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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

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: 001-38871

 

Turning Point Therapeutics, Inc.

(Exact Name of Registrant as Specified in its Charter)

 

 

Delaware

46-3826166

( State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer
Identification No.)

10628 Science Center Drive, Ste. 200

San Diego, California

92121

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: (858) 926-5251

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, $0.0001 par value per share

TPTX

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, a 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  

As of April 30 2021 the registrant had 49,154,551 shares of common stock, $0.0001 par value per share, outstanding.

 

 


 

Table of Contents

 

 

 

Page

PART I.

FINANCIAL INFORMATION

 

Item 1.

Financial Statements (unaudited)

3

 

Condensed Balance Sheets

3

 

Condensed Statements of Operations and Comprehensive Loss

4

 

Condensed Statements of Stockholders’ Equity

5

 

Condensed Statements of Cash Flows

6

 

Notes to the Unaudited Condensed Financial Statements

7

Item 2.

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

18

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

25

Item 4.

Controls and Procedures

25

PART II.

OTHER INFORMATION

 

Item 1.

Legal Proceedings

26

Item 1A.

Risk Factors

26

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

72

Item 3.

Defaults Upon Senior Securities

73

Item 4.

Mine Safety Disclosures

73

Item 5.

Other Information

73

Item 6.

Exhibits

74

SIGNATURES

76

 

 

 

2


 

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements

 

Turning Point Therapeutics, Inc.

Condensed Balance Sheets

(In thousands, except share and par value amounts)

 

 

March 31,

 

 

December 31,

 

 

 

2021

 

 

2020

 

 

Assets

Unaudited

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

$

469,167

 

 

$

554,101

 

 

Marketable securities

 

645,610

 

 

 

568,407

 

 

Prepaid and other current assets

 

7,135

 

 

 

8,171

 

 

Total current assets

 

1,121,912

 

 

 

1,130,679

 

 

Property and equipment, net

 

2,509

 

 

 

2,604

 

 

Right-of-use lease assets

 

3,056

 

 

 

3,357

 

 

Other assets

 

107

 

 

 

73

 

 

Total assets

$

1,127,584

 

 

$

1,136,713

 

 

Liabilities and stockholders' equity

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

$

6,784

 

 

$

5,225

 

 

Accrued expenses and other current liabilities

 

12,283

 

 

 

9,183

 

 

Accrued compensation

 

3,865

 

 

 

8,588

 

 

Current portion of operating lease liabilities

 

1,439

 

 

 

1,396

 

 

Total current liabilities

 

24,371

 

 

 

24,392

 

 

Operating lease liabilities, long-term

 

2,048

 

 

 

2,423

 

 

Commitments and contingencies (Note 8)

 

 

 

 

 

 

 

 

Stockholders' equity:

 

 

 

 

 

 

 

 

Preferred stock, $0.0001 par value;10,000,000 shares authorized at March 31, 2021 and December 31, 2020, zero shares outstanding at March 31, 2021 and December 31, 2020

 

-

 

 

 

-

 

 

Common stock, $0.0001 par value; 200,000,000 shares authorized at March 31, 2021 and December 31, 2020; 49,117,040 and 48,678,540 shares issued and outstanding at March 31, 2021 and December 31, 2020, respectively

 

5

 

 

 

5

 

 

Additional paid-in capital

 

1,416,817

 

 

 

1,389,860

 

 

Accumulated other comprehensive income

 

23

 

 

 

209

 

 

Accumulated deficit

 

(315,680

)

 

 

(280,176

)

 

Total stockholders' equity

 

1,101,165

 

 

 

1,109,898

 

 

Total liabilities  and stockholders’ equity

$

1,127,584

 

 

$

1,136,713

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes.

 

3


 

Turning Point Therapeutics, Inc.

Condensed Statements of Operations and Comprehensive Loss

(In thousands, except share and per share amounts)

 

(Unaudited)

 

 

 

 

Three Months Ended March 31,

 

 

 

2021

 

 

2020

 

Revenue

 

$

25,205

 

 

$

-

 

Operating expenses:

 

 

 

 

 

 

 

 

Research and development

 

 

41,263

 

 

 

22,769

 

General and administrative

 

 

19,991

 

 

 

39,857

 

Total operating expenses

 

 

61,254

 

 

 

62,626

 

Loss from operations

 

 

(36,049

)

 

 

(62,626

)

Other income, net

 

 

545

 

 

 

1,908

 

Net loss

 

 

(35,504

)

 

 

(60,718

)

Unrealized loss on marketable securities

 

 

(186

)

 

 

(316

)

Comprehensive loss

 

$

(35,690

)

 

$

(61,034

)

Net loss per share, basic and diluted

 

$

(0.73

)

 

$

(1.69

)

Weighted-average common shares outstanding, basic and diluted

 

 

48,920,403

 

 

 

35,919,358

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes.


