mirm-10q_20200630.htm

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 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, 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: 001-38981

 

Mirum Pharmaceuticals, Inc.

(Exact name of registrant as specified in its charter)

 

 

Delaware

83-1281555

( State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

950 Tower Lane, Suite 1050, Foster City, California

94404

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: (650) 667-4085

 

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 $0.0001 per share

 

MIRM

 

The Nasdaq Global 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, a 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 31, 2020 the registrant had 25,399,132 shares of common stock, $0.0001 par value per share, outstanding.

 

 

 

 


Table of Contents

 

 

 

Page

PART I.

FINANCIAL INFORMATION

 

Item 1.

Financial Statements (Unaudited)

1

 

Condensed Consolidated Balance Sheets

1

 

Condensed Consolidated Statements of Operations

2

 

Condensed Consolidated Statements of Comprehensive Loss

3

 

Condensed Consolidated Statement of Stockholders’ Equity for the Six Months Ended June 30, 2020

4

 

Condensed Consolidated Statement of Redeemable Convertible Preferred Stock, Redeemable Common Stock and Stockholders’ Deficit for the Six Months Ended June 30, 2019

5

 

Condensed Consolidated Statements of Cash Flows

6

 

Notes to Unaudited Condensed Consolidated Financial Statements

7

Item 2.

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

18

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

76

Item 3.

Defaults Upon Senior Securities

76

Item 4.

Mine Safety Disclosures

76

Item 5.

Other Information

76

Item 6.

Exhibits

77

Signatures

78

 

 

 

i


 

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

Mirum Pharmaceuticals, Inc.

Condensed Consolidated Balance Sheets

(In thousands, except share and per share data)

 

 

 

 

June 30,

 

 

December 31,

 

 

 

2020

 

 

2019

 

 

 

(Unaudited)

 

 

(Note 2)

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

83,042

 

 

$

11,970

 

Short-term investments

 

 

66,294

 

 

 

104,690

 

Prepaid expenses and other current assets

 

 

2,739

 

 

 

2,703

 

Total current assets

 

 

152,075

 

 

 

119,363

 

Long-term investments

 

 

 

 

 

23,292

 

Property and equipment, net

 

 

1,423

 

 

 

1,372

 

Operating lease right-of-use assets

 

 

2,107

 

 

 

2,361

 

Other assets

 

 

161

 

 

 

324

 

Total assets

 

$

155,766

 

 

$

146,712

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

3,024

 

 

$

3,351

 

Accrued expenses

 

 

13,026

 

 

 

9,328

 

Operating lease liabilities

 

 

530

 

 

 

397

 

Total current liabilities

 

 

16,580

 

 

 

13,076

 

Operating lease liabilities, noncurrent

 

 

2,947

 

 

 

3,251

 

Other liabilities

 

 

31

 

 

 

36

 

Total liabilities

 

 

19,558

 

 

 

16,363

 

Commitments and contingencies

 

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

 

 

Preferred stock, $0.0001 par value; 10,000,000 shares authorized

   as of June 30, 2020 and December 31, 2019, respectively; zero shares issued and

   outstanding as of June 30, 2020 and December 31, 2019, respectively; and

   liquidation value of $0 as of June 30, 2020 and December 31, 2019, respectively

 

 

 

 

 

Common stock, $0.0001 par value; 200,000,000 shares

   authorized as of June 30, 2020 and December 31, 2019, respectively;

   25,394,190 shares issued and 25,071,337 shares outstanding, excluding 322,853 shares

   subject to repurchase as of June 30, 2020; 22,989,987 shares issued

   and 22,600,338 shares outstanding, excluding 389,649 shares subject to

  repurchase as of December 31, 2019

 

 

3

 

 

 

2

 

Additional paid-in capital

 

 

250,349

 

 

 

200,119

 

Accumulated deficit

 

 

(114,462

)

 

 

(69,901

)

Accumulated other comprehensive income

 

 

318

 

 

 

129

 

Total stockholders’ equity

 

 

136,208

 

 

 

130,349

 

Total liabilities and stockholders’ equity

 

$

155,766

 

 

$

146,712

 

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

1


 

Mirum Pharmaceuticals, Inc.

