0001558370-22-002788 | 10-K | XBRL Viewer | Entasis Therapeutics Holdings INC

CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Dec. 31, 2021	Dec. 31, 2020
Current assets:
Cash and cash equivalents	$ 32,307	$ 53,247
Grants receivable	1,258	1,890
Prepaid expenses	5,754	4,160
Other current assets	496	835
Total current assets	39,815	60,132
Property and equipment, net	198	222
Operating lease right-of-use assets	604	1,141
Other assets	303	63
Total assets	40,920	61,558
Current liabilities:
Accounts payable	1,183	660
Accrued expenses and other current liabilities	8,525	7,905
Total current liabilities	9,708	8,565
Operating lease liabilities, net of current portion		704
Total liabilities	9,708	9,269
Commitments (Notes 4 and 10)
Stockholders' equity:
Common stock, par value $0.001; 125,000,000 shares authorized and 47,851,779 and 36,637,357 shares issued and outstanding as of December 31, 2021 and December 31, 2020, respectively	48	37
Additional paid-in capital	262,760	236,707
Accumulated deficit	(231,596)	(184,455)
Total stockholders' equity	31,212	52,289
Total liabilities and stockholders' equity	$ 40,920	$ 61,558

CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares	Dec. 31, 2021	Dec. 31, 2020
CONSOLIDATED BALANCE SHEETS
Common stock par value (in dollar per share)	$ 0.001	$ 0.001
Common stock authorized (in shares)	125,000,000	125,000,000
Common stock issued (in shares)	47,851,779	36,637,357
Common stock outstanding (in shares)	47,851,779	36,637,357

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020
Operating expenses:
Research and development	$ 37,105	$ 41,022
General and administrative	15,212	13,209
Total operating expenses	52,317	54,231
Loss from operations	(52,317)	(54,231)
Other income:
Grant income	5,163	3,562
Interest income	13	173
Total other income	5,176	3,735
Net loss	(47,141)	(50,496)
Comprehensive loss	$ (47,141)	$ (50,496)
Net loss per share - basic (in dollars per share)	$ (1.09)	$ (2.10)
Net loss per share - diluted (in dollars per share)	$ (1.09)	$ (2.10)
Weighted average common stock outstanding-basic (in shares)	43,340,826	24,060,615
Weighted average common stock outstanding-diluted (in shares)	43,340,826	24,060,615

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY - USD ($) $ in Thousands	Common Stock	Additional Paid-in Capital	Accumulated Deficit	Total
Balance at Dec. 31, 2019	$ 13	$ 176,103	$ (133,959)	$ 42,157
Balance (in shares) at Dec. 31, 2019	13,291,563
Stock-based compensation expense		2,951		2,951
Sale of common stock and warrants in Private Placement, net of issuance costs	$ 22	57,653		57,675
Sale of common stock and warrants in Private Placement, net of issuance costs (in shares)	22,183,878
Exercise of warrants	$ 2			2
Exercise of warrants (in shares)	1,161,916
Net loss			(50,496)	(50,496)
Balance at Dec. 31, 2020	$ 37	236,707	(184,455)	52,289
Balance (in shares) at Dec. 31, 2020	36,637,357
Stock-based compensation expense		4,023		4,023
Sale of common stock and warrants in Private Placement, net of issuance costs	$ 10	19,941		19,951
Sale of common stock and warrants in Private Placement, net of issuance costs (in shares)	10,000,000
Exercise of warrants	$ 1	1,799		1,800
Exercise of warrants (in shares)	672,897
Sale of common stock related to at-the-market offerings, net of issuance costs		290		290
Sale of common stock related to at-the-market offerings, net of issuance costs (in shares)	200,000
Issuance of common stock upon the vesting of restricted stock units (in shares)	341,525
Net loss			(47,141)	(47,141)
Balance at Dec. 31, 2021	$ 48	$ 262,760	$ (231,596)	$ 31,212
Balance (in shares) at Dec. 31, 2021	47,851,779

CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020
Cash flows from operating activities:
Net loss	$ (47,141)	$ (50,496)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation expense	104	141
Stock-based compensation expense	4,023	2,951
Amortization and accretion of investments		(37)
Changes in operating assets and liabilities:
Grants receivable	632	(658)
Prepaid expenses	(1,594)	400
Other assets	636	1,881
Accounts payable	513	(644)
Accrued expenses and other liabilities	(145)	1,036
Net cash used in operating activities	(42,972)	(45,426)
Cash flows from investing activities:
Purchases of property and equipment	(70)	(18)
Proceeds from maturities of short-term investments		25,000
Net cash (used in) provided by investing activities	(70)	24,982
Cash flows from financing activities:
Proceeds from the sale of common stock and warrants in private placements, net of issuance costs	19,951	57,657
Proceeds from the exercise of warrants	1,800
Proceeds from the sale of common stock related to at-the-market offering, net of issuance costs	351
Net cash provided by financing activities	22,102	57,657
Net (decrease) increase in cash and cash equivalents	(20,940)	37,213
Cash and cash equivalents at beginning of the year	53,247	16,034
Cash and cash equivalents at end of the year	32,307	$ 53,247
Supplemental disclosure of non-cash investing and financing activities:
Financing costs included in accrued expenses	61
Purchases of property and equipment in accounts payable	$ 10

Organization and Description of Business

12 Months Ended

Dec. 31, 2021

Organization and Description of Business

Organization and Description of Business

ENTASIS THERAPEUTICS HOLDINGS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Organization and Description of Business

Entasis Therapeutics Holdings Inc., or Entasis, or the Company, is an advanced, late clinical-stage biopharmaceutical company focused on the discovery, development and commercialization of targeted antibacterial products that address high unmet medical needs to treat serious infections caused by multidrug-resistant pathogens. The Company has four subsidiaries: Entasis Therapeutics Limited; Entasis Therapeutics Inc.; Entasis Therapeutics Security Corporation; and Entasis Therapeutics (Ireland) Limited.

On April 12, 2020, the Company entered into a securities purchase agreement, or the First Securities Purchase Agreement, with Innoviva Inc., or Innoviva, pursuant to which the Company issued and sold to Innoviva, in a private placement, 14,000,000 newly issued shares of common stock of the Company at $2.50 per share, and warrants to purchase up to 14,000,000 shares of common stock with an exercise price per share of $2.50, resulting in an aggregate gross purchase price of approximately $35.0 million, collectively, the First Private Placement. As a result of the transaction, Innoviva acquired control of the Company, owning approximately 51.3% of the Company’s common stock without giving effect to the potential exercise of its warrants.

