Condensed Consolidated Balance Sheets (Parenthetical) (Unaudited) - USD ($) $ in Thousands |
Jun. 30, 2020 |
Dec. 31, 2019 |
|---|---|---|
| Common stock, par value | $ 0.001 | $ 0.001 |
| Common stock, shares authorized | 200,000,000 | 200,000,000 |
| Common stock, shares issued | 11,198,315 | 2,108,266 |
| Common stock, shares outstanding | 11,198,315 | 2,108,266 |
| Series A Convertible Preferred Stock | ||
| Convertible preferred stock, par value | $ 0.001 | $ 0.001 |
| Convertible preferred stock, shares authorized | 10,000,000 | 10,000,000 |
| Convertible preferred stock, shares issued | 0 | 3,177,744 |
| Convertible preferred stock, shares outstanding | 0 | 3,177,744 |
| Convertible preferred stock, aggregate liquidation preference | $ 10,820,773 |
Condensed Consolidated Statements of Operations (Unaudited) - USD ($) shares in Thousands, $ in Thousands |
3 Months Ended | 6 Months Ended | ||
|---|---|---|---|---|
Jun. 30, 2020 |
Jun. 30, 2019 |
Jun. 30, 2020 |
Jun. 30, 2019 |
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| Operating expenses: | ||||
| Research and development | $ 1,937 | $ 310 | $ 3,291 | $ 1,173 |
| General and administrative | 760 | 319 | 1,433 | 643 |
| In process research and development assets acquired | 32,057 | 32,057 | ||
| Total operating expenses | 34,754 | 629 | 36,781 | 1,816 |
| Loss from operations | (34,754) | (629) | (36,781) | (1,816) |
| Other income (expenses) | (7) | (1) | (30) | 1 |
| Net loss | $ (34,761) | $ (630) | $ (36,811) | $ (1,815) |
| Net loss per share - basic and diluted | $ (9,520) | $ (300) | $ (12,770) | $ (860) |
| Weighted average shares outstanding, basic and diluted | 3,650,422 | 2,108,266 | 2,882,819 | 2,108,266 |
Condensed Consolidated Statements of Convertible Preferred Stock and Stockholders' Equity (Deficit) (Parenthetical) (Unaudited) - USD ($) $ in Thousands |
3 Months Ended | |
|---|---|---|
Jun. 30, 2020 |
Mar. 31, 2019 |
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| Issuance costs | $ 43 | |
| Series A Convertible Preferred Stock | ||
| Stock issuance cost | $ 44 | |
Organization and Description of Business |
6 Months Ended |
|---|---|
Jun. 30, 2020 | |
| Organization Consolidation And Presentation Of Financial Statements [Abstract] | |
| Organization and Description of Business |
1. Organization and Description of Business
Forte Biosciences, Inc. (www.fortebiorx.com), together with its subsidiary referred to herein as the “Company”, is a clinical-stage biopharmaceutical company focused on advancing its clinical program and developing a live biotherapeutic for the treatment of inflammatory skin diseases, particularly for pediatric atopic dermatitis patients for which there is currently a significant unmet need for safe and effective therapies. The Company entered into a business combination (“Merger”) between Forte Subsidiary, Inc. (“Forte Subsidiary”) a private entity, and Tocagen, Inc. (“Tocagen”), a publicly traded biotechnology company. The Merger closed on June 15, 2020, in which Telluride Merger Sub, Inc., a wholly-owned subsidiary of Tocagen, merged with and into Forte Subsidiary, with Forte Subsidiary surviving the Merger as a wholly-owned subsidiary of Tocagen. Immediately prior to the closing of the Merger, the shares of Tocagen common stock were adjusted with a reverse split ratio of ‑for‑15. At the closing of the Merger, each share of Forte Subsidiary common stock outstanding immediately prior to the Merger was converted into the right to receive approximately 3.1624 shares of Tocagen common stock (before giving effect to the reverse split). All share and per share amounts have been retrospectively adjusted to give effect to the exchange of Forte Subsidiary common stock and the reverse split of Tocagen common stock. The par value per share of our capital stock was not adjusted as a result of the stock split. Immediately prior to the closing of the Merger, Tocagen changed its name to Forte Biosciences, Inc. The Company’s common stock is traded on the Nasdaq stock exchange under the ticker symbol “FBRX.” Immediately following the Merger, the former Forte Subsidiary and Tocagen security holders owned approximately 84.7% and 15.3% of the number of shares of the Company’s common stock, respectively.
Prior to the Merger, Forte Subsidiary was incorporated as Forte Biosciences, Inc. under the laws of the State of Delaware on May 3, 2017 as a privately-held company. Forte Biosciences, Inc. was renamed Forte Subsidiary, Inc. in connection with the Merger.
The Merger was accounted for as a reverse asset acquisition. Forte Subsidiary is deemed to be the accounting acquirer for accounting purposes and Tocagen the accounting acquiree (Note 4). Accordingly, for accounting purposes: (i) the merger was treated as the equivalent of Forte Subsidiary issuing stock to acquire the net assets of Tocagen, (ii) the transaction price will be allocated over the acquired Tocagen net assets based upon their relative fair value at the time of closing, (iii) the reported historical operating results of the combined company prior to the merger will be those of Forte Subsidiary and not of Tocagen, and (iv) for periods prior to the transaction, shareholders’ authorized capital of the combined company is presented based on the historical authorized capital of Tocagen.
