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Table of Contents

7

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 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 June 30, 2022

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 001-37581

Aclaris Therapeutics, Inc.

(Exact Name of Registrant as Specified in Its Charter)

Delaware
(State or Other Jurisdiction of
Incorporation or Organization)

46-0571712
(I.R.S. Employer
Identification No.)

640 Lee Road, Suite 200
Wayne, PA
(Address of principal executive offices)

19087
(Zip Code)

Registrant’s telephone number, including area code: (484324-7933

N/A

(Former name, former address and former fiscal year, if changed since last report)

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, $0.00001 par value

 

ACRS

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 Securities Exchange Act of 1934:

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 Securities Exchange Act of 1934).   Yes  No 

The number of outstanding shares of the registrant’s common stock, par value $0.00001 per share, as of the close of business on July 29, 2022 was 66,671,750.

Table of Contents

ACLARIS THERAPEUTICS, INC.

INDEX TO FORM 10-Q

    

PAGE

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

2

Unaudited Condensed Consolidated Balance Sheets as of June 30, 2022 and December 31, 2021

2

Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss for the three and six months ended June 30, 2022 and 2021

3

Unaudited Condensed Consolidated Statements of Stockholders’ Equity for the three and six months ended June 30, 2022 and 2021

4

Unaudited Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2022 and 2021

5

Notes to Unaudited Condensed Consolidated Financial Statements

6

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

19

Item 3. Quantitative and Qualitative Disclosures about Market Risk

34

Item 4. Controls and Procedures

35

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

36

Item 1A. Risk Factors

36

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

36

Item 6. Exhibits

36

Signatures

38

Table of Contents

Part I. FINANCIAL INFORMATION

Item 1. Financial Statements

ACLARIS THERAPEUTICS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In thousands, except share and per share data)

    

June 30, 

December 31, 

    

2022

    

2021

Assets

Current assets:

Cash and cash equivalents

$

68,264

$

27,349

Short-term marketable securities

 

180,339

 

164,065

Accounts receivable, net

637

623

Prepaid expenses and other current assets

 

10,114

 

12,995

Total current assets

 

259,354

 

205,032

Marketable securities

 

7,221

 

34,242

Property and equipment, net

 

1,276

 

1,335

Intangible assets

7,011

7,048

Other assets

 

3,114

 

3,554

Total assets

$

277,976

$

251,211

Liabilities and Stockholders’ Equity

Current liabilities:

Accounts payable

$

5,703

$

9,985

Accrued expenses

 

7,571

 

10,051

Current portion of lease liabilities

741

693

Discontinued operations

2,202

2,202

Total current liabilities

 

16,217

 

22,931

Other liabilities

1,840

 

2,172

Contingent consideration

23,800

28,400

Deferred tax liability

 

367

 

367

Total liabilities

 

42,224

 

53,870

Commitments and contingencies (Note 16)

Stockholders’ Equity:

Preferred stock, $0.00001 par value; 10,000,000 shares authorized and no shares issued or outstanding at June 30, 2022 and December 31, 2021

Common stock, $0.00001 par value; 100,000,000 shares authorized at June 30, 2022 and December 31, 2021; 66,667,580 and 61,228,446 shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively

 

1

 

1

Additional paid‑in capital

 

871,805

 

792,971

Accumulated other comprehensive loss

 

(1,326)

 

(224)

Accumulated deficit

 

(634,728)

 

(595,407)

Total stockholders’ equity

 

235,752

 

197,341

Total liabilities and stockholders’ equity

$

277,976

$

251,211

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

2

Table of Contents

ACLARIS THERAPEUTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(Unaudited)

(In thousands, except share and per share data)

Three Months Ended

Six Months Ended

June 30, 

June 30, 

    

2022

    

2021

    

2022

    

2021

Revenues:

Contract research

$

1,218

$

1,606

$

2,439

$

3,141

Other revenue

310

218

542

460

Total revenue

1,528

1,824

2,981

3,601

Costs and expenses:

Cost of revenue

1,068

1,263

2,223

2,465

Research and development

 

18,779

7,897

 

33,085

 

15,735

General and administrative

 

6,075

5,870

 

12,174

 

10,697

Revaluation of contingent consideration

(3,400)

4,800

(4,600)

21,239

Total costs and expenses

 

22,522

 

19,830

 

42,882

 

50,136

Loss from operations

 

(20,994)

