Enliven Therapeutics, Inc. 10-Q

Item 1. Financial Statements. IMARA INC. CONDENSED C ONSOLIDATED BALANCE SHEETS (in thousands, except share and per share data) (Unaudited) September 30, 2020 December 31, 2019 ASSETS Current assets: Cash and cash equivalents $ 34,158 $ 4,936 Short-term investments 61,931 23,971 Prepaid expenses and other current assets 3,622 1,717 Total current assets 99,711 30,624 Property and equipment, net 376 442 Other assets 88 2,232 Total assets $ 100,175 $ 33,298 LIABILITIES, CONVERTIBLE PREFERRED STOCK & STOCKHOLDERS’ EQUITY (DEFICIT) Current liabilities: Accounts payable $ 1,886 $ 1,658 Accrued expenses and other current liabilities 3,424 2,540 Total current liabilities 5,310 4,198 Deferred rent 167 184 Total liabilities 5,477 4,382 Commitments and contingencies (Note 7) Convertible preferred stock, $0.001 par value per share; no shares authorized, issued or outstanding as of September 30, 2020; 70,378,661 shares authorized and 60,533,313 shares issued and outstanding as of December 31, 2019 — 77,764 Stockholders’ equity (deficit): Preferred stock, $0.001 par value per share; 10,000,000 shares authorized; no shares issued or outstanding as of September 30, 2020; no shares authorized, issued or outstanding as of December 31, 2019 — — Common stock, $0.001 par value per share; 200,000,000 and 100,000,000 shares authorized as of September 30, 2020 and December 31, 2019, respectively; 17,377,067 and 702,510 shares issued and outstanding as of September 30, 2020 and December 31, 2019, respectively 18 1 Additional paid-in capital 179,251 5,872 Accumulated other comprehensive income 24 32 Accumulated deficit (84,595 ) (54,753 ) Total stockholders’ equity (deficit) 94,698 (48,848 ) Total liabilities, convertible preferred stock and stockholders’ equity (deficit) $ 100,175 $ 33,298 The accompanying notes are an integral part of these condensed consolidated financial statements. 1 IMARA INC. CONDENSED C ONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (in thousands, except share and per share data) (Unaudited) Three Months Ended September 30, Nine Months Ended September 30, 2020 2019 2020 2019 Operating expenses: Research and development $ 9,533 $ 5,141 $ 23,195 $ 13,067 General and administrative 2,961 1,741 6,953 3,566 Total operating expenses 12,494 6,882 30,148 16,633 Loss from operations (12,494 ) (6,882 ) (30,148 ) (16,633 ) Total other income: Interest income 126 254 368 414 Other income (expense) (55 ) 6 (62 ) 6 Total other income (net) 71 260 306 420 Net loss $ (12,423 ) $ (6,622 ) $ (29,842 ) $ (16,213 ) Accretion of Series B convertible preferred stock — — (7,858 ) — Net loss attributable to common stockholders—basic and diluted $ (12,423 ) $ (6,622 ) $ (37,700 ) $ (16,213 ) Weighted-average common shares outstanding—basic and diluted 17,349,813 702,510 12,696,368 702,510 Net loss per share attributable to common stockholders—basic and diluted $ (0.72 ) $ (9.43 ) $ (2.97 ) $ (23.08 ) Comprehensive loss: Net loss $ (12,423 ) $ (6,622 ) $ (29,842 ) $ (16,213 ) Other comprehensive income: Unrealized gain (loss) on investments (net) (24 ) 30 (8 ) 30 Comprehensive loss $ (12,447 ) $ (6,592 ) $ (29,850 ) $ (16,183 ) The accompanying notes are an integral part of these condensed consolidated financial statements. 2 IMARA INC. CONDENSED CON SOLIDATED STATEMENTS OF CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT) (in thousands, except share and per share data) (Unaudited) CONVERTIBLE PREFERRED STOCK COMMON SERIES SEED $0.001 PAR VALUE SERIES A $0.001 PAR VALUE SERIES B $0.001 PAR VALUE STOCK $0.001 PAR VALUE ADDITIONAL PAID-IN ACCUMULATED OTHER COMPREHENSIVE ACCUMULATED TOTAL STOCKHOLDERS’ EQUITY SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT CAPITAL INCOME (LOSS) DEFICIT (DEFICIT) Balance at December 31, 2018 2,712,960 $ 1,460 31,499,040 $ 30,729 — $ — 702,510 $ 1 $ 4,973 $ — $ (31,290 ) $ (26,316 ) Issuance of Series B convertible preferred stock, net of issuance costs of $274 — — — — 25,316,663 43,825 — — — — — — Stock-based compensation expense — — — — — — — — 95 — — 95 Net loss — — — — — — — — — — (4,194 ) (4,194 ) Balance at March 31, 2019 2,712,960 $ 1,460 31,499,040 $ 30,729 25,316,663 $ 43,825 702,510 $ 1 $ 5,068 $ — $ (35,484 ) $ (30,415 ) Issuance of Series B convertible preferred stock, net of issuance costs — — — — 1,004,650 1,750 — — — — — — Stock-based compensation expense — — — — — — — — 197 — — 197 Net loss — — — — — — — — — — (5,397 ) (5,397 ) Balance at June 30, 2019 2,712,960 $ 1,460 31,499,040 $ 30,729 26,321,313 $ 45,575 702,510 $ 1 $ 5,265 $ — $ (40,881 ) $ (35,615 ) Stock-based compensation expense — — — — — — — — 310 — — 310 Unrealized gain on investments — — — — — — — — — 30 — 30 Net loss — — — — — — — — — — (6,622 ) (6,622 ) Balance at September 30, 2019 2,712,960 $ 1,460 31,499,040 $ 30,729 26,321,313 $ 45,575 702,510 $ 1 $ 5,575 $ 30 $ (47,503 ) $ (41,897 ) 3 CONVERTIBLE PREFERRED STOCK COMMON SERIES SEED $0.001 PAR VALUE SERIES A $0.001 PAR VALUE SERIES B $0.001 PAR VALUE STOCK $0.001 PAR VALUE ADDITIONAL PAID-IN ACCUMULATED OTHER COMPREHENSIVE ACCUMULATED TOTAL STOCKHOLDERS’ EQUITY SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT CAPITAL INCOME (LOSS) DEFICIT (DEFICIT) Balance at December 31, 2019 2,712,960 $ 1,460 31,499,040 $ 30,729 26,321,313 $ 45,575 702,510 $ 1 $ 5,872 $ 32 $ (54,753 ) $ (48,848 ) Issuance of Series B convertible preferred stock, net of issuance costs of $20 and beneficial conversion charge — — — — 9,845,348 9,271 — — 7,858 — — 7,858 Accretion of Series B converted preferred stock — — — — — 7,858 — — (7,858 ) — — (7,858 ) Conversion of convertible preferred stock into common stock (2,712,960 ) (1,460 ) (31,499,040 ) (30,729 ) (36,166,661 ) (62,704 ) 11,172,955 11 94,882 — — 94,893 Initial public offering, net of underwriting discounts, commissions and offering costs of $3,885 — — — — — — 4,700,000 5 66,047 — — 66,052 Stock-based compensation expense — — — — — — — — 360 — — 360 Unrealized loss on investments — — — — — — — — — (48 ) — (48 ) Net loss — — — — — — — — — — (7,215 ) (7,215 ) Balance at March 31, 2020 — $ — — $ — — $ — 16,575,465 $ 17 $ 167,161 $ (16 ) $ (61,968 ) $ 105,194 Initial public offering, net of underwriting discounts, commissions and offering costs of $17 — — — — — — 705,000 1 10,473 — — 10,474 Exercise of stock options — — — — — — 44,271 — 218 — — 218 Stock-based compensation expense — — — — — — — — 550 — — 550 Unrealized gain on investments — — — — — — — — — 64 — 64 Net loss — — — — — — — — — — (10,204 ) (10,204 ) Balance at June 30, 2020 — $ — — $ — — $ — 17,324,736 $ 18 $ 178,402 $ 48 $ (72,172 ) $ 106,296 Exercise of stock options — — — — — — 52,331 — 207 — — 207 Stock-based compensation expense — — — — — — — — 642 — — 642 Unrealized loss on investments — — — — — — — — — (24 ) — (24 ) Net loss — — — — — — — — — — (12,423 ) (12,423 ) Balance at September 30, 2020 — $ — — $ — — $ — 17,377,067 $ 18 $ 179,251 $ 24 $ (84,595 ) $ 94,698 The accompanying notes are an integral part of these condensed consolidated financial statements. 