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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 September 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 No. 001-36483
 VIRIDIAN THERAPEUTICS, INC.
(Exact name of registrant as specified in its charter)
Delaware
47-1187261
(State or other jurisdiction of incorporation or organization)
 
(I.R.S. Employer Identification No.)
221 Crescent Street, Suite 401, Waltham, MA 02453
(Address, including zip code, of principal executive offices)
 (617272-4600
(Registrant’s telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last report): N/A
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $0.01 par value per shareVRDNThe 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  o
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  o
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. o
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 November 9, 2022, there were 40,248,248 shares of the registrant’s common stock outstanding.



VIRIDIAN THERAPEUTICS, INC.
INDEX
PART I. FINANCIAL INFORMATION
PART II. OTHER INFORMATION

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q (“Quarterly Report”) contains forward-looking statements that involve substantial risks and uncertainties for purposes of the safe harbor provided by the Private Securities Litigation Reform Act of 1995. The words “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “plan,” “expect,” “predict,” “potential,” “opportunity,” “goals,” or “should,” and similar expressions are intended to identify forward-looking statements. All statements contained in this Quarterly Report, other than statements of historical fact are forward-looking statements. You should not unduly rely on forward-looking statements because they involve known and unknown risks, uncertainties and other factors, some of which are beyond our control. These risks, uncertainties and other factors may cause our actual results, performance or achievements to be materially different from the anticipated future results, performance or achievements expressed or implied by the forward-looking statements.
Actual results and performance could differ materially from those projected in the forward-looking statements as a result of many factors, including, without limitation, statements relating to:
our future research and development activities, including clinical testing and the costs and timing thereof;
our strategy, including clinical development of VRDN-001, VRDN-002, VRDN-003 and other product candidates, and the clinical and commercial potential of our product candidates, if approved;
the sufficiency of our cash resources;
our ability to raise additional funding when needed;
any statements concerning anticipated regulatory activities or licensing or collaborative arrangements;
business interruptions resulting from the ongoing coronavirus disease (“COVID-19”) outbreak or similar public health crises, which could cause a disruption in the development of our product candidates and adversely impact our business;
our research and development and other expenses;
our operations and legal risks;
developments relating to our competitors and our industry, including competing product candidates and therapies; and
any statement of assumptions underlying any of the foregoing.

We have based these forward-looking statements largely on our current expectations and projections about future events and trends that we believe may affect our financial condition, results of operations, business strategy, short-term and long-term business operations and objectives, and financial needs. Actual results and performance could differ materially from those projected in the forward-looking statements as a result of many factors. These forward-looking statements are subject to a number of risks, uncertainties, and assumptions, as described in greater detail in Part I, Item 1A, “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2021, and under a similar heading in any other periodic or current report we may file with the Securities and Exchange Commission (“SEC”) in the future. You are advised to consult any further disclosures we make on related subjects in our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and our website. Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties, and assumptions, the future events and trends discussed in this Quarterly Report, may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.
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We undertake no obligation to revise or publicly release the results of any revision to these forward-looking statements, except as required by law. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements. All forward-looking statements are qualified in their entirety by this cautionary statement.
Unless otherwise mentioned or unless the context requires otherwise, all references in this Quarterly Report, to “Viridian,” “Viridian Therapeutics,” the “Company,” “we,” “us,” and “our” or similar references refer to Viridian Therapeutics, Inc., and our consolidated subsidiaries.
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
VIRIDIAN THERAPEUTICS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)
(unaudited)
September 30,
2022
December 31,
2021
Assets
Current assets:
Cash and cash equivalents$344,210 $42,299 
Short-term investments87,112 154,666 
Prepaid expenses and other current assets5,635 2,747 
Unbilled revenue - related party398 451 
Total current assets437,355 200,163 
Property and equipment, net825 375 
Operating lease right-of-use asset1,247 1,680 
Other assets1,153 1,491 
Total assets$440,580 $203,709 
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable$12,152 $2,329 
Accrued liabilities12,774 11,018 
Current portion of deferred revenue - related party288 289 
Total current liabilities25,214 13,636 
Long-term debt, net4,613  
Deferred revenue - related party933 1,149 
Other liabilities813 1,208 
Total liabilities31,573 15,993 
Commitments and contingencies
Stockholders’ equity:
Preferred stock, series A non-voting convertible preferred stock, $0.01 par value; 435,000 shares authorized; 188,381 and 260,437 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively
85,470 118,164 
Preferred stock, series B non-voting convertible preferred stock, $0.01 par value; 500,000 shares authorized; 51,210 and 23,126 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively
56,677 15,669 
Common stock, $0.01 par value; 200,000,000 shares authorized; 40,244,355 and 23,924,004 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively
402 239 
Additional paid-in capital709,787 412,101 
Accumulated other comprehensive loss(940)(157)
Accumulated deficit(442,389)(358,300)
Total stockholders’ equity409,007 187,716 
Total liabilities and stockholders’ equity$440,580 $203,709 

