Balance Sheets (Parenthetical) - $ / shares |
Mar. 31, 2023 |
Dec. 31, 2022 |
|---|---|---|
| Balance Sheets | ||
| Common stock, par value (in dollars per share) | $ 0.0001 | $ 0.0001 |
| Common stock, shares authorized | 300,000,000 | 300,000,000 |
| Common stock, shares issued | 54,626,690 | 54,614,690 |
| Common stock, shares outstanding | 54,626,690 | 54,614,690 |
Statements of Operations and Comprehensive Loss - USD ($) $ in Thousands |
3 Months Ended | |
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Mar. 31, 2023 |
Mar. 31, 2022 |
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| Operating expenses: | ||
| Research and development | $ 16,836 | $ 26,213 |
| Acquired in-process research and development | 1,500 | |
| General and administrative | 19,047 | 15,099 |
| Loss from operations | (35,883) | (42,812) |
| Other income (expense), net | 1,545 | 1 |
| Net loss | $ (34,338) | $ (42,811) |
| Per share information: | ||
| Net loss per share of common stock, basic | $ (0.63) | $ (0.79) |
| Net loss per share of common stock, diluted | $ (0.63) | $ (0.79) |
| Weighted average common shares outstanding, basic | 54,618,799 | 54,275,751 |
| Weighted average common shares outstanding, diluted | 54,618,799 | 54,275,751 |
| Comprehensive loss: | ||
| Net loss | $ (34,338) | $ (42,811) |
| Unrealized gain (loss) on marketable securities | 539 | (921) |
| Comprehensive loss | $ (33,799) | $ (43,732) |
Nature of Operations |
3 Months Ended |
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Mar. 31, 2023 | |
| Nature of Operations | |
| Nature of Operations | 1. Nature of Operations Passage Bio, Inc., or the Company, a Delaware corporation incorporated in July 2017, is a clinical stage genetic medicines company focused on developing transformative therapies for central nervous system, or CNS, disorders, with limited or no approved treatment options. The Company has a strategic research collaboration with the Trustees of the University of Pennsylvania’s, or Penn, Gene Therapy Program, or GTP. Under this collaboration, GTP conducts discovery and preclinical activities enabling Investigational New Drug, or IND, applications and the Company conducts all clinical development, manufacturing, regulatory strategy, and commercialization activities under the agreement. Through this collaboration, the Company has assembled a strong portfolio of genetic medicine product candidates, including two lead clinical product candidates: PBGM01 for the treatment of GM1 gangliosidosis, or GM1, and PBFT02 for the treatment of frontotemporal dementia, or FTD. The Company also has a collaboration agreement and a development services and clinical supply agreement with Catalent Maryland, Inc., or Catalent, for clinical scale manufacturing requirements. |
Risks and Liquidity |
3 Months Ended |
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Mar. 31, 2023 | |
| Risks and Liquidity | |
| Risks and Liquidity | 2. Risks and Liquidity The Company has incurred recurring losses and negative cash flows from operations since inception and had an accumulated deficit of $526.7 million as of March 31, 2023. The Company anticipates incurring additional losses until such time, if ever, that it can generate significant sales of its product candidates currently in development. Substantial additional capital will be needed by the Company to fund its operations and to develop its product candidates. The Company’s operations have consisted primarily of conducting preclinical studies, developing licensed technology, conducting clinical trials, and manufacturing clinical supply to support clinical trials. The Company faces risks associated with early-stage biotechnology companies whose product candidates are in development. Product candidates currently under development will require significant additional research and development efforts and establishing manufacturing capacity and regulatory approval prior to commercialization. These efforts require significant amounts of additional capital for the Company to complete its research and development, achieve its research and development objectives, defend its intellectual property rights, and recruit and retain skilled personnel, and key members of management. Even if the Company’s product development efforts are successful, it is uncertain when, if ever, the Company will realize revenue from product sales. The Company plans to seek additional funding through public or private equity offerings, debt financings, other collaborations, strategic alliances and licensing arrangements. The Company may not be able to obtain financing on acceptable terms, or at all, and the Company may not be able to enter into strategic alliances or other arrangements on favorable terms, or at all. The terms of any financing may adversely affect the holdings or the rights of the Company’s stockholders. If the Company is unable to obtain funding or prospects of funding are unfavorable, the Company could be required to further delay, reduce or eliminate research and development programs, product portfolio expansion or future commercialization efforts, which could adversely affect its business prospects. In accordance with Accounting Standards Update, or ASU, No. 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern, the Company has evaluated whether there are certain conditions and events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the financial statements are issued. As of the issuance date of these financial statements, the Company expects that its cash, cash equivalents and marketable debt securities will be sufficient to fund its forecasted operating expenses and capital expenditure requirements for at least the next twelve months from the issuance date of these financial statements. |
Summary of Significant Accounting Policies |
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Mar. 31, 2023 | ||||||||||||||||||||||||||||||||||||
| Summary of Significant Accounting Policies | ||||||||||||||||||||||||||||||||||||
| Summary of Significant Accounting Policies | 3. Summary of Significant Accounting Policies The Company’s complete summary of significant accounting policies can be found in “Note 3. Summary of Significant Accounting Policies” in the audited financial statements included in the Company’s Annual Report filed on Form 10-K for the year ended December 31, 2022. Basis of Presentation The accompanying unaudited financial statements have been prepared in accordance with generally accepted accounting principles in the United States, or GAAP. Any reference in these notes to applicable guidance is meant to refer to GAAP as found in the Accounting Standards Codification, or ASC, and Accounting Standards Updates promulgated by the Financial Accounting Standards Board, or FASB. Interim Financial Statements The accompanying unaudited interim financial statements have been prepared from the books and records of the Company in accordance with GAAP for interim financial information and Rule 10-01 of Regulation S-X promulgated by the United States Securities and Exchange Commission, or SEC, which permits reduced disclosures for interim periods. All adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the accompanying balance sheets, statements of operations and comprehensive loss, stockholders’ equity, and cash flows have been made. Although these interim financial statements do not include all of the information and footnotes required for complete annual financial statements, management believes the disclosures are adequate to make the information presented not misleading. Unaudited interim results of operations and cash flows are not necessarily indicative of the results that may be expected for the full year. Unaudited interim financial statements and footnotes should be read in conjunction with the audited financial statements and footnotes included in the Company’s 2022 Annual Report filed on Form 10-K. Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and contingent liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates. Estimates and assumptions are periodically reviewed and the effects of the revisions are reflected in the accompanying financial statements in the period they are determined to be necessary. Fair Value of Financial Instruments Management believes that the carrying amounts of the Company’s financial instruments, including cash equivalents, prepaid expenses, and accounts payable, approximate fair value due to the short-term nature of those instruments. Concentration of credit risk Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash and cash equivalents, and marketable securities. The Company maintains a deposit account in a federally insured financial institution in excess of federally insured limits. The Company maintains a money market account in a federally insured financial institution in excess of federally insured limits. The Company has not experienced any losses in such accounts and believes it is not exposed to significant risk on its cash and cash equivalents beyond the normal credit risk associated with commercial banking relationships. The Company maintains a portfolio of marketable debt securities, which is diversified to limit exposure related to counterparty risk, industry risk and security type risk. The Company maintains an investment policy which dictates the allocation of funds within our portfolio of marketable debt securities. The Company has not experienced any material losses in such portfolio. Cash and cash equivalents The Company considers all highly-liquid investments that have maturities of three months or less when acquired to be cash equivalents. Cash equivalents as of March 31, 2023 consisted of only money market funds. Cash consists of cash deposits at banking institutions. Marketable securities The Company classifies its marketable securities as available-for-sale, which include commercial paper, certificates of deposit, corporate debt securities, United States, or U.S., government debt securities and U.S. government agency securities with original maturities of greater than three months. These securities are carried at fair market value, with unrealized gains and losses reported in comprehensive loss and accumulated other comprehensive income (loss) within stockholders’ equity. Gains or losses on marketable securities sold are recognized as a component of other income, net in the statement of operations and comprehensive loss on the specific identification method. All marketable securities are available for use, as needed, to fund operations and therefore, the Company classifies all marketable securities as current assets within the balance sheet. Property and Equipment, net Property and equipment consists of laboratory equipment, office equipment, computer hardware and software, furniture and leasehold improvements and are recorded at cost. Maintenance and repairs that do not improve or extend the lives of the respective assets are expensed as incurred. Property and equipment are depreciated on a straight-line basis over their estimated useful lives. The Company estimates useful life on an asset by asset basis, which generally consists of three years for computer hardware and software, five years for office equipment, five years for laboratory equipment and seven years for furniture and fixtures. Leasehold improvements are amortized over the shorter of the lease term or the estimated useful life of the asset. The Company reviews long-lived assets, such as property and equipment, for impairment when events or changes in circumstances indicate the carrying amount of the assets may not be recoverable. If circumstances require a long-lived asset to be tested for possible impairment, recoverability is measured by comparison of the carrying amount of the assets to estimated future undiscounted cash flows that the assets are expected to generate. If the carrying amount of an asset exceeds its estimated future cash flows, then impairment expense is recognized for the amount by which the carrying amount of the asset exceeds the fair value of the asset. For the three months ended March 31, 2023 and 2022, no impairment expenses were recognized. Leasing The Company evaluates leases at their inception to determine if they are an operating lease or a finance lease. As of March 31, 2023, the Company has classified all leases with terms greater than one year, as operating leases. The Company recognizes assets and liabilities for operating leases at their inception, based on the present value of all payments due under the lease agreement. The Company uses its incremental borrowing rate to determine the present value of operating leases, which is determined by referencing collateralized borrowing rates for debt instruments with terms similar to the respective lease. The Company utilizes the accounting policy election to not separate lease and non-lease components and the accounting policy election to not apply the recognition requirement to leases with a term of twelve months or less. Share-based compensation The Company measures share-based awards at grant-date fair value and records compensation expense on a straight-line basis over the vesting period of the awards. The Company’s share-based compensation consists of restricted stock units, or RSUs, and options to purchase common stock, or stock option awards. The Company uses the Black-Scholes option pricing model to value its stock option awards. Estimating the fair value of stock option awards requires the input of assumptions, including, the expected term of stock options, and stock price volatility. The assumptions used in estimating the fair value of share-based awards represent management's estimate and involve inherent uncertainties and the application of management's judgment. As a result, if factors change and management uses different assumptions, share-based compensation expense could be materially different for future awards. The expected term of the stock options is estimated using the "simplified method," as the Company has limited historical information from which to develop reasonable expectations about future exercise patterns and post-vesting employment termination behavior for its stock option grants. The simplified method is the midpoint between the vesting period and the contractual term of the option. For stock price volatility, the Company uses a composite of comparable public company data as a basis for its expected volatility to calculate the fair value of option grants. The selection of comparable public company data requires the application of management’s judgement. The Company accounts for forfeitures of RSUs and stock option awards as they occur. Research and Development Research and development costs are expensed as incurred and consist primarily of expenses incurred with Penn, contract research organizations, contract manufacturing organizations, internal analytical and testing activities, and employee-related expenses, including salaries, benefits, and share-based compensation. Management makes estimates of the Company’s external accrued research and development expenses, which primarily relates to contract research organizations and contract manufacturing organizations, as of each balance sheet date in the Company’s financial statements based on an estimate of progress to