4 IMARA INC. CONDENSED CON SOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (Unaudited) Nine Months Ended September 30, 2020 2019 Cash flows from operating activities: Net loss $ (29,842 ) $ (16,213 ) Adjustments to reconcile net loss to net cash used in operating activities: Stock-based compensation expense 1,552 602 Depreciation expense 74 8 Amortization and accretion on investments (57 ) (6 ) Changes in operating assets and liabilities: Prepaid expenses and other current assets (1,905 ) (936 ) Accounts payable 228 1,589 Accrued expenses and other current liabilities 898 1,485 Deferred rent (17 ) 93 Other assets (60 ) (457 ) Net cash used in operating activities (29,129 ) (13,835 ) Cash flows from investing activities: Proceeds from maturities and sales of short-term investments 17,900 — Purchases of short-term investments (55,811 ) (21,808 ) Purchases of property and equipment (22 ) (140 ) Net cash used in investing activities (37,933 ) (21,948 ) Cash flows from financing activities: Proceeds from issuance of Series B convertible preferred stock, net of issuance costs 17,150 45,575 Proceeds from initial public offering, net of underwriting discounts and commissions 80,427 — Payment of issuance costs (1,718 ) — Proceeds from exercise of options 425 — Net cash provided by financing activities 96,284 45,575 Net increase in cash, cash equivalents and restricted cash $ 29,222 $ 9,792 Cash, cash equivalents and restricted cash, beginning of period $ 5,024 $ 7,382 Cash, cash equivalents and restricted cash, end of period $ 34,246 $ 17,174 Supplemental disclosure of non-cash investing and financing activities: Conversion of convertible preferred stock into common stock $ 94,893 $ — Accretion of redeemable convertible preferred stock to redemption value $ 7,858 $ — Reclassification of deferred offering costs from other assets to additional paid-in capital $ 2,144 $ — Deferred offering costs included in accounts payable and accrued expenses $ — $ 1,320 Property and equipment purchases included in accrued expenses $ 14 $ 335 Unrealized gain (loss) on investments $ (8 ) $ 30 The following table provides a reconciliation of the cash, cash equivalents, and restricted cash balances as of each of the periods shown above: Nine Months Ended September 30, 2020 2019 Cash and cash equivalents $ 34,158 $ 17,086 Restricted cash (included in other assets) 88 88 Total cash, cash equivalents and restricted cash $ 34,246 $ 17,174 The accompanying notes are an integral part of these condensed consolidated financial statements. 5 IMARA INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 1. Nature of the Business IMARA Inc. (“IMARA” or the “Company”) is a clinical-stage biopharmaceutical company dedicated to developing and commercializing novel therapeutics to treat patients suffering from rare inherited genetic disorders of hemoglobin, known as hemoglobinopathies, which have significant unmet medical need. The Company was incorporated in January 2016 under the laws of the State of Delaware, and its principal offices are in Boston, Massachusetts. The Company is subject to risks and uncertainties common to early-stage companies in the biotechnology industry, including but not limited to, risks associated with completing preclinical studies and clinical trials, receiving regulatory approvals for product candidates, development by competitors of new biopharmaceutical products, dependence on key personnel, protection of proprietary technology, compliance with government regulations and the ability to secure additional capital to fund operations. Such risks and uncertainties may be amplified by the COVID-19 pandemic and its impact on the Company’s business and the global economy. The Company’s sole product candidate currently under development, IMR-687, as well as any other product candidates the Company may develop, will require significant additional research and development efforts, including preclinical and clinical testing and regulatory approval, prior to commercialization. These efforts require significant amounts of additional capital, adequate personnel and infrastructure and extensive compliance-reporting capabilities. Even if the Company’s product development efforts are successful, it is uncertain when, if ever, the Company will realize revenue from product sales. In February 2020, the Company effected a 1-for-6.299 reverse stock split of the Company’s issued and outstanding shares of common stock and a proportional adjustment to the existing conversion ratios for each of the Company’s outstanding series of preferred stock. All share and per share amounts in the unaudited condensed consolidated financial statements and notes thereto have been retroactively adjusted for all periods presented to give effect to the reverse stock split, including reclassifying an amount equal to the change in par value of common stock to additional paid-in capital. On February 25, 2020, the Company issued and sold 1,562,994‬ shares of Series B convertible preferred stock (“Series B Preferred Stock”), at a price of $10.9722 per share, upon a waiver of specified milestone conditions from the holders of a majority of the shares then held by holders of Series B Preferred Stock, and raised approximately $17.1 million in net proceeds after deducting less than $0.1 million of issuance costs. On March 16, 2020, the Company completed an initial public offering (“IPO”) of its common stock and issued and sold 4,700,000 shares of common stock at a public offering price of $16.00 per share, resulting in gross proceeds of $75.2 million. On April 13, 2020, the Company issued and sold an additional 705,000 shares of common stock pursuant to the exercise of the underwriters’ option to purchase additional shares for aggregate