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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 June 30, 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: 001-38582

 

Allakos Inc.

(Exact Name of Registrant as Specified in its Charter)

 

 

Delaware

45-4798831

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer
Identification No.)

975 Island Drive, Suite 201

Redwood City, California

94065

(Address of principal executive offices)

(Zip Code)

(650) 597-5002

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, par value $0.001

ALLK

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 July 30, 2021, the registrant had 53,996,459 shares of common stock outstanding.

 

 

 


 

ALLAKOS INC.

Table of Contents

 

 

 

Page

PART I.

FINANCIAL INFORMATION

 

Item 1.

Financial Statements (Unaudited)

2

 

Balance Sheets

2

 

Statements of Operations and Comprehensive Loss

3

 

Statements of Stockholders’ Equity

4

 

Statements of Cash Flows

5

 

Notes to Unaudited Interim Financial Statements

6

Item 2.

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

17

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

26

Item 4.

Controls and Procedures

26

PART II.

OTHER INFORMATION

 

Item 1.

Legal Proceedings

27

Item 1A.

Risk Factors

27

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

60

Item 3.

Defaults Upon Senior Securities

60

Item 4.

Mine Safety Disclosures

60

Item 5.

Other Information

60

Item 6.

Exhibits

61

Signatures

62

 

 

 

1


 

 

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements (unaudited).

allakos inc.

balance sheets

(in thousands, except per share data)

 

 

 

June 30,

 

 

December 31,

 

 

 

2021

 

 

2020

 

 

 

(unaudited)

 

 

 

 

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

203,956

 

 

$

207,177

 

Investments in marketable securities

 

 

355,739

 

 

 

451,820

 

Prepaid expenses and other current assets

 

 

16,363

 

 

 

10,270

 

Total current assets

 

 

576,058

 

 

 

669,267

 

Property and equipment, net

 

 

25,034

 

 

 

8,345

 

Operating lease right-of-use assets

 

 

37,736

 

 

 

39,731

 

Other long-term assets

 

 

16,119

 

 

 

2,275

 

Total assets

 

$

654,947

 

 

$

719,618

 

Liabilities and stockholders’ equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

15,663

 

 

$

13,960

 

Accrued expenses and other current liabilities

 

 

18,335

 

 

 

8,490

 

Total current liabilities

 

 

33,998

 

 

 

22,450

 

Operating lease liabilities, net of current portion

 

 

49,963

 

 

 

42,773

 

Total liabilities

 

 

83,961

 

 

 

65,223

 

Commitments and contingencies (Note 6)

 

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

 

 

Preferred stock, $0.001 par value per share; 20,000 shares

   authorized as of June 30, 2021 and December 31, 2020;

   no shares issued and outstanding as of June 30, 2021

   and December 31, 2020

 

 

 

 

 

 

Common stock, $0.001 par value per share; 200,000 shares

   authorized as of June 30, 2021 and December 31, 2020;

   53,936 and 53,081 shares issued and outstanding as of

   June 30, 2021 and December 31, 2020, respectively

 

 

53

 

 

 

53

 

Additional paid-in capital

 

 

1,026,632

 

 

 

997,298

 

Accumulated other comprehensive gain

 

 

32

 

 

 

8

 

Accumulated deficit

 

 

(455,731

)

 

 

(342,964

)

Total stockholders’ equity

 

 

570,986

 

 

 

654,395

 

Total liabilities and stockholders’ equity

 

$

654,947

 

 

$

719,618

 

 

See accompanying notes to unaudited interim financial statements

 

2


 

 

Allakos Inc.

