IDRA_Current_Folio_10Q2

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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 


 

FORM 10-Q

 


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

For the quarterly period ended June 30, 2019

OR

 

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

For transition period from                      to                     .  

 

Commission File Number: 001-31918

 


Picture 1

IDERA PHARMACEUTICALS, INC.

(Exact name of registrant as specified in its charter)

 


 

 

 

 

Delaware

    

04-3072298

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

 

 

505 Eagleview Blvd., Suite 212

Exton, Pennsylvania

(Address of principal executive offices)

 

19341

(Zip code)

 

(484) 348-1600

(Registrant’s telephone number, including area code)


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

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.001 per share

IDRA

Nasdaq Capital Market

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.

 

 

 

 

Large accelerated filer

Accelerated filer

Non-accelerated filer

  

Smaller reporting company

 

 

Emerging growth company

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  

 

 

 

Common Stock, par value $.001 per share

    

28,843,528

Class

 

Outstanding as of July 31, 2019

 

 

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IDERA PHARMACEUTICALS, INC.

FORM 10-Q

 

TABLE OF CONTENTS

 

 

 

 

 

 

 

    

Page

PART I — FINANCIAL INFORMATION 

 

 

 

 

Item 1.

Financial Statements

 

1

 

Condensed Balance Sheets as of June 30, 2019 and December 31, 2018

 

1

 

Condensed Statements of Operations and Comprehensive Loss for the Three and Six Months Ended June 30, 2019 and 2018

 

2

 

Condensed Statements of Cash Flows for the Six Months Ended June 30, 2019 and 2018

 

3

 

Condensed Statements of Stockholders’ Equity for the Three and Six Months Ended June 30, 2019

 

4

 

Notes to Condensed Financial Statements

 

5

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

18

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

 

34

Item 4.

Controls and Procedures

 

34

 

 

 

 

PART II — OTHER INFORMATION 

 

 

 

 

Item 1A.

Risk Factors

 

35

Item 5.

Other Information

 

35

Item 6.

Exhibits

 

36

 

 

 

 

 

Signatures

 

37

 

IMO® and Idera® are our trademarks. All other trademarks and service marks appearing in this Quarterly Report on Form 10-Q are the property of their respective owners.

 

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NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. All statements, other than statements of historical fact, included or incorporated in this report regarding our strategy, future operations, clinical trials, collaborations, intellectual property, cash resources, financial position, future revenues, projected costs, prospects, plans, and objectives of management are forward-looking statements. The words “believes,” “anticipates,” “estimates,” “plans,” “expects,” “intends,” “may,” “could,” “should,” “potential,” “likely,” “projects,” “continue,” “will,” and “would” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. We cannot guarantee that we actually will achieve the plans, intentions or expectations disclosed in our forward-looking statements and you should not place undue reliance on our forward-looking statements.

 

There are a number of important factors that could cause our actual results to differ materially from those indicated or implied by forward-looking statements. These important factors include those set forth under Part I, Item 1A “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2018, which was filed with the Securities and Exchange Commission, or the SEC, on March 6, 2019. These factors and the other cautionary statements made in this Quarterly Report on Form 10-Q should be read as being applicable to all related forward-looking statements whenever they appear in this Quarterly Report on Form 10-Q.

 

In addition, any forward-looking statements represent our estimates only as of the date that this Quarterly Report on Form 10-Q is filed with the SEC and should not be relied upon as representing our estimates as of any subsequent date. We do not assume any obligation to update any forward-looking statements. We disclaim any intention or obligation to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

 

 

 

 

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PART I — FINANCIAL INFORMATION

 

Item 1. Financial Statements.

 

IDERA PHARMACEUTICALS, INC.