gross proceeds of $11.3 million. Inclusive of the exercise by the underwriters of their option to purchase additional shares, the Company received approximately $76.5 million in net proceeds from the IPO after deducting $10.0 million of underwriting discounts and commissions and offering expenses. Upon the closing of the IPO, all 70,378,661 shares of outstanding preferred stock automatically converted into 11,172,955 shares of common stock. Upon conversion of the convertible preferred stock, the Company reclassified the carrying value of the convertible preferred stock to common stock and additional paid-in capital. Liquidity The Company has incurred recurring negative cash flows since inception and has funded its operations primarily from the sale of convertible preferred stock and proceeds from the IPO. As of September 30, 2020, the Company had cash, cash equivalents, and investments of $96.1 million and an accumulated deficit of approximately $84.6 million. The Company expects its operating losses and negative operating cash flows to continue into the foreseeable future as it continues to expand its research and development efforts. The Company believes its cash, cash equivalents and investments as of September 30, 2020 will be sufficient to fund its operating expenses and capital expenditure requirements for at least twelve months from the date of filing this Quarterly Report on Form 10-Q. The Company will need additional funding to support its planned operating activities. There can be no assurances, however, that the current operating plan will be achieved or that additional funding will be available on terms acceptable to the Company, or at all. If the Company is unable to obtain sufficient funding, it could be required to delay its development efforts, limit activities and reduce research and development costs, which could adversely affect its business prospects. 6 2. Summary of Significant Accounting Policies Basis of presentation The accompanying unaudited condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”). Any reference in these notes to applicable guidance is meant to refer to the authoritative GAAP as found in the Accounting Standards Codification (“ASC”) and as amended by Accounting Standards Updates of the Financial Accounting Standards Board (“FASB”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted from this report, as is permitted by such rules and regulations. Accordingly, these financial statements should be read in conjunction with the audited financial statements as of and for the year ended December 31, 2019 and notes thereto, included in the Company’s Registration Statement on Form S-1/A, filed with the Securities Exchange Commission (“SEC”) on March 10, 2020. The unaudited condensed consolidated interim financial statements have been prepared on the same basis as the audited financial statements. In the opinion of the Company’s management, the accompanying unaudited condensed consolidated interim financial statements contain all adjustments which are necessary to present fairly the Company’s financial position as of September 30, 2020, the results of its operations for the three and nine months ended September 30, 2020 and 2019 and cash flows for the nine months ended September 30, 2020 and 2019. Such adjustments are of a normal and recurring nature. The results for the three and nine months ended September 30, 2020 are not necessarily indicative of the results for the year ending December 31, 2020, or for any future period. Principles of Consolidation The accompanying unaudited condensed consolidated financial statements of the Company include the accounts of its wholly owned subsidiaries, IMARA Security Corporation and IMARA E.U. Limited. All intercompany transactions and balances have been eliminated in consolidation. Summary of Significant Accounting Policies The significant accounting policies and estimates used in the preparation of the accompanying unaudited condensed consolidated financial statements are described in the Company’s audited consolidated financial statements for the year ended December 31, 2019 included in the Company’s Registration Statement on Form S-1/A filed with the SEC on March 10, 2020. There have been no material changes in the Company’s significant accounting policies during the three and nine months ended September 30, 2020. Use of Estimates The preparation of unaudited condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the unaudited condensed consolidated financial statements and the reported amounts of expenses during the reporting periods. Significant estimates and assumptions reflected in these unaudited condensed consolidated financial statements include, but are not limited to, accrued research and development expenses, stock-based compensation expense, the fair value of the common stock and the intrinsic value of the beneficial conversation feature present in the second tranche of the Series B Preferred Stock issued in February of 2020. Actual results could differ materially from those estimates. Segments Operating segments are defined as components of an enterprise for which separate and discrete information is available for evaluation by the chief operating decision-maker in deciding how to allocate resources and assess performance. The Company has one operating segment. The Company’s chief operating decision maker, its Chief Executive Officer, manages the Company’s operations on a consolidated basis for the purpose of allocating resources. All of the Company’s long-lived assets are held in the United States. Deferred Offering Costs The Company capitalizes certain legal, professional, accounting and other third-party fees that are directly associated with in-process equity issuances as deferred offering costs until such equity issuances are consummated. After consummation of the equity issuance, these costs are recorded as a reduction in the capitalized amount associated with the equity issuance. Should the equity issuance be abandoned, the deferred offering costs will be expensed immediately as a charge to operating expenses in the unaudited condensed consolidated statement of operations and comprehensive loss. 7 Comprehensive Loss Comprehensive loss includes net loss and certain changes in stockholders’ equity (deficit) that are excluded from net loss. The Company’s comprehensive loss includes unrealized gains and unrealized