See accompanying notes to these condensed consolidated financial statements.
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VIRIDIAN THERAPEUTICS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(in thousands, except share and per share data)
(unaudited)

Three Months Ended
September 30,
Nine Months Ended
September 30,
2022202120222021
Revenue:
Collaboration revenue - related party$1,195 $208 $1,667 $2,749 
Operating expenses:
Research and development22,119 8,121 61,577 34,492 
General and administrative8,861 6,221 25,328 18,904 
Total operating expenses30,980 $14,342 86,905 $53,396 
Loss from operations(29,785)(14,134)(85,238)(50,647)
Other income:
Interest and other income1,044 91 1,467 180 
Interest and other expense(164) (318) 
Other income, net880 91 1,149 180 
Net loss$(28,905)$(14,043)$(84,089)$(50,467)
Net loss per share, basic and diluted$(0.86)$(1.25)$(2.88)$(5.95)
Weighted-average shares used to compute basic and diluted net loss per share33,742,076 11,183,578 29,238,247 8,487,485 
Comprehensive loss:
Net loss$(28,905)$(14,043)$(84,089)$(50,467)
Other comprehensive gain (loss):
Change in unrealized gain (loss) on investments137 9 (783)5 
Total other comprehensive gain (loss)137 9 (783)5 
Total comprehensive loss$(28,768)$(14,034)$(84,872)$(50,462)









See accompanying notes to these condensed consolidated financial statements.
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VIRIDIAN THERAPEUTICS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(in thousands, except share data)
(unaudited)

Preferred StockCommon StockAdditional
Paid-in
Capital
Accumulated Other Comprehensive LossAccumulated
Deficit
Total
Stockholders’
Equity
Series A Series B
SharesAmountSharesAmountSharesAmount
Balance as of December 31, 2021260,437 $118,164 23,126 $15,669 23,924,004 $239 $412,101 $(157)$(358,300)$187,716 
Issuance of common stock upon the conversion of convertible preferred stock(47,871)(21,722)— — 3,191,555 33 21,689 — —  
Issuance of common stock for exercises of stock options— — — — 47,735 — 667 — — 667 
Issuance of common stock for cash under employee stock purchase plan— — — — 6,128 — 71 — — 71 
Share-based compensation expense— — — — — — 4,659 — — 4,659 
Change in unrealized loss on investments— — — — — — — (778)— (778)
 Net loss— — — — — — — — (25,693)(25,693)
Balance as of March 31, 2022212,566 $96,442 23,126 $15,669 27,169,422 $272 $439,187 $(935)$(383,993)$166,642 
Issuance of common stock upon the conversion of convertible preferred stock(19,027)(8,633)— — 1,268,528 13 8,620 — —  
Issuance of common stock for exercises of stock options— — — — 26,030 — 4 — — 4 
Share-based compensation expense— — — — — — 4,885 — — 4,885 
Change in unrealized loss on investments— — — — — — — (142)— (142)
Net loss— — — — — — — — (29,491)(29,491)
Balance as of June 30, 2022193,539 $87,809 23,126 $15,669 28,463,980 $285 $452,696 $(1,077)$(413,484)$141,898 
Issuance of common stock upon the conversion of convertible preferred stock(5,158)(2,339)— — 343,882 2 2,337 — —  
Issuance of Series B preferred stock and common stock, 2022 offering, net of issuance costs— — 28,084 41,008 11,352,640 114 248,528 — — 289,650 
Issuance of common stock upon exercises of warrants— — — — 56,666 1 934 — — 935 
Issuance of common stock for exercises of stock options— — — — 20,291 — 237 — — 237 
Issuance of common stock for cash under employee stock purchase plan— — — — 6,896 — 112 — — 112 
Share-based compensation expense— — — — — — 4,943 — — 4,943 
Change in unrealized loss on investments— — — — — — — 137 — 137 
Net loss— — — — — — — — (28,905)(28,905)
Balance as of September 30, 2022188,381 $85,470 51,210 $56,677 40,244,355 $402 $709,787 $(940)$(442,389)$409,007 
VIRIDIAN THERAPEUTICS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(in thousands, except share data)
(unaudited)
Preferred StockCommon StockAdditional
Paid-in
Capital
Accumulated Other Comprehensive LossAccumulated
Deficit
Total
Stockholders’
Equity
Series A Series B
SharesAmountSharesAmountSharesAmount
Balance as of December 31, 2020398,487$180,801  $ 4,231,135$42 $218,089 $(8)$(278,887)$120,037 
Issuance of common stock upon the conversion of convertible preferred stock(43,664)(19,811)— — 2,911,071 29 19,782 — —  
Issuance of common stock upon exercises of warrants— — — 56,935 1 939 — — 940 
Issuance of common stock for exercises of stock options and vesting of restricted stock units— — — 31,249 — 307 — — 307 
Issuance of common stock for cash under employee stock purchase plan— — — 980 — 12 — — 12 
Share-based compensation expense— — — — — 3,175 — — 3,175 
Change in unrealized loss on investments— — — — — — (13)— (13)
Net loss— — — — — — — (18,460)(18,460)
Balance as of March 31, 2021354,823 $160,990  $ 7,231,370 $72 $242,304 $(21)$(297,347)$105,998 
Issuance of common stock upon the conversion of convertible preferred stock(14,604)(6,627)— — 973,64810 6,617  
Issuance of common stock under April 2021 ATM, net of issuance costs— — 403,8684 7,048 7,052 
Share-based compensation expense— — 3,817 3,817 
Change in unrealized gain on investments— — 9 9 
Net loss— — — (17,964)(17,964)
Balance as of June 30, 2021340,219 $154,363  $ 8,608,886 $86 $259,786 $(12)$(315,311)$98,912 
Issuance of Series B preferred stock and common stock in the 2021 Public Offering, net of issuance costs— 23,126 15,669 7,344,54373 74,568 90,310 
Issuance of common stock upon the conversion of convertible preferred stock(18,885)(8,569)— — 1,259,01413 8,556  
Issuance of common stock for exercises of stock options and vesting of restricted stock units— — 16,79024 24 
Issuance of common stock under 2021 ATM, net of issuance costs— — 2,147,40122 25,375 25,397 
Share-based compensation expense— — 3,982 3,982 
Change in unrealized gain on investments— — — 9 9 
Net loss— — — (14,043)(14,043)
Balance as of September 30, 2021321,334$145,794 23,126 15,669 19,376,634$194 $372,291 $(3)$(329,354)$204,591 



