Corvus Pharmaceuticals, Inc. 10-K

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations The following discussion should be read in conjunction with the consolidated financial statements and notes thereto included elsewhere in this Annual report on Form 10-K. This Annual Report on Form 10-K, including the following sections, contains forward-looking statements within the meaning of the federal securities laws. These statements are subject to risks and uncertainties that could cause actual results and events to differ materially from those expressed or implied by such forward-looking statements. For a detailed discussion of these risks and uncertainties, see the “Risk Factors” section in Item 1A of this Annual Report on Form 10-K. We caution the reader not to place undue reliance on these forward-looking statements, which reflect management’s analysis only as of the date of this Form 10-K. We undertake no obligation to update forward-looking statements, which reflect events or circumstances occurring after the date of this Form 10-K. Overview We are a clinical stage, immunology focused biopharmaceutical company developing drugs and antibodies that target the most critical cellular elements of the immune system. Our strategy is to focus our efforts on the development of immune modulator product candidates to treat COVID-19, T-cell lymphomas, other cancers and autoimmune diseases. We have built a pipeline of five programs, three of which are in clinical development. Our lead product candidate is CPI-006, a potent humanized monoclonal antibody that is designed to react with a specific site on CD73. In both preclinical and in vivo studies in cancer patients and patients with COVID-19, CPI-006 has demonstrated binding to various immune cells and the inducement of a humoral adaptive immune response. We believe CPI-006 has the potential to be an important new therapeutic agent with a novel mechanism of action for the treatment of a broad range of infectious diseases and cancers. We are evaluating CPI-006 in a global, randomized, double-blind, Phase 3 trial designed to evaluate the efficacy and safety of CPI-006 compared to placebo in hospitalized patients with mild-to-moderate COVID-19. The primary endpoint of the trial is the proportion of patients progressing to respiratory failure or death during the 28 days after dosing. The trial was designed with input from the U.S. Food and Drug Administration, or FDA. Our next product candidate, CPI-818, is a selective, covalent inhibitor of ITK and is in a multi-center Phase 1/1b clinical trial in patients with various malignant T-cell lymphomas. CPI-818 is designed to inhibit the proliferation of certain malignant T-cells, and we believe it also has the potential to regulate the growth of abnormal T cells involved in autoimmunity. Our third product candidate, ciforadenant (formerly CPI-444), is an oral, small molecule antagonist of the A2A receptor for adenosine with which we completed a Phase 2 expansion protocol in combination with Genentech, Inc.’s cancer immunotherapy, Tecentriq® (atezolizumab) for patients with either advanced or refractory renal cell cancer (“RCC”). We have identified a novel biomarker that may enable us to select patients most likely to benefit from ciforadenant. In studies presented at the American Society of Oncology (“ASCO”) meeting in 2020, patients expressing this marker in their tumor had a 17% response rate. Activity was seen with both CPI-444 as a monotherapy and in combination with Tecentriq. We have refined our strategy with ciforadenant and plan to collaborate with an academic consortium to evaluate ciforadenant in a first line RCC Phase 2 trial as a triplet combination with pembrolizumab and a tyrosine kinase inhibitor (“TKI”). To date, the majority of our efforts have been focused on the research, development and advancement of CPI-006, CPI-818 and ciforadenant, and we have not generated any revenue from product sales and, as a result, we have incurred significant losses. We expect to continue to incur significant research and development and general and administrative expenses related to our operations. Our net loss for the years ended December 31, 2020 and 2019 was $6.0 million and $46.7 million, respectively. As of December 31, 2020, we had an accumulated deficit of $223.1 million. We expect to continue to incur losses for the foreseeable future, and we anticipate these losses will increase as we continue our development of, seek regulatory approval for and begin to commercialize CPI-006, CPI-818 and ciforadenant, and as we develop other product candidates. Even if we achieve profitability in the future, we may not be able to sustain profitability in subsequent periods. 