What changed in this filing

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Item 1. Financial Statements

2021-11-09 compared with 2021-08-10 · 192 added, 158 removed, 397 unchanged (47% of the section changed)

4 unchanged sentences

(In thousands, except share and per share data)

September 30,

CURRENT ASSETS:

16 unchanged sentences

Accrued expenses

Current portion of long term debt

Other current liabilities

8 unchanged sentences

Preferred stock - $ 0.00001 par value;

10,000,000 shares and 0 shares authorized at June 30, 2021 and December 31, 2020, respectively;

0 shares issued and outstanding at June 30, 2021 and December 31, 2020, respectively

10,000,000 shares and 00 shares authorized at September 30, 2021 and December 31, 2020, respectively;

00 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively

Common stock— $ 0.00001 par value;

500,000,000 shares authorized at June 30, 2021 and December 31, 2020, respectively;

57,000,139 shares and 56,890,569 issued and outstanding at June 30, 2021 and December 31, 2020, respectively

500,000,000 shares authorized at September 30, 2021 and December 31, 2020, respectively;

58,414,546 shares and 56,890,569 issued and outstanding at September 30, 2021 and December 31, 2020, respectively

Additional paid in capital

8 unchanged sentences

(In thousands, except share and per share data)

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Net product revenues

5 unchanged sentences

Total operating expenses

Operating income (loss)

Operating income

Loss on debt extinguishment

1 unchanged sentence

Interest expense, net

Income (loss) before income taxes

Net income (loss) and comprehensive income (loss)

(Loss) income before income taxes

Income tax benefit (expense)

Net (loss) income and comprehensive (loss) income

Accumulation of dividends on preferred stock

Net income (loss) available to common stockholders

EARNINGS (LOSS) PER SHARE:

Net (loss) income available to common stockholders

(LOSS) EARNINGS PER SHARE:

Weighted average number of shares of common stock - basic

7 unchanged sentences

Balance as of December 31, 2020

Issuance of common stock

Exercise of stock options

Stock-based compensation

Balance as of June 30, 2021

Balance as of September 30, 2021

stockholders’

Balance as of March 31, 2021

Balance as of June 30, 2021

Issuance of common stock

Exercise of options

Stock-based compensation

Balance as of June 30, 2021

Balance as of September 30, 2021

Convertible Preferred

stockholders’

Series A, B, & C

stockholders’ equity

Balance as of December 31, 2019

5 unchanged sentences

Preferred stock accretion, Series C

Issuance of stock upon initial public offering, net of issuance costs

Issuance of Series A, B, C convertible stock to common stock

( 318,510,205 )

Reclassification of warrant liability to equity

Exercise of stock options

1 unchanged sentence

Repurchase and cancellation of common units

Balance as of June 30, 2020

Repurchase and cancellation of common units withheld for taxes

Balance as of September 30, 2020

Convertible Preferred

1 unchanged sentence

stockholders’

Balance as of March 31, 2020

equity (deficit)

Balance as of June 30, 2020

Preferred stock dividend, Series A

4 unchanged sentences

Preferred stock accretion, Series C

Issuance of stock upon initial public offering, net of issuance costs

Issuance of Series A, B, C convertible stock to common stock

( 318,510,205 )

Reclassification of warrant liability to equity

Exercise of options

Stock-based compensation

Repurchase and cancellation of common units

Balance as of June 30, 2020

Repurchase and cancellation of common units withheld for taxes

Balance as of September 30, 2020

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

3 unchanged sentences

(In thousands, except share and per share data)

Six Months Ended June 30,

Nine Months Ended September 30,

CASH FLOWS FROM OPERATING ACTIVITIES

17 unchanged sentences

Purchase of property and equipment

Milestone and acquisition of intangible asset

Milestone payments

Net cash used in investing activities

CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from issuance of common stock upon initial public offering

Initial public offering issuance costs

Proceeds from issuance of common stock

Common stock issuance costs

Proceeds from long term debt

4 unchanged sentences

Repurchase of common stock

Tax payments for employees shares withheld

Net cash provided by financing activities

4 unchanged sentences

Cash paid during the year for interest

Cash paid during the year for milestones

Supplemental Disclosures of Noncash Investing and Financing Activities:

6 unchanged sentences

Warrant financing

Warrant liability reclassified to equity

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

24 unchanged sentences

Shares of common stock reserved for issuance upon the conversion of the Company’s Preferred Stock and preferred dividend were proportionately reduced.

All references in the accompanying condensed consolidated financial statements and related notes to the number of shares of common stock, convertible preferred stock, warrants and options to purchase common stock and per share data reflect the effect of the reverse stock split.

All references in the accompanying unaudited condensed consolidated financial statements and related notes to the number of shares of common stock, convertible preferred stock, warrants and options to purchase common stock and per share data reflect the effect of the reverse stock split.

LIQUIDITY AND CAPITAL RESOURCES

The unaudited condensed consolidated financial statements have been prepared as though the Company will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business.

The Company has an accumulated deficit of $ 466,692 and $ 488,195 , as of June 30, 2021 and December 31, 2020, respectively.

As of June 30, 2021, the Company had cash and cash equivalents of $ 159,686 .

On August 21, 2020, the Company received aggregate proceeds from a common stock offering of approximately $ 135,435 , net of underwriting discounts and commissions and other estimated offering expenses (see Note 11).

Additionally, on January 9, 2020, the Company received aggregate proceeds of approximately $ 200,000 through the loan agreement with OrbiMed Royalty & Credit Opportunities, LP.

The Company has an accumulated deficit of $ 476,312 and $ 488,195 , as of September 30, 2021 and December 31, 2020, respectively.

As of September 30, 2021, the Company had cash and cash equivalents of $ 189,704 .

(see Note 11).