See accompanying notes to these condensed consolidated financial statements.
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VIRIDIAN THERAPEUTICS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Nine Months Ended
September 30,
20222021
Cash flows from operating activities:
Net loss$(84,089)$(50,467)
Adjustments to reconcile net loss to net cash used in operating activities:
Share-based compensation expense14,487 10,974 
Non-cash interest expense and amortization of debt issuance costs100  
Depreciation and amortization159 88 
Amortization of premiums and discounts on available-for-sale securities727 715 
Non-cash lease expense40 (197)
Amortization of issuance costs, 2021 ATM75  
Loss on sale of equipment 75 
Changes in operating assets and liabilities:
Prepaid expenses and other assets(2,622)(2,277)
Unbilled revenue - related party52 (479)
Deferred revenue - related party(216)707 
Accounts payable9,779 3,061 
Accrued and other liabilities1,712 (246)
       Net cash used in operating activities(59,796)(38,046)
Cash flows from investing activities:
Purchases of short-term investments(5,192)(85,547)
Proceeds from sales and maturities of short-term investments71,235 91,642 
Purchase of property and equipment, net(566)(254)
Proceeds from sale of property and equipment 77 
Net cash provided by investing activities65,477 5,918 
Cash flows from financing activities:
Proceeds from the issuance of common stock, pursuant to 2022 Public Offering266,788 — 
Proceeds from the issuance of common stock, pursuant to 2021 Public Offering and April 2021 ATM— 113,238 
Payments of issuance costs associated with the sale of common stock (18,146)(5,269)
Proceeds from the issuance of Series B preferred stock44,000 16,960 
Payment of issuance costs associated with the sale of Preferred Stock(2,992)(1,106)
Proceeds from issuance of long-term debt, net of costs4,554  
Proceeds from the sale of common stock - warrants935 939 
Proceeds from issuance of common stock upon the exercise of stock options908 331 
Proceeds from the issuance of common stock for cash under employee stock purchase plan183 12 
Net cash provided by financing activities296,230 125,105 
Net increase in cash and cash equivalents301,911 92,978 
Cash and cash equivalents at beginning of period42,299 45,897 
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Cash and cash equivalents at end of period$344,210 $138,875 
Cash paid for interest$144 $ 
Supplemental disclosure of non-cash investing and financing activities
Unpaid common and preferred stock issuance costs included in accrued liabilities$39 $1,065 
Purchases of property and equipment in accounts payable$44 $23 