 

(18,006)

 

(39,901)

 

(46,535)

Other income (expense), net

 

462

 

(155)

 

580

 

(380)

Net loss

$

(20,532)

$

(18,161)

$

(39,321)

$

(46,915)

Net loss per share, basic and diluted

$

(0.31)

$

(0.34)

$

(0.62)

$

(0.90)

Weighted average common shares outstanding, basic and diluted

 

65,990,031

 

53,968,405

 

63,723,123

 

52,163,136

Other comprehensive loss:

Unrealized gain (loss) on marketable securities, net of tax of $0

$

(354)

$

25

$

(1,101)

$

(10)

Foreign currency translation adjustment

(69)

(80)

Total other comprehensive loss

 

(354)

 

(44)

 

(1,101)

 

(90)

Comprehensive loss

$

(20,886)

$

(18,205)

$

(40,422)

$

(47,005)

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

3

Table of Contents

ACLARIS THERAPEUTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF

STOCKHOLDERS’ EQUITY

(Unaudited)

(In thousands, except share data)

Accumulated

Common Stock

Additional

Other

Total

Par

Paidin

Comprehensive

Accumulated

Stockholders’

  

  Shares 

  

Value

  

Capital

  

Loss

  

Deficit

  

Equity

Balance at December 31, 2021

61,228,446

$

1

$

792,971

$

(224)

$

(595,407)

$

197,341

Issuance of common stock in connection with exercise of stock options and vesting of restricted stock units

509,037

49

49

Unrealized loss on marketable securities

(748)

(748)

Stock-based compensation expense

2,346

2,346

Net loss

(18,789)

(18,789)

Balance at March 31, 2022

61,737,483

$

1

$

795,366

$

(972)

$

(614,196)

$

180,199

Issuance of common stock in connection with exercise of stock options and vesting of restricted stock units

91,388

88

88

Issuance of common stock under at-the-market sales agreement, net of offering costs of $2,341

4,838,709

72,659

72,659

Unrealized loss on marketable securities

(354)

(354)

Stock-based compensation expense

3,692

3,692

Net loss

(20,532)

(20,532)

Balance at June 30, 2022

66,667,580

$

1

$

871,805

$

(1,326)

$

(634,728)

$

235,752

Accumulated

Common Stock

Additional

Other

Total

Par

Paidin

Comprehensive

Accumulated

Stockholders’

  

  Shares 

  

Value

  

Capital

  

Income (Loss)

  

Deficit

  

Equity

Balance at December 31, 2020

45,109,314

$

$

542,286

$

(94)

$

(504,542)

$

37,650

Issuance of common stock in connection with exercise of stock options and warrants and vesting of restricted stock units

666,144

(2,579)

(2,579)

Issuance of common stock in connection with public offering, net of offering costs of $7,011

6,306,271

103,348

103,348

Unrealized loss on marketable securities

(35)

(35)

Foreign currency translation adjustment

(11)

(11)

Stock-based compensation expense

2,675

2,675

Net loss

(28,754)

(28,754)

Balance at March 31, 2021

52,081,729

$

$

645,730

$

(140)

$

(533,296)

$

112,294

Issuance of common stock in connection with vesting of restricted stock units

1,024,666

1,041

1,041

Issuance of common stock in connection with public offering, net of offering costs of $8,899

8,098,592

1

134,851

134,852

Unrealized gain on marketable securities

25

25

Foreign currency translation adjustment

(69)

(69)

Stock-based compensation expense

3,833

3,833

Net loss

(18,161)

(18,161)

Balance at June 30, 2021

61,204,987

$

1

$

785,455

$

(184)

$

(551,457)

$

233,815

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

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ACLARIS THERAPEUTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)

Six Months Ended

June 30, 

    

2022

    

2021

Cash flows from operating activities:

    

    

    

    

Net loss

$

(39,321)

$

(46,915)

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

Depreciation and amortization

 

414

 

535

Stock-based compensation expense

 

6,038

 

6,507

Revaluation of contingent consideration

(4,600)

21,239

Changes in operating assets and liabilities:

Accounts receivable

(14)

(167)

Prepaid expenses and other assets

 

1,309

 

(5,223)

Accounts payable

 

(4,283)

 

(1,290)

Accrued expenses

 

(178)

 

861

Net cash used in operating activities

 

(40,635)

 

(24,453)

Cash flows from investing activities:

Purchases of property and equipment

 

(350)

 

(52)

Purchases of marketable securities

 

(85,096)

 

(147,289)

Proceeds from sales and maturities of marketable securities

 

94,155

 

26,557

Net cash provided by (used in) investing activities

 

8,709

 

(120,784)

Cash flows from financing activities:

Proceeds from issuance of common stock in connection with public offerings, net of issuance costs

238,200

Proceeds from issuance of common stock under the at-the-market sales agreement, net of issuance costs

72,744

Payments of employee withholding taxes related to restricted stock unit award vesting

(23)

(3,038)

Proceeds from exercise of employee stock options and the issuance of stock

120

1,459

Net cash provided by financing activities

 

72,841

 

236,621

Net increase in cash and cash equivalents

 

40,915

 

91,384

Cash and cash equivalents at beginning of period

 

27,349

 

22,063

Cash and cash equivalents at end of period

$

68,264

$

113,447

Supplemental disclosure of non-cash investing and financing activities:

Additions to property and equipment included in accounts payable

$

72

$

37

Offering costs included in accounts payable

$

$

28

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

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ACLARIS THERAPEUTICS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. Organization and Nature of Business

Overview

Aclaris Therapeutics, Inc. was incorporated under the laws of the State of Delaware in 2012. In 2015,  Aclaris Therapeutics International Limited (“ATIL”) was established under the laws of the United Kingdom as a wholly-owned subsidiary of Aclaris Therapeutics, Inc. In 2017, Confluence Life Sciences, Inc. (now known as Aclaris Life Sciences, Inc.) (“Confluence”) was acquired by Aclaris Therapeutics, Inc. and became a wholly-owned subsidiary thereof.  Aclaris Therapeutics, Inc., ATIL and Confluence are referred to collectively as the “Company.”  The Company is a clinical-stage biopharmaceutical company focused on developing novel drug candidates for immuno-inflammatory diseases.  In addition to developing its novel drug candidates, the Company is pursuing strategic alternatives, including identifying and consummating transactions with third-party partners, to further develop, obtain marketing approval for and/or commercialize its novel drug candidates.  

Liquidity

The Company’s condensed consolidated financial statements have been prepared on the basis of continuity of operations, realization of assets and the satisfaction of liabilities in the ordinary course of business.  As of June 30, 2022, the Company had cash, cash equivalents and marketable securities of $255.8 million and an accumulated deficit of $634.7 million.  Since inception, the Company has incurred net losses and negative cash flows from its operations.  Prior to the acquisition of Confluence, the Company had never generated revenue.  There can be no assurance that profitable operations will ever be achieved, and, if achieved, will be sustained on a continuing basis. In addition, development activities, including clinical and preclinical testing of the Company’s drug candidates, will require significant additional financing.  The future viability of the Company is dependent on its ability to successfully develop its drug candidates and to generate revenue from identifying and consummating transactions with third-party partners to further develop, obtain marketing approval for and/or commercialize its development assets or to raise additional capital to finance its operations.  The Company will require additional capital to complete the clinical development of zunsemetinib (ATI-450), ATI-1777 and ATI-2138, to develop its preclinical compounds, and to support its discovery efforts.  

Additional funds may not be available on a timely basis, on commercially acceptable terms, or at all, and such funds, if raised, may not be sufficient to enable the Company to continue to implement its long-term business strategy.  The Company’s ability to raise additional capital may be adversely impacted by the potential worsening of global economic conditions, including inflationary pressure, and the recent disruptions to, and volatility in, the credit and financial markets in the United States and worldwide resulting from the COVID-19 pandemic and geopolitical tensions.  If the Company is unable to raise sufficient additional capital or generate revenue from transactions with potential third-party partners for the development and/or commercialization of its drug candidates, it may need to substantially curtail planned operations. The Company’s failure to raise capital as and when needed could have a negative impact on its financial condition and ability to pursue its business strategies.  

The Company evaluated whether there are conditions and events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that its condensed consolidated financial statements are issued.  As of the report date, the Company does not believe that substantial doubt exists about its ability to continue as a going concern.  The Company believes its existing cash, cash equivalents and marketable securities are sufficient to fund its operating and capital expenditure requirements for a period greater than 12 months from the date of issuance of these condensed consolidated financial statements.

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2. Summary of Significant Accounting Policies

Unaudited Interim Financial Information

The accompanying condensed consolidated balance sheet as of June 30, 2022, the condensed consolidated statements of operations and comprehensive loss for the three and six months ended June 30, 2022 and 2021, the condensed consolidated statement of stockholders’ equity for the three and six months ended June 30, 2022 and 2021, and the condensed consolidated statements of cash flows for the six months ended June 30, 2022 and 2021 are unaudited.  The unaudited interim condensed consolidated financial statements have been prepared on the same basis as the audited annual financial statements contained in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on February 24, 2022 and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments necessary for the fair statement of the Company’s financial position as of June 30, 2022, the results of its operations and comprehensive loss for the three and six months ended June 30, 2022 and 2021, its changes in stockholders’ equity for the three and six months ended June 30, 2022 and 2021 and its cash flows for the six months ended June 30, 2022 and 2021.  The condensed consolidated balance sheet data as of December 31, 2021 was derived from audited financial statements but does not include all disclosures required by generally accepted accounting principles in the United States (“GAAP”).  The financial data and other information disclosed in these notes related to the three and six months ended June 30, 2022 and 2021 are unaudited. The results for the three and six months ended June 30, 2022 are not necessarily indicative of results to be expected for the year ending December 31, 2022, any other interim periods, or any future year or period.  The unaudited interim financial statements of the Company included herein have been prepared, pursuant to the rules and regulations of the SEC. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted from this report, as is permitted by such rules and regulations. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto for the year ended December 31, 2021 included in the Company’s Annual Report on Form 10-K filed with the SEC on February 24, 2022.  

Basis of Presentation

The accompanying condensed consolidated financial statements have been prepared in conformity with GAAP.  The condensed consolidated financial statements of the Company include the accounts of the operating parent company, Aclaris Therapeutics, Inc., and its wholly-owned subsidiaries, ATIL and Confluence.  All intercompany transactions have been eliminated.  Based upon the Company’s revenue, the Company believes that gross profit does not provide a meaningful measure of profitability and, therefore, has not included a line item for gross profit on the condensed consolidated statement of operations.  

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting periods.  Significant estimates and assumptions reflected in these financial statements include, but are not limited to, contingent consideration and the valuation of stock-based awards.  Estimates are periodically reviewed in light of changes in circumstances, facts and experience.  As of the date of issuance of these financial statements, the Company is not aware of any specific event or circumstance that would require an update to its estimates, assumptions and judgments or revise the carrying value of its assets or liabilities.  Actual results could differ from the Company’s estimates.

Significant Accounting Policies

The Company’s significant accounting policies are disclosed in the audited consolidated financial statements for the year ended December 31, 2021 included in the Company’s Annual Report on Form 10-K filed with the SEC on February 24, 2022.  Except as set forth below, there have been no changes to the Company’s significant accounting policies from those disclosed in the annual report.

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Contingent Consideration

The Company initially recorded a contingent consideration liability at fair value on the date of acquisition related to future potential payments resulting from the acquisition of Confluence based upon significant unobservable inputs including the achievement of development, regulatory and commercial milestones, as well as estimated future sales levels and the discount rates applied to calculate the present value of the potential payments. Significant judgement was involved in determining the appropriateness of these assumptions.  These assumptions are considered Level 3 inputs.  Revaluation of the contingent consideration liability can result from changes to one or more of these assumptions.  The Company evaluates the fair value estimate of the contingent consideration liability on a quarterly basis with changes, if any, recorded as income or expense in the condensed consolidated statement of operations.

The fair value of contingent consideration is estimated using a probability-weighted expected payment model for regulatory milestone payments and a Monte Carlo simulation model for commercial milestone and royalty payments and then applying a risk-adjusted discount rate to calculate the present value of the potential payments.  Significant assumptions used in the Company’s estimates include the probability of achieving regulatory milestones and commencing commercialization, which are based on an asset’s current stage of development and a review of existing clinical data. Probability of success assumptions ranged between 10% and 40% at June 30, 2022.  Additionally, estimated future sales levels and the risk-adjusted discount rate applied to the potential payments are also significant assumptions used in calculating the fair value.  The discount rate ranged between 10.2% and 10.9% depending on the year of each potential payment.

