10-Q
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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 March 31, 2024

OR

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

For the transition period from _______________to ____________

Commission File Number: 001-39122

 

89bio, Inc.

(Exact Name of Registrant as Specified in its Charter)

 

 

Delaware

36-4946844

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

142 Sansome Street, Second Floor

San Francisco, California 94104

94104

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: (415) 432-9270

 

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, par value $0.001 per share

 

ETNB

 

Nasdaq Global 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 May 6, 2024, the registrant had 98,383,998 shares of common stock, $0.001 par value per share, outstanding.

 

 


 

Table of Contents

 

Page

PART I.

FINANCIAL INFORMATION

 

Item 1.

Financial Statements (Unaudited)

1

Condensed Consolidated Balance Sheets

1

Condensed Consolidated Statements of Operations and Comprehensive Loss

2

Condensed Consolidated Statements of Stockholders’ Equity

3

Condensed Consolidated Statements of Cash Flows

4

Notes to Unaudited Condensed Consolidated Financial Statements

5

Item 2.

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

15

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

21

Item 4.

Controls and Procedures

21

PART II.

OTHER INFORMATION

23

Item 1.

Legal Proceedings

23

Item 1A.

Risk Factors

23

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

42

Item 3.

Default Upon Senior Securities

42

Item 4.

Mine Safety Disclosures

42

Item 5.

Other Information

42

Item 6.

Exhibits

43

Signatures

44

 

 

i


 

PART I—FINANCIAL INFORMATION

 

Item 1. Financial Statements.

89bio, Inc.

Condensed Consolidated Balance Sheets

(In thousands)

 

 

 

March 31,
2024

 

 

December 31,
2023

 

 

 

(Unaudited)

 

 

 

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

217,573

 

 

$

316,161

 

Marketable securities

 

 

344,715

 

 

 

262,709

 

Prepaid and other current assets

 

 

12,494

 

 

 

14,664

 

Total current assets

 

 

574,782

 

 

 

593,534

 

Operating lease right-of-use assets

 

 

2,118

 

 

 

2,293

 

Property and equipment, net

 

 

37

 

 

 

46

 

Other assets

 

 

385

 

 

 

396

 

Total assets

 

$

577,322

 

 

$

596,269

 

Liabilities and stockholders’ equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

15,352

 

 

$

8,585

 

Accrued expenses

 

 

20,295

 

 

 

20,530

 

Operating lease liabilities, current

 

 

702

 

 

 

496

 

Term loan, current

 

 

1,892

 

 

 

 

Total current liabilities

 

 

38,241

 

 

 

29,611

 

Operating lease liabilities, noncurrent

 

 

1,640

 

 

 

1,817

 

Term loan, noncurrent, net

 

 

23,065

 

 

 

24,795

 

Other noncurrent liabilities

 

 

3,837

 

 

 

3,740

 

Total liabilities

 

 

66,783

 

 

 

59,963

 

Commitments and contingencies (Note 5)

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

Common stock, $0.001 par value: 200,000,000 shares authorized; 95,199,724 and 93,269,377 shares issued and outstanding as of March 31, 2024 and December 31, 2023, respectively

 

 

95

 

 

 

93

 

Additional paid-in capital

 

 

1,020,076

 

 

 

993,455

 

Accumulated other comprehensive (loss) income

 

 

(519

)

 

 

190

 

Accumulated deficit

 

 

(509,113

)

 

 

(457,432

)

Total stockholders’ equity

 

 

510,539

 

 

 

536,306

 

  Total liabilities and stockholders’ equity

 

$

577,322

 

 

$

596,269

 

 

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

1


 

89bio, Inc.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(Unaudited)

(In thousands, except share and per share amounts)

 

 

 

Three Months Ended
March 31,

 

 

 

2024

 

 

2023

 

Operating expenses:

 

 

 

 

 

 

Research and development

 

$

47,428

 

 

$

22,306

 

General and administrative

 

 

9,849

 

 

 

6,218

 

Total operating expenses

 

 