 

CONDENSED BALANCE SHEETS

 

 

 

 

 

 

 

 

 

 

 

    

June 30, 

    

December 31, 

 

(In thousands, except per share amounts)

 

2019

 

2018*

 

ASSETS

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

39,884

 

$

71,431

 

Short-term investments

 

 

12,489

 

 

 —

 

Prepaid expenses and other current assets

 

 

1,567

 

 

1,376

 

Total current assets

 

 

53,940

 

 

72,807

 

Property and equipment, net

 

 

151

 

 

207

 

Operating lease right-of-use asset

 

 

171

 

 

 —

 

Other assets

 

 

70

 

 

 9

 

Total assets

 

$

54,332

 

$

73,023

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

Accounts payable

 

$

457

 

$

1,134

 

Accrued expenses

 

 

5,939

 

 

7,884

 

Operating lease liability

 

 

189

 

 

 —

 

Total current liabilities

 

 

6,585

 

 

9,018

 

Other liabilities

 

 

12

 

 

11

 

Total liabilities

 

 

6,597

 

 

9,029

 

 

 

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

 

Preferred stock, $0.01 par value, Authorized — 5,000 shares:

 

 

 

 

 

 

 

Series A convertible preferred stock; Designated — 1,500 shares, Issued and outstanding — 1 share

 

 

 —

 

 

 —

 

Common stock, $0.001 par value, Authorized — 70,000 shares; Issued and outstanding — 28,827 and 27,188 shares at June 30, 2019 and December 31, 2018, respectively

 

 

29

 

 

27

 

Additional paid-in capital

 

 

734,229

 

 

728,342

 

Accumulated deficit

 

 

(686,525)

 

 

(664,375)

 

Accumulated other comprehensive income

 

 

 2

 

 

 —

 

Total stockholders’ equity

 

 

47,735

 

 

63,994

 

Total liabilities and stockholders’ equity

 

$

54,332

 

$

73,023

 


* The condensed balance sheet at December 31, 2018 has been derived from the audited financial statements at that date.

 

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

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IDERA PHARMACEUTICALS, INC.

 

CONDENSED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(UNAUDITED)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Six Months Ended

 

 

June 30,

 

June 30,

(In thousands, except per share amounts)

    

2019

    

2018

    

2019

    

2018

Alliance revenue

 

$

1,448

 

$

163

 

$

1,448

 

$

418

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

10,024

 

 

10,880

 

 

18,126

 

 

24,436

General and administrative

 

 

2,895

 

 

4,000

 

 

6,038

 

 

7,481

Merger-related costs, net

 

 

 —

 

 

1,583

 

 

 —

 

 

5,081

Restructuring costs

 

 

45

 

 

 —

 

 

176

 

 

 —

Total operating expenses

 

 

12,964

 

 

16,463

 

 

24,340

 

 

36,998

Loss from operations

 

 

(11,516)

 

 

(16,300)

 

 

(22,892)

 

 

(36,580)

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

339

 

 

271

 

 

743

 

 

482

Interest expense

 

 

 —

 

 

(4)

 

 

 —

 

 

(11)

Foreign currency exchange loss

 

 

 1

 

 

 2

 

 

(1)

 

 

(17)

Net loss

 

$

(11,176)

 

$

(16,031)

 

$

(22,150)

 

$

(36,126)

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss per share applicable to common stockholders - basic and diluted (Note 13)

 

$

(0.39)

 

$

(0.59)

 

$

(0.79)

 

$

(1.39)

Weighted-average number of common shares used in computing net loss per share applicable to common stockholders - basic and diluted

 

 

28,461

 

 

27,133

 

 

28,070

 

 

26,012

 

 

 

 

 

 

 

 

 

 

 

 

 

Comprehensive loss:

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

$

(11,176)

 

$

(16,031)

 

$

(22,150)

 

$

(36,126)

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized gain on available-for-sale securities

 

 

 —

 

 

 —

 

 

 2

 

 

 —

Total other comprehensive income

 

 

 —

 

 

 —

 

 

 2

 

 

 —

Comprehensive loss

 

$

(11,176)

 

$

(16,031)

 

$

(22,148)

 

$

(36,126)

 

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

 

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IDERA PHARMACEUTICALS, INC.