4


 

Turning Point Therapeutics, Inc.

Condensed Statements of Stockholders’ Equity

(In thousands, except share amounts)

 

(Unaudited)

 

 

Common Stock

 

 

Additional

Paid-In

 

 

Accumulated

Other

Comprehensive

 

 

Accumulated

 

 

Total

Stockholders’

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Income (Loss)

 

 

Deficit

 

 

Equity

 

Balance at December 31, 2020

 

48,678,540

 

 

$

5

 

 

$

1,389,860

 

 

$

209

 

 

$

(280,176

)

 

$

1,109,898

 

Option exercises

 

438,500

 

 

 

 

 

 

9,679

 

 

 

 

 

 

 

 

 

9,679

 

Stock-based compensation expense

 

 

 

 

 

 

 

17,278

 

 

 

 

 

 

 

 

 

17,278

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

(35,504

)

 

 

(35,504

)

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

(186

)

 

 

 

 

 

(186

)

Balance at March 31, 2021

 

49,117,040

 

 

$

5

 

 

$

1,416,817

 

 

$

23

 

 

$

(315,680

)

 

$

1,101,165

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common Stock

 

 

Additional

Paid-In

 

 

Accumulated

Other

Comprehensive

 

 

Accumulated

 

 

Total

Stockholders’

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Income (Loss)

 

 

Deficit

 

 

Equity

 

Balance at December 31, 2019

 

35,915,119

 

 

$

4

 

 

$

526,960

 

 

$

271

 

 

$

(122,884

)

 

$

404,351

 

Option exercises

 

7,129

 

 

 

 

 

 

25

 

 

 

 

 

 

 

 

 

25

 

Stock-based compensation expense

 

 

 

 

 

 

 

38,365

 

 

 

 

 

 

 

 

 

38,365

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

(60,718

)

 

 

(60,718

)

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

(316

)

 

 

 

 

 

(316

)

Balance at March 31, 2020

 

35,922,248

 

 

$

4

 

 

$

565,350

 

 

$

(45

)

 

$

(183,602

)

 

$

381,707

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes.

 

5


 

 

Turning Point Therapeutics, Inc.

Condensed Statements of Cash Flows

(In thousands)

 

(Unaudited)

 

 

 

 

Three months ended March 31,

 

 

2021

 

 

2020

 

 

Operating activities

 

 

 

 

 

 

 

 

 

Net loss

 

$

(35,504

)

 

$

(60,718

)

 

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

 

 

 

 

 

 

 

 

 

Stock-based compensation expense

 

 

17,278

 

 

 

38,365

 

 

Depreciation

 

 

253

 

 

 

208

 

 

Accretion of premium (discount) on marketable securities

 

 

1,400

 

 

 

(242

)

 

Amortization of right-of-use operating lease asset

 

 

380

 

 

 

380

 

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

 

Prepaid expenses and other current assets

 

 

1,002

 

 

 

(2,819

)

 

Accounts payable

 

 

1,542

 

 

 

(28

)

 

Accrued expenses and other current liabilities

 

 

2,690

 

 

 

946

 

 

Accrued compensation

 

 

(4,723

)

 

 

(3,958

)

 

Net cash used in operating activities

 

 

(15,682

)

 

 

(27,866

)

 

 

 

 

 

 

 

 

 

 

 

Investing activities

 

 

 

 

 

 

 

 

 

Purchases of marketable securities

 

 

(160,650

)

 

 

(63,675

)

 

Sales and maturities of marketable securities

 

 

81,862

 

 

 

73,620

 

 

Purchases of property and equipment

 

 

(143

)

 

 

(454

)

 

Net cash (used in) provided by investing activities

 

 

(78,931

)

 

 

9,491

 

 

 

 

 

 

 

 

 

 

 

 

Financing activities

 

 

 

 

 

 

 

 

 

Proceeds from issuance of common stock under equity incentive plans

 

 

9,679

 

 

 

25

 

 

Net cash provided by financing activities

 

 

9,679

 

 

 

25

 

