krtx-10q_20210331.htm
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

(Mark One)

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

For the quarterly period ended March 31, 2021 

OR

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

For the transition period from __________ to ____________

Commission File Number: 001-38958

 

Karuna Therapeutics, Inc.

(Exact Name of Registrant as Specified in its Charter)

 

 

Delaware

27-0605902

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer
Identification No.)

99 High Street, 26th Floor

Boston, Massachusetts

02110

(Address of principal executive offices)

(Zip Code)

 

Registrant’s telephone number, including area code: (857449-2244

 

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, $0.0001 par value per share

 

KRTX

 

Nasdaq Global Market

 

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, 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 April 30, 2021, the registrant had 29,457,896 shares of common stock, $0.0001 par value per share, outstanding.

 

 

 

 


 

 

Table of Contents

 

 

 

Page

PART I.

FINANCIAL INFORMATION

1

Item 1.

Consolidated Financial Statements (Unaudited)

1

 

Consolidated Balance Sheets

1

 

Consolidated Statements of Operations

2

 

Consolidated Statements of Comprehensive Loss

3

 

Consolidated Statements of Stockholders’ Equity

4

 

Consolidated Statements of Cash Flows

5

 

Notes to Consolidated Financial Statements (Unaudited)

6

Item 2.

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

17

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

26

Item 4.

Controls and Procedures

26

PART II.

OTHER INFORMATION

27

Item 1.

Legal Proceedings

27

Item 1A.

Risk Factors

27

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

27

Item 3.

Defaults Upon Senior Securities

27

Item 4.

Mine Safety Disclosures

27

Item 5.

Other Information

27

Item 6.

Exhibits

28

Signatures

29

 

 

i


 

 

PART I—FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements.

KARUNA THERAPEUTICS, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data)

(Unaudited)

 

 

 

March 31,

2021

 

 

December 31,

2020

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

353,685

 

 

$

53,048

 

Investment securities, available-for-sale

 

 

217,610

 

 

 

269,282

 

Prepaid expenses and other current assets

 

 

18,318

 

 

 

21,864

 

Deferred offering costs

 

 

405

 

 

 

405

 

Total current assets

 

 

590,018

 

 

 

344,599

 

Restricted cash

 

 

261

 

 

 

157

 

Right-of-use lease assets - operating, net

 

 

1,576

 

 

 

2,420

 

Property and equipment, net

 

 

403

 

 

 

449

 

Other non-current assets

 

 

1,006

 

 

 

 

Total assets

 

$

593,264

 

 

$

347,625

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

1,298

 

 

$

865

 

Accrued expenses

 

 

4,433

 

 

 

5,144

 

Current portion of operating lease liability

 

 

862

 

 

 

844

 

Deferred rent

 

 

35

 

 

 

 

Total current liabilities

 

 

6,628

 

 

 

6,853

 

Operating lease liability, net of current portion

 

 

1,618

 

 

 

1,841

 

Other non-current liabilities

 

 

104

 

 

 

 

Total liabilities

 

 

8,350

 

 

 

8,694

 

Commitments and Contingencies (Note 8)

 

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

 

 

Preferred stock, $0.0001 par value; 10,000,000 shares authorized and 0 shares

   outstanding as of March 31, 2021 and December 31, 2020

 

 

 

 

 

 

Common stock, $0.0001 par value; 150,000,000 shares authorized at March 31, 2021 and December 31, 2020; 29,441,168 and 26,988,458 shares issued

   and outstanding at March 31, 2021 and December 31, 2020, respectively

 

 

3

 

 

 

3

 

Additional paid-in capital

 

 

759,465

 

 

 

482,955

 

Accumulated deficit

 

 

(174,563

)

 

 

(144,066

)

Accumulated other comprehensive income

 

 

9

 

 

 

39

 

Total stockholders’ equity

 

 

584,914

 

 

 

338,931

 

Total liabilities and stockholders’ equity

 

$

593,264

 

 

$

347,625

 

 

The accompanying notes are an integral part of these consolidated financial statements

1


 

Karuna Therapeutics, Inc.