See accompanying notes to these condensed consolidated financial statements.
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VIRIDIAN THERAPEUTICS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. DESCRIPTION OF BUSINESS
Viridian Therapeutics, Inc., a Delaware corporation (the “Company” or “Viridian”), is a biotechnology company advancing new treatments for patients suffering from serious diseases that are underserved by today’s therapies. The Company’s most advanced program, VRDN-001, is a differentiated monoclonal antibody targeting insulin-like growth factor-1 receptor (“IGF-1R”), a clinically and commercially validated target for the treatment of thyroid eye disease (“TED”). The Company’s second product candidate, VRDN-002, is a distinct anti-IGF-1R antibody that incorporates half-life extension technology. VRDN-003 is an extended half-life version of VRDN-001. Both VRDN-002 and VRDN-003 are designed for administration as convenient, low-volume, subcutaneous injections. TED is a debilitating autoimmune disease that causes inflammation and fibrosis within the orbit of the eye which can cause double vision, pain, and potential blindness. Patients with severe disease often require multiple remedial surgeries to the orbit, eye muscles and eyelids. In addition to developing therapies for TED, the Company is executing a similar strategic approach to identify opportunities in other rare and/or serious disease indications.

Liquidity
The accompanying condensed consolidated financial statements have been prepared on a basis that assumes the Company is a going concern and do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result from any uncertainty related to its ability to continue as a going concern. The Company has funded its operations to date principally through proceeds received from the sale of the Company’s common stock, its Series A Preferred Stock, Series B Preferred Stock, and other equity securities, debt financings, license fees, and reimbursements received under collaboration agreements. Since its inception and through September 30, 2022, the Company has generated an accumulated deficit of $442.4 million. The Company expects to continue to generate operating losses for the foreseeable future.

The Company has no products approved for commercial sale, has not generated any revenue from product sales, and cannot guarantee when or if it will generate any revenue from product sales. Substantially all of the Company’s operating losses resulted from expenses incurred in connection with its research and development programs and from general and administrative costs associated with its operations. The Company expects to incur significant expenses and operating losses for at least the next several years as it continues the development of, and seeks regulatory approval for, its product candidates. It is expected that operating losses will fluctuate significantly from quarter to quarter and year to year due to timing of development programs and efforts to achieve regulatory approval.

As of September 30, 2022, the Company had approximately $431.3 million in cash, cash equivalents, and short-term investments. As of the issuance date of these condensed consolidated financial statements, the Company expects that its current resources will be sufficient to fund its operations for at least the next twelve months from the issuance of these financial statements.

The Company will continue to require additional capital in order to continue to finance its operations. The amount and timing of future funding requirements will depend on many factors, including the pace and results of the Company’s clinical development efforts, equity financings, entering into license and collaboration agreements, and issuing debt or other financing vehicles. The Company’s ability to secure additional capital is dependent upon a number of factors, some of which are outside of the Company’s control, including success in developing its technology and drug product candidates, operational performance, and market conditions, including those resulting from the ongoing COVID-19 pandemic and the current inflationary environment.

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Failure to raise capital as and when needed, on favorable terms or at all, would have a negative impact on the Company’s financial condition and its ability to develop its product candidates. Changing circumstances may cause the Company to consume capital significantly faster or slower than currently anticipated. If the Company is unable to acquire additional capital or resources, it will be required to modify its operational plans. The estimates included herein are based on assumptions that may prove to be wrong, and the Company could exhaust its available financial resources sooner than currently anticipated.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”), for interim financial reporting and as required by Regulation S-X, Rule 10-01. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. Any reference in these notes to applicable guidance is meant to refer to the authoritative U.S. GAAP as found in the Accounting Standards Codification (“ASC”), and Accounting Standards Update (“ASU”), or the Financial Accounting Standards Board (“FASB”).
In the opinion of management, all adjustments, consisting of normal recurring accruals and revisions of estimates, considered necessary for a fair presentation of the unaudited condensed consolidated financial statements have been included. Interim results for the three and nine months ended September 30, 2022, are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2022, or any other future period.

The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. The Company’s subsidiaries have no employees or operations. All intercompany balances and transactions have been eliminated in consolidation. Management has determined that the Company operates in one segment, which is the business of developing and commercializing novel therapeutics. The information included in this Quarterly Report on Form 10-Q should be read in conjunction with the Company’s consolidated financial statements and the accompanying notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, filed with the U.S. Securities and Exchange Commission on March 11, 2022 (the “2021 Annual Report on Form 10-K”). The Company’s management performed an evaluation of its activities through the date of filing of these unaudited condensed consolidated financial statements and concluded that there are no subsequent events requiring disclosure, other than as disclosed.