57,277

 

 

 

28,524

 

Loss from operations

 

 

(57,277

)

 

 

(28,524

)

Interest expense

 

 

(863

)

 

 

(2,075

)

Interest income and other, net

 

 

6,556

 

 

 

1,763

 

Net loss before income tax

 

 

(51,584

)

 

 

(28,836

)

Income tax expense

 

 

(97

)

 

 

 

Net loss

 

$

(51,681

)

 

$

(28,836

)

Other comprehensive (loss) income:

 

 

 

 

 

 

Unrealized (loss) gain on marketable securities

 

 

(714

)

 

 

114

 

Foreign currency translation adjustments

 

 

5

 

 

 

(4

)

Total other comprehensive (loss) income

 

$

(709

)

 

$

110

 

Comprehensive loss

 

$

(52,390

)

 

$

(28,726

)

Net loss per share, basic and diluted

 

$

(0.54

)

 

$

(0.54

)

Weighted-average shares used to compute net loss per share,
   basic and diluted

 

 

95,846,740

 

 

 

53,171,370

 

 

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

2


 

89bio, Inc.

Condensed Consolidated Statements of Stockholders’ Equity

For the Three Months Ended March 31, 2024 and 2023

(Unaudited)

(In thousands, except share amounts)

 

 

 

 

 

 

 

 

 

Additional

 

 

Accumulated Other

 

 

 

 

 

Total

 

 

 

Common Stock

 

 

Paid-in

 

 

Comprehensive

 

 

Accumulated

 

 

Stockholders’

 

 

 

Shares

 

 

Amounts

 

 

Capital

 

 

Income (Loss)

 

 

Deficit

 

 

Equity

 

Balance as of December 31, 2023

 

 

93,269,377

 

 

$

93

 

 

$

993,455

 

 

$

190

 

 

$

(457,432

)

 

$

536,306

 

Issuance of common stock in at-the-market public offerings, net of issuance costs

 

 

1,396,888

 

 

 

2

 

 

 

21,047

 

 

 

 

 

 

 

 

 

21,049

 

Issuance of common stock upon exercise of common stock warrants

 

 

337,713

 

 

 

 

 

 

1,798

 

 

 

 

 

 

 

 

 

1,798

 

Issuance of common stock upon exercise of stock options

 

 

1,626

 

 

 

 

 

 

7

 

 

 

 

 

 

 

 

 

7

 

Issuance of common stock upon vesting of restricted stock units,
   net of tax withholding for net share settlement

 

 

194,120

 

 

 

 

 

 

(1,229

)

 

 

 

 

 

 

 

 

(1,229

)

Stock-based compensation

 

 

 

 

 

 

 

 

4,998

 

 

 

 

 

 

 

 

 

4,998

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(51,681

)

 

 

(51,681

)

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

(709

)

 

 

 

 

 

(709

)

Balance as of March 31, 2024

 

 

95,199,724

 

 

$

95

 

 

$

1,020,076

 

 

$

(519

)

 

$

(509,113

)

 

$

510,539

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

Accumulated Other

 

 

 

 

 

Total

 

 

 

Common Stock

 

 

Paid-in

 

 

Comprehensive

 

 

Accumulated

 

 

Stockholders’

 

 

 

Shares

 

 

Amounts

 

 

Capital

 

 

Loss

 

 

Deficit

 

 

Equity

 

Balance as of December 31, 2022

 

 

50,560,590

 

 

$

51

 

 

$

467,374

 

 

$

(350

)

 

$

(315,243

)

 

$

151,832

 

Issuance of common stock in public offerings, net of issuance costs

 

 

19,461,538

 

 

 

19

 

 

 

296,798

 

 

 

 

 

 

 

 

 

296,817

 

Issuance of common stock in at-the-market public offerings,
   net of issuance costs

 

 

968,000

 

 

 

1

 

 

 

13,421

 

 

 

 

 

 

 

 

 

13,422

 

Issuance of common stock upon exercise of common stock warrants

 

 

1,682,500

 

