What changed in this filing

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Item 1. Financial Statements

2021-08-03 compared with 2021-05-05 · 159 added, 121 removed, 564 unchanged (33% of the section changed)

37 unchanged sentences

(In thousands, except per share amounts)

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Product sales, net

7 unchanged sentences

Total costs and expenses

Income from operations

Income (loss) from operations

Interest income

Interest expense

Income before income taxes

Provision for income taxes

Net income per share

Weighted average shares used in computing net income per share

Income (loss) before income taxes

Provision for (benefit from) income taxes

Net income (loss)

Net income (loss) per share

Weighted average shares used in computing net income (loss) per share

See Accompanying Notes to Condensed Financial Statements

2 unchanged sentences

(In thousands)

Three Months Ended March 31,

Other comprehensive income:

Net unrealized gain on short-term investments

Comprehensive income

Three Months Ended June 30,

Six Months Ended June 30,

Net income (loss)

Other comprehensive income (loss):

Net unrealized gain (loss) on short-term investments

Comprehensive income (loss)

See Accompanying Notes to Condensed Financial Statements

4 unchanged sentences

Stockholders’

Balance at January 1, 2021

Balance as of January 1, 2021

( 1,305,972 )

1 unchanged sentence

Issuance of common stock upon exercise of options

Stock compensation expense

Balance at March 31, 2021

Stock-based compensation expense

Balance as of March 31, 2021

( 1,266,472 )

Net unrealized gain on short-term investments

Issuance of common stock upon exercise of options and participation in Purchase Plan

Stock-based compensation expense

Balance as of June 30, 2021

( 1,280,293 )

Comprehensive

Stockholders’

Balance at January 1, 2020

Balance as of January 1, 2020

( 1,276,228 )

1 unchanged sentence

Issuance of common stock upon exercise of options

Stock compensation expense

Balance at March 31, 2020

Stock-based compensation expense

Balance as of March 31, 2020

( 1,254,985 )

Net unrealized loss on short-term investments

Issuance of common stock upon exercise of options and participation in Purchase Plan

Stock-based compensation expense

Balance as of June 30, 2020

( 1,272,561 )

See Accompanying Notes to Condensed Financial Statements

2 unchanged sentences

(In thousands)

Three Months Ended March 31,

Six Months Ended June 30,

Operating activities

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

Adjustments to reconcile net income to net cash provided by (used in) operating activities:

Stock-based compensation expense

12 unchanged sentences

Deferred revenue

Other current and long-term liabilities

Net cash used in operating activities

Net cash provided by (used in) operating activities

Investing activities

2 unchanged sentences

Capital expenditures

Net cash provided by investing activities

Net cash (used in) provided by investing activities

Financing activities

Net proceeds from issuances of common stock upon exercise of options

Cost share advance from collaboration partner

Net proceeds from issuances of common stock upon exercise of options and participation in Purchase Plan

Net proceeds from term loan financing

Net cash provided by financing activities

Net (decrease) increase in cash and cash equivalents

Net increase in cash and cash equivalents

Cash and cash equivalents at beginning of period

6 unchanged sentences

In this report, “Rigel,” “we,” “us” and “our” refer to Rigel Pharmaceuticals, Inc.

Nature of O perations

Nature of Operations

We are a biotechnology company dedicated to discovering, developing and providing novel small molecule drugs that significantly improve the lives of patients with hematologic disorders, cancer and rare immune diseases.

3 unchanged sentences

Fostamatinib is currently being studied in a Phase 3 trial for the treatment of warm autoimmune hemolytic anemia (wAIHA);

a Phase 3 clinical trial for the treatment of hospitalized patients with COVID-19, a National Institutes of Health (NIH)/National Heart, Lung, and Blood Institute (NHLBI)-sponsored Phase 2 trial for the treatment of hospitalized patients with COVID-19, in collaboration with Inova Health System;

a Phase 3 clinical trial for the treatment of hospitalized high-risk patients with COVID-19;

a Phase 3 trial sponsored by National Institute of Health (NIH)/National Heart, Lung, and Blood Institute (NHLBI), the ACTIV-4 Host Tissue Trial, is evaluating treatments, including fostamatinib in hospitalized patients with COVID-19;

and a Phase 2 trial for the treatment of COVID-19 being conducted by Imperial College London.

An NIH/ NHLBI-sponsored Phase 2 trial for the treatment of hospitalized patients with COVID-19, in collaboration with Inova Health System, was recently completed.

Our other clinical programs include our interleukin receptor-associated kinase (IRAK) inhibitor program and a receptor-interacting serine/threonine-protein kinase (RIP1) inhibitor program in clinical development with partner Eli Lilly and Company (Lilly).

28 unchanged sentences

Prior to FDA approval of TAVALISSE, all manufacturing costs were charged to research and development expense in the period incurred.

As of March 31, 2021 and December 31, 2020, our physical inventory included active pharmaceutical product for which costs have been previously charged to research and development expense.