losses on available-for-sale securities for the three and nine months ended September 30, 2020 and 2019. Recently Issued Accounting Pronouncements In February 2016, the FASB issued ASU 2016-02 , Leases (Topic 842) (“ASU 2016-02”), which sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract (i.e., lessees and lessors). The new standard requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase by the lessee. This classification will determine whether lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease, respectively. A lessee is also required to record a right-of-use asset and a lease liability for all leases with a term of greater than 12 months regardless of their classification. Leases with a term of 12 months or less will be accounted for similar to existing guidance for operating leases today. ASU 2016-02 supersedes the previous leases standard, ASC 840, Leases . This standard will become effective for the Company for fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022. Early adoption is permitted. The Company anticipates that the adoption of this standard will have an impact on its balance sheet due to the recognition of right-of-use assets and lease liabilities; however, the Company is currently evaluating the impact that the adoption of ASU 2016-02 will have on its consolidated financial statements. In July 2017, the FASB issued ASU 2017-11, Earnings Per Share (Topic 260), Distinguishing Liabilities from Equity (Topic 480), Derivatives and Hedging (Topic 815) I. Accounting for Certain Financial Instruments with Down Round Features II. Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception (“ASU 2017-11”) . Part I applies to entities that issue financial instruments such as warrants, convertible debt or convertible preferred stock that contain down-round features. Part II replaces the indefinite deferral for certain mandatorily redeemable noncontrolling interests and mandatorily redeemable financial instruments of nonpublic entities contained within ASC Topic 480 with a scope exception and does not impact the accounting for these mandatorily redeemable instruments. The amendments in Part I of this update are effective for the Company for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020. Early adoption is permitted for all entities, including adoption in an interim period. The Company is currently evaluating the impact that the adoption of ASU 2017-11 will have on its consolidated financial statements. In March 2020, the FASB issued (“ASU 2020-03”), Codification Improvements to Financial Instruments, which addressed, among other topics, Amendments related to ASU 2016-13 Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments ("ASU 2016-13”). The amendments align the contractual term under Topic 326 and Topic 842 (Leases) to be consistent, and also clarifies when an entity should record an allowance for credit losses in accordance with Topic 326. This standard becomes for the Company for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The Company is currently evaluating the impact of this new guidance on the Company’s consolidated financial statements and related disclosures, but does not expect the adoption of ASU 2020-03 or ASU 2016-13 to be material. 3. Fair Value of Financial Assets and Liabilities The following table presents information about the Company’s financial assets and liabilities measured at fair value on a recurring basis and indicates the level of the fair value hierarchy utilized to determine such fair values (in thousands): September 30, 2020 Quoted Prices in Active Markets for Identical Assets Significant Other Observable Inputs Significant Other Observable Inputs Description Total (Level 1) (Level 2) (Level 3) Assets: Money market funds, included in cash and cash equivalents $ 31,782 $ 31,782 $ — $ — Marketable securities: United States Treasury Bills 21,998 21,998 — — Corporate debt securities 23,661 — 23,661 — Commercial paper 16,272 — 16,272 — Total financial assets $ 93,713 $ 53,780 $ 39,933 $ — 8 December 31, 2019 Quoted Prices in Active Markets for Identical Assets Significant Other Observable Inputs Significant Other Observable Inputs Description Total (Level 1) (Level 2) (Level 3) Assets: Money market funds, included in cash and cash equivalents $ 4,477 $ 4,477 $ — $ — Marketable securities: Corporate debt securities 5,772 — 5,772 — Commercial paper 18,199 — 18,199 — Total financial assets $ 28,448 $ 4,477 $ 23,971 $ — As of September 30, 2020 and December 31, 2019, the Company’s Level 1 financial assets consisted of cash equivalents held in money market funds, which are valued using quoted market prices in active markets without any valuation adjustment , and United States treasury bills, which are based on quoted market prices in active markets. The financial assets valued based on Level 2 inputs consist of corporate debt securities and commercial paper, which consist of investments in highly-rated investment-grade securities. The Company estimates the fair values of these marketable securities by taking into consideration valuations obtained from third-party pricing sources. These pricing sources utilize industry standard valuation models, including both income and market-based approaches, for which all significant inputs are observable, either directly or indirectly, to estimate fair value. These inputs include market pricing based on real-time trade data for the same or similar securities, issuer credit spreads, benchmark yields, and other observable inputs. The Company validates the prices provided by its third-party pricing sources by understanding the models used, obtaining market values from other pricing sources and analyzing pricing data in certain instances. During the three and nine months ended September 30, 2020 and the year ended December 31, 2019, there were no transfers between fair value measurement levels. The carrying values of other current assets, accounts payable and accrued expenses approximate their fair values due to the short-term nature of these assets and liabilities. 