On January 9, 2020, the Company received aggregate proceeds of approximately $ 200,000 through the loan agreement with OrbiMed Royalty & Credit Opportunities, LP (“OrbiMed”).

This capital raise and debt issuance has resolved the Company’s significant risks and uncertainties regarding sources of liquidity, which previously raised substantial doubt about the Company’s ability to continue as a going concern.

On August 9, 2021, the Company sold 1,048,951 shares of the Company’s common stock to Blackstone Alternative Credit Advisors (“Blackstone”) at a price per share of $ 28.60 for gross proceeds of $ 30,000 .

In addition, the Company received aggregate proceeds of approximately $ 200,000 through the credit agreement (“Blackstone Credit Agreement”) with Blackstone and repaid in full the loan with OrbiMed (see note 8).

The Company believes that its anticipated cash from operating and financing activities and existing cash and cash equivalents will enable the Company to meet its operational liquidity needs and fund its planned investing activities for the next twelve months from the date of issuance of these unaudited condensed consolidated financial statements.

3 unchanged sentences

All intercompany accounts and transactions have been eliminated in consolidation.

The condensed consolidated balance sheet as of June 30, 2021, the condensed consolidated statements of cash flows for the six months ended June 30, 2021 and 2020, and the condensed consolidated statements of operations and comprehensive income (loss) and the condensed consolidated statements of convertible preferred stock and shareholders’ equity (deficit) for the three and six months ended June 30, 2021 and 2020, are unaudited.

The unaudited condensed consolidated balance sheet as of September 30, 2021, the unaudited condensed consolidated statements of cash flows for the nine months ended September 30, 2021 and 2020, and the unaudited condensed consolidated statements of operations and comprehensive income (loss) and the unaudited condensed consolidated statements of convertible preferred stock and shareholders’ equity (deficit) for the three and nine months ended September 30, 2021 and 2020, are unaudited.

The balance sheet as of December 31, 2020 was derived from audited financial statements as of and for the year ended December 31, 2020.

The unaudited interim condensed consolidated financial statements have been prepared on the same basis as the audited annual financial statements as of and for the year ended December 31, 2020, and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary for the fair presentation of the Company’s financial position as of June 30, 2021, and the results of its operations and its cash flows for the three and six months ended June 30, 2021 and 2020.

The condensed consolidated results of operations are not necessarily indicative of the results that may occur for the full fiscal year.

The unaudited interim condensed consolidated financial statements have been prepared on the same basis as the audited annual financial statements as of and for the year ended December 31, 2020, and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary for the fair presentation of the Company’s financial position as of September 30, 2021, and the results of its operations and its cash flows for the three and nine months ended September 30, 2021 and 2020.

The unaudited condensed consolidated results of operations are not necessarily indicative of the results that may occur for the full fiscal year.

Certain information and note disclosures of the Company normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted under the SEC’s rules and regulations.

These condensed consolidated financial statements should be read in conjunction with the audited financial statements and accompanying notes thereto for the year ended December 31, 2020.

These unaudited condensed consolidated financial statements should be read in conjunction with the audited financial statements and accompanying notes thereto contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts and disclosures in the Condensed Consolidated Financial Statements, including the notes thereto, and elsewhere in this report.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts and disclosures in the unaudited condensed consolidated financial statements, including the notes thereto, and elsewhere in this report.

Uncertainties related to the magnitude and duration of COVID-19, the extent to which it will impact our estimated future financial results, worldwide macroeconomic conditions including interest rates, employment rates, consumer spending and health insurance coverage, the speed of the anticipated recovery and governmental and business reactions to the pandemic have increased the complexity of developing these estimates, including the carrying amounts of long-lived assets, and the intangible asset.

2 unchanged sentences

The Company’s unaudited condensed consolidated financial statements include cash, cash equivalents, restricted cash, accounts payable, and accrued liabilities, all of which are short term in nature and, accordingly, approximate fair value.

Additionally, prior to the IPO, the Company’s condensed consolidated financial statements included a warrant liability that was carried at fair value and was re-measured at each balance sheet date until it would be exercised or expired.

Additionally, prior to the IPO, the Company’s unaudited condensed consolidated financial statements included a warrant liability that was carried at fair value and was re-measured at each balance sheet date until it would be exercised or expired.

In connection with the IPO, the Warrants were re-evaluated under the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 480 Distinguishing Liabilities from Equity and reclassified to equity.

14 unchanged sentences

The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the balance sheet that equal the amount reflected in the statements of cash flows.

September 30,

Cash and cash equivalents

Restricted cash

Total cash, cash equivalents, and restricted cash shown in the statements

of cash flows

Total cash, cash equivalents, and restricted cash shown in the statements of cash flows

Amounts included in restricted cash represent those amounts required to be held as a security deposit in the form of letters of credit for the Company’s credit card program and the fleet program.

11 unchanged sentences

Historically, the Company has not experienced credit losses on its accounts receivable.

As of June 30, 2021, three customers accounted for 100 % of gross accounts receivable;

As of September 30, 2021, three customers accounted for 100 % of gross accounts receivable;

Caremark LLC (“CVS Caremark”), which accounted for 36 % of gross accounts receivable;

6 unchanged sentences

and Accredo, which accounted for 33 % of gross accounts receivable.

For the six months ended June 30, 2021, three customers accounted for 100 % of gross product revenues;

For the nine months ended September 30, 2021, three customers accounted for 100 % of gross product revenues;

CVS Caremark accounted for 36 % of gross product revenues;

Pantherx accounted for 35 % of gross product

Pantherx accounted for 36 % of gross product revenues;

and Accredo accounted for 28 % of gross product revenues.

For the six months ended June 30 , 2020 three customers accounted for 100 % of gross product revenues;

For the nine months ended September 30, 2020 three customers accounted for 100 % of gross product revenues;

CVS Caremark accounted for 40 % of gross product revenues;

2 unchanged sentences

The Company depends on a single source supplier for its product and active pharmaceutical ingredient.