Statements of Operations and Comprehensive Loss

(in thousands, except per share data)

(unaudited)

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

June 30,

 

 

June 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

$

40,985

 

 

$

28,346

 

 

$

79,900

 

 

$

46,631

 

General and administrative

 

 

16,210

 

 

 

12,058

 

 

 

32,880

 

 

 

23,646

 

Total operating expenses

 

 

57,195

 

 

 

40,404

 

 

 

112,780

 

 

 

70,277

 

Loss from operations

 

 

(57,195

)

 

 

(40,404

)

 

 

(112,780

)

 

 

(70,277

)

Interest income

 

 

103

 

 

 

1,284

 

 

 

233

 

 

 

3,273

 

Other expense, net

 

 

(117

)

 

 

(172

)

 

 

(220

)

 

 

(112

)

Net loss

 

 

(57,209

)

 

 

(39,292

)

 

 

(112,767

)

 

 

(67,116

)

Unrealized gain (loss) on marketable securities

 

 

(56

)

 

 

(1,219

)

 

 

24

 

 

 

650

 

Comprehensive loss

 

$

(57,265

)

 

$

(40,511

)

 

$

(112,743

)

 

$

(66,466

)

Net loss per common share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted

 

$

(1.07

)

 

$

(0.80

)

 

$

(2.11

)

 

$

(1.38

)

Weighted-average number of common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted

 

 

53,669

 

 

 

48,816

 

 

 

53,429

 

 

 

48,753

 

 

See accompanying notes to unaudited interim financial statements

 


 

3


 

 

Allakos Inc.

Statements of STOCKHOLDERS’ EQUITY

(in thousands)

(unaudited)

 

 

 

 

Common Stock

 

 

Additional

Paid-In

Capital

 

 

Accumulated Other Comprehensive Gain

 

 

Accumulated

Deficit

 

 

Total

Stockholders’

Equity

 

 

 

Shares

 

 

Amount

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at December 31, 2020

 

 

53,081

 

 

$

53

 

 

$

997,298

 

 

$

8

 

 

$

(342,964

)

 

$

654,395

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

12,354

 

 

 

 

 

 

 

 

 

12,354

 

Issuance of common stock upon exercise of stock options

 

 

321

 

 

 

 

 

 

3,788

 

 

 

 

 

 

 

 

 

3,788

 

Issuance of common stock upon 2018 ESPP purchase

 

 

17

 

 

 

 

 

 

995

 

 

 

 

 

 

 

 

 

995

 

Issuance of common stock upon vesting of restricted stock units

 

 

38

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized gain on marketable securities

 

 

 

 

 

 

 

 

 

 

 

80

 

 

 

 

 

 

80

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(55,558

)

 

 

(55,558

)

Balance at March 31, 2021

 

 

53,457

 

 

$

53

 

 

$

1,014,435

 

 

$

88

 

 

$

(398,522

)

 

$

616,054

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

11,397

 

 

 

 

 

 

 

 

 

11,397

 

Issuance of common stock upon exercise of stock options

 

 

443

 

 

 

 

 

 

800

 

 

 

 

 

 

 

 

 

800

 

Issuance of common stock upon vesting of restricted stock units

 

 

36

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized loss on marketable securities

 

 

 

 

 

 

 

 

 

 

 

(56

)

 

 

 

 

 

(56

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(57,209

)

 

 

(57,209

)

Balance at June 30, 2021

 

 

53,936

 

 

$

53

 

 

$

1,026,632

 

 

$

32

 

 

$

(455,731

)

 

$

570,986

 

 

 

 

 

Common Stock

 

 

Additional

Paid-In

Capital

 

 

Accumulated Other Comprehensive Gain

 

 

Accumulated

Deficit

 

 

Total

Stockholders’

Equity

 

 

 

Shares

 

 

Amount

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at December 31, 2019

 

 

48,668

 

 

$

48

 

 

$

685,020

 

 

$

137

 

 

$

(189,484

)

 

$

495,721

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

7,489

 

 

 

 

 

 

 

 

 

7,489

 

Issuance of common stock upon exercise of stock options

 

 

57

 

 

 

 

 

 

33

 

 

 

 

 

 

 

 

 

33

 

Issuance of common stock upon 2018 ESPP purchase

 

 

40

 

 

 

 

 

 

756

 

 

 

 

 

 

 

 

 

756

 

Unrealized gain on marketable securities

 

 

 

 

 

 

 

 

 

 

 

1,869

 

 

 

 

 

 

1,869

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(27,824

)

 

 

(27,824

)

Balance at March 31, 2020

 

 

48,765

 

 

$

48

 

 

$

693,298

 

 

$

2,006

 

 