On August 27, 2020, the Company entered into another securities purchase agreement, or the Second Securities Purchase Agreement, with the purchasers named therein, or the Investors, which included existing stockholder Innoviva. Pursuant to the Second Securities Purchase Agreement, the Company issued and sold to the Investors in a private placement (i) 8,183,878 newly issued shares of common stock of the Company at $2.675 per share, (ii) warrants to purchase an aggregate of 9,345,794 shares of common stock with an exercise price of $2.675, and (iii) pre-funded warrants, in lieu of common stock, to purchase an aggregate of 1,161,916 shares of common stock with an exercise price of $0.001 per share, resulting in aggregate gross proceeds of approximately $25.0 million, which is referred to collectively as the Second Private Placement. The closing of the Second Private Placement occurred on September 1, 2020. As a result of the transaction, Innoviva owned approximately 52.6% of the Company’s common stock without giving effect to the potential exercise of its warrants.

On May 3, 2021, the Company entered into a securities purchase agreement, or the Third Securities Purchase Agreement, with a subsidiary of Innoviva, pursuant to which the Company agreed to issue and sell to Innoviva, in a private placement up to 10,000,000 newly issued shares of common stock of the Company at $2.00 per share and warrants to purchase up to 10,000,000 shares of common stock with an exercise price per share of $2.00, collectively, the Third Private Placement. The warrants were exercisable immediately and have a five-year term.

The Third Private Placement occurred in two tranches. At the closing of the first tranche, or the First Closing, which occurred on May 3, 2021, Innoviva purchased 3,731,025 shares of common stock and warrants to purchase up to 3,731,025 shares of common stock, for an aggregate purchase price of approximately $7.5 million. At the closing of the second tranche, or the Second Closing, which occurred on June 11, 2021, Innoviva purchased the remaining 6,268,975 shares of common stock and warrants to purchase up to 6,268,975 shares of common stock, for an aggregate purchase price of approximately $12.5 million. As a result of these transactions, as of December 31, 2021, Innoviva owned approximately 59.9% of the Company’s common stock without giving effect to the potential exercise of the warrants. If Innoviva were to exercise all of its warrants, as of December 31, 2021 Innoviva would have held approximately 74.9% of the Company’s outstanding common stock.

On February 17, 2022, the Company entered into a securities purchase agreement, or Fourth Securities Purchase Agreement with a subsidiary of Innoviva, pursuant to which the Company issued and sold to Innoviva, in a private placement which closed on February 18, 2022, a convertible promissory note having a principal amount of $15.0 million. This transaction is described in further detail in Note 16 – Subsequent Events.

Going Concern

Since its inception, the Company has incurred recurring net losses and negative cash flows from its operations. The Company has financed its operations primarily with proceeds from the sale of preferred stock, common stock, warrants and pre-funded warrants. As of December 31, 2021, the Company had cash and cash equivalents of $32.3 million.

The Company follows the provisions of Financial Accounting Standards Board, or FASB, Accounting Standards Codification, or ASC, Topic 205-40, Presentation of Financial Statements — Going Concern, or ASC 205-40, which requires management to assess the Company’s ability to continue as a going concern for one year after the date the consolidated financial statements are issued.

Based on the Company’s available cash resources, the Company believes its existing cash and cash equivalents, including the $15.0 million received from Innoviva as part of the Fourth Securities Purchase Agreement, will enable it to fund its operating expenses and capital requirements through the end of the third quarter of 2022. Accordingly, management does not expect that its existing cash and cash equivalents as of December 31, 2021 will be sufficient to enable the Company to fund its operating expenses and capital expenditure requirements through the first quarter of 2023. Management has concluded that substantial doubt exists about the Company’s ability to continue as a going concern for one year from the date these financial statements are issued. The Company expects to seek additional funding to sustain its future operations and while the Company has successfully raised capital in the past, the ability to raise capital in future periods is not assured. If the Company is not able to secure adequate additional funding in future periods, the Company may make reductions in certain expenditures. This may include suspending or curtailing planned activities. The Company may also have to delay, reduce the scope of, suspend or eliminate one or more research and development programs or its commercialization efforts. A failure to raise substantial additional funding or effectively implement cost reductions could harm the Company’s business, results of operations and future prospects.

The consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates continuity of operations, the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Risks and Uncertainties

As of December 31, 2021, the Company had $32.3 million in cash and cash equivalents, and an accumulated deficit of $231.6 million. Since its inception through December 31, 2021, the Company has funded its operations primarily with proceeds from the sale of preferred stock, common stock, warrants and pre-funded warrants. The Company also has either directly received funding or financial commitments from, or has had its program activities conducted and funded by, United States government agencies, non-profit entities and the collaboration agreement with Zai Lab (Shanghai), Co., Ltd., or Zai Lab. In the absence of positive cash flows from operations, the Company is highly dependent on its ability to find additional sources of funding in the form of debt, equity financing, strategic collaborations, or partnerships. If the Company raises additional funds through collaborations, strategic alliances or marketing, distribution or licensing arrangements with third parties, it may be required to relinquish valuable rights to its technologies, future revenue streams, research programs or product candidates or to grant licenses on terms that may not be favorable. If the Company is unable to raise additional funds through equity or debt financings when needed, it may be required to delay, limit, reduce or terminate drug development or future commercialization efforts or grant rights to a third party to develop and market product candidates. The Company’s failure to raise capital as and when needed would compromise its ability to pursue its business strategy.

As a late clinical-stage company, Entasis is subject to a number of risks common to other life science companies, including, but not limited to, raising additional capital, development by its competitors of new technological innovations, risk of failure in preclinical and clinical studies, safety and efficacy of its product candidates in clinical trials, the risk of relying on external parties such as contract research organizations and contract manufacturing organizations, the regulatory approval process, market acceptance of the Company’s products once approved, lack of

marketing and sales history, dependence on key personnel and protection of proprietary technology. The Company’s therapeutic programs are currently pre-commercial, spanning discovery through late-stage development and will require additional research and development efforts, including the completion of Phase 3 registration trials and regulatory approval, prior to commercialization of any product candidates. These efforts require significant amounts of additional capital, adequate personnel, infrastructure, and extensive compliance-reporting capabilities. There can be no assurance that the Company’s research and development will be successfully completed, that adequate protection for the Company’s intellectual property will be obtained, that any products developed will obtain necessary regulatory approval or that any approved products will be commercially viable. Even if the Company’s product development efforts are successful, it is uncertain when, if ever, the Company will generate revenue from product sales. The Company may never achieve profitability, and unless and until it does, it will continue to need to raise additional capital or obtain financing from other sources, such as strategic collaborations or partnerships.