As of June 30, 2021 and December 31, 2020, our physical inventory included active pharmaceutical product for which costs have been previously charged to research and development expense.

However, manufacturing of drug product, finished bottling and other labeling activities that occurred post FDA approval are included in the inventory value at each balance sheet date.

2 unchanged sentences

Cost of product sales consists of third-party manufacturing costs, transportation and freight, and indirect overhead costs associated with the manufacture and distribution of TAVALISSE.

A portion of the cost of producing the product sold to date was expensed as research and development prior to the Company’s New Drug Application (NDA) approval for TAVALISSE and therefore is not included in the cost of product sales during this period.

A portion of the cost of producing the product sold to date was expensed as research and development prior to the Company’s New Drug Application approval for TAVALISSE and therefore is not included in the cost of product sales during this period.

Accounts Receivable

1 unchanged sentence

We estimate the allowance for doubtful accounts based on existing contractual payment terms, actual payment patterns of our customers and individual customer circumstances.

As of March 31, 2021 and December 31, 2020, customer allowance for prompt payment discounts were $ 105,000 and $ 171,000 , respectively.

As of June 30, 2021 and December 31, 2020, customer allowance for prompt payment discounts were $ 113,000 and $ 171,000 , respectively.

To date, we have determined that an allowance for doubtful accounts is not required.

8 unchanged sentences

We apply the five-step model to contracts when it is probable that we will collect the consideration we are entitled to in exchange for the goods or services we transfer to the customer.

At contract inception, once the contract is determined to be within the scope of this new guidance, we assess the goods or services promised within each contract and identify, as a performance obligation, and assess whether each promised good or service is distinct.

At contract inception, once the contract is determined to be within the scope of this new guidance, we assess the goods or services promised

within each contract and identify, as a performance obligation, and assess whether each promised good or service is distinct.

We then recognize as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied.

67 unchanged sentences

In December 2014, we entered into a sublease agreement with an unrelated third party to occupy a portion of our research and office space through January 2023.

All of our leases outstanding as March 31, 2021 continued to be classified as operating leases.

All of our leases outstanding as June 30, 2021 continued to be classified as operating leases.

We recorded an operating lease right-of-use asset and an operating lease liability on our balance sheet.

22 unchanged sentences

We recognize interest and penalties related to unrecognized tax benefits as a component of income taxes.

Net Income Per Share

Basic net income per share is computed by dividing net income by the weighted-average number of shares of common stock outstanding during the period.

Diluted net income per share is computed by dividing net income by the weighted-average number of shares of common stock outstanding during the period and the number of additional shares of common stock that would have been outstanding if potentially dilutive securities had been issued.

Potentially dilutive securities include stock options, restricted stock units and shares issuable under our stock award plans.

Net Income (Loss) Per Share

Basic net income (loss) per share is computed by dividing net income (loss) by the weighted-average number of shares of common stock outstanding during the period.

Diluted net income (loss) per share is computed by dividing net income (loss) by the weighted-average number of shares of common stock outstanding during the period and the number of additional shares of common stock that would have been outstanding if potentially dilutive securities had been issued.

Potentially dilutive securities include stock options, restricted stock units and shares issuable under our Purchase Plan.

The dilutive effect of these potentially dilutive securities is reflected in diluted earnings per share by application of the treasury stock method.

2 unchanged sentences

Three Months Ended

Six Months Ended

EPS Numerator:

Net income (loss)

EPS Denominator—Basic:

2 unchanged sentences

Weighted-average common shares outstanding

Dilutive effect of stock options, restricted stock units and shares under ESPP

Dilutive effect of stock options, restricted stock units and shares under Purchase Plan

Weighted-average shares outstanding and common stock equivalents

Net income per common share, basic and diluted

The potential shares of common stock that were excluded from the computation of diluted net income per share for the periods presented because including them would have been antidilutive are as follows:

(in thousands):

Net income (loss) per share

The potential shares of common stock that were excluded from the computation of diluted net income (loss) per share for the periods presented because including them would have been antidilutive are as follows (in thousands):

Three Months Ended

Six Months Ended

Outstanding stock options

Restricted stock units

Purchase Plan

Stock Award Plans

5 unchanged sentences

The fair value of each option award is estimated on the date of grant using the Black-Scholes option pricing model which considered our stock price, as well as assumptions regarding a number of complex and subjective variables.

The fair value of the restricted stock unit grant is based on the market price of our common stock on the date of grant.

The fair value of the restricted stock unit grant is based on the market price of our common stock on

the date of grant.

We use the straight-line attribution method over the requisite employee service period for the entire award in recognizing stock-based compensation expense.

6 unchanged sentences

Stock-Based Compensation

Total stock-based compensation related to all of our share-based payments that we recognized for the three months ended March 31, 2021 and 2020 were as follows (in thousands):

Total stock-based compensation related to all of our share-based payments that we recognized for the three and six months ended June 30, 2021 and 2020 were as follows (in thousands):

Three Months Ended

Six Months Ended

Selling, general and administrative

1 unchanged sentence

Total stock-based compensation expense

During the three months ended March 31, 2021, we granted options to purchase 5,339,981 shares of common stock with a grant-date weighted-average fair value of $ 2.32 per share, and 813,854 options to purchase shares were exercised.

