SEC Filing | Decibel Therapeutics, Inc.

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended March 31, 2021

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

For the transition period from ________________ to ________________

Commission File Number: 001-40030

Decibel Therapeutics, Inc.

(Exact name of Registrant as specified in its Charter)

Delaware	46-4198709
( State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
1325 Boylston Street, Suite 500 Boston, Massachusetts	02215
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (617) 370-8701

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common stock, par value $0.001 per share		DBTX		The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of May 10th, 2021, the registrant had 24,901,931 shares of common stock, $0.001 par value per share, outstanding.

Table of Contents

		Page
PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)	5
	Condensed Consolidated Balance Sheets	5
	Condensed Consolidated Statements of Operations and Comprehensive Loss	6
	Condensed Consolidated Statements of Convertible Preferred Stock and Stockholders’ (Deficit) Equity	7
	Condensed Consolidated Statements of Cash Flows	8
	Notes to Unaudited Condensed Consolidated Financial Statements	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	30
Item 4.	Controls and Procedures	31

PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	32
Item 1A.	Risk Factors	32
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	81
Item 3.	Defaults Upon Senior Securities	81
Item 4.	Mine Safety Disclosures	81
Item 5.	Other Information	81
Item 6.	Exhibits	81
Signatures		82

Cautionary Note Regarding Forward-Looking Statements and Industry Data

This Quarterly Report on Form 10-Q contains forward-looking statements that involve substantial risks and uncertainties. All statements, other than statements of historical fact, contained in this Quarterly Report on Form 10-Q, including statements regarding our strategy, future operations, future financial position, future revenue, projected costs, prospects, plans and objectives of management, are forward-looking statements. The words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “potential,” “predict,” “project,” “should,” “target,” “would,” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words.

The forward-looking statements in this Quarterly Report on Form 10-Q include, among other things, statements about:

•

the initiation, timing, progress and results of our current research and development programs, preclinical studies and clinical trials;

•

our estimates regarding expenses, future revenue, capital requirements and need for additional financing;

•

our plans to develop our product candidates and programs;

•

the timing of and our ability to submit applications for, obtain and maintain regulatory approvals for our product candidates;

•

our estimates regarding the potential patient populations for our programs;

•

our expectations regarding our ability to fund our operating expenses and capital expenditure requirements with our cash, cash equivalents and available-for-sale securities;

•

the potential advantages of our product candidates and programs;

•

the potential advantages of our platform;

•

the rate and degree of market acceptance and clinical utility of our product candidates and programs;

•

our estimates regarding the potential market opportunity for our product candidates and programs;

•

our commercialization, marketing and manufacturing capabilities and strategy;

•

our expectations regarding our ability to obtain and maintain intellectual property protection for our product candidates;

•

the impact of government laws and regulations;

•

our competitive position;

•

developments relating to our competitors and our industry;

•

our ability to maintain and establish collaborations or obtain additional funding;

•

the potential direct or indirect impact of the COVID-19 pandemic on our business; and

•

our expectations regarding the time during which we will be an emerging growth company under the Jumpstart our Business Startup Acts of 2012.

We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements we make. We have included important factors in the cautionary statements included in this Quarterly Report on Form 10-Q, particularly in the “Risk Factor Summary” below and in Part II, Item 1A. “Risk Factors,” that we believe could cause actual results or events to differ materially from the forward-looking statements that we make. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments we may make.

You should read this Quarterly Report on Form 10-Q and the documents that we reference herein and have filed or incorporated by reference hereto completely and with the understanding that our actual future results may be materially different from what we expect. The forward-looking statements contained in this Quarterly Report on Form 10-Q are made as of the date of this Quarterly Report on Form 10-Q, and we do not assume any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law.

This Quarterly Report on Form 10-Q includes statistical and other industry and market data that we obtained from industry publications and research, surveys and studies conducted by third parties as well as our own estimates of potential market opportunities. The market data used in this Quarterly Report on Form 10-Q involves a number of assumptions and limitations, and you are cautioned not to give undue weight to such data. Although we are responsible for the disclosure contained in this Quarterly Report on Form 10-Q and we believe the information from industry publications and other third-party sources included in this Quarterly Report on Form 10-Q is reliable, such information is inherently imprecise. Industry publications and third-party research, surveys and studies generally indicate that their information has been obtained from sources believed to be reliable, although they do not guarantee the accuracy or completeness of such information. Our estimates of the potential market opportunities for our product candidates include several key assumptions based on our industry knowledge, industry publications, third-party research and other surveys, which may be based on a small sample size and may fail to accurately reflect market opportunities. While we believe that our internal assumptions are reasonable, no independent source has verified such assumptions.