Condensed Consolidated Statements of Operations

(Unaudited)

(In thousands, except share and per share data)

 

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

$

18,555

 

 

$

11,589

 

 

$

35,895

 

 

$

16,452

 

General and administrative

 

 

5,042

 

 

 

2,445

 

 

 

9,734

 

 

 

3,766

 

Total operating expenses

 

 

23,597

 

 

 

14,034

 

 

 

45,629

 

 

 

20,218

 

Loss from operations

 

 

(23,597

)

 

 

(14,034

)

 

 

(45,629

)

 

 

(20,218

)

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

405

 

 

 

468

 

 

 

1,154

 

 

 

700

 

Other income (expense), net

 

 

(56

)

 

 

9

 

 

 

(79

)

 

 

4

 

Net loss before provision for income taxes

 

 

(23,248

)

 

 

(13,557

)

 

 

(44,554

)

 

 

(19,514

)

Provision for income taxes

 

 

3

 

 

 

 

 

 

7

 

 

 

 

Net loss

 

$

(23,251

)

 

$

(13,557

)

 

$

(44,561

)

 

$

(19,514

)

Net loss per share, basic and diluted

 

$

(0.93

)

 

$

(5.31

)

 

$

(1.79

)

 

$

(7.70

)

Weighted-average shares of common stock outstanding, basic and diluted

 

 

25,056,123

 

 

 

2,551,822

 

 

 

24,880,387

 

 

 

2,534,877

 

 

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

2


 

Mirum Pharmaceuticals, Inc.

Condensed Consolidated Statements of Comprehensive Loss

(Unaudited)

(In thousands)

 

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Net loss

 

$

(23,251

)

 

$

(13,557

)

 

$

(44,561

)

 

$

(19,514

)

Other comprehensive gain (loss):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized gain on available-for-sale investments

 

 

339

 

 

 

46

 

 

 

190

 

 

 

46

 

Cumulative translation adjustments

 

 

3

 

 

 

(18

)

 

 

(1

)

 

 

(18

)

Comprehensive loss

 

$

(22,909

)

 

$

(13,529

)

 

$

(44,372

)

 

$

(19,486

)

 

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

 

 

3


 

Mirum Pharmaceuticals, Inc.

Condensed Consolidated Statement of Stockholders’ Equity

(Unaudited)

(In thousands, except share and per share data)

 

 

Preferred Stock

 

 

Common Stock

 

 

Additional

Paid-In

 

 

Accumulated

 

 

Accumulated

Other

Comprehensive

 

 

Total

Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Income (Loss)

 

 

Equity

 

Balance as of December 31, 2019

 

 

 

 

$

 

 

 

22,600,338

 

 

$

2

 

 

$

200,119

 

 

$

(69,901

)

 

$

129

 

 

$

130,349

 

Issuance of common stock in follow-on public

   offering, net of issuance costs of $3,342

 

 

 

 

 

 

 

 

2,400,000

 

 

 

1

 

 

 

44,658

 

 

 

 

 

 

 

 

 

44,659

 

Restricted common stock vested in the period

 

 

 

 

 

 

 

 

33,398

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,573

 

 

 

 

 

 

 

 

 

2,573

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(21,310

)

 

 

 

 

 

(21,310

)

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(153

)

 

 

(153

)

Balance as of March 31, 2020

 

 

 

 

$

 

 

 

25,033,736

 

 

$

3

 

 

$

247,350

 

 

$

(91,211

)

 

$

(24

)

 

$

156,118

 

Issuance of common stock in connection with common stock option exercises

 

 

 

 

 

 

 

 

4,203

 

 

 

 

 

 

25

 

 

 

 

 

 

 

 

 

25

 

Restricted common stock vested in the period

 

 

 

 

 

 

 

 

33,398

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,974

 

 

 

 

 

 

 

 

 

2,974

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(23,251

)

 

 

 

 

 

(23,251

)

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

342

 

 

 

342

 

Balance as of June 30, 2020

 

 

 

 

$

 

 

 

25,071,337

 

 

$

3

 

 

$

250,349

 

 

$

(114,462

)

 

$

318

 

 

$

136,208

 

 

 

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

4


 

Mirum Pharmaceuticals, Inc.

