What changed in this filing

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Item 1. Financial Statements

2023-11-07 compared with 2023-08-01 · 134 added, 114 removed, 419 unchanged (37% of the section changed)

3 unchanged sentences

(In thousands)

June 30, 2023

September 30, 2023

December 31, 2022 (1)

37 unchanged sentences

(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

16 unchanged sentences

(In thousands)

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Other comprehensive gain (loss):

22 unchanged sentences

( 1,402,595 )

Net change in unrealized gain on short-term investments

Issuance of common stock upon exercise of options

Stock-based compensation expense

Balance as of September 30, 2023

( 1,408,287 )

Accumulated Other

16 unchanged sentences

( 1,364,823 )

Net unrealized gain on short-term investments

Stock-based compensation expense

Balance as of September 30, 2022

( 1,383,860 )

See Accompanying Notes to Condensed Financial Statements

2 unchanged sentences

(In thousands)

Six Months Ended June 30,

Nine Months Ended September 30,

Operating activities

19 unchanged sentences

Investing activities

Purchases of short-term investments

Maturities of short-term investments

Purchases of short-term investments

Purchases of intangible asset

3 unchanged sentences

Financing activities

Cost share payments to a collaboration partner

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

Net proceeds from term loan financing

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

Cost share payments to a collaboration partner

Net cash provided by financing activities

19 unchanged sentences

We continue to advance the development of our interleukin receptor-associated kinase (IRAK) 1/4 inhibitor program, in an open-label, Phase 1b trial to determine the tolerability and preliminary efficacy of the drug in patients with lower-risk myelodysplastic syndrome (MDS) who are refractory or resistant to prior therapies.

Our other ongoing clinical programs include a fostamatinib Phase 2/3 trial, the Accelerating COVID-19 Therapeutic Inventions and Vaccines Phase 2/3 trial (ACTIV-4 Host Tissue Trial), for the treatment of hospitalized high-risk patients with COVID-19 being conducted and sponsored by the National Institute of Health (NIH)/National Heart, Lung, and Blood Institute (NHLBI), and a receptor-interacting serine/threonine-protein kinase 1 (RIPK1) inhibitor program in clinical development with our partner Eli Lilly and Company (Lilly).

We have a receptor-interacting serine/threonine-protein kinase 1 (RIPK1) inhibitor program in clinical development with our partner Eli Lilly and Company (Lilly).

We also have product candidates in clinical development with partners BerGenBio ASA (BerGenBio) and Daiichi Sankyo (Daiichi).

13 unchanged sentences

There have been no material changes to these accounting policies.

As of June 30, 2023, we had approximately $ 64.4 million in cash, cash equivalents and short-term investments.

As of September 30, 2023, we had approximately $ 62.4 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.

9 unchanged sentences

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

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Outstanding stock options

Purchase Plan

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

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Product sales:

12 unchanged sentences

Our net product sales include gross product sales, net of chargebacks, discounts and fees, government and other rebates and returns.

Of the total discounts and allowances from gross product sales for the six months ended June 30, 2023 and 2022, $ 18.6 million and $ 13.0 million, respectively, was accounted for as additions to revenue reserves and refund liability, and $ 0.4 million and $ 1.3 million, respectively, 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 fees that were prepaid) in the condensed balance sheet.

Of the total discounts and allowances from gross product sales for the nine months ended September 30, 2023 and 2022, $ 29.7 million and $ 19.7 million, respectively, was accounted for as additions to revenue reserves and refund liability, and $ 0.8 million and $ 2.4 million, respectively, 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 fees that were prepaid) in the condensed balance sheet.

The following tables summarize the activities in chargebacks, discounts and fees, government and other rebates and returns that were accounted for within revenue reserves and refund liability, for each of the periods presented (in thousands):

3 unchanged sentences

Credit or payments made during the period

Balance as of June 30, 2023

Balance as of September 30, 2023

Discounts and

2 unchanged sentences

Credit or payments made during the period

Balance as of June 30, 2022

The following table summarizes the percentages of revenues from each of our customers who individually accounted for 10% or more of the total net product sales and revenues from collaborations:

Three Months Ended June 30,

Six Months Ended June 30,

Balance as of September 30, 2022

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 September 30,

Nine Months Ended September 30,

McKesson Specialty Care Distribution Corporation

4 unchanged sentences

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

As of June 30, 2023, 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 September 30, 2023, 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.