Liquidity and Risks
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. The financial statements do not reflect any adjustments relating to the recoverability and reclassification of assets and liabilities that might be necessary if the Company is unable to continue as a going concern. Since inception, the Company has incurred losses and negative cash flows from operations. As of June 30, 2020, the Company had an accumulated deficit of $41.8 million, which includes a charge of $32.1 million of acquired in-process research and development assets in connection with the Merger. The Company used $6.9 million of cash in operating activities for the six months ended June 30, 2020.
Management expects to continue to incur additional substantial losses in the foreseeable future as a result of the Company’s research and development activities. However, the Company believes that its cash of approximately $27.7 million as of June 30, 2020 will be sufficient to allow the Company to fund its operations for at least 12 months from the filing date of this Form 10-Q. Future operations will be reliant on additional equity or financing arrangements. There can be no assurances that, in the event that the Company requires additional financing, such financing will be available on terms which are favorable to the Company, or at all. If the Company is unable to raise additional funding to meet its working capital needs in the future, it will be forced to delay or reduce the scope of its research programs and/or limit or cease its operations. Because of the numerous risks and uncertainties associated with pharmaceutical development, the Company is unable to predict the timing or amount of increased expenses or when or if it will start to generate revenues. Even if the Company is able to generate revenues, it may not be able to achieve or maintain profitability. If the Company fails to become profitable or is unable to sustain profitability on a continuing basis, then it may be unable to continue its operations at planned levels and be forced to reduce its operations.
The pandemic caused by an outbreak of a new strain of coronavirus, or COVID-19, has resulted, and is likely to continue to result, in significant national and global economic disruption and may adversely affect the Company’s operations. The Company is actively monitoring the impact of COVID-19 and the possible effects on its financial condition, liquidity, operations, suppliers, industry, and workforce. However, the full extent, consequences, and duration of the COVID-19 pandemic and the resulting impact on the Company cannot currently be predicted. The Company will continue to evaluate the impact that these events could have on the operations, financial position, and the results of operations and cash flows during fiscal year 2020. |
Summary of Significant Accounting Policies |
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| Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Summary of Significant Accounting Policies |
2. Summary of Significant Accounting Policies Basis of Presentation The accompanying unaudited condensed consolidated financial statements of the Company should be read in conjunction with Forte Subsidiary’s audited financial statements and accompanying notes thereto as of and for the year ended December 31, 2019 included in Tocagen’s Registration Statement on Form S-4 (Registration No. 333-237371) as filed with the U.S. Securities and Exchange Commission (the “SEC”) on March 25, 2020, as amended and declared effective by the SEC on May 13, 2020. The accompanying unaudited condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim condensed consolidated financial statements. Any reference in the Notes to applicable guidance is meant to refer to authoritative U.S. GAAP as found in the Accounting Standards Codification (“ASC”) and Accounting Standards Update (“ASU”) of the Financial Accounting Standards Board (“FASB”). The Merger (Note 1) was accounted for as a reverse asset acquisition. Forte Subsidiary is deemed to be the acquirer for accounting purposes(Note 4) and Tocagen is the accounting acquiree. Accordingly, for accounting purposes: (i) the merger will be treated as the equivalent of Forte Subsidiary issuing stock to acquire the net assets of Tocagen, (ii) the transaction price will be allocated over the acquired Tocagen net assets based upon their relative fair value at the time of closing, (iii) the reported historical operating results of the combined company prior to the merger will be those of Forte Subsidiary and not of Tocagen, and (iv) for periods prior to the transaction, shareholders’ authorized capital of the combined company is presented based on the historical authorized capital of Tocagen. In the opinion of management, the accompanying condensed consolidated financial statements include all adjustments that are of a normal and recurring nature and that are necessary for the fair presentation of the Company’s financial position, the results of its operations and cash flows for the periods presented. Interim results are not necessarily indicative of results for the full year or any future period. Principles of Consolidation The condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, Forte Subsidiary, Inc. All intercompany accounts and transactions have been eliminated in the preparation of the condensed consolidated financial statements. Use of Estimates The preparation of the Company’s financial statements requires management to make estimates and assumptions that impact the reported amounts of assets, liabilities, and expenses and the disclosure of contingent assets and liabilities in the Company’s financial statements and accompanying notes. Significant management estimates that affect the reported amounts of assets and liabilities include useful lives of property and equipment, stock-based compensation, accruals for clinical trials and deferred tax assets. Although these estimates are based on the Company’s knowledge of current events and actions it may undertake in the future, actual results may ultimately materially differ from these estimates and assumptions.
Acquired In-Process Research and Development Expense The Company acquired in-process research and development assets in connection with its Merger with Tocagen. As the acquired in-process research and development assets were deemed to have no current or alternative future use, an expense of $32.1 million was recognized in the condensed consolidated statements of operations for the three-month period ended June 30, 2020. Impairment of Long-Lived Assets The Company reviews long-lived assets for impairment when events or changes in circumstances indicate the carrying value of the assets may not be recoverable. Recoverability is measured by comparing the book values of the assets to future net undiscounted cash flows that the assets or the asset groups 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 value of the assets exceed their fair value, which is measured based on the estimated discounted future net cash flows arising from the assets or asset groups. No impairment losses on long-lived assets have been recorded through June 30, 2020.