completion of specific tasks using facts and circumstances known to the Company at that time. The Company determines the estimates by reviewing contracts, vendor agreements and change orders, and through discussions with our internal clinical personnel and external service providers as to the progress to completion of services and the agreed-upon fee to be paid for such services. If the actual timing of the performance of services or the level of effort varies from the estimate, the Company will adjust the accrual and related expenses accordingly. Net Loss Per Share Basic net loss per share of common stock is computed by dividing net loss by the weighted average number of shares of common stock outstanding during each period. Diluted loss per share of common stock includes the effect, if any, from the potential exercise or conversion of securities, such as stock options, which would result in the issuance of incremental shares of common stock. For diluted net loss per share, the weighted average number of shares of common stock is the same for basic net loss per share due to the fact that when a net loss exists, dilutive securities are not included in the calculation as the impact is anti-dilutive. The following potentially dilutive securities have been excluded from the computation of diluted weighted average shares of common stock outstanding, as they would be anti-dilutive:
Recently Adopted Accounting Pronouncements In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses: Measurement of Credit Losses on Financial Instruments, or ASU 2016-13, which replaces the incurred loss impairment methodology under current U.S. GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. ASU 2016-13 was subsequently updated by ASU No. 2019-04, Codification Improvements to Topic 326, Financial Instruments—Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments, to clarify that entities should include recoveries when estimating the allowance for credit losses. This guidance was effective for the Company starting in fiscal year 2023. The Company adopted ASU 2016-13 as of January 1, 2023, which did not have a material impact on its financial statements. |
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Cash, Cash Equivalents and Marketable Securities |
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| Cash, Cash Equivalents and Marketable Securities | 4. Cash, Cash Equivalents and Marketable Securities The following table provides details regarding the Company’s portfolio of cash and cash equivalents:
The following table provides details regarding the Company’s portfolio of marketable securities:
The contractual maturities of our marketable securities as of March 31, 2023, are as follows:
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Fair Value of Financial Instruments |
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| Fair Value of Financial Instruments | 5. Fair Value of Financial Instruments Fair value is the price that could be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. Fair value determination in accordance with applicable accounting guidance requires that a number of significant judgments be made. Additionally, fair value is used on a nonrecurring basis to evaluate assets for impairment or as required for disclosure purposes by applicable accounting guidance on disclosures about fair value of financial instruments. Depending on the nature of the assets and liabilities, various valuation techniques and assumptions are used when estimating fair value. The carrying amounts of certain of the Company’s financial instruments, including prepaid expense and accounts payable are shown at cost, which approximates fair value due to the short-term nature of these instruments. The Company follows the provisions of FASB ASC Topic 820, Fair Value Measurement, for financial assets and liabilities measured on a recurring basis. The guidance requires fair value measurements be classified and disclosed in one of the following three categories:
The following fair value hierarchy table presents information about the Company’s assets measured at fair value on a recurring basis. Included within cash and cash equivalents on the balance sheet, but excluded from the fair value hierarchy table, are cash deposits held at financial institutions:
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Property and Equipment, net |
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| Property and Equipment, net | 6. Property and Equipment, net Property and Equipment, net, consist of the following:
Depreciation expense was $1.0 million and $0.9 million for the three months ended March 31, 2023 and 2022, respectively. |
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Accrued Expenses and Other Current Liabilities |
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| Accrued Expenses and Other Current Liabilities | 7. Accrued Expenses and Other Current Liabilities Accrued expenses and other current liabilities consisted of the following:
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Leases |
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| Leases | |||||||||||||||||||||||||||||||||||||||||||||
| Leases | 8. Leases The Company is party to a lease agreement for office space, or the Lease Agreement, in Philadelphia, Pennsylvania. The Lease Agreement commenced in February 2021 and is expected to expire in December 2031. The Company has an option to extend the term of the Lease Agreement by up to two five-year terms. This option to extend was not recognized as part of the Company's measurement of the right of use, or ROU, asset and operating lease liability as of March 31, 2023. The landlord provided the Company with a tenant improvement allowance of $2.8 million, for which the related expenditures were paid directly by the landlord. The Company is also party to a lease agreement for laboratory space, or the Laboratory Lease Agreement, in Hopewell, New Jersey. The laboratory is focused on state-of-the-art analytical capabilities, assay development and validation, and clinical product testing to support both viral vector manufacturing and clinical development. The Laboratory Lease Agreement commenced in March 2021 and is expected to expire in February 2036. The Company has an option to extend the term of the Laboratory Lease Agreement by up to two five-year terms. This option to extend was not recognized as part of the Company's measurement of the ROU asset and operating lease liability as of March 31, 2023. The landlord provided the Company with a tenant improvement allowance of $1.3 million in connection with the Laboratory Lease Agreement, for which the related expenditures were paid by the Company and will be reimbursed by the landlord. As of March 31, 2023, $0.1 million of reimbursements were unpaid by the landlord and recorded within other current assets. The following table summarizes future minimum lease payments under the Company’s operating leases:
Operating lease expense was $0.8 million and $0.8 million for the three months ended March 31, 2023 and 2022, respectively. |
Commitments and Contingencies |
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Mar. 31, 2023 | |
| Commitments and Contingencies. | |
| Commitments and Contingencies | 9. Commitments and Contingencies Amended and Restated Research, Collaboration and License Arrangement with Penn The Company has a research, collaboration and licensing agreement with Penn, as amended, or the Penn Agreement, for research and development collaborations and exclusive license rights to patents for certain products and technologies. Under the Penn Agreement, the Company has obligations to fund certain research relating to the preclinical development of selected products in research programs as well as exploratory research programs in non-rare and/or non-monogenic, or large CNS indications, currently TLE. In addition, the Company will fund discovery research conducted by Penn through August 3, 2026 and will receive exclusive rights, subject to certain limitations, to technologies resulting from the discovery research for the Company’s products developed with GTP, such as novel capsids, toxicity reduction technologies and delivery and formulation improvements. This funding commitment for the discovery research is $5.0 million annually, paid in quarterly increments of $1.3 million through June, 2026. The Penn Agreement includes an exploratory research program focused on discovering targets and novel gene therapy candidates for large CNS indications, currently focused on TLE, and can be expanded to other large CNS diseases upon mutual agreement. The initial term of the exploratory research program is until August 2024, which term can be extended by mutual agreement. Under the exploratory research program, the Company will have the right to further develop and commercialize any gene therapy product candidates specific for those selected targets (and any future large CNS diseases that are mutually agreed upon) that may arise from the exploratory research programs on substantially the same terms of the current Penn Agreement. Under the Penn Agreement, the Company has eight remaining options available to commence additional licensed programs for CNS indications and has until August 3, 2026, to exercise these options. If the Company were to exercise any of these options, it would owe Penn a non-refundable upfront fee of $1.0 million per product indication, with $0.5 million due upfront and another $0.5 million fee owed upon a further developmental milestone. The Company has the obligation to fund certain research relating to the preclinical development of each licensed program. The Penn Agreement requires that the Company make payments of up to (i) $16.5 million per product candidate for rare, monogenic disorders in the aggregate and (ii) $39.0 million per product candidate in the aggregate arising from the exploratory program for large CNS indications, currently for TLE. Each payment will be due upon the achievement of specific development milestone events by such licensed product for a first indication, reduced development milestone payments for the second and third indications and no development milestone payments for subsequent indications. In addition, on a product-by-product basis, the Company is obligated to make up to $55.0 million in sales milestone payments on each licensed product based on annual sales of the licensed product in excess of defined thresholds. Upon successful commercialization of a product using the licensed technology, the Company is obligated to pay to Penn, on a licensed product-by-licensed product and country-by-country basis, tiered royalties (subject to customary reductions) in the mid-single digits on annual worldwide net sales of such licensed product. In addition, the Company is obligated to pay to Penn a percentage of sublicensing income, ranging from the mid-single digits to low double digits, for sublicenses under the Penn Agreement. The agreement will expire on a licensed product-by-licensed product and country-by-country basis upon the later of (i) the expiration of the last valid claim of the licensed patent rights that covers the exploitation of such licensed product in such country, and (ii) the expiration of the royalty period. In addition, the Company will pay a tiered transaction fee of 1-2% of the net proceeds upon certain change of control events. During the three months ended March 31, 2023, the Company did not make any payments for acquired in-process research and development. During the three months ended March 31, 2022, the Company made payments under the Penn Agreement for acquired in-process research and development of $1.5 million related to the achievement of a development milestone. Catalent Agreements In June 2019, the Company entered into a collaboration agreement, or the Collaboration Agreement, with Catalent. As part of the Collaboration Agreement, the Company was required to pay an annual fee for five years ending in 2025 for the exclusive use of a dedicated clean room suite, or the Clean Room Suite. In April 2020, the Company entered into a development services and clinical supply agreement, or the Manufacturing and Supply Agreement, with Catalent to secure clinical scale manufacturing capacity for batches of active pharmaceutical ingredients for the Company’s gene therapy product candidates. The Manufacturing and Supply Agreement confirms the terms contemplated by the Collaboration Agreement and the Collaboration Agreement continues to be in effect pursuant to its terms. Under the terms of the Manufacturing and Supply Agreement, Catalent agreed to manufacture batches of drug product for the Company’s gene therapy product candidates at the Clean Room Suite at a Catalent facility provided for in the Collaboration Agreement. The Manufacturing and Supply Agreement provided for a term of five years. The Manufacturing and Supply Agreement also included minimum annual purchase commitments. The Company has the right to terminate the Manufacturing and Supply Agreement for convenience or other reasons specified in the Manufacturing and Supply Agreement upon prior written notice. If the Company terminates the Manufacturing and Supply Agreement, it will be obligated to pay an early termination fee to Catalent. Under both the Collaboration Agreement and the Manufacturing and Supply Agreement, the Company had an annual minimum commitment of $10.6 million per year owed to Catalent for five years from the validation of the Clean Room, subject to certain inflationary adjustments. On March 31, 2023, the Company entered into certain letter agreements amending each of (i) the Collaboration Agreement and (ii) the Manufacturing and Supply Agreement, together with the Collaboration Agreement, the Existing Agreements. Letter agreement I, or Agreement I, eliminated the minimum annual purchase obligation and the obligation to pay an annual fee for use of the Clean Room Suite, thereby eliminating the annual minimum commitment of $10.6 million per year owed to Catalent through November 2025 under the Existing Agreements. In consideration of Agreement I, the Company will make aggregate payments to Catalent of $6.0 million between June 30, 2023 and May 1, 2024. The Company accrued the $6.0 million of aggregate payments as of the three-months ended March 31, 2023. Letter agreement II, or Agreement II, and together with Agreement I, the Letter Agreements, extended the term of the Existing Agreements until November 6, 2030, and established a limited exclusive relationship between the Company and Catalent for the manufacture of bulk drug substance and drug product for the Company’s adeno-associated virus delivery therapeutic product candidates for the treatment of FTD and GM1. The limited exclusive relationship under Agreement II would convert to a non-exclusive relationship (i) in the event Catalent fails to meet certain performance standards and (ii) following certain conditional events related to the divestiture by the Company of either FTD or GM1, in which case, if such events occur, the Company would pay Catalent certain fees. In addition, in the event of certain transactions, the Company may terminate the Existing Agreements for convenience with respect to such products, in which case, the Company would pay to Catalent a certain termination fee. Immediately prior to the execution of the Letter Agreements, the Company had a $5.3 million prepaid asset related to upfront payments made to secure the Clean Room Suite. In connection with the Letter Agreements, the Company no longer has exclusive access to the Clean Room Suite at Catalent and, as a result, the Company recognized an expense of $5.3 million related to the elimination of the prepaid asset as of the three months ended March 31, 2023. The Company classified the $11.3 million of expenses, which comprises of $6.0 million in aggregate payments due to Catalent and the $5.3 million elimination of the prepaid asset, as general and administrative expense within the statement of operations for the three months ended March 31, 2023, as both amounts do not directly relate to the future advancement of our research and development programs. Employment Agreements The Company has entered into employment agreements with key personnel providing for compensation and, in certain circumstances, severance and acceleration of vesting in stock-based compensation awards, as described in the respective employment agreements. |
Share-Based Compensation |
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| Share-Based Compensation | 10. Share-Based Compensation Equity Incentive Plan The Company has three equity incentive plans: the 2018 Equity Incentive Plan, as amended, or the 2018 Plan, the 2020 Equity Incentive Plan, or the Incentive Plan, and the 2021 Equity Inducement Plan, as amended, or the Inducement Plan. New awards can only be granted under the Incentive Plan and the Inducement Plan. The total number of shares authorized under the Incentive Plan as of March 31, 2023 was 13,101,661. Additionally, any awards previously issued under our 2018 Plan which are forfeited become available for issuance under the Incentive Plan. As of March 31, 2023, 4,439,463 shares were available for future grants under the Incentive Plan. The number of shares of the Company’s common stock that may be issued pursuant to rights granted under the Incentive Plan shall automatically increase on January 1st of each year, commencing on January 1, 2021 and continuing for ten years, in an amount equal to five percent of the total number of shares of the Company’s common stock outstanding on December 31st of the preceding calendar year, subject to the discretion of the board of directors or compensation committee to determine a lesser number of shares shall be added for such year. As a result, the number of shares reserved for issuance under the Incentive Plan increased by 2,730,735 and 2,712,249 shares in January 2023 and 2022, respectively. The Incentive Plan provides for the granting of common stock, incentive stock options, nonqualified stock options, restricted stock awards, and/or stock appreciation rights to employees, directors, and other persons, as determined by the Company’s board of directors. The Company’s stock options awarded to date under the Incentive Plan vest based on a requisite service period, generally over four-year periods, and have a term of ten years. The Inducement Plan was approved by the Company’s board of directors in July 2021 and subsequently amended in February 2022 and February 2023. The total number of shares authorized under the Inducement Plan as of March 31, 2023 was 2,500,000. Of this amount, 880,967 shares were available for future grants as of March 31, 2023. The Inducement Plan provides for the granting of nonqualified stock options and restricted stock awards to employees hired by the Company, as determined by the Company’s board of directors. The Company’s stock options awarded to date under the Inducement Plan vest based on requisite service period and have a term of ten years. The Company’s restricted stock units awarded to date under the Inducement Plan vest based on requisite service period and have a term based on each award agreement. The Company measures share-based awards at their grant-date fair value and records compensation expense on a straight-line basis over the vesting period of the awards. The Company recorded share-based compensation expense in the following expense categories in its accompanying statements of operations for the period presented:
During the three months ended March 31, 2023 and 2022, there was no expense related to the modifications of awards. The following table summarizes stock option activity for the three months ended March 31, 2023:
The weighted average grant date fair value of options granted was $0.83 and $3.45 for the three months ended March 31, 2023 and 2022, respectively. As of March 31, 2023, the total unrecognized compensation expense related to unvested stock option awards was $21.9 million, which the Company expects to recognize over a weighted average period of 2.2 years. The 2018 Plan and the Incentive Plan provide certain holders of stock options an election to early exercise prior to vesting. The Company has the right to repurchase early exercised options without transferring any appreciation in the value of the underlying shares to the employee if the employee terminates employment before the end of the original vesting period. The repurchase price is the lesser of the original exercise price or the then fair value of the Company’s common stock. As of March 31, 2023, 70,456 options to purchase common stock are unvested, but exercisable, under early exercise provisions. The fair value of each option was estimated on the date of grant using the weighted average assumptions in the table below:
Restricted Stock Units The Company issues restricted stock units, or RSUs, to employees that vest over periods as determined by the board of directors. Any unvested shares are forfeited upon termination of services. The fair value of the RSUs is equal to the fair market value price of the Company’s common stock on the date of grant. Compensation expense is recognized on a straight-line basis over the vesting period of the RSUs. The following table summarizes activity related to RSU awards during the three months ended March 31, 2023:
As of March 31, 2023, the total unrecognized expense related to all RSUs was $2.4 million, which the Company expects to recognize over a weighted average period of 1.5 years. Employee Stock Purchase Plan The Company’s 2020 Employee Stock Purchase Plan, or the ESPP, became effective on February 28, 2020. The ESPP authorizes the issuance of up to 1,981,766 shares of the Company’s common stock. Of this amount, 1,666,061 were available for future grants as of March 31, 2023. The number of shares of the Company’s common stock that may be issued pursuant to rights granted under the ESPP shall automatically increase on January 1st of each year and continuing for ten years, in an amount equal to one percent of the total number of shares of the Company’s common stock outstanding on December 31st of the preceding calendar year, subject to the discretion of the board of directors or compensation committee to determine a lesser number of shares shall be added for such year. As a result, on January 1, 2023, the number of shares reserved for issuance under the ESPP increased by 546,147 shares, resulting in a total of 1,981,766 shares authorized for issuance. Under the ESPP, eligible employees can purchase the Company’s common stock through accumulated payroll deductions at such times as are established by the compensation committee. Eligible employees may purchase the Company’s common stock at 85% of the lower of the fair market value of the Company’s common stock on the first day of the offering period or on the last day of the offering period. The offering periods under the ESPP have a duration of six months, with periods ending in May and November of each calendar year. Eligible employees may contribute up to 15% of their eligible compensation. Under the ESPP, a participant may not accrue rights to purchase more than $25,000 worth of the Company’s common stock for each calendar year in which such right is outstanding or purchase more than 4,000 shares of the Company’s common stock in any single offering period. In accordance with the guidance in ASC 718-50, Compensation – Stock Compensation, the ability to purchase shares of the Company’s common stock at 85% of the lower of the price on the first day of the offering period or the last day of the offering period (i.e. the purchase date) represents an option and, therefore, the ESPP is a compensatory plan under this guidance. Accordingly, share-based compensation expense is determined based on the option’s grant-date fair value as estimated by applying the Black Scholes option-pricing model and is recognized over the withholding period. The Company recognized share-based compensation expense of de minimus and $0.1 million during the three months ended March 31, 2023 and 2022, respectively, related to the ESPP. |
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Subsequent Events |
3 Months Ended |
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| Subsequent Events. | |
| Subsequent Events | 11. Subsequent Events None. |
Summary of Significant Accounting Policies (Policies) |
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| Summary of Significant Accounting Policies | ||||||||||||||||||||||||||||||||||||
| Basis of Presentation | Basis of Presentation The accompanying unaudited financial statements have been prepared in accordance with generally accepted accounting principles in the United States, or GAAP. Any reference in these notes to applicable guidance is meant to refer to GAAP as found in the Accounting Standards Codification, or ASC, and Accounting Standards Updates promulgated by the Financial Accounting Standards Board, or FASB. |
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| Interim Financial Statements | Interim Financial Statements The accompanying unaudited interim financial statements have been prepared from the books and records of the Company in accordance with GAAP for interim financial information and Rule 10-01 of Regulation S-X promulgated by the United States Securities and Exchange Commission, or SEC, which permits reduced disclosures for interim periods. All adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the accompanying balance sheets, statements of operations and comprehensive loss, stockholders’ equity, and cash flows have been made. Although these interim financial statements do not include all of the information and footnotes required for complete annual financial statements, management believes the disclosures are adequate to make the information presented not misleading. Unaudited interim results of operations and cash flows are not necessarily indicative of the results that may be expected for the full year. Unaudited interim financial statements and footnotes should be read in conjunction with the audited financial statements and footnotes included in the Company’s 2022 Annual Report filed on Form 10-K. |
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| Use of Estimates | Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and contingent liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates. Estimates and assumptions are periodically reviewed and the effects of the revisions are reflected in the accompanying financial statements in the period they are determined to be necessary. |
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| Fair Value of Financial Instruments | Fair Value of Financial Instruments Management believes that the carrying amounts of the Company’s financial instruments, including cash equivalents, prepaid expenses, and accounts payable, approximate fair value due to the short-term nature of those instruments. |
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| Concentration of credit risk | Concentration of credit risk Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash and cash equivalents, and marketable securities. The Company maintains a deposit account in a federally insured financial institution in excess of federally insured limits. The Company maintains a money market account in a federally insured financial institution in excess of federally insured limits. The Company has not experienced any losses in such accounts and believes it is not exposed to significant risk on its cash and cash equivalents beyond the normal credit risk associated with commercial banking relationships. The Company maintains a portfolio of marketable debt securities, which is diversified to limit exposure related to counterparty risk, industry risk and security type risk. The Company maintains an investment policy which dictates the allocation of funds within our portfolio of marketable debt securities. The Company has not experienced any material losses in such portfolio. |
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| Cash and cash equivalents | Cash and cash equivalents The Company considers all highly-liquid investments that have maturities of three months or less when acquired to be cash equivalents. Cash equivalents as of March 31, 2023 consisted of only money market funds. Cash consists of cash deposits at banking institutions. |
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| Marketable securities | Marketable securities The Company classifies its marketable securities as available-for-sale, which include commercial paper, certificates of deposit, corporate debt securities, United States, or U.S., government debt securities and U.S. government agency securities with original maturities of greater than three months. These securities are carried at fair market value, with unrealized gains and losses reported in comprehensive loss and accumulated other comprehensive income (loss) within stockholders’ equity. Gains or losses on marketable securities sold are recognized as a component of other income, net in the statement of operations and comprehensive loss on the specific identification method. All marketable securities are available for use, as needed, to fund operations and therefore, the Company classifies all marketable securities as current assets within the balance sheet. |
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| Property and Equipment, net | Property and Equipment, net Property and equipment consists of laboratory equipment, office equipment, computer hardware and software, furniture and leasehold improvements and are recorded at cost. Maintenance and repairs that do not improve or extend the lives of the respective assets are expensed as incurred. Property and equipment are depreciated on a straight-line basis over their estimated useful lives. The Company estimates useful life on an asset by asset basis, which generally consists of three years for computer hardware and software, five years for office equipment, five years for laboratory equipment and seven years for furniture and fixtures. Leasehold improvements are amortized over the shorter of the lease term or the estimated useful life of the asset. The Company reviews long-lived assets, such as property and equipment, for impairment when events or changes in circumstances indicate the carrying amount of the assets may not be recoverable. If circumstances require a long-lived asset to be tested for possible impairment, recoverability is measured by comparison of the carrying amount of the assets to estimated future undiscounted cash flows that the assets are expected to generate. If the carrying amount of an asset exceeds its estimated future cash flows, then impairment expense is recognized for the amount by which the carrying amount of the asset exceeds the fair value of the asset. For the three months ended March 31, 2023 and 2022, no impairment expenses were recognized. |
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| Leasing | Leasing The Company evaluates leases at their inception to determine if they are an operating lease or a finance lease. As of March 31, 2023, the Company has classified all leases with terms greater than one year, as operating leases. The Company recognizes assets and liabilities for operating leases at their inception, based on the present value of all payments due under the lease agreement. The Company uses its incremental borrowing rate to determine the present value of operating leases, which is determined by referencing collateralized borrowing rates for debt instruments with terms similar to the respective lease. The Company utilizes the accounting policy election to not separate lease and non-lease components and the accounting policy election to not apply the recognition requirement to leases with a term of twelve months or less. |
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| Share-based compensation | Share-based compensation The Company measures share-based awards at grant-date fair value and records compensation expense on a straight-line basis over the vesting period of the awards. The Company’s share-based compensation consists of restricted stock units, or RSUs, and options to purchase common stock, or stock option awards. The Company uses the Black-Scholes option pricing model to value its stock option awards. Estimating the fair value of stock option awards requires the input of assumptions, including, the expected term of stock options, and stock price volatility. The assumptions used in estimating the fair value of share-based awards represent management's estimate and involve inherent uncertainties and the application of management's judgment. As a result, if factors change and management uses different assumptions, share-based compensation expense could be materially different for future awards. The expected term of the stock options is estimated using the "simplified method," as the Company has limited historical information from which to develop reasonable expectations about future exercise patterns and post-vesting employment termination behavior for its stock option grants. The simplified method is the midpoint between the vesting period and the contractual term of the option. For stock price volatility, the Company uses a composite of comparable public company data as a basis for its expected volatility to calculate the fair value of option grants. The selection of comparable public company data requires the application of management’s judgement. The Company accounts for forfeitures of RSUs and stock option awards as they occur. |
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| Research and Development | Research and Development Research and development costs are expensed as incurred and consist primarily of expenses incurred with Penn, contract research organizations, contract manufacturing organizations, internal analytical and testing activities, and employee-related expenses, including salaries, benefits, and share-based compensation. Management makes estimates of the Company’s external accrued research and development expenses, which primarily relates to contract research organizations and contract manufacturing organizations, as of each balance sheet date in the Company’s financial statements based on an estimate of progress to completion of specific tasks using facts and circumstances known to the Company at that time. The Company determines the estimates by reviewing contracts, vendor agreements and change orders, and through discussions with our internal clinical personnel and external service providers as to the progress to completion of services and the agreed-upon fee to be paid for such services. If the actual timing of the performance of services or the level of effort varies from the estimate, the Company will adjust the accrual and related expenses accordingly. |
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| Net Loss Per Share | Net Loss Per Share Basic net loss per share of common stock is computed by dividing net loss by the weighted average number of shares of common stock outstanding during each period. Diluted loss per share of common stock includes the effect, if any, from the potential exercise or conversion of securities, such as stock options, which would result in the issuance of incremental shares of common stock. For diluted net loss per share, the weighted average number of shares of common stock is the same for basic net loss per share due to the fact that when a net loss exists, dilutive securities are not included in the calculation as the impact is anti-dilutive. The following potentially dilutive securities have been excluded from the computation of diluted weighted average shares of common stock outstanding, as they would be anti-dilutive:
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| Recently Adopted Accounting Pronouncements | Recently Adopted Accounting Pronouncements In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses: Measurement of Credit Losses on Financial Instruments, or ASU 2016-13, which replaces the incurred loss impairment methodology under current U.S. GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. ASU 2016-13 was subsequently updated by ASU No. 2019-04, Codification Improvements to Topic 326, Financial Instruments—Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments, to clarify that entities should include recoveries when estimating the allowance for credit losses. This guidance was effective for the Company starting in fiscal year 2023. The Company adopted ASU 2016-13 as of January 1, 2023, which did not have a material impact on its financial statements. |
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Summary of Significant Accounting Policies (Tables) |
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| Schedule of antidilutive securities excluded from computation of earnings per share |
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Cash, Cash Equivalents and Marketable Securities (Tables) |
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| Schedule of details regarding the Company's portfolio of cash and cash equivalents |
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| Schedule of details regarding the Company's portfolio of marketable securities |
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| Contractual Final Maturities of Marketable Securities |
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Fair Value of Financial Instruments (Tables) |
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| Fair Value of Financial Instruments | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Summary of assets measured at fair value on a recurring basis |
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Property and Equipment, net (Tables) |
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| Schedule of property and equipment, net |
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Accrued Expenses and Other Current Liabilities (Tables) |
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| Accrued Expenses and Other Current Liabilities | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of accrued liabilities and other current liabilities |
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Leases (Tables) |
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| Leases | |||||||||||||||||||||||||||||||||||||||||||||
| Schedule of future minimum rental payments for operating leases |
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Share-Based Compensation (Tables) |
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| Share-Based Compensation | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of share-based compensation expense category |
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| Summary of stock option activity plan |
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| Schedule of weighted average assumptions applied to options |
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| Summary of activity related to restricted stock unit |
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Nature of Operations (Details) |
3 Months Ended |
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Mar. 31, 2023
item
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| Nature of Operations | |
| Number of lead clinical product candidates | 2 |
Risks and Liquidity (Details) - USD ($) $ in Thousands |
Mar. 31, 2023 |
Dec. 31, 2022 |
|---|---|---|
| Risks and Liquidity | ||
| Accumulated deficit | $ (526,744) | $ (492,406) |
Cash, cash equivalents and marketable securities - Portfolio of Cash and Cash Equivalents (Details) - USD ($) $ in Thousands |
Mar. 31, 2023 |
Dec. 31, 2022 |
|---|---|---|
| Cash and cash equivalents | ||
| Cost or Amortized cost | $ 33,372 | $ 34,601 |
| Fair value | 33,372 | 34,601 |
| Cash accounts in banking institutions | ||
| Cash and cash equivalents | ||
| Cost or Amortized cost | 8,070 | 7,532 |
| Fair value | 8,070 | 7,532 |
| Money market funds | ||
| Cash and cash equivalents | ||
| Cost or Amortized cost | 25,302 | 24,578 |
| Fair value | $ 25,302 | 24,578 |
| Commercial paper | ||
| Cash and cash equivalents | ||
| Cost or Amortized cost | 2,491 | |
| Fair value | $ 2,491 |
Cash, cash equivalents and marketable securities (Contractual Final Maturities of Marketable Securities) (Details) $ in Thousands |
Mar. 31, 2023
USD ($)
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|---|---|
| Debt Securities, Available-for-sale, Maturity, Allocated and Single Maturity Date, Amortized Cost [Abstract] | |
| Due within one year, Amortized Cost | $ 115,567 |
| Due after one year through five years, Amortized Cost | 19,262 |
| Total, Amortized Cost | 134,829 |
| Debt Securities, Available-for-sale, Maturity, Allocated and Single Maturity Date, Fair Value [Abstract] | |
| Due within one year, Fair Value | 115,207 |
| Due after one year through five years, Fair Value | 19,195 |
| Total, Fair Value | $ 134,402 |
Property and Equipment, net (Details) - USD ($) $ in Thousands |
3 Months Ended | ||
|---|---|---|---|
Mar. 31, 2023 |
Mar. 31, 2022 |
Dec. 31, 2022 |
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| Property, Plant and Equipment [Line Items] | |||
| Total property and equipment | $ 27,730 | $ 27,668 | |
| Accumulated depreciation | (6,131) | (5,153) | |
| Total, property plant and equipment net | 21,599 | 22,515 | |
| Depreciation expense | 978 | $ 883 | |
| Laboratory equipment | |||
| Property, Plant and Equipment [Line Items] | |||
| Total property and equipment | 10,379 | 9,972 | |
| Office equipment | |||
| Property, Plant and Equipment [Line Items] | |||
| Total property and equipment | 601 | 601 | |
| Computer hardware and software. | |||
| Property, Plant and Equipment [Line Items] | |||
| Total property and equipment | 1,128 | 1,090 | |
| Furniture and fixtures | |||
| Property, Plant and Equipment [Line Items] | |||
| Total property and equipment | 1,208 | 1,208 | |
| Leasehold improvements | |||
| Property, Plant and Equipment [Line Items] | |||
| Total property and equipment | 13,506 | 13,506 | |
| Construction in progress | |||
| Property, Plant and Equipment [Line Items] | |||
| Total property and equipment | $ 908 | $ 1,291 | |
Accrued Expenses and Other Current Liabilities (Details) - USD ($) $ in Thousands |
Mar. 31, 2023 |
Dec. 31, 2022 |
|---|---|---|
| Accrued Expenses and Other Current Liabilities | ||
| Professional fees | $ 874 | $ 602 |
| Compensation and related benefits | 3,370 | 8,446 |
| Research and development | 2,634 | 1,878 |
| Property and equipment | 29 | 85 |
| Amount due to Catalent in connection with Letter Agreements | 4,000 | |
| Accrued expenses and other current liabilities | $ 10,907 | $ 11,011 |
Leases (Details) $ in Thousands |
3 Months Ended | |
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Mar. 31, 2023
USD ($)
item
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Mar. 31, 2022
USD ($)
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| Lessee, Lease, Description [Line Items] | ||
| Rent expense | $ 800 | $ 800 |
| Future minimum lease payments | ||
| 2023 | 2,603 | |
| 2024 | 3,553 | |
| 2025 | 3,654 | |
| 2026 | 3,757 | |
| 2027 | 3,864 | |
| Thereafter | 29,679 | |
| Total Undiscounted lease payments | 47,110 | |
| Less: imputed interest | (20,158) | |
| Total Lease Liabilities | 26,952 | |
| Other current assets | ||
| Lessee, Lease, Description [Line Items] | ||
| Tenant improvements | $ 100 | |
| Maximum | Operating Leases For Office Space | ||
| Lessee, Lease, Description [Line Items] | ||
| Number of extension terms | item | 2 | |
| Extended term of new lease agreement | 5 years | |
| Tenant improvement allowance | $ 2,800 | |
| Maximum | Operating Leases For Laboratory Space | ||
| Lessee, Lease, Description [Line Items] | ||
| Tenant improvement allowance | $ 1,300 | |
Share-Based Compensation - Share-based compensation expense (Details) - USD ($) $ in Thousands |
3 Months Ended | |
|---|---|---|
Mar. 31, 2023 |
Mar. 31, 2022 |
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| Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
| Share-based compensation expense | $ 2,784 | $ 6,337 |
| Share-based compensation expense due to modifications | 0 | |
| Research and development | ||
| Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
| Share-based compensation expense | 1,628 | 2,996 |
| General and administrative | ||
| Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
| Share-based compensation expense | $ 1,156 | $ 3,341 |
Share-Based Compensation - Assumptions Used in Determining Fair Value & Early exercise of Stock Options (Details) |
3 Months Ended | |
|---|---|---|
Mar. 31, 2023 |
Mar. 31, 2022 |
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| Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions and Methodology [Abstract] | ||
| Expected volatility | 92.40% | 95.40% |
| Risk-free interest rate | 3.50% | 1.50% |
| Expected term | 6 years | 6 years |
Share-Based Compensation - Restricted Stock Units (Details) - Unvested restricted stock units - USD ($) $ / shares in Units, $ in Millions |
3 Months Ended | |
|---|---|---|
Mar. 31, 2023 |
Dec. 31, 2022 |
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| Number of shares | ||
| Unvested balance, Beginning | 1,229,166 | |
| Vested | (12,000) | |
| Forfeited | (23,500) | |
| Unvested balance, Ending | 1,193,666 | |
| Weighted average grant date fair value | ||
| Unvested balance, Weighted average grant date fair value, Beginning | $ 2.85 | $ 2.98 |
| Vested, Weighted average grant date fair value | 21.85 | |
| Forfeited, Weighted average grant date fair value | 2.40 | |
| Unvested balance, Weighted average grant date fair value, Ending | $ 2.85 | |
| Total unrecognized expense | $ 2.4 | |
| Weighted-average remaining contractual term | 1 year 6 months |