 

 

 

 

 

 

 

 

 

 

 

Net decrease in cash and cash equivalents

 

 

(84,934

)

 

 

(18,350

)

 

Cash and cash equivalents at the beginning of period

 

 

554,101

 

 

 

48,188

 

 

Cash and cash equivalents at the end of period

 

$

469,167

 

 

$

29,838

 

 

 

 

 

 

 

 

 

 

 

 

Supplemental disclosure of cash flow information:

 

 

 

 

 

 

 

 

 

Cash paid for income taxes

 

$

1

 

 

$

1

 

 

Supplemental disclosure of non-cash investing and financing information:

 

 

 

 

 

 

 

 

 

Purchases of property and equipment in accounts payable

 

$

16

 

 

$

-

 

 

 

 

See accompanying notes.

 

6


 

 

Turning Point Therapeutics, Inc.

Notes to Unaudited Condensed Financial Statements

1. Formation and Business of the Company; Basis of Presentation

Organization

Turning Point Therapeutics, Inc. (the Company) was organized in 2013 and commenced operations in 2014. The Company is a clinical-stage precision oncology biopharmaceutical company designing and developing novel small molecule, targeted oncology therapies.  The Company’s principal operations are in the United States and the Company operates in one segment, with its headquarters in San Diego, California.

The Company’s primary activities since inception have been to build infrastructure, conduct research and development, including clinical trials, perform business and financial planning, and raise capital.

Basis of Presentation

The accompanying unaudited condensed financial statements have been prepared in accordance with U.S. generally accepted accounting principles (GAAP) for interim financial information and pursuant to Form 10-Q and Article 10 of Regulation S-X of the Securities and Exchange Commission (SEC). Accordingly, since they are interim statements, the accompanying condensed financial statements do not include all of the information and notes required by GAAP for complete financial statements. The unaudited interim financial statements reflect all adjustments which, in the opinion of management, are necessary for a fair statement of the results for the periods presented. All such adjustments are of a normal and recurring nature. The condensed balance sheet at December 31, 2020 has been derived from the audited financial statements at that date, but does not include all information and footnotes required by GAAP for complete financial statements. The operating results presented in these unaudited condensed financial statements are not necessarily indicative of the results that may be expected for any future periods. These unaudited condensed financial statements should be read in conjunction with the audited financial statements and the notes thereto for the year ended December 31, 2020 included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 filed with the SEC. In the opinion of management, the unaudited condensed financial statements and notes thereto include all adjustments that are of a normal and recurring nature that are necessary for the fair presentation of the Company’s financial position and of the results of operations and cash flows for the periods presented.

Liquidity

Substantial doubt about an entity’s ability to continue as a going concern exists when relevant conditions and events, considered in the aggregate, indicate that it is probable that the entity will be unable to meet its obligations as they become due within one year from the financial statement issuance date. The Company determined that there are no conditions or events that raise substantial doubt about its ability to continue as a going concern within one year after the date that the unaudited condensed financial statements for the quarter ended March 31, 2021 are issued.

The COVID-19 pandemic continues to rapidly evolve and has already resulted in a significant disruption of global financial markets.  The Company’s ability to raise additional capital may be adversely impacted by potential worsening global economic conditions and further disruptions to, and volatility in, the credit and financial markets in the United States and worldwide resulting from the pandemic. If such further disruption occurs, the Company could experience an inability to access additional capital.

2. Summary of Significant Accounting Policies

The Company’s significant accounting policies are described in Note 2 of the Notes to Financial Statements included in its Annual Report on Form 10‑K for the year ended December 31, 2020.

 

Revenue

The Company recognizes revenue in accordance with Accounting Standards Codification (ASC) Topic 606, Revenue From Contracts With Customers (ASC 606). Under ASC 606, an entity recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration that the entity expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements within the scope of ASC 606, the entity performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price, including variable consideration, if any; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the entity satisfies a performance obligation. The Company only applies the five-step model to contracts when it is probable that the entity will collect the consideration to which it is entitled in exchange for the goods or services it transfers to the customer.

7

 


 

The Company assesses the goods or services promised within each contract and determines those that are performance obligations. Arrangements that include rights to additional goods or services that are exercisable at a customer’s discretion are generally considered options. The Company assesses if these options provide a material right to the customer and if so, they are considered performance obligations.

