What changed in this filing

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Item 1. Financial Statements

2021-11-02 compared with 2021-08-03 · 174 added, 122 removed, 601 unchanged (33% of the section changed)

3 unchanged sentences

(In thousands)

September 30,

Current assets:

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Lease liabilities, current portion

Deferred revenue, current portion

Deferred revenue

Other long-term liabilities, current portion

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Additional paid-in capital

Accumulated other comprehensive loss

Accumulated other comprehensive income (loss)

Accumulated deficit

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Total stockholders’ equity

(1) The balance sheet as of December 31, 2020 has been derived from the audited financial statements included in Rigel’s Annual Report on Form 10-K for the year ended December 31, 2020 filed with the SEC on March 2, 2021 .

See Accompanying Notes to Condensed Financial Statements

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(In thousands, except per share amounts)

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Product sales, net

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(In thousands)

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Net income (loss)

20 unchanged sentences

( 1,280,293 )

Net unrealized gain on short-term investments

Issuance of common stock upon exercise of options

Stock-based compensation expense

Balance as of September 30, 2021

( 1,301,245 )

Comprehensive

12 unchanged sentences

( 1,272,561 )

Net unrealized loss on short-term investments

Issuance of common stock upon exercise of options

Stock-based compensation expense

Balance as of September 30, 2020

( 1,286,735 )

See Accompanying Notes to Condensed Financial Statements

2 unchanged sentences

(In thousands)

Six Months Ended June 30,

Nine Months Ended September 30,

Operating activities

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

Net income (loss)

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

Stock-based compensation expense

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Our pioneering research focuses on signaling pathways that are critical to disease mechanisms.

Our first product approved by the United States Food and Drug Administration (FDA) is TAVALISSE® (fostamatinib disodium hexahydrate) tablets, the only approved oral spleen tyrosine kinase (SYK) inhibitor, for the treatment of adult patients with chronic immune thrombocytopenia (ITP) who have had an insufficient response to a previous treatment.

The product is also commercially available in Europe (TAVLESSE) and Canada (TAVALISSE) for the treatment of chronic immune thrombocytopenia in adult patients.

Our first product approved by the United States Food and Drug Administration (FDA) is TAVALISSE® (fostamatinib disodium hexahydrate) tablets, the only oral spleen tyrosine kinase (SYK) inhibitor, for the treatment of adult patients with chronic immune thrombocytopenia (ITP) who have had an insufficient response to a previous treatment.

The product is also commercially available in Europe, the United Kingdom (TAVLESSE) and Canada (TAVALISSE) for the treatment of chronic ITP in adult patients.

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 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;

a National Institute of Health (NIH)/National Heart, Lung, and Blood Institute (NHLBI) sponsored Phase 3 trial (ACTIV-4 Host Tissue Trial) for the treatment of COVID-19 in hospitalized patients;

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).

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

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.

As of September 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.

6 unchanged sentences

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

As of September 30, 2021 and December 31, 2020, customer allowance for prompt payment discounts were $ 100,000 and $ 171,000 , respectively.

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

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Department of Defense’s Joint Program Executive Office for Chemical, Biological, Radiological and Nuclear Defense (referred here as U.S.

Department of Defense) to support our ongoing Phase 3 clinical trial to evaluate the safety and efficacy of fostamatinib in hospitalized COVID-19 patients.

Department of Defense) to support our ongoing Phase 3 clinical trial to evaluate the safety and efficacy of fostamatinib for the treatment of hospitalized high-risk patients with COVID-19.

We determined that the government award should be accounted for under IAS 20, Accounting for Government Grants and Disclosure of Government Assistance, which is outside the scope of Topic 606, as the U.S.

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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 June 30, 2021 continued to be classified as operating leases.

All of our leases outstanding as September 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.

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The guidance prescribes a “more likely than not” recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return.

We do not expect any material change in our unrecognized tax benefits over the next twelve months.

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

We do not expect any material change in our unrecognized tax benefits over the next 12 months.

We recognize interest and penalties related to unrecognized tax

benefits as a component of income taxes.

Net Income (Loss) Per Share

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Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

EPS Numerator:

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Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Outstanding stock options

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The 2018 Plan is the successor plan to the 2011 Equity Incentive Plan, the 2000 Equity Incentive Plan, and the 2000 Non-Employee Directors' Stock Option Plan.

We have two equity plans, our 2018 Plan and the Inducement Plan (collectively, the Equity Incentive Plans), that provide for granting of stock awards to our officers, directors and all other employees and consultants.