The COVID-19 pandemic has, and will likely continue to have, a significant impact on the U.S. economy and businesses. The social distancing and stay-at-home orders issued by national, state and local governments have resulted in closures of offices and factories and disrupted supply chains. The pandemic also has taxed healthcare systems both in the U.S. and around the world, resulting in disruption to or temporary suspension of clinical trials. The nature, extent and duration of the COVID-19 pandemic remains uncertain and the time needed for businesses and healthcare systems to recover remains unknown. The full impact of the pandemic on the economy, including the capital markets, also remains unknown. The continuation of prolonged adverse economic conditions (including due to any resurgence of COVID-19 infections) could limit the Company’s access to financial resources from the capital markets and other sources. It is not possible to predict the full impact of the COVID-19 pandemic on the Company’s business and access to capital in the future. Despite these challenges, the Company and its contract research organization, or CRO, partner were able to keep the ATTACK Phase 3 registration trial enrolling throughout the pandemic and announced positive top-line data in October 2021. Furthermore, the Company has observed an increase in the enrollment rate during the past two quarters in the zoliflodacin Phase 3 registration trial.

Summary of Significant Accounting Policies

12 Months Ended

Dec. 31, 2021

Summary of Significant Accounting Policies

Summary of Significant Accounting Policies

2. Summary of Significant Accounting Policies

Basis of Presentation and Consolidation

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States, or U.S. GAAP. The consolidated financial statements include the Company’s accounts and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

Use of Estimates

The preparation of the Company’s consolidated financial statements in conformity with U.S. GAAP requires management to make estimates, judgments and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Significant estimates and assumptions reflected in these consolidated financial statements include, but are not limited to, the recognition of revenue and the recognition of research and development expenses. Estimates are periodically reviewed in light of changes in circumstances, facts and experience. Changes in estimates are recorded in the period in which they become known. Actual results could differ from the Company’s estimates.

Fair Value Measurements

The accounting standard for fair value measurements defines fair value, establishes a framework for measuring fair value in accordance with U.S. GAAP, and requires detailed disclosures about fair value measurements. Under this standard, fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The valuation techniques are based on observable and

unobservable inputs. Observable inputs reflect readily obtainable data from independent sources, while unobservable inputs reflect the Company’s assumptions. This standard classifies these inputs into the following hierarchy:

Level 1 Inputs— Quoted prices in active markets for identical instruments;

Level 2 Inputs—Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable;

Level 3 Inputs—Instruments with primarily unobservable value drivers.

The Company evaluates transfers between levels at the end of each reporting period. There were no transfers of assets or liabilities between Level 1, Level 2 or Level 3 during the years ended December 31, 2021 and 2020.

Cash and Cash Equivalents

The Company considers all highly liquid investments purchased with original maturities of 90 days or less at acquisition to be cash equivalents. Cash and cash equivalents include cash held in banks, money market instruments, corporate and municipal notes, U.S. Treasury securities and federal agency securities. Cash equivalents are stated at fair value. The amount of cash equivalents included in cash and cash equivalents was approximately $28.1 million and $49.1 million as of December 31, 2021 and 2020, respectively.

Concentrations of Credit Risk and of Significant Suppliers

Financial instruments that potentially expose the Company to concentrations of credit risk consist primarily of cash and short-term investments. The Company maintains each of its cash balances with high-quality, accredited, financial institutions and, accordingly, such funds are not exposed to significant credit risk. The Company does not believe that it is subject to unusual credit risk beyond the normal credit risk associated with commercial banking relationships.

The Company is dependent on third-party manufacturers to supply active pharmaceutical ingredient, or API, and drug product for research and development activities for its programs, including clinical trial testing. These programs could be adversely affected by a significant interruption in the supply of API or drug product.

Deferred Financing Costs

The Company capitalizes certain legal, professional accounting and other third-party fees that are directly associated with in-process equity financings as deferred offering costs until such financings are consummated. After consummation of the equity financing, these costs are recorded in stockholders’ equity as a reduction of proceeds generated as a result of the offering.

Should a planned equity financing be abandoned, the deferred offering costs would be expensed immediately as a charge to operating expenses in the consolidated statement of operations.

Property and Equipment

Property and equipment is recorded at cost and depreciated over the estimated useful lives of the related assets using the straight-line method. Upon disposal of an asset, the related cost and accumulated depreciation are removed from the asset accounts and any resulting gain or loss is included in the consolidated statement of operations. Repair and maintenance costs are expensed as incurred, whereas major improvements are capitalized as additions to property and equipment. The estimated useful lives of the Company’s respective assets are as follows:


		Estimated Useful Life
Laboratory equipment		3 ‑ 5 years
Computer software		3 years
Computer equipment		3 years
Furniture and fixtures		5 years

Impairment of Long-Lived Assets

Long-lived assets are tested for recoverability whenever events or changes in business circumstances indicate that the carrying amount of the assets may not be fully recoverable. Whenever such events occur, the Company compares forecasts of undiscounted cash flows expected to result from the use and eventual disposition of the long-lived asset to its carrying value. An impairment loss would be recognized when estimated undiscounted future cash flows expected to result from the use of an asset are less than its carrying amount. The impairment loss would be based on the excess of the carrying value of the impaired asset over its fair value, determined based on discounted cash flows.

Segment Information

The Company manages its operations as a single operating segment for the purposes of assessing performance and making operating decisions. As of December 31, 2021 and 2020, all of the Company’s long-lived assets were domiciled in the United States.

Revenue Recognition

The Company enters into collaboration agreements for research, development, manufacturing and commercial services, under which the Company licenses certain rights to its product candidates to third parties. The terms of these arrangements typically include payment to the Company of one or more of the following: non-refundable, upfront license fees; reimbursement of certain costs; customer option exercise fees; development, regulatory and commercial milestone payments; and royalties on net sales of licensed products. The amount of variable consideration is constrained until it is probable that the revenue is not at a significant risk of reversal in a future period. The contracts into which the Company enters generally do not include significant financing components.