Risk and Uncertainties – Impact of the COVID-19 Pandemic

The Company is subject to risks and uncertainties as a result of the ongoing COVID-19 pandemic. The virus continues to spread globally and the impact of this pandemic has been and may continue to be extensive in many aspects of society, which has resulted in and may continue to result in significant disruptions to the global economy, as well as businesses and capital markets around the world.
Potential impacts to the Company’s business include temporary closures of its facilities or those of its vendors, disruptions to its employees’ ability to travel, disruptions to or delays in ongoing laboratory experiments and operations, and the potential diversion of healthcare resources away from the conduct of clinical trials to focus on pandemic concerns, manufacturing delays or disruptions, and its ability to raise capital. As of September 30, 2022, there have been no material impacts to the Company as a result of the COVID-19 pandemic. The Company continually assesses the impacts of COVID-19 and the extent to which the pandemic may materially impact the Company’s financial condition, liquidity, or results of operations in the future is uncertain.

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Going Concern
At each reporting period, the Company evaluates whether there are conditions or events that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the financial statements are issued. The Company is required to make certain additional disclosures if it concludes substantial doubt exists and it is not alleviated by the Company’s plans or when its plans alleviate substantial doubt about the Company’s ability to continue as a going concern.
The Company’s evaluation entails, among other things, analyzing the results of the Company’s clinical development efforts, license and collaboration agreements as well as the entity’s current financial condition including conditional and unconditional obligations anticipated within a year, and related liquidity sources at the date the financial statements are issued. This is reflected in the Company’s prospective operating budgets and forecasts and compared to the current cash and cash equivalent balance.
Use of Estimates
The Company’s condensed consolidated financial statements are prepared in accordance with U.S. GAAP, which requires it to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and contingent liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Significant estimates and assumptions reflected in these condensed consolidated financial statements include, but are not limited to, the accrual for clinical trial costs and other outsourced research and development expenses, and the valuation of share-based awards. Although these estimates are based on the Company’s knowledge of current events and actions it may take in the future, actual results may ultimately differ from these estimates and assumptions.
Revenue Recognition
The Company accounts for revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”).
The Company enters into collaboration agreements and certain other agreements that are within the scope of ASC 606, under which the Company licenses, may license, or grants an option to license rights to certain of the Company’s product candidates and performs research and development services in connection with such agreements. The terms of these agreements typically include payment of one or more of the following: non-refundable, up-front fees; reimbursement of research and development costs; developmental, clinical, regulatory, and commercial sales milestone payments; and royalties on net sales of licensed products.
In accordance with 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 Company expects to receive in exchange for those goods or services.
To determine the appropriate amount of revenue to be recognized, for agreements within the scope of ASC 606, the Company performs the following five steps: (i) identification of the goods or services within the contract; (ii) determination of whether the promised goods or services are performance obligations, including whether they are distinct within the terms of the contract; (iii) measurement of the transaction price, including the constraint on variable consideration; (iv) allocation of the transaction price to the identified performance obligations; and (v) recognition of revenue when (or as) the Company satisfies each performance obligation. The Company only applies the five-step model to contracts when it is probable that the Company will collect consideration it is entitled to in exchange for the goods or services it transfers to the customer.
The promised goods or services in the Company’s agreements typically consist of a license, or option to license, rights to the Company’s intellectual property or research and development services. Performance obligations are
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promises in a contract to transfer a distinct good or service to the customer and are considered distinct when (i) the customer can benefit from the good or service on its own or together with other readily available resources and (ii) the promised good or service is separately identifiable from other promises in the contract. In assessing whether promised goods or services are distinct, the Company considers factors such as the stage of development of the underlying intellectual property, the capabilities of the customer to develop the intellectual property on its own or whether the required expertise is readily available, and whether the goods or services are integral or dependent to other goods or services in the contract.
The Company estimates the transaction price based on the amount expected to be received for transferring the promised goods or services in the contract. The consideration may include fixed consideration or variable consideration. At the inception of each agreement that includes variable consideration, the Company evaluates the amount of potential payment and the likelihood that the payments will be received. The Company utilizes either the most likely amount method or expected value method to estimate the amount expected to be received based on which method best predicts the amount expected to be received. The amount of variable consideration that is included in the transaction price may be constrained and is included in the transaction price only to the extent that it is probable that a significant reversal in the amount of the cumulative revenue recognized will not occur in a future period.
The Company’s contracts often include development and regulatory milestone payments that are assessed under the most likely amount method and constrained if it is probable that a significant revenue reversal would occur. Milestone payments that are not within the Company’s control or the licensee’s control, such as regulatory approvals, are not considered probable of being achieved until those approvals are received. At the end of each reporting period, the Company re-evaluates the probability of achievement of such development and clinical milestones 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, which would affect collaboration and other research and development revenue in the period of adjustment.
For agreements 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 revenue at the later of (i) when the related sales occur, or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied). To date, the Company has not recognized any royalty revenue resulting from any of the Company’s collaboration or strategic alliance agreements.
The Company allocates the transaction price based on the estimated standalone selling price. The Company must develop assumptions that require judgment to determine the stand-alone selling price for each performance obligation identified in the contract. The Company utilizes key assumptions to determine the stand-alone selling price, which may include other comparable transactions, pricing considered in negotiating the transaction, and the estimated costs. Variable consideration is allocated specifically to one or more performance obligations in a contract when the terms of the variable consideration relate to the satisfaction of the performance obligation and the resulting amounts allocated are consistent with the amounts the Company would expect to receive for the satisfaction of each performance obligation.
The consideration allocated to each performance obligation is recognized as revenue when control is transferred for the related goods or services. For performance obligations which consist of licenses and other promises, the Company utilizes judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress. The Company evaluates the measure of progress each reporting period and, if necessary, adjusts the measure of performance and related revenue recognition.
The Company receives payments from its customers based on billing schedules established in each contract. Up-front payments and fees are recorded as deferred revenue upon receipt or when due until the Company
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performs its obligations under these arrangements. Amounts are recorded as accounts receivable when the Company’s right to consideration is unconditional.
Research and Development
Research and development costs are expensed as incurred in performing research and development activities. The costs include employee-related expense including salaries, benefits, share-based compensation, restructuring charges, fees for acquiring and maintaining licenses under third-party license agreements, consulting fees, costs of research and development activities conducted by third parties on the Company’s behalf, costs to manufacture or have manufactured clinical trial materials, laboratory supplies, depreciation, and facilities and overhead costs. The Company records research and development expense in the period in which the Company receives or takes ownership of the applicable goods or when the applicable services are performed. In circumstances where amounts have been paid in excess of costs incurred, the Company records a prepaid expense.
The Company records up-front and milestone payments to acquire and retain contractual rights to licensed technology as research and development expenses when incurred if there is uncertainty in the Company receiving future economic benefit from the acquired contractual rights. The Company considers future economic benefits from acquired contractual rights to licensed technology to be uncertain until such a drug candidate is approved for sale by the U.S. Food and Drug Administration or when other significant risk factors are abated.
Clinical Trial and Preclinical Study Accruals
The Company makes estimates of accrued expenses as of each balance sheet date in its condensed consolidated financial statements based on certain facts and circumstances at that time. The Company’s accrued expenses for clinical trials and preclinical studies are based on estimates of costs incurred for services provided by clinical research organizations, manufacturing organizations, and other providers. Payments under the Company’s agreements with external service providers depend on a number of factors, such as site initiation, patient screening, enrollment, delivery of reports, and other events. In accruing for these activities, the Company obtains information from various sources and estimates the level of effort or expense allocated to each period. Adjustments to the Company’s research and development expenses may be necessary in future periods as its estimates change.
Share-Based Compensation
The Company accounts for share-based compensation expense to employees and non-employees based on the fair value of each stock option or award on the date of the grant. The Company uses the Black-Scholes option pricing model to determine the fair value of stock options. The use of the Black-Scholes option-pricing model requires the Company to make assumptions with respect to the expected term of the option, the expected volatility of the common stock consistent with the expected life of the option, risk-free interest rates and expected dividend yields of the common stock. The Company recognizes share-based compensation expense for awards with service-based conditions using the straight-line method over the requisite service period, net of any actual forfeitures.
Cash and Cash Equivalents
All highly-liquid investments that have maturities of 90 days or less at the date of purchase are classified as cash equivalents. Cash equivalents are reported at cost, which approximates fair value due to the short maturities of these instruments.
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Investments
The Company’s investments consist of highly-rated corporate and U.S. Treasury securities and have been classified as available-for-sale securities. Accordingly, these investments are recorded at their respective fair values, as determined based on quoted market prices. The Company may hold securities with stated maturities greater than one year. All available-for-sale securities are considered available to support current operations, and thus investments with maturities beyond one year are generally classified as current assets.
Unrealized gains and losses are reported as a component of stockholders’ equity until their disposition. Realized gains and losses are included as a component of other income (expense), net based on the specific identification method. The securities are subject to a periodic impairment review. An impairment charge would occur when a decline in the fair value of the investments below the cost basis is judged to be other-than-temporary.
Fair Value Measurements
Certain assets and liabilities are carried at fair value under U.S. GAAP. 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 on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of observable in puts. Financial assets and liabilities carried at fair value are to be classified and disclosed in one of the following three levels of the fair value hierarchy, of which the first two are considered observable and the last is considered unobservable:
Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2 inputs utilizes observable inputs other than Level 1 prices, such as quoted prices, for similar assets or liabilities, quoted market 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 related assets or liabilities.
Level 3 inputs are unobservable data points for the asset or liability and include situations where there is little, if any, market activity for the asset or liability.

Certain of the Company’s financial instruments are not measured at fair value on a recurring basis but are recorded at amounts that approximate their fair value due to the short-term nature of their maturities, such as cash and cash equivalents, accounts receivable, accounts payable and accrued expenses.
Concentrations of Credit Risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash equivalents, which include short-term investments that have maturities of less than three months. The Company maintains deposits in federally insured financial institutions in excess of federally insured limits. The Company has not experienced any losses in such accounts. The Company invests its excess cash primarily in deposits and money market funds held with one financial institution.
Property and Equipment
The Company carries its property and equipment at cost, less accumulated depreciation and amortization. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, generally three to five years. Leasehold improvements are amortized over the shorter of the life of the lease (including any renewal periods that are deemed to be reasonably assured) or the estimated useful life of the assets. Construction in progress is not depreciated until placed in service. Repairs and maintenance costs are expensed as incurred and expenditures for major improvements are capitalized.
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Operating Lease Right-of-Use Assets and Liabilities
The Company determines if an arrangement is, or contains, a lease at contract inception and during modifications or renewal of existing leases. Operating lease assets represent the Company’s right to use an underlying asset for the lease term and operating lease liabilities represent the Company’s obligation to make lease payments arising from the lease. The Company has recorded operating lease assets and liabilities pursuant to the guidance in Accounting Standards Update (“ASU”) No. 2016-02, Leases (Topic 842), and subsequent amendments to the initial guidance: ASU No. 2017-13, ASU No. 2018-10, and ASU No. 2018-11 (collectively, “ASC 842”). These operating lease assets and liabilities are recognized at the commencement date of the lease based upon the present value of lease payments over the lease term. The lease payments used to determine the Company’s operating lease assets may include lease incentives, stated rent increases, and escalation clauses and are recognized in the Company’s operating lease assets in the Company’s condensed consolidated balance sheets. The Company’s operating leases are reflected in operating lease right-of-use asset and operating lease liability within accrued and other liabilities in the Company’s condensed consolidated balance sheets. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term. Short-term leases, defined as leases that have a lease term of 12 months or less at the commencement date, are excluded from this treatment and are recognized on a straight-line basis over the term of the lease. Refer to Note 6. Commitments and Contingencies - Lease Obligations for additional information related to the Company’s operating leases.
Debt and Debt Issuance Costs
Debt issuance costs and expenses paid by the Company to its lenders are presented on the consolidated balance sheet as a direct deduction from the related debt liability rather than capitalized as an asset in accordance with ASU No. 2015-03, Interest - Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs. Debt issuance costs represent legal and other direct costs incurred in connection with the Company’s Term Loan. These costs are amortized as a non-cash component of interest expense using the effective interest method over the term of the loan.
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Convertible Preferred Stock
The Company records shares of non-voting convertible preferred stock at their respective fair values on the dates of issuance, net of issuance costs. The Company has applied the guidance in ASC 480-10-S99-3A, SEC Staff Announcement: Classification and Measurement of Redeemable Securities, and at issuance classified the Series A Preferred Stock outside of stockholders’ equity because, if convertibility of Series A Preferred Stock into common stock was not approved by the stockholders, the Series A Preferred Stock would be redeemable at the option of the holders for cash equal to the closing price of the common stock on last trading day prior to the holder’s redemption request. On December 31, 2020, the stockholders approved the convertibility of the Series A Preferred Stock into common stock and as such, the Company reclassified the Series A Preferred Stock to permanent equity. In September 2021, the Company first issued Series B Preferred Stock with conversion rights which the Company has classified as permanent equity.

Impairment of Long-Lived Assets
The Company assesses the carrying amount of its property and equipment whenever events or changes in circumstances indicate the carrying amount of such assets may not be recoverable. No impairment charges were recorded during the three and nine months ended September 30, 2022 and 2021.
Net Loss per Share
Basic net loss per share is calculated by dividing the net loss by the weighted-average number of shares of common stock outstanding during the period without consideration of common stock equivalents. Since the Company was in a loss position for all periods presented, diluted net loss per share is the same as basic net loss per share for all periods, as the inclusion of all potential common shares outstanding is antidilutive.
Comprehensive Loss
Comprehensive loss is comprised of net loss and adjustments for the change in unrealized gains and losses on investments. Unrealized accumulated comprehensive gains or losses are reflected as a separate component in the condensed consolidated statements of changes in stockholders’ equity.
Income Taxes
The Company accounts for income taxes by using an asset and liability method of accounting for deferred income taxes. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. A valuation allowance is recorded to the extent it is more likely than not that a deferred tax asset will not be realized. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in operations in the period that includes the enactment date.
The Company’s significant deferred tax assets are for net operating loss carryforwards, tax credits, accruals and reserves, and capitalized start-up costs. The Company has provided a valuation allowance for its entire net deferred tax assets since inception as, due to its history of operating losses, the Company has concluded that it is more likely than not that its deferred tax assets will not be realized.
The Company has no unrecognized tax benefits. The Company classifies interest and penalties arising from the underpayment of income taxes in the condensed consolidated statements of operations and comprehensive loss as general and administrative expenses. No such expenses have been recognized during the three and nine months ended September 30, 2022 and 2021.
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Warrants
Upon the issuance of warrants to purchase shares of common stock, the Company evaluates the terms of the warrant issue to determine the appropriate accounting and classification of the warrant issue pursuant to FASB ASC Topic 480, Distinguishing Liabilities from Equity, FASB ASC Topic 505, Equity, FASB ASC 815, Derivatives and Hedging, and ASC 718, Compensation - Stock Compensation, and classifies warrants for common stock as liabilities or equity. Warrants are classified as liabilities when the Company may be required to settle a warrant exercise in cash and classified as equity when the Company settles a warrant exercise in shares of its common stock.
Segment Information
The Company operates in one operating segment and, accordingly, no segment disclosures have been presented herein. All equipment, leasehold improvements, and other fixed assets are physically located within the United States and all agreements with the Company’s partners are denominated in U.S. dollars, except where noted.
Recent Accounting Pronouncements – To Be Adopted
From time to time, new accounting pronouncements are issued by the FASB or other standard setting bodies that the Company adopts as of the specified effective date. The Company does not believe that the adoption of recently issued standards have or may have a material impact on the Company’s consolidated financial statements or disclosures.

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3. FAIR VALUE MEASUREMENTS
Investments
The following table provides details regarding the Company’s short-term investments:
(in thousands)Amortized CostGross Unrealized GainsGross Unrealized LossesFair Value
September 30, 2022
Money market funds$344,110 $ $ $344,110 
U.S. treasury securities22,061  (266)21,795 
U.S. corporate paper and bonds63,976  (626)63,350 
International corporate bond holdings2,015  (48)1,967 
Total$432,162 $ $(940)$431,222 
December 31, 2021
Money market funds$42,199 $ $ $42,199 
U.S. treasury securities22,215  (54)22,161 
U.S. corporate paper and bonds128,005 6 (94)127,917 
International corporate bond holdings4,603  (15)4,588 
Total$197,022 $6 $(163)$196,865 
The money market funds above are included in cash and cash equivalents on the Company’s condensed consolidated balance sheets.

As of September 30, 2022, the Company considers the unrealized losses in its investment portfolio to be temporary in nature and not due to credit losses. The Company has the intent and ability to hold such investments until their recovery at fair value. The Company had zero and $4 thousand in realized gains in its available for sale securities during the nine months ended September 30, 2022 and 2021, respectively. The contractual maturity dates of all of the Company’s investments are all less than 24 months.

Fair Value Measurements

The following tables summarize the Company’s assets and liabilities that are measured at fair value on a recurring basis:

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(in thousands)Quoted Prices in Active Markets
(Level 1)
Significant Other Observable Inputs
 (Level 2)
Significant Unobservable Inputs
(Level 3)
Total
September 30, 2022
Assets:
Cash equivalents:
Money market funds$344,110 $ $ $344,110 
Short-term investments:
U.S. treasury securities 21,795  21,795 
U.S. corporate paper and bonds 63,350  63,350 
International corporate bond holdings 1,967  1,967 
Total cash equivalents and short-term investments$344,110 $87,112 $ $431,222 
December 31, 2021
Assets:
Cash equivalents:
Money market funds$42,199 $ $ $42,199 
Short-term investments:
U.S. treasury securities 22,161  22,161 
U.S. corporate paper and bonds 127,917  127,917 
International corporate bond holdings 4,588  4,588 
Total cash equivalents and short-term investments$42,199 $154,666 $