Risk Factor Summary

Our business is subject to a number of risks of which you should be aware before making an investment decision. Below we summarize what we believe to be the principal risks facing our business, in addition to the risks described more fully in Item 1A, “Risk Factors” of Part II of this Quarterly Report on Form 10-Q and other information included in this report. The risks and uncertainties described below are not the only risks and uncertainties we face. Additional risks and uncertainties not presently known to us or that we presently deem less significant may also impair our business operations.

If any of the following risks occurs, our business, financial condition and results of operations and future growth prospects could be materially and adversely affected, and the actual outcomes of matters as to which forward-looking statements are made in this report could be materially different from those anticipated in such forward-looking statements.

•

We have incurred significant losses since our inception, have no products approved for sale and we expect to incur substantial losses for the foreseeable future and may never achieve or maintain profitability;

•

We will need substantial additional funding. If we are unable to raise capital when needed, we could be forced to delay, reduce or eliminate our research and development programs or commercialization efforts;

•

The COVID-19 pandemic has disrupted our ongoing Phase 1b clinical trial of DB-020 and may affect our ability to initiate and complete preclinical studies, delay the initiation of our planned clinical trials or future clinical trials, disrupt regulatory activities, disrupt our manufacturing and supply chain or have other adverse effects on our business and operations. In addition, this pandemic has caused substantial disruption in the financial markets and may adversely impact economies worldwide, both of which could result in adverse effects on our business, operations and ability to raise capital;

•

Our limited operating history may make it difficult for stockholders to evaluate the success of our business to date and to assess our future viability;

•

We are very early in our development efforts. Our business is dependent on our ability to advance our lead gene therapy product candidate, DB-OTO, and our other current and future product candidates through preclinical studies and clinical trials, obtain marketing approval and ultimately commercialize them. If we are unable to complete clinical development, obtain regulatory approval for or commercialize our product candidates, or experience significant delays in doing so, our business will be materially harmed;

•

Clinical development involves a lengthy and expensive process with uncertain outcomes, and results of earlier studies and trials may not be predictive of future clinical trial results. If our preclinical studies and clinical trials are not sufficient to support regulatory approval of any of our product candidates, we may incur additional costs or experience delays in completing, or ultimately be unable to complete, the development of such product candidate;

•

Gene therapy is an emerging field of drug development that poses many risks. We have only limited prior experience in gene therapy research and no prior experience in gene therapy clinical development. Our lack of experience and the limited patient populations for our gene therapy programs may limit our ability to be successful or may delay our development efforts;

•

If we experience delays or difficulties in participant enrollment for clinical trials, our research and development efforts and the receipt of necessary regulatory approvals could be significantly delayed or prevented;

•

Our product candidates or the process for administering our product candidates may cause undesirable side effects or have other properties that could delay or prevent their regulatory approval, limit their commercial potential or result in significant negative consequences following any potential marketing approval;

•

The manufacture of gene therapy products is complex and difficult and is subject to a number of scientific and technical risks, some of which are common to the manufacture of drugs and biologics and others of which are unique to the manufacture of gene therapies. We could experience manufacturing problems that result in delays in our gene therapy development or commercialization programs;

•

We rely, and expect to continue to rely, on third parties to conduct some or all aspects of our product manufacturing, research, preclinical and clinical testing, and these third parties may not perform satisfactorily;

•

We face substantial competition, which may result in others discovering, developing or commercializing products before or more successfully than we do; and

•

Our rights to develop and commercialize any product candidates are subject and may in the future be subject, in part, to the terms and conditions of licenses granted to us by third parties. If we fail to comply with our obligations under our current or future intellectual property license agreements or otherwise experience disruptions to our business relationships with our current or any future licensors, we could lose intellectual property rights that are important to our business.