4. Investments As of September 30, 2020, the Company had short-term investments consisting of United States treasury bills, corporate debt securities, and commercial paper, which are considered to be available-for-sale investments. As of December 31, 2019, the Company had short-term investments consisting of corporate debt securities and commercial paper. These are included in short-term investments on the condensed consolidated balance sheets, even though the stated maturity date may be one year or more beyond the current balance sheet date, as the Company views those securities as available for use in current operations, if needed. The following table summarizes the Company’s investments (in thousands): September 30, 2020 Amortized Cost Gross Unrealized Gains Gross Unrealized Loss Fair Value Current: Corporate debt securities $ 23,638 $ 23 $ — $ 23,661 United States Treasury Bills 21,997 1 — $ 21,998 Commercial Paper 16,272 — — 16,272 Total $ 61,907 $ 24 $ — $ 61,931 December 31, 2019 Amortized Cost Gross Unrealized Gains Gross Unrealized Loss Fair Value Current: Commercial paper $ 18,167 $ 32 $ — $ 18,199 Corporate debt securities 5,772 — — 5,772 Total $ 23,939 $ 32 $ — $ 23,971 9 As of September 3 0 , 2020 and December 31, 2019, the Company had no available-for-sale securities in unrealized loss positions. 5. Accrued Expenses Accrued expenses consisted of the following (in thousands): September 30, 2020 December 31, 2019 Accrued research and development expenses $ 1,726 $ 1,106 Accrued compensation and benefits 1,239 802 Accrued professional services 372 330 Accrued other 87 302 Total accrued expenses $ 3,424 $ 2,540 6. License Agreements Agreement with Lundbeck In April 2016, the Company entered into a license agreement with Lundbeck A/S (“Lundbeck” and the “Lundbeck Agreement”) pursuant to which Lundbeck granted the Company the following licenses within the field of prevention, treatment or diagnosis of hemoglobinopathy disorders and/or other diseases or disorders, including those directly or indirectly related to hemoglobinopathies: (1) an exclusive, royalty-bearing license to certain patent rights and certain know-how owned or otherwise controlled by Lundbeck (“Licensed Technology”) to research, develop, make, use, sell, and commercialize products (“Licensed Products”) from PDE9 inhibitors, which included IMR-687 (“Licensed Compounds”); (2) a non-exclusive license to the Licensed Technology to make, research, develop, and use such Licensed Technology to enable research and development, with certain restrictions; and (3) a sublicensing right that allows the Company to grant sublicenses to third parties to use the Licensed Technology subject to the certain terms detailed in the Lundbeck Agreement. Under the Lundbeck Agreement, the Company is subject to certain achievement dates for development milestones as defined in the agreement. The regulatory milestones due under the Lundbeck Agreement depend on the products being developed. Development milestones due under the Lundbeck Agreement with respect to the Licensed Compounds total up to $23.5 million, and, for any products that contain PDE9 inhibitors other than Licensed Compounds, total up to $11.8 million. The Company also agreed to pay tiered royalties based on net sales of all products licensed under the agreement in the low single-digit percentages. To date, pursuant to the license agreement, the Company has made cash payments to Lundbeck of $1.8 million consisting of an upfront payment and ongoing milestone payments, which were recorded as research and development expenses. No payments were made during the year ended December 31, 2019, or for the three and nine months ended September 30, 2020. As partial consideration for the license, the Company issued 167,523 shares of common stock to Lundbeck, which represented 8.0% of the Company’s then outstanding equity pursuant to a restricted stock agreement. The shares were fully vested on the date of issuance. The Company also allowed Lundbeck to participate in the fourth tranche of its Series A preferred stock financing in November 2018 at $1.00 per share. The Lundbeck Agreement can be terminated by the Company at any time with 180 days’ written notice. The Company or Lundbeck may terminate the agreement by written notice within a specified period of time in the event of a material breach. 7. Commitments and Contingencies Lease Agreements In 2016, the Company entered into an agreement for office space located in Cambridge, Massachusetts, which was a month-to-month lease, with a related party (see Note 13). The agreement for this space terminated on August 17, 2019. The Company recorded rent expense of less than $0.2 million during the three and nine months ended September 30, 2019. In May 2019, the Company entered into a new operating lease agreement for office space totaling 4,210 square feet, located in Boston, Massachusetts with a 62-month term. The lease includes a rent escalation clause which results in cash rental payments of approximately $0.3 million annually. Rent expense is being recognized on a straight-line basis over the lease term. In addition to the base rent, the Company is also responsible for its share of operating expenses, electricity and real estate taxes, in accordance with the terms of the Lease Agreement. The Company provided a security deposit of approximately $0.1 million in May 2019, which is included as a component of other assets on the Company’s unaudited condensed consolidated balance sheets as of September 30, 2020 and December 31, 2019. The Company occupied the space in August 2019 and commenced recognition of rent expense. The Company recorded rent expense of approximately $0.1 million during the three months ended September 30, 2020, and approximately $0.2 million during the nine months ended September 30, 2020. 10 The following table summarizes the future minimum lease payments due under the Company’s operating lease (in thousands): September 30, 2020 2020 $ 68 2021 273 2022 278 2023 284 Thereafter 229 $ 1,132 Legal Proceedings The Company may from time to time be party to litigation arising in the ordinary course of business. The Company was not subject to any material legal proceedings during the three and nine months ended September 30, 2020 and year ended December 31, 2019, and no material legal proceedings are currently pending or, to the best of its knowledge, threatened. Indemnification Obligations The Company agrees to standard indemnification obligations as part of entering into agreements in the ordinary course of business. Pursuant to the indemnification provisions, the Company agrees to indemnify, hold harmless, and to reimburse the indemnified party for losses suffered or incurred by the indemnified party, generally the Company’s business partners, in connection with matters specified in the applicable provision, which may include any U.S. patent or any copyright or other intellectual property infringement claim by any third-party with respect to the Company’s products or product liability claims by any third-party with respect to the Company’s products. The term of these indemnification obligations is generally perpetual any time after execution of the agreement. The potential amount of future payments the Company could be required to make under these indemnification obligations is unlimited. The Company has never incurred costs to defend lawsuits or settle claims related to these indemnification obligations. 