As part of the accounting for these arrangements, the Company may be required to use significant judgment to determine: (a) the performance obligations in the contract, (b) the transaction price and (c) the timing of revenue recognition, including the appropriate measure of progress. The Company uses judgment to determine whether milestones or other variable consideration, except for royalties, should be included in the transaction price, as described further below. The transaction price is allocated to each performance obligation on a relative stand-alone selling price basis, for which the Company recognizes revenue as or when the performance obligations under the contract are satisfied. If a milestone or other variable consideration relates specifically to the Company’s efforts to satisfy a single performance obligation or to a specific outcome from satisfying the performance obligation, the Company generally allocates the milestone amount entirely to that performance obligation once it is probable that a significant revenue reversal would not occur.

Amounts received prior to revenue recognition are recorded as deferred revenue. Amounts expected to be recognized as revenue within the 12 months following the balance sheet date would be classified as current portion of deferred revenue in the consolidated balance sheet. Amounts not expected to be recognized as revenue within the 12 months following the balance sheet date would be classified as deferred revenue, net of current portion.

Licenses of intellectual property

In assessing whether a license is distinct from the other promises, the Company considers factors such as the research, development, manufacturing and commercialization capabilities of the collaboration partner and the availability of the associated expertise in the general marketplace. In addition, the Company considers whether the

collaboration partner can benefit from a license for its intended purpose without the receipt of the remaining promise(s), whether the value of the license is dependent on the unsatisfied promise(s), whether there are other vendors that could provide the remaining promise(s), and whether it is separately identifiable from the remaining promise(s). For licenses that are combined with other promises, the Company utilizes judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress for purposes of recognizing revenue. The Company evaluates the measure of progress each reporting period and, if necessary, adjusts the measure of performance and related revenue recognition.

Customer options

If an arrangement is determined to contain customer options that allow the customer to acquire additional goods or services, the goods and services underlying the customer options are not considered to be performance obligations at the outset of the arrangement, as they are contingent upon option exercise. The Company evaluates the customer options for material rights, or options to acquire additional goods or services for free or at a discount. If the customer options are determined to represent or include a material right, the material right is recognized as a separate performance obligation at the outset of the arrangement. The Company allocates the transaction price to material rights based on the relative standalone selling price, which is determined based on the identified discount and the probability that the customer will exercise. Amounts allocated to a material right are not recognized as revenue until, at the earliest, the option is exercised.

Milestone payments

At the inception of each arrangement that includes development milestone payments, the Company evaluates whether the milestones are considered probable of being achieved and estimates the amount to be included in the transaction price using the most likely amount method. If it is probable that a significant reversal of cumulative revenue would not occur, the associated milestone value is included in the transaction price. Milestone payments based on events that are not within the Company’s control, such as regulatory approvals, are not considered probable of being achieved until those approvals are received. The Company evaluates factors such as the scientific, clinical, regulatory, commercial, and other risks that must be overcome to achieve the particular milestone in making this assessment. There is considerable judgment involved in determining whether it is probable that a significant reversal of cumulative revenue would not occur. At the end of each subsequent reporting period, the Company reevaluates the probability of achievement of all milestones subject to constraint and, if necessary, adjusts its estimate of the overall transaction price. Any such adjustments are recorded on a cumulative catch-up basis, which would affect revenue and earnings in the period of adjustment.

Government Contracts and Grant Agreements

Income from grants is recognized in the period during which the related specified expenses are incurred, provided that the conditions under which the grants or incentives were provided have been met. Grant funding that is received by the Company in advance of incurring specified expenses is recorded in the consolidated balance sheet as a liability. Grant income recognized upon incurring specified expenses in advance of receipt of grant funding is recorded in the consolidated balance sheet as a receivable.

Research and Development Costs

Research and development costs are expensed as incurred. Research and development expenses include employee costs, such as salaries, equity-based compensation and benefits, as well as consulting, contract research, third-party license fees, depreciation, rent and other corporate or operational costs attributable to the Company’s research and development activities. These costs include allocated facility-related expenses and external costs of outside vendors engaged to conduct both preclinical studies and clinical trials. Non-refundable pre-payments for goods or services that will be used or rendered for future research and development activities are deferred. Such amounts are recognized as

expense as the goods or services are delivered or the related services are performed, or until it is no longer expected that the goods will be delivered or the services rendered.

The Company has entered into various research and development contracts with research institutions and other companies. These agreements are generally cancelable, and related payments are recorded as research and development expenses as incurred. The Company records accruals for estimated ongoing research costs. When evaluating the adequacy of the accrued liabilities, the Company analyzes progress of the studies, including the phase or completion of events, invoices received and contracted costs. Significant judgments and estimates are made in determining the accrued balances at the end of any reporting period. Actual results could differ from the Company’s estimates. The Company’s historical accrual estimates have not been materially different from the actual costs.

Patent Costs

The Company expenses patent costs as incurred and records such costs within general and administrative expenses.

Stock-Based Compensation

The Company measures stock-based awards based on the estimated fair value of the award on the date of the grant and recognizes compensation expense for those awarded to employees and directors over the requisite service period, which is generally the vesting period of the respective award, and for those awarded to nonemployees over the period during which services are rendered by nonemployees until completed. Forfeitures are accounted for as they occur. The Company has historically issued stock-based awards with only service-based vesting conditions and records the expense for these awards using the straight-line method.

The Company classifies stock-based compensation expense in its consolidated statement of operations in the same manner in which the award recipients’ payroll costs are classified or in which the award recipients’ service payments are classified.

The fair value of each stock option grant is estimated on the date of grant using the Black-Scholes option pricing model. The Company lacks company-specific historical and implied volatility information for its stock. The Company estimates its expected stock price volatility based on the historical volatility of publicly traded peer companies and expects to continue to do so until such time as it has adequate historical data regarding the volatility of its own traded stock price. The expected term of the Company’s stock options has been determined utilizing the “simplified” method. The “simplified” method estimates the expected term of stock options as the mid-point between the weighted average time to vesting and the contractual maturity. The risk-free interest rate is determined by reference to the U.S. Treasury yield curve in effect at the time of grant of the award for time periods approximately equal to the expected term of the award. There is no expected dividend yield since the Company has never paid cash dividends on common stock and does not expect to pay any cash dividends in the foreseeable future.

Income Taxes

The Company accounts for income taxes using the asset and liability method which requires recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts and the tax bases of assets and liabilities. Deferred tax assets and liabilities are determined based on the difference between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. A valuation allowance is provided to reduce the deferred tax asset to a level which, more likely than not, will be realized. See Note 11 for further discussion of income taxes.

Accounting for income taxes requires a two-step approach to recognize and measure uncertain tax positions. The first step is to evaluate the tax position for recognition by determining if, based on the technical merits, it is more likely than not that the position will be sustained upon audit, including resolution of related appeals or litigation

processes, if any. The second step is to measure the tax benefit as the largest amount that is more than 50 percent likely of being realized upon ultimate settlement. The provision for income taxes includes the effects of any resulting tax reserves, or unrecognized tax benefits, that are considered appropriate as well as the related net interest and penalties.

Basic and Diluted Net Loss Per Share

Net earnings or loss per share is calculated in accordance with the applicable accounting guidance provided in ASC 260, Earnings per Share. The Company uses the two-class method for the computation and presentation of net income (loss) per common share. The two-class method is an earnings allocation formula that calculates basic and diluted net income (loss) per share for each class of common stock separately based on dividends declared and participation rights in undistributed earnings as if all such earnings had been distributed during the period. Under the two-class method, warrants issued to the investors in connection with the First Private Placement and the Second Private Placement are assumed to participate in undistributed earnings on an as-exercised basis, in accordance with the respective warrant agreements. Undistributed net losses are allocated entirely to common stockholders since the participating security has no contractual obligation to share in the losses.

Basic net income (loss) per share is computed by dividing the net income (loss) by the weighted average number of shares of common stock outstanding for the period. Diluted net income (loss) is computed by adjusting net income (loss) to reallocate undistributed earnings based on the potential impact of dilutive securities. Diluted net income (loss) per share is computed by dividing the diluted net income (loss) by the weighted average number of common shares outstanding for the period, including potential dilutive common shares assuming the dilutive effect of common stock equivalents.

Recently Adopted Accounting Pronouncements

Effective January 1, 2021, the Company adopted the provisions of FASB ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which simplifies the accounting for income taxes. The adoption of the new guidance did not affect the Company’s consolidated financial statements.

Recently Issued Accounting Pronouncements

In November 2021, the FASB issued ASU 2021-10, Government Assistance (Topic 832): Disclosures by Business Entities about Government Assistance. This update requires annual disclosures about transactions with a government that are accounted for by applying a grant or contribution accounting model by analogy. This standard is effective for fiscal years beginning after December 15, 2021 and should be applied either prospectively or retrospectively. Early adoption is permitted. The Company is currently evaluating the impact of ASU 2021-10 on the consolidated financial statements.

Fair Value of Financial Instruments

12 Months Ended

Dec. 31, 2021

Fair Value of Financial Instruments

Fair Value of Financial Instruments

3. Fair Value of Financial Instruments

The following tables set forth the Company’s assets that were accounted for at fair value on a recurring basis:


	December 31, 2021
	Fair Value Measurement Using
	Level 1		Level 2		Level 3		Total

	(in thousands)
Cash equivalents:
Money market funds	$	28,137	$	—	$	—	$	28,137
Total	$	28,137	$	—	$	—	$	28,137



	December 31, 2020
	Fair Value Measurement Using
	Level 1		Level 2		Level 3		Total

	(in thousands)
Cash equivalents:
Money market funds	$	49,125	$	—	$	—	$	49,125
Total	$	49,125	$	—	$	—	$	49,125

The Company classifies its money market funds and U.S. Treasury securities as Level 1 assets under the fair value hierarchy as these assets have been valued using quoted market prices in active markets without any valuation adjustment.

The carrying amounts of the Company’s cash equivalents, grants receivable, accounts payable and accrued expenses approximate their fair value due to the short-term nature of these amounts.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

+ References + Details

Stockholders' Equity

12 Months Ended

Dec. 31, 2021

Stockholders' Equity

Stockholders' Equity

9. Stockholders’ Equity

Common Stock

Each holder of common stock shall be entitled to one vote for each share of common stock held of record by such holder on all matters on which stockholders generally are entitled to vote. Common stockholders are entitled to receive dividends when and if declared by the board of directors, out of any funds legally available. As of December 31, 2021, no dividends have been declared or paid.

Third Private Placement

On May 3, 2021, the Company entered into the Third Securities Purchase Agreement, with a subsidiary of Innoviva, pursuant to which the Company agreed to issue and sell to Innoviva up to 10,000,000 newly issued shares of common stock of the Company at $2.00 per share and warrants to purchase up to 10,000,000 shares of common stock, each with an exercise price per share of $2.00.

Third Private Placement occurred in two tranches. At the First Closing, which occurred on May 3, 2021, Innoviva purchased 3,731,025 shares of common stock and warrants to purchase 3,731,025 shares of common stock, for aggregate gross proceeds of $7.5 million. At the Second Closing, which occurred on June 11, 2021, Innoviva purchased the remaining 6,268,975 shares of common stock and warrants to purchase 6,268,975 shares of common stock, for aggregate gross proceeds of $12.5 million.

Second Private Placement

On August 27, 2020, the Company entered into the Second Securities Purchase Agreement with the Investors, including existing stockholder Innoviva, pursuant to which the Company issued and sold to the Investors in a private placement (i) 8,183,878 newly issued shares of common stock of the Company at $2.675 per share, (ii) warrants to purchase an aggregate of 9,345,794 shares of common stock with and exercise price of $2.675, and (iii) pre-funded warrants, in lieu of common stock, to purchase an aggregate of 1,161,916 shares of common stock, with an exercise price of $0.001 per share, resulting in aggregate gross proceeds of approximately $25.0 million. The closing of the Second Private Placement occurred on September 1, 2020.

The exercise price and the number of shares of common stock issuable upon exercise of each warrant is subject to appropriate adjustments in the event of certain stock dividends and distributions, stock splits, stock combinations, reclassifications or similar events affecting the Company’s common stock. Each warrant is exercisable from the date of issuance and has a term of five years.

First Private Placement

On April 12, 2020, the Company entered into the First Securities Purchase Agreement, with Innoviva, pursuant to which the Company issued and sold to Innoviva 14,000,000 newly issued shares of common stock of the Company at $2.50 per share, and warrants to purchase up to 14,000,000 shares of common stock with an exercise price per share of $2.50.

Under the First Securities Purchase Agreement, the First Private Placement occurred in two tranches. At the closing of the first tranche, which occurred on April 22, 2020, or the First Closing, Innoviva purchased 1,322,510 shares of common stock and warrants to purchase 1,322,510 shares of common stock, for an aggregate gross purchase price of approximately $3.3 million. At the closing of the second tranche, which occurred on June 11, 2020, or the Second Closing, Innoviva purchased the remaining 12,677,490 shares of common stock and warrants to purchase 12,677,490 shares of the common stock for an aggregate gross purchase price of approximately $31.7 million.

As of December 31, 2021, Innoviva owned approximately 59.9% of the Company’s outstanding common stock without giving effect to the potential exercise of the warrants.

At-the-Market Facility

In August 2021, the Company entered into a Controlled Equity Offering Sales Agreement, or Sales Agreement, with Cantor Fitzgerald & Co, or Cantor, for the offer and sale of up to $17.5 million of its common stock at the then current market prices in amounts to be determined from time to time. On October 21, 2021, the Company sold an aggregate of 200,000 shares of common stock at a sale price of $3.25 per share, for gross proceeds of $0.7 million. Proceeds, net of fees, were $0.6 million.

Warrants

As of December 31, 2021, outstanding warrants to purchase shares of the Company’s common stock are as follows:


Shares Underlying Outstanding Warrants	Exercise Price		Expiration Date
1,322,510	$	2.50	April 22, 2025
12,677,490	$	2.50	June 11, 2025
8,672,897	$	2.675	September 1, 2025
10,000,000	$	2.00	May 3, 2026
32,672,897

- Definition

The entire disclosure for shareholders' equity comprised of portions attributable to the parent entity and noncontrolling interest, including other comprehensive income. Includes, but is not limited to, balances of common stock, preferred stock, additional paid-in capital, other capital and retained earnings, accumulated balance for each classification of other comprehensive income and amount of comprehensive income.

+ References

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+ Details

Stock-Based Compensation Expense

12 Months Ended

Dec. 31, 2021

Stock-Based Compensation Expense

Stock-Based Compensation Expense

10. Stock-Based Compensation Expense

Stock Incentive Plan

In September 2018, the Company’s board of directors adopted and its stockholders approved the 2018 Equity Incentive Plan, or the 2018 Plan, which became effective on September 25, 2018, at which point no further grants will be made under the 2015 Stock Incentive Plan, or the 2015 Plan, previously in effect. Under the 2018 Plan, the Company may grant incentive stock options, or ISOs, non-statutory stock options, stock appreciation rights, restricted stock awards, restricted stock units and other stock-based awards. As of December 31, 2021, options to purchase an aggregate of 5,213,285 shares had been granted, restricted stock units, or RSUs, of 992,600 had been awarded, and 1,604,834 shares were available for future issuance under the 2018 Plan. The options issued under the 2018 Plan expire after 10 years from the date of grant.

At its inception, the aggregate number of shares of the Company’s common stock available for issuance under the 2018 Plan was 2,350,000. The number of shares of the Company’s common stock reserved for issuance under the 2018 Plan will automatically increase on January 1 of each year, for a period of 10 years, from January 1, 2019 continuing through January 1, 2028, by 4% of the total number of shares of the Company’s common stock outstanding on December 31 of the preceding calendar year, or a lesser number of shares as may be determined by the Company’s board of directors. Accordingly, on January 1, 2022 and 2021, 1,914,071 and 1,465,494 shares were added to the number of available shares, respectively. The maximum number of shares that may be issued pursuant to the exercise of ISOs under the 2018 Plan is 7,500,000.

The maximum number of shares of the Company’s common stock subject to awards granted under the 2018 Plan or otherwise during a single calendar year to any nonemployee directors, taken together with any cash fees paid by the Company to such nonemployee directors during the calendar year for serving on the Company’s board of directors, will not exceed $500,000 in total value, or, with respect to the calendar year in which a nonemployee director is first appointed or elected to the Company’s board of directors, $800,000.

All options and awards granted under the 2015 Plan consisted of the Company’s common stock. As of September 25, 2018, no additional stock awards have been or will be granted under the 2015 Plan. Although the 2015 Plan was terminated as to future awards in September 2018, it continues to govern the terms of options that remain outstanding under the 2015 Plan.

Stock Option Activity

Stock option activity under both plans for year ended December 31, 2021 is summarized as follows:


				Weighted-
		Weighted-		Average
		Average		Remaining	Aggregate
	Number of	Exercise		Contractual	Intrinsic
	Options	Price		Term (Years)	Value (in thousands)
Outstanding as of December 31, 2020	3,112,704	$	5.58	7.76	$	44
Granted	1,492,776		2.45
Forfeited and expired	(1,710,100)		6.86
Outstanding as of December 31, 2021	2,895,380	$	3.21	8.33	$	30
Exercisable as of December 31, 2021	978,915	$	3.84	6.57	$	7

The aggregate intrinsic value of options is calculated as the difference between the exercise price of the options and the fair value of the Company’s common stock for those options that had exercise prices lower than the fair value of the Company’s common stock.

During the years ended December 31, 2021 and 2020 the weighted-average grant-date fair value per granted option was $4.03 and $2.95, respectively.

As described below, on July 16, 2021, the Company completed a stock option exchange program that resulted in the termination of options to purchase 1,562,752 shares of the Company’s common stock with a weighted-average exercise price of $7.17 per share and the issuance of stock options to purchase 1,148,572 shares of the Company’s common stock with an exercise price of $2.44 per share.

Stock Option Exchange

On June 17, 2021, the Company commenced a voluntary stock option exchange program, or the Exchange Program, to permit the Company’s eligible employees, directors and certain consultants to exchange some or all of their eligible outstanding options, or the Original Options, to purchase the Company’s common stock with an exercise price greater than or equal to $4.98 per share, whether vested or unvested, for a lesser number of new stock options, or the New Options. The New Options will be granted under the 2018 Plan on the date on which the Original Options accepted for exchange are cancelled. Participants must remain continuously employed by the Company or in continuous service to the Company through the New Option grant date. New Options will have a per share exercise price equal to the per share closing price of the Company’s common stock on the New Option grant date. The New Options will have the same vesting schedule as the Original Options for options with a remaining vesting period exceeding 12 months. For Original Options with a remaining vesting period of 12 months or less, including full vesting options, the replacement options will vest in full 12 months from the New Option grant date. In accordance with the terms and conditions of the Exchange Program, the Company closed the exchange program and accepted all exchanged outstanding options on July 16, 2021, at which time the Company’s common stock price per share was $2.44. The stock option exchange program was approved at the Company’s annual shareholder meeting on June 10, 2021.

Pursuant to the Exchange Program, 44 eligible participants elected to exchange, and the Company accepted for cancellation Original Options to purchase an aggregate of 1,562,752 shares of the Company’s common stock, representing approximately 97% of the total shares of common stock underlying the eligible Original Options. On July 16, 2021, immediately following the expiration of the exchange offer, the Company granted New Options to purchase 1,148,572 shares of common stock, pursuant to the terms of the exchange offer and the Company’s 2018 Plan. In addition to the grant date fair value of the original awards, the Company will recognize incremental expense of approximately $0.3 million over the remaining service periods of the replacement awards.

Restricted Stock Unit Activity

Restricted stock unit activity for the year ended December 31, 2021 is summarized as follows:


		Weighted-
		Average
	Number of	Grant Date
	Units	Fair Value
Outstanding as of December 31, 2020	395,100	$	1.65
Granted	597,500		2.57
Released	(427,975)		2.24
Forfeited	(73,650)		1.99
Outstanding as of December 31, 2021	490,975	$	2.20

Employee Stock Purchase Plan

In September 2018, the Company’s board of directors and its stockholders approved the 2018 Employee Stock Purchase Plan, or the ESPP, which became effective as of September 25, 2018. The ESPP is intended to qualify as an “employee stock purchase plan” within the meaning of Section 423 of the U.S. Internal Revenue Code of 1986, as amended. The number of shares of common stock initially reserved for issuance under the ESPP was 140,000 shares. The ESPP provides for an annual increase on the first day of each year beginning in 2019 and ending in 2028, in each case subject to the approval of the board of directors, equal to the lesser of (i) 1% of the shares of common stock outstanding on the last day of the prior fiscal year or (ii) 250,000 shares; provided, that prior to the date of any such increase, the board of directors may determine that such increase will be less than the amount set forth in clauses (i) and (ii). Pursuant to the terms of the 2018 Employee Stock Purchase Plan, an additional 250,000 shares were added to the number of available shares effective January 1, 2022 and 2021. As of December 31, 2021, no shares of common stock had been issued under the ESPP and 654,163 shares remained available for future issuance under the ESPP. No offering period under the ESPP has been set by the Company’s board of directors.

Stock-Based Compensation

Stock-based compensation expense was classified in the consolidated statement of operations as follows (in thousands):


	Year Ended
	December 31,
	2021		2020
Research and development	$	1,932	$	1,397
General and administrative		2,091		1,554
Total stock-based compensation expense	$	4,023	$	2,951

The following table summarizes stock-based compensation expense by type of award (in thousands):


	Year Ended
	December 31,
	2021		2020
Stock options	$	2,714	$	2,898
Restricted stock units		1,309		53
Total stock-based compensation expense	$	4,023	$	2,951

The following table summarizes unrecognized stock-based compensation expense as of December 31, 2021, by type of awards, and the weighted-average period over which that expense is expected to be recognized. The total unrecognized stock-based compensation expense will be adjusted for actual forfeitures as they occur.


	As of December 31, 2021
	Unrecognized Expense		Weighted-average Remaining Recognition Period
	(in thousands)		(in years)
Stock options	$	1,945		1.69
Restricted stock units	$	679		0.72

The following weighted average assumptions were used to calculate the fair value of each stock option award under the Black-Scholes option pricing model:


	Year Ended
	December 31,
	2021		2020
Expected stock price volatility	80.7	%	82.0	%
Risk-free interest rate	0.9	%	0.5	%
Expected annual dividend yield	—		—
Expected life of options	6.1	years	6.3	years

Income Taxes

12 Months Ended

Dec. 31, 2021

Income Taxes

Income Taxes

11. Income Taxes

During the years ended December 31, 2021 and 2020, the Company recorded no income tax benefits for the net operating losses incurred due to its uncertainty of realizing a benefit from those items. The Company’s losses before income taxes were generated in the United States and the United Kingdom.

Net loss before the provision for income taxes for the years ended December 31, 2021 and 2020, consisted of the following (in thousands):


	Year Ended
	December 31,
	2021		2020
United Kingdom	$	28,411	$	38,280
United States		18,730		12,216
	$	47,141	$	50,496

A reconciliation of the federal statutory income tax rate to the Company’s effective income tax rate is as follows:


	Year Ended
	December 31,
	2021		2020
Income tax benefit computed at U.S. statutory tax rate	21.0	%	21.0	%
State taxes, net of federal benefit	6.4		6.6
Foreign rate differential	(1.2)		(1.5)
Disregarded entity	12.7		15.9
Research and development tax credits	1.4		1.4
Permanent difference	(1.2)		(0.6)
Valuation allowances	(58.9)		(45.7)
Rate change	20.0		3.6
Other	(0.2)		(0.7)
Effective income tax rate	(0.0)	%	(0.0)	%

Net deferred tax assets consisted of the following (in thousands):


	As of December 31,
	2021		2020
Deferred tax assets:
Net operating loss carryforwards	$	84,786	$	57,265
Tax credit carryforwards		5,261		4,345
Accrued expenses and other		2,275		3,099
Total deferred tax assets		92,322		64,709
Deferred tax liabilities:
Right-of-use asset		(165)		(312)
Total deferred tax liabilities		(165)		(312)
Valuation allowance		(92,157)		(64,397)
Net deferred tax assets	$	—	$	—

Net operating losses generated in years ending after December 31, 2018 will be carried forward indefinitely and can no longer be carried back, and net operating losses generated in years beginning after December 31, 2017, can only reduce taxable income by 80% when utilized in a future period. As of December 31, 2021, the Company had federal and state net operating loss carryforwards, or NOLs, of $166.3 million and $167.4 million, respectively, which begin to expire in 2035. Included in the $166.3 million of federal net operating losses are losses of $153.6 million that will carry forward indefinitely as a result of the Tax Cuts and Jobs Act. As of December 31, 2021, the Company had federal and state research and development tax credits carryforwards of $4.1 million and $1.4 million, respectively, which begin to expire in 2035 and 2026, respectively.

Utilization of the NOLs and research and development tax credit carryforwards may be subject to a substantial annual limitation under Section 382 of the Internal Revenue Code of 1986 due to ownership changes that have occurred previously or that could occur in the future. These ownership changes may limit the amount of carryforwards that can be utilized annually to offset future taxable income. In general, an ownership change, as defined by Section 382, results from transactions increasing the ownership of certain stockholders or public groups in the stock of a corporation by more than 50% over a three-year period. During 2020, Innoviva purchased over 50% of the Company’s common stock. This ownership change may result in a limitation of the Company’s NOLs. The Company has not conducted a study to assess whether there have been multiple changes of control since inception due to the significant complexity and cost associated with such a study. Ownership changes may limit the amount of NOLs and tax credit carryforwards that could be utilized annually to offset future taxable income. The amount of the annual limitation is determined based on the Company’s value immediately prior to the ownership change. Subsequent significant changes in ownership could affect

the limitations in future years. Any limitation may result in expiration of a portion of the net operating loss carryforwards or tax credit carryforwards before utilization.

As of December 31, 2021, the Company had NOLs in the United Kingdom of $157.2 million to offset future taxable income. The NOLs in the United Kingdom can be carried forward indefinitely.

The Company has evaluated the positive and negative evidence bearing upon its ability to realize the deferred tax assets. Management has considered the Company’s history of cumulative net losses incurred since inception and its lack of commercialization of any products or generation of any revenue from product sales since inception and has concluded that it is more likely than not that the Company will not realize the benefits of the federal, state and foreign deferred tax assets. Accordingly, a full valuation allowance of $92.2 million has been established against the deferred tax assets as of December 31, 2021. Management reevaluates the positive and negative evidence at each reporting period.

Changes in the valuation allowance for deferred tax assets during the years ended December 31, 2021 and 2020 related primarily to the increases in NOLs and research and development tax credit carryforwards and were as follows (in thousands):


		Year Ended
		December 31,
	2021		2020
Valuation allowance at beginning of year	$	(64,397)	$	(41,253)
Increases recorded to income tax provision		(27,760)		(23,144)
Valuation allowance at end of year	$	(92,157)	$	(64,397)

The Company has not recorded an amount for unrecognized tax benefits or related interest and penalties accrued as of December 31, 2021. The Company files income tax returns in the United States, Massachusetts and the United Kingdom. The federal and state returns are generally subject to tax examinations for the tax years ended December 31, 2015 to the present. The statute of limitations for assessment by the United Kingdom is open for the tax years since 2015. There are currently no pending tax examinations. To the extent the Company has tax attribute carryforwards, the tax years in which the attribute was generated may still be adjusted upon examination by the Internal Revenue Service and state tax authorities to the extent utilized in a future or prior period. The Company’s policy is to record interest and penalties related to income taxes as part of its income tax provision.

- Definition

The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.

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+ Details

Summary of Significant Accounting Policies (Policies)

12 Months Ended

Dec. 31, 2021

Summary of Significant Accounting Policies

Basis of Presentation and Consolidation

Use of Estimates

Fair Value Measurements

Level 1 Inputs— Quoted prices in active markets for identical instruments;

Level 3 Inputs—Instruments with primarily unobservable value drivers.

Cash and Cash Equivalents

Concentrations of Credit Risk and of Significant Suppliers

Deferred Financing Costs

Should a planned equity financing be abandoned, the deferred offering costs would be expensed immediately as a charge to operating expenses in the consolidated statement of operations.

Property and Equipment


		Estimated Useful Life
Laboratory equipment		3 ‑ 5 years
Computer software		3 years
Computer equipment		3 years
Furniture and fixtures		5 years

Impairment of Long-Lived Assets

Segment Information

Revenue Recognition

Licenses of intellectual property

Customer options

Milestone payments

Government Contracts and Grant Agreements

Research and Development Costs

expense as the goods or services are delivered or the related services are performed, or until it is no longer expected that the goods will be delivered or the services rendered.

Patent Costs

The Company expenses patent costs as incurred and records such costs within general and administrative expenses.

Stock-Based Compensation

Income Taxes

Basic and Diluted Net Loss Per Share

Recently Adopted Accounting Pronouncements

Recently Issued Accounting Pronouncements

Fair Value of Financial Instruments (Tables)

12 Months Ended

Dec. 31, 2021

Fair Value of Financial Instruments

Schedule of assets that were accounted for at fair value on recurring basis


	December 31, 2021
	Fair Value Measurement Using
	Level 1		Level 2		Level 3		Total

	(in thousands)
Cash equivalents:
Money market funds	$	28,137	$	—	$	—	$	28,137
Total	$	28,137	$	—	$	—	$	28,137



	December 31, 2020
	Fair Value Measurement Using
	Level 1		Level 2		Level 3		Total

	(in thousands)
Cash equivalents:
Money market funds	$	49,125	$	—	$	—	$	49,125
Total	$	49,125	$	—	$	—	$	49,125

Stock-Based Compensation Expense (Tables)

12 Months Ended

Dec. 31, 2021

Stock-Based Compensation Expense

Summary of Stock option activity under the 2015 and 2018 Plan


				Weighted-
		Weighted-		Average
		Average		Remaining	Aggregate
	Number of	Exercise		Contractual	Intrinsic
	Options	Price		Term (Years)	Value (in thousands)
Outstanding as of December 31, 2020	3,112,704	$	5.58	7.76	$	44
Granted	1,492,776		2.45
Forfeited and expired	(1,710,100)		6.86
Outstanding as of December 31, 2021	2,895,380	$	3.21	8.33	$	30
Exercisable as of December 31, 2021	978,915	$	3.84	6.57	$	7

Summary of Restricted Stock Unit activity


		Weighted-
		Average
	Number of	Grant Date
	Units	Fair Value
Outstanding as of December 31, 2020	395,100	$	1.65
Granted	597,500		2.57
Released	(427,975)		2.24
Forfeited	(73,650)		1.99
Outstanding as of December 31, 2021	490,975	$	2.20

Schedule of stock-based compensation expense

Stock-based compensation expense was classified in the consolidated statement of operations as follows (in thousands):


	Year Ended
	December 31,
	2021		2020
Research and development	$	1,932	$	1,397
General and administrative		2,091		1,554
Total stock-based compensation expense	$	4,023	$	2,951

The following table summarizes stock-based compensation expense by type of award (in thousands):