Cost of Product Sold

Cost of product sold includes manufacturing and distribution costs, the cost of drug substance, FDA program fees, royalties due to third parties on net product sales, freight, shipping, handling, storage costs, and salaries of employees involved with production.

The Company began capitalizing inventory upon FDA approval of WAKIX ® .

Excluded from cost of product sold shown and included in general and administrative expenses on the condensed consolidated statements of operations and comprehensive loss is amortization of acquired developed technology of $ 4,629 and $ 1,907 for the three months ended June 30, 2021 and 2020, respectively, and $ 9,208 and $ 3,693 for the six months ended June 30, 2021 and 2020, respectively.

Agreement Related to Intellectual Property

In August 2021, The Company entered into an asset purchase agreement with ConSynance Therapeutics, Inc.

to acquire HBS-102 (formerly referred to as “CSTI-100”), a potential first-in-class molecule with a novel mechanism of action.

Under the terms of the agreement, the Company acquired full development and commercialization rights globally, with the exception of Greater China, for $ 3,500 .

The Company accounted for the transaction as an asset acquisition as substantially all of the fair value of the assets acquired was concentrated in a single identified asset.

The payment was recorded in research and development within the unaudited condensed consolidated statement of operations and comprehensive loss for the three and nine months ended September 30, 2021.

Additionally, there are payments due upon the achievement of certain milestones including $ 1,750 for preclinical milestones, $ 19,000 for development milestones, $ 44,000 for regulatory milestones and $ 110,000 for sales milestones.

Recently Issued Accounting Pronouncements

3 unchanged sentences

For finance leases, a lessee should recognize interest on the lease liability separately from amortization of the right-of-use asset.

For operating leases, a lessee should recognize a single lease cost, calculated so that the cost of the lease is allocated over the lease term on a generally straight-line basis.

For operating

leases, a lessee should recognize a single lease cost, calculated so that the cost of the lease is allocated over the lease term on a generally straight-line basis.

For leases with a term of 12 months or less, a lessee is permitted to make an accounting policy election not to recognize lease assets and lease liabilities.

The new standard will become effective for the Company’s fiscal year ending December 31, 2021.

The Company is currently assessing the impact of this amended guidance and the timing of adoption.

We will no longer be an emerging growth company as of December 31, 2021, after which we will not be able to take advantage of the reduced disclosure requirements applicable to emerging growth companies.

In June 2016, the FASB issued ASU No.

2 unchanged sentences

2016-13 introduces an approach, based on expected losses, to estimate credit losses on certain types of financial instruments and modifies the impairment model for available-for-sale debt securities.

The new standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2022 for companies deemed to be small reporting companies as of November 15, 2019, with early adoption permitted.

The Company is currently evaluating the potential impact of adoption of this standard on its results of operations, financial position and cash flows and related disclosures.

As a result, we expect to adopt this standard on a modified retrospective basis on December 31, 2021 and to reflect the adoption as of January 1, 2021 in our annual results for the period ended December 31, 2021, but the Company does not expect a significant impact to its condensed consolidated financial statements.

In December 2019, the FASB issued ASU No.

8 unchanged sentences

The Company is currently evaluating the impact of the transition from LIBOR to alternative reference rates but does not expect a significant impact to its condensed consolidated financial statements.

In May 2021, the FASB issued ASU No.

2021-04, Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40):

Issuer’s Accounting for Certain

Modifications or Exchanges of Freestanding Equity-Classified Written Call Options (a consensus of the FASB Emerging Issues Task Force) , which clarif ies and reduce s diversity in an issuer’s accounting for modifications or exchanges of freestanding equity-classified written call options (for example, warrants) that remain equity classified after modification or exchang e.

The amendments are effective for annual periods beginning after December 15, 2021, including interim periods within those periods with early adoption permitted.

The Company is currently evaluating the impact of adopting this new accounting guidance.

Inventory, net consisted of the following:

September 30,

Raw materials

7 unchanged sentences

This event triggered a milestone payment of $ 75,000 associated with the License Agreement (discussed below) which the Company capitalized as an intangible asset and paid in November of 2019.

The Company determined a useful life of 10 years for such intangible asset, and, as of June 30, 2021, the remaining useful life was 8.25 years.

Prior to this event, all other milestones associated with the License Agreement were expensed through research and development as they did not meet the criteria to be recognized as an intangible asset.

The Company determined a useful life of 10 years for such intangible asset and the remaining useful life was 8.00 years as of September 30, 2021.

Prior to this event,

all other milestones associated with the License Agreement were expensed through research and development as they did not meet the criteria to be recognized as an intangible asset.

On October 13, 2020, the Company received notice that the FDA approved the New Drug Application (“NDA”) for WAKIX for the treatment of cataplexy in adult patients with narcolepsy.

This event triggered a milestone payment of $ 100,000 associated with the License Agreement which the Company capitalized as an intangible asset and paid in January of 2021.

The Company determined a useful life of 9 years for such intangible asset, and, as of June 30, 2021, the remaining useful life was 8.25 years.

Amortization expense was $ 4,629 and $ 1,907 for the three months ended June 30, 2021 and 2020, respectively, and $ 9,208 , and $ 3,693 , for the six months ended June 30, 2021 and 2020 respectively, and is recorded in general and administrative expenses on the condensed consolidated statements of operations and comprehensive income (loss).

The Company determined a useful life of 9 years for such intangible asset and the remaining useful life was 8.00 years as of September 30, 2021.

Amortization expense was $ 4,573 and $ 1,867 for the three months ended September 30, 2021 and 2020, respectively, and $ 13,781 and $ 5,560 , for the nine months ended September 30, 2021 and 2020, respectively, and is recorded in general and administrative expenses on the unaudited condensed consolidated statements of operations and comprehensive income (loss).