$

(217,308

)

 

$

478,044

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

7,762

 

 

 

 

 

 

 

 

 

7,762

 

Issuance of common stock upon exercise of stock options

 

 

148

 

 

 

1

 

 

 

1,707

 

 

 

 

 

 

 

 

 

1,708

 

Issuance of common stock upon 2018 ESPP purchase

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized loss on marketable securities

 

 

 

 

 

 

 

 

 

 

 

(1,219

)

 

 

 

 

 

(1,219

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(39,292

)

 

 

(39,292

)

Balance at June 30, 2020

 

 

48,913

 

 

$

49

 

 

$

702,767

 

 

$

787

 

 

$

(256,600

)

 

$

447,003

 

 

See accompanying notes to unaudited interim financial statements

 

4


 

Allakos Inc.

Statements of Cash Flows

(in thousands)

(unaudited)

 

 

 

Six Months Ended

 

 

 

June 30,

 

 

 

2021

 

 

2020

 

Cash flows from operating activities

 

 

 

 

 

 

 

 

Net loss

 

$

(112,767

)

 

$

(67,116

)

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

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

747

 

 

 

777

 

Stock-based compensation

 

 

23,751

 

 

 

15,251

 

Net amortization of premiums and discounts on marketable securities

 

 

1,211

 

 

 

966

 

Noncash lease expense

 

 

1,541

 

 

 

142

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Prepaid expenses and other current assets

 

 

(4,072

)

 

 

13

 

Other long-term assets

 

 

(13,844

)

 

 

 

Accounts payable

 

 

(2,034

)

 

 

3,654

 

Accrued expenses and other current liabilities

 

 

7,952

 

 

 

2,627

 

Operating lease liabilities, net of current portion

 

 

1,474

 

 

 

 

Net cash used in operating activities

 

 

(96,041

)

 

 

(43,686

)

Cash flows from investing activities

 

 

 

 

 

 

 

 

Purchases of marketable securities

 

 

(215,461

)

 

 

(90,010

)

Proceeds from maturities of marketable securities

 

 

310,000

 

 

 

246,800

 

Purchases of property and equipment

 

 

(7,302

)

 

 

(70

)

Net cash provided by investing activities

 

 

87,237

 

 

 

156,720

 

Cash flows from financing activities

 

 

 

 

 

 

 

 

Proceeds from exercise of stock options

 

 

4,588

 

 

 

1,741

 

Proceeds from issuance of common stock under the 2018 ESPP

 

 

995

 

 

 

756

 

Net cash provided by financing activities

 

 

5,583

 

 

 

2,497

 

Net increase (decrease) in cash, cash equivalents and restricted cash

 

 

(3,221

)

 

 

115,531

 

Cash, cash equivalents and restricted cash, beginning of period

 

 

209,452

 

 

 

40,642

 

Cash, cash equivalents and restricted cash, end of period

 

$

206,231

 

 

$

156,173

 

Supplemental disclosures

 

 

 

 

 

 

 

 

Noncash investing and financing items:

 

 

 

 

 

 

 

 

Lessor funded lease incentives included in property and equipment

 

$

5,348

 

 

$

 

Property and equipment purchased, not yet paid

 

$

4,786

 

 

$

 

 

See accompanying notes to unaudited interim financial statements

 

 

5


 

 

ALLAKOS INC.

NOTES TO UNAUDITED INTERIM FINANCIAL STATEMENTS

1. Organization and Business

Allakos Inc. (“Allakos” or the “Company”) was incorporated in the state of Delaware in March 2012. Allakos is a clinical stage biopharmaceutical company focused on the development of lirentelimab (AK002) for the treatment of eosinophil and mast cell related diseases. The Company’s primary activities to date have included establishing its facilities, recruiting personnel, conducting research and development of its product candidates and raising capital. The Company’s operations are located in Redwood City, California.