 

CONDENSED STATEMENTS OF CASH FLOWS

(UNAUDITED)

 

 

 

 

 

 

 

 

 

 

 

Six Months Ended

 

 

 

June 30, 

 

(In thousands)

    

2019

    

2018

 

Cash Flows from Operating Activities:

 

 

 

 

 

 

 

Net loss

 

$

(22,150)

 

$

(36,126)

 

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

 

Stock-based compensation

 

 

1,905

 

 

3,127

 

Issuance of common stock for services rendered

 

 

59

 

 

45

 

Accretion of discounts on short-term investments

 

 

(353)

 

 

 —

 

Unrealized gain on available-for-sale securities

 

 

 2

 

 

 —

 

Depreciation and amortization expense

 

 

67

 

 

321

 

Gain on disposal of property and equipment

 

 

(11)

 

 

 —

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

Prepaid expenses and other assets

 

 

(423)

 

 

69

 

Accounts payable, accrued expenses, and other liabilities

 

 

(2,426)

 

 

4,243

 

Deferred revenue

 

 

 —

 

 

(331)

 

Net cash used in operating activities

 

 

(23,330)

 

 

(28,652)

 

 

 

 

 

 

 

 

 

Cash Flows from Investing Activities:

 

 

 

 

 

 

 

Purchases of available-for-sale securities

 

 

(35,486)

 

 

 —

 

Proceeds from maturity of available-for-sale securities

 

 

23,350

 

 

 —

 

Proceeds from the sale of property and equipment

 

 

11

 

 

 —

 

Purchases of property and equipment

 

 

(11)

 

 

(42)

 

Net cash used in investing activities

 

 

(12,136)

 

 

(42)

 

 

 

 

 

 

 

 

 

Cash Flows from Financing Activities:

 

 

 

 

 

 

 

Proceeds from equity financings, net of issuance costs

 

 

3,857

 

 

 —

 

Proceeds from employee stock purchases

 

 

68

 

 

159

 

Proceeds from exercise of common stock options and warrants

 

 

 —

 

 

10,166

 

Payments on note payable

 

 

 —

 

 

(209)

 

Other

 

 

(6)

 

 

(5)

 

Net cash provided by financing activities

 

 

3,919

 

 

10,111

 

Net decrease in cash and cash equivalents

 

 

(31,547)

 

 

(18,583)

 

Cash, cash equivalents and restricted cash, beginning of period

 

 

71,431

 

 

112,940

 

Cash, cash equivalents and restricted cash, end of period

 

$

39,884

 

$

94,357

 

 

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

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IDERA PHARMACEUTICALS, INC.

 

CONDENSED STATEMENTS OF STOCKHOLDERS’ EQUITY 

(UNAUDITED)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Six Months Ended June 30, 2018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

Common Stock

 

Additional

 

 

 

 

Other

 

Total

 

 

 

Number of

 

$0.001 Par

 

Paid-In

 

Accumulated

 

Comprehensive

 

Stockholders’

 

(In thousands, except per share amounts)

 

Shares

 

Value

 

Capital

 

Deficit

 

Income

 

Equity

 

Balance, December 31, 2017

 

24,453

 

$

24

 

$

712,165

 

$

(604,494)

 

$

 —

 

$

107,695

 

Issuance of common stock under stock purchase plan

 

 7

 

 

 —

 

 

81

 

 

 —

 

 

 —

 

 

81

 

Issuance of common stock upon exercise of warrants

 

2,551

 

 

 3

 

 

9,588

 

 

 —

 

 

 —

 

 

9,591

 

Issuance of common stock for services rendered

 

 1

 

 

 —

 

 

23

 

 

 —

 

 

 —

 

 

23

 

Stock-based compensation

 

 —

 

 

 —

 

 

1,589

 

 

 —

 

 

 —

 

 

1,589

 

Net loss

 

 —

 

 

 —

 

 

 —

 

 

(20,095)

 

 

 —

 