The Company expects the future annual amortization expense for the unamortized intangible assets to be as follows:

Years ending December 31,

2021 (excluding the six months ended June 30, 2021)

2021 (excluding the nine months ended September 30, 2021)

The gross carrying amount and net book value of the intangible assets is as follows:

September 30,

Gross Carrying Amount

10 unchanged sentences

The License Agreement also requires sales-based milestone payments, a fixed trademark royalty and a tiered royalty, all based on net sales, which become due and payable to Bioprojet on a quarterly basis.

The Company incurred $ 11,812 and $ 6,000 for the three months ended June 30, 2021 and 2020, respectively, and $ 21,359 and $ 9,277 for the six months ended June 30, 2021 and 2020, respectively, for sales-based, trademark and tiered royalties recognized as cost of product sold.

As of June 30, 2021 and December 31, 2020, the Company had accrued $ 11,811 and $ 9,006 , respectively, for sales-based, trademark and tiered royalties.

At December 31, 2020, the Company had accrued $ 100,000 for the milestone payment to Bioprojet.

The Company incurred $ 13,202 and $ 7,297 for the three months ended September 30, 2021 and 2020, respectively, and $ 34,561 and $ 16,574 for the nine months ended September 30, 2021 and 2020, respectively, for sales-based,

trademark and tiered royalties recognized as cost of product sold.

As of September 30, 2021 and December 31, 2020, the Company had accrued $ 13,202 and $ 9,006 , respectively, for sales-based, trademark and tiered royalties.

The Company had $ 0 and $ 100,000 accrued for milestone payments to Bioprojet as of September 30, 2021, and December 31, 2020, respectively.

ACCRUED EXPENSES

Accrued expenses consist of the following:

September 30,

Royalties due to third parties

6 unchanged sentences

Credit Agreements

On February 28, 2019, the Company entered into a multi-draw loan agreement with CRG Servicing LLC for an aggregate of $ 200,000 (the “CRG Loan”), which would have matured in March 2025 .

The CRG Loan bore a fixed rate of 12 %.

The CRG Loan required compliance with certain financial covenants.

The Company could draw three tranches of the CRG Loan based on achieving specific milestones and dates.

The Company could elect to pay the interest on the outstanding principal amount as follows:

(i) only 7.5 % of the 12% per annum in cash, paid quarterly, starting in March 2019, and (ii) 4.5 % of the 12% per annum interest as compounded interest, added to the aggregate outstanding principal balance quarterly;

the amount of any such compounded interest being a paid-in-kind loan.

As of December 31, 2019, the Company had borrowed $ 100,000 , resulting in cash proceeds received of $ 94,816 , net of issuance costs.

The issuance costs of $ 5,184 were being amortized over the six-year loan term of the CRG Loan.

On January 9, 2020, the Company entered into a credit agreement with OrbiMed Royalty & Credit Opportunities, LP for an aggregate amount of $ 200,000 (the “OrbiMed Loan”), which matures in January 2026 .

Blackstone Credit Agreement

On August 9, 2021, the Company entered into the Blackstone Credit Agreement that provides for (i) a senior secured term loan facility in an aggregate original principal amount of $ 200,000 (the “Initial Term Loan”) and (ii) a senior secured delayed draw term loan facility in an aggregate principal amount up to $ 100,000 (the “DDTL” and, together with the Initial Term Loan, the “Loans”).

The DDTL will become available on August 9, 2022.

The repayment schedule for the Initial Term Loan consists of quarterly $ 500 principal payments commencing on December 31, 2021 and increasing to quarterly $ 5,000 principal payments beginning on March 31, 2024, with a $ 145,500 payment due on the maturity date of August 9, 2026 (“Maturity Date”).

Interest is payable quarterly commencing on November 9, 2021 and continuing through the Maturity Date.

The Initial Loan bears interest at a per annum rate equal to LIBOR, subject to a 1.00 % floor, plus 6.50 %.

The net cash received related to the Initial Term Loan as a result of the transaction, less debt issuance costs of $ 8,147 , was $ 191,853 .

The debt issuance costs related to the Initial Term Loan will be amortized as additional interest expense over the five-year loan term of the Blackstone Credit Agreement.

In addition, the Company paid $ 1,000 in debt issuance costs relating the DDTL, which are recorded in other current assets within the unaudited condensed consolidated balance sheet.

The fair value of the Initial Term Loan as of September 30, 2021 was $ 190,436 .

OrbiMed Credit Agreement

On January 9, 2020, the Company entered into a credit agreement with OrbiMed for an aggregate amount of $ 200,000 (the “OrbiMed Loan”), with a maturity date of January 2026 .

Borrowings under the OrbiMed Loan are collateralized by all of the Company’s assets, excluding the intellectual property licensed through the License Agreement.

The OrbiMed Loan bears an interest rate equal to the sum of (i) the greater of (a) 1-month LIBOR or (b) 2.00 % per annum, plus (ii) 11.00 % per annum, paid in cash monthly in arrears on the last day of each month starting in January 2020.

each month starting in January 2020.

At the time of prepayment or repayment of all or any portion of the principal of the OrbiMed Loan, the Company is required to pay an exit fee of 7.0 % of the principal amount of the OrbiMed Loan prepaid, repaid, or required to be prepaid or repaid.

The Company recorded the exit fee as a liability and debt discount at the origination of the term loan.

In addition to entering into the OrbiMed Loan, the Company extinguished the CRG Loan which required a payoff amount of $ 120,893 consisting of principal repayment, interest, and exit fees.

In connection with extinguishment of the CRG Loan, the Company recognized a loss on extinguishment of $ 22,639 , which included an exit fee of $ 18,047 and the write-off of the remaining unamortized debt issuance costs of $ 4,592 .