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

DECIBEL THERAPEUTICS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In thousands, except share and per share data)

	March 31, 2021			December 31, 2020
Assets
Current assets:
Cash and cash equivalents	$	52,239		$	27,742
Available-for-sale securities		129,839			26,568
Accounts receivable from related party		4,237			1,237
Prepaid expenses and other current assets		4,419			2,281
Total current assets		190,734			57,828
Available-for-sale securities, long-term		8,999			—
Property and equipment, net		5,975			6,337
Other assets		1,378			3,120
Total assets	$	207,086		$	67,285
Liabilities, Convertible Preferred Stock and Stockholders’ (Deficit) Equity
Current liabilities:
Accounts payable	$	1,000		$	2,131
Accrued expenses and other current liabilities		3,835			5,665
Deferred collaboration liability, current		9,725			10,968
Deferred rent and lease incentive obligation, current		631			610
Total current liabilities		15,191			19,374
Long-term liabilities:
Deferred collaboration liability, long term		6,515			4,177
Deferred rent and lease incentive obligation, long term		4,738			4,901
Other long-term liabilities		376			523
Total liabilities		26,820			28,975
Commitments and contingencies (Note 7)
Series A convertible preferred stock, $0.001 par value; no shares authorized, issued and outstanding at March 31, 2021; 57,758,734 shares authorized, issued and outstanding at December 31, 2020; aggregate liquidation preference of $40,284 at December 31, 2020		—			16,176
Series B convertible preferred stock, $0.001 par value; no shares authorized, issued and outstanding at March 31, 2021; 12,500,000 shares authorized, issued and outstanding at December 31, 2020; aggregate liquidation preference of $16,334 at December 31, 2020		—			5,700
Series C convertible preferred stock, $0.001 par value; no shares authorized, issued and outstanding at March 31, 2021; 37,528,581 shares authorized, issued and outstanding at December 31, 2020; aggregate liquidation preference of $45,457 at December 31, 2020		—			16,759
Series D convertible preferred stock, $0.001 par value; no shares authorized, issued and outstanding at March 31, 2021; 47,610,763 shares authorized, 31,740,554 shares issued and outstanding at December 31, 2020; aggregate liquidation preference of $55,509 at December 31, 2020		—			54,456
Stockholders’ (deficit) equity:
Preferred stock, $0.001 par value; 5,000,000 shares authorized, no shares issued and outstanding at March 31, 2021; no shares authorized, issued and outstanding at December 31, 2020		—			—
Common stock, $0.001 par value; 200,000,000 shares authorized, 24,901,577 shares issued and 24,859,038 outstanding at March 31, 2021; 115,000,000 shares authorized, 573,793 shares issued and 521,052 shares outstanding at December 31, 2020		25			1
Additional paid-in capital		353,821			107,908
Accumulated other comprehensive loss		(21	)		(1	)
Accumulated deficit		(173,559	)		(162,689	)
Total stockholders’ equity (deficit)		180,266			(54,781	)
Total liabilities, convertible preferred stock and stockholders’ equity (deficit)	$	207,086		$	67,285

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

DECIBEL THERAPEUTICS, INC.

CONDENSED conSOLIDATED Statements of Operations and Comprehensive Loss

(Unaudited)

(In thousands, except share and per share data)

	Three Months Ended March 31,
	2021			2020
Operating expenses:
Research and development	$	6,020		$	7,436
General and administrative		4,883			4,178
Total operating expenses		10,903			11,614
Loss from operations		(10,903	)		(11,614	)
Other income:
Interest income		33			79
Total other income, net		33			79
Net loss	$	(10,870	)	$	(11,535	)
Cumulative dividends on convertible preferred stock		(2,309	)		(2,749	)
Net loss attributable to common stockholders	$	(13,179	)	$	(14,284	)
Net loss per share attributable to common stockholders, basic and diluted	$	(1.09	)	$	(31.84	)
Weighted average shares of common stock outstanding, basic and diluted		12,105,464			448,616
Comprehensive loss:
Net loss	$	(10,870	)	$	(11,535	)
Other comprehensive loss:
Unrealized loss on available-for-sale securities, net of tax of $0		(20	)		(9	)
Total other comprehensive loss		(20	)		(9	)
Comprehensive loss	$	(10,890	)	$	(11,544	)

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

DECIBEL THERAPEUTICS, INC.