As of March 31, 2021, total stock options outstanding was 30,902,155 shares, of which, 2,018,125 shares outstanding are performance-based stock options wherein the achievement of the corresponding corporate-based milestones was not considered as probable.

Accordingly, the related grant date fair value for these performance-based stock options of $ 4.2 million has not been recognized as stock-based compensation expense as of March 31, 2021.

During the six months ended June 30, 2021, we granted options to purchase 5,850,481 shares of common stock with a grant-date weighted-average fair value of $ 2.32 per share, and 1,049,121 options to purchase shares were exercised.

As of June 30, 2021, total stock options outstanding was 30,639,026 shares, of which, 2,018,125 shares outstanding are performance-based stock options wherein the achievement of the corresponding corporate-based milestones was not considered as probable.

Accordingly, the related grant date fair value for these performance-based stock options of $ 4.2 million has not been recognized as stock-based compensation expense as of June 30, 2021.

The exercise price of stock options granted under our stock plans is equal to the fair market value of the underlying shares on the date of grant.

13 unchanged sentences

(2) for cancelled options, the term of the options from option grant date to cancellation date, excluding non-vested option forfeitures;

and (3) for options that remained outstanding at the balance sheet date, the term of the options from option grant date to the end of the reporting period and the estimated remaining term of the options.

options that remained outstanding at the balance sheet date, the term of the options from option grant date to the end of the reporting period and the estimated remaining term of the options.

The consideration and calculation of the above data gave us reasonable estimates of the expected term for each employee group.

4 unchanged sentences

● Dividend yield—The expected dividend yield is 0 % as we have not paid and do not expect to pay dividends in the future.

The following table summarizes the weighted-average assumptions relating to options granted pursuant to our equity incentive plans for the three months ended March 31, 2021 and 2020:

The following table summarizes the weighted-average assumptions relating to options granted pursuant to our equity incentive plans for the three and six months ended June 30, 2021 and 2020:

Three Months Ended

Six Months Ended

Risk-free interest rate

2 unchanged sentences

Expected volatility

During the three months ended March 31, 2021, we granted 52,000 restricted stock units with grant-date weighted-average fair value of $ 3.77 per share, and vests over 2 years .

As of March 31, 2021, there were approximately $ 18.2 million of unrecognized stock-based compensation cost which is expected to be recognized over the remaining weighted-average period of 2.37 years, related to time-based stock options, RSUs and performance-based stock options, wherein achievement of the corresponding corporate-based milestones was considered as probable.

As of March 31, 2021, there were 9,702,519 shares of common stock available for future grant under our equity incentive plans.

In January 2021, our Compensation Committee approved the 825,000 shares increase in available number of shares for future grant under our 2018 Plan, contingent and effective upon approval by our stockholders at the annual meeting in May 2021.

During the six months ended June 30, 2021, we granted 233,750 restricted stock units with grant-date weighted-average fair value of $ 3.67 per share.

The restricted stock units granted vests over 1 to 2 years , all of which are outstanding as of June 30, 2021.

As of June 30, 2021, there were approximately $ 17.4 million of unrecognized stock-based compensation cost which is expected to be recognized over the remaining weighted-average period of 2.11 years, related to time-based stock options, RSUs and performance-based stock options, wherein achievement of the corresponding corporate-based milestones was considered as probable.

In January 2021, our Board of Directors approved the 825,000 shares increase in available number of shares for future grant under our 2018 Plan, which became effective upon approval by our stockholders during the stockholders annual meeting in May 2021.

As of June 30, 2021, there were 10,381,756 shares of common stock available for future grant under our equity incentive plans.

Employee Stock Purchase Plan

14 unchanged sentences

The total incremental fair value associated with this “reset” was approximately $ 535,000 and is being amortized to expenses from July 1, 2020 to June 30, 2022.

As of March 31, 2021, there were no shares reserved for future issuance under the Purchase Plan.

In January 2021, our Compensation Committee approved the 5,500,000 shares increase in the maximum number of shares authorized for issuance under the Purchase Plan, contingent and effective upon approval by our stockholders at the annual meeting in May 2021.

As of March 31, 2021, unrecognized stock-based compensation cost related to our Purchase Plan amounted to $ 455,000 , which is expected to be recognized over the remaining weighted average period of 0.74 years.

In January 2021, our Board of Directors approved the 5,500,000 shares increase in the maximum number of shares authorized for issuance under the Purchase Plan, which became effective upon approval by our stockholders during the annual stockholders meeting in May 2021.

As of June 30, 2021, there were 5,039,922 shares reserved for future issuance under the Purchase Plan.

As of June 30, 2021, unrecognized stock-based compensation cost related to our Purchase Plan amounted to $ 292,000 , which is expected to be recognized over the remaining weighted average period of 0.49 years.