Condensed Consolidated Statement of Redeemable Convertible Preferred Stock, Redeemable Common Stock and Stockholders’ Deficit

(Unaudited)

(In thousands, except share and per share data)

 

 

 

Series A Redeemable Convertible

Preferred Stock

 

 

Redeemable

Common Stock

 

 

 

Common Stock

 

 

Additional

Paid-In

 

 

Accumulated

 

 

Accumulated

Other

Comprehensive

 

 

Total

Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Income

 

 

Deficit

 

Balance as of December 31, 2018

 

 

59,908,284

 

 

$

59,849

 

 

 

1,859,151

 

 

$

6,990

 

 

 

 

636,719

 

 

$

1

 

 

$

34

 

 

$

(17,348

)

 

$

 

 

$

(17,313

)

Restricted common stock vested in the period

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

35,156

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

218

 

 

 

 

 

 

 

 

 

218

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(5,957

)

 

 

 

 

 

(5,957

)

Balance as of March 31, 2019

 

 

59,908,284

 

 

$

59,849

 

 

 

1,859,151

 

 

$

6,990

 

 

 

 

671,875

 

 

$

1

 

 

$

252

 

 

$

(23,305

)

 

$

 

 

$

(23,052

)

Restricted common stock vested in the period

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

33,398

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of Series A redeemable convertible preferred stock at $1.00259507 per share, net of issuance costs of $23

 

 

59,844,699

 

 

 

59,977

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,641

 

 

 

 

 

 

 

 

 

1,641

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(13,557

)

 

 

 

 

 

(13,557

)

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

28

 

 

 

28

 

Balance as of June 30, 2019

 

 

119,752,983

 

 

$

119,826

 

 

 

1,859,151

 

 

$

6,990

 

 

 

 

705,273

 

 

$

1

 

 

$

1,893

 

 

$

(36,862

)

 

$

28

 

 

$

(34,940

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

5


 

Mirum Pharmaceuticals, Inc.

Condensed Consolidated Statement of Cash Flows

(Unaudited)

(In thousands)

 

 

 

Six Months Ended June 30,

 

 

 

2020

 

 

2019

 

Operating activities

 

 

 

 

 

 

 

 

Net loss

 

$

(44,561

)

 

$

(19,514

)

Reconciliation of net loss to net cash used in operating activities:

 

 

 

 

 

 

 

 

Stock-based compensation

 

 

5,547

 

 

 

1,859

 

Depreciation and amortization

 

 

143

 

 

 

43

 

Amortization of operating lease right-of-use assets

 

 

160

 

 

 

72

 

Net accretion of discounts on investments

 

 

(7

)

 

 

(35

)

Change in operating assets and liabilities:

 

 

 

 

 

 

 

 

Prepaid expenses and other current assets

 

 

(36

)

 

 

(654

)

Operating lease right-of-use assets

 

 

94

 

 

 

(33

)

Other assets

 

 

 

 

 

(89

)

Accounts payable, accrued expenses and other liabilities

 

 

3,486

 

 

 

7,865

 

Operating lease liabilities

 

 

(171

)

 

 

43

 

Net cash used in operating activities

 

 

(35,345

)

 

 

(10,443

)

Investing activities

 

 

 

 

 

 

 

 

Proceeds from maturities of investments

 

 

61,900

 

 

 

 

Proceeds from paydowns of investments

 

 

14,005

 

 

 

 

Purchase of investments

 

 

(14,020

)

 

 

(58,401

)

Purchase of property and equipment

 

 

(151

)

 

 

(44

)

Net cash provided by (used in) investing activities

 

 

61,734

 

 

 

(58,445

)

Financing activities

 

 

 

 

 

 

 

 

Proceeds from issuance of preferred stock, net of issuance costs

 

 

 

 

 

59,977

 

Payment of deferred offering costs

 

 

 

 

 

(1,217

)

Proceeds from issuance of common stock in public offering, net of issuance costs

 

 

44,659

 

 

 

 

Proceeds from issuance of common stock pursuant to equity award plans

 

 

25

 

 

 

 

 

Net cash provided by financing activities

 

 

44,684

 

 

 

58,760

 

Effect of exchange rate on cash and cash equivalents

 

 

(1

)

 

 

(18

)

Net increase (decrease) in cash and cash equivalents

 