84 Table of Contents Since our inception and through December 31, 2019, we have funded our operations primarily through the sale and issuance of stock. On March 22, 2016, our registration statement on Form S-1 (File No. 333-208850) relating to our initial public offering (“IPO”) of our common stock was declared effective by the SEC. Shares of our common stock began trading on the Nasdaq Global Market on March 23, 2016. The IPO closed on March 29, 2016, pursuant to which we sold 4,700,000 shares of our common stock at a public offering price of $15.00 per share. In April 2016, we sold an additional 502,618 shares of our common stock to the underwriters upon partial exercise of their over-allotment option, at the initial offering price of $15.00 per share. We received aggregate net proceeds of approximately $70.6 million, after underwriting discounts, commissions and offering expenses. Immediately prior to the consummation of the IPO, all of our outstanding shares of convertible preferred stock were converted into 14.3 million shares of our common stock. In March 2018, in a follow-on offering, we sold 8,117,647 shares of our common stock at a price of $8.50 per share, which included 1,058,823 shares issued pursuant to the underwriters’ exercise of their option to purchase additional shares of common stock. We received aggregate net proceeds of approximately $64.9 million, after underwriting discounts, commissions and offering expenses. In March 2020, we entered into a open market sales agreement (the “Sales Agreement”) with Jefferies LLC (“Jeffries”) to sell shares of the Company’s common stock, from time to time, with aggregate gross sales proceeds of up to $50,000,000, through an at-the-market equity offering program under which Jeffries acts as our sales agent. Jeffries is entitled to compensation for its services equal to 3.0% of the gross proceeds of any shares of common stock sold through Jeffries under the Sales Agreement. As of December 31, 2020, we had sold 310,734 shares of our common stock for net proceeds of approximately $1.2 million pursuant to the Sales Agreement. As of December 31, 2020, $48.7 million remained for sale under the Sales Agreement. In October 2020, we announced the formation and launch of Angel Pharmaceuticals Co., Ltd. (“Angel Pharmaceuticals”), a new China based biopharmaceutical company with a mission to bring innovative quality medicines to Chinese patients for treatment of serious diseases including cancer, autoimmune diseases and infectious diseases. We formed Angel Pharmaceuticals as a wholly owned subsidiary and it launched with a post-money valuation of approximately $106.0 million, based on an approximate $41.0 million cash investment from a Chinese investor group that includes funds associated with Tigermed and Betta Pharmaceuticals, Hisun Pharmaceuticals and Zhejiang Puissance Capital. Such cash is not available for our use. Contemporaneously with the financing, Angel Pharmaceuticals licensed the rights to develop and commercialize our three clinical-stage candidates – CPI-006, CPI-818 and ciforadenant – in greater China and obtained global rights to our BTK inhibitor preclinical programs. Under the collaboration, we currently have a 49.7% equity interest in Angel Pharmaceuticals, excluding 7% of Angel’s equity reserved for issuance under the Angel ESOP, and are entitled to designate three individuals on Angel’s five-person Board of Directors. As of December 31, 2020, we had capital resources consisting of cash, cash equivalents and marketable securities of approximately $44.3 million. We do not expect our existing capital resources to be sufficient to enable us to fund the completion of all of our ongoing or planned clinical trials and remaining development program of any of ciforadenant, CPI-006 or CPI-818 through commercialization. In addition, our operating plan may change as a result of many factors, including those described in the section of this report entitled “Risk Factors” and others currently unknown to us, and we may need to seek additional funds sooner than planned, through public or private equity, debt financings or other sources, such as strategic collaborations. Such financing would result in dilution to stockholders, imposition of debt covenants and repayment obligations or other restrictions that may affect our business. If we raise additional capital through strategic collaboration agreements, we may have to relinquish valuable rights to our product candidates, including possible future revenue streams. In addition, additional funding may not be available to us on acceptable terms or at all and any additional fundraising efforts may divert our management from its day-to-day activities, which may adversely affect our ability to develop and commercialize our product candidates. Furthermore, even if we believe we have sufficient funds for our current or future operating plans, we may seek additional capital due to favorable market conditions or strategic considerations. We currently have no manufacturing capabilities and do not intend to establish any such capabilities. We have no commercial manufacturing facilities for our product candidates. As such, we are dependent on third parties to supply our product candidates according to our specifications, in sufficient quantities, on time, in compliance with appropriate regulatory standards and at competitive prices. 