Comprehensive Loss Comprehensive loss includes net loss and other comprehensive income (loss) for the period. The Company did not have other comprehensive income (loss) items such as unrealized gains and losses. For the three and six months ended June 30, 2020 and 2019, the comprehensive loss was equal to the net loss.
Net Loss Per Share Basic net loss per share is computed by dividing net loss applicable to common stockholders by the weighted average number of common shares outstanding during the period, without consideration for common stock equivalents. Diluted net loss per share is computed by dividing net loss by the weighted-average number of shares of common stock and common stock equivalents outstanding during the period. The following number of unexercised stock options, convertible preferred stock and warrants, which are common stock equivalents, have been excluded from the diluted net loss calculation as their effect would have been anti-dilutive for all periods presented:
Recently Adopted Accounting Standards In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses, which changes the accounting for recognizing impairments of financial assets. Under the new guidance, credit losses for certain types of financial instruments will be estimated based on expected losses. The new guidance also modifies the impairment models for available-for-sale debt securities and for purchased financial assets with credit deterioration since their origination. The Company adopted this ASU as of January 1, 2020, which did not have a material impact on its financial position or results of operations. In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (“ASC 820”). The new guidance removes, modifies and adds to certain disclosure requirements on fair value measurements in ASC 820. The Company adopted this ASU as of January 1, 2020, which did not have a material impact on its financial position or results of operations. Recently Issued Accounting Standards From time to time, new accounting pronouncements are issued by the FASB or other standard setting bodies and adopted by us as of a specified effective date. Unless otherwise discussed, the Company believes that the impact of recently issued standards that are not yet effective will not have a material impact on the Company’s financial position or results of operations. In December 2019, the FASB issued ASU 2019-12, Income Taxes (“ASC 740”), which simplifies the accounting for income taxes by eliminating certain exceptions to the guidance in ASC 740 related to the approach for intra-period tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. The new guidance also simplifies aspects of the accounting for franchise taxes and enacted changes in tax laws or rates and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill. The guidance is effective for calendar-year public business entities in 2021 and interim periods within that year. Early adoption is permitted. The Company does not expect adoption of this new guidance will have a material impact on its financial position or results of operations. |
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Balance Sheet Components |
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| Balance Sheet Related Disclosures [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance Sheet Components |
3. Balance Sheet Components Prepaid Expenses and Other Current Assets Prepaid expenses and other current assets as of June 30, 2020 and December 31, 2019 consist of the following (in thousands):
Accrued Liabilities Accrued liabilities, as of June 30, 2020 and December 31, 2019 consist of the following (in thousands):
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Merger |
6 Months Ended | ||||||||||||||||||||||||||||||
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Jun. 30, 2020 | |||||||||||||||||||||||||||||||
| Business Combinations [Abstract] | |||||||||||||||||||||||||||||||
| Merger |
4. Merger On June 15, 2020, the Company completed the Merger (see Note 1). The Merger was accounted for as a reverse asset acquisition as Tocagen did not meet the definition of a business pursuant to Topic 805, Business Combinations, as Tocagen did not have the ability to create output, and substantially all of its fair value was concentrated in cash and in-process research and development (“IPR&D”) assets. Forte Subsidiary is deemed to be the acquirer for accounting purposes because immediately following the merger: (i) Forte Subsidiary stockholders owned a substantial majority of the voting rights of the combined company; (ii) Forte Subsidiary designated a majority of the initial members of the board of directors of the combined company; and (iii) Forte Subsidiary’s senior management held all key positions of the combined company and no employees were retained from Tocagen. Accordingly, for accounting purposes: (i) the merger has been treated as the equivalent of Forte Subsidiary issuing stock to acquire the net assets of Tocagen, (ii) the transaction price has been allocated over the acquired Tocagen net assets based upon their relative fair value at the time of closing, (iii) the reported historical operating results of the combined company prior to the merger are those of Forte Subsidiary, and (iv) for periods prior to the transaction, shareholders’ authorized capital of the combined company is presented based on the historical authorized capital of Tocagen. The following summarizes the estimated fair value of the assets and liabilities acquired at June 15, 2020, the date of the Merger (in thousands):
The estimated fair value of total consideration given was $33.0 million based on 1,594,670 shares of Tocagen common stock, 61,406 vested restricted stock awards and in-the-money options to purchase 26,975 shares of common stock of Tocagen outstanding immediately prior to the merger date, multiplied by the Tocagen closing stock price of $18.90 on the date of the merger, and transaction costs of approximately $1.2 million. The fair value of the IPR&D assets is expensed as a charge in the condensed consolidated statements of operations for the three and six months ended June 30, 2020 as there is no alternative use to these assets. |