Liquidity Matters

Since inception, the Company has incurred net losses and negative cash flows from operations. During the six months ended June 30, 2021, the Company incurred a net loss of $112.8 million and used $96.0 million of cash in operations. At June 30, 2021, the Company had an accumulated deficit of $455.7 million and does not expect to experience positive cash flows from operating activities in the foreseeable future. The Company has financed its operations to date primarily through the sale of common stock. Management expects to incur additional operating losses in the future as the Company continues to further develop, seek regulatory approval for and, if approved, commence commercialization of its product candidates. The Company had $559.7 million of cash, cash equivalents and marketable securities at June 30, 2021. Management believes that this amount is sufficient to fund the Company’s operations for at least the next 12 months from the issuance date of these financial statements.

2. Summary of Significant Accounting Policies

Basis of Presentation

The unaudited interim financial statements have been prepared in accordance with United States generally accepted accounting principles (“U.S. GAAP”). The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts and disclosures reported in the financial statements and accompanying notes.

The interim balance sheet as of June 30, 2021, the statements of operations and comprehensive loss, statements of stockholders’ equity and statements of cash flows for the six months ended June 30, 2021 and 2020 are unaudited. The unaudited interim financial statements have been prepared on the same basis as the audited annual financial statements and reflect, in the opinion of management, all adjustments of a normal and recurring nature that are necessary for the fair presentation of the Company’s financial position as of June 30, 2021 and its results of operations and comprehensive loss for the three and six months ended June 30, 2021 and 2020 and its cash flows for the six months ended June 30, 2021 and 2020. Certain information and note disclosures normally included in annual audited financial statements prepared in accordance with U.S. GAAP have been omitted. The financial data and the other financial information disclosed in these notes to the interim financial statements are also unaudited. The results of operations for any interim period are not necessarily indicative of the results to be expected for the entire year or for any other future annual or interim period. The balance sheet as of June 30, 2021 included herein was derived from the audited financial statements as of that date. These interim financial statements should be read in conjunction with the Company’s audited financial statements included in the Company’s Annual Report on Form 10-K, which was filed with the Securities and Exchange Commission (the “SEC”) on March 1, 2021.

Use of Estimates

Management uses significant judgment when making estimates related to common stock valuation and related stock-based compensation expense, accrued research and development expense, and deferred tax valuation allowances. Management bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results could differ from those estimates under different assumptions or conditions, and those differences could be material to the financial position and results of operations.

Concentration of Credit Risk and Other Risks and Uncertainties

Financial instruments that potentially subject the Company to credit risk principally consist of cash, cash equivalents and marketable securities. These financial instruments are held in accounts at a single financial institution that management believes possesses high credit quality. Amounts on deposit with this financial institution have and will continue to exceed federally-insured limits. The Company has not experienced any losses on its cash deposits. Additionally, the Company’s investment policy limits its investments to certain types of securities issued by or backed by the U.S. government and its agencies.

The Company is subject to a number of risks similar to that of other clinical stage biopharmaceutical companies, including, but not limited to, the need to obtain adequate additional funding, possible failure of current or future clinical trials, its reliance on third-parties to conduct its clinical trials, the need to obtain regulatory and marketing approvals for its product candidates, competitive developments, the need to successfully commercialize and gain market acceptance of the Company’s product candidates, its right to

 

6


 

develop and commercialize its product candidates pursuant to the terms and conditions of the licenses granted to the Company, protection of proprietary technology, the ability to make milestone, royalty or other payments due under licensing agreements, and the need to secure and maintain adequate manufacturing arrangements with third-parties. If the Company does not successfully commercialize or partner its product candidates, it will be unable to generate product revenue or achieve profitability.

Cash, Cash Equivalents and Restricted Cash

The Company considers all highly liquid investments with original maturities of three months or less from the date of purchase to be cash equivalents.

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the Company’s balance sheets and which, in aggregate, represent the amounts reported in the accompanying statements of cash flows (in thousands):

 

 

 

June 30,

 

 

December 31,

 

 

 

2021

 

 

2020

 

Cash and cash equivalents

 

$

203,956

 

 

$

207,177

 

Restricted cash in other long-term assets, deposit for lease facility

 

 

2,275

 

 

 

2,275

 

Total cash, cash equivalents and restricted cash

 

$

206,231

 

 

$

209,452

 

 

 

 

June 30,

 

 

December 31,

 

 

 

2020

 

 

2019

 

Cash and cash equivalents

 

$

153,898

 

 

$

38,367

 

Restricted cash in other long-term assets, deposit for lease facility

 

 

2,275

 

 

 

2,275

 

Total cash, cash equivalents and restricted cash

 

$

156,173

 

 

$

40,642

 

 

Restricted cash at June 30, 2021 represents $2.3 million in deposits for the lease of the Company’s facilities in Redwood City, California and San Carlos, California. Both security deposits are in the form of letters of credit secured by restricted cash. Restricted cash amounts are included within other long-term assets on the Company’s balance sheets.