85 Table of Contents Impact of COVID-19 COVID-19 was first identified in Wuhan, China in December 2019, and subsequently declared a pandemic by the World Health Organization. COVID-19 has placed strains on the providers of healthcare services, including the healthcare institutions where we conduct our clinical trials. These strains have resulted in institutions prohibiting the initiation of new clinical trials, enrollment in existing clinical trials and restricting the on-site monitoring of clinical trials. As our oncology clinical trial enrollment goals for 2020 were largely completed in our first quarter, we have not been significantly affected by any clinical trial enrollment restrictions. Patients in our ongoing oncology clinical trials have generally completed their scheduled visits and we have been able to collect the essential data from those visits. We also follow FDA guidance on clinical trial conduct during the COVID-19 pandemic, including the remote monitoring of clinical data. In alignment with public health guidance designed to slow the spread of COVID-19, as of mid-March 2020, we implemented a reduced onsite staffing model and transitioned to a remote work plan for all employees other than those providing essential services, such as our laboratory staff. For our onsite employees, we have implemented heightened health and safety measures designed to comply with applicable federal, state and local guidelines in response to the COVID-19 pandemic. We are further supporting all of our employees by leveraging virtual meeting technology and encouraging employees to follow local health authority guidance. We may need to undertake additional actions that could impact our operations if required by applicable laws or regulations or if we determine such actions to be in the best interests of our employees. Components of Results of Operations Revenue To date, we have not generated any revenues. We do not expect to receive any revenues from any product candidates that we develop unless and until we obtain regulatory approval and commercialize our products or enter into revenue-generating collaboration agreements with third parties. Research and Development Expenses Our research and development expenses consist primarily of costs incurred to conduct research and development of our product candidates. We record research and development expenses as incurred. Research and development expenses include: ● employee-related expenses, including salaries, benefits, travel and non-cash stock-based compensation expense; ● external research and development expenses incurred under arrangements with third parties, such as contract research organizations, preclinical testing organizations, contract manufacturing organizations, academic and non-profit institutions and consultants; ● costs to acquire technologies to be used in research and development that have not reached technological feasibility and have no alternative future use; ● license fees; and ● other expenses, which include direct and allocated expenses for laboratory, facilities and other costs. We plan to increase our research and development expenses substantially as we continue the development and potential commercialization of our product candidates. Our current planned research and development activities include the following: ● enrollment and completion of our Phase 3 clinical trial of CPI-006 in hospitalized COVID-19 patients; 86 Table of Contents ● completion of our Phase 1/1b clinical trial and amended Phase 1b/2 clinical trial of ciforadenant; ● completion of our ongoing Phase 1/1b clinical trial of CPI-006 in cancer patients; ● enrollment and completion of our ongoing Phase 1/1b clinical trial of CPI-818; ● process development and manufacturing of drug supply of CPI-006, CPI-818 and ciforadenant; and ● preclinical studies under our other programs in order to select development product candidates. In addition to our product candidates that are in clinical development, we believe it is important to continue substantial investment in potential new product candidates to build the value of our product candidate pipeline and our business. Our expenditures on current and future preclinical and clinical development programs are subject to numerous uncertainties related