CONSOLIDATED Statements of Operations

(In thousands, except share and per share data)

(Unaudited)

 

 

 

Three Months Ended

March 31,

 

 

 

2021

 

 

2020

 

Revenue

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

Research and development

 

$

20,186

 

 

$

4,420

 

General and administrative

 

 

9,777

 

 

 

5,635

 

Total operating expenses

 

 

29,963

 

 

 

10,055

 

Loss from operations

 

 

(29,963

)

 

 

(10,055

)

Other income (loss), net:

 

 

 

 

 

 

 

 

Impairment loss on right-of-use assets

 

 

(677

)

 

 

 

Interest income

 

 

143

 

 

 

1,397

 

Total other income (loss), net

 

 

(534

)

 

 

1,397

 

Net loss before income taxes

 

 

(30,497

)

 

 

(8,658

)

Income tax provision

 

 

 

 

 

 

Net loss attributable to common stockholders

 

$

(30,497

)

 

$

(8,658

)

Net loss per share, basic and diluted (Note 5)

 

$

(1.10

)

 

$

(0.33

)

Weighted average common shares outstanding used in

   computing net loss per share, basic and diluted

 

 

27,786,538

 

 

 

26,042,434

 

 

The accompanying notes are an integral part of these consolidated financial statements

2


 

Karuna Therapeutics, Inc.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(In thousands)

(Unaudited)

 

 

 

Three Months Ended March 31,

 

 

 

2021

 

 

2020

 

Net loss

 

$

(30,497

)

 

$

(8,658

)

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

Unrealized gains (losses) on available-for-sale

   investments

 

 

(30

)

 

 

1,566

 

Comprehensive loss

 

$

(30,527

)

 

$

(7,092

)

 

The accompanying notes are an integral part of these consolidated financial statements

 

3


 

 

Karuna Therapeutics, Inc.

CONSOLIDATED Statements of Stockholders’ Equity

(In thousands, except share data)

(Unaudited)

 

 

 

Common Stock

 

 

Additional

Paid-in

 

 

Accumulated

 

 

Accumulated

Other

Comprehensive

 

 

Total

Stockholders’

 

 

 

Shares

 

 

Value

 

 

Capital

 

 

Deficit

 

 

Income

 

 

Equity

 

Balance, December 31, 2020

 

 

26,988,458

 

 

$

3

 

 

$

482,955

 

 

$

(144,066

)

 

$

39

 

 

$

338,931

 

Issuance of common stock upon public

   offering, net of $17,250 in under-writing

   discounts and commissions and $233 in

   offering costs

 

 

2,395,834

 

 

 

 

 

 

270,017

 

 

 

 

 

 

 

 

 

270,017

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

5,822

 

 

 

 

 

 

 

 

 

5,822

 

Exercise of common options

 

 

56,876

 

 

 

 

 

 

671

 

 

 

 

 

 

 

 

 

671

 

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(30

)

 

 

(30

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

(30,497

)

 

 

 

 

 

(30,497

)

Balance, March 31, 2021

 

 

29,441,168

 

 

$

3

 

 

$

759,465

 

 

$

(174,563

)

 

$

9

 

 

$

584,914

 

 

 

 

Common Stock

 

 

Additional

Paid-in

 

 

Accumulated

 

 

Accumulated

Other

Comprehensive

 

 

Total

Stockholders’

 

 

 

Shares

 

 

Value

 

 

Capital

 

 

Deficit

 

 

Income

 

 

Equity

 

Balance, December 31, 2019

 

 

26,012,754

 

 

$

3

 

 

$

465,420

 

 

$

(75,512

)

 

$

5

 

 

$

389,916

 

Follow-on offering costs

 

 

 

 

 

 

 

 

(34

)

 

 

 

 

 

 

 

 

(34

)

Stock-based compensation expense

 

 

 

 

 

 

 

 

1,634

 

 

 

 

 

 

 

 

 

1,634

 

Exercise of common options

 

 

82,138

 

 

 

 

 

 

517

 

 

 

 

 

 

 

 

 

517

 

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,566

 

 

 

1,566

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(8,658

)

 

 

 

 

 

(8,658

)

Balance, March 31, 2020

 

 

26,094,892

 

 

$

3

 

 

$

467,537

 

 

$

(84,170

)

 

$

1,571

 

 

$

384,941

 

 

The accompanying notes are an integral part of these consolidated financial statements

 

4


 

 

Karuna Therapeutics, Inc.