 

 

2

 

 

 

8,958

 

 

 

 

 

 

 

 

 

8,960

 

Issuance of common stock upon exercise of stock options

 

 

61,408

 

 

 

 

 

 

185

 

 

 

 

 

 

 

 

 

185

 

Issuance of common stock upon vesting of restricted stock units,
   net of tax withholding for net share settlement

 

 

133,669

 

 

 

 

 

 

(693

)

 

 

 

 

 

 

 

 

(693

)

Issuance of common stock warrants in connection with term loan

 

 

 

 

 

 

 

 

482

 

 

 

 

 

 

 

 

 

482

 

Stock-based compensation

 

 

 

 

 

 

 

 

3,551

 

 

 

 

 

 

 

 

 

3,551

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(28,836

)

 

 

(28,836

)

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

110

 

 

 

 

 

 

110

 

Balance as of March 31, 2023

 

 

72,867,705

 

 

$

73

 

 

$

790,076

 

 

$

(240

)

 

$

(344,079

)

 

$

445,830

 

 

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

3


 

89bio, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(In thousands)

 

 

Three Months Ended
March 31,

 

 

 

2024

 

 

2023

 

Cash flows from operating activities:

 

 

 

 

 

 

Net loss

 

$

(51,681

)

 

$

(28,836

)

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

 

 

 

 

 

 

Stock-based compensation

 

 

4,998

 

 

 

3,551

 

Net accretion of discounts on investments in marketable securities

 

 

(2,822

)

 

 

(1,040

)

Amortization of debt discount and accretion of deferred debt costs

 

 

162

 

 

 

219

 

Loss on extinguishment of debt

 

 

 

 

 

1,208

 

Noncash operating lease expense

 

 

175

 

 

 

41

 

Depreciation

 

 

9

 

 

 

14

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

Prepaid and other assets

 

 

2,089

 

 

 

(4,599

)

Accounts payable

 

 

6,767

 

 

 

4,225

 

Accrued expenses

 

 

457

 

 

 

(4,827

)

Operating lease liabilities

 

 

29

 

 

 

(41

)

Other noncurrent liabilities

 

 

97

 

 

 

 

Net cash used in operating activities

 

 

(39,720

)

 

 

(30,085

)

Cash flows from investing activities:

 

 

 

 

 

 

Proceeds from sales and maturities of marketable securities

 

 

72,140

 

 

 

37,880

 

Purchases of marketable securities

 

 

(152,038

)

 

 

(33,774

)

Net cash (used in) provided by investing activities

 

 

(79,898

)

 

 

4,106

 

Cash flows from financing activities:

 

 

 

 

 

 

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

 

 

 

 

 

296,817

 

Payments of deferred offering costs

 

 

(253

)

 

 

 

Proceeds from issuance of common stock in at-the-market public offerings,
   net of issuance costs

 

 

21,067

 

 

 

13,422

 

Proceeds from term loan facility, net of issuance costs

 

 

 

 

 

24,363

 

Proceeds from issuance of common stock upon exercise of common stock warrants

 

 

1,798

 

 

 

8,960

 

Proceeds from issuance of common stock upon exercise of stock options

 

 

104

 

 

 

185

 

Payments for taxes related to net share settlement
 upon vesting of restricted stock units

 

 

(1,686

)

 

 

(693

)

Repayment of term loan

 

 

 

 

 

(21,400

)

Net cash provided by financing activities

 

 

21,030

 

 

 

321,654

 

Net change in cash and cash equivalents

 

 

(98,588

)

 

 

295,675

 

Cash and cash equivalents at beginning of period

 

 

316,161

 

 

 

55,255

 

Cash and cash equivalents at end of period

 

$

217,573

 

 

$

350,930

 

Supplemental disclosures of cash information:

 

 

 

 

 

 

Cash paid for interest

 

$

679

 

 

$

542

 

Cash paid related to operating lease liabilities

 

$

46

 

 

$

47

 

Supplemental disclosures of noncash information:

 

 

 

 