The Company assesses whether each promised good or service is distinct for the purpose of identifying the performance obligations in the contract. This assessment involves subjective determinations and requires management to make judgments about the individual promised goods or services and whether such are separable from the other aspects of the contractual relationship. Promised goods and services are considered distinct provided that: (i) the customer can benefit from the good or service either on its own or together with other resources that are readily available to the customer (that is, the good or service is capable of being distinct) and (ii) the entity’s promise to transfer the good or service to the customer is separately identifiable from other promises in the contract (that is, the promise to transfer the good or service is distinct within the context of the contract). In assessing whether a promised good or service is distinct, the Company considers factors such as the research, manufacturing and commercialization capabilities of the collaboration partner and the availability of the associated expertise in the general marketplace. The Company also considers the intended benefit of the contract in assessing whether a promised good or service is separately identifiable from other promises in the contract. If a promised good or service is not distinct, an entity is required to combine that good or service with other promised goods or services until it identifies a bundle of goods or services that is distinct.

The transaction price is then determined and allocated to the identified performance obligations in proportion to their standalone selling prices (SSP) on a relative SSP basis. SSP is determined at contract inception and is not updated to reflect changes between contract inception and when the performance obligations are satisfied. Determining the SSP for performance obligations requires significant judgment. In developing the SSP for a performance obligation, the Company considers applicable market conditions and relevant entity-specific factors, including factors that were contemplated in negotiating the agreement with the customer and estimated costs.

If the consideration promised in a contract includes a variable amount, the Company estimates the amount of consideration to which it will be entitled in exchange for transferring the promised goods or services to a customer. The Company determines the amount of variable consideration by using the expected value method or the most likely amount method. The Company includes the unconstrained amount of estimated variable consideration in the transaction price. The amount included in the transaction price is constrained to the amount for which it is probable that a significant reversal of cumulative revenue recognized will not occur. At the end of each subsequent reporting period, the Company re-evaluates the estimated variable consideration included in the transaction price and any related constraint, and if necessary, adjusts its estimate of the overall transaction price. Any such adjustments are recorded on a cumulative catch-up basis in the period of adjustment.

If an arrangement includes development and regulatory milestone payments, the Company evaluates whether the milestones are considered probable of being reached and estimates the amount to be included in the transaction price using the most likely amount method. If it is probable that a significant revenue reversal would not occur, the associated milestone value is included in the transaction price. Milestone payments that are not within the Company’s control or the licensee’s control, such as regulatory approvals, are generally not considered probable of being achieved until those approvals are received.

 

For arrangements with licenses of intellectual property that include sales-based royalties, including milestone payments based on the level of sales, and the license is deemed to be the predominant item to which the royalties relate, the Company recognizes royalty revenue and sales-based milestones at the later of (i) when the related sales occur, or (ii) when the performance obligation to which the royalty has been allocated has been satisfied.

In determining the transaction price, the Company adjusts consideration for the effects of the time value of money if the timing of payments provides the Company with a significant benefit of financing. The Company does not assess whether a contract has a significant financing component if the expectation at contract inception is such that the period between payment by the licensees and the transfer of the promised goods or services to the licensees will be one year or less.

The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) each performance obligation is satisfied, either at a point in time or over time, and if over time, recognition is based on the use of an output or input method.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that impact the reported amounts of assets, liabilities and expenses and the disclosure of contingent liabilities in the Company’s financial statements and accompanying notes. The most significant estimates in the

8

 


 

Company’s financial statements relate to determining the SSP of performance obligations associated with license arrangements, preclinical and clinical trial costs and accruals and stock-based compensation costs. Management bases its estimates on historical experience and on various other market-specific and relevant assumptions that management believes to be reasonable under the circumstances. Although these estimates are based on the Company’s knowledge of current events and actions it may undertake in the future, actual results may ultimately materially differ from these estimates and assumptions. Although the impact of the COVID-19 pandemic to the Company’s business and operating results presents additional uncertainty, the Company continues to use the best information available to update its critical accounting estimates.

Concentration of Credit Risk

Substantially all of the Company’s cash, cash equivalents, and marketable securities are held at two financial institutions.  Due to the financial strength of the depository institutions, the Company believes these financial institutions represent minimal credit risk. Cash amounts held at financial institutions are insured by the Federal Deposit Insurance Corporation (FDIC) up to $250,000.  At March 31, 2021, cash and cash equivalents and marketable securities totaling $1,114.5 million are either not subject to FDIC insurance, or exceed the FDIC insured limit. The Company’s cash and cash equivalents and marketable securities are invested in short term, high grade securities, and as a result, the Company believes represent a minimal credit risk.