8. Convertible Preferred Stock On February 25, 2020, the Company raised $17.1 million in net proceeds from the sale of 1,562,994‬ shares of Series B Preferred Stock, at a price of $10.9722 per share, upon a waiver of specified milestone conditions from the holders of a majority of the shares then held by the holders of Series B Preferred Stock. Upon issuance, each share of Series B Preferred Stock included an embedded beneficial conversion feature as the estimated fair value of the Company’s common stock on the date of issuance of the Series B Preferred Stock was higher than the effective conversion price of the Series B Preferred Stock of $10.9722 per share. Given the proximity of the issuance to the Company’s public offering, the Company utilized the $16.00 public offing price of its common stock to determine the intrinsic value of the beneficial conversion feature. As a result, the Company recorded the intrinsic value of the beneficial conversion feature of $7.9 million as a discount on the Series B Preferred Stock at issuance. Because the Series B Preferred Stock was immediately convertible upon issuance and did not include mandatory redemption provisions, the discount on the Series B Preferred Stock was immediately accreted. Upon the completion of the IPO on March 16, 2020, all 70,378,661 shares of outstanding preferred stock automatically converted into 11,172,955 shares of common stock. Prior to the conversion, the holders of the preferred stock were entitled to receive noncumulative dividends of 8% per annum of the Series B issuance price only when and if declared by the Company’s Board of Directors. No dividends have been declared by the Company’s Board of Directors since inception. 11 As of December 31, 2019, p referred s tock consisted of the following (in thousands, except share data): December 31, 2019 Preferred Stock Authorized Preferred Stock Issued and Outstanding Carrying Value Liquidation Value Common stock Issuable Upon Conversion Series Seed Preferred Stock 2,712,960 2,712,960 $ 1,460 $ 2,713 430,693 Series A Preferred Stock 31,499,040 31,499,040 30,729 31,499 5,000,623 Series B Preferred Stock 36,166,661 26,321,313 45,575 45,849 4,178,645 70,378,661 60,533,313 $ 77,764 $ 80,061 9,609,961 9. Stockholders’ Equity On August 13, 2019, the Company’s board of directors, and on February 26, 2020, the Company’s stockholders, approved the Company’s restated certificate of incorporation, which became effective upon closing of the IPO on March 16, 2020, to authorize 10,000,000 shares of undesignated preferred stock, $0.001 per share par value, and to increase the number of authorized shares of common stock from 100,000,000 to 200,000,000 shares, $0.001 per share par value. Common stockholders are entitled to receive dividends, as may be declared by the Board, if any, subject to the preferential dividend rights of any preferred stock then outstanding. Through September 30, 2020, no cash dividends have been declared or paid. As of September 30, 2020, 10,000,000 shares of preferred stock were authorized and no shares of preferred stock were issued or outstanding. As of September 30, 2020 and December 31, 2019, the Company has reserved for future issuance the following shares of common stock: September 30, 2020 December 31, 2019 Conversion of outstanding preferred stock — 9,609,961 Shares reserved for future issuance under the 2016 Stock Incentive Plan — 228,852 Shares reserved for future issuance under the 2020 Equity Incentive Plan 1,277,645 — Shares reserved for future issuance under the 2020 Employee Stock Purchase Plan 193,216 — 1,470,861 9,838,813 10. Stock-Based Compensation 2016 Stock Incentive Plan The Company’s 2016 Stock Incentive Plan, (the “2016 Plan”) provided for the grant of restricted stock, restricted stock units, stock appreciation rights, incentive stock options, non-statutory stock options and other stock-based awards to employees, officers, members of the Board, consultants and advisors of the Company. As of December 31, 2019, the number of shares of common stock authorized to be issued under the 2016 Plan was 2,091,969, of which 228,852 shares remained available for future grants as of December 31, 2019. As of the effective date of the 2020 Equity Incentive Plan (the “2020 Plan”), no shares remained available for future issuance under the 2016 Plan. Any options or awards outstanding under the 2016 Plan remain outstanding and effective. 2020 Equity Incentive Plan On October 1, 2019, the Company’s board of directors adopted, and on February 26, 2020 the Company’s stockholders approved, the 2020 Equity Incentive Plan (the “2020 Plan”), which became effective on March 11, 2020. The 2020 Plan provides for the grant of incentive stock options, non-qualified stock options, stock appreciation rights, restricted stock awards, restricted stock units and other stock-based awards. The number of shares reserved for issuance under the 2020 Plan is the sum of: (1) 1,220,283 shares of the Company’s common stock; plus (2) the number of shares (up to a maximum of 2,091,969 shares) equal to the sum of (x) 228,852 shares, which represents the Company’s common stock reserved for issuance under the 2016 Plan that remained available for grant under the 2016 Plan as of March 11, 2020 and (y) the number of shares of the Company’s common stock subject to outstanding 12 awards granted under the 2016 Plan that expire, terminate or are otherwise surrendered, cancelled, forfeited or repurchased by the Company at their original issuance price pursuant to a contractual repurchase right . The number of shares reserved shall be annually increased on the first day of each fiscal year, beginning with the fiscal year ending December 31, 2021 and continuing until, and including, the fiscal year ending December 31, 2030, equal to the lesser of (i) 4% of the number of shares of the Company’s common stock outstanding on the first day of such fiscal year and (ii) an amount determined by the Company’s board of directors. No more than 8,541,982 shares of common stock may be issued as incentive stock options under the 2020 Plan . The shares of common stock underlying any awards that expire, terminate, or are otherwise surrendered, cancelled, forfeited or repurchased by the Company under the 2016 Plan or the 2020 Plan wil l be added back to the shares of common stock available for issuance under the 2020 Plan As of September 30, 2020, there were 1,277,645 shares available for future issuance under the 2020 Plan. For financial reporting purposes, the Company performed common stock valuations with the assistance of a third-party specialist through October 23, 2019 to determine stock-based compensation expense for stock options. Upon completion of the IPO, the fair value of the common stock on the grant date was based on the closing price of the stock on the Nasdaq Global Select Market on the date of grant. The following table summarizes the Company’s stock option activity: Number of Shares Weighted- Average Exercise Price Weighted- Average Remaining Contractual Term (in years) Aggregate Intrinsic Value (in thousands) Outstanding as of December 31, 2019 1,863,117 $ 4.60 8.90 $ 15,151 Granted 540,939 17.74 Exercised (96,602 ) 4.39 Forfeited (369,449 ) 7.58 Outstanding as of September 30, 2020 1,938,005 $ 7.71 7.69 $ 24,507 Options vested and exercisable as of September 30, 2020 706,693 $ 4.26 5.50 $ 11,364 The aggregate intrinsic value of options is calculated as the difference between the exercise price of the stock options and the fair value of the Company’s common stock for those stock options that had exercise prices lower than the fair value of the common stock as of the end of the period. The weighted-average grant date fair value of the Company’s stock options granted during the three and nine months ended September 30, 2020 was $12.99 and $11.30, respectively. The weighted-average grant date fair value of the Company’s stock options granted during the nine months ended September 30, 2019 was $3.42. The Company did not grant any stock options during the three months ended September 30, 2019. The assumptions that the Company used to determine the grant date fair value of stock options granted to employees, non-employees and members of the Board during the three and nine months ended September 30, 2020 and the nine months ended September 30, 2019 were as follows, presented on a weighted-average basis Stock-based compensation expense was allocated as follows (in thousands): Three Months Ended September 30, Nine Months Ended September 30, 2020 2019 2020 2019 Expected term (in years) 6.17 — 6.14 6.11 Expected volatility 73.40 % — 72.77 % 69.70 % Expected dividend yield 0.00 % — 0.00 % 0.00 % Risk-free interest rate 0.30 % — 0.52 % 2.19 % Performance-based awards The Company granted stock options to purchase an aggregate of 220,928 shares of common stock to certain employees, officers and consultants and advisors of the Company on May 16, 2019, June 5, 2019 and June 21, 2019, which contain performance-based vesting criteria. Vesting of these options was contingent on the closing of the second tranche of Series B Preferred Stock financing. Stock-based compensation expense associated with performance-based stock options is recognized if the performance conditions are 13 considered probable of being achieved, using management’s best estimates. As a result of the performance condition being met on February 25, 2020, these options will vest as to 25% of the share s underlying each option on February 25, 2021 and as to the remainder of the shares in equal quarterly installments for three years thereafter. The Company recognized stock-based compensation expense of less than $ 0.1 million and $0.2 million for these opt ions during the three and nine months ended September 30 , 2020 , respectively . Stock-Based Compensation Stock-based compensation expense included in the Company’s unaudited condensed consolidated statements of operations and comprehensive loss is as follows (in thousands): Three Months Ended September 30, Nine Months Ended September 30, 2020 2019 2020 2019 Research and development $ 161 $ 120 $ 501 $ 193 General and administrative 481 190 1,051 409 Total stock-based compensation expense $ 642 $ 310 $ 1,552 $ 602 As of September 30, 2020 and December 31, 2019, total unrecognized compensation cost related to the unvested stock-based awards was $6.9 million and $3.3 million, respectively, which is expected to be recognized over a weighted-average period of 3.06 and 3.17 years, respectively. 2020 Employee Stock Purchase Plan On October 1, 2019, the Company’s board of directors adopted, and on February 26, 2020, the Company’s stockholders approved the 2020 Employee Stock Purchase Plan (the “2020 ESPP”), which became effective on March 11, 2020. The 2020 ESPP initially provides participating employees with the opportunity to purchase up to an aggregate of 193,216 shares of the Company’s common stock. The number of shares of the Company’s common stock reserved for issuance under the 2020 ESPP will automatically increase on the first day of each fiscal year, beginning with the fiscal year commencing on January 1, 2021 and continuing until, and including, the fiscal year commencing on January 1, 2031, in an amount equal to the lowest of (i) 386,432 shares of the Company’s common stock, (ii) 1% of the number of shares of the Company’s common stock outstanding on the first day of such fiscal year and (iii) an amount determined by the Company’s board of directors. 