Document and Entity Information - USD ($) $ in Millions |
12 Months Ended | ||
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Dec. 31, 2021 |
Mar. 10, 2022 |
Jun. 30, 2021 |
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Cover [Abstract] | |||
Document Type | 10-K | ||
Amendment Flag | false | ||
Document Period End Date | Dec. 31, 2021 | ||
Document Fiscal Year Focus | 2021 | ||
Document Fiscal Period Focus | FY | ||
Entity Interactive Data Current | Yes | ||
Trading Symbol | FBRX | ||
Entity Current Reporting Status | Yes | ||
Entity Registrant Name | FORTE BIOSCIENCES, INC. | ||
Entity Central Index Key | 0001419041 | ||
Current Fiscal Year End Date | --12-31 | ||
Entity Filer Category | Non-accelerated Filer | ||
Entity Well-known Seasoned Issuer | No | ||
Entity Voluntary Filers | No | ||
Entity Shell Company | false | ||
ICFR Auditor Attestation Flag | false | ||
Entity Small Business | true | ||
Entity Emerging Growth Company | true | ||
Entity Ex Transition Period | true | ||
Title of 12(b) Security | Common Stock | ||
Security Exchange Name | NASDAQ | ||
Entity File Number | 001-38052 | ||
Entity Incorporation, State or Country Code | DE | ||
Entity Tax Identification Number | 26-1243872 | ||
Entity Address, Address Line One | 3060 Pegasus Park Drive, Building 6 | ||
Entity Address, City or Town | Dallas | ||
Entity Address, State or Province | TX | ||
Entity Address, Postal Zip Code | 75247 | ||
City Area Code | 310 | ||
Local Phone Number | 618-6994 | ||
Document Annual Report | true | ||
Document Transition Report | false | ||
Entity Public Float | $ 395.7 | ||
Entity Common Stock, Shares Outstanding | 14,761,261 | ||
Auditor Name | Mayer Hoffman McCann P.C. | ||
Auditor Firm ID | 199 | ||
Auditor Location | San Diego, California | ||
Documents Incorporated by Reference |
Portions of the registrant’s definitive proxy statement to be filed with the Securities and Exchange Commission, or SEC, subsequent to the date hereof pursuant to Regulation 14A in connection with the registrant’s 2022 Annual Meeting of Stockholders, are incorporated by reference into Part III of this Annual Report on Form 10-K. Such proxy statement will be filed with the SEC not later than 120 days after the conclusion of the registrant’s fiscal year ended December 31, 2021. |
Consolidated Balance Sheets - USD ($) $ in Thousands |
Dec. 31, 2021 |
Dec. 31, 2020 |
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Current assets: | ||
Cash and cash equivalents | $ 42,044 | $ 58,765 |
Prepaid expenses and other current assets | 476 | 1,133 |
Total current assets | 42,520 | 59,898 |
Property and equipment, net | 97 | |
Other assets | 786 | 1,244 |
Total assets | 43,306 | 61,239 |
Current liabilities: | ||
Accounts payable | 946 | 1,240 |
Accrued liabilities | 812 | 1,019 |
Total current liabilities | 1,758 | 2,259 |
Commitments and contingencies (Note 5) | ||
Stockholders’ equity | ||
Common stock, $0.001 par value: 200,000,000 shares authorized; 14,754,447 and 12,830,598 shares issued and outstanding as of December 31, 2021 and 2020, respectively | 15 | 13 |
Additional paid-in capital | 114,698 | 110,424 |
Accumulated deficit | (73,165) | (51,457) |
Total stockholders’ equity | 41,548 | 58,980 |
Total liabilities, convertible preferred stock and stockholders’ equity | $ 43,306 | $ 61,239 |
Consolidated Balance Sheets (Parenthetical) - $ / shares |
Dec. 31, 2021 |
Dec. 31, 2020 |
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Common stock, par value | $ 0.001 | $ 0.001 |
Common stock, shares authorized | 200,000,000 | 200,000,000 |
Common stock, shares issued | 14,754,447 | 12,830,598 |
Common stock, shares outstanding | 14,754,447 | 12,830,598 |
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 | 0 |
Convertible preferred stock, shares outstanding | 0 | 0 |
Consolidated Statements of Operations - USD ($) $ in Thousands |
12 Months Ended | |
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Dec. 31, 2021 |
Dec. 31, 2020 |
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Operating expenses: | ||
Research and development | $ 13,853 | $ 10,004 |
General and administrative | 7,633 | 4,221 |
In-process research and development assets acquired | 32,057 | |
Total operating expenses | 21,486 | 46,282 |
Loss from operations | (21,486) | (46,282) |
Other expenses, net | 222 | 205 |
Net loss | $ (21,708) | $ (46,487) |
Net loss per share - basic and diluted | $ (1.55) | $ (6.32) |
Weighted average shares outstanding, basic and diluted | 13,967,818 | 7,358,931 |
Consolidated Statements of Convertible Preferred Stock and Stockholders' Equity (Parenthetical) $ in Thousands |
12 Months Ended |
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Dec. 31, 2020
USD ($)
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Statement Of Stockholders Equity [Abstract] | |
Issuance costs | $ 3,361 |
Organization and Description of Business |
12 Months Ended |
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Dec. 31, 2021 | |
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 subsidiaries, referred to herein as the “Company”, is a biopharmaceutical company that had been focused on developing a topical live biotherapeutic for the treatment of inflammatory skin diseases with an initial focus on atopic dermatitis (“AD”). On September 2, 2021, the Company announced that the clinical trial of FB-401 for the treatment of AD failed to achieve statistical significance in its primary endpoint. Following the announcement of the FB-401 trial results, our board of directors commenced a process of evaluating strategic alternatives to maximize stockholder value including the in-licensing or acquisition of assets, a merger, asset sales, a collaboration or other arrangements. 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 1‑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: (i) The Merger was treated as the equivalent of Forte Subsidiary issuing stock to acquire the net assets of Tocagen, (ii) The transaction price was 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 not of Tocagen, and (iv) For periods prior to the transaction, shareholders’ authorized capital of the combined company is presented using the historical authorized capital of Tocagen.