The loss on extinguishment of debt was recorded in loss on debt extinguishment within the Company’s condensed consolidated statements of operations.

The net cash received as a result of the transaction, less debt issuance costs of $ 5,804 , was $ 73,313 .

These debt issuance costs will be amortized as additional interest expense over the six-year loan term of the OrbiMed Loan.

The fair value of the OrbiMed loan as of June 30, 2021 was $ 257,568 .

In connection with the OrbiMed Loan, the Company issued warrants (the “Warrants”) to OrbiMed Royalty & Credit Opportunities, LP on January 9, 2020.

See Note 13 for further discussion of the Warrants.

Pursuant to the Warrants, OrbiMed Royalty & Credit Opportunities, LP, may purchase up to 410,239 shares of the Company’s Common Stock for an initial exercise price of $ 16.10 at any time from the date of execution of the Warrants through the expiration date, defined within the Warrants as the earlier of (i) January 9, 2027 and (ii) the closing date of a Corporate Reorganization.

The fair value of the Warrants using the Black-Scholes option-pricing model was $ 2,359 at January 9, 2020.

The portion of the OrbiMed Loan proceeds allocated to the warrant liability resulted in a debt discount, which is presented in the condensed consolidated balance sheets as a direct deduction from the carrying value of the debt and is being amortized as additional interest expense over the six-year loan term of the OrbiMed Loan.

The unamortized debt discount as of June 30, 2021 is $ 1,957 and is presented in the condensed consolidated balance sheets as a direct deduction from the carrying value of the debt.

The balances of the OrbiMed Loan as of June 30, 2021 and December 31, 2020 were as follows:

In connection with the OrbiMed Loan, the Company extinguished its $ 200,000 multi-draw loan agreement with CRG Servicing LLC (the “CRG Loan”), which required a payoff amount of $ 120,893 consisting of principal repayment, interest, and exit fees.

In connection with extinguishment of the CRG Loan, the Company recognized a loss on extinguishment of $ 22,639 within the Company’s unaudited condensed consolidated statements of operations for the nine months ended September 30, 2020.

In connection with the Blackstone Credit Agreement, the Company extinguished the OrbiMed Loan, which required a payoff amount of $ 222,666 consisting of principal repayment, interest, exit fees and a prepayment premium.

The Company recognized a loss on extinguishment of $ 26,146 relating to the OrbiMed Loan within the Company’s unaudited condensed consolidated statements of operation for the three and nine months ended September 30, 2021.

Long-term debt, net consists of the following:

September 30,

Liability component - principal

Unamortized debt discount associated with the exit fee, debt financing costs and discount with warrant financing

Unamortized debt discount associated with the exit fee, debt financing costs and discount with warrant financing (see note 13)

Liability component - net carrying value

Interest expense related to the OrbiMed Loan and CRG Loan were included in interest expense, net in the condensed consolidated statements of operations and comprehensive income (loss) as follows:

Less current portion

Long term debt, net

Future minimum payments relating to long term debt, net as of September 30, 2021 for the periods indicated below consists of the following:

Years ending December 31,

2021 (excluding the nine months ended September 30, 2021)

Interest expense related to the Company’s long term debt, net, which is included in interest expense, net in the unaudited condensed consolidated statements of operations and comprehensive income (loss), consists of the following:

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Interest on principal balance

5 unchanged sentences

Lease Agreements

In April 2018, the Company entered into an operating lease for approximately nine thousand square feet of office space in Northbrook, IL, which expired in January 2020 .

In June 2018, the Company entered into an operating lease for approximately fifteen thousand square feet of office space in Plymouth Meeting, PA, which expires in May 2024 .

In December 2020, the Company entered into an operating lease for approximately thirteen thousand square feet of additional office space in Plymouth Meeting, PA, which expires in May 2024 .

The term will not commence until the Company takes occupancy in mid-2021.

The terms of the lease payments provide for rental payments on a monthly basis and on a graduated scale.

1 unchanged sentence

In addition, tenant improvement allowances recorded are amortized as a reduction to rent expense on a straight-line basis over the lease term.

Rent expense was $ 217 and $ 353 for the three and six months ended June 30, 2021, respectively, compared to $ 151 and $ 355 for the three and six months ended June 30, 2020, respectively.

The following table sets forth the lease payment obligations as of June 30, 2021, for the periods indicated below:

Rent expense was $ 420 and $ 773 for the three and nine months ended September 30, 2021, respectively, compared to $ 161 and $ 516 for the three and nine months ended September 30, 2020, respectively.

The following table sets forth the lease payment obligations as of September 30, 2021, for the periods indicated below:

Years ending December 31,

2021 (excluding the six months ended June 30, 2021)

2021 (excluding the nine months ended September 30, 2021)

CONVERTIBLE PREFERRED STOCK

Upon the closing of the IPO, all outstanding shares of the Company’s convertible preferred stock were automatically converted into shares of common stock and the accrued dividend payable to holders of the convertible preferred stock was paid out in shares of common stock, resulting in a total of 42,926,630 shares of common stock being issued to former holders of the Company’s convertible preferred stock.

convertible preferred stock was paid out in shares of common stock, resulting in a total of 42,926,630 shares of common stock being issued to former holders of the Company’s convertible preferred stock.

Series A Preferred Stock

1 unchanged sentence

On January 8, 2018, the Company issued an additional 15,000,000 shares of Series A convertible preferred stock for a purchase price of $ 1.00 per share, or $ 15,000 in the aggregate.

As of June 30, 2020, there were 286,000,000 Series A convertible preferred stock authorized of which 285,000,000 were issued and outstanding.

As of September 30, 2020, there were 286,000,000 Series A convertible preferred stock authorized of which 285,000,000 were issued and outstanding.

Each outstanding share of Series A convertible preferred stock accrued dividends at 10 % per annum of the Series A original issue price, subject to adjustment for stock splits, combinations, recapitalizations, stock dividends and similar transactions.