 

(20,095)

 

Balance, March 31, 2018

 

27,012

 

$

27

 

$

723,446

 

$

(624,589)

 

$

 —

 

$

98,884

 

Issuance of common stock under stock purchase plan

 

 6

 

 

 —

 

 

78

 

 

 —

 

 

 —

 

 

78

 

Issuance of common stock upon exercise of options and warrants

 

151

 

 

 —

 

 

575

 

 

 —

 

 

 —

 

 

575

 

Issuance of common stock for services rendered

 

 2

 

 

 —

 

 

22

 

 

 —

 

 

 —

 

 

22

 

Stock-based compensation

 

 —

 

 

 —

 

 

1,538

 

 

 —

 

 

 —

 

 

1,538

 

Net loss

 

 —

 

 

 —

 

 

 

 

 

(16,031)

 

 

 —

 

 

(16,031)

 

Balance, June 30, 2018

 

27,171

 

$

27

 

$

725,659

 

$

(640,620)

 

$

 —

 

$

85,066

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Six Months Ended June 30, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

Common Stock

 

Additional

 

 

 

 

Other

 

Total

 

 

 

Number of

 

$0.001 Par

 

Paid-In

 

Accumulated

 

Comprehensive

 

Stockholders’

 

(In thousands, except per share amounts)

 

Shares

 

Value

 

Capital

 

Deficit

 

Income

 

Equity

 

Balance, December 31, 2018

 

27,188

 

$

27

 

$

728,342

 

$

(664,375)

 

$

 —

 

$

63,994

 

Sale of common stock, net of issuance costs

 

533

 

 

 1

 

 

1,584

 

 

 —

 

 

 —

 

 

1,585

 

Issuance of commitment shares

 

270

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

Issuance of common stock under employee stock purchase plan

 

11

 

 

 —

 

 

26

 

 

 —

 

 

 —

 

 

26

 

Issuance of common stock for services rendered

 

 6

 

 

 —

 

 

23

 

 

 —

 

 

 —

 

 

23

 

Stock-based compensation

 

 —

 

 

 —

 

 

1,016

 

 

 —

 

 

 —

 

 

1,016

 

Unrealized gain on marketable securities

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 2

 

 

 2

 

Net loss

 

 —

 

 

 —

 

 

 —

 

 

(10,974)

 

 

 —

 

 

(10,974)

 

Balance, March 31, 2019

 

28,008

 

$

28

 

$

730,991

 

$

(675,349)

 

$

 2

 

$

55,672

 

Sale of common stock, net of issuance costs

 

786

 

 

 1

 

 

2,271

 

 

 —

 

 

 —

 

 

2,272

 

Issuance of common stock under employee stock purchase plan

 

19

 

 

 —

 

 

42

 

 

 —

 

 

 —

 

 

42

 

Issuance of common stock for services rendered

 

14

 

 

 —

 

 

36

 

 

 —

 

 

 —

 

 

36

 

Stock-based compensation

 

 —

 

 

 —

 

 

889

 

 

 —

 

 

 —

 

 

889

 

Net loss

 

 —

 

 

 —

 

 

 —

 

 

(11,176)

 

 

 —

 

 

(11,176)

 

Balance, June 30, 2019

 

28,827

 

$

29

 

$

734,229

 

$

(686,525)

 

$

 2

 

$

47,735

 

 

The accompanying notes are an integral part of these financial statements

 

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IDERA PHARMACEUTICALS, INC.

 

NOTES TO CONDENSED FINANCIAL STATEMENTS

June 30, 2019

 

(UNAUDITED)

 

Note 1.  Business and Organization

 

Business Overview

 

Idera Pharmaceuticals, Inc. (“Idera” or the “Company”), a Delaware corporation, is a clinical-stage biopharmaceutical company with a business strategy focused on the clinical development, and ultimately the commercialization, of drug candidates for both oncology and rare disease indications characterized by small, well defined patient populations with serious unmet medical needs.  The Company’s current focus is on its Toll-like receptor, or TLR, agonist, tilsotolimod (IMO-2125), for oncology. The Company believes it can develop and commercialize targeted therapies on its own.  To the extent the Company seeks to develop drug candidates for broader disease indications, it has entered into and may explore additional collaborative alliances to support development and commercialization.