to timing and cost to completion. The duration, costs and timing of clinical trials and development of product candidates will depend on a variety of factors, including many of which are beyond our control. The process of conducting the necessary clinical research to obtain regulatory approval is costly and time consuming, and the successful development of our product candidates is uncertain. The risks and uncertainties associated with our research and development projects are discussed more fully in “Part I, Item 1A—Risk Factors.” As a result of these risks and uncertainties, we are unable to determine with any degree of certainty the duration and completion costs of our research and development projects or if, when or to what extent we will generate revenues from the commercialization and sale of any of our product candidates that obtain regulatory approval. We may never succeed in achieving regulatory approval for any of our product candidates. General and Administrative Expenses General and administrative expenses include personnel costs, expenses for outside professional services and allocated expenses. Personnel costs consist of salaries, benefits and stock-based compensation. Outside professional services consist of legal, accounting and audit services and other consulting fees. Allocated expenses consist of rent expense related to our office and research and development facility. We expect that our general and administrative expenses will increase in the future as we increase our headcount to support our continued research and development and potential commercialization of one or more of our product candidates. Results of Operations Comparison of the periods below as indicated (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year ended December 31, Change Change ​ ​ 2020 ​ 2019 ​ 2018 ​ 2019 to 2020 ​ 2018 to 2019 Operating expenses: ​ ​ ​ ​ ​ ​ ​ ​ ​ Research and development ​ $ 31,830 ​ $ 37,975 ​ $ 38,586 ​ $ (6,145) ​ $ (611) General and administrative ​ 11,930 ​ 10,879 ​ 10,636 ​ 1,051 ​ 243 Total operating expenses ​ 43,760 ​ 48,854 ​ 49,222 ​ (5,094) ​ (368) Loss from operations ​ (43,760) ​ (48,854) ​ (49,222) ​ 5,094 ​ 368 Interest income and other expense, net ​ 540 ​ 2,182 ​ 2,283 ​ (1,642) ​ (101) Gain on deconsolidation of Angel Pharmaceuticals ​ ​ 37,459 ​ ​ — ​ ​ — ​ ​ 37,459 ​ — Loss from equity method investment ​ ​ (234) ​ ​ — ​ ​ — ​ ​ (234) ​ — Net loss ​ $ (5,995) ​ $ (46,672) ​ $ (46,939) ​ $ 40,677 ​ $ 267 ​ 87 Table of Contents Research and Development Expenses Research and development expenses for the years ended December 31, 2020 and 2019, consisted of the following costs by program (specific program costs consist solely of external costs): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year ended December 31, Change Change ​ ​ 2020 ​ 2019 ​ 2018 ​ 2019 to 2020 ​ 2018 to 2019 Ciforadenant (formerly CPI-444) ​ $ 3,784 $ 5,750 $ 10,378 $ (1,966) $ (4,628) ​ CPI‑006 ​ 8,956 ​ 6,774 ​ 6,108 ​ 2,182 ​ 666 ​ CPI-818 ​ 2,734 ​ 6,577 ​ 4,707 ​ (3,843) ​ 1,870 ​ Other programs ​ 645 ​ 981 ​ 877 ​ (336) ​ 104 ​ Unallocated employee and overhead costs ​ 15,711 ​ 17,893 ​ 16,516 ​ (2,182) ​ 1,377 ​ ​ ​ $ 31,830 ​ $ 37,975 ​ $ 38,586 ​ $ (6,145) ​ $ (611) ​ ​ For the year ended December 31, 2020, the decrease in ciforadenant costs of $2.0 million as compared to the year ended December 31, 2019, primarily consisted of a decrease of $1.5 million in clinical trial expenses, a decrease of $0.2 million in drug manufacturing costs and a decrease of $0.3 million in other outside services. For the year ended December 31, 2020, the increase in CPI-006 costs of $2.2 million as compared to the year ended December 31, 2019, primarily consisted of an increase of $3.5 million in clinical trial expenses as well as an increase of $0.4 million in other outside services, partially offset by a decrease of $1.7 million in drug manufacturing costs. For the year ended December 31, 2020, the decrease in CPI-818 costs of $3.8 million as compared to the year ended December 31, 2019, primarily consisted of a decrease of $2.7 million in drug manufacturing costs, a decrease of $0.4 million in clinical trial expenses and a decrease of $0.7 million in other outside services. For the year ended December 31, 2020, the decrease in costs related to other programs of $0.3 million as compared to the year ended December 31, 2019, primarily consisted of a decrease of $0.6 million in outside services, partially offset by an increase of $0.3 million in drug manufacturing costs. For the year ended December 31, 2020, the decrease in unallocated costs of $2.2 million as compared to the year ended December 31, 2019, primarily consisted of a decrease of $1.5 million in outside services and a decrease of $0.7 million in personnel and related