Clinical Trial Costs and Accruals

A significant portion of the Company’s clinical trial costs relate to contracts with contract research organizations (CROs). The financial terms of the Company’s CRO contracts may result in payment flows that do not match the periods over which materials or services are provided to the Company under such contracts. The Company’s objective is to reflect the appropriate clinical trial expenses in the Company’s financial statements by matching those expenses with the period in which services and efforts are expended. As part of the process of preparing the Company’s financial statements, the Company evaluates cost information provided by the Company’s CROs concerning estimated monthly expenses for services rendered and unbilled obligations as the sponsor of the Company’s clinical trials. Accordingly, the Company’s clinical trial accrual is dependent upon the timely and accurate reporting of CROs and other third-party vendors, and the Company’s ability to accurately estimate any unbilled obligations.  If the contracted amounts are modified, for instance, as a result of changes in the clinical trial protocol or scope of work to be performed, the Company’s modifies its accruals accordingly on a prospective basis. Revisions in the scope of a contract are charged to research and development expense in the period in which the facts that give rise to the revision become reasonably certain.

Research and Development Expenses

Research and development costs are expensed as incurred. These costs consist primarily of salaries and other personnel-related expenses, including stock-based compensation; facility-related expenses; depreciation of facilities and equipment; laboratory consumables; and services performed by clinical research organizations, research institutions, and other outside service providers.

The Company recorded the estimated costs of research and development activities based upon the estimated amount of services provided but not yet invoiced and include these costs in accrued expenses and other current liabilities in the balance sheet and within research and development expense in the statement of operations and comprehensive loss. As actual costs become known, the Company will adjust its accrued expenses and other current liabilities.

Net Loss Per Share

The Company computes basic loss per share by dividing the net loss available to common stockholders by the weighted average number of common shares outstanding for the period, without consideration for common stock equivalents. Diluted net loss assumes the conversion, exercise or issuance of all potential common stock equivalents, unless the effect of inclusion would be anti-dilutive. For purposes of this calculation, common stock equivalents include the Company’s stock options, restricted stock units (RSUs) and performance stock units (PSUs). The Company excluded stock options to purchase common stock, RSUs and PSUs from the number of shares used to calculate diluted shares outstanding because the inclusion of these potentially dilutive securities would have been antidilutive.

Historical outstanding anti-dilutive securities not included in the diluted net loss per share calculation include the following:

 

 

Three Months Ended March 31,

 

 

 

2021

 

 

2020

 

Options to purchase common stock

 

 

5,581,907

 

 

 

6,556,169

 

RSUs

 

 

162,165

 

 

 

-

 

PSUs

 

 

176,675

 

 

 

-

 

Total

 

 

5,920,747

 

 

 

6,556,169

 

 

9

 


 

 

    

3. Marketable Securities

The Company invests its excess cash in marketable securities, including debt instruments of financial institutions, corporations with investment grade credit ratings, commercial paper and government agencies.

At March 31, 2021, marketable securities consisted of the following (in thousands): 

 

 

 

 

 

 

 

 

Unrealized

 

 

 

 

 

 

 

Maturity in Years

 

Amortized Cost

 

 

Gains

 

 

Losses

 

 

Fair Value

 

U.S. Treasuries

 

2 years or less

 

$

152,912

 

 

$

50

 

 

$

-

 

 

$

152,962

 

U.S. Government agency securities

 

2 years or less

 

 

173,309

 

 

 

71

 

 

 

-

 

 

 

173,380

 

Corporate debt securities

 

2 years or less

 

 

163,573

 

 

 

16

 

 

 

(98

)

 

 

163,491

 

Commercial paper

 

Less than 1

 

 

155,777

 

 

 

-

 

 

 

-

 

 

 

155,777

 

   Total marketable securities

 

 

 

$

645,571

 

 

$

137

 

 

$

(98

)

 

$

645,610

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At December 31, 2020, marketable securities consisted of the following (in thousands):

 

 

 

 

 

 

 

 

Unrealized

 

 

 

 

 

 

 

Maturity in Years

 

Amortized Cost

 

 

Gains

 

 

Losses

 

 

Fair Value

 

U.S. Treasuries

 

2 years or less

 

$

113,662

 

 

$

19

 

 

$

(1

)

 

$

113,680

 

U.S. Government agency securities

 

2 years or less

 

 