2 unchanged sentences

On January 8, 2018, the Company issued 8,000,000 shares of Series B convertible preferred stock for a purchase price of $ 1.25 per share, or $ 10,000 in the aggregate.

As of June 30, 2020, there were 8,030,000 shares of Series B convertible preferred stock authorized, of which 8,000,000 were issued and outstanding.

outstanding share of Series B convertible preferred stock accrue d dividends at 10 % per annum of the Series B original issue price, subject to adjustment for stock splits, combinations, recapitalizations, stock dividends and similar transactions.

As of September 30, 2020, there were 8,030,000 shares of Series B convertible preferred stock authorized, of which 8,000,000 were issued and outstanding .

Each outstanding share of Series B convertible preferred stock accrued dividends at 10 % per annum of the Series B original issue price, subject to adjustment for stock splits, combinations, recapitalizations, stock dividends and similar transactions.

Preferred dividends on the Series B convertible preferred stock were cumulative and were compounded annually.

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On August 9, 2019, the Company issued 25,510,205 shares of Series C convertible preferred stock for a purchase price of $ 1.96 per share, or $ 50,000 in the aggregate.

As June 30, 2020, there were 25,600,000 shares of Series C convertible preferred stock authorized, of which 25,510,205 were issued and outstanding.

As September 30, 2020, there were 25,600,000 shares of Series C convertible preferred stock authorized, of which 25,510,205 were issued and outstanding .

Each outstanding share of Series C convertible preferred stock accrued dividends at 10 % per annum of the Series C original issue price, subject to adjustment for stock splits, combinations, recapitalizations, stock dividends and similar transactions.

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The Company’s common stock has no preemptive rights, conversion rights or other subscription rights or redemption or sinking fund provisions.

In connection with the Blackstone Credit Agreement, on August 9, 2021, the Company sold an aggregate of 1,048,951 shares of our common stock, par value $ 0.00001 per share, to Blackstone for an aggregate cash consideration of $ 30,000 , or $ 28.60 per share.

This sale did not involve a public offering and was therefore exempt from registration under Section 4(a)(2) of the Securities Act of 1933, as amended, and Regulation D thereunder as a transaction not involving any public offering.

In connection with the OrbiMed warrant (see Note 13) 221,511 shares of the Company’s common stock were issued to OrbiMed on September 3, 2021.

STOCK INCENTIVE PLAN AND STOCK-BASED COMPENSATION

2020 Stock Incentive Plan

On August 7, 2017, the Company adopted an equity incentive plan (the “2017 Plan”).

Under the 2017 Plan, directors, officers, employees, consultants, and advisors of the Company can be paid incentive compensation measured by the value of the Company’s common shares through grants of stock options, stock appreciation rights (“SARs”), or restricted stock.

In connection with the Company’s IPO, the board of directors adopted, and its stockholders approved, the 2020 Incentive Award Plan (the “2020 Plan”), in order to facilitate the grant of cash and equity incentives to directors, employees (including the Company’s named executive officers) and consultants of the Company and its subsidiaries.

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However, the 2017 Plan will continue to govern the terms and conditions of outstanding awards granted under it.

The 2020 Plan provides for the grant of stock options, including i ncentive s tock o ption s (“ ISOs ”) and n on-qualified stock options (“ NSOs ”) , SARs, restricted stock, dividend equivalents, restricted stock units (“ RSUs ”) and other stock or cash - based awards.

The 2020 Plan provides for the grant of stock options, including incentive stock options (“ISOs”) and non-qualified stock options (“NSOs”), SARs, restricted stock, dividend equivalents, restricted stock units (“RSUs”) and other stock or cash-based awards.

Stock options and stock appreciation rights under the 2017 Plan and the 2020 Plan have a 10-year contractual term and vest over the vesting period specified in the applicable award agreement, at achievement of a performance requirement, or upon change of control (as defined in the applicable plan).

RSUs vest over the vesting period specified in the applicable award agreement, at achievement of a performance requirement, or upon change of control (as defined in the applicable plan).

Changes in stock options granted under the 2017 and 2020 Plans for the six months ended June 30, 2021 is as follows:

2017 Stock Incentive Plan

On August 7, 2017, the Company adopted an equity incentive plan (the “2017 Plan”).

Stock Options

The following table summarizes stock option activity for the nine months ended September 30, 2021:

Awards outstanding—December 31, 2020

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Awards forfeited

Awards outstanding—June 30, 2021

Changes in SARs granted under the 2017 Plan for the three months ended June 30, 2021 is as follows:

Awards outstanding—September 30, 2021

Stock Appreciation Rights

The following table summarizes SARs activity for the nine months ended September 30, 2021:

Awards outstanding—December 31, 2020

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Awards forfeited

Awards outstanding—June 30, 2021

Changes in RSUs granted under the 2020 Plan for the three months ended June 30, 2021 is as follows:

Awards outstanding—September 30, 2021

Restricted Stock Units

The following table summarizes RSU activity for the nine months ended September 30, 2021:

Awards outstanding—December 31, 2020

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Awards forfeited

Awards outstanding—June 30, 2021

As of June 30, 2021 and December 31, 2020, stock awards issued under the 2017 and 2020 Plans of 1,074,133 and 987,538 common shares, respectively, were vested.

The Company has elected early adoption of ASU No.

Awards outstanding—September 30, 2021

As of September 30, 2021 and December 31, 2020, stock awards issued under the 2017 and 2020 Plans of 1,473,881 and 987,538 common shares, respectively, were vested.

The Company has elected early

adoption of ASU No.

2016-09 to recognize forfeitures as they occur.

As a result of the adoption, for the six months ended June 30, 2020 the Company reversed $ 10 out of stock-based compensation previously recorded.