costs. For the year ended December 31, 2019, the decrease in ciforadenant costs of $4.6 million as compared to the year ended December 31, 2018, primarily consisted of a decrease of $2.8 million in drug manufacturing costs, a decrease of $1.3 million in clinical trial expenses associated with lower enrollment in accordance with our protocol amendment focusing on RCC and mCRPC patients and a decrease of $0.5 million in other outside services. For the year ended December 31, 2019, the increase in CPI-006 costs of $0.7 million as compared to the year ended December 31, 2018, primarily consisted of an increase of $1.2 million in clinical trial expenses, partially offset by a decrease of $0.3 million in drug manufacturing costs and a decrease of $0.2 million in other outside services. For the year ended December 31, 2019, the increase in CPI-818 costs of $1.9 million as compared to the year ended December 31, 2018, primarily consisted of an increase of $2.2 million in clinical trial expenses, an increase of $0.6 million in drug manufacturing costs, and an increase of $0.2 million in other outside services, partially offset by a decrease of $1.1 million in IND-enabling study costs. For the year ended December 31, 2019, the increase in costs related to other programs of $0.1 million as compared to the year ended December 31, 2018, primarily consisted of outside chemical synthesis and testing of research compounds. 88 Table of Contents For the year ended December 31, 2019, the increase in unallocated costs of $1.4 million as compared to the year ended December 31, 2018, primarily consisted of an increase in personnel and related costs. General and Administrative Expenses For the year ended December 31, 2020, the increase in general and administrative expenses of $1.1 million as compared to the year ended December 31, 2019, primarily consisted of an increase of $1.9 million in outside professional services, partially offset by a decrease of $0.8 million in personnel and related costs. For the year ended December 31, 2019, the increase in general and administrative expenses of $0.2 million as compared to the year ended December 31, 2018, primarily consisted of an increase in personnel and related costs. Interest Income and Other Expense, net For the year ended December 31, 2020, the decrease in interest income and other expense, net of $1.6 million as compared to the year ended December 31, 2019, primarily consisted of a decrease in interest income earned due to a decrease in cash equivalents and marketable securities and a decrease in interest rates. For the year ended December 31, 2019, the decrease in interest income and other expense, net of $0.1 million as compared to the year ended December 31, 2018, primarily consisted of a decrease in interest income earned due to a decrease in cash equivalents and marketable securities. Gain on deconsolidation of Angel Pharmaceuticals For the year ended December 31, 2020, the gain on deconsolidation of Angel Pharmaceuticals of $37.5 million represents the fair value of our investment in Angel Pharmaceuticals at the date Angel Pharmaceuticals was deconsolidated from our financial statements. Loss from equity method investment For the year ended December 31, 2020, the loss from equity method investment of $0.2 million represents our share of the Angel Pharmaceutical’s loss for the period from deconsolidation of our investment in Angel Pharmaceuticals through December 31, 2020. Liquidity and Capital Resources Sources of Liquidity As of December 31, 2020, we had cash, cash equivalents and marketable securities of $44.3 million and an accumulated deficit of $223.1 million, compared to cash, cash equivalents and marketable securities of $78.0 million and an accumulated deficit of $217.1 million as of December 31, 2019. We have financed our operations primarily through sales of our common stock and convertible preferred stock. In March 2016, we consummated our IPO and sold 4,700,000 shares of our common stock at a price of $15.00 per share, and in April 2016, sold 502,618 shares at a price of $15.00 per share pursuant to the partial exercise of the underwriters’ option to purchase additional shares of common stock. We received net proceeds of approximately $70.6 million, after deducting underwriting discounts, commissions and offering expenses. Immediately prior to the consummation of our IPO, all outstanding shares of the convertible preferred stock were converted into common stock on a one-for-one basis. In March 2018, in a follow-on offering, we sold 8,117,647 shares of our common stock at a price of $8.50 per share, which included 1,058,823 shares issued pursuant to the underwriters’ exercise of their option to purchase additional shares of common stock. We received aggregate net proceeds of approximately $64.9 million, after underwriting discounts, commissions and offering expenses. 