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Commitments and Contingencies |
6 Months Ended |
|---|---|
Jun. 30, 2020 | |
| Commitments And Contingencies Disclosure [Abstract] | |
| Commitments and Contingencies |
5. Commitments and Contingencies Concentrations of Credit Risk Bank accounts in the United States are insured by the Federal Deposit Insurance Corporation (FDIC) up to $250,000. The Company’s primary operating cash accounts significantly exceed FDIC limits. Indemnifications As permitted under Delaware law, the Company indemnifies its officers, directors, and employees for certain events and occurrences while the officer, or director is, or was, serving at the Company’s request in such capacity. License to Patented Technology In December 2017, the Company entered into an exclusive license agreement with the Department of Health and Human Services (“DHHS”). Under the agreement, the DHHS granted the Company an exclusive, sublicensable, worldwide license to certain patent rights under which the Company may develop and commercialize pharmaceutical and biological compositions comprising Gram-negative bacteria for the topical treatment of dermatological diseases and conditions (the “DHHS License”). Under the DHHS License, the Company is obligated to meet certain development benchmarks within certain time periods. If the Company is unable to meet any of these development benchmarks, the DHHS could terminate the license. In addition, the DHHS may terminate or modify the DHHS License in the event of a material breach or upon certain insolvency events that remain uncured following the date that is 90 days following written notice of such material breach or insolvency event. The DHHS also has the right to require the Company to grant mandatory sublicenses to patent rights licensed from the DHHS to product candidates covered by other DHHS licenses under certain specified circumstances, including if it is necessary to meet health and safety needs that the Company is not reasonably satisfying or if necessary to meet requirements for public use specified by federal regulations, which the Company is not reasonably satisfying. Under the DHHS License, the Company is obligated to pay the DHHS a minimum annual payment of $20,000 and is required to reimburse the DHHS for certain patent-related expenses. In addition, the Company may also be obligated to make milestone payments to the DHHS aggregating up to $105.5 million based on achieving specified development, regulatory and commercial milestones for the first licensed product. Such development milestone payments are the completion of patient enrollment in a phase 3 clinical trial and the completion of a phase 3 clinical trial demonstrating statistically significant efficacy benefit. The regulatory milestones are the receipt of the first FDA approval and the first non-USA regulatory agency approval. The commercial milestones are the first $100.0 million of annual net sales, the first $500.0 million of annual net sales, and the first $1,000.0 million of annual net sales. In addition, to the extent licensed products are approved for commercial sale, the Company is also obligated to pay the DHHS royalties within the range of 10% to 15% based on net sales of licensed products sold by the Company and if applicable, its sublicensees. In May 2020, the Company and DHHS entered into a second amendment to the DHHS License agreement, where the Company agreed to pay a minimum annual royalty of $100,000 beginning January 1, 2021. The second amendment reduced total milestone payments to the DHHS from $105.5 million to $40.5 million, based on achieving specified development and regulatory milestones for the first licensed product. In addition, DHHS royalties were reduced to a new range of 5% to 10% based on net sales of licensed products sold by the Company and if applicable, its sublicensees. No milestones have been achieved as of June 30, 2020. No milestones have been achieved as of June 30, 2020. The Company incurred $15,000 and $5,000 in minimum royalty expenses for the three months ended June 30, 2020 and 2019, respectively. The Company incurred $20,000 and $10,000 in minimum royalty expenses for the six months ended June 30, 2020 and 2019, respectively. Lease Agreement In April 2019, the Company entered into a lease agreement for certain office and laboratory space in Torrance, California. The lease agreement is cancellable by the Company at any time with 30-day notice. The Company recorded total rent expenses of $8,000 and $4,000 for the three months ended June 30, 2020 and 2019, and $14,000 and $4,000 for the six months ended June 30, 2020 and 2019, respectively. |
Equity |
6 Months Ended |
|---|---|
Jun. 30, 2020 | |
| Equity [Abstract] | |
| Equity |
6. Equity Series A Convertible Preferred Stock On November 27, 2018, the Company entered into a preferred stock purchase agreement with certain investors and issued 1,738,758 shares of Series A convertible preferred stock for net proceeds of $5.7 million, including $0.7 million from conversion of convertible notes and accrued interest. In addition, on January 2, 2019, the Company completed a second round of the Series A preferred stock financing and issued 1,438,985 shares at $3.41 per share for net proceeds of $4.9 million. All outstanding Series A convertible preferred stocks were converted into common stock at a one for one ratio in connection with closing of the Merger on June 15, 2020. Common Stock In connection with the Merger, the Company issued 3,804,817 shares of its common stock, and warrants to purchase 2,752,546 shares of the Company’s common stock at an exercise price of $10.56 per share, for net proceeds of $19.4 million. In addition, on June 16, 2020, the Company issued an additional 411,112 shares of common stock for net proceeds of $4.6 million. Warrants to purchase 4,434 shares of the Company’s common stock at an exercise price of $140.25 per share which were previously issued by Tocagen, survived the Merger and remained outstanding as of June 30, 2020.
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Stock-Based Compensation |
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| Disclosure Of Compensation Related Costs Sharebased Payments [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock-Based Compensation |
7. Stock-Based Compensation Equity Plans In December 2018, Forte Subsidiary adopted the 2018 Equity Incentive Plan (the “2018 Incentive Plan”). The terms and conditions of stock-based awards are defined at the sole discretion of the Forte Subsidiary’s Board of Directors. Forte Subsidairy issues service-based awards, vesting over a defined period of service, and performance-based awards that vest upon the achievement of defined conditions. Service-based awards generally vest over a period, with the first 25% of such awards vesting following twelve months of continued employment or service and the remaining awards vesting monthly in equal installments over the following thirty-six months. Stock options granted under the 2018 Incentive Plan expire ten years from the date of grant and the exercise price must be at least equal to the fair market value of common stock on the grant date. In connection with the Merger, all outstanding options under the 2018 Plan was exchanged into options to purchase common stock of Tocagen, which changed its name to Forte Biosciences Inc. after the Merger. Subsequent to the Merger, the 2018 Incentive Plan were frozen and no more stock-based awards will be granted. In connection with the Merger, the Company assumed Tocagen’s 2017 Equity Incentive Plan, which was effective on April 12, 2017 and was subsequently amended September 30, 2018 and further amended February 12, 2019 (the “2017 Plan”). The 2017 Plan provides for the grant of incentive stock options (ISOs), nonstatutory stock options, stock appreciation rights, restricted stock awards, restricted stock unit awards, performance-based stock awards, other forms of equity compensation and performance cash awards. ISOs may be granted only to employees. All other awards may be granted to employees, including officers, and to non-employee directors and consultants of the Company and its affiliates. Subsequent to the Merger, service-based awards generally vest over a period, with the first 25% of such awards vesting following twelve months of continued employment or service and the remaining awards vesting monthly in equal installments over the following thirty-six months. For certain service-based awards to the board of directors, vesting occurs in thirty-six equal monthly installments over a period. Immediately upon closing of the Merger, 61,406 restricted stock awards and stock options to purchase 26,968 shares of common stock granted under the 2017 Plan prior to the Merger became fully vested in consideration for pre-merger services provided to Tocagen. On July 26, 2020, the Company adopted the 2020 Inducement Equity Incentive Plan (the “2020 Inducement Plan”) and reserved 500,000 shares for future grant under the 2020 Inducement Plan. Options The risk-free interest rate assumption for options is based on the U.S. Treasury yield curve rate at the date of grant with a maturity approximating the expected term of the option. The expected term assumption for options granted to employees is determined using the simplified method that represents the average of the contractual term of the option and the weighted average vesting period of the option. The Company uses the simplified method because it does not have sufficient historical option exercise data to provide a reasonable basis upon which to estimate expected term. Due to the Company’s limited trading of its common stock and lack of company-specific historical or implied volatility data, the Company has based its estimate of expected volatility on the historical volatility of a group of similar companies in the life sciences industry whose shares are publicly traded. The Company selects the peer group based on comparable characteristics, including development stage, product pipeline, and enterprise value. The Company computes historical volatility data using the daily closing prices for the selected companies’ shares during the equivalent period of the calculated expected term of the stock-based awards. The Company will continue to apply this process until sufficient amount of historical information regarding the volatility of its own stock price become available. The historical volatility is generally calculated based on a period of time commensurate with the expected term assumption. The assumed dividend yield is based upon the Company’s expectation of not paying dividends in the foreseeable future. The fair value per share is determined by the Company’s Board of Directors, as of the date of each grant based on independent third-party valuations, taking into consideration various objective and subjective factors. The weighted average grant-date fair value of stock options granted to employees and non-employees in the three and six months ended June 30, 2020 was $10.08 and $8.17, respectively. The weighted-average assumptions used to value these stock options using the Black-Scholes option-pricing were as follows.
There were no stock options granted during the six months ended June 30, 2019. Stock-Based Compensation Expense Stock-based compensation expenses included in the Company’s condensed consolidated statements of operations for the three and six months ended June 30, 2020 and 2019 were (in thousands):
As of June 30, 2020, there was unrecognized stock-based compensation expense related to stock options with service conditions of $2.7 million, which is expected to be recognized over a weighted-average period of 3.37 years. Total unrecognized stock-based compensation related to stock options with performance conditions was approximately $232,000, which is expected to be recognized if and when performance conditions become probable. The table below summarizes the stock option activity during the six months ended June 30, 2020:
The aggregate intrinsic value of options at June 30, 2020 is based on the Company’s fair value of the stock price on that date of $14.58 per share. |
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Related Party Transactions |
6 Months Ended |
|---|---|
Jun. 30, 2020 | |
| Related Party Transactions [Abstract] | |
| Related party transactions |
8. Related party transactions Two members of the Company’s board of directors received $2,000 and $24,000 of cash payments during the three and six months ended June 30, 2020 for scientific consulting services provided to the Company, respectively. As of June 30, 2020, the Company had $1,000 in accounts payable to one of these directors. |
Summary of Significant Accounting Policies (Policies) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Basis of Presentation |
Basis of Presentation The accompanying unaudited condensed consolidated financial statements of the Company should be read in conjunction with Forte Subsidiary’s audited financial statements and accompanying notes thereto as of and for the year ended December 31, 2019 included in Tocagen’s Registration Statement on Form S-4 (Registration No. 333-237371) as filed with the U.S. Securities and Exchange Commission (the “SEC”) on March 25, 2020, as amended and declared effective by the SEC on May 13, 2020. The accompanying unaudited condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim condensed consolidated financial statements. Any reference in the Notes to applicable guidance is meant to refer to authoritative U.S. GAAP as found in the Accounting Standards Codification (“ASC”) and Accounting Standards Update (“ASU”) of the Financial Accounting Standards Board (“FASB”). The Merger (Note 1) was accounted for as a reverse asset acquisition. Forte Subsidiary is deemed to be the acquirer for accounting purposes(Note 4) and Tocagen is the accounting acquiree. Accordingly, for accounting purposes: (i) the merger will be treated as the equivalent of Forte Subsidiary issuing stock to acquire the net assets of Tocagen, (ii) the transaction price will be allocated over the acquired Tocagen net assets based upon their relative fair value at the time of closing, (iii) the reported historical operating results of the combined company prior to the merger will be those of Forte Subsidiary and not of Tocagen, and (iv) for periods prior to the transaction, shareholders’ authorized capital of the combined company is presented based on the historical authorized capital of Tocagen. In the opinion of management, the accompanying condensed consolidated financial statements include all adjustments that are of a normal and recurring nature and that are necessary for the fair presentation of the Company’s financial position, the results of its operations and cash flows for the periods presented. Interim results are not necessarily indicative of results for the full year or any future period. |
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| Principles of Consolidation |
Principles of Consolidation The condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, Forte Subsidiary, Inc. All intercompany accounts and transactions have been eliminated in the preparation of the condensed consolidated financial statements. |
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| Use of Estimates |
Use of Estimates The preparation of the Company’s financial statements requires management to make estimates and assumptions that impact the reported amounts of assets, liabilities, and expenses and the disclosure of contingent assets and liabilities in the Company’s financial statements and accompanying notes. Significant management estimates that affect the reported amounts of assets and liabilities include useful lives of property and equipment, stock-based compensation, accruals for clinical trials and deferred tax assets. Although these estimates are based on the Company’s knowledge of current events and actions it may undertake in the future, actual results may ultimately materially differ from these estimates and assumptions. |
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| Acquired In-Process Research and Development Expense |
Acquired In-Process Research and Development Expense The Company acquired in-process research and development assets in connection with its Merger with Tocagen. As the acquired in-process research and development assets were deemed to have no current or alternative future use, an expense of $32.1 million was recognized in the condensed consolidated statements of operations for the three-month period ended June 30, 2020. |
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| Impairment of Long-Lived Assets |
Impairment of Long-Lived Assets The Company reviews long-lived assets for impairment when events or changes in circumstances indicate the carrying value of the assets may not be recoverable. Recoverability is measured by comparing the book values of the assets to future net undiscounted cash flows that the assets or the asset groups 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 value of the assets exceed their fair value, which is measured based on the estimated discounted future net cash flows arising from the assets or asset groups. No impairment losses on long-lived assets have been recorded through June 30, 2020. |
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| Comprehensive Loss |
Comprehensive Loss Comprehensive loss includes net loss and other comprehensive income (loss) for the period. The Company did not have other comprehensive income (loss) items such as unrealized gains and losses. For the three and six months ended June 30, 2020 and 2019, the comprehensive loss was equal to the net loss. |
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| Net Loss Per Share |
Net Loss Per Share Basic net loss per share is computed by dividing net loss applicable to common stockholders by the weighted average number of common shares outstanding during the period, without consideration for common stock equivalents. Diluted net loss per share is computed by dividing net loss by the weighted-average number of shares of common stock and common stock equivalents outstanding during the period. The following number of unexercised stock options, convertible preferred stock and warrants, which are common stock equivalents, have been excluded from the diluted net loss calculation as their effect would have been anti-dilutive for all periods presented:
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| Recently Adopted Accounting Standards |
Recently Adopted Accounting Standards In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses, which changes the accounting for recognizing impairments of financial assets. Under the new guidance, credit losses for certain types of financial instruments will be estimated based on expected losses. The new guidance also modifies the impairment models for available-for-sale debt securities and for purchased financial assets with credit deterioration since their origination. The Company adopted this ASU as of January 1, 2020, which did not have a material impact on its financial position or results of operations. In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (“ASC 820”). The new guidance removes, modifies and adds to certain disclosure requirements on fair value measurements in ASC 820. The Company adopted this ASU as of January 1, 2020, which did not have a material impact on its financial position or results of operations. |
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| Recently Issued Accounting Pronouncements |
Recently Issued Accounting Standards From time to time, new accounting pronouncements are issued by the FASB or other standard setting bodies and adopted by us as of a specified effective date. Unless otherwise discussed, the Company believes that the impact of recently issued standards that are not yet effective will not have a material impact on the Company’s financial position or results of operations. In December 2019, the FASB issued ASU 2019-12, Income Taxes (“ASC 740”), which simplifies the accounting for income taxes by eliminating certain exceptions to the guidance in ASC 740 related to the approach for intra-period tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. The new guidance also simplifies aspects of the accounting for franchise taxes and enacted changes in tax laws or rates and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill. The guidance is effective for calendar-year public business entities in 2021 and interim periods within that year. Early adoption is permitted. The Company does not expect adoption of this new guidance will have a material impact on its financial position or results of operations. |
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Summary of Significant Accounting Policies (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Common Stock Equivalents Excluded from Diluted Net Loss Calculation | The following number of unexercised stock options, convertible preferred stock and warrants, which are common stock equivalents, have been excluded from the diluted net loss calculation as their effect would have been anti-dilutive for all periods presented:
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Balance Sheet Components (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance Sheet Related Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Prepaid Expenses and Other Current Assets |
Prepaid expenses and other current assets as of June 30, 2020 and December 31, 2019 consist of the following (in thousands):
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| Components of Accrued Liabilities |
Accrued liabilities, as of June 30, 2020 and December 31, 2019 consist of the following (in thousands):
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Merger (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2020 | |||||||||||||||||||||||||||||||
| Business Combinations [Abstract] | |||||||||||||||||||||||||||||||
| Summary of Estimated Fair Value of Assets and Liabilities Acquired |
The following summarizes the estimated fair value of the assets and liabilities acquired at June 15, 2020, the date of the Merger (in thousands):
|
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Stock-Based Compensation (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Disclosure Of Compensation Related Costs Sharebased Payments [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Summary of Weighted-Average Assumptions Used to Value Stock Options | The weighted-average assumptions used to value these stock options using the Black-Scholes option-pricing were as follows.
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| Summary of Stock-Based Compensation Expenses |
Stock-based compensation expenses included in the Company’s condensed consolidated statements of operations for the three and six months ended June 30, 2020 and 2019 were (in thousands):
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| Summary of Stock Option Activity | The table below summarizes the stock option activity during the six months ended June 30, 2020:
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Organization and Description of Business - Additional Information (Details) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
|---|---|---|---|---|
|
Jun. 30, 2020
USD ($)
shares
|
Jun. 30, 2020
USD ($)
shares
|
Jun. 30, 2019
USD ($)
|
Dec. 31, 2019
USD ($)
|
|
| Organization Consolidation And Presentation Of Financial Statements [Line Items] | ||||
| Accumulated deficit | $ 41,781 | $ 41,781 | $ 4,970 | |
| Acquired in-process research and development assets | 32,057 | 32,057 | ||
| Cash used in operating activities | (6,881) | $ (1,565) | ||
| Cash | $ 27,749 | $ 27,749 | $ 6,939 | |
| Tocagen, Inc. | ||||
| Organization Consolidation And Presentation Of Financial Statements [Line Items] | ||||
| Right to receive shares for each common stock outstanding | shares | 3.1624 | 3.1624 | ||
| Reverse stock split, description | 1‑for‑15 | |||
| Reverse split ratio | 0.06667 | |||
| Common stock ownership percentage | 15.30% | 15.30% | ||
| Forte Subsidiary, Inc. | ||||
| Organization Consolidation And Presentation Of Financial Statements [Line Items] | ||||
| Common stock ownership percentage | 84.70% | 84.70% | ||
Summary of Significant Accounting Policies - Schedule of Common Stock Equivalents Excluded from Diluted Net Loss Calculation (Details) - shares |
3 Months Ended | 6 Months Ended | ||
|---|---|---|---|---|
Jun. 30, 2020 |
Jun. 30, 2019 |
Jun. 30, 2020 |
Jun. 30, 2019 |
|
| Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items] | ||||
| Anti-dilutive securities excluded from diluted net loss calculation | 3,578,890 | 3,694,265 | 3,578,890 | 3,694,265 |
| Options | ||||
| Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items] | ||||
| Anti-dilutive securities excluded from diluted net loss calculation | 821,910 | 516,521 | 821,910 | 516,521 |
| Convertible Preferred Stock | ||||
| Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items] | ||||
| Anti-dilutive securities excluded from diluted net loss calculation | 3,177,744 | 3,177,744 | ||
| Warrants | ||||
| Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items] | ||||
| Anti-dilutive securities excluded from diluted net loss calculation | 2,756,980 | 2,756,980 | ||
Balance Sheet Components - Schedule of Prepaid Expenses and Other Current Assets (Details) - USD ($) $ in Thousands |
Jun. 30, 2020 |
Dec. 31, 2019 |
|---|---|---|
| Balance Sheet Related Disclosures [Abstract] | ||
| Prepaid manufacturing expenses | $ 74 | $ 514 |
| Deposits for manufacturing components | 161 | |
| Other | 160 | 53 |
| Total Prepaid Expenses and Other Current Assets | $ 395 | $ 567 |
Balance Sheet Components - Components of Accrued Liabilities (Details) - USD ($) $ in Thousands |
Jun. 30, 2020 |
Dec. 31, 2019 |
|---|---|---|
| Balance Sheet Related Disclosures [Abstract] | ||
| Accrued legal and professional fees | $ 32 | $ 168 |
| Accrued manufacturing and clinical expenses | 527 | |
| Accrued compensation | 174 | 175 |
| Other | 133 | |
| Total Accrued Liabilities | $ 866 | $ 343 |
Merger - Summary of Estimated Fair Value of Assets and Liabilities Acquired (Details) - Tocagen, Inc. $ in Thousands |
Jun. 15, 2020
USD ($)
|
|---|---|
| Business Acquisition [Line Items] | |
| Cash | $ 2,997 |
| Restricted cash | 586 |
| Prepaid and other assets | 1,257 |
| In-process research and development | 32,057 |
| Accounts payable and accrued expenses assumed | (3,916) |
| Purchase price | $ 32,981 |
Merger - Additional Information (Details) - USD ($) $ / shares in Units, $ in Thousands |
Jun. 15, 2020 |
Jun. 30, 2020 |
Dec. 31, 2019 |
|---|---|---|---|
| Business Acquisition [Line Items] | |||
| Common stock, shares outstanding | 11,198,315 | 2,108,266 | |
| Vested restricted stock awards outstanding | 821,910 | ||
| Tocagen, Inc. | |||
| Business Acquisition [Line Items] | |||
| Estimated fair value of total consideration | $ 32,981 | ||
| Common stock, shares outstanding | 1,594,670 | ||
| Options to purchase shares of common stock outstanding | 26,975 | ||
| Closing stock price | $ 18.90 | ||
| Merger transaction costs | $ 1,200 | ||
| Tocagen, Inc. | Restricted Stock Awards | |||
| Business Acquisition [Line Items] | |||
| Vested restricted stock awards outstanding | 61,406 |
Equity - Additional Information (Details) - USD ($) $ / shares in Units, $ in Thousands |
3 Months Ended | 6 Months Ended | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 16, 2020 |
Jun. 15, 2020 |
Jan. 02, 2019 |
Nov. 27, 2018 |
Jun. 30, 2020 |
Jun. 30, 2020 |
Jun. 30, 2019 |
Mar. 31, 2020 |
Dec. 31, 2019 |
Mar. 31, 2019 |
Dec. 31, 2018 |
|
| Class Of Stock [Line Items] | |||||||||||
| Net proceeds from issuance of convertible preferred stock | $ 4,856 | ||||||||||
| Net proceeds from issuance of common stock | $ 24,016 | ||||||||||
| Common Stock | |||||||||||
| Class Of Stock [Line Items] | |||||||||||
| Sale of common stock, net of issuance costs, shares | 411,112 | 3,804,817 | 4,215,929 | ||||||||
| Net proceeds from issuance of common stock | $ 4,600 | $ 19,400 | |||||||||
| Warrants to purchase common stock | 2,752,546 | 4,434 | 4,434 | ||||||||
| Common stock exercise price | $ 10.56 | $ 140.25 | $ 140.25 | ||||||||
| Convertible Preferred Stock | |||||||||||
| Class Of Stock [Line Items] | |||||||||||
| Stock issued | 1,438,985 | 1,738,758 | 0 | 0 | 3,177,744 | 3,177,744 | 3,177,744 | 3,177,744 | 1,738,759 | ||
| Net proceeds from issuance of convertible preferred stock | $ 4,900 | $ 5,700 | |||||||||
| Conversion of convertible notes and accrued interest | $ 700 | ||||||||||
| Preferred stock per share | $ 3.41 | ||||||||||
| Convertible preferred stock description | All outstanding Series A convertible preferred stocks were converted into common stock at a one for one ratio in connection with closing of the Merger on June 15, 2020 | ||||||||||
Stock-Based Compensation - Summary of Weighted-Average Assumptions Used to Value Stock Options (Details) - $ / shares |
3 Months Ended | 6 Months Ended |
|---|---|---|
Jun. 30, 2020 |
Jun. 30, 2020 |
|
| Disclosure Of Compensation Related Costs Sharebased Payments [Abstract] | ||
| Fair value of common stock | $ 16.53 | $ 13.39 |
| Risk-free interest rate | 0.40% | 0.59% |
| Dividend yield | 0.00% | 0.00% |
| Expected term of options (years) | 5 years 11 months 8 days | 5 years 11 months 19 days |
| Volatility | 70.00% | 70.00% |
Stock-Based Compensation - Summary of Stock-Based Compensation Expenses (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
|---|---|---|---|---|
Jun. 30, 2020 |
Jun. 30, 2019 |
Jun. 30, 2020 |
Jun. 30, 2019 |
|
| Share Based Compensation Arrangement By Share Based Payment Award [Line Items] | ||||
| Stock-based compensation expense | $ 24 | $ 1 | $ 26 | $ 3 |
| Research and Development | ||||
| Share Based Compensation Arrangement By Share Based Payment Award [Line Items] | ||||
| Stock-based compensation expense | 4 | $ 1 | 6 | $ 3 |
| General and Administrative | ||||
| Share Based Compensation Arrangement By Share Based Payment Award [Line Items] | ||||
| Stock-based compensation expense | $ 20 | $ 20 | ||
Stock-Based Compensation - Summary of Stock Option Activity (Details) - USD ($) $ / shares in Units, $ in Thousands |
6 Months Ended | 12 Months Ended | |
|---|---|---|---|
Jun. 30, 2020 |
Jun. 30, 2019 |
Dec. 31, 2019 |
|
| Number of Shares Outstanding | |||
| Outstanding, Beginning | 516,521 | ||
| Granted | 335,015 | 0 | |
| Assumed from reverse merger | 26,968 | ||
| Exercised | (56,594) | ||
| Outstanding, Ending | 821,910 | 516,521 | |
| Vested and expected to vest | 821,910 | ||
| Exercisable | 38,889 | ||
| Weighted-Average Exercise Price | |||
| Outstanding, Beginning | $ 0.85 | ||
| Granted | 13.39 | ||
| Assumed from reverse merger | 9.59 | ||
| Exercised | 1.46 | ||
| Outstanding, Ending | 6.21 | $ 0.85 | |
| Vested and expected to vest | 6.21 | ||
| Exercisable | $ 5.98 | ||
| Weighted-Average Remaining Contractual Term (Years) | |||
| Outstanding | 8 years 9 months 29 days | 9 years | |
| Vested and expected to vest | 8 years 9 months 29 days | ||
| Exercisable | 3 years 9 months 18 days | ||
| Aggregate Intrinsic Value | |||
| Outstanding | $ 7,340 | ||
| Vested and expected to vest | 7,340 | ||
| Exercisable | $ 334 | ||
Related Party Transactions - Additional Information (Details) $ in Thousands |
3 Months Ended | 6 Months Ended |
|---|---|---|
|
Jun. 30, 2020
USD ($)
|
Jun. 30, 2020
USD ($)
|
|
| Director | ||
| Related Party Transaction [Line Items] | ||
| Payments for scientific consulting services | $ 2,000 | $ 24,000 |
| Director One | ||
| Related Party Transaction [Line Items] | ||
| Accounts payable | $ 1,000 | $ 1,000 |