, $63,000 and $95,000, respectively, related to the long-term liability for unvested stock were recorded in other liabilities.

Lease liabilities

 

Lease liabilities consist of the following (in thousands):

 

 

 

March 31,

 

 

December 31,

 

 

 

2020

 

 

2019

 

Lease liabilities, current

 

$

569

 

 

$

554

 

Lease liabilities, non-current

 

 

4,443

 

 

 

4,591

 

Total lease liabilities

 

$

5,012

 

 

$

5,145

 

 

Note 5. Debt obligation

Silicon Valley Bank and Hercules loan agreement  

On November 13, 2019, the Company entered into a Loan and Security Agreement with Silicon Valley Bank and Hercules Capital, Inc. (“SVB and Hercules Loan Agreement”). The SVB and Hercules Loan Agreement provides for up to $55.0 million in term loans to be drawn in three tranches as follows: (i) Tranche A loan of $17.5 million, (ii) Tranche B loan of up to $22.5 million which is available to be drawn until October 31, 2020, and (iii) Tranche C loan of up to $15.0 million available to be drawn upon a clinical trial milestone. The Tranche C loan is available to be drawn until September 30, 2021. The Tranche A loan of $17.5 million was drawn on November 13, 2019. There have not been any additional draws on the other tranches as of March 31, 2020.  

The Tranche A loan bears interest at a fixed rate equal to the greater of either (i) 8.50% or (ii) 3.25% plus the prime rate as reported in The Wall Street Journal (8.50% as of December 31, 2019). The Tranche A loan repayment schedule provides for interest only payments until November 1, 2021, followed by consecutive equal monthly payments of principal and interest commencing on this date continuing through the maturity date of October 2, 2023.  The Tranche A loan also provides for a $0.3 million commitment fee that was paid at closing and a final payment charge equal to 5.95% multiplied by the amount funded to be paid when the loan becomes due or upon prepayment of the facility. If the

11


 

Company elects to prepay the Tranche A loan, there is also a prepayment fee of between 0.75% and 2.50% of the principal amount being prepaid depending on the timing and circumstances of prepayment. The Tranche A loan is secured by substantially all of the Company’s assets, except the Company’s intellectual property, which is the subject of a negative pledge.

Embedded derivatives and debt discounts

On issuance, the net carrying value of the Tranche A loan was  $16.1 million after deducting for various discounts on issuance of $1.4 million. The debt included discounts and other issuance type costs related to the recognition of a bifurcated compound embedded derivative liability of $1.1 million treated as a debt discount, the final payment charge of $1.0 million due on maturity, the $0.3 million commitment fee paid at closing treated as a debt discount and $0.1 million in other debt issuance costs.  The debt discounts are being amortized to interest expense over the life of the Tranche A loan using the effective interest rate method.

The Company determined that the requirement in its SVB and Hercules Loan Agreement to pay a Success Fee in certain events is an embedded derivative liability requiring bifurcation from the Tranche A loan proceeds and separate accounting. The Success Fee amount is $1.0 million if conditions are met prior to November 13, 2021 and $2.0 million if conditions are met after November 13, 2021. The Company also determined that certain events of default provisions resulting in the prepayment of the loan or a change in the default rate of interest should also be recorded as an embedded derivative liability but were deemed immaterial for all periods presented due to the triggers being deemed unlikely. The Company recorded a compound embedded derivative liability of $1.1 million on issuance, which was recorded as a derivative liability in other long-term liabilities on the balance sheet and as a corresponding debt discount.

The Company calculated the fair values of the derivative liability on issuance and as of December 31, 2019 based on a probability weighted valuation of certain event outcomes and discounted to the present value. The key valuation assumptions used consist of the discount rate of 11.6% and the probability of an underlying event triggering the Success Fee payment and the timing of such events. The derivative liability is being remeasured at each financial reporting period with any changes in fair value being recognized as a component of other income (expense), net. The fair value of the derivative liability was approximately $1.1 million and $1.2 million as of March 31, 2020 and December 31, 2019 and was classified as other long-term liabilities on the balance sheet. There was a change in the fair value of the derivative liability of $62,000 for the three months ended March 31, 2020.

The facility fee, fair value of the bifurcated embedded derivative liability on issuance, and other debt issuance costs have been treated as debt discounts on the Company’s balance sheet and together with the final payment charge are being amortized to interest expense throughout the life of the Tranche A loan using the effective interest rate method. As of March 31, 2020 and December 31, 2019, the net carrying value of the Tranche A loan was $16.3 million and $16.1 million.  

As of March 31, 2020 and December 31, 2019, there were unamortized debt discounts of $2.2 million and $2.4 million. The Company recorded interest expense and amortization of the debt discount in the amount of $0.5 million on the Tranche A loan for the three months ended March 31, 2020.    

Future minimum payments  

The following table presents future payments of principal, interest and final payment charge on the Tranche A loan as of March 31, 2020:

 

Year Ending December 31:

 

2020 (remainder of the year)

 

$

 

1,136

 

2021

 

 

 

2,961

 

2022

 

 

 

9,786

 

2023

 

 

 

8,621

 

Total

 

 

 

22,504

 

Less: amount representing interest

 

 

 

(3,963

)

Less: unamortized debt discount associated with the issuance of a compound  embedded derivative liability, final payment charge and other debt issuance costs

 

 

 

(2,225

)

Total carrying value

 

$

 

16,316

 

 

12


 

Note 6. Related party transactions

BridgeBio Pharma LLC

BridgeBio through its ownership of BBP LLC, is a controlling stockholder in the Company, as it owned 63.8% and 64.6% of the Company’s total outstanding shares as of March 31, 2020 and December 31, 2019, respectively. In April 2016, the Company began receiving consulting, management, facility and infrastructure services pursuant to a services agreement with BBP LLC and the Company also provides similar services to BBP LLC and affiliates. The initial agreement was entered into on March 1, 2016 and was superseded by the subsequent agreement that was effective as of May 1, 2017.

The Company incurred the following benefits and expenses under the agreement with BBP LLC (in thousands):

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2020

 

 

2019

 

Rent

 

$

(25

)

 

$

(3

)

Facility

 

 

(31

)

 

 

79

 

Consulting

 

 

99

 

 

 

97

 

 

 

$

43

 

 

$

173

 

 

As of March 31, 2020 and December 31, 2019, the Company had outstanding receivables from BBP LLC of $0.1 million and $85,000, respectively, related to providing services to other related companies of BBP LLC. As of March 31, 2020 and December 31, 2019, the Company had outstanding liabilities due to BBP LLC of $0.3 million and $0.3 million, respectively.

Note 7. Stockholders’ equity and stock-based compensation

Common stock

The Company has reserved shares of common stock for issuance as follows:

 

 

 

As of March 31,

 

 

 

2020

 

 

2019

 

Options issued and outstanding

 

 

1,382,868

 

 

 

1,307,729

 

Options available for future grants

 

 

1,848,548

 

 

 

718,557

 

Employee Stock Purchase Plan shares available for future grants

 

 

97,805

 

 

 

130,166

 

Total

 

 

3,329,221

 

 

 

2,156,452

 

 

Stock options

The following table summarizes the Company’s stock option activity for the three months ended March 31, 2020:

 

 

 

 

 

 

 

 

 

 

 

Weighted-

Average