CONSOLIDATED Statements of Cash Flows

(In thousands)

(Unaudited)

 

 

 

Three Months Ended

March 31,

 

 

 

2021

 

 

2020

 

Cash flows from operating activities

 

 

 

 

 

 

 

 

Net loss

 

$

(30,497

)

 

$

(8,658

)

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

 

 

 

 

 

 

 

 

Stock-based compensation expense

 

 

5,822

 

 

 

1,634

 

Impairment loss on right-of-use assets

 

 

677

 

 

 

-

 

Amortization of premiums and accretion of discounts on

   investment securities

 

 

221

 

 

 

(21

)

Depreciation and amortization expense

 

 

112

 

 

 

21

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Change in accrued interest on investment securities

 

 

277

 

 

 

(441

)

Prepaid expenses and other current assets

 

 

3,546

 

 

 

132

 

Right-of-use assets

 

 

167

 

 

 

121

 

Other non-current assets

 

 

(1,006

)

 

 

 

Accounts payable

 

 

322

 

 

 

24

 

Accrued expenses

 

 

(754

)

 

 

(1,051

)

Operating lease liability

 

 

(205

)

 

 

(102

)

Deferred rent

 

 

35

 

 

 

 

Other non-current liabilities

 

 

104

 

 

 

 

Net cash used in operating activities

 

 

(21,179

)

 

 

(8,341

)

 

 

 

 

 

 

 

 

 

Cash flows from investing activities

 

 

 

 

 

 

 

 

Purchases of investment securities

 

 

(80,856

)

 

 

(70,350

)

Maturities of investment securities

 

 

132,000

 

 

 

60,000

 

Acquisition of property and equipment

 

 

(47

)

 

 

(76

)

Net cash provided by (used in) investing activities

 

 

51,097

 

 

 

(10,426

)

 

 

 

 

 

 

 

 

 

Cash flows from financing activities

 

 

 

 

 

 

 

 

Proceeds from public offering, net of underwriting discounts

   and commissions

 

 

270,250

 

 

 

 

Payment of offering costs

 

 

(98

)

 

 

 

Proceeds from exercise of stock options

 

 

671

 

 

 

517

 

Net cash provided by financing activities

 

 

270,823

 

 

 

517

 

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

 

 

300,741

 

 

 

(18,250

)

Cash, cash equivalents and restricted cash at beginning of period

 

 

53,205

 

 

 

209,052

 

Cash, cash equivalents and restricted cash at end of period

 

$

353,946

 

 

$

190,802

 

 

 

 

 

 

 

 

 

 

Supplemental disclosures of cash flows information

 

 

 

 

 

 

 

 

Lease liabilities arising from obtaining right-of-use assets

 

$

-

 

 

$

2,851

 

Deferred offering costs included in accounts payable and accrued expenses

 

$

135

 

 

$

34

 

Purchases of property and equipment included in accounts payable

   and accrued expenses

 

$

19

 

 

$

121

 

 

The accompanying notes are an integral part of these consolidated financial statements

5


 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1. Nature of the Business and Basis of Presentation

Description of the Business

Karuna Therapeutics, Inc. (the “Company”) was incorporated under the laws of the State of Delaware in July 2009 as Karuna Pharmaceuticals, Inc. and is headquartered in Boston, Massachusetts. In March 2019, the Company changed its name to Karuna Therapeutics, Inc. The Company is an innovative clinical-stage biopharmaceutical company driven to create and deliver transformative medicines for people living with psychiatric and neurological conditions.

