UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
OR
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:
(Exact name of Registrant as specified in its Charter)
( State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer |
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Registrant’s telephone number, including area code: (
Securities registered pursuant to Section 12(b) of the Act:
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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.
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).
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.
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Emerging growth company |
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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 1, 2023, the registrant had
Table of Contents
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PART I. |
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Item 1. |
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2 |
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Condensed Consolidated Statements of Operations and Comprehensive Loss |
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4 |
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5 |
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Notes to Unaudited Condensed Consolidated Financial Statements |
6 |
Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
20 |
Item 3. |
30 |
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Item 4. |
30 |
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PART II. |
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Item 1. |
31 |
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Item 1A. |
31 |
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Item 2. |
82 |
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Item 3. |
82 |
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Item 4. |
82 |
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Item 5. |
82 |
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Item 6. |
83 |
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84 |
i
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:
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.
1
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.
2
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 Part II, Item 1A, “Risk Factors” 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 occur, 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.
1
PART I—FINANCIAL INFORMATION
Item 1. Financial Statements.
DECIBEL THERAPEUTICS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands, except share and per share data)
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March 31, |
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December 31, |
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Assets |
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Current assets: |
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Cash and cash equivalents |
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$ |
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$ |
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Available-for-sale securities |
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Accounts receivable from related party |
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— |
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Prepaid expenses and other current assets |
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Total current assets |
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Property and equipment, net |
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Right-of-use asset, operating |
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Right-of-use asset, finance |
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— |
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Other assets |
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Total assets |
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$ |
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$ |
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Liabilities and Stockholders’ Equity |
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Current liabilities: |
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Accounts payable |
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$ |
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$ |
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Accrued expenses and other current liabilities |
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Deferred collaboration liability, current |
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Operating lease liability, current |
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Finance lease liability, current |
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— |
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Total current liabilities |
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Long-term liabilities: |
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Deferred collaboration liability, long-term |
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Operating lease liability, long-term |
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Other long-term liabilities |
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Total liabilities |
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Stockholders’ equity: |
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Preferred stock, $ |
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Common stock, $ |
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Additional paid-in capital |
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Accumulated other comprehensive loss |
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Accumulated deficit |
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( |
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Total stockholders’ equity |
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Total liabilities and stockholders’ equity |
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$ |
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$ |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
2
DECIBEL THERAPEUTICS, INC.
CONDENSED conSOLIDATED Statements of Operations and Comprehensive Loss
(Unaudited)
(In thousands, except share and per share data)
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Three Months Ended |
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2023 |
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2022 |
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Operating expenses: |
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Research and development |
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$ |
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$ |
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General and administrative |
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Total operating expenses |
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Loss from operations |
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Other income: |
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Interest income |
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Total other income, net |
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Net loss before provision for income taxes |
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Provision for income taxes |
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( |
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Net loss |
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$ |
( |
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$ |
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Net loss per share, basic and diluted |
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$ |
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$ |
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Weighted average shares of common stock outstanding, basic and diluted |
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Comprehensive loss: |
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Net loss |
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$ |
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$ |
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Other comprehensive income (loss): |
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Unrealized gain (loss) on available-for-sale securities, net of tax of $ |
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Total other comprehensive income (loss) |
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( |
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Comprehensive loss |
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$ |
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$ |
( |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
3
DECIBEL THERAPEUTICS, INC.