 

71,072

 

 

 

(10,146

)

Cash and cash equivalents at beginning of period

 

 

11,970

 

 

 

51,963

 

Cash and cash equivalents at end of period

 

$

83,042

 

 

$

41,817

 

 

 

 

 

 

 

 

 

 

Supplemental disclosure of cash flow information:

 

 

 

 

 

 

 

 

Operating lease right-of-use asset obtained in exchange for operating lease liability

 

$

 

 

$

1,418

 

Property and equipment purchases included in accounts payable

 

$

42

 

 

$

 

Landlord paid tenant improvements

 

$

 

 

$

461

 

Deferred initial public offering costs in accounts payable

 

$

 

 

$

565

 

 

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

6


 

Mirum Pharmaceuticals, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

(Unaudited)

1. Description of Business

Mirum Pharmaceuticals, Inc. (the “Company”) was incorporated in the State of Delaware on May 2, 2018 and is headquartered in Foster City, California. The Company is a biopharmaceutical company focused on the development and commercialization of a late-stage pipeline of novel therapies for debilitating liver diseases. The Company’s pipeline consists of two clinical-stage product candidates, maralixibat and volixibat, with mechanisms of action that have potential utility across a wide range of orphan liver diseases. The Company commenced significant operations in November 2018.

The unaudited condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiary, Mirum Pharmaceuticals AG. All intercompany balances and transactions among the consolidated entities have been eliminated in consolidation.

 

Reverse Stock Split

On July 3, 2019, the Company effected a 1-for-8 reverse stock split of its common stock. The par value and the authorized number of shares of common stock were not adjusted as a result of the reverse stock split. The reverse stock split resulted in an adjustment to the conversion price of the Company’s Series A redeemable convertible preferred stock (the “Series A Preferred Stock”) to reflect a proportional decrease in the number of shares of common stock to be issued upon conversion. The accompanying consolidated financial statements and notes to the consolidated financial statements give retroactive effect to the reverse stock split for all periods presented.

 

Follow-on Public Offering

On January 13, 2020, the Company completed a follow-on public offering of its common stock, pursuant to which the Company sold 2,400,000 shares of common stock at a price of $20.00 per share, resulting in net proceeds of $44.7 million after deducting underwriting discounts, commissions and offering expenses.

 

Liquidity

The Company has a limited operating history, has incurred significant operating losses since its inception, and the revenue and income potential of the Company’s business and market are unproven. As of June 30, 2020, the Company had an accumulated deficit of $114.5 million and cash, cash equivalents and investments of $149.3 million, which is available to fund future operations. The Company believes that its cash, cash equivalents and investments as of June 30, 2020 provide sufficient capital resources to continue its operations for at least twelve months from the issuance date of the accompanying unaudited condensed consolidated financial statements. As such, the unaudited condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. Management expects to continue to incur additional substantial losses in the foreseeable future as a result of the Company’s research and development activities.

7


 

2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and pursuant to Form 10-Q and Article 10 of Regulation S-X of the Securities and Exchange Commission (“SEC”). Accordingly, the accompanying unaudited condensed consolidated financial statements do not include all of the information and notes required by GAAP for complete financial statements. The unaudited interim financial statements reflect all adjustments which, in the opinion of management, are necessary for a fair statement of the results for the periods presented. All such adjustments are of a normal and recurring nature. The unaudited condensed consolidated balance sheet as of December 31, 2019 has been derived from the audited consolidated financial statements at that date but does not include all information and footnotes required by GAAP for complete financial statements. The operating results presented in these unaudited condensed consolidated financial statements are not necessarily indicative of the results that may be expected for any future periods. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto in the Company’s Annual Report on Form 10-K (“Annual Report”) for the fiscal year ended December 31, 2019, as filed with the SEC on March 12, 2020.

Use of Estimates

The preparation of consolidated financial statements in accordance with GAAP requires management to make estimates and assumptions that impact the reported amounts of assets, liabilities and expenses and the disclosure of contingent assets and liabilities in the financial statements and accompanying notes. The most significant estimates in the Company’s unaudited condensed consolidated financial statements relate to accrued research and development expenses, the valuation of investments, the valuation of common stock, equity awards and the valuation allowance of deferred tax assets resulting from net operating losses. These estimates and assumptions are based upon historical experience, knowledge of current events and various other factors 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 and the recording of expenses that are not readily apparent from other sources. Actual results could differ materially from those estimates.