Since the Company’s inception, it has focused substantially all of its efforts and financial resources on organizing and staffing the Company, acquiring and developing its technology, raising capital, building its intellectual property portfolio, undertaking preclinical studies and clinical trials and providing general and administrative support for these activities. The Company has not generated any product revenue related to its primary business purpose to date and is subject to a number of risks similar to those of other early stage companies, including dependence on key individuals, regulatory approval of products, uncertainty of market acceptance of products, competition from substitute products and larger companies, compliance with government regulations, protection of proprietary technology, dependence on third parties, product liability, the impact of the COVID-19 coronavirus pandemic, and the need to obtain adequate additional financing to fund the development of its product candidates.

On June 27, 2019, the Company’s registration statement on Form S-1 relating to its initial public offering of its common stock (“IPO”) was declared effective by the Securities and Exchange Commission (“SEC”). In the IPO, which closed on July 2, 2019, the Company issued and sold 6,414,842 shares of common stock, including full exercise of the underwriters’ over-allotment option to purchase an additional 836,718 shares, at a public offering price of $16.00 per share. The aggregate net proceeds to the Company from the IPO, inclusive of proceeds from the over-allotment exercise, were approximately $93.0 million after deducting underwriting discounts and commissions of $7.2 million and offering expenses of $2.4 million. Upon closing of the IPO, all 12,962,045 shares of the Company’s redeemable convertible preferred stock then outstanding converted into an aggregate of 16,833,790 shares of common stock.

On November 20, 2019, the Company’s registration statement on Form S-1 relating to its follow-on public offering of its common stock was declared effective by the SEC. In this offering, which closed on November 25, 2019, the Company issued and sold 2,600,000 shares of common stock at a public offering price of $96.00 per share. The aggregate net proceeds were $234.2 million after deducting underwriting discounts and commissions of $15.0 million and offering expenses of $0.4 million.

On July 2, 2020, the Company filed an automatically effective registration statement on Form S-3 (the “Registration Statement”) with the SEC which registers the offering, issuance and sale of an unspecified amount of common stock, preferred stock, debt securities, warrants and/or units of any combination thereof. The Company simultaneously entered into an equity distribution agreement with Goldman Sachs & Co. LLC, as sales agent, to provide for the issuance and sale by the Company of up to $150.0 million of common stock from time to time in “at-the-market” offerings under the Registration Statement and related prospectus filed with the Registration Statement (the “ATM Program”). As of March 31, 2021, no sales had been made pursuant to the ATM Program.  

On March 4, 2021, the Company completed a follow-on public offering under the Registration Statement and a related prospectus supplement in which it issued and sold 2,395,834 shares of common stock, including full exercise of the underwriters’ over-allotment option to purchase an additional 312,500 shares of common stock, at a public offering price of $120 per share. The aggregate net proceeds to the Company from the offering, inclusive of proceeds from the over-allotment exercise, were $270.0 million after deducting underwriting discounts and commissions of $17.3 million and offering expenses of $0.2 million.

The Company’s consolidated financial statements have been prepared on the basis of continuity of operations, realization of assets and the satisfaction of liabilities in the ordinary course of business. The Company experienced negative operating cash flows of $21.2 million for the three months ended March 31, 2021 and had an accumulated deficit of $174.6 million as of March 31, 2021. The Company expects to continue to generate operating losses for the foreseeable future.

6


 

The Company expects that its cash, cash equivalents and available-for-sale investments of $571.3 million as of March 31, 2021 will be sufficient to fund its operating expenses and capital expenditure requirements through at least 12 months from the date of issuance of these consolidated financial statements.

If the Company is unable to obtain funding when needed, the Company could be forced to delay, reduce or eliminate some or all of its research and development programs, product portfolio expansion or commercialization efforts, which could adversely affect its business prospects, or the Company may be unable to continue operations. Although management continues to pursue these plans, there is no assurance that the Company will be successful in obtaining sufficient funding on terms acceptable to the Company to fund continuing operations, if at all.