89 Table of Contents On February 17, 2021, we completed a follow-on public offering in which we sold 9,783,660 shares of common stock at a price of $3.50 per share, which included 1,212,231 shares issued pursuant to the underwriters’ exercise of their option to purchase additional shares of common stock. We received aggregate net proceeds of approximately $31.8 million, net of underwriting discounts and commissions and offering expenses. In March 2020, we entered into a Sales Agreement Jefferies LLC to sell shares of the Company’s common stock, from time to time, with aggregate gross sales proceeds of up to $50,000,000, through an at-the-market equity offering program under which Jeffries acts as our sales agent. Jeffries is entitled to compensation for its services equal to up to 3.0% of the gross proceeds of any shares of common stock sold through Jeffries under the Sales Agreement. During the year ended December 31, 2020, we received net proceeds of approximately $1.2 million from the sale of 310,734 shares of our common stock pursuant to the Sales Agreement. As of December 31, 2020, $48.7 million remained for sale under the Sales Agreement. We believe our current cash, cash equivalents and marketable securities, including the net proceeds from our February 2021 follow-on offering, will be sufficient to fund our planned expenditures and meet our obligations through at least the next twelve months from the issuance of our consolidated financial statements as of and for year ended December 31, 2020. The amounts and timing of our actual expenditures depend on numerous factors, including: ​ ● the progress, timing, costs and results of clinical trials for CPI-006, CPI-818 and ciforadenant; ​ ● the extent to which the COVID-19 pandemic may impact our business, including our clinical trials and financial condition; ​ ● the timing, progress, costs and results of preclinical and clinical development activities for our other product candidates; ​ ● the number and scope of preclinical and clinical programs we decide to pursue; ​ ● the costs involved in prosecuting, maintaining and enforcing patent and other intellectual property rights; ​ ● the cost and timing of regulatory approvals; ​ ● our efforts to enhance operational systems and hire additional personnel, including personnel to support development of our product candidates and satisfy our obligations as a public company; and ​ ● other factors described in the section of this report entitled “Risk Factors.” ​ We expect to increase our spending in connection with the development and commercialization of our product candidates. Until such time, if ever, as we can generate substantial revenue from product sales, we expect to fund our operations and capital funding needs through equity and/or debt financings. We may also enter into additional collaboration arrangements or selectively partner for clinical development and commercialization. The sale of additional equity would result in dilution to our stockholders. The incurrence of debt financing would result in debt service obligations and the governing documents would likely include operating and financing covenants that would restrict our operations. In addition, sufficient additional funding may not be available on acceptable terms, or at all. If we are not able to secure adequate additional funding, we may be forced to make reductions in spending, extend payment terms with suppliers, liquidate assets where possible and/or suspend or curtail planned programs. Any of these actions could have a material effect on our business, financial condition and results of operations. ​ 90 Table of Contents Summary of Statement of Cash Flows The following table summarizes our cash flows for the periods indicated (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year ended December 31, Change Change ​ ​ 2020 ​ 2019 ​ 2018 ​ 2019 to 2020 ​ 2018 to 2019 Net cash provided by (used in): ​ ​ ​ ​ ​ ​ Operating activities ​ $ (34,778) ​ $ (37,321) ​ $ (40,988) ​ $ 2,543 ​ $ 3,667 ​ Investing activities ​ 44,769 ​ 3,255 ​ (30,192) ​ 41,514 ​ 33,447 ​ Financing activities ​ 1,310 ​ 24 ​ 65,270 ​ 1,286 ​ (65,246) ​ Net increase (decrease) in cash and cash equivalents ​ $ 11,301 ​ $ (34,042) ​ $ (5,910) ​ $ 45,343 ​ $ (28,132) ​ ​ Cash Flows from Operating Activities Cash used in operating activities during the year ended December 31, 2020 was $34.8 million, which primarily consisted of a net loss of $6.0 million, adjusted by non-cash charges of $6.8 million, primarily consisting of $5.7 million of stock compensation expense, a non-cash gain on deconsolidation of Angel Pharmaceuticals of $37.5 million, an increase of $1.7 million in accounts payable and accrued and