CONDENSED CONSOLIDATED Statements of Stockholders’ EQUITY
(Unaudited)
(In thousands, except share data)
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Common Stock |
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Additional |
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Accumulated |
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Accumulated |
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Total |
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Shares |
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Amount |
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Capital |
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Loss |
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Deficit |
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Equity |
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Balance at December 31, 2021 |
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$ |
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$ |
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$ |
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$ |
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$ |
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Vesting of restricted common stock |
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— |
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— |
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— |
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— |
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— |
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Stock-based compensation expense |
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— |
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— |
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— |
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— |
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Unrealized loss on available-for-sale |
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— |
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— |
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— |
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( |
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— |
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( |
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Net loss |
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— |
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— |
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— |
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— |
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( |
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( |
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Balance at March 31, 2022 |
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$ |
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$ |
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$ |
( |
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$ |
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$ |
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Balance at December 31, 2022 |
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$ |
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$ |
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$ |
( |
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$ |
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$ |
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Stock-based compensation expense |
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— |
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— |
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— |
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— |
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Issuance of common stock, net of issuance costs of less than $ |
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— |
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— |
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— |
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Unrealized gain on available-for-sale |
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— |
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— |
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— |
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— |
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Net loss |
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— |
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— |
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— |
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— |
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( |
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Balance at March 31, 2023 |
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$ |
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$ |
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$ |
( |
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$ |
( |
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$ |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
4
Decibel Therapeutics, Inc.
CONDENSED CONSOLIDATED Statements of Cash Flows
(Unaudited)
(In thousands)
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Three Months Ended |
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2023 |
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2022 |
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Operating activities |
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Net loss |
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$ |
( |
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$ |
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Adjustments to reconcile net loss to net cash used in operating activities: |
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Stock-based compensation expense |
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Depreciation |
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Non-cash lease expense |
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(Accretion)/Amortization of available-for-sale securities |
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Changes in operating assets and liabilities: |
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Accounts receivable from related party |
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( |
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Prepaid expenses and other current assets |
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( |
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( |
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Accounts payable |
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( |
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Accrued expenses and other current liabilities |
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( |
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( |
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Deferred collaboration liability |
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( |
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Operating lease liability |
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( |
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( |
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Other long-term liabilities |
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( |
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( |
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Net cash used in operating activities |
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( |
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( |
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Investing activities |
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Purchases of available-for-sale securities |
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( |
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Proceeds from maturities and redemptions of available-for-sale securities |
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Purchases of property and equipment |
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( |
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( |
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Net cash provided by (used in) investing activities |
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( |
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Financing activities |
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Proceeds from equity offerings, net of issuance costs |
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— |
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Principal payments on finance lease liability |
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( |
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( |
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Net cash provided by (used in) financing activities |
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( |
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Net increase (decrease) in cash, cash equivalents and restricted cash |
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Cash, cash equivalents and restricted cash at beginning of period |
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Cash, cash equivalents and restricted cash at end of period |
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$ |
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$ |
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Supplemental disclosure of non-cash activities: |
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Operating lease right-of-use asset recognized upon adoption of ASC 842 |
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$ |
— |
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$ |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
5
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.
The Company is leveraging its platform to advance its pipeline of gene therapy product candidates and programs that are designed to selectively replace genes for the treatment of congenital, monogenic hearing loss and to regenerate inner ear hair cells for the treatment of acquired hearing and balance disorders. The Company is developing its lead gene therapy product candidate, DB-OTO, to provide durable, high quality, physiological hearing to individuals with profound, congenital hearing loss caused by mutations of the otoferlin gene. In addition to DB-OTO, the Company is advancing AAV.103 to restore hearing in individuals with mutations in the gap junction beta-2 gene, AAV.104 to restore hearing in individuals with mutations in the stereocilin gene and AAV.105 to restore hearing in individuals with another single gene mutation. The Company also has gene therapy programs to convert supporting cells, the cells adjacent to hair cells, into either cochlear or vestibular hair cells in order to restore hearing or balance function. In addition to its gene therapy programs, the Company is developing DB-020 for the prevention of cisplatin-induced hearing loss.
Risks and Uncertainties
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.
The COVID-19 pandemic has, and other pandemics may in the future, disrupt the Company’s ability to initiate and complete preclinical studies and clinical trials, disrupt regulatory activities, disrupt the Company’s manufacturing and supply chain activities or have other adverse effects on the Company’s business and operations. In addition, such pandemics may adversely impact economies worldwide, which could have an adverse impact on the Company’s business, operations and ability to raise capital.
