SEC Filing | Olema Oncology

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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 June 30, 2021


☐	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: 001-39712

OLEMA PHARMACEUTICALS, INC.

(Exact Name of Registrant as Specified in its Charter)


Delaware	30-0409740
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
512 2^nd Street, 4^th Floor San Francisco, CA	94107
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (650) 243-5555

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


Title of Each Class of Securities Registered	Trading Symbol	Name of Each Exchange on which Securities are Registered
Common Stock, par value $0.0001 per share	OLMA	The Nasdaq Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
Emerging growth company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of August 6, 2021, the registrant had 39,557,839 shares of common stock, $0.0001 par value per share, outstanding.

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PART I-FINANCIAL INFORMATION


Item 1. Financial Statements.
		Page
PART I. FINANCIAL INFORMATION		3
Item 1. Financial Statements (unaudited)		3
Condensed Consolidated Balance Sheets		3
Condensed Consolidated Statements of Operations and Comprehensive Loss		4
Condensed Consolidated Statements of Convertible Preferred Stock and Stockholders’ Equity (Deficit)		5
Condensed Consolidated Statements of Cash Flows		6
Notes to Unaudited Condensed Consolidated Financial Statements		7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		22
Item 3. Quantitative and Qualitative Disclosures About Market Risk		33
Item 4. Controls and Procedures		33
PART II. OTHER INFORMATION		33
Item 1. Legal Proceedings		33
Item 1A. Risk Factors		34
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		100
Item 3. Defaults Upon Senior Securities		101
Item 4. Mine Safety Disclosures		101
Item 5. Other Information		101
Item 6. Exhibits		102

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PART I – FINANCIAL INFORMATION

Item 1. Financial Statements.

Olema Pharmaceuticals, Inc.

Condensed Consolidated Balance Sheets

(Unaudited)

(Amounts in thousands, except per share amounts)


		June 30,		December 31,
	2021		2020
Assets
Current assets:
Cash and cash equivalents	$	50,422	$	338,549
Marketable securities		267,722		—
Prepaid expenses and other current assets		2,710		3,588
Total current assets		320,854		342,137
Property and equipment, net		866		75
Other assets		510		510
Total assets	$	322,230	$	342,722

Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	385	$	719
Other current liabilities		7,761		3,866
Total current liabilities		8,146		4,585
Total liabilities		8,146		4,585
Commitments and contingencies (Note 11)
Stockholders’ equity:
Preferred stock, $0.0001 par value; 10,000,000 shares authorized as of June 30, 2021 and December 31, 2020; no shares issued and outstanding as of June 30, 2021 and December 31, 2020.		—		—
Common stock, $0.0001 par value; 490,000,000 shares authorized as of June 30, 2021 and December 31, 2020; 40,256,637 and 40,169,738 shares issued as of June 30, 2021 and December 31, 2020, respectively; 39,552,588 and 39,308,238 shares outstanding as of June 30, 2021 and December 31, 2020, respectively.		3		3
Additional paid-in capital		378,934		371,228
Accumulated other comprehensive loss		(14)		—
Accumulated deficit		(64,839)		(33,094)
Total stockholders’ equity		314,084		338,137
Total liabilities and stockholders’ equity	$	322,230	$	342,722

See accompanying notes to the condensed consolidated financial statements.

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Olema Pharmaceuticals, Inc.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(Unaudited)

(Amounts in thousands, except per share amounts)


	Three Months Ended June 30,				Six Months Ended June 30,
		2021		2020		2021		2020
Operating expenses:
Research and development	$	11,910	$	1,947	$	22,602	$	2,742
General and administrative		4,612		539		9,370		787
Total operating expenses		16,522		2,486		31,972		3,529
Loss from operations		(16,522)		(2,486)		(31,972)		(3,529)
Other income (expense):
Interest income		117		33		228		36
Interest expense		—		—		—		(653)
Other income (expense)		(1)		—		(1)		—
Total other income (expense), net		116		33		227		(617)
Net loss	$	(16,406)	$	(2,453)	$	(31,745)	$	(4,146)
Net loss per share, basic and diluted	$	(0.42)	$	(0.95)	$	(0.81)	$	(1.60)
Weighted average shares used to compute net loss per share, basic and diluted		39,415,330		2,593,316		39,370,809		2,593,316


	Three Months Ended June 30,				Six Months Ended June 30,
		2021		2020		2021		2020
Net loss	$	(16,406)	$	(2,453)	$	(31,745)	$	(4,146)
Other comprehensive loss:
Net unrealized loss on marketable securities		(1)		—		(14)		—
Total comprehensive loss	$	(16,407)	$	(2,453)	$	(31,759)	$	(4,146)

See accompanying notes to the condensed consolidated financial statements.

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Olema Pharmaceuticals, Inc.

Condensed Consolidated Statements of Convertible Preferred Stock and Stockholders’ Equity (Deficit) (Unaudited)

(In thousands)


										Accumulated
	Convertible						Additional			Other			Total
	Preferred Stock			Common Stock			Paid-in			Comprehensive	Accumulated		Stockholders'
	Shares	Amount		Shares	Amount		Capital			Loss	Deficit		Equity
Balances at March 31, 2021	—	$	—	39,342,129	$	3	$	374,467	$	(13)	$	(48,433)	$	326,024
Vesting of early exercised stock options	—		—	6,989		—		30		—		—		30
Vesting of restricted stock awards	—		—	116,571		—		—		—		—		—
Exercise of stock options	—		—	63,014		—		130		—		—		130
Issuance of shares under the employee stock purchase plan	—		—	23,885		—		386		—		—		386
Stock-based compensation expense	—		—	—		—		3,871		—		—		3,871
Employee stock purchase plan expense	—		—	—		—		50		—		—		50
Net unrealized loss on marketable securities	—		—	—		—		—		(1)		—		(1)
Net loss	—		—	—		—		—		—		(16,406)		(16,406)
Balances at June 30, 2021	—	$	—	39,552,588	$	3	$	378,934	$	(14)	$	(64,839)	$	314,084


										Accumulated
	Convertible						Additional			Other			Total
	Preferred Stock			Common Stock			Paid-in			Comprehensive	Accumulated		Stockholders'
	Shares	Amount		Shares	Amount		Capital			Loss	Deficit		Equity
Balances at December 31, 2020	—	$	—	39,308,238	$	3	$	371,228	$	—	$	(33,094)	$	338,137
Vesting of early exercised stock options	—		—	13,979		—		61		—		—		61
Vesting of restricted stock awards	—		—	143,472		—		—		—		—		—
Exercise of stock options	—		—	63,014		—		130		—		—		130
Issuance of shares under the employee stock purchase plan	—		—	23,885		—		386		—		—		386
Stock-based compensation expense	—		—	—		—		7,015		—		—		7,015
Employee stock purchase plan expense	—		—	—		—		114		—		—		114
Net unrealized loss on marketable securities	—		—	—		—		—		(14)		—		(14)
Net loss	—		—	—		—		—		—		(31,745)		(31,745)
Balances at June 30, 2021	—	$	—	39,552,588	$	3	$	378,934	$	(14)	$	(64,839)	$	314,084


										Accumulated
	Convertible						Additional			Other			Total
	Preferred Stock			Common Stock			Paid-in			Comprehensive	Accumulated		Stockholders'
	Shares	Amount		Shares	Amount		Capital			Loss	Deficit		Equity
Balances at March 31, 2020	10,995,312	$	39,235	2,593,316	$	—	$	802	$	—	$	(12,455)	$	(11,653)
Issuance of Series B convertible stock, net of issuance costs of $130	5,072,450		23,769	—		—		—		—		—		—
Stock-based compensation expense	—		—	—		—		154		—		—		154
Net loss	—		—	—		—		—		—		(2,453)		(2,453)
Balances at June 30, 2020	16,067,762	$	63,004	2,593,316	$	—	$	956	$	—	$	(14,908)	$	(13,952)


										Accumulated
	Convertible						Additional			Other			Total
	Preferred Stock			Common Stock			Paid-in			Comprehensive	Accumulated		Stockholders'
	Shares	Amount		Shares	Amount		Capital			Loss	Deficit		Deficit
Balances at December 31, 2019	4,628,215	$	9,348	2,593,316	$	—	$	168	$	—	$	(10,762)	$	(10,594)
Beneficial conversion option recognized upon issuance of 2020 convertible notes	—		—	—		—		1,054		—		—		1,054
Beneficial conversion option recognized upon repurchase of 2020 convertible notes on settlement date	—		—	—		—		(2,568)		—		—		(2,568)
Extinguishment of 2020 convertible notes	—		—	—		—		2,148		—		—		2,148
Issuance of Series B convertible stock, net of issuance costs of $243	10,801,277		50,649	—		—		—		—		—		—
Issuance of Series B convertible preferred stock in connection with the conversion of convertible notes	638,270		3,007	—		—		—		—		—		—
Stock-based compensation expense	—		—	—		—		154		—		—		154
Net loss	—		—	—		—		—		—		(4,146)		(4,146)
Balances at June 30, 2020	16,067,762	$	63,004	2,593,316	$	—	$	956	$	—	$	(14,908)	$	(13,952)

See accompanying notes to the condensed consolidated financial statements.

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Olema Pharmaceuticals, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(In thousands)


	Six Months Ended June 30,
	2021		2020
Cash flows from operating activities:
Net loss	$	(31,745)	$	(4,146)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization expense		40		5
Non-cash interest expense		—		641
Premium amortization and discount accretion on marketable securities, net		138		—
Stock-based compensation expense, including employee stock purchase plan expense		7,129		154
Changes in operating assets and liabilities:
Prepaid expenses, other current assets		878		(185)
Accounts payable		(322)		89
Other current liabilities		3,893		125
Net cash used in operating activities		(19,989)		(3,317)
Cash flows from investing activities:
Purchase of equipment		(780)		(15)
Maturities of marketable securities		67,000		—
Purchases of marketable securities		(334,874)		—
Net cash used in investing activities		(268,654)		(15)
Cash flows from financing activities:
Proceeds from exercise of stock options		130		—
Proceeds from issuance of common stock under employee stock purchase plan		386		—
Proceeds from the issuance of convertible notes		—		3,000
Proceeds from issuance of Series B convertible preferred stock, net of issuance costs		—		50,740
Net cash provided by financing activities		516		53,740
Net (decrease) increase in cash and cash equivalents		(288,127)		50,408
Cash and cash equivalents at beginning of period		338,549		68
Cash and cash equivalents at end of period	$	50,422	$	50,476
Supplemental disclosure of non-cash investing and financing activities:
Purchases of property and equipment included in accounts payable and accrued liabilities	$	63	$	—
Conversion of convertible notes into Series B convertible preferred stock	$	—	$	3,007
Offering costs included in other current liabilities - Series B	$	—	$	91
Vesting of early exercised stock options	$	61	$	—

See accompanying notes to the condensed consolidated financial statements.

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Olema Pharmaceuticals, Inc.

Notes to condensed consolidated financial statements

(Unaudited)

1.	Nature of the Business and Basis of Presentation

Olema Pharmaceuticals Inc. (“Olema” or the “Company”) is a clinical-stage biopharmaceutical company focused on the discovery, development and commercialization of next-generation targeted therapies for women’s cancers. The Company is initially focused on developing therapies for the treatment of breast cancer. The Company’s wholly owned, lead product candidate, OP-1250, is a novel oral therapy with combined activity as both a complete estrogen receptor (“ER”) antagonist (“CERAN”) and a selective ER degrader (“SERD”). The Company is currently evaluating OP-1250 in a Phase 1/2 dose escalation and expansion trial for the treatment of recurrent, locally advanced or metastatic estrogen receptor-positive (“ER+”), human epidermal growth factor receptor 2-negative (“HER2-”) breast cancer.

The Company is located in San Francisco, California and was incorporated in Delaware on August 7, 2006 under the legal name of CombiThera, Inc. and on March 25, 2009 was renamed Olema Pharmaceuticals, Inc. The Company’s principal operations are based in San Francisco, California, and it operates in one business segment and therefore has only one reportable segment. The Company is subject to risks and uncertainties common to early-stage companies in the biopharmaceutical industry, including, but not limited to, successful discovery and development of its product candidates, development by competitors of new technological innovations, dependence on key personnel, the ability to attract and retain qualified employees, protection of proprietary technology, compliance with governmental regulations, the impact of COVID-19, the ability to secure additional capital to fund operations and commercial success of its product candidates. OP-1250 and any future product candidates the Company may develop will require extensive nonclinical and clinical testing and regulatory approval prior to commercialization. These efforts require significant amounts of additional capital, adequate personnel, and infrastructure and extensive compliance-reporting capabilities. Even if the Company’s product development efforts are successful, it is uncertain when, if ever, the Company will realize significant revenue from product sales.

Initial Public Offering

In November 2020, the Company completed the initial public offering of its common stock (“IPO”). In connection with its IPO, the Company issued and sold 12,650,000 shares of its common stock, at a price to the public of $19.00 per share. As a result of the IPO, the Company received $220.6 million in net proceeds, after deducting underwriting discounts and commissions and offering costs of $19.8 million.

Upon the closing of the IPO, 23,765,075 shares of outstanding convertible preferred stock were automatically converted into 23,765,075 shares of common stock with the related carrying value of $148.3 million reclassified to common stock and additional paid-in capital. In connection with the IPO, the Company amended and restated its amended and restated certificate of incorporation to change the authorized capital stock to 490,000,000 shares designated as common stock and 10,000,000 shares designated as preferred stock, all with a par value of $0.0001 per share.

Liquidity

The Company had $318.1 million of cash, cash equivalents and marketable securities at June 30 2021, which management believes is sufficient to fund its operating expenses and capital expenditure requirements for at least the next 12 months from the filing date of these condensed consolidated financial statements.

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Impact of COVID-19

The extent of the impact of the COVID-19 pandemic on the Company’s business, operations and development timelines and plans remains uncertain, and will depend on certain developments, including the duration of the outbreak and its impact on the Company’s development activities, planned clinical trial enrollment, future trial sites, CROs, third-party manufacturers, and other third parties with whom the Company does business, as well as its impact on regulatory authorities and the Company’s key scientific and management personnel. During 2020, although the Company modified its operations and practices due to the COVID-19 pandemic and to comply with federal, state and local requirements, its business, operations and development timelines were not material adversely affected. However, the extent to which the COVID-19 pandemic may affect the Company’s business, operations and development timelines and plans in the future, including the resulting impact on its expenditures and capital needs, remains uncertain.

2.	Summary of Significant Accounting Policies

Basis of Presentation and Consolidation

The accompanying interim unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United Stated (“GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (the “SEC”) regarding interim financial reporting, and the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. These condensed consolidated financial statements include the accounts of Olema Pharmaceuticals, Inc. and its wholly-owned subsidiary, Olema Oncology Australia Pty Ltd incorporated on January 6, 2021. All intercompany balances and transactions have been eliminated upon consolidation.

Unaudited Interim Financial Information

The interim condensed consolidated balance sheet as of June 30, 2021, the statements of operations and comprehensive loss, and stockholders’ equity (deficit) for the three and six months ended June 30, 2021 and 2020, and the statements of cash flows for the six months ended June 30, 2021 and 2020 are unaudited. The unaudited interim condensed consolidated financial statements have been prepared on the same basis as the annual financial statements and reflect, in the opinion of management, all adjustments of a normal and recurring nature that are necessary for the fair presentation of the Company’s condensed consolidated financial statements included in this report. The financial data and the other information disclosed in these notes to the condensed consolidated financial statements related to the three- and six-month periods are also unaudited. The results of operations for the six months ended June 30, 2021 are not necessarily indicative of the results to be expected for the year ending December 31, 2021 or for any other future annual or interim period. The condensed consolidated balance sheet as of December 31, 2020 included herein was derived from the audited financial statements as of that date. These interim condensed consolidated financial statements should be read in conjunction with the Company’s audited financial statements included in the Company’s Form 10-K as filed with the SEC on March 17, 2021.

Use of Estimates

The accompanying condensed consolidated financial statements are prepared in accordance with GAAP. The preparation of the condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the condensed consolidated financial statements and reported amounts of expenses during the reporting period. Significant areas that require management’s estimates include accruals of research and development expenses, including accrual of research contract costs, share-based compensation assumptions, and fair value of common stock and convertible preferred stock prior to the IPO. On an ongoing basis, the Company evaluates its estimates and judgments, which are based on historical and anticipated results and trends and on various

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other assumptions that management believes to be reasonable under the circumstances. Actual results could differ from those estimates.

Cash and Cash Equivalents

Cash and cash equivalents are defined as short-term, highly liquid investments with original maturities of 90 days or less at the date of purchase. Cash deposits are all in reputable financial institutions in the United States and as of June 30, 2021 and December 31, 2020, cash and cash equivalents consisted of cash on deposit with U.S. banks denominated in U.S. dollars and investments in interest bearing money market funds.

Marketable Securities

All marketable securities have been classified as “available-for-sale” and are carried at estimated fair value as determined based upon quoted market prices or pricing models for similar securities. Management determines the appropriate classification of its investments at the time of purchase and reevaluates such designation as of each balance sheet date. Unrealized gains and losses are excluded from earnings and are reported as a component of comprehensive loss. Realized gains and losses and declines in fair value judged to be other than temporary, if any, on available-for-sale securities are included in interest income. The cost of securities sold is based on the specific-identification method. Interest earned on marketable securities is included in interest income.

Concentration of Credit Risk and Other Risks and Uncertainties

Financial instruments that potentially subject the Company to concentration of credit risk consist of cash, cash equivalents, and marketable securities. The Company invests in a variety of financial instruments and, by its policy, limits these financial instruments to high credit quality securities issued by the U.S. government, U.S. government-sponsored agencies and highly rated banks and corporations, subject to certain concentration limits. The Company’s cash, cash equivalents, and marketable securities are held by financial institutions in the United States that management believes are of high credit quality. Amounts on deposit with individual banking institutions may at times exceed the limits insured by the Federal Deposit Insurance Corporation (“FDIC”); however, the Company has not experienced any losses on such deposits.

The Company’s future results of operations involve a number of other risks and uncertainties. Factors that could affect the Company’s future operating results and cause actual results to vary materially from expectations include, but are not limited to, uncertainty of results of clinical trials and reaching milestones, uncertainty of regulatory approval of the Company’s current and potential future product candidates, uncertainty of market acceptance of the Company’s product candidates, competition from substitute products and larger companies, securing and protecting proprietary technology, strategic relationships and dependence on key individuals or sole-source suppliers.

The Company’s product candidates require approvals from the U.S. Food and Drug Administration (“FDA”) and comparable foreign regulatory agencies prior to commercial sales in their respective jurisdictions. There can be no assurance that any product candidates will receive the necessary approvals. If the Company were denied approval, approval was delayed or the Company was unable to maintain approval for any product candidate, it could have a materially adverse impact on the Company.

Research and Development Costs

Research and development costs are expensed as incurred. Research and development expenses consist of costs incurred to discover, research and develop product candidates. These costs are recorded within research and development expenses in the condensed consolidated statements of operations and include personnel expenses, stock-based compensation expenses, allocated general and administrative expenses, and external costs including fees paid to consultants and clinical research organizations (“CROs”) and contract manufacturing organizations (“CMOs”), in connection with nonclinical studies and clinical trials, and other

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related clinical trial fees, such as for investigator fees, patient screening, laboratory work, clinical trial database management, clinical trial material management and statistical compilation and analysis. Non-refundable prepayments for goods or services that will be used or rendered for future research and development activities are recorded as prepaid expenses. Such amounts are recognized as an expense as the goods are delivered or the related services are performed.

Costs incurred in obtaining technology licenses are charged immediately to research and development expense if the technology licensed has not reached technological feasibility and has no alternative future uses.

Research Contract Costs and Accruals

The Company has from time to time entered into various research and development and other agreements with commercial firms, researchers, universities and others for provisions of goods and services. These agreements are generally cancelable, and the related costs are recorded as research and development expenses as incurred.

The Company records accruals for estimated ongoing research and development costs. When evaluating the adequacy of the accrued liabilities, the Company analyzes progress of the projects, studies or clinical trials, including the phase or completion of events, invoices received and contracted costs. Judgments and estimates are made in determining the accrued balances at the end of any reporting period. Actual results could differ materially from the Company’s estimates. The Company’s historical accrual estimates have not been materially different from the actual costs.

Net Loss Per Common Share

Basic net loss per common share is computed by dividing the net loss per common share by the weighted average number of common shares outstanding for the period without consideration of common stock equivalents. Diluted net loss per common share is computed by adjusting net loss to reallocate undistributed earnings based on the potential impact of dilutive securities, and by dividing the diluted net loss by the weighted average number of common shares outstanding for the period, including potential dilutive common shares. For purpose of this calculation, outstanding stock options, unvested restricted stock awards, contingently issuable common stock related to the 2020 Employee Stock Purchase Plan (the “ESPP”), and convertible preferred stock are considered potential dilutive common shares. Since the Company was in a loss position for all periods presented, basic net loss per share is the same as diluted net loss per share for all periods as the inclusion of all potential common shares outstanding would have been anti-dilutive.

The Company’s convertible preferred stock contractually entitled the holders of such shares to participate in dividends but did not contractually require the holders of such shares to participate in losses of the Company. Accordingly, in periods in which the Company reported a net loss, such losses were not allocated to such securities. In periods in which the Company reported a net loss, diluted net loss per common share is the same as basic net loss per common share, since dilutive common shares are not assumed to have been issued if their effect is anti-dilutive. The Company reported a net loss for the three- and six-month periods ended June 30, 2021 and 2020.

Recent Accounting Pronouncements

From time to time, new accounting pronouncements are issued by the FASB under its ASC or other standard setting bodies.

The Company is an emerging growth company as defined in the Jumpstart Our Business Startups Act of 2012, as amended (the “JOBS Act”). Under the JOBS Act, companies have extended transition periods available for complying with new or revised accounting standards. The Company has elected to use this exemption to delay adopting new or revised accounting standards until such time as those standards apply to private companies. As a result, the Company’s financial statements may not be comparable to the financial statements of issuers

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who are required to comply with the effective date for new or revised accounting standards that are applicable to public companies. The Company expects to lose its status as an emerging growth company on December 31, 2021, when it expects to qualify as a large accelerated filer based on its market capitalization as of June 30, 2021, according to Rule 12b-2 of the Securities Exchange Act of 1934, as amended. As a result, the Company intends to adopt all accounting pronouncements currently deferred under the extended transition period available for emerging growth companies according to public company standards at December 31, 2021. The adoption dates for the new accounting pronouncements disclosed below have been presented as such. Where allowable, the Company has early adopted certain standards as described below.

Recently Adopted Accounting Pronouncements

In November 2018, the FASB issued ASU 2018-18, Collaborative Arrangements (Topic 808): Clarifying the Interaction between Topic 808 and Topic 606. This standard provides guidance on the interaction between Revenue Recognition (Topic 606) and Collaborative Arrangements (Topic 808) by aligning the unit of account guidance between the two topics and clarifying whether certain transactions between collaborative participants should be accounted for as revenue under Topic 606. ASU 2018-18 is effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Early adoption is permitted. The Company early adopted this guidance effective on January 1, 2021. The adoption did not have a material impact on the Company’s condensed consolidated financial statements and related disclosures.

In August 2018, the FASB issued ASU No. 2018-15, Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract. ASU 2018-15 requires a customer in a cloud computing arrangement that is a service contract to follow the internal-use software guidance in ASC 350-40, Intangibles—Goodwill and Other—Internal Use Software (ASC 350-40), to determine which implementation costs to capitalize as assets or expense as incurred. The internal-use software guidance in ASC 350-40 requires that certain costs incurred during the application development stage be capitalized and other costs incurred during the preliminary project and post-implementation stages be expensed as they are incurred. A customer’s accounting for the hosting component of the arrangement is not affected by this guidance. The amendments in ASU 2018-15 are effective for fiscal years beginning after December 15, 2019 for public entities. For all other entities, the guidance is effective for annual reporting periods beginning after December 15, 2020 and interim periods within annual periods beginning after December 15, 2021. Early adoption permitted. The Company early adopted this guidance effective on January 1, 2021. The adoption did not have a material impact on the Company’s consolidated financial statements and related disclosures.

Recently Issued Accounting Pronouncements Not Yet Adopted

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) which sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract (i.e., lessees and lessors). The new standard requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase by the lessee. This classification will determine whether lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease. A lessee is also required to record a right-of-use asset and a lease liability for all leases with a term of greater than 12 months regardless of their classification. Leases with a term of 12 months or less may be accounted for similar to existing guidance for operating leases today. In July 2018, the FASB issued ASU No. 2018-11, Leases: Targeted Improvements, or ASU No. 2018-11. In issuing ASU No. 2018-11, the FASB is permitting another transition method for ASU 2016-02, which allows the transition to the new lease standard by recognizing a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. For non-public entities, ASU 2016-02 is effective for annual reporting periods beginning after December 15, 2021, including interim periods within those fiscal years, and early adoption is permitted. The Company expects to adopt this new guidance under ASU 2016-02 as of January 1, 2021 at December 31, 2021 on the Company’s 2021 Form 10-K filing and is in the process of completing its review of its existing lease agreements under Topic 842. The Company anticipates recording a right-of-use asset and lease liability to account for its facility leases and will record a cumulative-effect adjustment in the period of adoption.

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In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. This standard requires financial assets measured at amortized cost basis to be presented at the net amount expected to be collected. This standard is effective for public companies who are SEC filers for fiscal years beginning after December 15, 2019, including interim periods within those years. In November 2019, the FASB issued ASU 2019-11, Codification Improvements to Topic 326, Financial Instruments - Credit Losses, which extends the effective date of the standard for smaller reporting companies to interim and annual periods beginning after December 15, 2022. ASU 2019-11 also expands the scope of the practical expedient that allows entities to exclude the accrued interest component of amortized cost from various disclosures required by ASC 326 to also include certain disclosures required by ASC 320. Entities that elect to apply the practical expedient must disclose the total amount of accrued interest that they exclude from their disclosures of amortized cost. The amendments have the same effective dates as ASU 2016-13 for entities that have not yet adopted that standard. These standards require using a modified retrospective approach with the cumulative effect recognized as an adjustment to retained earnings. A prospective transition approach is required for debt securities that have recognized an other-than-temporary impairment prior to the effective date. The Company expects to adopt the new guidance under ASU 2016-13 as of January 1, 2021 at December 31, 2021 on the Company’s 2021 Form 10-K filing. Though the Company is currently evaluating the effect of these standards it does not expect the impact of the adoption of these standards on the Company’s financial position or results of operations to be material.

3.	Fair Value Measurement

The Company assesses the fair value of financial instruments based on the provisions of ASC 820, Fair Value Measurements. ASC 820 defines fair value 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. ASC 820 also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value:

●	Level 1 — Inputs are unadjusted quoted prices in active markets for identical assets or liabilities accessible to the reporting entity at the measurement date.

●

Level 2 — Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, 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 assets or liabilities.

●	Level 3 — Unobservable inputs that are supported by little or no market activity that are significant to determining the fair value of the assets or liabilities, including pricing models, discounted cash flow methodologies and similar techniques.


		June 30, 2021
(in thousands)	Level 1		Level 2		Level 3		Total
Financial Assets
Cash	$	13,176	$	—	$	—	$	13,176
Money market funds		8,249		—		—		8,249
Corporate bonds		—		6,271		—		6,271
Commercial paper		—		188,427		—		188,427
U.S. government treasury bills		16,992		—		—		16,992
Government-sponsored enterprise securities		-		85,029		—		85,029
Total	$	38,417	$	279,727	$	—	$	318,144

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	June 30, 2021
			Gross		Gross
	Amortized		Unrealized		Unrealized		Estimated
(in thousands)	Cost		Gains		Losses		Fair Value
Financial Assets
Cash and cash equivalents	$	50,422	$	—	$	—	$	50,422
Short-term marketable securities (<12 months to maturity)		213,800		26		(3)		213,823
Long-term marketable securities (>12 months to maturity)		53,936		—		(37)		53,899
Total	$	318,158	$	26	$	(40)	$	318,144

The Company considers its marketable securities with maturities beyond one year as current assets, based on their highly liquid nature and because such marketable securities represent the investment of cash that is available for current operations. The Company considers its investment portfolio of marketable securities to be available-for-sale.

As of December 31, 2020, all of the Company’s cash and cash equivalents consisted of cash on deposit with U.S. banks denominated in U. S. dollars.

4. Property and Equipment, net

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


	June 30,		December 31,
	2021		2020
Lab equipment	$	909	$	90
Computer equipment		59		47
Property and equipment, gross		968		137
Less: Accumulated depreciation		(102)		(62)
Property and equipment, net	$	866	$	75

5.	Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consisted of the following (in thousands):


	June 30,		December 31,
	2021		2020
Prepaid clinical trial costs	$	975	$	1,148
Prepaid insurance		785		1,663
Prepaid subscriptions and licenses		318		—
Prepaid research contracts		279		432
Prepaid professional services		124		—
Prepaid rent		45		196
Other		184		149
Total	$	2,710	$	3,588

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6.	Other Current Liabilities

Other current liabilities consisted of the following (in thousands):


	June 30,		December 31,
(in thousands)	2021		2020
Accrued R&D related costs	$	4,026	$	609
Accrued employee bonuses		1,330		1,222
Accrued payroll related costs		919		444
Accrued professional fees		696		577
Early exercise of unvested stock options		516		578
Accrued taxes		67		198
Other		207		238
Total	$	7,761	$	3,866

7.	Convertible Notes

2020 Convertible Notes

On January 3, 2020 (“issuance date”), the Company issued convertible promissory notes (the “2020 Notes”) in the aggregate principal amount of $3.0 million. The 2020 Notes bore interest at a rate of 1.21% per annum, were unsecured and were due and payable, including accrued interest, on May 2, 2020 (“maturity date”). The Company was not permitted to prepay the outstanding principal and interest without the consent of the note holders. In the event of a default, all unpaid principal and accrued interest would become immediately due.

On the issuance date the Company determined that the conversion option associated with the 2020 Notes met the definition of a beneficial conversion feature (“BCF”) as the fair value of the underlying instrument at the time of issuance exceeded the contractual conversion price. The BCF was recognized at its aggregate intrinsic value of $1.1 million as a debt discount with a corresponding credit to additional paid-in capital in the Company’s balance sheet. The debt discount was amortized over the term of the 2020 Notes through the recognition of interest expense via the effective interest method.

On March 17, 2020 (the “settlement date”), the Company issued and sold 2,545,277 shares of Series B convertible preferred stock at $4.712 per share for gross proceeds of approximately $12.0 million (see Note 8, “Convertible Preferred Stock”). On the settlement date, the principal and accrued interest then outstanding under the 2020 Notes of $3.0 million were converted into 638,270 shares of Series B convertible preferred stock (“March 2020 conversion”).

On the settlement date, the unamortized debt discount on the 2020 Notes was $0.4 million and the intrinsic value of the BCF was $2.6 million representing an increase of $1.5 million from the issuance date of the 2020 Notes. The March 2020 conversion was accounted for as a debt extinguishment. However, as the note holders were previous investors of the Company, the increase in the intrinsic value of the BCF was deemed to be a capital contribution and therefore not income attributable to common stockholders, and accordingly, the Company recorded the $1.5 million gain on extinguishment of the debt within additional paid-in capital.

8.	Convertible Preferred Stock

As of June 30, 2020, there were 16,067,762 shares of convertible preferred stock outstanding. Upon the closing of the Company’s IPO, each then outstanding share of convertible preferred stock was converted into one share of common stock.

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As of June 30, 2021 and December 31, 2020, there was no convertible preferred stock outstanding.

Refer to Note 6 “Convertible Preferred Stock” included in the Annual Report on Form 10-K for the year ended December 31, 2020 filed on March 17, 2021 with the SEC.

9. Stock-Based Compensation

In 2014, the Company’s Board of Directors and stockholders approved and adopted the 2014 Stock Plan (the “2014 Plan”). The 2014 Plan was intended to advance the interests of the Company and its stockholders by providing an incentive to attract, retain and reward persons performing services for the Company and by motivating such persons to contribute to the growth and profitability of the Company. The 2014 Plan permitted the grant of options and restricted stock awards (including restricted stock purchase rights and restricted stock bonus awards). The maximum aggregate number of shares that may be subject to awards and sold under the 2014 Plan as of December 31, 2019 was 717,360 shares, which was subsequently increased to 4,842,180 in September 2020.The 2014 Plan was terminated on the date the 2020 Equity Incentive Plan (the “2020 Plan”), which is described below, became effective, and no additional awards will be made pursuant to the 2014 Plan. However, any outstanding awards granted under the 2014 Plan will remain outstanding, subject to the terms of the 2014 Plan award agreements, until such outstanding options are exercised or until any awards terminate or expire by their terms.

In 2020, the Company’s Board of Directors and stockholders approved and adopted the 2020 Plan. The 2020 Plan is intended to advance the interests of the Company and its stockholders by providing an incentive to attract, retain and reward persons performing services for the Company and by motivating such persons to contribute to the growth and profitability of the Company. The maximum number of shares of common stock that may be issued under the 2020 Plan will not exceed 6,494,510 shares of the Company’s common stock, which is the sum of (i) 2,152,080 new shares, plus (ii) an additional number of shares not to exceed 4,342,430 shares, consisting of any shares of the Company’s common stock subject to outstanding stock options or other stock awards granted under the Company’s 2014 Plan that, on or after the 2020 Plan becomes effective, terminate or expire prior to exercise or settlement; are not issued because the award is settled in cash; are forfeited because of the failure to vest; or are reacquired or withheld (or not issued) to satisfy a tax withholding obligation or the purchase or exercise price. In addition, the number of shares of the Company’s common stock reserved for issuance under the 2020 Plan automatically increases on January 1 of each year for a period of ten years, beginning on January 1, 2021 and continuing through January 1, 2030, in an amount equal to the lesser of (1) 5% of the total number of shares of the Company’s common stock outstanding on December 31 of the immediately preceding year, or (2) a lesser number of shares determined by the Company’s board of directors no later than December 31 of the immediately preceding year. The maximum number of shares of the common stock that may be issued on the exercise of incentive stock options under the 2020 Plan is 19,483,530 shares. The 2020 Plan permits the grant of options restricted stock awards, stock appreciation rights, restricted stock unit awards, performance awards, and other awards.

The exercise price for each option and stock appreciation right is established in the discretion of the Board, provided that the exercise price of a stock option will not be less than 100% of the fair market value of the Company’s common stock on the date of grant. Specific vesting for stock options and stock appreciation rights is service related and determined in each award agreement, where stock options and stock appreciation rights are fully vested at the grant date or follow a graded vesting schedule. Stock options and stock appreciation rights granted under the Plan generally expire ten years after the date of grant.

Stock Option Valuation

The fair value of stock option grants is estimated using the Black-Scholes option-pricing model. The Company lacks company-specific historical and implied volatility information. Therefore, it estimated its expected stock volatility based on the historical volatility of a publicly traded set of peer companies. For options with service- based vesting conditions, the expected term of the Company’s stock options has been determined utilizing the

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“simplified” method for awards that qualify as “plain-vanilla” options. The expected term of stock options granted to nonemployees is equal to the contractual term of the option award. The risk-free interest rate is determined by reference to the U.S. Treasury yield curve in effect at the time of grant of the award for time periods approximately equal to the expected term of the award. Expected dividend yield is 0% since the Company has never paid cash dividends and does not expect to pay any cash dividends in the foreseeable future.

The assumptions that the Company used to determine the estimated grant-date fair value of stock options granted to employees and directors under the 2020 Plan were as follows, presented as a weighted average:


	June 30,		June 30,
	2021		2020
Risk-free interest rate		0.62%		*
Expected term (in years)		5.98		*
Expected volatility		77.08%		*
Expected dividend yield		—		*

*	There were no stock options granted during the period.

Stock Option Activity

The following table summarizes the stock option activity under the 2014 Plan and the 2020 Plan:


				Weighted
		Weighted		Average
		Average		Remaining
	Number of	Exercise		Contractual	Aggregate
	Shares	Price		Term	Intrinsic Value
				(in years)	(in thousands)
Outstanding as of December 31, 2020	4,776,908	$	10.83