other liabilities and a decrease of $0.4 million in prepaid and other current and non-current assets, partially offset by a decrease of $0.2 million in operating lease liability, net of operating lease right-of-use asset amortization. Cash used in operating activities during the year ended December 31, 2019 was $37.3 million, which primarily consisted of a net loss of $46.7 million, adjusted by non-cash charges of $7.4 million, primarily consisting of $7.3 million of stock compensation expense, an increase of $2.5 million in accounts payable and accrued and other liabilities and an increase of $0.4 million in prepaid and other current assets, primarily associated with the timing of payments to vendors. Cash used in operating activities during the year ended December 31, 2018 was $41.0 million, which primarily consisted of a net loss of $46.9 million, adjusted by non-cash charges of $7.4 million, primarily consisting of $7.1 million of stock compensation expense, a decrease of $2.0 million in accounts payable and accrued and other liabilities and a decrease of $0.6 million in current and other assets, primarily associated with the timing of payments to vendors. Cash Flows from Investing Activities Cash provided by investing activities during the year ended December 31, 2020 was $44.8 million, which consisted of proceeds from maturities of marketable securities of $86.4 million and proceeds from sales of marketable securities of $1.0 million, partially offset by purchases of marketable securities of $42.5 million and purchases of property and equipment of $0.1 million . Cash provided by investing activities during the year ended December 31, 2019 was $3.3 million, which consisted of proceeds from maturities of marketable securities of $141.9 million, which were partially offset by purchases of marketable securities of $138.6 million. Cash used in investing activities during the year ended December 31, 2018 was $30.2 million, which consisted of purchases of marketable securities of $161.9 million and purchases of property and equipment of $0.4 million, which were partially offset by proceeds from maturities of marketable securities of $132.0 million. Cash Flows from Financing Activities Cash provided by financing activities during the year ended December 31, 2020 was $1.3 million, which consisted of $1.2 million in net proceeds from the issuance of common stock through our at-the-market offering program and $0.1 million of proceeds from the exercise of stock options. 91 Table of Contents Cash provided by financing activities during the year ended December 31, 2019 was negligible. Cash provided by financing activities during the year ended December 31, 2018 was $65.3 million, consisting of $64.9 million of net proceeds from our follow-on offering and $0.4 million of proceeds from the exercise of stock options. Off-Balance Sheet Arrangements We have not entered into any off-balance sheet arrangements and do not have any holdings in variable interest entities. Contractual Obligations We lease our facilities under a non-cancelable operating lease that expires in 2023. As of December 31, 2020, contractual obligations were as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Payment Due by Period ​ ​ ​ Less than ​ ​ ​ ​ More than ​ ​ Total ​ 1 year ​ 2 - 3 years ​ 4 - 5 years ​ 5 years Contractual obligations: ​ ​ ​ ​ ​ Operating lease obligations ​ $ 2,559 ​ $ 1,260 ​ $ 1,299 ​ $ — ​ $ — Total contractual obligations ​ $ 2,559 ​ $ 1,260 ​ $ 1,299 ​ $ — ​ $ — ​ In August 2015 we entered into an agreement for a line of credit of $0.1 million for the purpose of issuing our landlord a letter of credit of $0.1 million as a security deposit under our facility lease. We pledged money market funds and marketable securities as collateral for the line of credit. Pursuant to our license agreements with each of Vernalis and Scripps, we have obligations to make future milestone and royalty payments to these parties. However, because these amounts are contingent, they have not been included on our balance sheet. Critical Accounting Policies Our management’s discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with United States generally accepted accounting principles (“U.S. GAAP”). The preparation of these consolidated financial statements requires our management to make judgments and estimates that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements, as well as the reported revenue generated and expenses incurred during the reporting periods. Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these judgments and estimates under different assumptions or conditions and any such differences may be material. We believe that the accounting policies discussed below are critical to understanding our historical and future performance, as these policies relate to the more significant areas involving management’s judgments and estimates. Our significant accounting policies are more fully described in Note 2 of Notes to Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K. Cash, Cash Equivalents and Marketable Securities We consider all highly liquid investment securities with remaining maturities at the date of purchase of three months or less to be cash equivalents. Investments with remaining maturities, at the date of purchase, greater than three months, but less than one year are considered short-term. We determined the appropriate classification of marketable securities at the time of purchase and evaluates such designation as of each balance sheet date. To date, all marketable securities have been classified as available-for-sale and are carried at fair value with unrealized gains and losses, if any, included as a component of 92 Table of Contents accumulated other comprehensive income (loss) in stockholders’ equity (deficit). Interest and realized gains and losses are included in interest income. Realized gains and losses are recognized based on the specific identification method. Research and Development Expenses We record research and development expenses as incurred. We account for nonrefundable advance payments for goods and services that will be used in future research and development activities as expenses when the goods have been received or when the service has been performed rather than when the payment is made. Research and development expenses consist of costs incurred by us for the discovery and development of our product candidates and include: ● employee-related expenses, including salaries, benefits, travel and non-cash stock-based compensation expense; ● external research and development expenses incurred under arrangements with third parties, such as contract research organizations, contract manufacturing organizations, academic and non-profit institutions and consultants; ● costs to acquire technologies to be used in research and development that have not reached technological feasibility and have no alternative future use; ● license fees; and ● other expenses, which include direct and allocated expenses for laboratory, facilities and other costs. Clinical Trial Accruals Costs for preclinical studies and clinical trial activities are recognized based on an evaluation of the vendors’ progress towards completion of specific tasks, using data such as clinical site activations, patient enrollment or information provided to us by our vendors regarding their actual costs incurred. Payments for these activities are based on the terms of individual contracts and payment timing may differ significantly from the period in which the services are performed. We determine accrual estimates through reports from and discussions with applicable personnel and outside service providers as to the progress or state of completion, or the services completed. Our estimates of accrued expenses as of each balance sheet date are based on the facts and circumstances known at the time Recent Accounting Pronouncements See Note 2 in Item 8 “Financial Statements and Supplementary Data.” Segment Information We have one primary business activity and operate as one reportable segment. JOBS Act Accounting Election We are an emerging growth company, as defined in the JOBS Act. Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies. We have irrevocably elected not to avail ourselves of this exemption from new or revised accounting standards and, therefore, will be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies. We also rely on other exemptions provided by the JOBS Act, including, without limitation, providing an auditor’s attestation report on our system of internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act. We will remain an emerging growth company until the earlier of (1) December 31, 2021, (2) the last day of the fiscal year in which we have total annual gross revenue of at least $1.07 billion, (3) the last day of the fiscal year in which we are 93 Table of Contents deemed to be a “large accelerated filer” as defined in Rule 12b-2 under the Exchange Act, which would occur if the market value of our common stock that is held by non-affiliates exceeded $700.0 million as of the last business day of the second fiscal quarter of such fiscal year, or (4) the date on which we have issued more than $1.0 billion in non-convertible debt during the prior three-year period. Even after we no longer qualify as an emerging growth company, we may still qualify as a “smaller reporting company” which may allow us to take advantage of many of the same exemptions from disclosure requirements including not being required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act.