Basis of Presentation

The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”). Any reference in these notes to applicable guidance is meant to refer to the authoritative U.S. GAAP as found in the Accounting Standards Codification (“ASC”) and Accounting Standards Updates (“ASUs”) of the Financial Accounting Standards Board (“FASB”).

The consolidated financial statements include the accounts of the Company and its wholly owned subsidiary, Karuna Securities Corporation, a Massachusetts corporation. All inter-company transactions and balances have been eliminated in consolidation.

The accompanying consolidated balance sheet as of March 31, 2021, the consolidated statements of operations, comprehensive loss, consolidated statements of cash flows, and stockholders’ equity for the three months ended March 31, 2021 and 2020 are unaudited. The unaudited interim consolidated financial statements have been prepared on the same basis as the audited annual consolidated financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary for the fair statement of the Company’s financial position as of March 31, 2021 and the results of its operations for the three months ended March 31, 2021 and 2020 and the results of its cash flows for the three months ended March 31, 2021 and 2020. Certain information and footnote disclosures typically included in annual financial statements prepared in accordance with U.S. GAAP have been condensed or omitted. Accordingly, these unaudited consolidated interim financial statements should be read in conjunction with the Company’s consolidated financial statements as of and for the year ended December 31, 2020. The results for the three months ended March 31, 2021 are not necessarily indicative of results to be expected for the year ending December 31, 2021, any other interim periods, or any future year or period.

Note 2. Summary of Significant Accounting Policies

The significant accounting policies and estimates used in preparation of the consolidated financial statements are described in the Company’s audited consolidated financial statements as of and for the year ended December 31, 2020, and the notes thereto, which are included in the Company’s Annual Report on Form 10-K. During the three months ended March 31, 2021, there were no material changes to the Company’s significant accounting policies, notwithstanding the following policy.

Impairment of Long-Lived Assets

The Company continually evaluates long-lived assets for potential impairment when events or changes in circumstances indicate the carrying value of the assets may not be recoverable. Recoverability is measured by comparing the carrying values of the assets to the expected future net undiscounted cash flows that the assets are expected to generate. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the book values of the assets exceed their fair value.

Recently Adopted Accounting Pronouncements

New pronouncements issued but not effective until after March 31, 2021 are not expected to have a material impact on the Company’s consolidated financial statements.

 

7


 

 

Note 3. Prepaid Expenses and Other Assets and Accrued Expenses

Prepaid expenses and other current assets consisted of the following (in thousands):

 

 

 

March 31,

2021

 

 

December 31,

2020

 

Prepaid research and development expenses

 

$

16,730

 

 

$

18,660

 

Prepaid insurance

 

 

1,053

 

 

 

2,116

 

Other

 

 

535

 

 

 

1,088

 

Total prepaid expenses and other current assets

 

$

18,318

 

 

$

21,864

 

 

The Company also had other non-current assets of $1.0 million as of March 31, 2021, which consisted of $0.6 million in prepaid research and development expenses and a security deposit of $0.4 million.

 

Accrued expenses consisted of the following (in thousands):

 

 

 

March 31,

2021

 

 

December 31,

2020

 

Accrued payroll and related expenses

 

$

1,047

 

 

$

2,654

 

Accrued research and development expenses

 

 

2,755

 

 

 

1,829

 

Professional fees

 

 

375

 

 

 

458

 

Other

 

 

256

 

 

 

203

 

Total accrued expenses

 

$

4,433

 

 

$

5,144

 

 

Note 4. Stockholders’ Equity

Preferred Stock

On July 2, 2019, in connection with the closing of the Company’s IPO, the Company filed its amended and restated Certificate of Incorporation, which authorizes the Company to issue up to 10,000,000 shares of preferred stock, $0.0001 par value per share. There were no shares of preferred stock outstanding as of March 31, 2021 or December 31, 2020.

Common Stock

As of March 31, 2021, the Company’s amended and restated Certificate of Incorporation authorized the Company to issue 150,000,000 shares of common stock, $0.0001 par value per share.

Holders of the common stock are entitled to one vote for each share of common stock held at all meetings of stockholders and written actions in lieu of meetings. The holders of common stock are entitled to receive dividends out of funds legally available, as declared by the board of directors. These dividends are subject to the preferential dividend rights of the holders of the Company’s preferred stock. Through March 31, 2021, no cash dividends have been declared or paid.

Note 5. Net Loss per Share

The following table sets forth the computation of basic and diluted net loss per share of common stock for the three months ended March 31, 2021 and 2020 (in thousands, except share and per share data):

 

 

 

Three Months Ended

March 31,

 

 

 

2021

 

 

2020

 

Net Loss

 

$

(30,497

)

 

$

(8,658

)

Weighted-average shares used in computing net loss per share

 

 

27,786,538

 

 

 

26,042,434

 

Net loss per share, basic and diluted

 

$

(1.10

)

 

$

(0.33

)

 

The Company’s potentially dilutive securities, which consist of stock options, have been excluded from the computation of diluted net loss per share as the effect would be to reduce the net loss per share. Therefore, the weighted

8


 

average number of common shares outstanding used to calculate both basic and diluted net loss per share attributable to common stockholders is the same. 

Common Stock Equivalents

The following common stock equivalents, presented based on amounts outstanding at each period end, have been excluded from the calculation of diluted net loss per share because including them would have had an anti-dilutive impact:

 

 

 

March 31,

 

 

 

2021

 

 

2020

 

Stock options to purchase common stock

 

 

5,171,914

 

 

 

4,974,356

 

 

Note 6. Stock-based Compensation

Stock Options

In September 2009, the Company’s board of directors approved the 2009 Stock Incentive Plan (the “2009 Plan”) which provided for the grant of incentive stock options to employees and non-statutory stock options to directors, consultants, and non-employees of the Company. The aggregate common shares issuable were 3,911,138 under the 2009 Plan, as amended. The 2009 Plan terminated in July 2019 effective upon the completion of the Company’s IPO. No additional options will be granted under the 2009 Plan. As of March 31, 2021, there were 2,618,016 options outstanding under the 2009 Plan.

In May 2019, the Company’s board of directors approved the 2019 Stock Option and Incentive Plan (the “2019 Plan”) which became effective on June 26, 2019, the date immediately prior to the date on which the registration statement related to the IPO was declared effective by the SEC. The 2019 Plan will expire in May 2029. Under the 2019 Plan, the Company may grant incentive stock options, non-statutory stock options, restricted stock awards, restricted stock units and other stock-based awards. There were 1,709,832 shares of the Company’s common stock initially reserved for issuance under the 2019 Plan. The number of shares of common stock that may be issued under the 2019 Plan automatically increases on January 1 of each calendar year, commencing on January 1, 2020 and each January 1 thereafter, by 4% of the number of shares of common stock outstanding on the immediately preceding December 31 or such lesser amount determined by the Company’s board of directors or the compensation committee of the board of directors. In addition, any shares of common stock underlying any awards from the 2009 Plan that are forfeited, cancelled, held back, reacquired, or otherwise terminated shall be added back to the shares of stock available for issuance under the 2019 Plan. As of March 31, 2021, there were 1,412,344 common shares available for issuance and 2,553,898 options outstanding under the 2019 Plan.

Options under the 2019 Plan generally vest based on the grantee’s continued service with the Company during a specified period following a grant as determined by the board of directors and expire ten years from the grant date. Awards typically vest in four years, but vesting conditions can vary based on the discretion of the Company’s board of directors.