7 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.

As of June 30, 2023, total future contingent payments to us under all of the above existing agreements, excluding terminated agreements, could exceed $ 1.3 billion if all potential product candidates achieved all of the payment triggering events under all of our current agreements.

As of September 30, 2023, total future contingent payments to us under all of the above existing agreements, excluding terminated agreements, could exceed $ 1.3 billion if all potential product candidates achieved all of the payment triggering events under all of our current agreements.

Of this amount, $ 279.5 million relates to the achievement of development events, $ 263.1 million relates to the achievement of regulatory events and $ 796.0 million relates to the achievement of certain commercial events.

4 unchanged sentences

In addition, the collaboration is aimed at developing additional RIPK1 inhibitors for the treatment of CNS diseases.

Pursuant to the terms of the license agreement, we granted to Lilly exclusive rights to develop and commercialize R552 and related RIPK1 inhibitors in all indications worldwide.

Pursuant to the terms of the Lilly Agreement, we granted Lilly the exclusive rights to develop and commercialize R552 and related RIPK1 inhibitors in all indications worldwide.

The parties’ collaboration is governed through a joint governance committee and appropriate subcommittees.

5 unchanged sentences

payments on net sales of CNS disease products up to low-double digits, subject to certain standard reductions and offsets.

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

Under 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.

Under the Lilly Agreement, we are responsible for 20 % of development costs for R552 in the US, Europe, and Japan, up to a specified cap, and Lilly is responsible for funding the remainder of all development activities for R552 and other non-CNS disease development candidates.

Pursuant to the terms of the Lilly Agreement, we have the right to opt-out of co-funding the R552 development activities at two different specified times.

If we exercise our first opt-out right (no later than September 30, 2023), we are required to fund our share of the R552 development activities 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.

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.

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

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

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

No interest was accreted during the six months ended June 30, 2023, and $ 0.7 million of interest was accreted during the six months ended June 30, 2022.

Through June 30, 2023, Lilly billed us $ 16.9 million for our share of development costs under this agreement, and the amount was fully paid as of June 30, 2023.

As of June 30, 2023 and December 31, 2022, the outstanding financing liability to Lilly was $ 44.5 million and $ 46.2 million, respectively, and included within other long-term liabilities, current portion, and other long-term liabilities in the condensed balance sheet.

We are responsible for 20 % of development costs for R552 in the US, Europe, and Japan, up to a specified cap, and Lilly is responsible for funding the remainder of all development activities for R552 and other non-CNS disease development candidates.

Pursuant to the terms of the Lilly Agreement, we have the right to opt-out of co-funding the R552 development activities in the US, Europe and Japan at two different specified times and as a result receive lesser royalties from sales.

Prior to us providing our first opt-out notice as discussed below, under the Lilly Agreement, we were required to fund our share of the R552 development activities up to a maximum funding commitment of $ 65.0 million through April 1, 2024.

On September 28, 2023, we entered into an amendment to the Lilly Agreement which provides, among others that if we exercise our first opt-out right, we have the right to opt-in to the co-funding of R552 development, upon us providing notice to Lilly within 30 days of certain events as specified in the Lilly Agreement, and as a result receive greater royalties from sales.

If we decide to exercise our opt-in right, we will be required to continue to share in global development costs, and if we later exercise our second opt-out right (no later than April 1, 2025), our share in global development costs will be up to a specified cap through December 31, 2025, as provided for in the Lilly Agreement.

On September 29, 2023, we provided the first opt-out notice to Lilly.

We will continue to fund our share of the R552 development activities up to $ 22.6 million through April 1, 2024 as provided for in the amended Lilly Agreement.

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 rights over the non-CNS penetrant intellectual property (IP), and (b) granting of the license rights over the CNS penetrant IP which will be delivered to Lilly upon completion of the additional research and development efforts specified in the agreement.

We concluded each of these performance obligations is distinct.

We concluded that each of these performance obligations is distinct.

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.

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.

At the inception of the Lilly Agreement, given our rights to opt-out from the development of R552, we believed at the minimum, we had a commitment to fund the development costs up to $ 65.0 million as discussed above.

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 accreted on such liability over the expected commitment period, adjusted for timing of expected cost share payments.