We have two equity plans, our 2018 Plan and the Company’s Inducement Plan, as amended (collectively, the Equity Incentive Plans), that provide for granting of stock awards to our officers, directors and all other employees and consultants.

To date, we granted stock options and restricted stock units under our Equity Incentive Plans.

We also have our Employee Stock Purchase Plan (Purchase Plan), wherein eligible employees can purchase shares of our common stock at a price per share equal to the lesser of 85 % of the fair market value on the first day of the offering period or 85 % of the fair market value on the purchase date.

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 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.

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

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Stock-Based Compensation

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):

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

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Selling, general and administrative

1 unchanged sentence

Total stock-based compensation expense

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.

During the nine months ended September 30, 2021, we granted options to purchase 6,373,981 shares of common stock with a grant-date weighted-average fair value of $ 2.36 per share, and 1,176,386 options to purchase shares were exercised.

As of September 30, 2021, total stock options outstanding was 30,489,827 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 September 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.

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● Expected term—For options granted to consultants, we use the contractual term of the option, which is generally ten years , for the initial valuation of the option and the remaining contractual term of the option for the succeeding periods.

We analyzed various historical data to determine the applicable expected term for each of the other option groups.

We analyzed various historical data to determine the applicable

expected term for each of the other option groups.

This data included:

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

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.

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.

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

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● 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 and six months ended June 30, 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 nine months ended September 30, 2021 and 2020:

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Risk-free interest rate

2 unchanged sentences

Expected volatility

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.

During the nine months ended September 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 September 30, 2021.

As of September 30, 2021, there were approximately $ 15.5 million of unrecognized stock-based compensation cost which is expected to be recognized over the remaining weighted-average period of 1.98 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.

As of September 30, 2021, there were 10,403,690 shares of common stock available for future grant under our Equity Incentive Plans.

Employee Stock Purchase Plan

4 unchanged sentences

A look-back option is a provision in our Purchase Plan under which eligible employees can purchase shares of our common stock at a price per share equal to the lesser of 85 % of the fair market value on the first day of the offering period or 85 % of the fair market value on the purchase date.

Our Purchase Plan also includes a feature that provides for a new offering period to begin when the fair market value of our common stock on any purchase date during an offering period falls below the fair market value of our common stock on the first day of such offering period.

market value of our common stock on the first day of such offering period.

This feature is called a “reset.” Participants are automatically enrolled in the new offering period.

We had a “reset” in January 2020 because the fair market value of our stock on December 31, 2019 was lower than the fair market value of our stock on January 1, 2019, the first day of the offering period.

Following the “reset” in January 2020, January 1, 2020 was the new first day of the two-year offering period of our ESPP program.

Following the “reset” in January 2020, January 1, 2020 was the new first day of the two-year offering period of our Purchase Plan.

We applied modification accounting in accordance with the relevant accounting guidance.

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In July 2020, we had another “reset” because the fair market value of our stock on June 30, 2020 was lower than the fair market value of our stock on January 1, 2020.

Following the “reset” in July 2020, July 1, 2020 is the new start date of our two-year offering period of our ESPP program.

Following the “reset” in July 2020, July 1, 2020 is the new start date of our two-year offering period of our Purchase Plan.

We applied modification accounting in accordance with the relevant accounting guidance.

1 unchanged sentence

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.

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

As of September 30, 2021, unrecognized stock-based compensation cost related to our Purchase Plan amounted to $ 193,000 , which is expected to be recognized over the remaining weighted average period of 0.33 years.

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

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Product sales:

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License revenues

Development milestones

Research and development services and others

4 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

ASD Healthcare and Oncology Supply

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We commenced commercial sale of TAVALISSE in the U.S.

Fostamatinib is marketed in Europe under the brand name TAVLESSE ™ (fostamatinib).

Grifols launched TAVLESSE in the UK and Germany in July 2020, and thereafter expects a phased roll-out -out over the next 18 months across Europe.

Fostamatinib is marketed in Europe under the

brand name TAVLESSE™ (fostamatinib).

In July 2020, Grifols S.A.

(Grifols) launched TAVLESSE in the United Kingdom (UK) and Germany.

In September 2021, Grifols announced that it began commercializing TAVLESSE in France, Italy and Spain.

In December 2020, the Scottish Medicines Consortium accepted TAVLESSE for use in NHS in Scotland.

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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 six months ended June 30, 2021 and 2020 (in thousands):

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

Discounts and

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Credit or payments made during the period

Balance at June 30, 2021

Balance at September 30, 2021

Discounts and

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Credit or payments made during the period

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.

Balance at September 30, 2020

Of the $ 13.3 million discounts and allowances from gross product sales for the nine months ended September 30, 2021, $ 12.1 million was accounted for as additions to other accrued liabilities and $ 1.2 million 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 $ 7.3 million as of September 30, 2021.

Of the $ 10.1 million discounts and allowances from gross product sales for the nine months ended September 30, 2020, $ 9.1 million was accounted for as additions to other accrued liabilities and $ 1.0 million 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 $ 4.9 million as of September 30, 2020.

Sponsored Research and License Agreements and Government Contract

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

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.

(Grifols) to commercialize fostamatinib in all indications, including chronic i mmune thrombocytopenic purpura ( ITP) and autoimmune hemolytic anemia (AIHA), in Europe and Turkey;

As of September 30, 2021, we are a party to collaboration agreements with 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 to commercialize fostamatinib for human diseases in all indications, including chronic ITP and autoimmune hemolytic anemia (AIHA), in Europe and Turkey;

with Kissei Pharmaceutical Co., Ltd.

(Kissei) for the development and commercialization of fostamatinib in Japan, China, Taiwan and the Republic of Korea;

and with Medison Pharma Trading AG and Medison Pharma Ltd.

(collectively, Medison) to commercialize fostamatinib in all indications, including chronic ITP and AIHA, in Canada and Israel, respectively.

(Kissei) to develop and commercialize fostamatinib in Japan, China, Taiwan and the Republic of Korea;

and with Medison Pharma Trading AG

(Medison Canada) and Medison Pharma Ltd.

(Medison Israel and, together with Medison Canada, Medison) to commercialize fostamatinib in all indications, including chronic ITP and AIHA, in Canada and Israel, respectively.

Further, we are also a party to collaboration agreements, but do not have ongoing performance obligations, with AZ for the development and commercialization of R256, an inhaled JAK inhibitor;

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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.

Under the above existing agreements that 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).

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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 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 (Lilly Agreement), 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.

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We have the right to opt- out of co-funding the R552 development activities in the U.S., Europe and Japan at two different specified times.

If we exercise our first opt-out right (no later than September 30, 2023), we will continue to fund our share of the R552 development activities in the U.S., Europe, and Japan up to a maximum funding commitment of $ 65.0 million through April 1, 2024.

If we decide not to exercise our opt-out rights, we will be required to share in global development costs of up to certain amounts at a specified cap, as provided for in the agreement.

We are responsible for performing and funding initial discovery and identification of CNS disease development candidates, which is expected to be completed by the end of fiscal year 2021.

If we exercise our first opt- out right (no later than September 30, 2023), under the Lilly Agreement, we are required to fund our share of the R552 development activities in the U.S., Europe, and Japan up to a maximum funding commitment of $ 65.0 million through April 1, 2024.

If we decide not to exercise our opt- out rights, we will be required to share in global development costs of up to certain amounts at a specified cap, as provided for in the Lilly Agreement.

We are responsible for performing and funding initial discovery and identification of CNS disease development candidates.

Following candidate selection, Lilly will be responsible for performing and funding all future development and commercialization of the CNS disease development candidates.

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We based our assessment on the assumption that Lilly can benefit from each of the licenses on its own by developing and commercializing the underlying product using its own resources.

Under the agreement, we are required to share 20 % of the development costs for R552 in the U.S., Europe and Japan up to a specified cap.

Under the Lilly Agreement, we are required to share 20 % of the development costs for R552 in the U.S., Europe and Japan up to a specified cap.

Given our rights to opt- out from the development of R552, we believe at the minimum, we have a commitment to fund the development costs up to $ 65.0 million as discussed above.

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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.

Interest expense is being accreted on such liability over the expected commitment period.

Interest expense accreted during the three and nine months ended September 30, 2021 was $ 836,000 and $ 1.9 million, respectively.

As of September 30, 2021, the outstanding financing liability of $ 59.8 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.

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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 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 allocated transaction price to the CNS penetrant IP of $ 6.7 million is being recognized as revenue from the effective date of the Lilly Agreement through the eventual acceptance by Lilly using the input method.

We recognized revenue during the three and nine months ended September 30, 2021 of $ 2.4 million and $ 6.0 million, respectively, relative to the delivery of CNS penetrant IP.

As of September 30, 2021, the remaining deferred revenue amounted to $ 744,000 .

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.

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

In return, Grifols received exclusive rights to fostamatinib in human diseases, including chronic ITP, AIHA, and IgAN, in Europe and Turkey.

In return, Grifols received exclusive rights to commercialize fostamatinib for human diseases, including chronic ITP, AIHA, and IgAN, in Europe and Turkey.

Grifols also received an exclusive option to expand the territory under its exclusive and non-exclusive licenses to include the Middle East, North Africa and Russia (including Commonwealth of Independent States).

In November 2020, Grifols exercised its option to include these territories as part of the licensed territories under the agreement.

The agreement also required us to continue to conduct our long-term open-label extension study on patients with ITP through EMA approval of ITP in Europe or until the study ends as well as conduct the Phase 3 trial in AIHA.

The agreement also required us to continue to conduct our long-term open-label extension study on patients with ITP through European Medicines Agency (EMA) approval of ITP in Europe or until the study ends as well as conduct the Phase 3 trial in AIHA.

In December 2019, we entered into a Drug Product Purchase Agreement with Grifols wherein we agreed to supply and sell to Grifols at 30 % mark up the drug product requested under an anticipated first and only purchase order until Grifols enters into a supply agreement directly with a third-party drug product manufacturer.

In October 2020, we entered into a Commercial Supply Agreement with Grifols.

In January 2020, we received European Commission’s approval of our MAA for fostamatinib for the treatment of chronic immune thrombocytopenia in adult patients who are refractory to other treatments.

With this approval, we received in February 2020 a $ 20.0 million non-refundable payment, which is comprised of a $ 17.5 million payment for EMA approval of fostamatinib for the first indication and a $ 2.5 million creditable advance royalty payment, based on the terms of our collaboration agreement with Grifols.

In January 2020, the European Commission granted a centralized Marketing Authorization (MA) for fostamatinib valid throughout the European Union and in the UK after the departure of the UK from the European Union for the treatment of chronic immune thrombocytopenia in adult patients who are refractory to other treatments.

With this approval, we received in February 2020 a $ 20.0 million non-refundable payment, comprised of a $ 17.5 million payment due upon Marketing Authorization Application (MAA) approval by the EMA of fostamatinib for the first indication and a $ 2.5 million creditable advance royalty payment, based on the terms of our collaboration agreement with Grifols.

The above milestone payment was allocated to the distinct performance obligations in the collaboration agreement with Grifols.

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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 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.

As of September 30, 2021 and December 31, 2020, the remaining deferred revenue was $ 1.0 million and $ 1.6 million, respectively, related to the performance of research services.

During the three and nine months ended September 30, 2021, we recognized $ 225,000 and $ 605,000 , respectively, in revenue related to the research and development services.

During the nine months ended September 30, 2021, we also recognized $ 1.0 million in revenue for the delivery of drug supplies in the first quarter of 2021 to Grifols for its commercialization.

During the three months ended September 30, 2020, we recognized no revenues from Grifols.

During the nine months ended September 30, 2020, we recognized $ 39.9 million in revenues in the first quarter of 2020 related to the licensed rights in intellectual property and $ 3.6 million in revenues in the first and second quarters of 2020 related to the research services performed.

During the nine months ended September 30, 2020, we also recognized $ 651,000 in revenue for delivery of drug supplies in the second quarter of 2020 to Grifols for commercialization.

Kissei License Agreement

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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 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.

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

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

Medison Commercial and License Agreements

In October 2019, we entered into two exclusive commercial and license agreements with Medison for the commercialization of fostamatinib for chronic ITP in Israel and in Canada, pursuant to which we received a $ 5.0 million upfront payment with respect to the agreement in Canada.

upfront payment with respect to the agreement in Canada.

We accounted for the agreement made with an upfront payment under ASC 606 and identified the following combined performance obligations at inception of the agreement:

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We believe that the buyback provision, if exercised, will require us to repurchase the license at an amount equal to or more than the upfront $ 5.0 million.

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

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.

As such, this arrangement was accounted for as a financing arrangement.

During the three and nine months ended September 30, 2021, we accrued interest amounting to $ 50,000 and $ 387,000 , respectively, related to this financing arrangement.

No interest was accrued during the three and nine months ended September 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.

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

In August 2021, Medison Israel received the licenses for registrational approval from the Ministry of Health.

Pursuant to the exclusive commercial and license agreement, this event triggered the first milestone that is the regulatory approval of the product in Israel for the first indication, for a non-refundable payment of $ 75,000 .

We recognized this amount as revenue during the three and nine months ended September 30, 2021.

Daiichi Collaboration Agreement

Pursuant to the Amended Collaboration Agreement dated April 20, 2005 with Daiichi, during the three and nine months ended September 30, 2021, we recognized $ 1.8 million of revenue related to the achievement of a certain milestone, of which the payment was received in October 2021.

During the three and nine months ended September 2020, we also recognized $ 2.1 million related to the achievement of a certain milestone, of which payment was received in October 2020.

All deliverables under the agreement had been previously delivered, and as such the above had been recognized as revenue in the corresponding periods such milestones were achieved.

Other license agreements

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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

Government Contract - U.S.

Department of Defense’s JPEO-CBRND

In January 2021, we were awarded up to $ 16.5 million by the U.S.

Department of Defense to support our ongoing Phase 3 clinical trial to evaluate the safety and efficacy of fostamatinib in hospitalized COVID-19 patients.

Department of Defense to support our ongoing Phase 3 clinical trial to evaluate the safety and efficacy of fostamatinib for the treatment of hospitalized high-risk patients with COVID-19.

The amount of award we will receive from the U.S.

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Department of Defense is not receiving reciprocal value for their contributions.

We will record grant income in the statement of operations in the same period it is probable that we will receive the award, which is when we comply with the conditions associated with the award and obtain approval from the U.S.

We record government contract revenue in the statement of operations in the period when it is probable that we will receive the award, which is when we comply with the conditions associated with the award and obtain approval from the U.S.

Department of Defense that such conditions have been met.

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.

For the three and nine months ended September 30, 2021, we recognized $ 1.0 million and $ 9.5 million, respectively, related to this grant, all of which had been invoiced and collected as of September 30, 2021.

We expect to receive the remaining award of $ 7.0 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 June 30, 2021 and December 31, 2020, we have the following inventories (in thousands):

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

September 30,

Raw materials

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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.

Accordingly, such advance payments were reclassified to inventories as raw materials.

Cash, Cash Equivalents and Short-Term Investments

Cash, cash equivalents and short-term investments consisted of the following (in thousands):

September 30,

Money market funds

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

June 30, 2021

September 30, 2021

treasury bills

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Corporate bonds and commercial paper

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.

As of September 30, 2021 and December 31, 2020, our cash equivalents and short-term investments had a weighted-average time to maturity of approximately 227 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.

As of September 30, 2021, we had no

investments that had been in a continuous unrealized loss position for more than 12 months.

As of September 30, 2021, a total of 19 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 June 30, 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):

June 30, 2021

September 30, 2021

Unrealized Losses

treasury bills

Government-sponsored enterprise securities

Corporate bonds and commercial paper

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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 June 30, 2021

Assets at Fair Value as of September 30, 2021

Money market funds

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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

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.

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 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.

As of September 30, 2021 and December 31, 2020, we had operating lease right-of-use asset of $ 11.8 million and $ 17.9 million, respectively, and lease liability of $ 12.9 million and $ 19.3 million, respectively, in the condensed balance sheet.

The weighted average remaining term of our lease as of September 30, 2021 was 1.33 years.

As of September 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.

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Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Fixed operating lease expense

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Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Cash payments included in the measurement of operating lease liabilities

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Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Fixed sublease expense

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Sublease income

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

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

Operating Lease

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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 March 2020, we signed a credit extension form for Tranche 2 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.

The outstanding principal balance of the loan bears interest at an annual rate of one-month LIBOR ( or a comparable applicable index rate determined pursuant to the Credit Agreement.

if the LIBOR is no longer available)

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.

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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 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.

As of September 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 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):

As of September 30, 2021 and December 31, 2020, the unamortized issuance costs and debt discounts amounted to $ 113,000 and $ 185,000 , respectively.

For the three and nine months ended September 30, 2021, interest expense, including amortization of the debt discount and accretion of the final fees related to the Credit Agreement was $ 427,000 and $ 1.2 million, respectively.

For the three and nine months ended September 30, 2020, interest expense, including amortization of the debt discount and accretion of the final fees related to the Credit Agreement was $ 429,000 and $ 1.0 million, respectively.

Accrued interest of $ 351,000 was included within other accrued liabilities in the condensed balance sheet as of September 30, 2021.

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

Remainder of 2021

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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 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.

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

For the three and nine months ended September 30, 2021, we recorded benefit from income tax of $ 136,000 and provision for income tax of $ 665,000 , respectively.

The benefit from and the provision for income tax for the three and nine months ended September 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, which 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.

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.

For the three and nine months ended September 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