11. Income Taxes Deferred tax assets and deferred tax liabilities are recognized based on temporary differences between the financial reporting and tax basis of assets and liabilities using statutory rates. A valuation allowance is recorded against deferred tax assets if it is more likely than not that some or all of the deferred tax assets will not be realized. Due to the uncertainty surrounding the realization of the favorable tax attributes in future tax returns, the Company has recorded a full valuation allowance against the Company’s otherwise recognizable net deferred tax assets. On March 27, 2020, the United States enacted the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”). The Cares Act includes provisions relating to refundable payroll tax credits, deferment of the employer portion of certain payroll taxes, net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations and technical corrections to tax depreciation methods for qualified improvement property. The CARES Act also established a Paycheck Protection Program whereby certain small businesses are eligible for a loan to fund payroll expenses, rent, and related costs. The Company considered the provisions under the CARES Act and elected not to take advantage of the provisions of CARES Act as the effect of such provisions was not expected to have a material impact on the Company’s results of operations, cash flows and consolidated financial statements. 14 1 2 . Net Loss Per Share Basic and diluted net loss per share is determined by dividing net loss attributable to common stockholders by the weighted-average common shares outstanding during the period. Net loss attributable to common stockholders for the nine months ended September 30, 2020 did not equal net loss due to the accretion of the beneficial conversion feature of Series B Preferred Stock in the amount of $7.9 million. The beneficial conversion feature was initially recorded as a discount on the Series B Preferred Stock with a corresponding amount recorded to Additional Paid-in Capital. The discount on the Series B Preferred Stock was then immediately written off as a deemed dividend as the Series B Preferred Stock does not have a stated redemption date and is immediately convertible at the option of the holder. The Company has computed diluted net loss per common share after giving consideration to all potentially dilutive common shares, including convertible preferred stock and options to purchase common stock during the period determined using the if-converted method, except where the effect of including such securities would be antidilutive. Because the Company has reported net losses since inception, these potential common shares have been anti-dilutive and basic and diluted loss per share have been the same. The Company excluded the following potential common shares from the computation of diluted net loss per share attributable to common stockholders for the periods indicated because including them would have had an anti-dilutive effect: Three Months Ended September 30, Nine Months Ended September 30, 2020 2019 2020 2019 Series Seed Preferred Stock — 430,693 — 430,693 Series A Preferred Stock — 5,000,623 — 5,000,623 Series B Preferred Stock — 4,178,645 — 4,178,645 Options to purchase common stock 1,938,005 645,568 1,938,005 645,568 13. Related Party Transactions Lundbeck Lundbeckfond Invest A/S is one of the Company’s stockholders and participated in all tranches of the Series A preferred stock financing and both tranches of the Series B preferred stock financing. Prior to the conversion of the Company’s preferred stock, Lundbeckfond Invest A/S owned 5,470,492 shares of Series A Preferred Stock as of December 31, 2019, and 478,749 shares of Series Seed Preferred Stock as of December 31, 2019. Lundbeckfond Invest A/S owned 1,326,111 shares of Series B Preferred Stock as of December 31, 2019. All shares of preferred stock converted into shares of common stock upon closing of the IPO. Lundbeckfond Invest A/S also purchased 187,500 shares of common stock in the IPO. This reflects a 7.4% and a 9.3% ownership interest on a fully diluted basis as of September 30, 2020 and December 31, 2019, respectively. Mette Kirstine Agger, a member of our board of directors, is a Managing Partner at Lundbeckfonden Ventures, which is an affiliate of Lundbeckfond Invest A/S. Lundbeck, an affiliate of Lundbeckfond Invest A/S, is also one of the Company’s stockholders and participated in the fourth tranche of the Company’s Series A preferred stock financing. Prior to the conversion of the Company’s preferred stock, Lundbeck owned 499,069 shares of Series A Preferred Stock as of December 31, 2019, as well as 443,271 shares of common stock issued in conjunction with the Lundbeck Agreement (See Note 6). All shares of preferred stock converted into shares of common stock upon closing of the IPO. This reflects a 2.7% and a 4.2% ownership interest on a fully diluted basis as of September 30, 2020 and December 31, 2019, respectively. Lundbeck did not participate in the Series B Preferred Stock financing. To date, pursuant to the Lundbeck Agreement, the Company has made cash payments to Lundbeck of $1.8 million consisting of an upfront payment and ongoing milestone payments which are recorded as research and development expense. Cydan Development, Inc. In January 2016, the Company entered into a Business Services Agreement with Cydan Development, Inc., or Cydan, pursuant to which Cydan provided office space, personnel assistance, and other business services to the Company on an as-needed basis. At the time the agreement was signed, Cydan was considered a related party because Cydan was a holder of more than 5% of the Company’s capital stock and Dr. James McArthur was the Company’s founder, President and Chief Executive Officer, a member of the Company’s board of directors and a holder of more than 5% of the Company’s capital stock and the Chief Scientific Officer of Cydan. As of September 30, 2020, Cydan is no longer considered a related party. The Company paid Cydan less than $0.1 million during the three and nine months ended September 30, 2019 related to the Business Services Agreement, all of which was recorded as research and development expense. The Company agreed with Cydan to terminate the Business Services Agreement and all related services rendered by Cydan to the Company effective as of August 17, 2019. Accordingly, there were no amounts due to Cydan as of September 30, 2020 and December 31, 2019. 15 1 4 . Benefit Plans The Company established a defined contribution savings plan under Section 401(k) of the Internal Revenue Code effective as of January 2019. This plan covers substantially all employees who meet minimum age and service requirements and allows participants to defer a portion of their annual compensation on a pre-tax basis. Matching contributions to the plan may be made at the discretion of the Board. The Company has made no contributions to the plan to date. 16