3. Fair Value of Financial Assets and Liabilities

The following tables present information about the fair value measurements of the Company’s financial assets and liabilities which are measured at fair value on a recurring and non-recurring basis, and indicate the level of the fair value hierarchy utilized to determine such fair values:

June 30, 2022

(In thousands)

    

Level 1

    

Level 2

    

Level 3

    

Total

Assets:

    

    

    

    

    

    

    

    

Cash equivalents

$

63,838

$

$

$

63,838

Marketable securities

 

187,560

187,560

Total assets

$

63,838

$

187,560

$

$

251,398

Liabilities:

Contingent consideration

$

$

$

23,800

$

23,800

Total liabilities

$

$

$

23,800

$

23,800

December 31, 2021

(In thousands)

    

Level 1

    

Level 2

    

Level 3

    

Total

Assets:

    

    

    

    

    

    

    

    

Cash equivalents

$

21,678

$

$

$

21,678

Marketable securities

 

198,307

198,307

Total assets

$

21,678

$

198,307

$

$

219,985

Liabilities:

Contingent consideration

$

$

$

28,400

$

28,400

Total liabilities

$

$

$

28,400

$

28,400

As of June 30, 2022 and December 31, 2021, the Company’s cash equivalents consisted of a money market fund, which was valued based upon Level 1 inputs.  The Company’s marketable securities as of June 30, 2022 and December

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31, 2021 consisted of commercial paper and corporate, asset-backed and U.S. government agency debt securities, which were all valued based upon Level 2 inputs.  Marketable securities as of December 31, 2021 also included foreign government agency debt securities which were all valued based upon Level 2 inputs.

In determining the fair value of its Level 2 investments, the Company relies on quoted prices for identical securities in markets that are not active. These quoted prices are obtained by the Company with the assistance of a third-party pricing service based on available trade, bid and other observable market data for identical securities.  The Company compares the quoted prices obtained from the third-party pricing service to other available independent pricing information to validate the reasonableness of the quoted prices provided.  The Company evaluates whether adjustments to third-party pricing are necessary and, historically, the Company has not made adjustments to quoted prices obtained from the third-party pricing service.  During the three and six months ended June 30, 2022 and 2021, there were no transfers into or out of Level 3.

A decrease in the fair value of the contingent consideration liability of $4.6 million during the six months ended June 30, 2022 was mainly due to higher discount rates, resulting from higher risk-free rates and wider credit spreads, being applied to potential payments relative to prior periods.  The overall decrease was partially offset by an increase in the contingent consideration liability as a result of the impact of the passage of time.

As of June 30, 2022 and December 31, 2021, the fair value of the Company’s available-for-sale marketable securities by type of security was as follows:

June 30, 2022

Gross

Gross

Amortized

Unrealized

Unrealized

Fair

(In thousands)

Cost

Gain

Loss

Value

Marketable securities:

Corporate debt securities

$

47,201

$

$

(398)

$

46,803

Commercial paper

56,053

56,053

Asset-backed debt securities(1)

28,423

(175)

28,248

U.S. government agency debt securities

57,211

(755)

56,456

Total marketable securities

$

188,888

$

$

(1,328)

$

187,560

(1) Included in Asset-backed debt securities is $7.2 million with maturity dates between one and five years.

December 31, 2021

Gross

Gross

Amortized

Unrealized

Unrealized

Fair

(In thousands)

Cost

Gain

Loss

Value

Marketable securities:

Corporate debt securities(1)

$

40,993

$

6

$

(50)

$

40,949

Commercial paper

71,837

71,837

Asset-backed debt securities

36,166

(43)

36,123

Foreign government agency debt securities

4,073

(13)

4,060

U.S. government agency debt securities(2)

45,465

(127)

45,338

Total marketable securities

$

198,534

$

6

$

(233)

$

198,307

(1) Included in Corporate debt securities is $9.2 million with maturity dates between one and five years.

(2) Included in US government agency debt securities is $25.0 million with maturity dates between one and five years.

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4. Property and Equipment, Net

Property and equipment, net consisted of the following:

June 30, 

December 31, 

(In thousands)

2022

2021

Computer equipment

    

$

1,355

    

$

1,380

Lab equipment

1,879

1,605

Furniture and fixtures

620

620

Leasehold improvements

1,123

1,123

Property and equipment, gross

 

4,977

 

4,728

Accumulated depreciation

 

(3,701)

 

(3,393)

Property and equipment, net

$

1,276

$

1,335

Depreciation expense was $0.2 million for each of the three months ended June 30, 2022 and 2021, and $0.4 million for each of the six months ended June 30, 2022 and 2021.