In addition, U.S. and global financial markets have experienced disruption due to various macroeconomic and geopolitical events. These include, but are not limited to, rising inflation, the risk of a recession and other ongoing global conflicts. The Company cannot predict at this time to what extent it and its collaborators, employees, suppliers, contract manufacturers and/or vendors could potentially be negatively impacted by these events.
Liquidity
In accordance with Accounting Standards Update (“ASU”) No. 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern (Subtopic 205-40) (“ASU 2014-15”), management must evaluate whether there are conditions or events, when 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. This evaluation initially does not take into consideration the potential mitigating effect of management’s plans that have not been fully implemented as of the date the financial statements are issued. When substantial doubt exists under this methodology, management evaluates whether the mitigating effect of its plans sufficiently alleviates substantial doubt about the company’s ability to continue as a going concern. The mitigating effect of management’s plans, however, is only considered if both (1) it is probable that the plans will be effectively implemented within one year after the date that the financial statements are issued, and (2) it is probable that the plans, when implemented, will mitigate the relevant conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date that the financial statements are issued. Generally, to be considered probable of being effectively implemented, the plans must have been approved before the date that the financial statements are issued.
6
Since inception, the Company has incurred recurring losses and negative cash flows from operations in each period and on an aggregate basis. As of March 31, 2023, the Company had an accumulated deficit of $
As of March 31, 2023, the Company had $
The accompanying condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the ordinary course of business. The condensed consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of this uncertainty.
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 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, 2022. 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 ASUs of the Financial Accounting Standards Board (“FASB”).
Principles of Consolidation
The accompanying condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, Decibel Securities Corporation and Decibel Therapeutics Australia Pty. All intercompany balances and transactions have been eliminated in consolidation.
Unaudited Interim Condensed Consolidated Financial Information
The accompanying condensed consolidated balance sheet as of March 31, 2023, the condensed consolidated statements of operations and comprehensive loss for the three months ended March 31, 2023 and 2022, the condensed consolidated statements of stockholders’ equity for the three months ended March 31, 2023 and 2022 and the condensed consolidated statements of cash flows for the three months ended March 31, 2023 and 2022 are unaudited. The financial data and other information contained in the notes thereto as of and for the three months ended March 31, 2023 and 2022 are also unaudited. The condensed consolidated balance sheet data as of December 31, 2022 were derived from the Company’s audited consolidated financial statements for the year ended December 31, 2022.
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, 2023, the results of its operations for the three months ended March 31, 2023 and 2022 and cash flows for the three months ended March 31, 2023 and 2022. 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, 2022 and the notes thereto.
The results for the three months ended March 31, 2023 are not necessarily indicative of results to be expected for the year ending December 31, 2023, or any other interim periods, or any future year or period.
7
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 estimated cost to perform research which is an input into the measurement of research and development expenses recognized under the Company’s license and collaboration agreement (the “Regeneron Agreement”) with Regeneron Pharmaceuticals, Inc. (“Regeneron”) as described below, the accrual of research and development expenses, stock-based compensation expenses, leases and income taxes. 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 money market accounts invested in U.S. Treasury securities and agency bonds.
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 prepaid expenses and other current assets and other assets on the condensed consolidated balance sheets.
Cash, cash equivalents and restricted cash consisted of the following (in thousands):
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March 31, |
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2023 |
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2022 |
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Cash and cash equivalents |
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$ |
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$ |
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||
Restricted cash, current |
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— |
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Restricted cash, long-term |
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Total cash, cash equivalents and restricted cash as shown on the statement |
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$ |
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$ |
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Available-For-Sale Securities
The Company classifies all of its investments as available-for-sale securities and reports them at fair market value using quoted prices in active markets for similar securities. The cost of securities sold is determined on a specific identification basis, and realized gains and losses are included as a component of other income within the condensed consolidated statements of operations and comprehensive loss.