No interest was accreted during the nine months ended September 30, 2023, and $ 0.7 million of interest was accreted during the nine months ended September 30, 2022.

Through September 30, 2023, Lilly billed us $ 17.7 million for our share of development costs, and the amount was fully paid as of September 30, 2023.

As of September 30, 2023 and December 31, 2022, the outstanding liability to Lilly was $ 43.6 million and $ 46.2 million, respectively, and included within other long-term liabilities, current portion, and other long-term liabilities in the condensed balance sheet.

As discussed above, following the amendment to the Lilly Agreement, and us providing the first opt-out notice to Lilly, our cumulative share of the R552 development cost is now capped at $ 22.6 million through April 1, 2024.

Although our cumulative share of the development cost is now at the specified cap that is less than our outstanding recorded liability at the balance sheet date, such excess amount has not been recognized as revenue because we cannot conclude that it is probable that a significant reversal of the amount of revenue, if recognized, will not occur until the likelihood of us exercising our opt-in right becomes remote, or when the opt-in right period lapses.

At the inception, 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.

The transaction price allocated to the non-CNS penetrant IP of $ 60.4 million was recognized as revenue upon delivery of the non-CNS penetrant IP to Lilly during the first quarter of 2021.

The transaction price allocated 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, since we were required to perform additional research and development efforts before the final acceptance of the license by Lilly.

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.

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

As such, we recognized the remaining outstanding deferred revenue in the second quarter of 2022.

For the three and six months ended June 30, 2022, we recognized $ 0.3 million and $ 0.5 million, respectively, of revenue associated with the delivery of CNS penetrant IP.

No such revenue was recognized in the three and six months ended June 30, 2023.

For the three and nine months ended September 30, 2022, we recognized no revenue and $ 0.5 million of revenue, respectively, associated with the delivery of CNS penetrant IP.

No such revenue was recognized in the three and nine months ended September 30, 2023.

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.

13 unchanged sentences

We allocated the transaction price to the distinct performance obligations in our collaboration agreement based on our best estimate of the relative standalone selling price, and recognized the corresponding revenue in the periods we satisfied the performance obligations.

During the three and six months ended June 30, 2022, we recognized $ 0.2 million and $ 0.5 million, respectively, of revenue associated with the remaining performance obligation to perform research services.

No such revenue was recognized during the three and six months ended June 30, 2023.

As of September 30, 2023, there was no outstanding deferred revenue.

In the three and nine months ended September 30, 2022, we recognized $ 0.2 million and $ 0.7 million, respectively, of revenue associated with such remaining performance obligation.

The remaining variable consideration 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.

5 unchanged sentences

Prior to the Commercial Supply Agreement, we had a Drug Product Purchase Agreement with Grifols entered in December 2019.

During the three and six months ended June 30, 2023, we recognized $ 1.2 million and $ 2.8 million, respectively, of revenue related to delivery of drug supply to Grifols.

D uring the three and six months ended June 30, 2022, we recognized $ 1.2 million of revenue related to delivery of drug supply to Grifols .

We began recognizing royalty revenue from Grifols beginning in the third quarter of 2022.

For the three and six months ended June 30, 2023, we recognized $ 0.8 million and $ 1.5 million, respectively, of royalty revenue from Grifols, and such amount was included within contract revenues from collaboration.

No such revenue was recognized for the three and six months ended June 30, 2022.

During the three and nine months ended September 30, 2023, we recognized no revenue and $ 2.8 million of revenue, respectively, related to delivery of drug supply to Grifols.

D uring the three and nine months ended September 30, 2022, we recognized $ 0.4 million and $ 1.6 million of revenue, respectively, related to delivery of drug supply to Grifols .

We began recognizing royalty revenue from Grifols included within contract revenues from collaboration beginning in the third quarter of 2022.

For the three and nine months ended September 30, 2023, we recognized $ 0.8 million and $ 2.3 million, respectively, of royalty revenue from Grifols.

For the three and nine months ended September 30, 2022, we recognized $ 0.1 million of royalty revenue from Grifols.

Kissei License Agreement

9 unchanged sentences

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 and recognized the corresponding revenue in the period we satisfied the performance obligations.

As of June 30, 2023 and December 31, 2022, the remaining deferred revenue was related to the material right associated with discounted fostamatinib supply which amounted to $ 1.4 million.

For 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, 2023.

As of September 30, 2023 and December 31, 2022, the remaining deferred revenue was related to the material right associated with discounted fostamatinib supply which amounted to $ 1.4 million.

For the three and nine months ended September 30, 2022, we recognized an immaterial amount of revenue and $ 2.6 million of revenue, respectively, related to the delivery of fostamatinib supply to Kissei mainly for commercial use.

No such revenue was recognized during the three and nine months ended September 30, 2023.

In April 2022, Kissei announced that an NDA was submitted to Japan’s Pharmaceuticals and Medical Devices Agency (PMDA) 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, and such amount was recognized as revenue in the three and six months ended June 30, 2022 .

In December 2022, Kissei announced that Japan’s PMDA approved the NDA for fostamatinib in chronic ITP.

14 unchanged sentences

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

Interest expense

was accreted on such liability over the expected buyback period.

We also billed Medison for the delivery of fostamatinib supplies for clinical use which we previously deferred and included within the outstanding financing liability considering the buy-back provision.

The decision to exercise the buyback option is dependent of many factors including management’s cost and benefit assessments and the success of obtaining regulatory approval for the treatment of AIHA in Canada.

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

We also billed Medison for the delivery of drug supplies for clinical use which we previously deferred and included within the outstanding financing liability considering the buy-back provision.

The decision to exercise the buyback option is dependent on many factors including management’s cost and benefit assessments and the success of obtaining regulatory approval for the treatment of AIHA in Canada.

In June 2022, we reported the top-line results from our Phase 3 trial of fostamatinib in warm autoimmune hemolytic anemia (wAIHA) which showed that the trial did not demonstrate statistical significance in the primary efficacy endpoint in the overall study population.

3 unchanged sentences

As such, during the fourth quarter of 2022, we relieved the outstanding financing liability to Medison amounting to $ 5.7 million and recognized such amount as collaboration revenue in accordance with ASC 606.

There was no outstanding financing liability to Medison as of June 30, 2023 and December 31, 2022.

There was no outstanding financing liability to Medison as of September 30, 2023 and December 31, 2022.

During the three and nine months ended September 30, 2023, we recognized $ 0.2 million of revenue related to the delivery of drug supplies to Medison and a milestone pursuant to the commercial and license agreement.

No such revenue was recognized during the three and nine months ended September 30, 2022.

Knight Commercial License and Supply Agreement

We have a commercial license and supply agreements with Knight entered in May 2022 for the commercialization of fostamatinib for approved indications in Knight territory.

We have commercial license and supply agreements with Knight entered in May 2022 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 and six months ended June 30, 2022.

As such, we recognized the upfront payment as revenue during the second quarter of 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.

2 unchanged sentences

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

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

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

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

2 unchanged sentences

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 and six months ended June 30, 2023, we recognized $ 1.0 million of revenue related to this grant upon achievement of certain milestones.

Through June 30, 2023, we received $ 16.0 million of the awards which we recognized as revenue in the respective periods, with remaining $ 0.5 million available, subject to us meeting certain milestone and approval by the US Department of Defense that such milestone has been met, as specified in the agreement.

We recognized no revenue and $ 1.0 million of revenue for three and nine months ended September 30, 2023, respectively, and $ 2.5 million of revenue for the three and nine months ended September 30, 2022, related to this grant upon achievement of certain milestones.

Through September 30, 2023, we received $ 16.0 million of the award which we recognized as revenue in the respective periods, with remaining $ 0.5 million available, subject to us meeting a certain milestone and approval by the US Department of Defense that such milestone has been met, as specified in the agreement.

License and Transition Services Agreement with Forma (now Novo Nordisk)

6 unchanged sentences

At the acquisition date, the acquired license asset was accounted for as IPR&D, and we anticipated no other economic benefit to be derived from such acquired licensed asset other than the primary indications.

As such, we accounted for the upfront fee of $ 2.0 million as IPR&D and recorded such cost within research and development expense in the condensed statements of operations in the third quarter of 2022.

Under the accounting guidance, we account for contingent cash payments when it is probable that a liability is incurred and the amount can be reasonably estimated.

9 unchanged sentences

Since such milestone payment obligations were incurred upon and after regulatory approval of the product, we recorded such amount as intangible asset on our condensed balance sheet in the fourth quarter of 2022.

The $ 15.0 million milestone payment obligation was outstanding as of December 31, 2022 and included within accounts payable in our condensed balance sheet.

The $ 15.0 million in milestone payment obligation was outstanding as of

December 31, 2022 and included within accounts payable in our condensed balance sheet.

Such amount was paid in the first quarter of 2023 .

During the three and six months ended June 30, 2023, we recognized $ 0.3 million and $ 0.5 million, respectively, of amortization of intangible asset, and $ 0.4 million and $ 0.6 million, respectively, of royalty expense related to the license and transition services agreement as discussed above.

During the three and nine months ended September 30, 2023, we recognized amortization of intangible asset of $ 0.3 million and $ 0.8 million, respectively, and royalty expense of $ 0.4 million and $ 1.0 million, respectively, related to the license and transition services agreement as discussed above.

Such costs were included within cost of sales in our condensed statements of operations.

No such expenses were recognized during the three and six months ended June 30, 2022.

No such expenses were recognized during the three and nine months ended September 30, 2022.

Stock-Based Compensation

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

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Selling, general and administrative

1 unchanged sentence

Total stock-based compensation expense

Stock-based compensation expense within research and development in the six months ended June 30, 2023 include an incremental charge of approximately $ 0.5 million from stock option modifications recorded in the first quarter of 2023 related to the acceleration of vesting and extension of exercise period of vested stock option grants made to a former officer whose employment ended in March 2023.

Stock-based compensation expense within selling, general and administrative in the six months ended June 30, 2022 include an incremental charge of approximately $ 0.8 million from stock option modifications recorded in the first quarter of 2022 related to the extension of the exercise period of the stock option grants made to our two former Board of Directors whose terms expired in May 2022.

During the six months ended June 30, 2023, we granted stock options to purchase 2,938,600 shares of common stock with weighted-average grant-date fair value of $ 1.37 per share, and 15,557 stock options were exercised.

As of June 30, 2023, there were 35,244,121 stock options outstanding, of which, 2,870,000 are outstanding performance-based stock options wherein the achievement of the corresponding corporate-based milestones were not considered probable as of June 30, 2023.

Accordingly, none of the $ 5.3 million grant date fair value for these awards has been recognized as stock-based compensation expense as of June 30, 2023.

Stock-based compensation expense within research and development in the nine months ended September 30, 2023 include an incremental charge of approximately $ 0.5 million from stock option modifications recorded in the first quarter of 2023 related to the acceleration of vesting and extension of exercise period of vested stock option grants made to a former officer whose employment ended in March 2023.

Stock-based compensation expense within selling, general and administrative in the nine months ended September 30, 2022 include an incremental charge of approximately $ 0.8 million from stock option modifications recorded in the first quarter of 2022 related to the extension of the exercise period of the stock option grants made to our two former Board of Directors whose terms expired in May 2022.

During the nine months ended September 30, 2023, we granted stock options to purchase 3,186,000 shares of common stock with weighted-average grant-date fair value of $ 1.34 per share, and 24,837 stock options were exercised.

As of September 30, 2023, there were 34,283,826 stock options outstanding, of which, 2,870,000 are outstanding performance-based stock options wherein the achievement of the corresponding corporate-based milestones were not considered probable as of September 30, 2023.

Accordingly, none of the $ 5.3 million grant date fair value for these awards has been recognized as stock-based compensation expense as of September 30, 2023.

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 June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Risk-free interest rate

2 unchanged sentences

Expected volatility

During the six months ended June 30, 2023, we granted 1,387,600 RSUs with a grant-date weighted-average fair value of $ 1.80 per share, and 435,006 RSUs were released.

During the nine months ended September 30, 2023, we granted 1,387,600 RSUs with a grant-date weighted-average fair value of $ 1.80 per share, and 435,006 RSUs were released.

The RSUs granted generally vest over 4 years .

As of June 30, 2023, there were 1,963,487 RSUs outstanding.

As of June 30, 2023, there was approximately $ 14.6 million of unrecognized stock-based compensation cost which is expected to be recognized over a remaining weighted-average period of 2.68 years, related to time-based stock options, performance-based stock options wherein achievement of the corresponding corporate-based milestones was considered as probable, and RSUs.

In April 2023, our Board of Directors approved additional 108,600 shares of common stock reserved for issuance under our Inducement Plan.

As of September 30, 2023, there were 1,937,064 RSUs outstanding.

As of September 30, 2023, there was approximately $ 12.6 million of unrecognized stock-based compensation cost which is expected to be recognized over a remaining weighted-average period of 2.45 years, related to time-based stock options, performance-based stock options wherein achievement of the corresponding corporate-based milestones was considered as probable, and RSUs.

In April 2023 and July 2023, our Board of Directors approved additional 356,000 shares of common stock reserved for issuance under our Inducement Plan.

In May 2023, our stockholders approved an amendment to our 2018 Plan, to, among other items, add an additional 4,000,000 shares to the number of shares of common stock authorized for issuance under our 2018 Plan.

As of June 30, 2023, there were 12,186,098 shares of common stock available for future grant under our Equity Incentive Plans.

As of September 30, 2023, there were 13,145,511 shares of common stock available for future grant under our Equity Incentive Plans.

Employee Stock Purchase Plan

3 unchanged sentences

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

Our previous 24 -month offering period under our Purchase Plan ended on June 30, 2022, and a new twenty-four-month offering period started on July 1, 2022.

Our previous 24 -month offering period under our Purchase Plan ended on June 30, 2022, and a new 24-month offering period started on July 1, 2022.

The fair value of awards under our Purchase Plan is estimated on the date of our new offering period using the Black-Scholes option pricing model, which is being amortized over the requisite service periods.

As of June 30, 2023, unrecognized stock-based compensation cost related to our Purchase Plan amounted to $ 0.4 million, which is expected to be recognized over the remaining weighted average period of 0.74 years.

During the six months ended June 30, 2023, there were 509,190 shares purchased under the Purchase Plan.

As of June 30, 2023, there were 2,928,443 shares reserved for future issuance under the Purchase Plan.

As of September 30, 2023, unrecognized stock-based compensation cost related to our Purchase Plan amounted to $ 0.3 million, which is expected to be recognized over the remaining weighted average period of 0.49 years.

During the nine months ended September 30, 2023, there were 509,190 shares purchased under the Purchase Plan.

As of September 30, 2023, there were 2,928,443 shares reserved for future issuance under the Purchase Plan.

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

June 30, 2023

September 30, 2023

December 31, 2022

2 unchanged sentences

Finished goods

Inventories as of June 30, 2023 and December 31, 2022 include inventories acquired from Forma (now Novo Nordisk) pursuant to the license and transition agreement.

As of June 30, 2023 and December 31, 2022, we have $ 0.7 million and $ 0.8 million, respectively, in advance payments to the manufacturer of our raw materials, which were included within prepaid and other current assets in the condensed balance sheet.

Inventories as of September 30, 2023 and December 31, 2022 include inventories acquired from Forma (now Novo Nordisk) pursuant to the license and transition agreement.

As of September 30, 2023 and December 31, 2022, zero and $ 0.8 million, respectively, of advance payments to the manufacturer of our raw materials were included within prepaid and other current assets in the condensed balance sheet .

We provide reserves for potential excess, dated or obsolete inventories based upon assumptions about future demand and market conditions, as well as product shelf life.

There were no material inventory reserves as of September 30, 2023 and December 31, 2022.

Inventories that are not expected to be consumed beyond our normal operating cycle are classified as non-current inventories and included within other assets in the condensed balance sheet.

Non-current inventories primarily consist of active pharmaceutical ingredient classified as raw materials, which have multi-year shelf life.

Cash, Cash Equivalents and Short-Term Investments

Cash, cash equivalents and short-term investments for the periods presented consist of the following (in thousands):

June 30, 2023

September 30, 2023

December 31, 2022

6 unchanged sentences

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

As of June 30, 2023

As of September 30, 2023

US treasury bills

5 unchanged sentences

Corporate bonds and commercial paper

As of June 30, 2023 and December 31, 2022, our cash equivalents and short-term investments had a weighted-average time to maturity of approximately 72 days and 89 days , respectively.

As of September 30, 2023 and December 31, 2022, our cash equivalents and short-term investments had a weighted-average time to maturity of approximately 82 days and 89 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 June 30, 2023, we had no investments that had been in a continuous unrealized loss position for more than 12 months.

As of June 30, 2023, 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.

As of September 30, 2023, we had no investments that had been in a continuous unrealized loss position for more than 12 months.

As of September 30, 2023, 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.

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, we have no t recognized any credit losses on these securities as of June 30, 2023 and December 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):

As of June 30, 2023

As of September 30, 2023

Unrealized Losses

US treasury bills

Government-sponsored enterprise securities

1 unchanged sentence

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 June 30, 2023

Assets at Fair Value as of September 30, 2023

Money market funds

10 unchanged sentences

At the Closing Date, $ 10.0 million was funded (Tranche 1), in May 2020, an additional $ 10.0 million was funded (Tranche 2), at the Second Amendment, an additional $ 10.0 million was funded (Tranche 3), at the Third Amendment, an additional $ 10.0 million was funded (Tranche 4), and in March 2023, an additional $ 20.0 million was funded (Tranche 5).

As of June 30, 2023, the outstanding principal balance of the loan was $ 60.0 million, and no remaining funds are available for draw under the term loan credit facility.

As of September 30, 2023, the outstanding principal balance of the loan was $ 60.0 million, and no remaining funds are available for draw under the term loan credit facility.

The First Amendment to the Credit Agreement extended the period through which Tranche 3 was available to us.

8 unchanged sentences

Debt issuance costs are recorded as a direct deduction from the outstanding principal balance of the term loan.

As of June 30, 2023 and December 31, 2022, the unamortized issuance costs and debt discounts amounted to $ 0.4 million and $ 0.6 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, 2023 and 2022 was $ 1.9 million and $ 0.6 million, respectively, and for the six months ended June 30, 2023 and 2022 was $ 3.1 million and $ 1.1 million, respectively.

Accrued interest of $ 1.2 million was included within other accrued liabilities in the condensed balance sheet as of June 30, 2023.

The following table presents the future minimum principal payments of the outstanding loan as of June 30, 2023 (in thousands):

As of September 30, 2023 and December 31, 2022, the unamortized issuance costs and debt discounts amounted to $ 0.3 million and $ 0.6 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 September 30, 2023 and 2022 was $ 1.9 million and $ 0.8 million, respectively, and for the nine months ended September 30, 2023 and 2022 was $ 5.0 million and $ 1.9 million, respectively.

Accrued interest of $ 1.4 million was included within other accrued liabilities in the condensed balance sheet as of September 30, 2023.

The following table presents the future minimum principal payments of the outstanding loan as of September 30, 2023 (in thousands):

Remainder of 2023

1 unchanged sentence

The amended Credit Agreement contains certain covenants which, among others, require us to deliver financial reports at designated times of the year and maintain minimum unrestricted cash and trailing net revenues.

As of June 30, 2023, we were not in violation of any covenants.

As of September 30, 2023, we were not in violation of any covenants.

We have a sublease agreement with Atara Biotherapeutics, Inc.

2 unchanged sentences

This leased facility is currently held as our new headquarters following the expiration of our previously leased facility in January 2023.

At lease measurement date in the fourth quarter of 2022, we recognized the operating lease right-of-use asset and lease liability of approximately $ 1.3 million.

As of June 30, 2023, we recorded $ 0.2 million of lease incentives from our sublease with Atara, which we recorded as a reduction to operating lease right-of-use asset and lease liability until the lease ends and the asset is transferred.

The weighted average remaining term of our leases as of June 30, 2023 was 1.92 years.

We had a lease agreement with Healthpeak Properties, Inc.

(formerly known as HCP BTC, LLC), to occupy research and office space located in South San Francisco, California and a sublease agreement with an unrelated third-party to sublet a portion of the leased facility.

The weighted average remaining term of our leases as of September 30, 2023 was 1.67 years.

We previously leased our prior headquarter space located in South San Francisco, California with Healthpeak Properties, Inc.

(formerly known as HCP BTC, LLC), and had a sublease agreement with an unrelated third-party to sublet a portion of the leased facility.

Both leases expired in January 2023.

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

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Fixed operating lease expense

Variable operating lease expense (net credit)

Variable operating lease expense

Total operating lease expense

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

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 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 June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Fixed sublease expense

1 unchanged sentence

Sublease income

The following table presents the future lease payments as of June 30, 2023 (in thousands):

The following table presents the future lease payments as of September 30, 2023 (in thousands):

Remainder of 2023

1 unchanged sentence

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