In December 2019, a novel strain of coronavirus, which causes COVID-19, was identified. Due to the rapid and global spread of the virus, on March 11, 2020, the World Health Organization declared the COVID-19 outbreak a pandemic. To slow the proliferation of COVID-19, governments have implemented extraordinary measures, which include the mandatory closure of businesses, restrictions on travel and gatherings, and quarantine and physical distancing requirements.

The full extent to which the COVID-19 pandemic will directly or indirectly impact the Company’s business, results of operations and financial condition, including clinical trial delays and costs, will depend on future developments that are highly uncertain, including as a result of new information that may emerge concerning COVID-19 and the actions taken to contain it or treat COVID-19, as well as the economic impact on local, regional, national and international markets. There were no significant estimates contained in the preparation of the Company’s consolidated financial statements or impacts to the Company’s consolidated financial statements for the three or six months ended June 30, 2020 that were directly a result of the COVID-19 pandemic.

Significant Accounting Policies

There have been no significant changes to the accounting policies during the six months ended June 30, 2020, as compared to the significant accounting policies described in Note 2 of the “Notes to Consolidated Financial Statements” in the Company’s audited consolidated financial statements included in the Annual Report.

Net Loss Per Share

Basic net loss per share is computed by dividing net loss attributable to common stockholders by the weighted-average shares of common stock outstanding for the period, without consideration for potentially dilutive securities. Diluted net loss per share is computed by dividing the net loss attributable to common stockholders by the weighted-average shares of common stock and potentially dilutive securities outstanding for the period determined using the treasury-stock and if-converted methods. Diluted net loss per share excludes the potential impact of the Company’s common stock subject to repurchase and common stock options because their effect would be anti-dilutive due to the Company’s net loss. Since the Company had a net loss in each of the periods presented, basic and diluted net loss per share were the same.

8


 

The following potentially dilutive shares have been excluded from the calculation of diluted net loss per share for the periods presented due to their anti-dilutive effect:

 

 

 

As of June 30,

 

 

As of December 31,

 

 

 

2020

 

 

2019

 

Options to purchase common stock

 

 

4,921,326

 

 

 

3,366,812

 

Common stock subject to repurchase

 

 

322,853

 

 

 

389,649

 

Employee Stock Purchase Plan Contingently Issuable

 

 

7,278

 

 

 

 

Total

 

 

5,251,457

 

 

 

3,756,461

 

 

Recently Adopted Accounting Pronouncements

On January 1, 2020, the Company adopted Accounting Standards Update (“ASU”) No. 2018-13, Disclosure Framework — Changes to the Disclosure Requirements for Fair Value Measurement (Topic 820), which eliminated the requirements to disclose the amount and reasons for transfers between Level 1 and Level 2 assets, the policy for timing and transfers between levels and the valuation process for Level 3 fair value measurements. The guidance modified disclosure requirements for investments in certain entities that calculate net asset value and clarifies the purpose of the measurement uncertainty disclosure. The guidance added requirements to disclose changes in unrealized gains or losses included in other comprehensive income for recurring Level 3 fair value measurements and to disclose the range and weighted average used to develop significant unobservable inputs for Level 3 fair value measurements. There was no impact on the accompanying unaudited condensed consolidated financial statements as of the adoption date, January 1, 2020.

Other recent accounting pronouncements issued by the Financial Accounting Standards Board (“FASB”) (including its Emerging Issues Task Force), the American Institute of Certified Public Accountants, and the SEC did not, or are not believed by management to, have a material impact on the Company’s consolidated financial position, results of operations or cash flows.

