SEC Filing | Athira Pharma

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10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q


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

For the quarterly period ended March 31, 2023


☐	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: 001-39503

Athira Pharma, Inc.

(Exact name of registrant as specified in its charter)


Delaware	45-3368487
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

18706 North Creek Parkway, Suite 104

Bothell, Washington 98011

(Address of principal executive offices)

(425) 620-8501

(Registrant’s telephone number, including area code)

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


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.0001 par value per share	ATHA	The Nasdaq Stock Market LLC
		(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 during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

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


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

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

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

As of May 8, 2023, there were 37,950,600 shares of registrant’s common stock, $0.0001 par value per share, outstanding.

Table of Contents


		Page
PART I.	FINANCIAL INFORMATION	5
Item 1.	Financial Statements (Unaudited)	5
	Condensed Consolidated Balance Sheets	5
	Condensed Consolidated Statements of Operations and Comprehensive Loss	6
	Condensed Consolidated Statements of Stockholders’ Equity	7
	Condensed Consolidated Statements of Cash Flows	8
	Notes to Unaudited Condensed Consolidated Financial Statements	9
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	35
Item 1.	Legal Proceedings	35
Item 1A.	Risk Factors	37
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	93
Item 3.	Defaults Upon Senior Securities	93
Item 4.	Mine Safety Disclosures	93
Item 5.	Other Information	93
Item 6.	Exhibits	94
Signatures		95

This report includes our trademarks and registered trademarks, including Athira, Athira Pharma, the Athira logo, and other trademarks or service marks of Athira. Each other trademark, trade name or service mark appearing in this report belongs to its holder.

SUMMARY RISK FACTORS

Our business is subject to numerous risks and uncertainties, including those highlighted in the section of this report captioned “Risk Factors.” The following is a summary of the principal risks we face:

•

We are a late clinical-stage biopharmaceutical company with a limited operating history.

•

Our ability to generate revenue and achieve profitability depends significantly on our ability to achieve a number of objectives.

•

Our development of fosgonimeton may never lead to a marketable product.

•

Our approach to targeting brain growth factors through the use of small molecules is based on a novel therapeutic approach, which exposes us to unforeseen risks. We have limited data from our Phase 1a/1b and Phase 2 clinical trials to date, and we cannot be certain that future trials will yield data in support of the safety, efficacy, and tolerability of our product candidates.

•

We have concentrated our research and development efforts on the treatment of central and peripheral nervous system degenerative disorders, a field that has seen very limited success in product development.

•

An independent special committee of our board of directors engaged in a review of papers co-authored by our former chief executive officer in connection with her doctoral research at Washington State University, or WSU. The special committee’s findings included that (1) our former chief executive officer altered images in her 2011 doctoral dissertation and at least four research papers that she co-authored while a graduate student at Washington State University, and published from 2011 to 2014, (2) that we cited challenged research papers in certain communications and applications, and (3) that WSU’s dihexa patent, exclusively licensed to us, incorporated certain of these altered images. Washington State University has undertaken a review of claims of potential research misconduct involving our former chief executive officer’s doctoral research at Washington State University. We cannot predict when WSU’s investigation will be completed or what conclusions WSU will reach.

•

We are and may in the future be subject to claims, lawsuits, arbitration proceedings, government investigations and other legal, regulatory and administrative proceedings and face potential liability and expenses related thereto, which could have a material adverse effect on our business, operating results and financial condition.

•

Clinical development involves a lengthy and expensive process with an uncertain outcome, and results of early, smaller-scale preclinical studies and clinical trials with a single or few clinical trial sites may not be predictive of eventual safety or effectiveness in large-scale potentially pivotal clinical trials across multiple clinical trial sites. We may encounter substantial delays in clinical trials, or may not be able to conduct or complete clinical trials on the expected timelines, if at all.

•

If we experience delays or difficulties in the enrollment or retention of patients in clinical trials, our regulatory submissions or receipt of necessary marketing approvals could be delayed or prevented.

•

The loss of any of our key personnel could significantly harm our business, results of operations and competitive position.

•

We face significant competition, and if our competitors develop and market technologies or products more rapidly than we do or that are more effective, safer, or less expensive than the product candidates we develop, our commercial opportunities will be negatively impacted.

•

We may expend our limited resources to pursue a particular product candidate or indication and fail to capitalize on product candidates or indications that may be more profitable or for which there is a greater likelihood of success.

•

The continuing and potential effects of the novel coronavirus disease, or COVID-19, pandemic or other disease outbreaks could adversely impact our business, including our nonclinical studies and clinical trials.

•

We have incurred significant losses since our inception and anticipate that we will continue to incur significant losses for the foreseeable future.

•

We will require substantial additional funding to finance our operations, complete the development and commercialization of fosgonimeton, and develop and commercialize other and future product candidates. If we are unable to raise this funding when needed, we may be forced to delay, reduce, or eliminate our product development programs or other operations.

•

The regulatory approval processes of the U.S. Food and Drug Administration and other comparable foreign regulatory authorities are lengthy, time consuming and inherently unpredictable. If we are not able to obtain, or if there are delays in obtaining, required regulatory approvals for our product candidates, we will not be able to commercialize, or will be delayed in commercializing, our product candidates, and our ability to generate revenue will be materially impaired.

•

Intellectual property discovered or developed through government funded programs may be subject to federal regulations such as “march-in” rights, certain reporting requirements and a manufacturing preference for U.S.-based companies. Compliance with such regulations may limit our exclusive rights and limit our ability to contract with non-U.S. manufacturers.

•

We rely on third parties to conduct our nonclinical studies and clinical trials. If these third parties do not properly and successfully carry out their contractual duties or meet expected deadlines, we may not be able to obtain regulatory approval of or commercialize our product candidates.

•

Even if approved, our product candidates may not achieve adequate market acceptance among physicians, patients, healthcare payors and others in the medical community necessary for commercial success.

•

We have never commercialized a product candidate before and may lack the necessary expertise, personnel and resources to successfully commercialize any products on our own or together with suitable collaborators.

•

Our success depends on our ability to protect our intellectual property and our proprietary technologies.

•

If the scope of any patent protection we obtain is not sufficiently broad, or if we lose any of our patent protection, our ability to prevent our competitors from commercializing similar or identical product candidates would be adversely affected.

•

The market price of our common stock has been and may continue to be volatile, which could result in substantial losses for investors.

•

We and certain of our directors and executive officers have been, and may in the future be, named as defendants in lawsuits that could result in substantial costs and divert management’s attention.

•

Actions by activist stockholders have in the past been, and may in the future be, disruptive and could cause uncertainty about the strategic direction of our business.

Our Risk Factors are not guarantees that no such conditions exist as of the date of this report and should not be interpreted as an affirmative statement that such risks or conditions have not materialized, in whole or in part.

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

Athira Pharma, Inc.

Condensed Consolidated Balance Sheets

(in thousands, except share and per share amounts)


	March 31, 2023			December 31, 2022
	(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	105,182		$	95,966
Short-term investments		80,799			104,378
Unbilled grant receivable		—			1,227
Prepaid expenses and other current assets		6,915			5,962
Total current assets		192,896			207,533
Restricted cash		631			420
Property and equipment, net		4,058			4,053
Operating lease right-of-use asset		1,212			1,263
Long-term investments		33,903			44,829
Other long-term assets		72			55
Total assets	$	232,772		$	258,153
Liabilities and stockholders' equity
Current liabilities:
Accounts payable	$	892		$	2,501
Accrued liabilities		8,921			8,604
Accrued legal settlement (Note 7)		10,000			10,000
Current operating lease liability		337			326
Total current liabilities		20,150			21,431
Operating lease liability, less current portion		1,497			1,585
Total liabilities		21,647			23,016
Stockholders' equity:
Common stock, $0.0001 par value; 900,000,000 shares authorized at March 31, 2023 and December 31, 2022, respectively; 37,950,600 and 37,877,387 shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively		4			4
Additional paid-in capital		431,504			428,623
Accumulated other comprehensive loss		(1,029	)		(1,956	)
Accumulated deficit		(219,354	)		(191,534	)
Total stockholders' equity		211,125			235,137
Total liabilities and stockholders' equity	$	232,772		$	258,153

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

Athira Pharma, Inc.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(in thousands, except share and per share amounts)

(unaudited)


	Three Months Ended March 31,
	2023			2022
Operating expenses:
Research and development	$	21,293		$	14,460
General and administrative		8,477			8,927
Total operating expenses		29,770			23,387
Loss from operations		(29,770	)		(23,387	)
Grant income		157			2,234
Other income, net		1,793			173
Net loss	$	(27,820	)	$	(20,980	)
Unrealized gain (loss) on available-for-sale securities		927			(1,068	)
Comprehensive loss attributable to common stockholders	$	(26,893	)	$	(22,048	)
Net loss per share attributable to common stockholders, basic and diluted	$	(0.73	)	$	(0.56	)
Weighted-average shares used in computing net loss per share attributable to common stockholders, basic and diluted		37,923,402			37,593,328

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

Athira Pharma, Inc.

Condensed Consolidated Statements of Stockholders’ Equity

For the Three Months Ended March 31, 2023 and 2022

(in thousands, except share amounts)

(unaudited)


							Accumulated
	Common Stock				Additional Paid-In		Other Comprehensive			Accumulated			Total Stockholders’
	Shares		Amount		Capital		Loss			Deficit			Equity
Balance as of January 1, 2022		37,379,077	$	4	$	417,363	$	(388	)	$	(95,895	)	$	321,084
Issuance of common stock upon exercise of common stock options		244,981		—		210		—			—			210
Stock-based compensation		—		—		2,731		—			—			2,731
Unrealized loss on available-for-sale securities		—		—		—		(1,068	)		—			(1,068	)
Net loss		—		—		—		—			(20,980	)		(20,980	)
Balance as of March 31, 2022		37,624,058	$	4	$	420,304	$	(1,456	)	$	(116,875	)	$	301,977

							Accumulated
	Common Stock				Additional Paid-In		Other Comprehensive			Accumulated			Total Stockholders’
	Shares		Amount		Capital		Loss			Deficit			Equity
Balance as of January 1, 2023		37,877,387	$	4	$	428,623	$	(1,956	)	$	(191,534	)	$	235,137
Issuance of common stock upon exercise of common stock options		73,213		—		99		—			—			99
Stock-based compensation		—		—		2,782		—			—			2,782
Unrealized gain on available-for-sale securities		—		—		—		927			—			927
Net loss		—		—		—		—			(27,820	)		(27,820	)
Balance as of March 31, 2023		37,950,600	$	4	$	431,504	$	(1,029	)	$	(219,354	)	$	211,125

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

Athira Pharma, Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)


	Three Months Ended March 31,
	2023			2022
Operating activities
Net loss	$	(27,820	)	$	(20,980	)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation		2,782			2,731
Depreciation expense		236			154
Non-cash lease expense		51			45
Amortization of premiums and accretion of discounts on available-for-sale securities, net		(331	)		140
Changes in operating assets and liabilities:
Unbilled grant receivable		1,227			102
Prepaid expenses and other current assets		(970	)		1,141
Accounts payable and accrued liabilities		(1,292	)		164
Operating lease liability		(77	)		(69	)
Net cash used in operating activities		(26,194	)		(16,572	)
Investing activities
Purchases of available-for-sale securities		(9,712	)		(17,828	)
Maturities of available-for-sale securities		45,475			42,419
Purchases of property and equipment		(241	)		(745	)
Net cash provided by investing activities		35,522			23,846
Financing activities
Proceeds from exercise of common stock options		99			210
Net cash provided by financing activities		99			210
Net increase in cash, cash equivalents and restricted cash		9,427			7,484
Cash, cash equivalents and restricted cash, beginning of period		96,386			110,537
Cash, cash equivalents and restricted cash, end of period	$	105,813		$	118,021

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

ATHIRA PHARMA, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

1. Description of Business

Organization

Athira Pharma, Inc. (the “Company”) was incorporated as M3 Biotechnology, Inc. in the state of Washington on March 31, 2011 and reincorporated in the state of Delaware on October 27, 2015. In April 2019, the Company changed its name to Athira Pharma, Inc. The Company currently has office and laboratory space in Bothell, Washington. The Company is a late clinical-stage biopharmaceutical company focused on developing small molecules to restore neuronal health and slow neurodegeneration.

At The Market Common Stock Offering

In January 2023, the Company entered into a sales agreement with Cantor Fitzgerald & Co., or Cantor Fitzgerald, and BTIG, LLC, or BTIG, to sell shares of our common stock having aggregate sales proceeds of up to $75.0 million, from time to time, through an “at the market” (“ATM”) equity offering program under which Cantor Fitzgerald and BTIG are acting as sales agents. The Company has not sold any securities pursuant to this ATM offering.

Liquidity and Capital Resources

Since the Company’s inception, it has funded its operations primarily with proceeds from the sale and issuance of common stock, convertible preferred stock, common stock warrants, and convertible notes, and to a lesser extent from grant income and stock option exercises. From the Company’s inception through March 31, 2023, it has raised aggregate net cash proceeds of $407.4 million primarily from the issuance of its common stock (excluding option exercises), convertible preferred stock, common stock warrants, and convertible notes. As of March 31, 2023, the Company had $219.9 million in cash, cash equivalents and investments and had not generated positive cash flows from operations. Since the Company’s inception, it has devoted substantially all of its resources to its research and development efforts such as small molecule compound discovery, nonclinical studies and clinical trials, as well as manufacturing activities, establishing and maintaining the Company’s intellectual property portfolio, hiring personnel, raising capital, and providing general and administrative support for these operations.

Based upon the Company’s current operating plan, it estimates that its $219.9 million of cash, cash equivalents and investments at March 31, 2023 will be sufficient to fund its operating expenses and capital expenditure requirements through at least the 12 months following the date of this report.

2. Significant Accounting Policies

Basis of Presentation

The unaudited condensed consolidated financial statements have been prepared in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”). The unaudited condensed consolidated financial statements include the operations of Athira Pharma, Inc., and its wholly owned Australian subsidiary. All intercompany balances and transactions have been eliminated upon consolidation.

Unaudited Interim Condensed Consolidated Financial Statements

The accompanying unaudited condensed consolidated balance sheet as of March 31, 2023, and unaudited condensed consolidated statements of operations and comprehensive loss, cash flows, and stockholders’ equity for the three months ended March 31, 2023 and 2022, are unaudited. The balance sheet as of December 31, 2022 was derived from the audited consolidated financial statements as of and for the year ended December 31, 2022. The unaudited interim condensed consolidated financial statements have been prepared on a basis consistent with the audited annual financial statements as of and for the year ended December 31, 2022, and, in the opinion of management, reflect all adjustments, consisting solely of normal recurring adjustments, necessary for the fair presentation of the Company’s financial position as of March 31, 2023, and the unaudited condensed consolidated results of its operations and its cash flows for the three months

ended March 31, 2023 and 2022. The financial data and other information disclosed in these notes related to the three months ended March 31, 2023 and 2022 are also unaudited. The unaudited condensed consolidated results of operations for the three months ended March 31, 2023 are not necessarily indicative of the results to be expected for the full year ending December 31, 2023 or any other period. These unaudited interim condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements as of and for the year ended December 31, 2022 included in its Annual Report on Form 10-K filed with the SEC on March 23, 2023.

Fair Value Measurements

The carrying amounts of certain financial instruments, including cash, cash equivalents, restricted cash, investments, accounts payable and accrued expenses approximate their fair values due to the short-term nature of those amounts.

Restricted Cash

Restricted cash consists of collateral pledged in connection with the Company's corporate credit cards. The table below reconciles the balances of cash and cash equivalents and restricted cash reported on the unaudited condensed consolidated balance sheets to the balances of cash, cash equivalents and restricted cash reported on the unaudited condensed consolidated statements of cash flows.


	March 31,		December 31,
	2023		2022
Cash and cash equivalents	$	105,182	$	95,966
Restricted cash		631		420
Cash, cash equivalents and restricted cash	$	105,813	$	96,386

Grant Income

In December 2020, the Company accepted a grant from the National Institute on Aging (“NIA”) of the National Institutes of Health (“NIH”) to support its ACT-AD Phase 2 clinical trial for fosgonimeton (then-named ATH-1017), the Company’s lead therapeutic candidate being developed for the treatment of individuals with mild-to-moderate Alzheimer’s disease. Under the terms of the agreement and approval received from the NIH, the Company may receive up to an aggregate of $15.2 million. The Company recognizes income related to the NIH grant in the accompanying unaudited condensed consolidated statements of operations and comprehensive loss as qualifying expenses under the grant agreement are incurred.

During the three months ended March 31, 2023 and 2022, the Company recognized grant income of $0.2 million and $2.2 million, respectively, in connection with the NIH grant. As of December 31, 2022, the Company incurred qualifying expenses in excess of cash received of approximately $1.2 million, which is included in unbilled grant receivable on the unaudited condensed consolidated balance sheets. During the three months ended March 31, 2023 and 2022, the Company received cash of $1.4 million and $2.3 million, respectively. As of March 31, 2023, the Company has recognized aggregate grant income of $15.2 million in connection with the NIH grant, equal to the total grant amount approved. The Company will not recognize any additional grant income in connection with the NIH grant.

Short-term and Long-term Investments

The Company generally invests its excess cash in investment grade short- to intermediate-term fixed income securities. Such investments are included in cash and cash equivalents, short-term investments, and long-term investments on the unaudited condensed consolidated balance sheets, classified as available-for-sale, and reported at fair value with unrealized gains and losses included in accumulated other comprehensive loss. Amortization and accretion are included in other income, net. Realized gains and losses on the sale of these securities are recognized in other income, net.

The Company periodically evaluates whether declines in fair values of its investments below their book value are due to expected credit losses, as well as the Company's ability and intent to hold the investment until a forecasted recovery occurs. Expected credit losses are recorded as an allowance through other income, net.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Estimates include those used for fair value of assets and liabilities, accrued liabilities, valuation allowance for deferred tax assets, and stock-based compensation. Management evaluates related assumptions on an ongoing basis using historical experience and other factors and adjusts those estimates and assumptions when facts and circumstances dictate. Actual results could differ from those estimates.

Research and Development Expenses

Research and development expenses consist primarily of direct and indirect costs incurred for research activities, including development of the pipeline from the Company’s proprietary drug discovery platform (“ATH platform”), the Company’s drug discovery efforts and the development of its product candidates. Direct costs include laboratory materials and supplies, contracted research and manufacturing, clinical trial costs, consulting fees, and other expenses incurred to sustain the Company’s research and development program. Indirect costs include personnel-related expenses, consisting of employee salaries, related benefits, and stock-based compensation expense for employees engaged in research and development activities, and facilities and other expenses consisting of direct and allocated expenses for rent and depreciation and lab consumables.

Research and development costs are expensed as incurred. In-licensing fees and other costs to acquire technologies used in research and development that have not yet received regulatory approval and that are not expected to have an alternative future use are expensed when incurred. Non-refundable advance payments for goods and services that will be used over time for research and development are capitalized and recognized as goods are delivered or as the related services are performed. The Company estimates the period over which such services will be performed and the level of effort to be expended in each period. If actual timing of performance or the level of effort varies from the estimate, the Company adjusts the amounts recorded accordingly. The Company has not experienced any material differences between accrued or prepaid costs and actual costs since inception.

General and Administrative Expenses

General and administrative expenses consist primarily of personnel-related costs, consisting of employee salaries, related benefits, and stock-based compensation expense for employees in the executive, legal, finance and accounting, human resources, and other administrative functions. General and administrative expenses also include third-party costs such as legal costs, insurance costs, accounting, auditing and tax related fees, consulting fees and facilities and other expenses not otherwise included as research and development expenses. General and administrative costs are expensed as incurred.

Leases

The Company adopted Accounting Standards Codification (“ASC”) Topic 842 - Leases effective January 1, 2020. The Company determines if an arrangement contains a lease at inception. The Company performed an evaluation of contracts in accordance with ASC 842 and has determined it has an operating lease agreement for the laboratory and office facilities that the Company occupies. Operating lease right-of-use (“ROU”) assets and operating lease liabilities are recognized at the date the underlying asset becomes available for the Company’s use. Operating lease liabilities are based on the present value of the future minimum lease payments over the lease term. ROU assets are measured at the amount of the lease liability, adjusted for any initial direct costs incurred and any lease payments made at or before the lease commencement date, less lease incentives received. As the Company’s leases generally do not provide an implicit interest rate, the present value of the future minimum lease payments is determined using the Company’s incremental borrowing rate. This rate is an estimate of the collateralized borrowing rate the Company would incur on its future lease payments over a similar term and is based on the information available to the Company at the lease commencement date, discussed in more detail below.

The Company’s leases contain options to extend the leases; lease terms are adjusted for these options only when it is reasonably certain the Company will exercise these options. The Company’s lease agreements do not contain residual value guarantees or covenants.

The Company has made a policy election regarding its real estate leases not to separate non-lease components from lease components, to the extent they are fixed. Non-lease components that are not fixed are expensed as incurred as

variable lease expense. The Company’s lease includes variable non-lease components, such as common-area maintenance costs. The Company has elected not to record on the balance sheet a lease that has a lease term of 12 months or less and does not contain a purchase option that the Company is reasonably certain to exercise. The Company accounts for leases with initial terms of 12 months or less as operating expenses on a straight-line basis over the lease term.

Lease expense is recognized within operating expenses on a straight-line basis over the terms of the lease. Incentives granted under the Company’s facilities lease, including rent holidays, are recognized as adjustments to lease expense on a straight-line basis over the term of the lease.

Stock-based Compensation

The Company measures compensation expense for all stock-based payments to employees, officers and directors based on the estimated fair value of the award at the grant date. For stock options, the Company estimates the grant date fair value of each option award using the Black-Scholes option-pricing model. The grant date fair value of restricted stock units is based upon the fair market value of the Company’s common stock based on its closing price as reported on the date of grant on the Nasdaq Global Select Market. Compensation expense is recognized over the requisite service period on a straight-line basis. Forfeitures are recognized as they occur.

The Company records compensation expense for stock option and restricted stock unit grants subject to performance-based milestone vesting over the remaining implicit service period when management determines that achievement of the milestone is probable. Management evaluates when the achievement of a performance-based milestone is probable based on the relative satisfaction of the performance conditions as of the reporting date.

Net Loss Per Share Attributable to Common Stockholders

Basic net loss per share attributable to common stockholders is calculated by dividing the net loss attributable to common stockholders by the weighted-average number of shares of common stock outstanding for the period, without consideration of potentially dilutive securities. Diluted net loss per share attributable to common stockholders is the same as basic net loss per share attributable to common stockholders since the effect of potentially dilutive securities is anti-dilutive given the net loss of the Company.

Segments

The Company has determined that it operates and manages one operating segment, which is the business of developing and commercializing therapeutics. The Company’s chief operating decision maker, its chief executive officer, reviews financial information on an aggregate basis for the purpose of allocating resources.

Emerging Growth Company Status

The Company is an emerging growth company, as defined in the Jumpstart Our Business Startups Act of 2012 (“JOBS Act”). Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies. The Company has elected to use this extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date that it is (a) no longer an emerging growth company or (b) affirmatively and irrevocably opts out of the extended transition period provided in the JOBS Act, unless early adoption is permitted. As a result, these financial statements may not be comparable to companies that comply with the new or revised accounting pronouncements as of public company effective dates.

Recently Adopted Accounting Pronouncements

In June 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2016-13, Financial Instruments: Credit Losses (Topic 326) as clarified in ASU 2019-04, ASU 2019-05, and ASU 2020-02. The objective of the standard is to provide information about expected credit losses on financial instruments at each reporting date and to change how other-than-temporary impairments on investment securities are recorded. The Company adopted ASU 2016-13 effective January 1, 2023 and it did not have a material impact on its financial condition, results of operations or cash flows.

3. Fair Value

The Company has certain assets and liabilities that are measured at fair value on a recurring basis according to a fair value hierarchy that prioritizes the inputs, assumptions and valuation techniques used to measure fair value. The three levels of the fair value hierarchy are:

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

Level 2—Quoted prices in markets that are not active or financial instruments for which all significant inputs are observable, either directly or indirectly.

Level 3—Inputs are generally unobservable and reflect management’s estimates of assumptions that market participants would use in pricing the asset or liability. The fair values are determined using model-based techniques, including probability-based simulation methodologies.

The determination of a financial instrument’s level within the fair value hierarchy is based on an assessment of the lowest level of any input that is significant to the fair value measurement. The Company considers observable data to be market data, which is readily available, regularly distributed or updated, reliable and verifiable, not proprietary, and provided by independent sources that are actively involved in the relevant market.

The following tables reflect the Company’s financial asset balances measured at fair value on a recurring basis (in thousands):


	March 31, 2023
	Level	Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value
Cash equivalents:
Money market fund	1	$	28	$	—	$	—		$	28
Commercial paper	2		72,459		—		(23	)		72,436
Agency securities	2		17,724		7		—			17,731
Total cash equivalents		$	90,211	$	7	$	(23	)	$	90,195
Short-term investments:
Commercial paper	2		24,799		—		(55	)		24,744
U.S. government debt and agency securities	2		53,278		—		(496	)		52,782
Corporate bonds	2		3,302		—		(29	)		3,273
Total short-term investments		$	81,379	$	—	$	(580	)	$	80,799
Long-term investments:
U.S. government debt and agency securities	2		34,336		22		(455	)		33,903
Total long-term investments		$	34,336	$	22	$	(455	)	$	33,903


	December 31, 2022
	Level	Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value
Cash equivalents:
Money market fund	1	$	7	$	—	$	—		$	7
Commercial paper	2		78,028		—		(26	)		78,002
Total cash equivalents		$	78,035	$	—	$	(26	)	$	78,009
Short-term investments:
Commercial paper	2		36,933		—		(168	)		36,765
U.S. government debt and agency securities	2		65,157		—		(784	)		64,373
Corporate bonds	2		3,302		—		(62	)		3,240
Total short-term investments		$	105,392	$	—	$	(1,014	)	$	104,378
Long-term investments:
U.S. government debt and agency securities	2		45,745		—		(916	)		44,829
Total long-term investments		$	45,745	$	—	$	(916	)	$	44,829

All the commercial paper, U.S. government debt, municipal bonds and agency securities, U.S. treasury bills, and corporate bonds designated as short-term investments have an effective maturity date that is equal to or less than one year from the respective balance sheet date. Those that are designated as long-term investments have an effective maturity date that is more than one year, but less than two years, from the respective balance sheet date.

As of March 31, 2023, the Company does not intend to sell any securities in unrealized loss positions, and it is not more-likely-than-not that the Company will be required to sell such securities prior to the recovery of the amortized cost basis. Based on the Company's assessment, the Company concluded all impairments as of March 31, 2023 to be due to factors other than credit loss, such as changes in interest rates. A credit loss allowance was not recognized and the unrealized losses for available-for-sale securities were recorded in other comprehensive loss.

4. Property and Equipment, Net

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


	March 31,		December 31,
	2023		2022
Lab equipment	$	653	$	433
Office furniture, fixtures, and computer equipment		712		692
Leasehold improvement		4,296		4,296
Property and equipment, at cost		5,661		5,421
Less: accumulated depreciation