5. Intangible Assets

Intangible assets consisted of the following:

Gross Cost

Accumulated Amortization

Remaining

June 30, 

December 31, 

June 30, 

December 31, 

(In thousands, except years)

   

Life (years)

   

2022

   

2021

   

2022

   

2021

Other intangible assets

5.1

$

751

$

751

$

369

$

332

In-process research and development

n/a

6,629

6,629

Total intangible assets

$

7,380

$

7,380

$

369

$

332

Amortization expense was $19 thousand for each of the three months ended June 30, 2022 and 2021, and $38 thousand for each of the six months ended June 30, 2022 and 2021.

As of June 30, 2022, estimated future amortization expense was as follows:

Year Ending

(In thousands)

    

December 31,

2022

$

37

2023

 

75

2024

 

75

2025

75

2026

75

Thereafter

45

Total

$

382

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6. Accrued Expenses

Accrued expenses consisted of the following:

June 30, 

December 31, 

(In thousands)

    

2022

    

2021

Employee compensation expenses

$

2,885

$

4,389

Research and development expenses

2,771

1,278

Litigation settlements (see Note 16)

2,650

Other

 

1,915

 

1,734

Total accrued expenses

$

7,571

$

10,051

7. Debt

Loan and Security Agreement – Silicon Valley Bank

In March 2020, the Company entered into a Loan and Security Agreement with Silicon Valley Bank (“SVB”).  The Loan and Security Agreement provided for $11.0 million in term loans, of which the Company borrowed the entire amount on March 30, 2020.  In connection with the Loan and Security Agreement, the Company issued to SVB a warrant to purchase up to 460,251 shares of common stock (the “Warrant”) (see Note 8).  The proceeds of the Loan and Security Agreement were allocated to the term loan and Warrant using a relative fair value approach.  

In July 2021, the Company repaid in full the $11.0 million that was outstanding under the Loan and Security Agreement, together with all accrued and unpaid interest and fees as of the payoff date, for a total payment of $11.7 million.

8. Stockholders’ Equity

Preferred Stock

As of June 30, 2022 and December 31, 2021, the Company’s amended and restated certificate of incorporation authorized the Company to issue 10,000,000 shares of undesignated preferred stock.  There were no shares of preferred stock outstanding as of June 30, 2022 or December 31, 2021.

Common Stock

As of June 30, 2022 and December 31, 2021, the Company’s amended and restated certificate of incorporation authorized the Company to issue 100,000,000 shares of $0.00001 par value common stock. There were 66,667,580 and 61,228,446 shares of common stock issued and outstanding as of June 30, 2022 and December 31, 2021, respectively.

Each share of common stock entitles the holder to one vote on all matters submitted to a vote of the Company’s stockholders. Common stockholders are entitled to receive dividends, as may be declared by the board of directors, if any, subject to any preferential dividend rights of any series of preferred stock that may be outstanding.  No dividends have been declared through June 30, 2022.  

Warrants

The Warrant issued to SVB in March 2020 had an initial exercise price of $0.956 per share, subject to adjustment as provided in the Warrant.  The Warrant became immediately exercisable in full upon the funding of the term loan facility.  The Company assigned a fair value of $0.4 million to the Warrant using a Black-Scholes valuation methodology, and also concluded that the Warrant was indexed to its own stock and therefore classified the Warrant as an equity instrument.  In January 2021, SVB net exercised the Warrant in full, and the Company issued 388,119 shares of common stock to SVB.  

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January 2021 Public Offering

In January 2021, the Company closed a public offering in which it sold 6,306,271 shares of common stock at a price to the public of $17.50 per share, for aggregate gross proceeds of $110.4 million. The Company paid underwriting discounts and commissions of $6.6 million, and also incurred expenses of $0.4 million in connection with the offering.  As a result, the net offering proceeds received by the Company, after deducting underwriting discounts, commissions and offering expenses, were $103.3 million.

June 2021 Public Offering

In June 2021, the Company closed a public offering in which it sold 8,098,592 shares of common stock at a price to the public of $17.75 per share, for aggregate gross proceeds of $143.8 million. The Company paid underwriting discounts and commissions of $8.6 million, and also incurred expenses of $0.3 million in connection with the offering.  As a result, the net offering proceeds received by the Company, after deducting underwriting discounts, commissions and offering expenses, were $134.9 million.