CONDENSED CONSOLIDATED Statements of CONVERTIBLE PREFERRED STOCK AND Stockholders’ (Deficit) EQUITY

(Unaudited)

(In thousands, except share data)

	Series A Convertible Preferred Stock						Series B Convertible Preferred Stock						Series C Convertible Preferred Stock						Series D Convertible Preferred Stock						Common Stock				Additional Paid-In		Accumulated Other Comprehensive			Accumulated			Total Stockholders’ (Deficit)
	Shares			Amount			Shares			Amount			Shares			Amount			Shares			Amount			Shares		Amount		Capital		(Loss) Income			Deficit			Equity
Balance at December 31, 2019		57,758,734		$	57,682			12,500,000		$	24,957			27,528,581		$	55,005			—		$	—			434,942	$	—		1,546	$	10		$	(123,352	)	$	(121,796	)
Vesting of restricted common stock		—			—			—			—			—			—			—			—			21,872		—		11		—			—			11
Stock-based compensation expense		—			—			—			—			—			—			—			—			—		—		225		—			—			225
Unrealized loss on available-for-sale securities		—			—			—			—			—			—			—			—			—		—		—		(9	)		—			(9	)
Net loss		—			—			—			—			—			—			—			—			—		—		—		—			(11,535	)		(11,535	)
Balance at March 31, 2020		57,758,734		$	57,682			12,500,000		$	24,957			27,528,581		$	55,005			—		$	—			456,814	$	—	$	1,782	$	1		$	(134,887	)	$	(133,104	)
Balance at December 31, 2020		57,758,734		$	16,176			12,500,000		$	5,700			37,528,581		$	16,759			31,740,554		$	54,456			521,052	$	1	$	107,908	$	(1	)	$	(162,689	)	$	(54,781	)
Issuance of common stock upon exercise of stock options		—			—			—			—			—			—			—			—			3,773		—		17		—			—			17
Vesting of restricted common stock		—			—			—			—			—			—			—			—			10,202		—		4		—			—			4
Stock-based compensation expense		—			—			—			—			—			—			—			—			—		—		646		—			—			646
Issuance of Series D convertible preferred stock		—			—			—			—			—			—			15,870,209			27,400			—		—		—		—			—			—
Conversion of convertible preferred stock into common stock upon completion of initial public offering		(57,758,734	)		(16,176	)		(12,500,000	)		(5,700	)		(37,528,581	)		(16,759	)		(47,610,763	)		(81,856	)		16,662,011		17		120,474		—			—			120,491
Issuance of common stock upon completion of initial public offering, net of commissions, underwriting discounts and offering costs of $13,137		—			—			—			—			—			—			—			—			7,662,000		7		124,772		—			—			124,779
Unrealized loss on available-for-sale securities		—			—			—			—			—			—			—			—			—		—		—		(20	)		—			(20	)
Net loss		—			—			—			—			—			—			—			—			—		—		—		—			(10,870	)		(10,870	)
Balance at March 31, 2021		—		$	—			—		$	—			—		$	—			—		$	—			24,859,038	$	25	$	353,821	$	(21	)	$	(173,559	)	$	180,266

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

Decibel Therapeutics, Inc.

CONDENSED CONSOLIDATED Statements of Cash Flows

(Unaudited)

(In thousands)

	Three Months Ended March 31,
	2021			2020
Operating activities
Net loss	$	(10,870	)	$	(11,535	)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation expense		646			225
Depreciation		427			487
Amortization (accretion) of available-for-sale securities		88			(44	)
Changes in operating assets and liabilities:
Accounts receivable from related party		(3,000	)		—
Prepaid expenses and other current assets		(2,138	)		(273	)
Accounts payable		(1,131	)		(57	)
Accrued expenses and other current liabilities		(1,180	)		(186	)
Deferred rent and lease incentive		(142	)		(119	)
Deferred collaboration liability		1,095			(589	)
Other long-term liabilities		(101	)		185
Net cash used in operating activities		(16,306	)		(11,906	)
Investing activities
Purchases of available-for-sale securities		(116,156	)		—
Proceeds from maturities of available-for-sale securities		3,778			11,750
Purchases of property and equipment		(65	)		(56	)
Net cash (used in) provided by investing activities		(112,443	)		11,694
Financing activities
Proceeds from the issuance of Series D convertible preferred stock		27,400			—
Proceeds from issuance of common stock upon completion of initial public offering net of commissions and underwriting discounts		128,240			—
Payment of initial public offering costs		(2,463	)		—
Proceeds from the exercise of stock options		17			—
Principal payments on equipment financing		(46	)		—
Net cash provided by financing activities		153,148			—
Net increase (decrease) in cash, cash equivalents and restricted cash		24,399			(212	)
Cash, cash equivalents and restricted cash at beginning of period		29,218			20,039
Cash, cash equivalents and restricted cash at end of period	$	53,617		$	19,827
Supplemental disclosure of non-cash activities:
Vesting of early exercised restricted stock	$	4		$	11
Initial public offering costs included in accrued expenses	$	792		$	—