Revenues disaggregated by category were as follows (in thousands):

Three Months Ended

Six Months Ended

Product sales:

9 unchanged sentences

The following table summarizes the percentages of revenues from each of our customers who individually accounted for 10% or more (wherein * denotes less than 10%) of the total net product sales and revenues from collaborations:

Three Months Ended

Six Months Ended

ASD Healthcare and Oncology Supply

McKesson Specialty Care Distribution Corporation

Cardinal Healthcare

Our first and only FDA approved product, TAVALISSE ® , was approved by the U.S.

6 unchanged sentences

Also refer to Revenue Recognition policy discussion in “Note 3” above.

The following table summarizes activity in each of the product revenue allowance and reserve categories for the three months ended March 31, 2021 and 2020 (in thousands):

The following table summarizes activity in each of the product revenue allowance and reserve categories for the six months ended June 30, 2021 and 2020 (in thousands):

Discounts and

2 unchanged sentences

Credit or payments made during the period

Balance at March 31, 2021

Balance at June 30, 2021

Discounts and

1 unchanged sentence

Provision related to current period sales

Adjustment related to prior period sales

Credit or payments made during the period

Balance at March 31, 2020

Of the $ 3.7 million discounts and allowances from gross product sales for the three months ended March 31, 2021, $ 3.3 million was accounted for as additions to other accrued liabilities and $ 434,000 as reductions in accounts receivable and prepaid and other current assets in the balance sheet.

Other accrued liabilities related to the discounts and allowances had a remaining outstanding balance of $ 5.4 million as of March 31, 2021.

Of the $ 2.7 million discounts and allowances from gross product sales for the three months ended March 31, 2020, $ 2.2 million was accounted for as additions to other accrued liabilities and $ 467,000 as reductions in accounts receivable and prepaid and other current assets in the balance sheet.

Other accrued liabilities related to the discounts and allowances had a remaining outstanding balance of $ 3.5 million as of March 31, 2020.

Balance at June 30, 2020

Of the $ 8.7 million discounts and allowances from gross product sales for the six months ended June 30, 2021, $ 7.8 million was accounted for as additions to other accrued liabilities and $ 936,000 as reductions in accounts receivable and prepaid and other current assets in the balance sheet.

Other accrued liabilities related to the discounts and allowances had a remaining outstanding balance of $ 6.3 million as of June 30, 2021.

Of the $ 6.1 million discounts and allowances from gross product sales for the six months ended June 30, 2020, $ 5.3 million was accounted for as additions to other accrued liabilities and $ 796,000 as reductions in accounts receivable and prepaid and other current assets in the balance sheet.

Other accrued liabilities related to the discounts and allowances had a remaining outstanding balance of $ 4.3 million as of June 30, 2020.

Sponsored Research and License Agreements and Government Contract

1 unchanged sentence

We conduct research and development programs independently and in connection with our corporate collaborators.

As of March 31, 2021, we are a party to collaboration agreements with ongoing performance obligations with Eli Lilly (Lilly) to develop and commercialize R552, a receptor-interacting serine/threonine-protein kinase 1 (RIP1) inhibitor, for the treatment of non-central nervous system (non-CNS) diseases and collaboration aimed at developing additional RIP1 inhibitors for the treatment of central nervous system (CNS) diseases;

As of June 30, 2021, we are a party to collaboration agreements with Eli Lilly (Lilly) to develop and commercialize R552, a RIP1 inhibitor, for the treatment of non-central nervous system (non-CNS) diseases and collaboration aimed at developing additional RIP1 inhibitors for the treatment of central nervous system (CNS) diseases;

with Grifols, S.A.

7 unchanged sentences

and with Daiichi to pursue research related to MDM2 inhibitors, a novel class of drug targets called ligases.

We had a collaboration agreement with Aclaris for the development and commercialization of JAK inhibitors for the treatment of alopecia areata and other dermatological conditions.

Our collaboration agreement with Aclaris was terminated effective April 30, 2021.

Under these agreements, which we entered into in the ordinary course of business, we received or may be entitled to receive upfront cash payments, payments contingent upon specified events achieved by such partners and royalties on any net sales of products sold by such partners under the agreements.

Our collaboration agreement with Aclaris related to the development and commercialization of JAK inhibitors for the treatment of alopecia areata and other dermatological conditions was terminated in April 2021.

Under the above existing agreements which we entered into in the ordinary course of business, we received or may be entitled to receive upfront cash payments, payments contingent upon specified events achieved by such partners and royalties on any net sales of products sold by such partners under the agreements.

Total future contingent payments to us under all of these agreements could exceed $ 1.4 billion if all potential product candidates achieved all of the payment triggering events under all of our current agreements (based on a single product candidate under each agreement).

3 unchanged sentences

Global Exclusive License Agreement with Eli Lilly

On February 18, 2021, we entered into a global exclusive license agreement and strategic collaboration with Lilly, which became effective on March 27, 2021, to develop and commercialize R552, a receptor-interacting serine/threonine-protein kinase 1 (RIP1) inhibitor, for the treatment of non-CNS diseases.