173,583

 

 

 

100

 

 

 

-

 

 

 

173,683

 

Corporate debt securities

 

2 years or less

 

 

169,189

 

 

 

103

 

 

 

(27

)

 

 

169,265

 

Commercial paper

 

Less than 1

 

 

111,779

 

 

 

-

 

 

 

-

 

 

 

111,779

 

   Total marketable securities

 

 

 

$

568,213

 

 

$

222

 

 

$

(28

)

 

$

568,407

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The Company segments its portfolio based on the underlying risk profiles of their current securities being held. The Company regularly reviews the securities in an unrealized loss position and evaluates the current expected credit loss by considering factors such as historical experience, market data, issuer-specific factors, current and expected future economic conditions. As of March 31, 2021, the Company did not record an allowance for credit loss related to its investment portfolio.

 

4. Fair Value Measurements

Fair value is defined as 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 at the measurement date. Fair value should maximize the use of observable inputs and minimize the use of unobservable inputs. The Company determines the fair value of financial assets and liabilities using three levels of inputs as follows:

Level 1—Inputs which include quoted prices in active markets for identical assets or liabilities at the measurement date.

Level 2—Inputs (other than quoted market prices included in Level 1) that are either directly or indirectly observable, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the instrument’s anticipated life.

Level 3—Unobservable inputs for assets or liabilities and include little or no market activity.

10

 


 

A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The Company’s financial assets subject to fair value measurements on a recurring basis and the level of inputs used for such measurements were as follows (in thousands):

 

 

 

Fair Value Measurements at March 31, 2021 Using:

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Money market funds

 

$

178,150

 

 

$

-

 

 

$

-

 

 

$

178,150

 

U.S. Treasuries

 

 

152,962

 

 

 

-

 

 

 

-

 

 

 

152,962

 

U.S. Government agency securities

 

 

-

 

 

 

173,380

 

 

 

-

 

 

 

173,380

 

Corporate debt securities

 

 

-

 

 

 

179,174

 

 

 

-

 

 

 

179,174

 

Commercial paper

 

 

-

 

 

 

430,289

 

 

 

-

 

 

 

430,289

 

Total cash equivalents and marketable securities

 

$

331,112

 

 

$

782,843

 

 

$

-

 

 

$

1,113,955

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fair Value Measurements at December 31, 2020 Using:

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Money market funds

 

$

299,571

 

 

$

-

 

 

$

-

 

 

$

299,571

 

U.S. Treasuries

 

 

113,680

 

 

 

-

 

 

 

-

 

 

 

113,680

 

U.S. Government agency securities

 

 

-

 

 

 

173,683

 

 

 

-

 

 

 

173,683

 

Corporate debt securities

 

 

-

 

 

 

180,718

 

 

 

-

 

 

 

180,718

 

Commercial paper

 

 

-

 

 

 

354,223

 

 

 

-

 

 

 

354,223

 

Total cash equivalents and marketable securities

 

$

413,251

 

 

$

708,624

 

 

$

-

 

 

$

1,121,875

 

 

5. Property and Equipment, Net

Property and equipment, net consisted of the following (in thousands):

 

 

March 31,

 

 

December 31,

 

 

 

2021

 

 

2020

 

Laboratory equipment

 

$

1,678

 

 

$

1,629

 

Computer equipment and software

 

 

1,065

 

 

 

956

 

Tenant improvements

 

 

1,108

 

 

 

1,108

 

Furniture and fixtures

 

 

357

 

 

 

357

 

Property and equipment

 

 

4,208

 

 

 

4,050

 

Less: accumulated depreciation

 

 

(1,699

)

 

 

(1,446

)

Property and equipment, net

 

$

2,509

 

 

$

2,604

 

Depreciation expense for the three months ended March 31, 2021 and 2020 was $0.3 million and $0.2 million, respectively.