The Company assesses its available-for-sale securities under the available-for-sale security impairment model in ASU 2016-13 (as defined below) as of each reporting date in order to determine if a portion of any decline in fair value below carrying value is the result of a credit loss for its available-for-sale securities. The Company records credit losses for its available-for-sale securities in the condensed consolidated statements of operations and comprehensive loss as credit loss expense, which is limited to the difference between the fair value and the amortized cost of the security. To date, the Company has not recorded any credit losses on its available-for-sale securities. Declines in fair value below carrying value attributable to non-credit related factors are recorded as accumulated other comprehensive loss, which is a separate component of stockholders’ equity.
Accrued interest receivable related to the Company’s available-for-sale securities is presented within prepaid expenses and other current assets on the Company’s condensed consolidated balance sheets and was $
8
The Company classifies its available-for-sale securities as current assets on the condensed consolidated balance sheets if they mature within one year from the balance sheet date, and long-term available-for-sale securities if they mature longer than one year from the balance sheet date.
Concentrations of Credit Risk and Significant Suppliers
Financial instruments that potentially expose the Company to credit risk primarily consist of cash, cash equivalents, restricted cash and available-for-sale securities. The Company maintains its cash, cash equivalents, restricted cash and available-for-sale securities balances with accredited financial institutions and, consequently, the Company does not believe it is subject to unusual credit risk beyond the normal credit risk associated with commercial banking relationships.
The Company’s cash management and investment policy limits investment instruments to U.S. Treasury and government securities with the objective to preserve capital and to maintain liquidity until the funds can be used in business operations. Bank accounts in the United States are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $
The Company is dependent on third-party manufacturers to supply products for research and development activities in its programs. In particular, the Company relies and expects to continue to rely on a small number of manufacturers to supply it with its requirements for the active pharmaceutical ingredients, other raw materials and formulated drugs related to these programs. These programs could be adversely affected by a significant interruption in the supply of active pharmaceutical ingredients, other raw materials and formulated drugs.
Stock-Based Compensation
The Company issues stock-based awards to employees, directors and non-employee consultants, generally in the form of stock options, restricted stock and restricted stock units (“RSUs”). The Company accounts for its stock-based compensation awards in accordance with FASB ASC Topic 718, Compensation—Stock Compensation (“ASC 718”). ASC 718 requires stock-based payments to employees, qualifying directors and non-employees to be recognized as expense based on the fair value determined on the date of grant.
The Company issues equity awards with service-based and performance-based vesting conditions. Compensation expense related to awards to employees, directors and non-employees with service-based vesting conditions is recognized on a straight-line basis based on the grant date fair value over the associated requisite service period of the award, which is generally the vesting term. Compensation expense related to awards to employees, directors and non-employees with performance-based vesting conditions is recognized when it becomes probable that the performance conditions will be met using the accelerated attribution method. The Company has no awards with market-based conditions. The Company recognizes forfeitures as they occur. Compensation expense for discounted purchases under the Company's employee stock purchase plan is measured using the Black-Scholes model to compute the fair value of the look-back provision plus the purchase discount, and is recognized as compensation expense over the applicable offering period.
The Company classifies stock-based compensation expense in the condensed consolidated statements of operations and comprehensive loss in the same manner in which the award recipient’s salary and related costs are classified or in which the award recipient’s service payments are classified, as applicable.
The Company determines the fair value of restricted stock and RSU awards in reference to the fair value of its common stock less any applicable purchase price. The Company estimates the fair value of its stock options using the Black-Scholes option pricing model, which requires inputs of subjective assumptions, including: (i) the expected volatility of its common stock, (ii) the expected term of the award, (iii) the risk-free interest rate, (iv) expected dividends and (v) the fair value of its common stock. Due to the lack of a public market for the trading of the Company’s common stock prior to the completion of its initial public offering in February 2021 (the “IPO”) and a lack of company-specific historical and implied volatility data, the Company bases the estimate of expected volatility on the historical volatilities of a representative group of publicly traded companies. For these analyses, the Company selects companies with comparable characteristics and with historical share price information that approximates the expected term of the stock-based awards. The Company computes the historical volatility data using the daily closing prices for the selected companies’ shares during the equivalent period that approximates the calculated expected term of its stock options. The Company will continue to apply this method until a sufficient amount of historical information regarding the volatility of its own stock price becomes available. The Company estimates the expected term of its stock options granted to employees and directors using the simplified method, whereby the expected term equals the average of the vesting term and the original contractual term of the option. The Company utilizes this method as it does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate the expected term. The expected dividend yield is assumed to be zero, as the Company has no current plans to pay any dividends on its common stock. The Company has elected to use the expected term for stock options granted to non-employees, using the simplified method, as the basis for the expected term assumption. However, the Company may elect to use either the contractual term or the expected term for stock options granted to non-employees on an award-by-award basis.