On February 18, 2021, we entered into a global exclusive license agreement and strategic collaboration with Lilly, which became effective on March 27, 2021, to develop and commercialize R552, a RIP1 inhibitor, for the treatment of non-CNS diseases.

In addition, the collaboration is aimed at developing additional RIP1 inhibitors for the treatment of CNS diseases.

20 unchanged sentences

We considered this commitment to fund the development costs as a significant financing component of the contract, which we accounted for as a reduction of the upfront fee to derive the transaction price.

This financing component was recorded as a liability at its net present value of approximately $ 57.9 million, and interest expense will be accreted on such liability over the expected commitment period using the 6.4 % discount rate applied.

This financing component was recorded as a liability at its net present value of approximately $ 57.9 million using a 6.4 % discount rate.

Interest expense will be accreted on such liability over the expected commitment period.

Interest expense accreted during the three and six months ended June 30, 2021 was $ 1.0 million and $ 1.1 million, respectively.

As of June 30, 2021, the outstanding financing liability of $ 59.0 million to Lilly was included within other long-term liabilities, current portion, and other long-term liabilities in the condensed balance sheet.

We allocated the net transaction price of $ 67.1 million to each performance obligation based on our best estimate of its relative standalone selling price using the adjusted market assessment approach.

We concluded that the license rights over the non-CNS penetrant IP represents functional IP that is not expected to change over time, and we have no ongoing or undelivered obligations relative to such IP that Lilly will benefit from the use of such IP on the delivery date.

As such, the transaction price allocated to the non-CNS penetrant IP of $ 60.4 million was recognized as revenue for the three months ended March 31, 2021 upon delivery of the non-CNS penetrant IP to Lilly in March 2021.

As such, the transaction price allocated to the non-CNS penetrant IP of $ 60.4 million was recognized as revenue in the first quarter of 2021 upon delivery of the non-CNS penetrant IP to Lilly in March 2021.

For the delivery of license rights over the CNS penetrant IP, we are obligated to perform additional research and development efforts before Lilly can accept the license.

The allocated transaction price of $ 6.7 million will be recognized as revenue from the effective date of the agreement through the eventual acceptance by Lilly using the input method.

We recognized revenue during the three months ended March 31, 2021 of $ 243,000 , relative to the delivery of CNS penetrant IP.

As of March 31, 2021, the remaining deferred revenue amounted to $ 6.5 million and the outstanding financing liability of $ 58.0 million is included within other current and long-term liabilities in the condensed balance sheet.

Interest expense accreted during the three months ended March 31, 2021 was $ 60,000 .

The allocated transaction price of $ 6.7 million is being recognized as revenue from the effective date of the agreement through the eventual acceptance by Lilly using the input method.

We recognized revenue during the three and six months ended June 30, 2021 of $ 3.3 million and $ 3.5 million, respectively, relative to the delivery of CNS penetrant IP.

As of June 30, 2021, the remaining deferred revenue amounted to $ 3.2 million.

The remaining future variable consideration related to future milestone payments as discussed above were fully constrained because we cannot conclude that it is probable that a significant reversal of the amount of cumulative revenue recognized will not occur, given the inherent uncertainty of success with these future milestones.

4 unchanged sentences

In January 2019, we entered into an exclusive license agreement with Grifols to commercialize fostamatinib in all indications, including chronic ITP and AIHA, in Europe and Turkey.

Under the agreement, we received an upfront payment of $ 30.0 million, with the potential for $ 297.5 million in total regulatory and commercial milestones, which included a $ 17.5 million payment for EMA approval of fostamatinib for the first indication and a $ 2.5 million creditable advance royalty payment due upon EMA approval of fostamatinib in the first indication in chronic ITP.

Under the agreement, we received an upfront payment of $ 30.0 million, with the potential for $ 297.5 million in total regulatory and commercial milestones.

We will also receive stepped double-digit royalty payments based on tiered net sales which may reach 30 % of net sales.

25 unchanged sentences

We will re-evaluate the transaction price in each reporting period and as uncertain events are resolved or other changes in circumstances occur.

As of March 31, 2021 and December 31, 2020, the remaining deferred revenue was $ 1.6 million related to the performance of research services.

We did no t recognize revenues during the three months ended March 31, 2021 related to the research and development services.

During the three months ended March 31, 2021, we recognized $ 1.0 million in revenues for the delivery of drug supplies to Grifols for its commercialization.

During the three months ended March 31, 2020, we recognized $ 39.9 million in revenues related to the licensed rights in intellectual property and $ 3.2 million in revenues related to the research services performed.

As of June 30, 2021 and December 31, 2020, the remaining deferred revenue was $ 1.2 million and $ 1.6 million, respectively, related to the performance of research services.

During the three and six months ended June 30, 2021, we recognized $ 381,000 in revenue related to the research and development services.

In addition, in the first quarter of 2021, we recognized $ 1.0 million in revenue for the delivery of drug supplies to Grifols for its commercialization.