Marketable Securities

The Company invests in marketable securities, primarily securities issued by the United States government and its agencies. The Company’s marketable securities are considered available-for-sale and are classified as current assets even when the stated maturities of the underlying securities exceed one year from the date of the current balance sheet being reported. This classification reflects management’s ability and intent to utilize proceeds from the sale of such investments to fund ongoing operations. Unrealized gains and losses are excluded from earnings and are reported as a component of accumulated other comprehensive gain. The cost of securities sold is determined using the specific-identification method. Interest earned and adjustments for the amortization of premiums and discounts on investments are included in interest income, net, on the statements of operations and comprehensive loss. Realized gains and losses and declines in fair value judged to be other than temporary, if any, on investments in marketable securities are included in other expense, net, on the statements of operations and comprehensive loss.

Operating Leases

Effective January 1, 2019, the Company accounts for its leases in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 842, “Leases” (“ASC 842”). As part of this transition, the Company elected a number of optional practical expedients made available under the ASC 842 transition guidance including (i) carrying forward the Company’s historical lease classifications, (ii) foregoing of re-evaluation of historical contracts using ASC 842’s definition of a lease, (iii) foregoing a re-assessment of initial direct costs related to leases that existed prior to adoption, (iv) combining lease and non-lease components for all classes of assets, and (v) recognizing lease expense for all contracts with an initial term of 12 months or less within the statements of operations and comprehensive loss on a straight-line basis over the requisite lease term.

Under ASC 842, the Company accounts for its leases by recording right-of-use assets and lease liabilities on the Company’s balance sheets. Right-of-use assets represent the Company’s right to use an underlying asset over the lease term and include any lease payments made prior to the lease commencement date and are reduced by lease incentives. Lease liabilities represent the present value of the total lease payments over the lease term, calculated using the Company’s incremental borrowing rate. In determining the Company’s incremental borrowing rate, consideration is given to the term of the lease and the Company’s credit risk. The Company recognizes options to extend a lease when it is reasonably certain that it will exercise such extension. The Company does not recognize options to terminate a lease when it is reasonably certain that it will not exercise such early termination options. Lease expense is recognized on a straight-line basis over the expected lease term.

 

7


 

Prior to the Company’s adoption of ASC 842, the Company accounted for its leases in accordance with FASB ASC 840, Leases (“ASC 840”). Under ASC 840, rent expense is recorded on a straight-line basis over the term of the lease. Differences that exist between cash rent payments and the recognition of rent expense, such as those resulting from rent abatements or contractual escalations of future lease payments, are recorded as a deferred rent liability and recognized as adjustments to rental expense on a straight-line basis over the term of the lease. The current portion of the deferred rent liability is included within accrued expenses and other current liabilities on the Company’s balance sheets with remainder included within operating lease liabilities, net of current portion. Tenant improvement allowances received are recorded as lease incentive obligations included in accrued expenses and other current liabilities and operating lease liabilities, net of current portion on the Company’s balance sheets and amortized to rent expense over the term of the lease.

Accrued Research and Development Expense

Service agreements with contract development and manufacturing organizations (“CDMOs”), clinical contract research organizations (“CROs”) and clinical investigative sites comprise a significant component of the Company’s research and development activities. External costs for these vendors are recognized as the services are incurred. The Company accrues for expenses resulting from obligations under agreements with its third-parties for which the timing of payments does not match the periods over which the materials or services are provided to the Company. Accruals are recorded based on estimates of services received and efforts expended pursuant to agreements established with CDMOs, clinical CROs, clinical investigative sites and other outside service providers. These estimates are typically based on contracted amounts applied to the proportion of work performed and determined through analysis with internal personnel and external service providers as to the progress or stage of completion of the services.