A summary of the Company’s stock option activity and related information is as follows:

 

 

 

Number of

Shares

 

 

Weighted-

Average

Exercise

Price

Per Share

 

 

Weighted-

Average

Remaining

Contractual

Term (Years)

 

 

Aggregate

Intrinsic Value

(in thousands)

 

Outstanding as of December 31, 2020

 

 

4,612,790

 

 

$

28.63

 

 

 

8.3

 

 

$

336,740

 

Granted

 

 

644,625

 

 

 

128.50

 

 

 

 

 

 

 

 

 

Exercised

 

 

(56,876

)

 

 

11.80

 

 

 

 

 

 

 

 

 

Forfeited

 

 

(28,625

)

 

 

38.73

 

 

 

 

 

 

 

 

 

Outstanding as of March 31, 2021

 

 

5,171,914

 

 

$

41.21

 

 

 

8.3

 

 

$

415,257

 

Options vested and expected to vest as of

   March 31, 2021

 

 

5,171,914

 

 

$

41.21

 

 

 

8.3

 

 

$

415,257

 

Options exercisable as of March 31, 2021

 

 

3,099,022

 

 

$

14.12

 

 

 

7.7

 

 

$

328,828

 

 

9


 

 

The aggregate intrinsic values of options outstanding, exercisable, vested and expected to vest were calculated as the difference between the exercise price of the options and the fair value of the Company’s common stock as of March 31, 2021.

As of March 31, 2021, there was $86.0 million of unrecognized compensation cost, which is expected to be recognized over a weighted-average period of 3.4 years.

Stock-based Compensation Expense

Stock-based compensation expense is classified in the statements of operations for the three months ended March 31, 2021 and 2020 as follows (in thousands):

 

 

 

Three Months Ended

March 31,

 

 

 

2021

 

 

2020

 

General and administrative

 

$

3,741

 

 

$

1,285

 

Research and development

 

 

2,081

 

 

 

349

 

Total stock-based compensation expense

 

$

5,822

 

 

$

1,634

 

 

Note 7. Fair Value of Financial Assets and Liabilities

The following tables present information about the Company’s assets as of March 31, 2021 and December 31, 2020 that are measured at fair value on a recurring basis and indicate the level of the fair value hierarchy utilized to determine such fair values (in thousands):

 

 

 

Fair Value Measurement

 

 

 

at March 31, 2021 Using

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money market fund

 

$

335,151

 

 

$

 

 

$

 

 

$

335,151

 

Commercial paper

 

 

 

 

 

12,000

 

 

 

 

 

 

12,000

 

Investment securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasuries

 

 

99,912

 

 

 

 

 

 

 

 

 

99,912

 

Corporate debt securities

 

 

 

 

 

28,762

 

 

 

 

 

 

28,762

 

Commercial paper

 

 

 

 

 

88,936

 

 

 

 

 

 

88,936

 

Total

 

$

435,063

 

 

$

129,698

 

 

$

 

 

$

564,761

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fair Value Measurement

 

 

 

at December 31, 2020 Using

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money market fund

 

$

50,141

 

 

$

 

 

$

 

 

$

50,141

 

Investment securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasuries

 

 

172,295

 

 

 

 

 

 

 

 

 

172,295

 

Corporate debt securities

 

 

 

 

 

36,817

 

 

 

 

 

 

36,817

 

Commercial paper

 

 

 

 

 

60,170

 

 

 

 

 

 

60,170

 

Total

 

$

222,436

 

 

$

96,987

 

 

$

 

 

$

319,423

 

 

The fair values of the Company’s commercial paper and corporate debt securities are based on prices obtained from independent pricing sources. Securities with validated quotes from pricing services are reflected within Level 2, as they are primarily based on observable pricing for similar assets or other market observable inputs. Typical inputs used by these pricing services include, but are not limited to, reported trades, benchmark yields, issuer spreads, bids, offers or estimates of cash flow, prepayment spreads and default rates.

 

The Company does not hold any securities classified as Level 3, which are securities valued using unobservable inputs. The Company has not transferred any investment securities between the classification levels.

10


 

The estimated fair value and amortized cost of the Company’s available-for-sale investments, by contractual maturity and security type, are summarized as follows (in thousands):

 

 

 

March 31, 2021

 

 

 

Amortized

Cost

 

 

Unrealized

Gains

 

 

Unrealized

Losses

 

 

Fair Value

 

U.S. Treasuries (due within one year)

 

 

99,907

 

 

 

5