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

Decibel Therapeutics, Inc.

(Unaudited)

Notes to CONDENSED CONSOLIDATED Financial Statements

1. Nature of the Business

Decibel Therapeutics, Inc. (the “Company”) was formed on November 26, 2013. The Company is a clinical-stage biotechnology company dedicated to discovering and developing transformative treatments for hearing and balance disorders, one of the largest areas of unmet need in medicine. The Company aims to restore and improve hearing and balance through the restoration and regeneration of functional hair cells and non-sensory support cells within the inner ear.

On October 30, 2020, the Company’s board of directors approved a 1-for-10 reverse stock split of the Company’s common stock, par value $0.001 per share. On February 5, 2021, the Company’s board of directors approved a 1-for-5.3 reverse stock split of the Company’s common stock. All share and per share amounts in the condensed consolidated financial statements and notes thereto have been retroactively adjusted for all periods presented to give effect to both reverse stock splits.

Initial Public Offering

On February 17, 2021, the Company completed an initial public offering (the “IPO”), issuing and selling 7,062,000 shares of common stock at a public offering price of $18.00 per share, and on February 24, 2021, the Company issued and sold an additional 600,000 shares pursuant to the underwriters’ partial exercise of their option to purchase additional shares. The aggregate net proceeds received by the Company from the offering were approximately $124.8 million. Upon closing of the IPO, all outstanding shares of convertible preferred stock automatically converted into shares of common stock.

Liquidity

Since its inception, the Company’s operations have been focused on organizing and staffing, business planning, raising capital, establishing the Company’s intellectual property portfolio and performing research and development of its product candidates, programs and platform.

The Company is subject to risks and uncertainties common to early-stage companies in the biotechnology industry, including but not limited to, risks associated with completing preclinical studies and clinical trials, obtaining regulatory approvals for product candidates, development by competitors of new biopharmaceutical products, dependence on key personnel, protection of proprietary technology, compliance with government regulations and the ability to secure additional capital to fund operations. Programs currently under development will require significant additional research and development efforts, including preclinical and clinical testing and will need to obtain regulatory approval prior to commercialization. These efforts require significant amounts of additional capital, adequate personnel and infrastructure and extensive compliance-reporting capabilities. Even if the Company’s product development efforts are successful, it is uncertain when, if ever, the Company will realize revenue from product sales.

As of March 31, 2021, the Company had cash, cash equivalents and available-for-sale securities of $191.1 million. The Company has determined that its existing capital resources will be sufficient to meet its projected operating expenses and capital expenditure requirements for at least twelve months from the date of issuance of these condensed consolidated financial statements. The Company expects to experience negative cash flows from operations and net losses for the foreseeable future as it continues to invest significantly in research and development of its product candidates, preclinical and clinical development and platform. Management’s conclusion with respect to its ability to fund its operations is based on estimates that are subject to risks and uncertainties that may prove to be incorrect. If actual results differ from management’s estimates, the Company may be required to seek additional funding or curtail planned activities to reduce operating expenses, which may have an adverse impact on the Company’s ability to achieve its business objectives.

Impact of the COVID-19 Pandemic

The worldwide COVID-19 pandemic has affected and may affect in the future the Company’s ability to initiate and complete preclinical studies, delay the initiation and completion of the Company’s current and planned clinical trials, disrupt regulatory activities or have other adverse effects on the Company’s business, results of operations, financial condition and prospects. In addition, the pandemic has caused substantial disruption in the financial markets and may adversely impact economies worldwide, both of which could adversely affect the Company’s business, operations and ability to raise funds to support its operations.