 

6. Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consisted of the following (in thousands):

 

 

March 31,

 

 

December 31,

 

 

 

2021

 

 

2020

 

Accrued research and development expenses

 

$

11,615

 

 

$

8,457

 

Accrued general and administrative expenses

 

 

638

 

 

 

682

 

Other current liabilities

 

 

30

 

 

 

44

 

Total

 

$

12,283

 

 

$

9,183

 

 

7. Zai License Agreements

Zai Repotrectinib Agreement

In July 2020, the Company entered into a license agreement (the Zai Repotrectinib Agreement) with Zai Lab (Shanghai) Co., Ltd. (Zai), pursuant to which the Company granted Zai exclusive rights to develop and commercialize products containing the Company’s drug candidate, repotrectinib (the Repotrectinib Products), in Mainland China, Hong Kong, Macau and Taiwan (collectively, the Zai Territory or Greater China). The Company retains exclusive rights to, among other things, develop, manufacture and commercialize the Repotrectinib Products outside the Zai Territory. The Company will supply or have supplied to Zai the

11

 


 

Repotrectinib Products for use in the Zai Territory pursuant to a supply agreement for agreed upon consideration, except that Zai has the right, at its election, to package and label the Repotrectinib Products in or outside the Zai Territory for use in the Zai Territory.

 

Pursuant to the terms of the Zai Repotrectinib Agreement, the Company has received an upfront cash payment of $25.0 million and is eligible to receive up to $151.0 million in development and sales milestone payments, consisting of up to $46.0 million of development milestones and up to $105.0 million of sales milestones. In addition, during the term of the Zai Repotrectinib Agreement, Zai is obligated to pay the Company tiered percentage royalties ranging from mid-to-high teens on annual net sales of the Repotrectinib Products in the Zai Territory, subject to adjustments in specified circumstances. 

Zai is responsible for conducting the development and commercialization activities in the Zai Territory related to the Repotrectinib Products at Zai’s own expense, subject to limited exceptions pursuant to which the Company may be responsible for the cost. The Company is responsible for global clinical studies of the Repotrectinib Products, including the portions that may be conducted in the Zai Territory, at the Company’s expense, except that Zai will participate in global clinical studies of the Repotrectinib Products through clinical trial sites in the Zai Territory as agreed as of the effective date of the Zai Repotrectinib Agreement and may, at Zai’s election, participate in future global clinical studies of the Repotrectinib Products through clinical trial sites in the Zai Territory, in each case at Zai’s expense.

The Zai Repotrectinib Agreement will continue in effect until expiration of the last royalty term for a Repotrectinib Product in any region in the Zai Territory, where the royalty term for a Repotrectinib Product in a region continues until the later of (i) the date of the last-to-expire valid claim within Company’s patent rights that covers the Repotrectinib Product in such region in the Zai Territory; (ii) the expiry of the regulatory exclusivity for such Repotrectinib Product in such region; or (iii) the close of business of the day that is exactly 10 years after the date of the first commercial sale of such Repotrectinib Product in such region. Subject to the terms of the Zai Repotrectinib Agreement, Zai may terminate the Zai Repotrectinib Agreement for convenience by providing written notice to the Company, which termination will be effective following a prescribed notice period. In addition, the Company may terminate the Zai Repotrectinib Agreement under specified circumstances if Zai or certain other parties challenge the Company’s patent rights. Either party may terminate the Zai Repotrectinib Agreement for the other party’s uncured material breach of the Zai Repotrectinib Agreement, with a customary notice and cure period, for the other party’s insolvency or if the other party acquires a third party and the acquired party is engaged in activities with a competing product that is not divested or discontinued within a specified period. After termination (but not natural expiration), other than certain terminations by Zai for cause, the Company is entitled to retain a worldwide and perpetual license from Zai to exploit the Repotrectinib Products.

Revenue Recognition

The Company determined that two performance obligations existed: (1) the exclusive license, bundled with the associated know-how and (2) the Company's initial obligation to supply repotrectinib for clinical development in the Zai Territory.

The total transaction price of $25.7 million was allocated to the performance obligations on the basis of the relative stand-alone selling price estimated for each performance obligation. In estimating the stand-alone selling price for each performance obligation, the Company developed assumptions that require judgment and included forecasted revenues, expected development timelines, discount rates, probabilities of technical and regulatory success and costs for manufacturing clinical supplies.

The Company delivered the license and technical know-how to Zai in the third quarter of 2020 to satisfy this performance obligation, and accordingly the Company recognized license revenue of $25.0 million in the third quarter of 2020.  The $0.7 million in consideration allocable to the clinical supply performance obligation will be recognized when clinical trial material has been shipped by the Company and Zai obtains control of the goods, upon delivery, over the period of the obligation. For the three months ended March 31, 2021, the Company recognized $0.2 million in revenue associated with the clinical supply performance obligation.

The Company assessed the Zai Repotrectinib Agreement to determine whether a significant financing component exists and concluded that a significant financing component does not exist. As of March 31, 2021, the Company has not recognized any revenue associated with developmental or sales milestones.