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The fair value of the common stock underlying the Company's stock-based awards is determined based on the trading price of its common stock on the Nasdaq Global Select Market on the date of grant.
CARES Act
The Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) provided refundable employee retention credits, which could be used to offset payroll tax liabilities. On March 11, 2021, President Biden signed the American Rescue Plan Act (“ARPA”). The ARPA includes several provisions, such as measures that extended and expanded the employee retention credit, previously enacted under the CARES Act, through December 31, 2021.
Measures not related to income-based taxes within the CARES Act include (1) allowing an employer to pay its share of Social Security payroll taxes that would otherwise be due from the date of enactment through December 31, 2020 over the following two years and (2) allowing eligible employers subject to closure due to the COVID-19 pandemic to receive a 50% credit on qualified wages against their employment taxes each quarter, with any excess credits eligible for refunds.
The Company accounts for the credit under ASU No. 2021-10, Government Assistance (Topic 832): Disclosures by Business Entities about Government Assistance. During the year ended December 31, 2021, the Company recorded an employee retention credit of $
Accounts Receivable, net
The Company records accounts receivable for amounts invoiced to a collaborator, for which the Company has an unconditional right to consideration. For amounts to which the Company has an unconditional right to consideration but has not yet invoiced the collaborator, the Company records unbilled accounts receivable. The Company estimates an allowance for credit losses for its accounts receivable based on the creditworthiness of its collaborator, current economic conditions and future economic conditions, as may be applicable. If a receivable is deemed to be uncollectible, the balance is charged against the allowance. As of March 31, 2023 and December 31, 2022,
Recently Adopted and Issued Accounting Pronouncements
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326)—Measurement of Credit Losses on Financial Instruments, which has been subsequently amended by ASU No. 2018-19, ASU No. 2019-04, ASU No. 2019-05, ASU No. 2019-10, ASU No. 2019-11 and ASU No. 2020-03 (“ASU 2016-13”). The provisions of ASU 2016-13 modify the impairment model to utilize an expected loss methodology in place of the currently used incurred loss methodology and require a consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The Company
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, 2022 for the Company’s summary of recently issued accounting pronouncements that have not yet been adopted.
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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):
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Balance at March 31, 2023 |
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Quoted Prices |
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Significant |
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Significant |
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Cash equivalents: |
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Money market mutual funds |
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$ |
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$ |
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$ |
— |
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$ |
— |
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U.S. Agency discount notes |
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— |
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— |
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Total cash equivalents |
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$ |
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$ |
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$ |
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$ |
— |
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Available-for-sale securities: |
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U.S. Agency bonds |
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$ |
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$ |
— |
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$ |
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$ |
— |
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U.S. Treasury securities |
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— |
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— |
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U.S. Agency discount notes |
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— |
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— |
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Total available-for-sale securities |
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$ |
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$ |
— |
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$ |
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$ |
— |
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Balance at |
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Quoted Prices |
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Significant |
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Significant |
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Cash equivalents: |
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Money market mutual funds |
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$ |
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$ |
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$ |
— |
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$ |
— |
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Total cash equivalents |
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$ |
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$ |
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$ |
— |
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$ |
— |
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Available-for-sale securities: |
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U.S. Treasury securities |
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$ |
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$ |
— |
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$ |
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$ |
— |
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U.S. Agency bonds |
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— |
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— |
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U.S. Agency discount notes |
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— |
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— |