The Company is following, and plans to continue to follow, recommendations from federal, state and local governments regarding workplace policies, practices and procedures. In response to the direction from state and local governmental authorities, the

Company has restricted access to its facility to those individuals who must perform critical research, translational medicine and laboratory support activities that must be completed on site, limited the number of such people that can be present at its facility at any one time and required that most of its employees work remotely. In addition, screening and enrollment in the Company’s ongoing Phase 1b clinical trial of DB-020 in Australia and the United States have been adversely impacted by the COVID-19 pandemic. Patient screening and enrollment were paused in the second quarter of 2020 in both Australia and the United States, and screening for enrollment did not resume until early in the third quarter of 2020 in Australia and early in the fourth quarter of 2020 in the United States. The Company has also experienced delays in site start-up and the withdrawal of some sites in the United States. In addition, the Company and the third-party manufacturers, contract research organizations and academic collaborators that the Company engages have faced in the past and may face in the future disruptions that could affect its ability to initiate and complete preclinical studies or clinical trials, including disruptions in procuring items that are essential for its research and development activities, such as, for example, raw materials used in the manufacture of its product candidates, laboratory supplies for its preclinical studies and clinical trials, or animals that are used for preclinical testing, in each case, for which there may be shortages because of ongoing efforts to address the COVID-19 pandemic.

The Company cannot be certain what the overall impact of the COVID-19 pandemic will be on its business, and the pandemic has the potential to adversely affect the Company’s business, financial condition, results of operations and prospects.

2. Summary of Significant Accounting Policies

Basis of Presentation

These condensed consolidated financial statements have been prepared in conformity with the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim consolidated financial statements. Certain information and footnote disclosures normally included in the financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been condensed or omitted pursuant to such rules and regulations. These condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020. Any reference in these notes to applicable guidance is meant to refer to the authoritative GAAP as found in the Accounting Standards Codification (“ASC”) and Accounting Standards Updates (“ASUs”) of the Financial Accounting Standards Board (“FASB”).

Unaudited Interim Condensed Consolidated Financial Information

The accompanying condensed consolidated balance sheet as of March 31, 2021, the condensed consolidated statements of operations and comprehensive loss and statements of cash flows for the three months ended March 31, 2021 and 2020 and the condensed consolidated statements of convertible preferred stock and stockholders’ (deficit) equity for the three months ended March 31, 2021 and 2020 are unaudited. The financial data and other information contained in the notes thereto as of and for the three months ended March 31, 2021 and 2020 are also unaudited. The condensed consolidated balance sheet data as of December 31, 2020 was derived from the Company’s audited consolidated financial statements for the year ended December 31, 2020.

The unaudited interim condensed consolidated financial statements have been prepared on the same basis as the audited annual consolidated financial statements, and in the opinion of management, reflect all adjustments, which include only normal recurring adjustments necessary for the fair presentation of the Company’s financial position as of March 31, 2021 and the results of its operations and cash flows for the three months ended March 31, 2021 and 2020. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements as of and for the year ended December 31, 2020, and the notes thereto.

The results for the three months ended March 31, 2021 are not necessarily indicative of results to be expected for the year ending December 31, 2021, or any other interim periods, or any future year or period.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts in the financial statements and accompanying notes. Actual results could materially differ from those estimates. Management considers many factors in selecting appropriate financial accounting policies and controls, and in developing the estimates and assumptions that are used in the preparation of these condensed consolidated financial statements. Management must apply significant judgment in this process. In addition, other factors may affect estimates, including expected business and operational changes, sensitivity and volatility associated with the assumptions used in developing estimates, and whether historical trends are expected to be representative of future trends. The estimation process often may yield a range of potentially reasonable estimates of the ultimate future outcomes and management must select an amount that falls within that range of reasonable estimates. Significant estimates and assumptions reflected in these condensed consolidated financial statements include, but are not limited to, the valuation

of common stock awards, the estimated cost to perform research which is an input into the measurement of research and development expenses recognized under the Company’s collaboration agreement with Regeneron Pharmaceuticals, Inc. (“Regeneron”), as described below, and the accrual of research and development expenses. Estimates are periodically reviewed considering changes in circumstances, facts and historical experience. Actual results may differ from the Company’s estimates.