 

Liquidity and Financial Condition

 

As of June 30, 2019, the Company had an accumulated deficit of $686.5 million and a cash, cash equivalents and short-term investments balance of $52.4 million. The Company expects to incur substantial operating losses in future periods and will require additional capital as it seeks to advance tilsotolimod and any future drug candidates through development to commercialization. The Company does not expect to generate product revenue, sales-based milestones or royalties until the Company successfully completes development of and obtains marketing approval for tilsotolimod or other future drug candidates, either alone or in collaboration with third parties, which the Company expects will take a number of years. In order to commercialize tilsotolimod and any future drug candidates, the Company needs to complete clinical development and comply with comprehensive regulatory requirements. The Company is subject to a number of risks and uncertainties similar to those of other companies of the same size within the biotechnology industry, such as uncertainty of clinical trial outcomes, uncertainty of additional funding and history of operating losses.

 

The Company believes, based on management’s current operating plan, that its existing balance of cash, cash equivalents and short-term investments on hand as of June 30, 2019 will be sufficient to fund operations into the second quarter of 2020. The Company follows the provisions of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 205-40, Presentation of Financial Statements—Going Concern, which requires management to assess the Company’s ability to continue as a going concern for one year after the date the financial statements are issued.  The Company’s existing balance of cash, cash equivalents and short-term investments on hand as of June 30, 2019 is not sufficient to fund operations past the second quarter of 2020.  While there is substantial doubt about the Company’s ability to continue as a going concern through the year period from the date these financial statements are issued, management’s plans to mitigate this risk include raising additional capital through the Company’s Common Stock Purchase Agreement (Note 7), “At-The-Market” Equity Program (Note 7), or additional financing or strategic transactions.  Management’s plans may also include the possible deferral of certain operating expenses unless additional capital is received.

 

Reverse Stock Split

 

On July 27, 2018, the Company effected a 1-for-8 reverse stock split of the Company's outstanding shares of common stock, as authorized at a special meeting of stockholders on June 20, 2018. All share and per share amounts of common stock, options and warrants in the accompanying financial statements and notes thereto have been retroactively adjusted for all periods presented to reflect the reverse stock split.

 

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Note 2.  Summary of Significant Accounting Policies

 

Basis of Presentation

 

The accompanying unaudited financial statements included herein have been prepared by the Company in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. In the opinion of management, all adjustments, consisting of normal recurring adjustments, and disclosures considered necessary for a fair presentation of interim period results have been included. Interim results for the three and six months ended June 30, 2019 are not necessarily indicative of results that may be expected for the year ending December 31, 2019. For further information, refer to the financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018 (the “2018 Form 10-K”), which was filed with the SEC on March 6, 2019.

 

Reclassifications

 

The prior year financial statements contain certain reclassifications to the results of operations for the three and six months ended June 30, 2018 to conform to the presentation for the year ended December 31, 2018 included in the 2018 Form 10-K. Merger-related costs of approximately $1.6 million and $5.1 million were reclassified from general and administrative expenses to merger-related costs, net for the three and six months ended June 30, 2018, respectively.  

 

Cash and Cash Equivalents

 

The Company considers all highly liquid investments with maturities of 90 days or less when purchased to be “cash equivalents.” Cash and cash equivalents at June 30, 2019 and December 31, 2018 consisted of cash, commercial paper and money market funds.

 

Financial Instruments

 

The fair value of the Company’s financial instruments is determined and disclosed in accordance with the three-tier fair value hierarchy specified in Note 3. The Company is required to disclose the estimated fair values of its financial instruments. As of June 30, 2019 and December 31, 2018, the Company’s financial instruments consisted of cash, cash equivalents, investments and receivables and the estimated fair values of such financial instruments approximated their carrying values. As of June 30, 2019, the Company did not have any derivatives, hedging instruments or other similar financial instruments.