On February 12, 2021, the Company incorporated Forte Biosciences Emerald Limited in Dublin, Ireland, for the purpose of potentially undertaking clinical trials in the European Union. Liquidity and Risks The accompanying consolidated 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 consolidated 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 December 31, 2021, the Company had an accumulated deficit of $73.2 million. The Company used $16.7 million of cash in operating activities during the year ended December 31, 2021. Management expects to continue to incur additional losses in the foreseeable future as the Company explores its available strategic alternatives to maximize shareholder value following the announcement on September 2, 2021 of the unfavorable clinical trial results of FB-401. The Company had cash and cash equivalents of approximately $42.0 million as of December 31, 2021. The Company’s cash and cash equivalents are held at financial institutions and exceed federally insured limits. The Company believes that its existing cash and cash equivalents will be sufficient to allow the Company to fund its operations for at least 12 months from the filing date of this Form 10-K. The Company will continue to need to raise additional capital or obtain financing from other sources. Management may fund future operations through the sale of equity and debt financings and may also seek additional capital through arrangements with strategic partners or other sources. There can be no assurance that additional funding will be available on terms acceptable to the Company, if at all. If the Company is unable to raise additional funding to meet its working capital needs in the future, it may be forced to delay or reduce the scope of its research and development programs and/or limit or cease its operations. There are numerous risks and uncertainties associated with pharmaceutical development and the Company is unable to predict the timing or amount of increased expenses on the development of future product candidates or when or if it will start to generate revenues. Even if the Company does 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 may be forced to reduce its operations. The pandemic caused by outbreaks of new strains of coronaviruses, or COVID-19 and its variants, has resulted, and may 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 its operations, financial position, results of operations and cash flows during 2022.
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Summary of Significant Accounting Policies |
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Dec. 31, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Significant Accounting Policies |
2. Summary of Significant Accounting Policies Basis of Presentation The Company prepares its consolidated financial statements in accordance with accounting principles generally accepted in the United States of America (“GAAP”), as found in the Accounting Standards Codification (“ASC”), the Accounting Standards Update (“ASU”), of the Financial Accounting Standards Board (“FASB”), and the rules and regulations of the US Securities and Exchange Commission (“SEC”). The Merger was accounted for as a reverse asset acquisition, as more fully described in Notes 1 and 4. Forte Subsidiary is deemed to be the acquirer for accounting purposes and Tocagen is the accounting acquiree. Principles of Consolidation The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Forte Subsidiary, Inc. and Forte Biosciences Emerald Limited. All intercompany accounts and transactions have been eliminated in the preparation of the consolidated financial statements. Use of Estimates The preparation of the Company’s consolidated financial statements requires management to make estimates and assumptions that impact the reported amounts of assets, liabilities, expenses and the disclosure of contingent assets and liabilities in the Company’s consolidated financial statements and accompanying notes. Significant management estimates that affect the reported amounts of assets, liabilities and expenses include useful lives of property and equipment, stock-based compensation expense, accruals for clinical trials and drug manufacturing, 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. Segment Information The Company operates as a single operating segment. The Company’s chief operating decision maker, its President and Chief Executive Officer, manages the Company’s operations on a consolidated basis for the purposes of allocating resources, making operating decisions and evaluating financial performance. Cash and cash equivalents Cash and cash equivalents include money market funds and deposits with commercial banks. Cash equivalents are defined as short-term, highly liquid investments with original maturities of 90 days or less at the date of purchase. Fair Value of Financial Instruments Fair value is defined as 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. There is a three-level hierarchy that prioritizes the inputs used in determining fair value by their reliability and preferred use as follows:
To the extent that a valuation is based on models or inputs that are less observable, or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised by the Company in determining fair value is greatest for instruments categorized within Level 3. A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. There have been no significant changes to the valuation methods utilized by the Company during the periods presented. There have been no transfers between Level 1, Level 2, and Level 3 in any periods presented. The carrying amounts of financial instruments consisting of cash and cash equivalents, prepaid expenses and other current assets, accounts payable, accrued liabilities included in the Company’s financial statements are reasonable estimates of fair value, primarily due to their short maturities. The Company had $29.9 million and $34.9 million as of December 31, 2021 and 2020, respectively, and which are classified within Level 1. Money market funds are valued at the closing price reported by the fund sponsor from an actively traded exchange. Money market funds were included as cash and cash equivalents in the consolidated balance sheets at December 31, 2021 and 2020. Property and Equipment Property and equipment are recorded at cost and depreciated over their estimated useful life using the straight-line method. Depreciation or amortization begin at the time the asset is placed in service. Maintenance and repairs that do not improve or extend the lives of the respective assets are expensed to operations as incurred. Upon disposal, retirement, or sale of an asset, the related cost and accumulated depreciation is removed from the accounts and any resulting gain or loss is included in the results of operations. Estimated useful life for property and equipment is as follows:
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 consolidated statements of operations for year ended December 31, 2020. Research and Development Costs Research and development costs are expensed as incurred. Research and development costs consist primarily of salaries and benefits of research and development personnel, costs related to research activities, preclinical studies, clinical trials and drug manufacturing. Non-refundable advance payments for goods or services that will be used in future research and development activities are deferred and capitalized and are only expensed when the goods have been received or when the service has been performed rather than when the payment is made. Drug manufacturing and clinical trial costs are a component of research and development expenses. The Company expenses costs for its drug manufacturing activities performed by Contract Manufacturing Organizations (“CMOs”), preclinical and clinical trial costs performed by Contract Research Organizations (“CROs”) and other service providers, as they are incurred, based upon estimates of the work completed over the life of the individual study in accordance with associated agreements. The Company uses information it receives from internal personnel and outside service providers to estimate the percentage of completion and therefore the expense to be incurred. Patent Costs Costs to secure, defend and maintain patents are expensed as incurred, and are classified as general and administrative expenses due to the uncertainty of future benefits. 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 in accordance with the treasury stock method. The following number of unexercised stock options, restricted stock units 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 the periods presented:
Stock-Based Compensation The Company issues stock-based awards to employees, directors and non-employees, generally in the form of stock options, restricted stock units or rights granted to employees under the Employee Stock Purchase Plan (“ESPP”). The Company accounts for stock-based compensation awards in accordance with ASC Topic 718, Compensation—Stock Compensation. The Company measures compensation cost for all equity awards for employees, directors and non-employees at their grant-date fair value and recognizes compensation expense for service-based awards on a straight-line basis over the requisite service period, which is generally the vesting period. The grant-date fair value of stock options is estimated using the Black-Scholes option pricing model. The grant-date fair value of restricted stock units is determined using the Company’s closing stock price on the date of grant. Forfeitures are recognized as they occur. Stock-based compensation expense for an award with a performance condition is recognized when the achievement of the performance condition has been determined to be probable. If the outcome of such performance condition has not been determined to be probable, or has not been met, no compensation expense is recognized and any previously recognized compensation expense is reversed. For rights granted under the ESPP, the fair value of each purchase is estimated at the beginning of the offering period using the Black-Scholes option pricing model. The Company classifies stock-based compensation expense in its statement of operations in the same manner in which the award recipient’s salary and related costs are classified in the case of employees, or in which the award recipient’s service payments are classified in the case of director and non-employees. Series A Convertible Preferred Stock The Company records all convertible preferred stock at their respective transaction prices on the dates of issuance, less issuance costs. Series A convertible preferred stock, prior to its conversion into common stock (Note 6), was classified as temporary equity and excluded from stockholders’ equity as the potential redemption, in the event of a deemed liquidation event, was not solely within the Company’s control. Foreign Currency Transactions The Company is subject to foreign currency risk with respect to contracts denominated in currencies other than the U.S. dollar. Payments for contracts denominated in foreign currencies are made at the spot rate on the day of payment. Changes in the exchange rate between billing dates and payment dates are recorded to other expenses, net in the consolidated statements of operations. Income Taxes The Company uses an asset and liability approach to account for income taxes. The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities. These differences are measured using the enacted statutory tax rates that are expected to be in effect for the years in which differences are expected to reverse. Valuation allowances are provided when the expected realization of deferred tax assets does not meet a “more likely than not” criterion. The Company makes estimates and judgments about its future taxable income that are based on assumptions that are consistent with its plans and estimates. Should the actual amounts differ from those estimates, the amount of the valuation allowance could be materially impacted. Changes in these estimates may result in significant increases or decreases to the Company’s tax provision in a period in which such estimates are changed, which in turn would affect net income or loss. The Company recognizes tax benefits from uncertain tax positions if it believes the position is more likely than not to be sustained on examination by the taxing authorities based on the technical merits of the position. The Company makes adjustments to these reserves when facts and circumstances change, such as the closing of a tax audit or the refinement of an estimate. The provision for income taxes includes the effects of any reserves for tax positions that are not more likely than not to be sustained, as well as the related net interest and penalties. Impairment of Property and Equipment The Company reviews its property and equipment 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 impaired, the impairment to be recognized is measured by the amount 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. Impairment losses on property and equipment of $61,000 have been recorded for the year ended December 31, 2021. No impairment losses on property and equipment have been recorded for the year ended December 31, 2020. Comprehensive Loss Comprehensive loss includes net loss and other comprehensive loss for the periods presented. The Company did not have other comprehensive loss items such as unrealized gains and losses and so for the years ended December 31, 2021 and 2020, comprehensive loss was equal to the net loss. Recently Adopted Accounting Standards 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 Company adopted this ASU as of January 1, 2021. The adoption did not have a material impact on its financial position or results of operations. Recently Issued Accounting Standards Not Yet Adopted From time to time, new accounting pronouncements are issued by the FASB or other standard setting bodies and are adopted by the Company 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 August 2020, the FASB issued ASU 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in an Entity’s Own Equity (Subtopic 815-40) (“ASU 2020-06”). ASU 2020-06 eliminates the beneficial conversion and cash conversion accounting models for convertible instruments. It also amends the accounting for certain contracts in an entity’s own equity that are currently accounted for as derivatives because of specific settlement provisions. In addition, ASU 2020-06 modifies how particular convertible instruments and certain contracts that may be settled in cash or shares impact the diluted earnings per share computation. The amendments in ASU 2020-06 are effective for smaller reporting companies as defined by the SEC for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption is permitted, but not earlier than fiscal years beginning after December 15, 2020. The Company is currently evaluating the impact of ASU 2020-06 on its consolidated financial statements and does not expect the adoption of this amended guidance to have a material impact on the Company’s consolidated financial statements. |
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 December 31, 2021 and 2020 consist of the following (in thousands):
Other Assets Other assets as of December 31, 2021 and 2020 consist of the following (in thousands).
Accrued Liabilities Accrued liabilities as of December 31, 2021 and 2020 consist of the following (in thousands):
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Merger |
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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 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 and so did not meet the definition of a business pursuant to Topic 805, Business Combinations. Forte Subsidiary was deemed to be the acquirer for accounting purposes as 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: (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 net assets of Tocagen 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 26,968 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 consolidated statements of operations for the year ended December 31, 2020 as there was no alternative use to these assets. |
Commitments and Contingencies |
12 Months Ended |
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Dec. 31, 2021 | |
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 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, employee 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 a 90 day 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 or to meet requirements for public use as specified by federal regulations that the Company is not reasonably satisfying. Under the DHHS License, as amended in May 2020, the Company was obligated to pay the DHHS a minimum annual payment of $20,000 for 2020, which increased to $100,000 beginning January 1, 2021. The Company is required to reimburse the DHHS for certain patent-related expenses and may also be obligated to make payments to the DHHS based upon achieving specified development and regulatory 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 a statistically significant efficacy benefit. The regulatory milestones are the receipt of the first FDA approval and the first non-USA regulatory agency approval. In addition, to the extent licensed products are approved for commercial sale, the Company is also obligated to pay the DHHS royalties based on net sales of licensed products sold by the Company and if applicable, by its sublicensees. No milestones have been met as of December 31, 2021. On February 1, 2022, the Company notified the DHHS of its intent to terminate the license agreement with an effective termination date of April 2, 2022. The Company incurred $100,000 and $30,000 in minimum royalty expenses for the years ended December 31, 2021 and 2020, respectively. Lease Agreement In April 2019, the Company entered into a lease agreement for certain office and laboratory space in Torrance, California. The lease in Torrance was terminated in December 2021 and replaced with a new lease for office and laboratory space in Dallas, Texas in December 2021. The lease in Dallas is cancellable by the Company at any time with a 30-day notice. In June 2021, the Company entered into a lease agreement for additional office space at a separate location for an initial lease of 6 months after which the lease term will be month-to-month. Total rent expense for all locations for the year ended December 31, 2021 was $5,000, which included a credit of $9,000 from a refund for operating expenses from a previous Tocagen facility. Total rent expense was $52,000 for the year ended December 31, 2020. Clinical Supply Agreements The Company has entered into various agreements with CMOs for the manufacture of clinical trial materials and CROs for clinical trial services. These agreements provide the terms and conditions under which the CMOs and CROs will formulate, fill, inspect, package, label and test the Company’s drug product candidate, FB-401. The Company has scaled back its clinical and manufacturing operations in order to conserve cash as a result of the FB-401 clinical trial not meeting its primary endpoint. Remaining commitments to CMOs and CROs have been included in accounts payable on the balance sheet as of December 31, 2021.
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Equity |
12 Months Ended |
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Dec. 31, 2021 | |
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 1,738,759 shares of Series A convertible preferred stock for net proceeds of $5.7 million, including $0.7 million from the conversion of convertible notes and accrued interest. In addition, on January 2, 2019, the Company completed a second round of 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 shares of Series A convertible preferred stock were converted into shares of common stock on a one for one ratio in connection with the 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 (“Concurrent Financing Warrants”) 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 December 31, 2021 and 2020. These warrants have an expiration date of October 30, 2025. On September 4, 2020, the Company entered into an “at-the-market” equity offering program (“ATM Facility”), as amended on October 28, 2020, whereby the Company may from time to time offer and sell shares of its common stock during the term of the ATM Facility. The Company had not issued any shares of common stock under the ATM Facility which expired in May 2021. The Company expensed $0.3 million in offering costs related to this ATM Facility in the second quarter of 2021. The Company subsequently filed a new "shelf" registration statement on Form S-3 that went effective in June 2021 which will allow the Company to raise up to $300 million in additional capital. The Company incurred $106,000 in offering costs related to this shelf registration statement which is recorded in Other Assets in the consolidated balance sheet as of December 31, 2021. The Company has not issued any securities under the new shelf registration statement as of the filing date of this Form 10-K. On November 2, 2020, the Company completed a public offering of 1,614,035 shares of its common stock at $28.50 per share, which includes the over-allotment option exercised by the underwriters to purchase an additional 210,526 shares. Total net proceeds were $42.7 million after deducting underwriting discounts and other offering expenses of approximately $3.3 million. In February 2021, Concurrent Financing Warrants to purchase 978,858 shares of common stock were exercised on a cashless basis resulting in 673,463 shares being issued. In June 2021, Concurrent Financing Warrants to purchase 760,572 shares of common stock were exercised on a cashless basis resulting in 560,402 shares being issued. In September 2021, Concurrent Financing Warrants to purchase 1,013,116 shares of common stock were exercised on a cashless basis resulting in 655,409 shares being issued. As of December 31, 2021, no Concurrent Financing Warrants were outstanding. |
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 were defined at the sole discretion of Forte Subsidiary’s Board of Directors. Service-based awards, vesting over a defined period of service, and performance-based awards that vest upon the achievement of defined conditions have been issued under the 2018 Incentive Plan. Service-based awards to employees generally vest over a period, with the first 25% of such awards vesting following twelve months of continued employment or service with the remainder of the 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 Incentive Plan were 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 was frozen and no more stock-based awards were granted from that plan.In connection with the Merger, the Company assumed Tocagen’s 2017 Equity Incentive Plan, which became effective on April 12, 2017 and was subsequently amended on September 30, 2018 and further amended on February 12, 2019 (the “2017 Plan”). 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. As of December 31, 2021, there were 319,897 shares available for issuance under the 2020 Inducement Plan. In May 2021, the 2017 Plan was terminated and replaced by the 2021 Equity Incentive Plan (the “2021 Plan”). The 2017 Plan will continue to govern outstanding awards issued under the 2017 Plan. The 2021 Plan had an initial reserve of 1,000,000 shares available for grant. The 2021 Plan provides for the grant of incentive stock options (“ISOs”), non-statutory 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. Service-based awards generally vested over a . period, with the first 25% of such awards vesting following twelve months of continued employment or service with 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 for initial grants and in twelve equal monthly installments over a period for subsequent grants. As of December 31, 2021, there were 715,277 options available for issuance under the 2021 Plan Stock Options The risk-free interest rate assumption for stock 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 assumed dividend yield is based upon the Company’s expectation of not paying dividends in the foreseeable future. Prior to the Merger, the fair value per share was 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. Subsequent to the Merger, the fair value per share is the closing stock price on the option grant date. The weighted average grant-date fair value of stock options granted to employees and non-employees for the years ended December 31, 2021 and 2020 was $21.89 and $11.94, respectively. The weighted-average assumptions used to value these stock options using the Black-Scholes option-pricing model were as follows.
The table below summarizes the stock option activity during the year ended December 31, 2021:
The aggregate intrinsic value of stock options as of December 31, 2021 is based on the Company’s closing stock price of $2.14 per share.
Restricted Stock Unit Awards
The restricted stock units granted during the year ended December 31, 2021 have performance-based vesting. The Company concluded that as of December 31, 2021, it was probable the performance criteria would be met and $252,000 in expense was recorded in the Consolidated Statement of Operations for the year ended December 31, 2021. Restricted stock unit award transactions during the year ended December 31, 2021 were as follows:
2017 Employee Stock Purchase Plan In May 2021, the Company’s board of directors reactivated the Company’s 2017 Employee Stock Purchase Plan (“ESPP”) which had previously been suspended. The ESPP allows eligible employees to withhold up to 15% of their earnings to purchase shares of the Company’s common stock at a price per share equal to the lower of (i) 85% of the fair market value of a share of the Company’s common stock on the first date of an offering or (ii) 85% of the fair market value of a share of the Company’s common stock on the date of purchase. The Company had 176,694 shares available for future issuance under the ESPP as of December 31, 2021. The number of shares of common stock reserved for issuance will automatically increase on January 1 of each calendar year through January 1, 2027, by the lesser of (a) 1% of the total number of shares of the Company’s common stock outstanding on December 31 of the preceding calendar year, (b) 300,000 shares, or (c) a number determined by the Company’s board of directors that is less than (a) and (b). No shares had been issued under the ESPP as of December 31, 2021 as the first six month offering period since the reactivation ends on January 2, 2022. The ESPP is considered a compensatory plan and the Company recorded stock-based compensation expense of $25,000 for the year ended December 31, 2021. No stock-based compensation expense related to the ESPP was recorded in 2020.
The fair value of the rights granted to employees under the ESPP was estimated using a Black-Scholes option-pricing model with the following weighted-average valuation assumptions:
Stock-Based Compensation Expense Stock-based compensation expenses included in the Company’s consolidated statements of operations for the years ended December 31, 2021 and 2020 are as follows (in thousands):
As of December 31, 2021, there was unrecognized stock-based compensation expense of $9.4 million related to stock options with service conditions, which is expected to be recognized over a weighted-average period of 2.77 years. Total unrecognized stock-based compensation as of December 31, 2021 was approximately $851,000 related to stock options and restricted stock units with performance based vesting. |
Income Taxes |
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Income Tax Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Taxes |
8. Income Taxes
For the years ended December 31, 2021 and 2020, the Company did not record a current or deferred income tax expense or benefit due to a valuation allowance position. The benefit for income taxes differs from the amount of income tax determined by applying the applicable U.S. statutory federal income tax rate to pretax income as a result of the following differences (in thousands):
The primary components of temporary differences which give rise to the Company’s net deferred tax assets and liabilities as of December 31, 2021 and 2020 are as follows:
The Company has evaluated the positive and negative evidence bearing upon the realizability of its deferred tax assets. Based upon the Company’s history of operating losses, the Company has concluded that it is more likely than not that the benefit of its deferred tax assets will not be realized. Accordingly, the Company has provided a full valuation allowance for deferred tax assets as of December 31, 2021 and 2020. During 2021 and 2020, the valuation allowance increased by $3.8 million and increased by $4.4 million, respectively.
The Company has federal and California net operating loss carryforwards which may be available to offset future income tax liabilities. As of December 31, 2021, the Company has federal net operating losses of $24.6 million that begin to expire in 2028 unless utilized. The Company has state net operating carryforwards of $11.6 million that begin to expire in 2027 unless previously utilized.
As of December 31, 2021, the Company has federal and California research and development tax credit carryforwards of approximately $200 thousand and $190 thousand, respectively. The federal research and development tax credits begin to expire in 2028 unless previously utilized. The California credits do not expire.
The Company is subject to taxation in the U.S. and California. As of December 31, 2021, Tocagen’s tax years beginning 2007 to date are subject to examination by federal and California taxing authorities due to the carry forward of unutilized net operating losses and research and development tax credits. 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 or state tax authorities to the extent utilized in a future period.
Pursuant to Internal Revenue Code (IRC) Sections 382 and 383, annual use of a company’s net operating loss and tax credit carryforwards may be limited if there is a cumulative change in ownership of greater than 50% (by value) within a period. The amount of the annual limitation is determined based on the value of the Company immediately prior to the ownership change. Subsequent ownership changes may further affect the limitation in future years. The Company has completed several equity offerings since its inception which may have resulted in a change in control as defined by Sections 382 and 383 of the IRC, or could result in a change in control in the future. The Company has not completed an IRC Section 382 and 383 analysis regarding the limitation of net operating loss and research and development credit carryforwards. Until such an analysis has been completed, the Company has removed the deferred tax assets for net operating losses of $74.2 million and federal and California research and development credits of approximately $36.3 million from its deferred tax asset schedule and has recorded a corresponding decrease to its valuation allowance. When this analysis is finalized, the Company plans to update its unrecognized tax benefits accordingly. The Company does not expect this analysis to be completed within the next 12 months and, as a result, the Company does not expect that the unrecognized tax benefits will change within 12 months of this reporting date. Due to the existence of the valuation allowance, future changes in the Company’s unrecognized tax benefits will not impact the Company’s effective tax rate.
The Company’s policy is to record interest and penalties relating to uncertain tax positions as a component of income tax expense should the Company believe there is an uncertain tax position liability. As of December 31, 2021, and 2020, there was no accrued interest or penalties for uncertain positions. |
Related Party Transactions |
12 Months Ended |
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Dec. 31, 2021 | |
Related Party Transactions [Abstract] | |
Related Party Transactions |
9. Related Party Transactions One member of the Company’s board of directors received a cash payment of $1,000 for scientific consulting services during the year ended December 31, 2021. Two members of the Company’s board of directors received cash payments of $4,000 and $25,000 for scientific consulting services during the year ended December 31, 2020. The Company had no outstanding accounts payable to either of these directors as of December 31, 2021. |
Subsequent Event |
12 Months Ended |
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Dec. 31, 2021 | |
Subsequent Events [Abstract] | |
Subsequent Event |
10. Subsequent Event
As disclosed in Note 5, on February 1, 2022, the Company notified the DHHS of its intent to terminate the license agreement with an effective termination date of April 2, 2022. |
Summary of Significant Accounting Policies (Policies) |
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Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Basis of Presentation |
Basis of Presentation The Company prepares its consolidated financial statements in accordance with accounting principles generally accepted in the United States of America (“GAAP”), as found in the Accounting Standards Codification (“ASC”), the Accounting Standards Update (“ASU”), of the Financial Accounting Standards Board (“FASB”), and the rules and regulations of the US Securities and Exchange Commission (“SEC”). The Merger was accounted for as a reverse asset acquisition, as more fully described in Notes 1 and 4. Forte Subsidiary is deemed to be the acquirer for accounting purposes and Tocagen is the accounting acquiree. |
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Principles of Consolidation |
Principles of Consolidation The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Forte Subsidiary, Inc. and Forte Biosciences Emerald Limited. All intercompany accounts and transactions have been eliminated in the preparation of the consolidated financial statements. |
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Use of Estimates |
Use of Estimates The preparation of the Company’s consolidated financial statements requires management to make estimates and assumptions that impact the reported amounts of assets, liabilities, expenses and the disclosure of contingent assets and liabilities in the Company’s consolidated financial statements and accompanying notes. Significant management estimates that affect the reported amounts of assets, liabilities and expenses include useful lives of property and equipment, stock-based compensation expense, accruals for clinical trials and drug manufacturing, 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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Segment Information |
Segment Information The Company operates as a single operating segment. The Company’s chief operating decision maker, its President and Chief Executive Officer, manages the Company’s operations on a consolidated basis for the purposes of allocating resources, making operating decisions and evaluating financial performance. |
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Cash and Cash Equivalents |
Cash and cash equivalents Cash and cash equivalents include money market funds and deposits with commercial banks. Cash equivalents are defined as short-term, highly liquid investments with original maturities of 90 days or less at the date of purchase. |
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Fair Value of Financial Instruments |
Fair Value of Financial Instruments Fair value is defined as 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. There is a three-level hierarchy that prioritizes the inputs used in determining fair value by their reliability and preferred use as follows:
To the extent that a valuation is based on models or inputs that are less observable, or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised by the Company in determining fair value is greatest for instruments categorized within Level 3. A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. There have been no significant changes to the valuation methods utilized by the Company during the periods presented. There have been no transfers between Level 1, Level 2, and Level 3 in any periods presented. The carrying amounts of financial instruments consisting of cash and cash equivalents, prepaid expenses and other current assets, accounts payable, accrued liabilities included in the Company’s financial statements are reasonable estimates of fair value, primarily due to their short maturities. The Company had $29.9 million and $34.9 million as of December 31, 2021 and 2020, respectively, and which are classified within Level 1. Money market funds are valued at the closing price reported by the fund sponsor from an actively traded exchange. Money market funds were included as cash and cash equivalents in the consolidated balance sheets at December 31, 2021 and 2020. |
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Property and Equipment |
Property and Equipment Property and equipment are recorded at cost and depreciated over their estimated useful life using the straight-line method. Depreciation or amortization begin at the time the asset is placed in service. Maintenance and repairs that do not improve or extend the lives of the respective assets are expensed to operations as incurred. Upon disposal, retirement, or sale of an asset, the related cost and accumulated depreciation is removed from the accounts and any resulting gain or loss is included in the results of operations. Estimated useful life for property and equipment is as follows:
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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 consolidated statements of operations for year ended December 31, 2020. |
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Research and Development Costs |
Research and Development Costs Research and development costs are expensed as incurred. Research and development costs consist primarily of salaries and benefits of research and development personnel, costs related to research activities, preclinical studies, clinical trials and drug manufacturing. Non-refundable advance payments for goods or services that will be used in future research and development activities are deferred and capitalized and are only expensed when the goods have been received or when the service has been performed rather than when the payment is made. Drug manufacturing and clinical trial costs are a component of research and development expenses. The Company expenses costs for its drug manufacturing activities performed by Contract Manufacturing Organizations (“CMOs”), preclinical and clinical trial costs performed by Contract Research Organizations (“CROs”) and other service providers, as they are incurred, based upon estimates of the work completed over the life of the individual study in accordance with associated agreements. The Company uses information it receives from internal personnel and outside service providers to estimate the percentage of completion and therefore the expense to be incurred. |
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Patent Costs |
Patent Costs Costs to secure, defend and maintain patents are expensed as incurred, and are classified as general and administrative expenses due to the uncertainty of future benefits. |
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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 in accordance with the treasury stock method. The following number of unexercised stock options, restricted stock units 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 the periods presented:
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Stock-Based Compensation |
Stock-Based Compensation The Company issues stock-based awards to employees, directors and non-employees, generally in the form of stock options, restricted stock units or rights granted to employees under the Employee Stock Purchase Plan (“ESPP”). The Company accounts for stock-based compensation awards in accordance with ASC Topic 718, Compensation—Stock Compensation. The Company measures compensation cost for all equity awards for employees, directors and non-employees at their grant-date fair value and recognizes compensation expense for service-based awards on a straight-line basis over the requisite service period, which is generally the vesting period. The grant-date fair value of stock options is estimated using the Black-Scholes option pricing model. The grant-date fair value of restricted stock units is determined using the Company’s closing stock price on the date of grant. Forfeitures are recognized as they occur. Stock-based compensation expense for an award with a performance condition is recognized when the achievement of the performance condition has been determined to be probable. If the outcome of such performance condition has not been determined to be probable, or has not been met, no compensation expense is recognized and any previously recognized compensation expense is reversed. For rights granted under the ESPP, the fair value of each purchase is estimated at the beginning of the offering period using the Black-Scholes option pricing model. The Company classifies stock-based compensation expense in its statement of operations in the same manner in which the award recipient’s salary and related costs are classified in the case of employees, or in which the award recipient’s service payments are classified in the case of director and non-employees. Stock Options The risk-free interest rate assumption for stock 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 assumed dividend yield is based upon the Company’s expectation of not paying dividends in the foreseeable future. Prior to the Merger, the fair value per share was 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. Subsequent to the Merger, the fair value per share is the closing stock price on the option grant date. |
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Series A Convertible Preferred Stock |
Series A Convertible Preferred Stock The Company records all convertible preferred stock at their respective transaction prices on the dates of issuance, less issuance costs. Series A convertible preferred stock, prior to its conversion into common stock (Note 6), was classified as temporary equity and excluded from stockholders’ equity as the potential redemption, in the event of a deemed liquidation event, was not solely within the Company’s control. |
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Foreign Currency Transactions |
Foreign Currency Transactions The Company is subject to foreign currency risk with respect to contracts denominated in currencies other than the U.S. dollar. Payments for contracts denominated in foreign currencies are made at the spot rate on the day of payment. Changes in the exchange rate between billing dates and payment dates are recorded to other expenses, net in the consolidated statements of operations. |
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Income Taxes |
Income Taxes The Company uses an asset and liability approach to account for income taxes. The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities. These differences are measured using the enacted statutory tax rates that are expected to be in effect for the years in which differences are expected to reverse. Valuation allowances are provided when the expected realization of deferred tax assets does not meet a “more likely than not” criterion. The Company makes estimates and judgments about its future taxable income that are based on assumptions that are consistent with its plans and estimates. Should the actual amounts differ from those estimates, the amount of the valuation allowance could be materially impacted. Changes in these estimates may result in significant increases or decreases to the Company’s tax provision in a period in which such estimates are changed, which in turn would affect net income or loss. The Company recognizes tax benefits from uncertain tax positions if it believes the position is more likely than not to be sustained on examination by the taxing authorities based on the technical merits of the position. The Company makes adjustments to these reserves when facts and circumstances change, such as the closing of a tax audit or the refinement of an estimate. The provision for income taxes includes the effects of any reserves for tax positions that are not more likely than not to be sustained, as well as the related net interest and penalties. |
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Impairment of Property and Equipment |
Impairment of Property and Equipment The Company reviews its property and equipment 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 impaired, the impairment to be recognized is measured by the amount 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. Impairment losses on property and equipment of $61,000 have been recorded for the year ended December 31, 2021. No impairment losses on property and equipment have been recorded for the year ended December 31, 2020. |
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Comprehensive Loss |
Comprehensive Loss Comprehensive loss includes net loss and other comprehensive loss for the periods presented. The Company did not have other comprehensive loss items such as unrealized gains and losses and so for the years ended December 31, 2021 and 2020, comprehensive loss was equal to the net loss. |
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Recently Adopted Accounting Standards |
Recently Adopted Accounting Standards 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 Company adopted this ASU as of January 1, 2021. The adoption did not have a material impact on its financial position or results of operations. |
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Recently Issued Accounting Standards Not Yet Adopted |
Recently Issued Accounting Standards Not Yet Adopted From time to time, new accounting pronouncements are issued by the FASB or other standard setting bodies and are adopted by the Company 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 August 2020, the FASB issued ASU 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in an Entity’s Own Equity (Subtopic 815-40) (“ASU 2020-06”). ASU 2020-06 eliminates the beneficial conversion and cash conversion accounting models for convertible instruments. It also amends the accounting for certain contracts in an entity’s own equity that are currently accounted for as derivatives because of specific settlement provisions. In addition, ASU 2020-06 modifies how particular convertible instruments and certain contracts that may be settled in cash or shares impact the diluted earnings per share computation. The amendments in ASU 2020-06 are effective for smaller reporting companies as defined by the SEC for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption is permitted, but not earlier than fiscal years beginning after December 15, 2020. The Company is currently evaluating the impact of ASU 2020-06 on its consolidated financial statements and does not expect the adoption of this amended guidance to have a material impact on the Company’s consolidated financial statements. |
Summary of Significant Accounting Policies (Tables) |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Estimated Useful Life for Property and Equipment | Estimated useful life for property and equipment is as follows:
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Schedule of Common Stock Equivalents Excluded from Diluted Net Loss Calculation | The following number of unexercised stock options, restricted stock units 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 the periods presented:
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Balance Sheet Components (Tables) |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance Sheet Related Disclosures [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Prepaid Expenses and Other Current Assets |
Prepaid expenses and other current assets as of December 31, 2021 and 2020 consist of the following (in thousands):
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Schedule of Other Assets |
Other assets as of December 31, 2021 and 2020 consist of the following (in thousands).
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Components of Accrued Liabilities |
Accrued liabilities as of December 31, 2021 and 2020 consist of the following (in thousands):
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Merger (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||
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Dec. 31, 2021 | |||||||||||||||||||||||||||||||
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) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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 model were as follows.
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Summary of Stock Option Activity |
The table below summarizes the stock option activity during the year ended December 31, 2021:
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Summary of Restricted Stock Unit Award Transactions |
Restricted stock unit award transactions during the year ended December 31, 2021 were as follows:
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Summary of Stock-Based Compensation Expenses |
Stock-based compensation expenses included in the Company’s consolidated statements of operations for the years ended December 31, 2021 and 2020 are as follows (in thousands):
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ESPP | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Weighted-Average Assumptions Used to Value Stock Options |
The fair value of the rights granted to employees under the ESPP was estimated using a Black-Scholes option-pricing model with the following weighted-average valuation assumptions:
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Income Taxes (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Tax Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Reconciliations of Income Tax |
The benefit for income taxes differs from the amount of income tax determined by applying the applicable U.S. statutory federal income tax rate to pretax income as a result of the following differences (in thousands):
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Components of Net Deferred Tax Assets and Liabilities |
The primary components of temporary differences which give rise to the Company’s net deferred tax assets and liabilities as of December 31, 2021 and 2020 are as follows:
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Organization and Description of Business - Additional Information (Details) $ in Thousands |
12 Months Ended | |
---|---|---|
Dec. 31, 2021
USD ($)
shares
|
Dec. 31, 2020
USD ($)
|
|
Organization Consolidation And Presentation Of Financial Statements [Line Items] | ||
Accumulated deficit | $ 73,165 | $ 51,457 |
Cash used in operating activities | (16,677) | (18,423) |
Cash and cash equivalents | $ 42,044 | $ 58,765 |
Tocagen, Inc. | ||
Organization Consolidation And Presentation Of Financial Statements [Line Items] | ||
Right to receive shares for each common stock outstanding | shares | 3.1624 | |
Reverse stock split, description | 1‑for‑15 | |
Reverse split ratio | 0.06667 | |
Common stock ownership percentage | 15.30% | |
Forte Subsidiary, Inc. | ||
Organization Consolidation And Presentation Of Financial Statements [Line Items] | ||
Common stock ownership percentage | 84.70% |
Summary of Significant Accounting Policies - Additional Information (Details) - USD ($) |
12 Months Ended | |
---|---|---|
Dec. 31, 2021 |
Dec. 31, 2020 |
|
Schedule Of Significant Accounting Policies [Line Items] | ||
Transfers between fair value hierarchy levels | $ 0 | |
Acquired in-process research and development expense | $ 32,057,000 | |
Impairment losses on property and equipment | 61,000 | 0 |
Other comprehensive income (loss) | $ 0 | |
ASU 2019-12 | ||
Schedule Of Significant Accounting Policies [Line Items] | ||
Change in accounting principle, accounting standards update, adopted | true | |
Change in accounting principle, accounting standards update, adoption date | Jan. 01, 2021 | |
Change in accounting principle, accounting standards update, immaterial effect | true | |
Level 1 | ||
Schedule Of Significant Accounting Policies [Line Items] | ||
Money market funds, at carrying value | $ 29,900,000 | $ 34,900,000 |
Summary of Significant Accounting Policies - Estimated Useful Life for Property and Equipment (Details) |
12 Months Ended |
---|---|
Dec. 31, 2021 | |
Manufacturing Equipment | |
Property Plant And Equipment [Line Items] | |
Property and equipment, estimated useful life | 3 years |
Summary of Significant Accounting Policies - Schedule of Common Stock Equivalents Excluded from Diluted Net Loss Calculation (Details) - shares |
12 Months Ended | |
---|---|---|
Dec. 31, 2021 |
Dec. 31, 2020 |
|
Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items] | ||
Anti-dilutive securities excluded from diluted net loss calculation | 1,544,681 | 3,900,476 |
Options | ||
Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items] | ||
Anti-dilutive securities excluded from diluted net loss calculation | 1,281,396 | 1,123,496 |
Warrants | ||
Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items] | ||
Anti-dilutive securities excluded from diluted net loss calculation | 4,434 | 2,756,980 |
Restricted Stock Units | ||
Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items] | ||
Anti-dilutive securities excluded from diluted net loss calculation | 258,851 | 20,000 |
Balance Sheet Components - Schedule of Prepaid Expenses and Other Current Assets (Details) - USD ($) $ in Thousands |
Dec. 31, 2021 |
Dec. 31, 2020 |
---|---|---|
Balance Sheet Related Disclosures [Abstract] | ||
Prepaid manufacturing and clinical expenses | $ 488 | |
Prepaid insurance | $ 387 | 395 |
Prepaid license | 100 | |
Prepaid taxes | 1 | 74 |
Other | 88 | 76 |
Total Prepaid Expenses and Other Current Assets | $ 476 | $ 1,133 |
Balance Sheet Components - Schedule of Other Assets (Details) - USD ($) $ in Thousands |
Dec. 31, 2021 |
Dec. 31, 2020 |
---|---|---|
Balance Sheet Related Disclosures [Abstract] | ||
Prepaid insurance | $ 667 | $ 861 |
Deposits for manufacturing components | 82 | |
Prepaid offering costs | 106 | 289 |
Other | 13 | 12 |
Total Other Assets | $ 786 | $ 1,244 |
Balance Sheet Components - Components of Accrued Liabilities (Details) - USD ($) $ in Thousands |
Dec. 31, 2021 |
Dec. 31, 2020 |
---|---|---|
Balance Sheet Related Disclosures [Abstract] | ||
Accrued legal and professional fees | $ 75 | $ 86 |
Accrued compensation | 681 | 646 |
Accrued manufacturing and clinical expenses | 40 | 237 |
Other | 16 | 50 |
Total Accrued Liabilities | $ 812 | $ 1,019 |
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 |
Dec. 31, 2021 |
Dec. 31, 2020 |
---|---|---|---|
Business Acquisition [Line Items] | |||
Common stock, shares outstanding | 14,754,447 | 12,830,598 | |
Vested restricted stock awards outstanding | 1,281,396 | ||
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 | 26,968 | ||
Closing stock price | $ 18.90 | ||
Merger transaction costs | $ 1,200 | ||
Restricted Stock Awards | Tocagen, Inc. | |||
Business Acquisition [Line Items] | |||
Vested restricted stock awards outstanding | 61,406 |
Commitments and Contingencies - Additional Information (Details) - USD ($) |
12 Months Ended | ||||
---|---|---|---|---|---|
Feb. 01, 2022 |
Dec. 31, 2021 |
Dec. 31, 2020 |
Jan. 01, 2021 |
May 31, 2020 |
|
Commitments And Contingencies [Line Items] | |||||
FDIC insured amount | $ 250,000 | ||||
Rent credit due to refund for operating expense adjustments | 9,000 | ||||
Rent expenses | 5,000 | $ 52,000 | |||
Subsequent Event | |||||
Commitments And Contingencies [Line Items] | |||||
License agreement effective termination date | Apr. 02, 2022 | ||||
DHHS | |||||
Commitments And Contingencies [Line Items] | |||||
Minimum annual payment | $ 100,000 | $ 20,000 | |||
DHHS | Minimum | |||||
Commitments And Contingencies [Line Items] | |||||
Royalty expenses | $ 100,000 | $ 30,000 |
Stock-Based Compensation - Summary of Weighted-Average Assumptions Used to Value Stock Options (Details) - $ / shares |
12 Months Ended | |
---|---|---|
Dec. 31, 2021 |
Dec. 31, 2020 |
|
Share Based Compensation Arrangement By Share Based Payment Award [Line Items] | ||
Fair value of common stock and exercise price | $ 35.78 | $ 19.43 |
Risk-free interest rate | 0.94% | 0.49% |
Dividend yield | 0.00% | 0.00% |
Expected term of options (years) | 5 years 11 months 12 days | 6 years 7 days |
Expected volatility | 69.02% | 70.00% |
ESPP | ||
Share Based Compensation Arrangement By Share Based Payment Award [Line Items] | ||
Fair value of common stock and exercise price | $ 34.97 | |
Risk-free interest rate | 0.05% | |
Dividend yield | 0.00% | |
Expected term of options (years) | 6 months 3 days | |
Expected volatility | 64.08% |
Stock-Based Compensation - Summary of Stock Option Activity (Details) - USD ($) $ / shares in Units, $ in Thousands |
12 Months Ended | |
---|---|---|
Dec. 31, 2021 |
Dec. 31, 2020 |
|
Number of Shares Outstanding | ||
Outstanding, Beginning | 1,123,496 | |
Granted | 566,500 | |
Exercised | (29,575) | |
Cancelled/Forfeited | (379,025) | |
Outstanding, Ending | 1,281,396 | 1,123,496 |
Vested and expected to vest | 1,281,396 | |
Exercisable | 272,554 | |
Weighted-Average Exercise Price | ||
Outstanding, Beginning | $ 11.72 | |
Granted | 35.78 | $ 19.43 |
Exercised | 14.45 | |
Cancelled/Forfeited | 26.60 | |
Outstanding, Ending | 18.18 | $ 11.72 |
Vested and expected to vest | 18.18 | |
Exercisable | $ 20.55 | |
Weighted-Average Remaining Contractual Term (Years) | ||
Outstanding | 7 years 11 months 8 days | 8 years 10 months 6 days |
Vested and expected to vest | 7 years 11 months 8 days | |
Exercisable | 7 years 3 months 3 days | |
Aggregate Intrinsic Value | ||
Exercised | $ 366 | |
Outstanding | 617 | |
Vested and expected to vest | 617 | |
Exercisable | $ 42 |
Stock-Based Compensation - Summary of Restricted Stock Unit Award Transactions (Details) - Restricted Stock Unit Awards |
12 Months Ended |
---|---|
Dec. 31, 2021
$ / shares
shares
| |
Shares | |
Outstanding at December 31, 2020 | 20,000 |
Stock awards granted | 258,851 |
Forfeited/Cancelled | (15,000) |
Issued as Common Stock | (5,000) |
Outstanding at December 31, 2021 | 258,851 |
Weighted Avg Grant Date Fair Value | |
Outstanding at December 31, 2020 | $ / shares | $ 21.36 |
Granted | $ / shares | 3.36 |
Forfeited/Cancelled | $ / shares | $ 21.36 |
Issued as Common Stock | 21.36 |
Outstanding at December 31, 2021 | $ / shares | $ 3.36 |
Stock-Based Compensation - Summary of Stock-Based Compensation Expenses (Details) - USD ($) $ in Thousands |
12 Months Ended | |
---|---|---|
Dec. 31, 2021 |
Dec. 31, 2020 |
|
Share Based Compensation Arrangement By Share Based Payment Award [Line Items] | ||
Stock-based compensation expense | $ 4,214 | $ 956 |
Research and Development | ||
Share Based Compensation Arrangement By Share Based Payment Award [Line Items] | ||
Stock-based compensation expense | 1,448 | 585 |
General and Administrative | ||
Share Based Compensation Arrangement By Share Based Payment Award [Line Items] | ||
Stock-based compensation expense | $ 2,766 | $ 371 |
Income Taxes - Summary of Reconciliations of Income Tax (Details) - USD ($) $ in Thousands |
12 Months Ended | |
---|---|---|
Dec. 31, 2021 |
Dec. 31, 2020 |
|
Income Tax Disclosure [Abstract] | ||
Income tax benefit at federal statutory rate | $ (4,558) | $ (9,765) |
Increase/(decrease) in tax resulting from: | ||
State income taxes | 479 | (3,248) |
Change in valuation allowance | 3,807 | 4,390 |
Deferred adjustments | 38 | |
Transaction adjustments | 369 | (392) |
Permanent items | (30) | 340 |
Nondeductible transaction costs | 8,643 | |
Other | $ (67) | $ (6) |
Income tax benefit at federal statutory rate | 21.00% | 21.00% |
Increase/(decrease) in tax resulting from: | ||
State income taxes | (2.20%) | 7.00% |
Change in valuation allowance | (17.50%) | (9.40%) |
Deferred adjustments | 0.00% | (0.10%) |
Transaction adjustments | (1.70%) | 0.90% |
Permanent items | 0.10% | (0.70%) |
Nondeductible transaction costs | 0.00% | (18.60%) |
Other | 0.30% | 0.00% |
Total | 0.00% | 0.00% |
Income Taxes - Components of Net Deferred Tax Assets and Liabilities (Details) - USD ($) $ in Thousands |
Dec. 31, 2021 |
Dec. 31, 2020 |
---|---|---|
Deferred tax assets: | ||
Accrual to cash adjustment | $ 268 | $ 256 |
Start-up costs | 2,111 | 1,730 |
Patent costs | 40 | 57 |
Stock option expense | 944 | 275 |
Net operating loss | 5,968 | 3,429 |
Tocagen acquisition | 418 | |
Other Deferred Taxes | 10 | |
R&D Credits | 245 | |
Total noncurrent deferred tax assets | 9,586 | 6,165 |
Deferred tax liabilities: | ||
Depreciation | (3) | |
State taxes | (383) | |
Total noncurrent deferred tax liabilities | (386) | |
Valuation Allowance | $ (9,586) | $ (5,779) |
Related Party Transactions - Additional Information (Details) - USD ($) |
3 Months Ended | 12 Months Ended | |
---|---|---|---|
Dec. 31, 2020 |
Dec. 31, 2021 |
Dec. 31, 2020 |
|
Director | |||
Related Party Transaction [Line Items] | |||
Payments for scientific consulting services | $ 4,000 | $ 1,000 | $ 25,000 |
Director One | |||
Related Party Transaction [Line Items] | |||
Accounts payable | $ 0 |
Subsequent Event - Additional Information (Details) |
Feb. 01, 2022 |
---|---|
Subsequent Event | |
Subsequent Event [Line Items] | |
License agreement effective termination date | Apr. 02, 2022 |