The Company makes judgements and estimates in determining the accrual balance in each reporting period. In the event advance payments are made to a CDMO, clinical CRO, clinical investigative site or other outside service provider, the payments are recorded within prepaid expenses and other current assets and subsequently recognized as research and development expense when the associated services have been performed. As actual costs become known, the Company adjusts its liabilities and assets. Inputs, such as the extent of services received and the duration of services to be performed, may vary from the Company’s estimates, which will result in adjustments to research and development 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. The Company’s historical estimates have not been materially different from actual amounts recorded.

Research and Development Expense

Research and development costs are expensed as incurred. Research and development costs include, among others, consulting costs, salaries, benefits, travel, stock-based compensation, laboratory supplies and other non-capital equipment utilized for in-house research, allocation of facilities and overhead costs and external costs paid to third-parties that conduct research and development activities on the Company’s behalf. Amounts incurred in connection with license agreements, including milestone payments, are also included in research and development expense.

Advance payments for goods or services to be rendered in the future for use in research and development activities are deferred and included in prepaid expenses and other current assets and other long-term assets. The deferred amounts are expensed as the related goods are delivered or the services are performed.

Comprehensive Loss

Comprehensive loss is defined as the change in stockholders’ equity (deficit) during a period from transactions and other events and circumstances from non-owner sources. The differences between net loss and comprehensive loss for the three and six months ended June 30, 2021 and 2020 are a result of unrealized gains and losses on the Company’s investments in marketable securities included in current assets on the Company’s balance sheets.

Net Loss per Share

The Company calculates basic net loss per share by dividing the net loss attributable to common stockholders by the weighted-average shares of common stock outstanding during the period. The Company calculates diluted net loss per share after giving consideration to all potentially dilutive securities outstanding during the period using the treasury-stock and if-converted methods, except where the effect of including such securities would be anti-dilutive. Because the Company has reported net losses since inception, the effect from potentially dilutive securities would have been anti-dilutive and therefore has been excluded from the calculation of diluted net loss per share.

 

8


 

Basic and diluted net loss per share was calculated as follows (in thousands, except per share data):

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

June 30,

 

 

June 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Numerator:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

$

(57,209

)

 

$

(39,292

)

 

$

(112,767

)

 

$

(67,116

)

Denominator:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted-average shares of common stock outstanding,

   basic and diluted

 

 

53,669

 

 

 

48,816

 

 

 

53,429

 

 

 

48,753

 

Net loss per share, basic and diluted

 

$

(1.07

)

 

$

(0.80

)

 

$

(2.11

)

 

$

(1.38

)

The following table sets forth the potentially dilutive securities that have been excluded from the calculation of diluted net loss per share due to their anti-dilutive effect for the periods indicated (in thousands):    

 

 

 

Six Months Ended

 

 

 

June 30,

 

 

 

2021

 

 

2020

 

Options to purchase common stock

 

 

5,826

 

 

 

7,016

 

Unvested restricted stock units

 

 

1,021

 

 

 

584

 

Shares issuable under employee stock purchase plans

 

 

8

 

 

 

24

 

Total

 

 

6,855

 

 

 

7,624

 

Recently Issued and Adopted Accounting Pronouncements

The Company has reviewed recently issued accounting pronouncements and concluded they are either not applicable to the business or that no material effect is expected on the Company’s financial statements as a result of future adoption.

Impact of Recent Legislation

In March 2020, the Coronavirus Aid, Relief and Economic Security Act (“the CARES Act”) was signed into law. The CARES Act includes provisions relating to several aspects of corporate income taxes. The Company does not currently expect the CARES Act to have a material impact on its income tax positions; however, it will continue to monitor the provisions of the CARES Act in relation to its operations.

3. Fair Value Measurements

The Company measures and reports certain financial instruments as assets and liabilities at fair value on a recurring basis. The Company’s financial assets measured at fair value on a recurring basis were as follows (in thousands):

 

 

 

June 30, 2021

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Cash equivalents