 

Revenue Recognition

 

In accordance with ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”), the Company recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services.

 

The Company’s revenues have primarily been generated through collaborative research, development and/or commercialization agreements and other out-licensing arrangements.  The terms of these agreements may include payment to the Company of one or more of the following: nonrefundable, up-front license fees; research, development and commercial milestone payments; and other contingent payments due based on the activities of the counterparty or the reimbursement by licensees of costs associated with patent maintenance.  Each of these types of revenue are recorded as Alliance revenues in the Company’s statement of operations.

 

See Note 9, “Collaboration and License Agreements” for additional details surrounding the Company’s collaboration arrangements.

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Note 2.  Summary of Significant Accounting Policies (Continued)

 

Income Taxes

 

In accordance with ASC 270, Interim Reporting, and ASC 740, Income Taxes, the Company is required at the end of each interim period to determine the best estimate of its annual effective tax rate and then apply that rate in providing for income taxes on a current year-to-date (interim period) basis.  For the three and six months ended June 30, 2019 and 2018, the Company recorded no tax expense or benefit due to the expected current year loss and its historical losses.  The Company has not recorded its net deferred tax asset as of either June 30, 2019 or December 31, 2018 because it maintained a full valuation allowance against all deferred tax assets as of these dates as management has determined that it is not more likely than not that the Company will realize these future tax benefits. As of June 30, 2019 and December 31, 2018, the Company had no uncertain tax positions.

 

New Accounting Pronouncements

 

From time to time, new accounting pronouncements are issued by the FASB and rules are issued by the SEC that the Company has or will adopt as of a specified date. Unless otherwise noted, management does not believe that any other recently issued accounting pronouncements issued by the FASB or guidance issued by the SEC had, or is expected to have, a material impact on the Company’s present or future financial statements.

 

Recently Adopted Accounting Pronouncements

 

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) (“ASU 2016-02”).  ASU 2016-02 requires organizations that lease assets, with lease terms of more than 12 months, to recognize on the balance sheet the assets and liabilities for the rights and obligations created by those leases. Consistent with GAAP, the recognition, measurement and presentation of expenses and cash flows arising from a lease by a lessee will depend primarily on its classification as a finance or operating lease. However, unlike the previous standard, which required only capital leases to be recognized on the balance sheet, ASU 2016-02 requires both types of leases to be recognized on the balance sheet. This guidance was applicable to the Company's fiscal year beginning January 1, 2019, and the Company adopted ASU 2016-02 in the first quarter of 2019 using the alternative modified retrospective transition method, which allowed the Company to apply the new lease standard to the beginning of the 2019 period and did not require adjusting comparative period financial information.  Additionally, the Company elected the package of practical expedients to not reassess prior conclusions related to contracts containing leases, lease classification and initial direct costs. As a result of adopting ASU 2016-02, the primary impact on the Company’s financial statements was the recognition of a right-of-use asset and corresponding liability of approximately $0.3 million on its balance sheet as of January 1, 2019 related to its existing Exton, PA facility operating lease.

 

In June 2018, the FASB issued ASU No. 2018-07, Compensation – Stock Compensation (Topic 718) (“ASU 2018-07”).  ASU 2018-07 simplifies the accounting for nonemployee share-based payment transactions and was adopted by the Company in the first quarter of 2019.  The adoption of this ASU did not have a material impact on the Company’s financial statements.

 

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Note 3.  Fair Value Measurements

 

Assets and Liabilities Measured at Fair Value on a Recurring Basis

 

The Company applies the guidance in ASC 820, Fair Value Measurement, to account for financial assets and liabilities measured on a recurring basis.  Fair value is measured at the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. As such, fair value is a market-based measurement that is determined based on assumptions that market participants would use in pricing an asset or liability.

 

The Company uses a fair value hierarchy, which distinguishes between assumptions based on market data (observable inputs) and an entity's own assumptions (unobservable inputs). The guidance requires that fair value measurements be classified and disclosed in one of the following three categories:

·

Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;

·

Level 2: Quoted prices in markets that are not active or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability; and

·

Level 3: Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported by little or no market activity).

 

Determining which category an asset or liability falls within the hierarchy requires significant judgment. The Company evaluates its hierarchy disclosures each reporting period. There were no transfers between Level 1, 2 and 3 during the six months ended June 30, 2019. 

 

The table below presents the assets and liabilities measured and recorded in the financial statements at fair value on a recurring basis at June 30, 2019 and December 31, 2018 categorized by the level of inputs used in the valuation of each asset and liability:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

June 30, 2019

 

(In thousands)

 

Total

 

Level 1

 

Level 2

 

Level 3

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash

 

$

250

 

$

250

 

$

 —

 

$

 —

 

Money market funds

 

 

36,647

 

 

36,647

 

 

 —

 

 

 —

 

Other cash equivalents – commercial paper

 

 

2,987

 

 

 —

 

 

2,987

 

 

 —

 

Short-term investments – commercial paper

 

 

3,496

 

 

 —

 

 

3,496

 

 

 —

 

Short-term investments – U.S. treasury bills

 

 

8,993

 

 

8,993

 

 

 —

 

 

 —

 

Total assets

 

$

52,373

 

$

45,890

 

$

6,483

 

$

 —

 

Total liabilities

 

$

 —

 

$

 —

 

$

 —

 

$

 —

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2018

 

(In thousands)

 

Total

 

Level 1

 

Level 2

 

Level 3

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash

 

$

8,446

 

$

8,446

 

$

 —

 

$

 —

 

Money market funds

 

 

61,177

 

 

61,177

 

 

 —

 

 

 —

 

Other cash equivalents – commercial paper

 

 

1,808

 

 

 —

 

 

1,808

 

 

 —

 

Total assets

 

$

71,431

 

$

69,623

 

$

1,808

 

$

 —

 

Total liabilities

 

$

 

$

 

$

 

$

 

The Level 1 assets include money market funds, which are actively traded daily.

 

 

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Note 4.  Investments

 

The Company’s available-for-sale investments at fair value consisted of the following at June 30, 2019:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

June 30, 2019

 

 

    

 

    

Gross

    

Gross

    

Estimated

 

 

 

 

 

Unrealized

 

Unrealized

 

Fair

 

(In thousands)

 

Cost

 

(Losses)

 

Gains

 

Value

 

Short-term investments – commercial paper

 

$

3,496

 

$

 —

 

$

 —

 

$

3,496

 

Short-term investments – U.S. treasury bills

 

 

8,991

 

 

 —

 

 

 2

 

 

8,993

 

Total short-term investments

 

$

12,487

 

$

 —

 

$

 2

 

$

12,489

 

Total investments

 

$

12,487

 

$

 —

 

$

 2

 

$

12,489

 

 

The Company had no realized gains or losses from the sale of investments in available-for-sale securities in each of the six months ended June 30, 2019 or 2018. There were no losses or other-than-temporary declines in value included in “Interest income” on the Company’s condensed statements of operations and comprehensive loss for any securities for the six months ended June 30, 2019 or 2018.

 

Note 5.  Property and Equipment

 

At June 30, 2019 and December 31, 2018, property and equipment, net, consisted of the following:

 

 

 

 

 

 

 

 

 

 

 

June 30, 

 

December 31, 

 

(In thousands)

    

2019

    

2018

 

Leasehold improvements

 

$

107

 

$

104

 

Laboratory equipment and other

 

 

765

 

 

767

 

Total property and equipment, at cost

 

 

872

 

 

871

 

Less: Accumulated depreciation and amortization

 

 

721

 

 

664

 

Property and equipment, net

 

$

151

 

$

207

 

 

Depreciation and amortization expense on property and equipment was approximately $0.1 million for each of the three months ended June 30, 2019 and 2018, and approximately $0.1 million and $0.3 million for the six months ended June 30, 2019 and 2018, respectively. There were no non-cash property additions during the six months ended June 30, 2019 or 2018.

 

Note 6.  Accrued Expenses 

 

At June 30, 2019 and December 31, 2018, accrued expenses consisted of the following:

 

 

 

 

 

 

 

 

 

 

    

June 30, 

 

December 31, 

 

(In thousands)

 

2019

    

2018

 

Payroll and related costs

 

$

1,249

 

$

1,962

 

Clinical and nonclinical trial expenses

 

 

3,681

 

 

3,958

 

Professional and consulting fees

 

 

446

 

 

605

 

Restructuring expenses

 

 

449

 

 

1,147

 

Other

 

 

114

 

 

212

 

Total accrued expenses

 

$

5,939

 

$

7,884

 

 

Included in accrued Payroll and related costs as of June 30, 2019 and December 31, 2018 is $0.2 million and $0.7 million, respectively, of salary continuation severance benefits to be paid in equal installments through October 31, 2019 to former executives.

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Note 7.  Stockholders’ Equity

 

Equity Financings

 

Common Stock Purchase Agreement

 

On March 4, 2019, the Company entered into a Purchase Agreement with Lincoln Park Capital Fund, LLC (“Investor”), pursuant to which, upon the terms and subject to the conditions and limitations set forth therein, Investor has committed to purchase an aggregate of $35.0 million of shares of Company common stock from time to time at the Company’s sole discretion (the “Purchase Agreement”). As consideration for entering into the Purchase Agreement, the Company issued 269,749 shares of Company common stock to Investor as a commitment fee (the “Commitment Shares”). The closing price of the Company’s common stock on March 4, 2019  was $2.84 and the Company did not receive any cash proceeds from the issuance of the Commitment Shares. During the six months ended June 30, 2019, the Company sold 785,848 Shares pursuant to the Purchase Agreement, resulting in net proceeds of $2.3 million.

 

"At-The-Market" Equity Program

 

In November 2018, the Company entered into an Equity Distribution Agreement (the “ATM Agreement”) with JMP Securities LLC (“JMP”) pursuant to which the Company may issue and sell shares of its common stock having an aggregate offering price of up to $50.0 million (the “Shares”) through JMP as its agent. Subject to the terms and conditions of the Agreement, JMP will use its commercially reasonable efforts to sell the Shares from time to time, based upon the Company’s instructions, by methods deemed to be an “at the market offering” as defined in Rule 415(a)(4) promulgated under the Securities Act of 1933, as amended, or if specified by the Company, by any other method permitted by law, including but not limited to in negotiated transactions. The Company has no obligation to sell any of the Shares, and the Company or JMP may at any time suspend sales under the ATM Agreement or terminate the ATM Agreement. JMP is entitled to a fixed commission of 3.0% of the gross proceeds from Shares sold. During the six months ended June 30, 2019, the Company sold 532,700 Shares pursuant to the ATM Agreement resulting in net proceeds, after deduction of commissions and other offering expenses, of $1.6 million.

 

Common Stock Warrants

 

In connection with various financing transactions, the Company has issued warrants to purchase shares of the Company’s common stock. The Company accounts for common stock warrants as equity instruments, derivative liabilities or liabilities, depending on the specific terms of the warrant agreement. As of June 30, 2019 and December 31, 2018, all of the Company’s outstanding common stock warrants were equity-classified. The following table summarizes outstanding warrants to purchase shares of the Company’s common stock as of June 30, 2019 and December 31, 2018:

 

 

 

 

 

 

 

 

 

 

 

 

 

Number of Shares

 

 

 

 

 

 

 

June 30,

December 31,

 

Weighted-Average

 

 

 

Description

 

2019

2018

 

Exercise Price

 

Expiration Date