During the three and six months ended June 30, 2020, we recognized $ 396,000 and $ 3.6 million, respectively, in revenues related to the research services performed.

In addition, in the first quarter of 2020, we recognized $ 39.9 million in revenues related to the licensed rights in intellectual property.

Kissei License Agreement

18 unchanged sentences

We will re-evaluate the transaction price in each reporting period and as uncertain events are resolved or other changes in circumstances occur.

We did no t recognize any revenues during the three months ended March 31, 2021 and 2020.

As of March 31, 2021, deferred revenues related to the unsatisfied performance obligations related to the supply of fostamatinib and material right associated with discounted fostamatinib supply was $ 1.4 million.

We did no t recognize any revenues with regards to the performance obligations related to the supply of fostamatinib and material right associated with discounted fostamatinib supply during the three and six months ended June 30, 2021 and 2020.

As of June 30, 2021 and December 31, 2020, the remaining deferred revenue was $ 1.4 million.

Medison Commercial and License Agreements

7 unchanged sentences

As such this arrangement is accounted for as a financing arrangement.

Accrued interest expense related to this financing arrangement as of March 31, 2021 and December 31, 2020 was immaterial.

During the three and six months ended June 30, 2021, we accrued interest amounting to $ 337,000 related to this financing arrangement.

No interest was accrued during the three and six months ended June 30, 2020.

Pursuant to this exclusive commercialization license agreement, in August 2020, we entered into a commercial supply agreement with Medison.

As of June 30, 2021, the outstanding financing liability of $ 5.5 million to Medison was included within other long-term liabilities in the condensed balance sheet.

Other license agreements

1 unchanged sentence

In consideration for the license rights granted, we received a one-time fee of $ 4.0 million.

All the deliverables under the agreement had been delivered and the one-time fee was recognized as revenue during the three months ended March 31, 2021.

All the deliverables under the agreement had been delivered and the one-time fee was recognized as revenue in the first quarter of 2021.

Government Contract

9 unchanged sentences

Department of Defense that such conditions have been met.

For the three months ended March 31, 2021, we recognized $ 3.0 million related to this grant, of which $ 1.0 million had been invoiced but not yet collected and is included within accounts receivable on the accompanying balance sheet as of March 31, 2021.

For the three and six months ended June 30, 2021, we recognized $ 5.5 million and $ 8.5 million, respectively, related to this grant, of which $ 4.0 million had been invoiced but not yet collected and is included within accounts receivable on the accompanying balance sheet as of June 30, 2021.

We expect to receive the remaining award of $ 8.0 million throughout the period we conduct our clinical trial, subject to us meeting certain clinical trial events or milestones and approval by the U.S.

Department of Defense as specified in the agreement.

As of March 31, 2021 and December 31, 2020, we have the following inventories (in thousands):

As of June 30, 2021 and December 31, 2020, we have the following inventories (in thousands):

Raw materials

2 unchanged sentences

As of December 31, 2020, we have $ 4.0 million in advance payments to our manufacturer of our raw materials, which was included as part of Prepaid and Other Current Assets in our condensed balance sheet.

During the three months ended March 31, 2021, the production of raw materials was completed and ownership was transferred to us.

Accordingly, such advance payments were reclassified to inventories and were included within raw materials account balance as of March 31, 2021.

During the first quarter of 2021, the production of raw materials was completed, and ownership was transferred to us.

Accordingly, such advance payments were reclassified to inventories and were included within raw materials account balance as of June 30, 2021.

Cash, Cash Equivalents and Short-Term Investments

7 unchanged sentences

Cash equivalents and short-term investments include the following securities with gross unrealized gains and losses (in thousands):

March 31, 2021

June 30, 2021

treasury bills

Government-sponsored enterprise securities

4 unchanged sentences

Corporate bonds and commercial paper

As of March 31, 2021 and December 31, 2020, our cash equivalents and short-term investments, which have contractual maturities within one year, had a weighted-average time to maturity of approximately 39 days and 78 days , respectively.

We view our short-term investments portfolio as available for use in current operations.

We have the ability to hold all investments as of March 31, 2021 through their respective maturity dates.

As of March 31, 2021, we had no investments that had been in a continuous unrealized loss position for more than 12 months.

As of March 31, 2021, a total of 18 individual securities had been in an unrealized loss position for 12 months or less, and the losses were determined to be temporary.

As of June 30, 2021 and December 31, 2020, our cash equivalents and short-term investments had a weighted-average time to maturity of approximately 241 days and 78 days , respectively.

Our short-term investments are classified as available-for-sale securities.

Accordingly, we have classified certain securities as short-term investments on our balance sheets as they are available for use in the current operations.

As of June 30, 2021, we had no investments that had been in a continuous unrealized loss position for more than 12 months.

As of June 30, 2021, a total of 10 individual securities had been in an unrealized loss position for 12 months or less, and the losses were determined to be temporary.

The gross unrealized losses above were caused by interest rate increases.

No significant facts or circumstances have arisen to indicate that there has been any significant deterioration in the creditworthiness of the issuers of the securities held by us.