Zai TPX-0022 Agreement

On January 10, 2021, the Company entered into a license agreement with Zai (the Zai TPX-0022 Agreement) pursuant to which the Company granted Zai exclusive rights to develop and commercialize products containing the Company’s drug candidate, TPX-0022 (the TPX-0022 Products), in the Zai Territory.  The Company retains exclusive rights to, among other things, develop, manufacture and commercialize the TPX-0022 Products outside the Zai Territory.

 

12

 


 

 

Pursuant to the terms of the Zai TPX-0022  Agreement, the Company has received an upfront cash payment of $25.0 million and is eligible to receive up to $336.0 million in development and sales milestone payments, consisting of up to $121.0 million of development milestones and up to $215.0 million of sales milestones. In addition, during the term of the Zai TPX-0022 Agreement, Zai is obligated to pay the Company tiered percentage royalties ranging from mid-teens to low twenties on annual net sales of the TPX-0022 Products in the Zai Territory, subject to adjustments in specified circumstances. 

Zai is responsible for conducting the development and commercialization activities in the Zai Territory related to the TPX-0022 Products at Zai’s own expense, subject to limited exceptions pursuant to which the Company may be responsible for the cost. The Company is responsible for global clinical studies of the TPX-0022 Products, including the portions that may be conducted in the Zai Territory, at the Company’s expense, except that Zai will participate in global clinical studies of the TPX-0022 Products through clinical trial sites in the Zai Territory as agreed as of the effective date of the Zai TPX-0022 Agreement and may, at Zai’s election subject to specified exceptions, participate in future global clinical studies of the TPX-0022 Products through clinical trial sites in the Zai Territory, in each case at Zai’s expense.

The Zai TPX-0022 Agreement will continue in effect until expiration of the last royalty term for a TPX-0022 Product in any region in the Zai Territory, where the royalty term for a TPX-0022 Product in a region continues until the later of (i) the date of the last-to-expire valid claim within Company’s patent rights that covers the TPX-0022 Product in such region in the Zai Territory; (ii) the expiry of the regulatory exclusivity for such TPX-0022 Product in such region; or (iii) the close of business of the day that is exactly 10 years after the date of the first commercial sale of such TPX-0022 Product in such region. Subject to the terms of the Zai TPX-0022 Agreement, Zai may terminate the Zai TPX-0022 Agreement for convenience by providing written notice to the Company, which termination will be effective following a prescribed notice period. In addition, the Company may terminate the Zai TPX-0022 Agreement under specified circumstances if Zai or certain other parties challenge the Company’s patent rights. Either party may terminate the Zai TPX-0022 Agreement for the other party’s uncured material breach of the Zai TPX-0022 Agreement, with a customary notice and cure period, for the other party’s insolvency or if the other party acquires a third party and the acquired party is engaged in activities with a competing product that is not divested or discontinued within a specified period. After termination (but not natural expiration), other than certain terminations by Zai for cause, the Company is entitled to retain a worldwide and perpetual license from Zai to exploit the TPX-0022 Products.

Revenue Recognition

The Company determined that two performance obligations existed: (1) the exclusive license, bundled with the associated know-how and (2) the Company’s initial obligation to supply TPX-0022 for clinical development in the Zai Territory.

The total transaction price of $25.9 million was allocated to the performance obligations on the basis of the relative stand-alone selling price estimated for each performance obligation. In estimating the stand-alone selling price for each performance obligation, the Company developed assumptions that require judgment and included forecasted revenues, expected development timelines, discount rates, probabilities of technical and regulatory success and costs for manufacturing clinical supplies.

The Company delivered the license and technical know-how to Zai in the first quarter of 2021 to satisfy this performance obligation, and accordingly the Company recognized license revenue of $25.0 million in the first quarter of 2021.  The $0.9 million in consideration allocable to the clinical supply performance obligation will be recognized when clinical trial material has been shipped by the Company and Zai obtains control of the goods, upon delivery, over the period of the obligation. As of March 31, 2021, the Company has not recognized any revenue associated with the clinical supply performance obligation under the Zai TPX-0022 Agreement.  

The Company assessed the Zai TPX-0022 Agreement to determine whether a significant financing component exists and concluded that a significant financing component does not exist. The upfront payment received by the Company was subject to foreign tax withholdings.  The Company recorded this tax expense to general and administrative expense in the Condensed Statements of Operations and Comprehensive Loss.