Sales of Common Stock Pursuant to At-The-Market Facility

In April 2022, the Company sold 4,838,709 shares of its common stock at a weighted average price per share of $15.50, for aggregate gross proceeds of $75.0 million, pursuant to a sales agreement with SVB Securities LLC and Cantor Fitzgerald & Co., as sales agents, dated May 20, 2021.  The Company paid selling commissions and other fees of $2.2 million in connection with the sale.

9. Stock-Based Awards

2015 Equity Incentive Plan

In September 2015, the Company’s board of directors adopted the 2015 Equity Incentive Plan (the “2015 Plan”), and the Company’s stockholders approved the 2015 Plan. The 2015 Plan became effective in connection with the Company’s initial public offering in October 2015.  Beginning at the time the 2015 Plan became effective, no further grants may be made under the Company’s 2012 Equity Compensation Plan, as amended and restated (the “2012 Plan”).  The 2015 Plan provides for the grant of incentive stock options, nonqualified stock options, stock appreciation rights, restricted stock awards, restricted stock unit (“RSU”) awards, performance stock awards, cash-based awards and other stock-based awards. The number of shares initially reserved for issuance under the 2015 Plan was 1,643,872 shares of common stock. The number of shares of common stock that may be issued under the 2015 Plan will automatically increase on January 1 of each year ending on January 1, 2025, in an amount equal to the lesser of (i) 4.0% of the shares of the Company’s common stock outstanding on December 31st of the preceding calendar year or (ii) an amount determined by the Company’s board of directors. The shares of common stock underlying any awards that expire, are otherwise terminated, settled in cash or repurchased by the Company under the 2015 Plan and the 2012 Plan will be added back to the shares of common stock available for issuance under the 2015 Plan.  As of January 1, 2022, the number of shares of common stock that may be issued under the 2015 Plan was automatically increased by 2,449,137 shares.  As of June 30, 2022, 3,372,766 shares remained available for grant under the 2015 Plan.  The Company had 4,130,376 stock options and 1,454,934 RSUs outstanding as of June 30, 2022 under the 2015 Plan.

2017 Inducement Plan

In July 2017, the Company’s board of directors adopted the 2017 Inducement Plan (the “2017 Inducement Plan”).  The 2017 Inducement Plan is a non-stockholder approved stock plan adopted pursuant to the “inducement exception” provided under Nasdaq listing rules.  The Company had 410,600 stock options and 2,375 RSUs outstanding as of June 30, 2022 under the 2017 Inducement Plan.  All shares of common stock that were eligible for issuance under the 2017 Inducement Plan after October 1, 2018, including any shares underlying any awards that expire or are otherwise terminated, reacquired to satisfy tax withholding obligations, settled in cash or repurchased by the Company in the future that would have been eligible for re-issuance under the 2017 Inducement Plan, were retired.  

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2012 Equity Compensation Plan

Upon the 2015 Plan becoming effective, no further grants can be made under the 2012 Plan.  The Company granted stock options to purchase a total of 1,140,524 shares under the 2012 Plan, of which 473,977 were outstanding as of June 30, 2022.  Stock options granted under the 2012 Plan expire after ten years.  

Stock Option Valuation

The weighted average assumptions the Company used to estimate the fair value of stock options granted during the six months ended June 30, 2022 and 2021 were as follows:

    

Six Months Ended

June 30, 

2022

2021

Risk-free interest rate

 

1.90

%

0.91

%

Expected term (in years)

 

6.2

6.2

Expected volatility

 

77.95

%

76.60

%

Expected dividend yield

 

0

%

0

%

The Company recognizes compensation expense for awards over their vesting period.  Compensation expense for awards includes the impact of forfeitures in the period when they occur.  

Stock Options

The following table summarizes stock option activity for the six months ended June 30, 2022:

    

    

    

Weighted

    

Weighted

Average

Average

Remaining

Aggregate

Number

Exercise

Contractual

Intrinsic

(In thousands, except share and per share data and years)

of Shares

Price

Term

Value

(in years)

Outstanding as of December 31, 2021

 

3,792,450

$

17.50

 

6.8

$

13,710

Granted

 

1,891,950

14.40

Exercised

 

(85,672)

1.40

1,115

Forfeited and cancelled

 

(583,775)

15.70

Outstanding as of June 30, 2022

 

5,014,953

$

16.81

 

7.1

$