Recent Accounting Pronouncements 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 new guidance requires the use of forward-looking expected credit loss models based on historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount, which may result in earlier recognition of credit losses under the new guidance. The new guidance also modifies the impairment models for available-for-sale debt securities and for purchased financial assets with credit deterioration since their origination. Subsequent to the issuance of ASU 2016-13, the FASB issued ASU 2018-19, Codification Improvements to Topic 326, Financial Instruments - Credit Losses. This ASU does not change the core principle of the guidance in ASU 2016-13, instead these amendments are intended to clarify and improve operability of certain topics included within the credit losses guidance. The FASB also subsequently issued ASU No. 2019-04, Codification Improvements to Topic 326, Financial Instruments—Credit Losses, Derivatives and Hedging (Topic 815), and Financial Instruments (Topic 842), which did not change the core principle of the guidance in ASU 2016-13 but clarified that expected recoveries of amounts previously written off and expected to be written off should be included in the valuation account and should not exceed amounts previously written off and expected to be written off. In March 2020, the FASB issued ASU No. 2020-3, Codification Improvements to Financial Instruments which makes narrow-scope improvements to various financial instruments topics, including the new credit losses standard and clarifies the following areas (i) the contractual term of a net investment in a lease should be the contractual term used to measure expected credit losses; (ii) when an entity regains control of financial assets sold, an allowance for credit losses should be recorded. The guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2019 for public business entities, excluding smaller reporting companies. As a smaller reporting company, the guidance will be effective for the Company during the first quarter of 2023. The Company is in the process of assessing the impact adoption will have on its consolidated financial statements.

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In December 2019, the FASB issued ASU No. 2019-12, Simplifying the Accounting for Income Taxes (Topic 740). The guidance eliminates certain exceptions for recognizing deferred taxes for investments, performing intraperiod allocation and calculating income taxes in interim periods. This guidance also includes guidance to reduce complexity in certain areas, including recognizing deferred taxes for tax goodwill and allocating taxes to members of a consolidated group. ASU 2019-12 is effective for annual and interim periods in fiscal years beginning after December 15, 2020. Early adoption is permitted. The Company is currently evaluating the impact this change will have on its consolidated financial statements.

 

3. Fair Value Measurements

Financial assets and liabilities subject to fair value measurements on a recurring basis and the level of inputs used in such measurements by major security type as of June 30, 2020 and December 31, 2019 are presented in the following table (in thousands):

 

 

 

June 30, 2020

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Financial assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money market fund

 

$

81,283

 

 

$

 

 

$

 

 

$

81,283

 

Corporate debt securities

 

 

 

 

 

31,512

 

 

 

 

 

 

31,512

 

Commercial paper

 

 

 

 

 

12,453

 

 

 

 

 

 

12,453

 

U.S. government bonds

 

 

 

 

 

7,511

 

 

 

 

 

 

7,511

 

Asset backed securities

 

 

 

 

 

14,818

 

 

 

 

 

 

14,818

 

Total

 

$

81,283

 

 

$

66,294

 

 

$

 

 

$

147,577

 

 

 

 

December 31, 2019

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Financial assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money market fund

 

$

10,621

 

 

$

 

 

$

 

 

$

10,621

 

Corporate debt securities

 

 

 

 

 

41,668

 

 

 

 

 

 

41,668

 

Commercial paper

 

 

 

 

 

35,016

 

 

 

 

 

 

35,016

 

U.S. government bonds

 

 

 

 

 

22,511

 

 

 

 

 

 

22,511

 

Asset-backed securities

 

 

 

 

 

28,787

 

 

 

 

 

 

28,787

 

Total

 

$

10,621

 

 

$

127,982

 

 

$

 

 

$

138,603

 

 

The carrying amounts of certain financial instruments such as cash and cash equivalents, prepaid expenses, other current assets, accounts payable, accrued expenses, and other current liabilities as of June 30, 2020 and December 31, 2019 approximate their related fair values due to the short-term maturities of these instruments.

The fair value of certain financial instruments was measured and classified within Level 1 of the fair value hierarchy based on quoted prices. Certain financial instruments classified within Level 2 of the fair value hierarchy include the types of instruments that trade in markets that are not considered to be active, but are valued based on quoted market prices, broker or dealer quotations, or alternative pricing sources with reasonable levels of price transparency.

 

 

10


 

4. Financial Instruments

The fair value and amortized cost of cash equivalents and available-for-sale investments by major security type are presented in the following table (in thousands):

 

 

 

June 30, 2020

 

 

 

Amortized

Cost

 

 

Unrealized

Gain

 

 

Unrealized

Loss

 

Estimated

Fair

Value

 

Cash equivalents and investments: