What changed in this filing

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Item 1. Financial Statements

2022-08-02 compared with 2022-05-03 · 167 added, 105 removed, 397 unchanged (41% of the section changed)

24 unchanged sentences

Other long-term liabilities

Stockholders’ equity:

Stockholders’ equity (deficit):

Preferred stock

4 unchanged sentences

( 1,323,886 )

Total stockholders’ equity

Total stockholders’ equity (deficit)

(1) The balance sheet as of December 31, 2021 has been derived from the audited financial statements included in Rigel’s Annual Report on Form 10-K for the year ended December 31, 2021 filed with the Securities and Exchange Commission (SEC) on March 1, 2022 .

3 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

11 unchanged sentences

Income (loss) before income taxes

Provision for income taxes

Provision for (benefit from) income taxes

Net income (loss)

5 unchanged sentences

(In thousands)

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Net income (loss)

4 unchanged sentences

RIGEL PHARMACEUTICALS, INC.

CONDENSED STATEMENTS OF STOCKHOLDERS’ EQUITY

CONDENSED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

(In thousands, except share amounts)

1 unchanged sentence

Stockholders’

Equity (Deficit)

Balance as of January 1, 2022

6 unchanged sentences

( 1,351,331 )

Net unrealized loss on short-term investments

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

Issuance of common stock upon vesting of restricted stock units

Stock-based compensation expense

Balance as of June 30, 2022

( 1,364,823 )

Comprehensive

7 unchanged sentences

( 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 )

See Accompanying Notes to Condensed Financial Statements

2 unchanged sentences

(In thousands)

Three Months Ended March 31,

Six Months Ended June 30,

Operating activities

Net income (loss)

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

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

Stock-based compensation expense

Gain on disposal of assets

Depreciation and amortization

12 unchanged sentences

Other current and long-term liabilities

Net cash used in operating activities

Net cash provided by (used in) operating activities

Investing activities

1 unchanged sentence

Maturities of short-term investments

Proceeds from disposal of assets

Capital expenditures

Net cash provided by investing activities

Net cash provided by (used in) investing activities

Financing activities

Cost share advance from collaboration partner

Cost share payment to a collaboration partner

Net proceeds from issuances of common stock upon exercise of options

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 increase (decrease) in cash and cash equivalents

Net increase in cash and cash equivalents

Cash and cash equivalents at beginning of period

12 unchanged sentences

The product is also commercially available in Europe, United Kingdom (UK) (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;

Our portfolio also includes olutasidenib, an oral, small molecule inhibitor of mutated isocitrate dehydrogensase-1 (mIDH1) being investigated for the treatment of relapsed/refractory acute myeloid leukemia (R/R AML) and other malignancies.

We in-licensed olutasidenib from Forma Therapeutics, Inc.

(Forma) with exclusive, worldwide rights to develop, manufacture, and commercialize the investigational agent.

See “Note 12 – Subsequent Events” for further discussion.

We conducted a Phase 3 clinical trial evaluating fostamatinib for the treatment of warm autoimmune hemolytic anemia (wAIHA);

Fostamatinib is also currently being studied in a Phase 3 clinical trial for the treatment of hospitalized high-risk patients with COVID-19;

and 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.

15 unchanged sentences

There have been no material changes to these accounting policies.

As of March 31, 2022, we had approximately $ 107.5 million in cash, cash equivalents and short-term investments.

Since inception, we have financed our operations primarily through sales of equity securities, debt financing arrangement, contract payments under our collaboration agreements and from product sales.

As of June 30, 2022, we had approximately $ 89.2 million in cash, cash equivalents and short-term investments.

Since inception, we have financed our operations primarily through sales of equity securities, debt financing, contract payments under our collaboration agreements and from product sales.

Based on our current operating plan, we believe that our existing cash, cash equivalents, and short-term investments will be sufficient to fund our expenses and capital expenditure requirements for at least the next 12 months from the date of issuance of this Form 10-Q.

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The following table sets forth the computation of basic and diluted earnings per share (in thousands except per share amounts):

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

EPS Numerator:

8 unchanged sentences

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 March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Outstanding stock options

Restricted stock units

Purchase Plan

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

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Product sales:

4 unchanged sentences

License revenues

Development milestones

Research and development services and others

8 unchanged sentences

Credit or payments made during the period

Balance as of March 31, 2022

Balance as of June 30, 2022

Discounts and

2 unchanged sentences

Credit or payments made during the period

Balance as of March 31, 2021

Of the $ 6.4 million discounts and allowances from gross product sales for the three months ended March 31, 2022, $ 6.1 million was accounted for as additions to other accrued liabilities and $ 0.3 million as reductions in accounts receivable (as it relates to allowance for prompt pay discount) and prepaid and other current assets (as it relates to certain chargebacks and other fess that were prepaid) in the condensed balance sheet.

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 $ 0.4 million as reductions in accounts receivable (as it relates to allowance for prompt pay discount) and prepaid and other current assets (as it relates to certain chargebacks and other fess that were prepaid) in the condensed balance sheet.

Balance as of June 30, 2021

Of the $ 14.3 million discounts and allowances from gross product sales for the six months ended June 30, 2022, $ 13.0 million was accounted for as additions to other accrued liabilities and $ 1.3 million as reductions in accounts receivable (as it relates to allowance for prompt pay discount) and prepaid and other current assets (as it relates to certain chargebacks and other fess that were prepaid) in the condensed balance sheet.

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 $ 0.9 million as reductions in accounts receivable (as it relates to allowance for prompt pay discount) and prepaid and other current assets (as it relates to certain chargebacks and other fess that were prepaid) in the condensed balance sheet.

For detailed discussions of our revenues from collaboration and government contract, see “Note 4 – Sponsored Research and License Agreements and Government Contract” below.

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 March 31,

Three Months Ended June 30,

Six Months Ended June 30,

McKesson Specialty Care Distribution Corporation

ASD Healthcare and Oncology Supply

Cardinal Healthcare

ASD Healthcare and Oncology Supply

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, 2022, we are a party to collaboration agreements with Lilly to develop and commercialize R552, a RIPK1 inhibitor, for the treatment of non-central nervous system (non-CNS) diseases and collaboration aimed at developing additional RIPK1 inhibitors for the treatment of central nervous system (CNS) diseases;

As of June 30, 2022, we are a party to collaboration agreements with Lilly to develop and commercialize R552, a RIPK1 inhibitor, for the treatment of non-central nervous system (non-CNS) diseases and collaboration aimed at developing additional RIPK1 inhibitors for the treatment of central nervous system (CNS) diseases;

with Grifols S.A.

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(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.

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;

and with Knight Therapeutics International SA (Knight) to commercialize fostamatinib in all indications, including chronic ITP and AIHA, in Latin America, consisting of Mexico, Central and South America, and the Caribbean (Knight territory).

Further, we are also a party to collaboration agreements, but do not have ongoing performance obligations with BerGenBio for the development and commercialization of AXL inhibitors in oncology, and with Daiichi to pursue research related to MDM2 inhibitors, a novel class of drug targets called ligases.

2 unchanged sentences

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 above existing agreements, excluding terminated or terminating agreements, could exceed $ 1.3 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).

Of this amount, $ 279.5 million relates to the achievement of development events, $ 285.6 million relates to the achievement of regulatory events and $ 778.5 million relates to the achievement of certain commercial or launch events.

As of June 30, 2022, total future contingent payments to us under all of above existing agreements, excluding terminated or terminating agreements, could exceed $ 1.3 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).

Of this amount, $ 279.5 million relates to the achievement of development events, $ 283.1 million relates to the achievement of regulatory events and $ 796.0 million relates to the achievement of certain commercial events.

This estimated future contingent amount does not include any estimated royalties that could be due to us if the partners successfully commercialize any of the licensed products.

13 unchanged sentences

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

Under the terms of the license agreement, we were entitled to receive a non-refundable and non-creditable upfront cash payment amounting to $ 125.0 million, which we received in April 2021, and a potential for an additional $ 330.0 million in milestone payments upon the achievement of specified development and regulatory milestones by non-CNS disease products and $ 255.0 million in milestone payments upon the achievement of specified development and regulatory milestones by CNS disease products.

We are also eligible to receive up to $ 100.0 million in sales milestone payments on a product-by-product basis for non-CNS disease products and up to $ 150.0 million in sales milestone payments on a product-by-product basis for CNS disease products.

Under the terms of the license agreement, we were entitled to receive a non-refundable and non-creditable upfront cash payment amounting to $ 125.0 million, which we received in April 2021.

We are also entitled to additional milestone payments for non-CNS disease products consisting of up to $ 330.0 million in milestone payments upon the achievement of specified development, regulatory and commercial milestones, and up to $ 100.0 million in sales milestone payments on a product-by-product basis.

In addition, depending on the extent of our co-funding of R552 development activities, we would be entitled to receive tiered royalty payments on net sales of non-CNS disease products at percentages ranging from the mid-single digits to high-teens, subject to certain standard reductions and offsets.

We are also eligible to receive milestone payments for CNS disease products consisting of up to $ 255.0 million in milestone payments upon the achievement of specified development, regulatory and commercial milestones, and up to $ 150.0 million in sales milestone payments on a product-by-product basis.

We would be entitled to receive tiered royalty payments on net sales of CNS disease products up to low-double digits, subject to certain standard reductions and offsets.

7 unchanged sentences

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

Interest expense accreted during the three months ended March 31, 2022 and 2021 was $ 0.7 million and $ 0.1 million, respectively.

As of March 31, 2022 and December 31, 2021, the outstanding financing liability to Lilly was $ 59.2 million and $ 60.7 million, respectively, and included within other long-term liabilities, current portion, and other long-term liabilities in the condensed balance sheet.

Through March 31, 2022, Lilly billed us $ 4.9 million for our share of development costs under this agreement, of which, $ 2.1 million was paid as of March 31, 2022.

Interest expense is being accreted on such liability over the expected commitment period and adjusted for timing of expected cost share payments.

Interest expense accreted during the three months ended June 30, 2022 and 2021 was no ne and $ 1.0 million, respectively, and for the six months ended June 30, 2022 and 2021 was $ 0.7 million and $ 1.1 million, respectively.

Through June 30, 2022, Lilly billed us $ 8.3 million for our share of development costs under this agreement, and the amount was fully paid as of June 30, 2022.

As of June 30, 2022 and December 31, 2021, the outstanding financing liability to Lilly was $ 53.0 million and $ 60.7 million, respectively, and 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 during the three months ended March 31, 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.

As such, the transaction price allocated to the non-CNS penetrant IP of $ 60.4 million was recognized as revenue during 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 were obligated to perform additional research and development efforts before Lilly can accept the license.

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

During the three months ended March 31, 2022 and 2021, we recognized $ 0.2 million of

revenue for both periods for activities related to the delivery of CNS penetrant IP.

As of March 31, 2022, there was $ 0.3 million of deferred revenue related to delivery of the CNS penetrant IP.

In June 2022, Lilly provided notice of continuance pursuant to the terms of the Lilly Agreement, whereby Lilly elected its option to lead the identification and selection of CNS penetrant lead candidate within a certain period.

As such, we recognized the remaining outstanding deferred revenue related to delivery of the CNS penetrant IP in the second quarter of 2022.

For the three months ended June 30, 2022 and 2021, we recognized revenue related to activities associated to the delivery of CNS penetrant IP of $ 0.3 million and $ 3.3 million, respectively, and $ 0.5 million and $ 3.5 million for the six months ended June 30, 2022 and 2021, respectively.

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.

26 unchanged sentences

(b) for the research and regulatory services, we estimated the standalone selling price using the cost plus expected margin approach.

As a result of the adjusted transaction price, adjustments are recorded on a cumulative catch-

up basis, and recorded as part of contract revenues from collaborations in the first quarter of 2020.

As of March 31, 2022 and December 31, 2021, the remaining deferred revenue was $ 0.4 million and $ 0.7 million, respectively, related to the performance of research services.

During the three months ended March 31, 2022 and 2021, we recognized $ 0.3 million and none , respectively, in revenue related to the research and development services.

During the three months ended March 31, 2022 and 2021, we recognized none and $ 1.0 million, respectively, in revenues for the delivery of drug supplies to Grifols for its commercialization .

As a result of the adjusted transaction price, adjustments are recorded on a cumulative catch-up basis, and recorded as part of contract revenues from collaborations in the first quarter of 2020.

As of June 30, 2022 and December 31, 2021, the remaining deferred revenue was $ 0.2 million and $ 0.7 million, respectively, related to the performance of research and development services.

For revenue associated with the research and development services, during the three months ended June 30, 2022 and 2021, we recognized $ 0.2 million and $ 0.4 million, respectively, and during the six months ended June 30, 2022 and 2021, we recognized revenue of $ 0.5 million and $ 0.4 million, respectively.

In addition, during the three and six months ended June 30, 2022, we recognized $ 1.2 million of revenue for the delivery of fostamatinib supply to Grifols.

During the three and six months ended June 30, 2021, no revenue and $ 1.0 million revenue, respectively, was recognized for the delivery of fostamatinib supply to Grifols.

The remaining future variable consideration of $ 277.5 million related to future regulatory and commercial milestones were fully constrained because we cannot conclude that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur, given the inherent uncertainty of success with these future milestones.

10 unchanged sentences

We accounted for this agreement under ASC 606 and identified the following distinct performance obligations at inception of the agreement:

(a) granting of the license, (b) supply of fostamatinib for clinical use and (c) material right associated with discounted fostamatinib that are supplied for use other than clinical or commercial.

(a) granting of the license, (b) supply of fostamatinib for clinical use and (c) material right associated with discounted fostamatinib that is supplied for use other than clinical or commercial.

In addition, we will provide commercial product supply if the product is approved in the licensed territory.

1 unchanged sentence

We based our assessment on the following:

(i) our assessment that Kissei can benefit from the license on its own by developing and commercializing the underlying product using its own resources and (ii) the fact that the manufacturing services are not highly specialized in nature and can be performed by other vendors.

(i) our assessment that Kissei can benefit from the license on its own by developing and commercializing the underlying product using its own resources and (ii)

the fact that the manufacturing services are not highly specialized in nature and can be performed by other vendors.

Moreover, we determined that the upfront fee of $ 33.0 million represented the transaction price and was allocated to the performance obligations based on our best estimate of the relative standalone selling price as follows:

6 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.

During the three months ended March 31, 2022 and 2021, we recognized an immaterial amount of revenue and no revenue, respectively, related to the supply of fostamatinib and material right upon delivery of fostamatinib to Kissei.

As of March 31, 2022 and December 31, 2021, the remaining deferred revenue was $ 1.4 million.

As of June 30, 2022 and December 31, 2021, the remaining deferred revenue was related to the material right associated with discounted fostamatinib supply which amounted to $ 1.4 million.

No material revenue was recognized during the three and six months ended June 30, 2022 and 2021 associated with such outstanding deferred revenue.

During the three and six months ended June 30, 2022, we recognized $ 2.5 million and $ 2.6 million, respectively, of revenue related to the delivery of fostamatinib supply to Kissei mainly for commercial use.

No such revenue was recognized during the three and six months ended June 30, 2021.

In April 2022, Kissei announced that a new drug application was submitted to Japan’s Pharmaceuticals and Medical Devices Agency for fostamatinib in chronic ITP.

With this milestone event, we received $ 5.0 million non-refundable and non-creditable payment from Kissei pursuant to the terms of our collaboration agreement.

Such amount was recognized as revenue during the three and six months ended June 30, 2022.

Medison Commercial and License Agreements

7 unchanged sentences

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

As of March 31, 2022 and December 31, 2021, the outstanding financing liability to Medison of $ 5.6 million was included within other long-term liabilities in the condensed balance sheet.

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

No interest was accrued during the three and six months ended June 30, 2022.

During the three and six months ended June 30, 2021, we accrued interest amounting to $ 0.3 million related to this financing arrangement.

During the three months ended June 30, 2022, we billed Medison $ 0.1 million related to the supply of fostamatinib for clinical use which was deferred and included the balance within the outstanding financing liability considering the buyback provision.

As of June 30, 2022 and December 31, 2021, the outstanding financing liability to Medison of $ 5.7 million and $ 5.6 million, respectively, was included within other long-term liabilities in the condensed balance sheet.

Knight Commercial License and Supply Agreement

In May 2022, we entered into commercial license and supply agreements with Knight for the commercialization of fostamatinib for approved indications in Knight territory.

Pursuant to such commercial license agreement, we received a $ 2.0 million one-time, non-refundable, and non-creditable upfront payment, with potential for up to an additional $ 20.0 million in regulatory and sales-based commercial milestone payments, and will receive twenty- to mid-thirty percent, tiered, escalated net-sales based royalty payments for products sold in the Knight territory.

We accounted for this

agreement under ASC 606 and identified that the upfront payment was a consideration for granting Knight the license to commercialize fostamatinib for approved indication in the Knight territory, and no further material deliverables associated to such upfront payment.

As such, we recognized the upfront payment as revenue during the three months ended June 30, 2022.

Variable consideration related to future regulatory milestones was fully constrained because we cannot conclude that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur, given the inherent uncertainty of success with these future milestones.

For sales-based milestones and royalties, we determined that the license is the predominant item to which the royalties or sales-based milestones relate to.

Accordingly, we will recognize revenue at the later of (i) when the related sales occur, or (ii) when the performance obligation to which some or all the royalty has been allocated has been satisfied (or partially satisfied).

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

We are also responsible for the exclusive manufacture and supply of fostamatinib for all future development and commercialization activities under agreement.

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 during the first quarter of 2021.

Government Contract - US Department of Defense’s JPEO-CBRND

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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 US Department of Defense that such conditions have been met.

For the three months ended March 31, 2022 and 2021, we recognized no revenue and $ 3.0 million of revenue, respectively, related to this grant.

Through March 31, 2022, we recognized $ 10.5 million revenue and we expect to receive the remaining award of $ 6.0 million throughout the period we conduct our clinical trial, subject to us meeting certain clinical trial events or milestones and approval by the US Department of Defense as specified in the agreement.

For the three and six months ended June 30, 2022, no revenue was recognized related to this grant.

For the three and six months ended June 30, 2021, we recognized $ 5.5 million and $ 8.5 million of revenue, respectively, related to this grant.

Through June 30, 2022, we recognized $ 10.5 million revenue and we expect to receive the remaining award of $ 6.0 million throughout the period we conduct our clinical trial, subject to us meeting certain clinical trial events or milestones and approval by the US Department of Defense as specified in the agreement.

Stock-Based Compensation

Stock-based compensation for the periods presented was as follows (in thousands):

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Selling, general and administrative

1 unchanged sentence

Total stock-based compensation expense

In March 2022, our Board of Directors approved to extend the exercise period of the stock option grants made to two members of our Board of Directors whose terms will expire in the next stockholders’ meeting in May 2022.

As a result of this modification, we recorded an incremental stock-based compensation expense of approximately $ 0.8 million during the three months ended March 31, 2022.

In March 2022, our Board of Directors approved to extend the exercise period of the stock option grants made to our two former Board of Directors whose terms expired in May 2022.

As a result of this modification, we recorded an incremental stock-based compensation expense of approximately $ 0.8 million in the first quarter of 2022.

The amount was included within selling, general and administrative expense in the condensed statement of operations.

During the three months ended March 31, 2022, we granted stock options to purchase 4,470,747 shares of common stock with weighted-average grant-date fair value of $ 1.58 per share, and 420,521 stock options were exercised.

As of March 31, 2022, there were 32,639,145 stock options outstanding, of which, 2,410,000 are outstanding performance-based stock options wherein the achievement of the corresponding corporate-based milestones were not considered probable as of March 31, 2022.

Accordingly, none of the $ 4.7 million grant date fair value for these awards has been recognized as stock-based compensation expense through March 31, 2022.

During the six months ended June 30, 2022, we granted stock options to purchase 5,299,247 shares of common stock with weighted-average grant-date fair value of $ 1.63 per share, and 433,318 stock options were exercised.

As of June 30, 2022, there were 33,081,045 stock options outstanding, of which, 2,535,000 are outstanding performance-based stock options wherein the achievement of the corresponding corporate-based milestones were not considered probable as of June 30, 2022.

Accordingly, none of the $ 5.0 million grant date fair value for these awards has been recognized as stock-based compensation expense through June 30, 2022.

The fair value of each option award is estimated on the date of grant using the Black-Scholes option pricing model.

The following table summarizes the weighted-average assumptions relating to options granted pursuant to our Equity Incentive Plans (2018 Equity Incentive Plan and Inducement Plan) for the periods presented:

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Risk-free interest rate

2 unchanged sentences

Expected volatility

During the three months ended March 31, 2022, we granted 1,012,612 restricted stock units (RSUs) with a grant-date weighted-average fair value of $ 2.42 per share, and 22,500 RSUs were released.

During the six months ended June 30, 2022, we granted 1,181,362 restricted stock units (RSUs) with a grant-date weighted-average fair value of $ 2.36 per share, and 203,750 RSUs were released.

The RSUs granted generally vest over 4 years .

As of March 31, 2022, there were 1,206,182 RSUs outstanding.

As of March 31, 2022, there was approximately $ 19.4 million of unrecognized stock-based compensation which is expected to be recognized over a remaining weighted-average period of 3.04 years related to time-based stock options, RSUs and performance-based stock options where achievement of the corresponding corporate-based milestones was considered probable as of March 31, 2022.

In September 2021 and January 2022, our Board of Directors approved increases of 469,000 shares and 610,000 shares, respectively, in common stock reserved for issuance under the Inducement Plan which became effective following the filing of a Registration Statement to register the additional shares available for issuance on March 1, 2022.

As of March 31, 2022, there were 7,130,256 shares of common stock available for future grant under our Equity Incentive Plans.

In April 2022, our Board of Directors approved the increase of 626,000 shares of common stock reserved for issuance under the Inducement Plan.

As of June 30, 2022, there were 1,190,532 RSUs outstanding.

As of June 30, 2022, there was approximately $ 18.3 million of unrecognized stock-based compensation which is expected to be recognized over a remaining weighted-average period of 2.94 years related to time-based stock options, RSUs and performance-based stock options where achievement of the corresponding corporate-based milestones was considered probable as of June 30, 2022.

In January 2022 and April 2022, our Board of Directors approved the increase of 610,000 shares and 626,000 shares, respectively, of common stock reserved for issuance under the Inducement Plan.

In May 2022 at the annual stockholders meeting, our stockholders approved to amend our 2018 Equity Incentive Plan (2018 Plan), among other items, add an additional 5,000,000 shares to the number of shares of common stock authorized for issuance under the 2018 Plan.

As of June 30, 2022, there were 11,940,095 shares of common stock available for future grant under our Equity Incentive Plans.

Employee Stock Purchase Plan

4 unchanged sentences

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

Our existing twenty-four -month offering period under our Purchase Plan is from July 1, 2020 to June 30, 2022.

As of March 31, 2022, the unrecognized stock-based compensation cost related to our Purchase Plan was $ 0.05 million, which is expected to be recognized over the remaining weighted average period of 0.24 years.

As of March 31, 2022, there were 4,584,484 shares reserved for future issuance under the Purchase Plan.

Our twenty-four -month offering period under our Purchase Plan ended on June 30, 2022 and a new twenty-four-month offering period begins on July 1, 2022.

As of June 30, 2022, no unrecognized stock-based compensation cost related to our Purchase Plan.

During the six months ended June 30, 2022, there were 597,042 shares purchased under the Purchase Plan.

As of June 30, 2022, there were 3,987,442 shares reserved for future issuance under the Purchase Plan.

Inventories for the periods presented consist of the following (in thousands):

2 unchanged sentences

Finished goods

As of March 31, 2022, we have $0.7 million in advance payments to the manufacturer of our raw materials, which was included within prepaid and other current assets in the condensed balance sheet.

As of June 30, 2022, we have $ 0.7 million in advance payments to the manufacturer of our raw materials, which was included within prepaid and other current assets in the condensed balance sheet.

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, 2022

June 30, 2022

US treasury bills

5 unchanged sentences

Corporate bonds and commercial paper

As of March 31, 2022 and December 31, 2021, our cash equivalents and short-term investments had a weighted-average time to maturity of approximately 166 days and 196 days , respectively.

As of June 30, 2022 and December 31, 2021, our cash equivalents and short-term investments had a weighted-average time to maturity of approximately 114 days and 196 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 condensed balance sheets as they are available for use in the current operations.

As of March 31, 2022, we had no

As of June 30, 2022, we had no

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

As of March 31, 2022, a total of 44 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, 2022, a total of 34 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 our assessment of the duration and severity of unrealized losses, there were no other-than-temporary impairments for these securities as of March 31, 2022.

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, 2022

June 30, 2022

Unrealized Losses

3 unchanged sentences

The table below summarizes the fair value of our cash equivalents and short-term investments measured at fair value on a recurring basis, and are categorized based upon the lowest level of significant input to the valuations (in thousands):

Assets at Fair Value as of March 31, 2022

Assets at Fair Value as of June 30, 2022

Money market funds

11 unchanged sentences

In May 2020, an additional $ 10.0 million was funded (Tranche 2).

In March 2021, we entered into the First Amendment to the Credit Agreement to extend the period through which Tranche 3 will be available to us through March 31, 2022 at our option, subject to the satisfaction of certain conditions set forth in the Credit Agreement.

In March 2021, we entered into the First Amendment to the Credit Agreement to extend the period through which Tranche 3 was available to us through March 31, 2022 at our option, subject to the satisfaction of certain conditions set forth in the Credit Agreement.

In February 2022, we entered into the Second Amendment to our Credit Agreement which, among other things, amended the applicable funding conditions, applicable commitments and certain other terms relating to available credit facilities (Tranches 3 and 4), added additional term loan credit facility (Tranche 5), and revised certain terms related to the financial covenants.

Following the Second Amendment, the Credit Agreement gives us the ability to access the following available credit facilities:

(i) on the closing date of the Second Amendment, $ 10.0 million term loan facility (Tranche 3), (ii) at our option, an additional $ 10.0 million aggregate principal amount of term loan facility available on the Second Amendment effective date through March 31, 2023 (Tranche 4), which is subject to satisfaction of certain conditions if Tranche 4 is drawn on or after August 31, 2022, and (iii) at our option and

upon the satisfaction of certain conditions contained in the Credit Agreement, as amended, an additional $ 20.0 million aggregate principal amount of term loan available through March 31, 2023 (Tranche 5).

aggregate principal amount of term loan available through March 31, 2023 (Tranche 5).

At the Second Amendment effective date, $ 10.0 million was funded (Tranche 3).

As of March 31, 2022, the outstanding principal balance of the loan was $ 30.0 million.

To date, the facility gives us the ability to access an additional $ 30.0 million at our option, subject to the achievement of certain customary conditions as discussed above.

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.

As of June 30, 2022, the outstanding principal balance of the loan was $ 30.0 million and the facility gives us the ability to access an additional $ 30.0 million at our option, subject to the achievement of certain customary conditions.

On July 27, 2022, we entered into thethird amendment to our Credit Agreement with MidCap (Third Amendment).

See “Note 12 – Subsequent Events” for further discussions.

The outstanding principal balance of the loan bears interest at an annual rate of one-month London Interbank Offered Rate (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.

Prior to the Third Amendment, the Credit Agreement provides that we initially make interest-only payments for 24 months from October 1, 2019, followed by 36 months of amortization payments.

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

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

Further, in June 2022, we satisfied the second interest-only extension conditions under the Credit Agreement which effectively further extended the interest-only period to 48 months or through October 1, 2023.

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

3 unchanged sentences

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.

As of March 31, 2022 and December 31, 2021, the outstanding balance of the loan, net of unamortized debt discount, was $ 29.8 million and $ 19.9 million, respectively.

As of March 31, 2022, we deemed that it is probable that we will satisfy the second interest-only criteria.

Accordingly, we classified our outstanding loan as a long-term liability in the accompanying condensed balance sheet.

As of June 30, 2022 and December 31, 2021, the outstanding balance of the loan, net of unamortized debt discount was classified as long-term liability in the accompanying condensed balance sheet.

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

As of March 31, 2022 and December 31, 2021, the unamortized issuance costs and debt discounts amounted to $ 0.2 million and $ 0.1 million, respectively.

For the three months ended March 31, 2022 and 2021, interest expense, including amortization of the debt discount and accretion of the final fees related to the Credit Agreement was $ 0.5 million and $ 0.4 million, respectively.

Accrued interest of $ 0.6 million was included within other accrued liabilities in the condensed balance sheet as of March 31, 2022.

The following table presents the future minimum principal payments of the outstanding loan as of March 31, 2022 under the current interest-only period as discussed above (in thousands):

As of June 30, 2022 and December 31, 2021, the unamortized issuance costs and debt discounts amounted to $ 0.2 million and $ 0.1 million, respectively.

Interest expense, including amortization of the debt discount and accretion of the final fees related to the Credit Agreement for the three months ended June 30, 2022 and 2021 was $ 0.6 million and $ 0.4 million, respectively, and for the six months ended June 30, 2022 and 2021 was $ 1.1 million and $ 0.8 million, respectively.

Accrued interest of $ 0.6 million was included within other accrued liabilities in the condensed balance sheet as of June 30, 2022.

The following table presents the future minimum principal payments of the outstanding loan as of June 30, 2022 (in thousands):

Remainder of 2022

1 unchanged sentence

The Credit Agreement contains certain covenants which, among others, require us to deliver financial reports at designated times of the year and maintain minimum trailing net revenues and cash, cash equivalents and short-term investments balance.

As of March 31, 2022, we were not in violation of any covenants.

As of June 30, 2022, we were not in violation of any covenants.

We currently lease our research and office space under a noncancelable lease agreement with our landlord, Healthpeak Properties, Inc.

1 unchanged sentence

In March 2022, we entered an amendment to the lease agreement to waive our option or right to further extend the term of the lease.

The weighted average remaining term of our lease as of June 30, 2022 was 0.58 years.

We have a sublease agreement originally entered in December 2014, and subsequently amended in February 2017 and July 2017, with an unrelated third party to occupy a portion of our research and office space which expire in January 2023.

As of March 31, 2022, we expect to receive approximately $ 3.9 million in future sublease income (excluding our subtenant’s share of facilities operating expenses) through January 2023.

As of March 31, 2022 and December 31, 2021, we had operating lease right-of-use asset of $ 7.5 million and $ 9.7 million, respectively, and lease liability of $ 8.3 million and $ 10.7 million, respectively, in the respective condensed balance sheets.

The weighted average remaining term of our lease as of March 31, 2022 was 0.83 year.

As of March 31, 2022, we received from our landlord leasehold improvement incentives amounting to $ 0.6 million related to leasehold improvements.

As of June 30, 2022, we received from our landlord leasehold improvement incentives amounting to $ 0.7 million 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.

2 unchanged sentences

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

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Fixed operating lease expense

2 unchanged sentences

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

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Cash payments included in the measurement of operating lease liabilities

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

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

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, 2022 (in thousands):

The following table presents the future lease payments of our operating lease liabilities as of June 30, 2022 (in thousands):

Operating Lease

2 unchanged sentences

Total minimum payments required

For the three months ended March 31, 2022, we did no t recognize provision for income taxes due to our pre-tax book loss as 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, 2021, we recorded a provision for income tax of $ 1.8 million.

The provision for income tax for the three months ended March 31, 2021 was estimated 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.

For the three and six months ended June 30, 2022, we did no t recognize provision for income taxes due to our pre-tax book loss as 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, 2021, we recorded a benefit from income tax of $ 1.0 million and a provision for income tax of $ 0.8 million.

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, which was primarily due to revenue recognized for the Lilly Agreement.

We did not estimate a provision for federal income taxes due to the sufficient net operating loss carryforwards that were generated prior to enactment of the Tax Cuts and Jobs Act, as well as our ability to utilize significant research and development credit carryforwards.

Subsequent Events

License and Transition Services Agreement with Forma

On July 27, 2022, we entered into a license and transition services agreement with Forma for an exclusive license to develop, manufacture and commercialize olutasidenib, Forma’s proprietary inhibitor of mIDH1, for any uses worldwide, including for the treatment of R/R AML and other malignancies.

Pursuant to the terms of the license and transition services agreement, we will pay an upfront fee of $ 2.0 million, with the potential to pay up to $ 67.5 million additional payments upon achievement of specified development and regulatory milestones and up to $ 165.5 million additional payments upon achievement of certain commercial milestones.

The potential development and regulatory milestone payments of $ 67.5 million include a $ 2.5 million payment upon achievement of a certain near-term regulatory milestone, a $ 5.0 million payment upon the first regulatory approval of the licensed product, and $ 10.0 million payment upon the licensed product’s first commercial sale subject to certain other conditions.

In addition, subject to the terms and conditions of the license and transition services agreement, Forma would be entitled to tiered royalty payments on net sales of licensed products at percentages ranging from low-teens to mid-thirties, as well as certain portion of our sublicensing revenue, subject to certain standard reductions and offsets.

Third Amendment to Credit Facility with MidCap

On July 27, 2022, we entered into the Third Amendment to our Credit Agreement with MidCap, which, among other things, (i) extended the maturity date for the term loans to September 1, 2026, (ii) extended the interest-only period for the term loans to October 1, 2024, (iii) reset the prepayment fee applicable to the term loans, (iv) grant a lien to MidCap over our intellectual property, (v) revised the financial covenants and (vi) changed the interest rate benchmark from LIBOR to Secured Overnight Financing Rate (SOFR), as defined in the amended Credit Agreement.

On the same day, $ 10.0 million was funded (Tranche 4).

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