Based on our review of these securities, including the assessment of the duration and severity of the unrealized losses and our ability and intent to hold the investments until maturity, there were no other-than-temporary impairments for these securities as of March 31, 2021.

The following table shows the fair value and gross unrealized losses of our investments in individual securities that are in an unrealized loss position, aggregated by investment category (in thousands):

March 31, 2021

June 30, 2021

Unrealized Losses

19 unchanged sentences

Financial assets measured at fair value on a recurring basis are categorized in the tables below based upon the lowest level of significant input to the valuations (in thousands):

Assets at Fair Value as of March 31, 2021

Assets at Fair Value as of June 30, 2021

Money market funds

treasury bills

Government-sponsored enterprise securities

12 unchanged sentences

In February 2017, we entered into an amendment to the sublease agreement to increase the subleased research and office space for an additional 9,328 square feet under the same term of the sublease.

Effective July 2017, the sublease agreement was amended primarily to extend the term of the sublease through January 2023 and modified the monthly base rent to equal the amount we will pay our landlord.

Effective July 2017, the sublease agreement was amended primarily to extend the term of the sublease through January 2023 and modified the monthly base rent to equal the amount we will pay our

Because the future sublease income under the extended sublease agreement is the same as the amount, we will pay our landlord, we did not recognize any loss on sublease relative to this amendment.

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For our sublease arrangement which we classified as an operating lease, our loss on the sublease was comprised of the present value of our future payments to our landlord less the present value of our future rent payments expected from our subtenant over the term of the sublease.

As of March 31, 2021 and December 31, 2020, we had operating lease right-of-use asset of $ 15.9 million and $ 17.9 million, respectively, and lease liability of $ 17.2 million and $ 19.3 million, respectively, in the condensed balance sheet.

The weighted average remaining term of our lease as of March 31, 2021 was 1.83 years.

As of March 31, 2021, we received from our landlord leasehold improvement incentives amounting to $ 563,000 related to leasehold improvements.

As of June 30, 2021 and December 31, 2020, we had operating lease right-of-use asset of $ 13.9 million and $ 17.9 million, respectively, and lease liability of $ 15.1 million and $ 19.3 million, respectively, in the condensed balance sheet.

The weighted average remaining term of our lease as of June 30, 2021 was 1.58 years.

As of June 30, 2021, we received from our landlord leasehold improvement incentives amounting to $ 563,000 related to leasehold improvements.

We record these leasehold improvement incentives as a reduction to operating lease right-of-use asset and lease liability until the lease ends and the asset is transferred.

For the three months ended March 31, 2021 and 2020, the components of our operating lease expense were as follows (in thousands):

The components of our operating lease expense were as follows (in thousands):

Three Months Ended

Six Months Ended

Fixed operating lease expense

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Total operating lease expense

Supplemental information related to our operating lease for the three months ended March 31, 2021 and 2020 were as follow (in thousands):

Supplemental information related to our operating lease were as follow (in thousands):

Three Months Ended

Six Months Ended

Cash payments included in the measurement of operating lease liabilities

For the three months ended March 31, 2021 and 2020, we have the following operating sublease information (in thousands):

Supplemental information related to our operating sublease was as follow (in thousands):

Three Months Ended

Six Months Ended

Fixed sublease expense

1 unchanged sentence

Sublease income

The following table presents the future lease payments of our operating lease liabilities as of March 31, 2021 (in thousands):

The following table presents the future lease payments of our operating lease liabilities as of June 30, 2021 (in thousands):

Operating Lease

2 unchanged sentences

Total minimum payments required

On September 27, 2019, we entered into a Credit and Security Agreement (Credit Agreement), dated as of September 27, 2019 (Closing Date) with MidCap Financial Trust (MidCap).

On September 27, 2019 (closing date), we entered into a Credit and Security Agreement (Credit Agreement) with MidCap Financial Trust (MidCap).

The Credit Agreement provides for a $ 60.0 million term loan credit facility with the following tranches:

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The obligations under the Credit Agreement are secured by a perfected security interest in all of our assets except for intellectual property and certain other customary excluded property pursuant to the terms of the Credit Agreement.

At the closing date, $ 10.0 million was funded in an initial tranche.

In March 2020, we signed a credit extension form for the second tranche amounting to $ 10.0 million, which we received in May 2020.

In April 2021, we amended the Credit Agreement to extend the period through which Tranche 3 will be available through March 31, 2022, subject to the satisfaction of certain conditions and at our option.

To date, the facility gives us the ability to access an additional $ 40.0 million at our option, subject to the achievement of certain customary conditions.

The outstanding principal balance of the loan bears interest at an annual rate of one-month LIBOR plus 5.65 % , subject to a LIBOR floor of 1.50 % and is payable monthly in arrears.

Commencing on October 1, 2019, the Credit Agreement provides that we initially make interest-only payments for 24 months followed by 36 months of amortization payments.

The interest-only period will be extended to 36 months and again to 48 months upon the satisfaction of certain conditions set forth in the Credit Agreement.