As a result of the adoption, for the nine months ended September 30, 2020, the Company reversed $ 2 out of stock-based compensation previously recorded.

Value of Stock Options and SARs

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The assumptions used to value the awards are summarized in the following table.

June 30, 2021

September 30,

Dividend yield

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The fair value of RSUs is equal to the value of the Company’s common stock on the grant date.

The weighted average per share fair value of awards issued under the 2017 Plan and 2020 Plan was $ 12.24 and $ 10.06 on June 30, 2021 and December 31, 2020, respectively.

Stock-based compensation expense, net for the three and six months ended June 30, 2021 and 2020, respectively, was recorded in the condensed consolidated statements of operations and comprehensive income (loss) in the following line items:

Three Months Ended June 30,

Six Months Ended June 30,

The weighted average per share fair value of awards issued under the 2017 Plan and 2020 Plan was $ 12.52 and $ 10.06 on September 30, 2021 and December 31, 2020, respectively.

Stock-Based Compensation

Stock-based compensation expense, net for the three and nine months ended September 30, 2021 and 2020, respectively, was recorded in the unaudited condensed consolidated statements of operations and comprehensive income (loss) in the following line items:

Three Months Ended September 30,

Nine Months Ended September 30,

Research and development expense

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General and administrative expense

Options and RSUs issued under the 2017 Plan and 2020 Plan are reflected as a component of equity in these condensed consolidated financial statements.

Stock appreciation rights are reflected as other non-current liability.

The Company will recognize compensation expense for these awards as summarized in the following table.

Years Ending December 31,

2021 (excluding the six months ended June 30, 2021)

Options and RSUs issued under the 2017 Plan and 2020 Plan are included in stockholder’s equity, and SARs are included in other non-current liabilities, in the Company’s unaudited condensed consolidated balance sheet.

As of September 30, 2021, the total unrecognized stock-based compensation expense related to

Options and RSUs was $ 63,450 .

Such amount will be recognized in the Company’s consolidated statement of operations over a weighted average period of 3.8 years.

Employee Stock Purchase Plan

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It is intended that the ESPP meet the requirements for an “employee stock purchase plan” under Section 423 of the Internal Revenue Code.

For the three and six months ended June 30, 2021, there were no shares issued under the ESPP, respectively.

The discount on the ESPP for the three and six months ended June 30, 2021 is nominal.

In connection with the OrbiMed Loan, the Company issued Warrants to OrbiMed Royalty & Credit Opportunities, LP on January 9, 2020.

The fair value of the Warrants using the Black-Scholes option-pricing model was $ 2,359 on January 9, 2020 and was initially recorded as a warrant liability which was included in warrant liability in the condensed consolidated balance sheet.

The unamortized debt discount as of June 30, 2021 and December 31, 2020 was $ 1,957 and $ 2,102 , respectively, and is presented in the condensed consolidated balance sheet as a direct deduction from the carrying value of the debt.

During the three and six months ended June 30, 2020, a loss of $ 438 and $ 1,584 was recorded in other expense in the condensed consolidated statements of operations due to the change in the fair value of the warrant liability.

For the three and nine months ended September 30, 2021, there were no shares issued under the ESPP, respectively.

The discount on the ESPP for the three and nine months ended September 30, 2021 was $ 60 and $ 80 , respectively, and is recorded within stock-based compensation expense.

In connection with the OrbiMed Loan, the Company issued warrants (the “Warrants”) to OrbiMed on January 9, 2020.

Pursuant to the Warrants, OrbiMed could purchase up to 410,239 shares of the Company’s common stock for an initial exercise price of $ 16.10 at any time from the date of execution of the Warrants through the expiration date, defined within the Warrants as the earlier of (i) January 9, 2027 and (ii) the closing date of a Corporate Reorganization.

The portion of the OrbiMed Loan proceeds allocated to the warrant liability resulted in a debt discount, which is presented in the unaudited condensed consolidated balance sheets as a direct deduction from the carrying value of the debt and is being amortized as additional interest expense over the six-year loan term of the OrbiMed Loan.

In connection with the Blackstone Credit Agreement, the OrbiMed Loan was repaid in fully and the unamortized debt discount related to the Warrants was included in the loss on debt extinguishment (see Note 11).

On September 3, 2021, OrbiMed exercised its option to purchase shares of the Company’s common stock pursuant to the Warrants, which resulted in the net settlement of 221,511 shares of the Company’s common stock issued to OrbiMed.

In connection with the IPO, the financial instrument underlying the warrants was converted from the Company’s Series C Preferred Stock to the Company’s Common Stock.

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EARNINGS PER SHARE

For the three and six months ended June 30, 2020, the Company used the two-class method to compute net loss per common share because the Company has issued securities (convertible preferred stock) that entitle the holder to participate in dividends and earnings of the Company.

The Company has reported a net loss for the three months ended September 30, 2021.

The weighted average number of shares utilized for basic and diluted net loss per share attributable to common stockholders are the same for this period because all stock options and warrants have been excluded from the computation of diluted weighted-average shares outstanding because such securities would have an antidilutive impact.

The Company has reported net income for the nine months ended September 30, 2021.

Diluted net income (loss) per common share is computed under the treasury stock method by using the weighted average number of shares of common stock outstanding, plus, for periods with net income attributable to common stockholders, the potential dilutive effects of stock options, stock appreciation rights, restricted stock units and warrants.

In addition, the Company analyzes the potential dilutive effects of the outstanding convertible preferred stock under the ‘if-converted’ method when calculating diluted earnings per share, in which it is assumed that the outstanding convertible preferred stock converts into common stock at the beginning of the

period or when issued if later.

The Company reports the more dilutive of the approaches (treasury stock or ‘if converted’) as its diluted net income per share during the period.

For the three and nine months ended September 30, 2020, the Company used the two-class method to compute net loss per common share because the Company has issued securities (convertible preferred stock) that entitle the holder to participate in dividends and earnings of the Company.

Under this method, net income is reduced by the amount of any dividends earned and the accretion of convertible preferred stock to its redemption value during the period.

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The two-class method is not applicable during periods with a net loss, as the holders of the convertible preferred stock have no obligation to fund losses.

The Company has reported a net loss for the three and six months ended June 30, 2020, and the weighted average number of shares utilized for basic and diluted net loss per share attributable to common stockholders are the same for these periods because all convertible preferred stock and stock options have been excluded from the computation of diluted weighted-average shares outstanding because such securities would have an antidilutive impact.

Additionally, the fair value adjustment for the warrants was excluded from the computation of diluted net loss for the three and six months ended June 30, 2020 since the additional income would have an antidilutive impact.

The Company has reported net income for the three and six months ended June 30, 2021.

The Company reports the more dilutive of the approaches ( treasury stock or ‘if converted’) as their diluted net income per share during the period.

The following table sets forth the computation of basic and diluted net loss per share:

Three Months Ended June 30,

Six Months Ended June 30,

Net income (loss)

The Company reported a net loss for the three and nine months ended September 30, 2020, and the weighted average number of shares utilized for basic and diluted net loss per share attributable to common stockholders are the same for these periods because all convertible preferred stock and stock options have been excluded from the computation of diluted weighted-average shares outstanding because such securities would have an antidilutive impact.

Additionally, the fair value adjustment for the warrants was excluded from the computation of diluted net loss for the three and nine months ended September 30, 2020 since the additional income would have an antidilutive impact.

The following table sets forth the computation of basic and diluted net (loss) income per share:

Three Months Ended September 30,

Nine Months Ended September 30,

Net (loss) income

Accumulation of dividends on preferred stock

Net income (loss) available to common shareholders

Net income (loss) per common share - basic

Net income (loss) per common share - diluted

Net (loss) income available to common shareholders

Net (loss) income per common share - basic

Net (loss) income per common share - diluted

Weighted average number of shares of common stock - basic

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Securities outstanding that are included in the computation above, utilizing the treasury stock method are as follows:

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Stock options, SARs, and RSUs to purchase common stock

Potential common shares issuable upon conversion of preferred stock, exercise of stock options, and exercise of warrants that are excluded from the computation of diluted weighted-average shares outstanding as well as the warrant fair value adjustments excluded from the numerator are as follows:

Three Months Ended June 30,

Six Months Ended June 30,

Potential common shares issuable upon conversion of preferred stock, exercise of stock options, and exercise of warrants that were excluded from the computation of diluted weighted-average shares outstanding as well as the warrant fair value adjustments excluded from the numerator are as follows:

Three Months Ended September 30,

Nine Months Ended September 30,

Stock options, SARs, and RSUs to purchase common stock

Convertible preferred stock

Adjustment for warrants

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In addition, the Chairman of the Company’s board of directors was the President and owner of the entity.

The Company incurred $ 71 and $ 1,744 for the three months ended June 30, 2021 and 2020, respectively, and $ 142 and $ 3,474 for the six months ended June 30, 2021 and 2020, respectively, in management fee expense and other expenses to this related party, which are included in general and

administrative expense in the condensed consolidated statements of operations and comprehensive loss.

The Company incurred $ 71 and $ 3,628 for the three months ended September 30, 2021 and 2020, respectively, and $ 213 and $ 7,101 for the nine months ended September 30, 2021 and 2020, respectively, in management fee expense and other expenses to this related party, which are included in general and administrative expense in the unaudited condensed consolidated statements of operations and comprehensive loss.

The Company terminated the Management Services Agreement upon the consummation of its IPO.

The Company is also party to a right of use agreement with the related party whereby it has access to and the right to use certain office space leased by the related party in Chicago, Illinois.

In addition, the Company had participate d in certain transactions with separate related parties that also share common ownership with the Company, primarily related to combined employee health plans.

As of June 30 , 2021 and Dec ember 3 1 , 2020 the amounts due to related parties included in current liabilities was $ 0 and $ 0 , respectively, and the amount in cluded in prepaid expenses and other assets was $ 0 and $ 1 , respectively.

SUBSEQUENT EVENTS

On August 9, 2021, the Company entered into a Credit Agreement (the “New Credit Facility”) with Blackstone Alternative Credit Advisors LP and the other lenders party thereto from time to time and Wilmington Trust, National Association , as administrative agent, that provides for (i) a senior secured term loan facility in an aggregate original principal amount of $ 200,000 and (b) a senior secured delayed draw term loan facility in an aggregate principal amount up to $ 100,000 .

In connection with the New Credit Facility, on August 9, 2021, the Company also sold 1,048,951 shares of the Company’s common stock at a price per share of $ 28.60 for gross proceeds of $ 30,000 .

The OrbiMed Loan was repaid in full and all commitments thereunder were terminated on August 9, 2021 in connection with the execution of the New Credit Facility .

In connection with the payment of the OrbiMed Loan, we paid an exit fee of 7.0 % and a repayment premium of 4.0 % of the principal amount of the OrbiMed Loan repaid.

In addition, the Company had participated in certain transactions with separate related parties that also share common ownership with the Company, primarily related to combined employee health plans.

In August 2021, the Company paid a $ 2,300 advisory fee to Paragon in connection with the Blackstone Credit Agreement.

$ 2,000 of this payment was recorded in debt issuance costs as a component of long-term debt, net and $ 300 was recorded in common stock issuance costs as a component of additional paid-in capital, within the unaudited condensed consolidated balance sheet as of September 30, 2021.

As of September 30, 2021 and December 31, 2020, the amount included in prepaid expenses and other assets was $ 0 and $ 1 , respectively, and there were no amounts due to related parties included in current liabilities.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements