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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

 

For the quarterly period ended March 31, 2020

or

 

TRANSITION REPORTS PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

 

For the transition period from                      to                      

Commission File Number: 001-36070

 

Five Prime Therapeutics, Inc.

(Exact name of registrant as specified in its charter)

 

 

Delaware

 

26-0038620

(State or other jurisdiction of

incorporation or organization)

 

(IRS Employer

Identification No.)

111 Oyster Point Boulevard

South San Francisco, California 94080

(415) 365-5600

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of Each Class

Trading Symbol(s)

Name of Each Exchange on Which Registered

Common Stock, par value $0.001 per share

FPRX

The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes      No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).   Yes      No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.:

 

Large accelerated filer

 

  

Accelerated filer

 

 

 

 

 

Non-accelerated filer

 

  

  

Smaller reporting company

 

 

 

 

 

Emerging growth company

 

  

  

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act)      Yes      No  

 

 

 

As of May 5, 2020, the number of outstanding shares of the registrant’s common stock was 36,635,444.

 

 

 

 

 


 

TABLE OF CONTENTS

 

 

PART I.

  

 

FINANCIAL INFORMATION

  

4

 

  

 

Item 1.

  

 

Unaudited Financial Statements

  

4

 

  

 

  

 

Balance Sheets as of March 31, 2020 and December 31, 2019

  

4

 

  

 

  

 

Statements of Operations for the Three Months Ended March 31, 2020 and March 31, 2019

  

5

 

  

 

  

 

Statements of Comprehensive Loss for the Three Months Ended March 31, 2020 and March 31, 2019

  

6

 

  

 

  

 

Statements of Stockholders’ Equity for the Three Months Ended March 31, 2020 and 2019

  

7

 

 

 

 

 

Statements of Cash Flows for the Three Months Ended March 31, 2020 and 2019

 

8

 

  

 

  

 

Notes to Financial Statements

  

9

 

  

 

Item 2.

  

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

  

21

 

  

 

Item 3.

  

 

Quantitative and Qualitative Disclosures About Market Risk

  

32

 

  

 

Item 4.

  

 

Controls and Procedures

  

32

 

PART II.

  

 

OTHER INFORMATION

  

33

 

  

 

Item 1.

  

 

Legal Proceedings

  

33

 

  

 

Item 1A.

  

 

Risk Factors

  

33

 

  

 

Item 6.

  

 

Exhibits

  

65

 

Signatures

  

66

In this report, unless otherwise stated or the context otherwise indicates, references to “Five Prime,” “the company,” “we,” “us,” “our” and similar references refer to Five Prime Therapeutics, Inc. The Five Prime logo is our registered trademark. This report also contains registered marks, trademarks and trade names of other companies. All other trademarks, registered marks and trade names appearing in this report are the property of their respective holders.

 

 

 

2


 

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS AND INDUSTRY DATA

This Quarterly Report on Form 10-Q, or this report, contains forward-looking statements. In some cases, you can identify these statements by forward-looking words such as “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “could,” “would,” “project,” “plan,” “expect,” or similar expressions, or the negative or plural of these words or expressions. These forward-looking statements include statements concerning the following:

 

the impact of the COVID-19 pandemic and its effects on our operations, research and development and clinical trials and potential disruption in the operations and business of third-party manufacturers, contract research organizations, or CROs, other service providers, and collaborators with whom we conduct business;

 

our estimates regarding our expenses, revenues, anticipated capital requirements and our needs for additional financing;

 

our receipt of future milestone payments and/or royalties, and the timing of such payments;

 

our or our partners’ ability to timely advance drug candidates into and through clinical data readouts and successful completion of clinical trials;

 

the timing of the initiation, progress and results of preclinical studies and research and development programs;

 

our expectations regarding the potential safety, efficacy or clinical utility of our product candidates;

 

the implementation, timing and likelihood of success of our plans to develop companion diagnostics for our product candidates;

 

our ability to establish and maintain collaborations and necessary licenses;

 

the implementation of our business model and strategic plans for our business, product candidates and technology;

 

the scope of protection we establish and maintain for intellectual property rights covering our product candidates and technology;

 

the size of patient populations targeted by products we or our partners develop and market adoption of such products by physicians and patients;

 

the extent of protein overexpression or gene amplification in certain patient populations;

 

the timing or likelihood of regulatory filings and approvals for products we or our partners develop;

 

the ability to negotiate adequate pricing, coverage and adequate reimbursement for our drug candidates with third parties and government authorities;

 

developments relating to our competitors and our industry;

 

our expectations regarding licensing, acquisitions and strategic operations; and

 

political, social and economic instability, natural disasters or public health epidemics in countries where we or our collaborators do business.

These forward-looking statements are only current predictions and are subject to known and unknown risks, uncertainties and other factors that may cause our or our industry’s actual results, levels of activity, performance or achievements to be materially different from those anticipated by such statements. We discuss many of these risks in greater detail under the heading “Risk Factors” and elsewhere in this report. You should not rely upon forward-looking statements as predictions of future events.

Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Except as required by law, we are under no duty to update or revise any of the forward-looking statements in this report, whether as a result of new information, future events or otherwise, after the date of this report.

We obtained the industry, market and competitive position data in this report from our own internal estimates and research as well as from industry and general publications and research surveys and studies conducted by third parties. While we believe that the information in each of these publications, surveys and studies is reliable, we have not independently verified market and industry data from third-party sources. While we believe our internal estimates and research are reliable and the market definitions we use are appropriate, such estimates, research and definitions have not been verified by any independent source.

 

 

 

3


 

PART I. FINANCIAL INFORMATION

 

Item 1. Unaudited Financial Statements

FIVE PRIME THERAPEUTICS, INC.

Balance Sheets

(In thousands, except share and per share amounts)

 

 

March 31,

 

 

December 31,

 

 

2020

 

 

2019

 

 

(Unaudited)

 

 

(Note 1)

 

Assets

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

Cash and cash equivalents

$

67,692

 

 

$

55,800

 

Marketable securities

 

73,436

 

 

 

100,580

 

Receivables from collaborative partners

 

2,166

 

 

 

4,097

 

Assets held for sale

 

3,155

 

 

 

 

Prepaid and other current assets

 

3,840

 

 

 

6,243

 

Total current assets

 

150,289

 

 

 

166,720

 

Restricted cash

 

1,543

 

 

 

1,543

 

Property and equipment, net

 

18,276

 

 

 

22,534

 

Operating lease, right-of-use assets

 

30,303

 

 

 

30,934

 

Other long-term assets

 

2,560

 

 

 

2,411

 

Total assets

$

202,971

 

 

$

224,142

 

 

 

 

 

 

 

 

 

Liabilities and stockholders' equity

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

Accounts payable

$

767

 

 

$

1,184

 

Accrued personnel-related expenses

 

4,126

 

 

 

6,805

 

Other accrued liabilities

 

9,980

 

 

 

9,659

 

Operating lease obligations, current portion

 

4,218

 

 

 

4,080

 

Deferred revenue, current portion

 

119

 

 

 

1,296

 

Total current liabilities

 

19,210

 

 

 

23,024

 

Deferred revenue, long-term portion

 

4,810

 

 

 

5,113

 

Operating lease obligations, long-term portion

 

44,408

 

 

 

45,532

 

Stockholders' equity:

 

 

 

 

 

 

 

Common stock, $0.001 par value; 100,000,000 shares authorized, 36,617,663

   issued and 35,324,056 outstanding at March 31, 2020; 36,280,368 issued and

  35,219,791 outstanding at December 31, 2019.

 

35

 

 

 

35

 

Preferred stock, $0.001 par value; 10,000,000 shares authorized; no shares issued and

   outstanding

 

 

 

 

 

Additional paid-in capital

 

586,448

 

 

 

582,243

 

Accumulated other comprehensive income

 

59

 

 

 

78

 

Accumulated deficit

 

(451,999

)

 

 

(431,883

)

Total stockholders' equity

 

134,543

 

 

 

150,473

 

Total liabilities and stockholders' equity

$

202,971

 

 

$

224,142

 

 

The accompanying notes are an integral part of these unaudited financial statements.

 

 

 

4


 

FIVE PRIME THERAPEUTICS, INC.

Statements of Operations

(In thousands, except per share amounts)

 (Unaudited)

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2020

 

 

2019

 

 

Revenue:

 

 

 

 

 

 

 

 

Collaboration revenue

$

3,414

 

 

$

5,347

 

 

License revenue

 

5,000

 

 

 

 

 

Total revenue

 

8,414

 

 

 

5,347

 

 

Operating expenses:

 

 

 

 

 

 

 

 

Research and development

 

18,556

 

 

 

31,753

 

 

General and administrative

 

10,491

 

 

 

10,510

 

 

Total operating expenses

 

29,047

 

 

 

42,263

 

 

Loss from operations

 

(20,633

)

 

 

(36,916

)

 

Interest income

 

517

 

 

 

1,533

 

 

Other expense, net

 

 

 

 

(2

)

 

Loss before income tax

 

(20,116

)

 

 

(35,385

)

 

Income tax provision

 

 

 

 

 

 

Net loss

$

(20,116

)

 

$

(35,385

)

 

Basic and diluted net loss per common share

$

(0.57

)

 

$

(1.02

)

 

Weighted-average shares used to compute basic and diluted net loss per common share

 

35,263

 

 

 

34,794

 

 

 

The accompanying notes are an integral part of these unaudited financial statements.

 

 

 

5


 

FIVE PRIME THERAPEUTICS, INC.

Statements of Comprehensive Loss

(In thousands)

 (Unaudited)

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2020

 

 

2019

 

 

Net loss

$

(20,116

)

 

$

(35,385

)

 

Other comprehensive gain:

 

 

 

 

 

 

 

 

Unrealized (loss) gain on marketable securities

 

(19

)

 

 

148

 

 

Comprehensive loss

$

(20,135

)

 

$

(35,237

)

 

 

The accompanying notes are an integral part of these unaudited financial statements.

 

 

 

6


 

FIVE PRIME THERAPEUTICS, INC.

Statements of Stockholders’ Equity

(In thousands, except share amounts)

 (Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

Other

 

 

 

 

 

 

Total

 

 

 

Common Stock

 

 

Paid-In

 

 

Comprehensive

 

 

Accumulated

 

 

Stockholders'

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Income (Loss)

 

 

Deficit

 

 

Equity

 

Balances at December 31, 2019

 

 

35,219,791

 

 

$

35

 

 

$

582,243

 

 

$

78

 

 

$

(431,883

)

 

$

150,473

 

Issuance of common stock under equity incentive plans

 

 

169,324

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Repurchase of shares to satisfy tax withholding obligations

 

 

(65,059

)

 

 

 

 

 

(277

)

 

 

 

 

 

 

 

 

(277

)

Stock-based compensation expense

 

 

 

 

 

 

 

 

4,482

 

 

 

 

 

 

 

 

 

4,482

 

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

(19

)

 

 

 

 

 

(19

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(20,116

)

 

 

(20,116

)

Balances at March 31, 2020

 

 

35,324,056

 

 

$

35

 

 

$

586,448

 

 

$

59

 

 

$

(451,999

)

 

$

134,543

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

Other

 

 

 

 

 

 

Total

 

 

 

Common Stock

 

 

Paid-In

 

 

Comprehensive

 

 

Accumulated

 

 

Stockholders'

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Income (Loss)

 

 

Deficit

 

 

Equity

 

Balances at December 31, 2018

 

 

34,745,721

 

 

$

34

 

 

$

559,892

 

 

$

(106

)

 

$

(294,681

)

 

$

265,139

 

Issuance of common stock under equity incentive plans

 

 

150,666

 

 

 

 

 

 

222

 

 

 

 

 

 

 

 

 

222

 

Repurchase of shares to satisfy tax withholding obligations

 

 

(57,703

)

 

 

 

 

 

(670

)

 

 

 

 

 

 

 

 

(670

)

Stock-based compensation expense

 

 

 

 

 

 

 

 

4,872

 

 

 

 

 

 

 

 

 

4,872

 

Other comprehensive gain

 

 

 

 

 

 

 

 

 

 

 

148

 

 

 

 

 

 

148

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(35,385

)

 

 

(35,385

)

Balances at March 31, 2019

 

 

34,838,684

 

 

$

34

 

 

$

564,316

 

 

$

42

 

 

$

(330,066

)

 

$

234,326

 

 

The accompanying notes are an integral part of these unaudited financial statements.

7


 

FIVE PRIME THERAPEUTICS, INC.

Statements of Cash Flows

(In thousands)

 (Unaudited)

 

 

Three Months Ended

 

 

March 31,

 

 

2020

 

 

2019

 

Operating activities

 

 

 

 

 

 

 

Net loss

$

(20,116

)

 

$

(35,385

)

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

 

 

 

 

 

 

 

Depreciation and amortization

 

1,292

 

 

 

1,331

 

Impairment of fixed assets

 

(190

)

 

 

 

Stock-based compensation expense

 

4,482

 

 

 

4,872

 

Amortization of discounts and premiums on marketable securities

 

(145

)

 

 

(778

)

Non-cash operating lease expense

 

631

 

 

 

563

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

Receivables from collaborative partners

 

1,931

 

 

 

1,733

 

Prepaid, other current assets and other long-term assets

 

2,254

 

 

 

2,421

 

Accounts payable

 

(388

)

 

 

3,180

 

Accrued personnel-related expenses

 

(2,679

)

 

 

(3,918

)

Deferred revenue

 

(1,480

)

 

 

(3,129

)

Other accrued liabilities, and other long-term liabilities

 

322

 

 

 

(3,349

)

Operating lease liabilities

 

(986

)

 

 

(217

)

Net cash used in operating activities

 

(15,072

)

 

 

(32,676

)

Investing activities

 

 

 

 

 

 

 

Purchases of marketable securities

 

(25,335

)

 

 

(59,714

)

Maturities of marketable securities

 

52,605

 

 

 

79,500

 

Purchases of property and equipment

 

(29

)

 

 

(983

)

Net cash provided by investing activities

 

27,241

 

 

 

18,803

 

Financing activities

 

 

 

 

 

 

 

Proceeds from issuance of common stock under equity incentive plans

 

 

 

 

222

 

Repurchase of shares to satisfy tax withholding obligations

 

(277

)

 

 

(670

)

Net cash used in financing activities

 

(277

)

 

 

(448

)

 

 

 

 

 

 

 

 

Net increase (decrease) in cash and cash equivalents and restricted cash

 

11,892

 

 

 

(14,321

)

Cash, cash equivalents and restricted cash at beginning of period

 

57,343

 

 

 

45,496

 

Cash, cash equivalents and restricted cash at end of period

$

69,235

 

 

$

31,175

 

 

 

 

 

 

 

 

 

Supplemental disclosure

 

 

 

 

 

 

 

Property and equipment purchases included in accrued liabilities

$

 

 

$

492

 

 

 

 

 

 

 

 

 

Supplemental cash flow information

 

 

 

 

 

 

 

Cash and cash equivalents at beginning of period

$

55,800

 

 

$

43,953

 

Restricted cash at beginning of period

 

1,543

 

 

 

1,543

 

Cash, cash equivalents and restricted cash at beginning of period

$

57,343

 

 

$

45,496

 

 

 

 

 

 

 

 

 

Cash and cash equivalents at end of period

$

67,692

 

 

$

29,632

 

Restricted cash at end of period

 

1,543

 

 

 

1,543

 

Cash, cash equivalents and restricted cash at end of period

$

69,235

 

 

$

31,175

 

 

The accompanying notes are an integral part of these unaudited financial statements.

 

8


 

FIVE PRIME THERAPEUTICS, INC.

Notes to Financial Statements

March 31, 2020

 

1.

Description of Business

Five Prime Therapeutics, Inc. (we, us, our, or the company) is a clinical-stage biotechnology company focused on developing immune modulators and precision therapies to improve the lives of patients with solid tumor cancers. We were incorporated in December 2001 in Delaware. Our operations are based in South San Francisco, California and we operate in one segment.

Unaudited Interim Financial Information

The accompanying financial information as of March 31, 2020 is unaudited. The financial statements included in this report reflect all adjustments (consisting only of normal recurring adjustments) that our management considers necessary for the fair statement of the results of operations for the interim periods covered and of our financial condition at the date of the interim balance sheet. The accompanying unaudited financial statements have been prepared in accordance with U.S. generally accepted accounting principles, or GAAP, for interim financial information. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. The results for interim periods are not necessarily indicative of the results for the entire year or any other interim period. The accompanying financial statements and related financial information should be read in conjunction with the audited financial statements and the related notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2019, filed with the U.S. Securities and Exchange Commission, or the SEC, on February 27, 2020, or our Annual Report.

2.

Summary of Significant Accounting Policies

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes as of the date of the financial statements. Management bases its estimates on historical experience and on various other market-specific and relevant assumptions that management believes to be reasonable. Actual results could differ materially from those estimates.

The COVID-19 pandemic may have an impact on the clinical and preclinical development timelines for our clinical and preclinical programs. Estimates and assumptions about future events and their effects cannot be determined with certainty and therefore require the exercise of judgment. As of the date of issuance of these financial statements, we are not aware of any specific event or circumstance that would require us to update our estimates, assumptions and judgments or revise the carrying value of our assets or liabilities. These estimates may change as new events occur and additional information is obtained and are recognized in the financial statements as soon as they become known. Actual results could differ from those estimates and any such differences may be material to our financial statements.

Restricted Cash

Restricted cash consists of a certificate of deposit held by our bank as collateral for a standby letter of credit in the same notional amount by our landlord to secure our obligations under our corporate office and laboratory facility lease that we entered into in December 2016. We are required to maintain this restricted cash balance, the amount of which is subject to reduction starting on January 1, 2023 if certain conditions are met, for the duration of this lease.

Fair Value of Financial Instruments

We determine the fair value of financial and nonfinancial assets and liabilities using the fair value hierarchy, which describes three levels of inputs that may be used to measure fair value, as follows:

Level 1—Quoted prices in active markets for identical assets or liabilities;

Level 2—Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities, quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities; and

Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

9


 

We determine the fair value of Level 1 assets using quoted prices in active markets for identical assets. We review trading activity and pricing for Level 2 investments as of each measurement date. Level 2 inputs, which are obtained from various third-party data providers, represent quoted prices for similar assets in active markets and were derived from observable market data, or, if not directly observable, were derived from or corroborated by other observable market data.

In certain cases where there is limited activity or less transparency around inputs to valuation, we classify securities as Level 3 within the valuation hierarchy. We do not have any assets or liabilities measured using Level 3 inputs as of March 31, 2020.

The following table summarizes our financial instruments that were measured at fair value on a recurring basis by level of input within the fair value hierarchy defined above (in thousands):

 

 

March 31, 2020

 

 

 

 

 

 

Basis of Fair Value

 

 

 

 

 

 

Measurements

 

 

Total

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

$

31,544

 

 

$

31,544

 

 

$

 

 

$

 

U.S. Treasury securities

 

21,044

 

 

 

21,044

 

 

 

 

 

 

 

Agency bonds

 

26,333

 

 

 

26,333

 

 

 

 

 

 

 

Corporate bonds

 

9,606

 

 

 

 

 

 

9,606

 

 

 

 

Commercial paper

 

16,453

 

 

 

 

 

 

16,453

 

 

 

 

Certificate of deposit

 

1,543

 

 

 

 

 

 

1,543

 

 

 

 

Total

$

106,523

 

 

$

78,921

 

 

$

27,602

 

 

$

 

 

 

December 31, 2019

 

 

 

 

 

 

Basis of Fair Value

 

 

 

 

 

 

Measurements

 

 

Total

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

$

21,706

 

 

$

21,706

 

 

$

 

 

$

 

U.S. Treasury securities

 

35,498

 

 

 

35,498

 

 

 

 

 

 

 

Agency bonds

 

48,834

 

 

 

48,834

 

 

 

 

 

 

 

Corporate bonds

 

1,800

 

 

 

 

 

 

1,800

 

 

 

 

Commercial paper

 

19,195

 

 

 

 

 

 

19,195

 

 

 

 

Certificate of deposit

 

1,543

 

 

 

 

 

 

1,543

 

 

 

 

Total

$

128,576

 

 

$

106,038

 

 

$

22,538

 

 

$

 

 

Revenue Recognition

We determine revenue recognition for arrangements within the scope of Financial Accounting Standards Board, or FASB, Accounting Standard Update, or ASU, 2014-09, Revenue from Contracts with Customers (Topic 606), or Topic 606, and those applying Topic 606 by analogy, by performing the following five steps: (i) identifying the contract; (ii) identifying the performance obligations in the contract; (iii) determining the transaction price; (iv) allocating the transaction price to the performance obligations in the contract; and (v) recognizing revenue when, or as, the company satisfies a performance obligation. 

The terms of our license and collaborative research and development agreements include upfront and license fees, research, development and other funding or reimbursements, milestone and other contingent payments for the achievement of defined collaboration objectives and certain preclinical, clinical, regulatory and sales-based events, as well as royalties on sales of commercialized products. Arrangements that include upfront payments may require deferral of revenue recognition to a future period until we perform obligations under these arrangements. We record research and development funding payable to us as accounts receivable when our right to consideration is unconditional. The event-based milestone and other contingent payments represent variable consideration, and we use the most likely amount method to estimate this variable consideration. Given the high degree of uncertainty around occurrence of these events, we determine the milestone and other contingent amounts to be fully constrained until the uncertainty associated with these payments is resolved. We will recognize revenue from sales-based royalty payments when or as the sales occur. We will re-evaluate the transaction price in each reporting period as uncertain events are resolved and other changes in circumstances occur.

10


 

A performance obligation is a promise in a contract to transfer a distinct good or service and is the unit of accounting in Topic 606. A contract’s transaction price is allocated among each distinct performance obligation based on relative standalone selling price and recognized as revenue when, or as, the applicable performance obligation is satisfied. Under Topic 606, we elected to use the practical expedient permitted related to adoption, which does not require us to disclose certain information regarding our remaining performance obligations as of the end of the reporting period prior to the initial date of adoption. Additionally, we elected the practical expedient for certain research and development funding which allows us to recognize revenue in the amount for which we have a right to invoice if our right to consideration is an amount that corresponds directly to the value of our performance completed to date. As a result, we effectively bypass the steps of determining the transaction price and allocating that transaction price to the performance obligation.

Net Loss Per Share of Common Stock

We compute basic net loss per common share by dividing net loss attributable to common stockholders by the weighted-average number of shares of common stock outstanding during the period. Diluted net loss per share attributable to common stockholders is the same as basic net loss per share attributable to common stockholders, since the effect of potentially dilutive securities is antidilutive. 

We excluded the following securities from the calculation of basic net loss per share (in thousands):

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2020

 

 

2019

 

 

Options to purchase common stock

 

3,804

 

 

 

3,868

 

 

Restricted stock awards (RSAs)

 

1,225

 

 

 

977

 

 

 

 

5,029

 

 

 

4,845

 

 

 

Restructuring and Other Charges

We account for costs related to our restructuring activities in accordance with ASC 420, Exit or Disposal Cost Obligations. Under ASC 420, one-time termination costs communicated to employees are accrued on the communication date, whereas termination costs that require employees to render future service beyond a minimum retention period are recognized ratably over the future service period.

We recognize other restructuring costs, including lease or other contract termination costs incurred in connection with terminating a contract before the end of its term, when we terminate the contract in accordance with its terms. See Note 7 for additional information regarding charges related to our corporate restructurings.

 

Accounting Pronouncements Adopted in 2020

In November 2018, FASB issued ASU No. 2018-18, Collaborative Arrangements (Topic 808), or ASU 2018-18, which clarifies when certain transactions between collaborative arrangement participants should be accounted for under Topic 606 and incorporates unit-of-account guidance consistent with Topic 606 to aid in this determination. We adopted ASU 2018-18, effective January 1, 2020, to be applied retrospectively to the date of initial application of Topic 606. The adoption of ASU 2018-18 had no effect on our financial statements and disclosures.

In August 2018, FASB issued ASU 2018-13, Fair Value Measurement–Disclosure Framework (Topic 820), or ASU 2018-13. The updated guidance enhances the disclosure requirements on fair value measurements. We adopted ASU 2018-13, effective January 1, 2020. The adoption of ASU 2018-13 had no effect on our financial statements and disclosures.

In June 2016, FASB issued ASU 2016-13, Financial Instruments–Credit Losses (Topic 326), or ASU 2016-13. ASU 2016-13 requires measurement and recognition of expected credit losses for financial assets. ASU 2016-13 requires that an entity measure and recognize expected credit losses for financial assets held at amortized cost and requires consideration of a broader range of information to estimate credit losses. We adopted ASU 2016-13, effective January 1, 2020, using a modified retrospective approach, with certain exceptions. The impact of the adoption had no effect on our financial statements as credit losses are not expected to be significant based on historical collection trends, the financial condition of payment partners, and external market factors.

11


 

In April 2015, FASB issued ASU 2018-15, Intangibles–Goodwill and Other–Internal-Use Software (Topic 350), or ASU 2018-15. ASU 2018-15 requires a customer in a cloud computing arrangement that is a service contract to follow the internal use software guidance to determine which implementation costs to defer and recognize as an asset. We adopted ASU 2018-15, effective January 1, 2020, to be applied prospectively to all implementation costs incurred after the date of adoption. The adoption of ASU 2018-15 had no effect on our financial statements and disclosures.

 

Accounting Pronouncements Not Yet Adopted

In December 2019, FASB issued ASU 2019-12, Income Taxes–Simplifying the Accounting for Income Taxes (Topic 740), or ASU 2019-12. The updated guidance simplifies the accounting for income taxes by removing certain exceptions in Topic 740 and clarifying and amending existing guidance. The amendments are effective for fiscal years ending after December 15, 2020, with early adoption permitted. We are currently assessing the timing and impact of adopting the updated provisions.

3.Cash Equivalents and Marketable Securities

The following table summarizes our cash equivalents and marketable securities aggregated by investment category (in thousands):

 

 

March 31, 2020

 

 

Amortized

 

 

Unrealized

 

 

Unrealized

 

 

Estimated

 

 

Cost Basis

 

 

Gains

 

 

Losses

 

 

Fair Value

 

Money market funds

$

31,544

 

 

$

 

 

$

 

 

$

31,544

 

U.S. Treasury securities

 

20,996

 

 

 

48

 

 

 

 

 

 

21,044

 

Agency bonds

 

26,281

 

 

 

52

 

 

 

 

 

 

26,333

 

Corporate bonds

 

9,655

 

 

 

 

 

 

(49

)

 

 

9,606

 

Commercial paper

 

16,445

 

 

 

8

 

 

 

 

 

 

16,453

 

Total cash equivalents and marketable securities

 

104,921

 

 

 

108

 

 

 

(49

)

 

 

104,980

 

Less: cash equivalents

 

(31,544

)

 

 

 

 

 

 

 

 

(31,544

)

Total marketable securities

$

73,377

 

 

$

108

 

 

$

(49

)

 

$

73,436

 

 

 

December 31, 2019

 

 

Amortized