Cash, Cash Equivalents and Restricted Cash

Cash equivalents are short-term, highly liquid investments that are readily convertible into cash, with original maturities of three months or less. Cash equivalents are mainly comprised of corporate debt securities and money market accounts invested in U.S. Treasury securities.

Restricted cash is comprised of deposits with a financial institution used to collateralize letters of credit related to the Company’s lease arrangements. Restricted cash is presented as a component of other assets on the condensed consolidated balance sheets.

Cash, cash equivalents and restricted cash consisted of the following (in thousands):

	March 31,
	2021		2020
Cash and cash equivalents	$	52,239	$	18,388
Restricted cash		1,378		1,439
Total cash, cash equivalents and restricted cash as shown on the statement of cash flows	$	53,617	$	19,827

Restricted cash decreased by $0.1 million during the three months ended March 31, 2021 due to a reduction in deposits with a financial institution used to collateralize letters of credit related to the Company’s lease arrangements.

Fair Value Measurements

Certain assets and liabilities of the Company are carried at fair value under GAAP. The fair values of the Company’s financial assets and liabilities reflect the Company’s estimate of the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. Financial assets and liabilities carried at fair value are to be classified and disclosed in one of the following three levels of the fair value hierarchy, of which the first two are considered observable and the last is considered unobservable:

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Level 1—Quoted prices in active markets for identical assets or liabilities.

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Level 2—Observable inputs (other than Level 1 quoted prices), such as quoted prices in active markets for similar assets or liabilities, quoted prices in markets that are not active for identical or similar assets or liabilities, or other inputs that are observable or can be corroborated by observable market data.

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Level 3—Unobservable inputs that are supported by little or no market activity that are significant to determining the fair value of the assets or liabilities, including pricing models, discounted cash flow methodologies and similar techniques.

To the extent the 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 in 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.

The carrying amounts reflected in the consolidated balance sheets for cash, accounts receivable, prepaid expenses and other current assets, accounts payable and accrued expenses approximate their fair values due to the short-term nature of these assets and liabilities. Items measured at fair value on a recurring basis include cash equivalents and available-for-sales securities as of March 31, 2021 and December 31, 2020.

Deferred Offering Costs

The Company capitalizes certain legal, professional, accounting and other third-party fees that are directly associated with in-process equity financings as deferred offering costs until the related financings are consummated. After consummation of the equity

financing, such costs are reclassified as a reduction to additional paid-in capital generated as a result of the related financing. Should an in-process equity financing be abandoned, the deferred offering costs would be expensed immediately as a charge to operating expenses in the condensed consolidated statements of operations and comprehensive loss. Deferred offering costs are presented as a component of other assets on the condensed consolidated balance sheets. The Company had no deferred offering costs as of March 31, 2021. As of December 31, 2020, the Company capitalized $1.6 million of deferred offering costs related to the IPO.

Recently Issued Accounting Pronouncements

Refer to Note 2 of the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020 for the Company’s summary of recently issued accounting pronouncements that have not yet been adopted.

3. Fair Value Measurements

The Company measures the following financial assets at fair value on a recurring basis. The fair value of these assets was determined as follows (in thousands):

	Balance at March 31, 2021		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Cash equivalents:
Corporate debt securities	$	27,360	$	—	$	27,360	$	—
Money market mutual funds		12,587		12,587		—		—
Commercial paper		7,248		—		7,248		—
Total cash equivalents	$	47,195	$	12,587	$	34,608	$	—
Available-for-sale securities:
Commercial paper	$	84,231	$	—	$	84,231	$	—
Corporate debt securities		39,838		—		39,838		—
US Treasury securities		3,015		—		3,015		—
Certificates of deposit		2,755		—		2,755		—
Total available-for-sale securities	$	129,839	$	—	$	129,839	$	—
Available-for-sale securities, long-term:
US Treasury securities	$	5,001	$	—	$	5,001	$	—
Agency bonds		3,998		—		3,998		—
Total available-for-sale securities, long-term	$	8,999	$	—	$	8,999