The interest-only period can be extended to 36 months and again to 48 months upon the satisfaction of certain conditions set forth in the Credit Agreement.

In June 2021, we satisfied the conditions under the Credit Agreement which effectively extended the interest-only period to 36 months or through October 1, 2022.

All unpaid principal and accrued interest are due and payable no later than September 1, 2024.

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The Credit Agreement also contains certain provisions, such as event of default and change in control provisions, which, if triggered, would require us to make mandatory prepayments on the term loan, which are subject to certain prepayment premiums and additional interest payments.

As discussed above, at Closing Date, $ 10.0 million was funded in an initial tranche.

In March 2020, we signed a credit extension form for the second tranche amounting to $ 10.0 million, which we received in May 2020.

To date, the facility gives us the ability to access an additional $ 40.0 million at our option, subject to the achievement of certain customary conditions.

As of March 31, 2021 and December 31, 2020, the outstanding balance of the loan, net of unamortized debt discount was $ 19.8 million.

As of June 30, 2021 and December 31, 2020, the outstanding balance of the loan, net of unamortized debt discount was $ 19.9 million and $ 19.8 million, respectively.

Debt issuance costs are recorded as a direct deduction from the term loan on the balance sheet and are being amortized ratably as interest expense over the term of the loan, using the effective interest method.

As of March 31, 2021 and December 31, 2020, the unamortized issuance costs and debt discounts amounted to $ 156,000 and $ 185,000 , respectively.

The following table presents the future minimum principal payments of the outstanding loan as of March 31, 2021 under the current Credit Agreement (in thousands):

As of June 30, 2021 and December 31, 2020, the unamortized issuance costs and debt discounts amounted to $ 140,000 and $ 185,000 , respectively.

For the three and six months ended June 30, 2021, interest expense, including amortization of the debt discount and accretion of the final fees related to the Credit Agreement was $ 411,000 and $ 831,000 , respectively.

For the three and six months ended June 30, 2020, interest expense, including amortization of the debt discount and accretion of the final fees related to the Credit Agreement was $ 353,000 and $ 593,000 , respectively.

Accrued interest of $ 318,000 was included within other accrued liabilities in the condensed balance sheet as of June 30, 2021.

The following table presents the future minimum principal payments of the outstanding loan as of June 30, 2021 under the current Credit Agreement (in thousands):

Remainder of 2021

Principal amount (Tranches 1 and 2)

Our Credit Agreement provides us an option to extend the principal amortization of our outstanding loan, subject to certain conditions.

Subject to us providing the evidence that we met the extension conditions and approval by MidCap, the extended amortization start date shall be the earlier of October 1, 2022 if we satisfy the first extension condition but fails to satisfy the second extension condition, or October 1, 2023 if we satisfy both first and second extension conditions.

For the three months ended March 31, 2021 and 2020, interest expense, including amortization of the debt discount and accretion of the final fees related to the Credit Agreement was $ 425,000 and $ 241,000 , respectively.

The Credit Agreement contains certain covenants which, among others, require us to deliver financial reports at designated times of the year and maintain minimum net revenues and $ 10.0 million of cash to draw Tranche 3 or Tranche 4.

As of March 31, 2021, we were not in violation of any covenants.

The quarterly provision for or benefit from income taxes is based on applying the estimated annual effective tax rate to the year-to-date pre-tax income (loss), plus any discrete items.

We update our estimate of our annual effective tax rate at the end of each quarterly period.

The estimate considers annual forecasted income (loss) before income taxes and any significant permanent tax items.

For the three months ended March 31, 2021, we recorded provision for income tax of $ 1.8 million.

The provision for income taxes for the three months ended March 31, 2021 was primarily related to state tax on our pre-tax book income.

We estimated a state tax liability over our forecasted pre-tax income for 2021, primarily due to revenue recognized for the Lilly agreement.

As of June 30, 2021, we were not in violation of any covenants.

For the three and six months ended June 30, 2021, we recorded benefit from income tax of $ 970,000 and provision for income tax of $ 801,000 , respectively.

The benefit from and the provision for income tax for the three and six months ended June 30, 2021 were determined using our effective tax rate on our year-to-date income (loss).

We estimated a state tax liability over our pre-tax income (loss) for 2021, and is primarily due to revenue recognized for the Lilly agreement.

We do not expect to owe federal income taxes due to the sufficient net operating loss carryforwards that were generated prior to the enactment of the Tax Cuts and Jobs Act, as well as significant research and development credit carryforwards.

Although we are projecting book income for 2021, we continue to record a full valuation allowance on our deferred tax assets considering our cumulative losses in prior years and forecasted losses in the future.

For the three months ended March 31, 2020, we did no t record provision for income taxes due to our pre-tax book loss.

We continue to record a full valuation allowance on our deferred tax assets considering our cumulative losses in prior years and forecasted losses in the future.

For the three and six months ended June 30, 2020, we did no t record provision for income taxes due to our pre-tax book loss.

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