 

 

Issuance of common stock warrants in connection with term loan

 

$

 

 

$

482

 

Unpaid offering costs included in accrued expenses

 

$

18

 

 

$

 

 

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

4


 

89bio, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

1. Organization and Liquidity

Description of Business

89bio, Inc. (“89bio” or the “Company”) is a clinical-stage biopharmaceutical company focused on the development and commercialization of innovative therapies for the treatment of liver and cardio-metabolic diseases. The Company’s lead product candidate, pegozafermin, a specifically engineered glycoPEGylated analog of fibroblast growth factor 21 (“FGF21”), is currently being developed for the treatment of metabolic dysfunction-associated steatohepatitis (“MASH”), previously known as nonalcoholic steatohepatitis, and for the treatment of severe hypertriglyceridemia (“SHTG”).

89bio was formed as a Delaware corporation in June 2019 to carry on the business of 89Bio Ltd., which was incorporated in Israel in January 2018.

Liquidity

The Company has incurred significant losses and negative cash flows from operations since inception and had an accumulated deficit of $509.1 million as of March 31, 2024. The Company has historically financed its operations primarily through the sale of equity securities, including warrants, and from borrowings under term loan facilities. To date, none of the Company’s product candidates have been approved for sale, and the Company has not generated any revenue from commercial products. The Company expects operating losses to continue and increase for the foreseeable future as the Company progresses its clinical development activities for its product candidates.

The Company believes its existing cash, cash equivalents and marketable securities of $562.3 million as of March 31, 2024 will be sufficient to fund its planned operating expense and capital expenditure requirements for a period of at least one year from the date of the issuance of these financial statements.

2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying interim unaudited condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States (“U.S. GAAP”), the instructions to Form 10-Q and Rule 10-01 of Regulation S-X and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting.

Unaudited Interim Condensed Consolidated Financial Statements

The accompanying interim condensed consolidated financial statements are unaudited. The interim unaudited condensed consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements as of and for the year ended December 31, 2023 and reflect all normal recurring adjustments that are necessary to present fairly the results for the interim periods presented. Interim results are not necessarily indicative of the results to be expected for the full year ending December 31, 2024 or for any other future annual or interim period. The condensed consolidated balance sheet as of December 31, 2023 was derived from the audited financial statements as of that date and, due to its summary nature, does not include all the disclosures required by U.S. GAAP in audited financial statements. These condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements included in the Annual Report on Form 10-K for the year ended December 31, 2023, which was filed with the SEC on March 1, 2024.

Principles of Consolidation

The accompanying condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. For the Company and its subsidiary in Israel, the functional currency has been determined to be the U.S. Dollar.

Use of Estimates

The preparation of condensed consolidated 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 disclosure of contingent assets and liabilities as of the date of the condensed consolidated financial statements and the reported amounts of expenses during the reporting period. Significant estimates and assumptions made in the accompanying condensed consolidated financial statements include but are not limited to accruals for uncertain tax positions, accrued research and development expenses and the valuation of stock options. The

5


 

Company evaluates its estimates and 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.

Fair Value Measurements

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the reporting date. Assets and liabilities recorded at fair value are categorized based upon the level of judgment associated with the inputs used to measure their fair value. Hierarchical levels are directly related to the amount of subjectivity with the inputs to the valuation of these assets or liabilities as follows:

Level 1—Observable inputs such as unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date;

Level 2—Inputs (other than quoted prices included in Level 1) are either directly or indirectly observable inputs for similar assets or liabilities. These include quoted prices for identical or similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active; and

Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

Assets Measured at Fair Value on a Recurring Basis

As of March 31, 2024 and December 31, 2023, cash equivalents and marketable securities were the only financial instruments measured and recorded at fair value on a recurring basis on the Company’s condensed consolidated balance sheets.

Financial Instruments Not Carried at Fair Value

The Company’s financial instruments, including cash, other current assets, accounts payable and accrued expenses are carried at cost which approximates their fair value because of the short-term nature of these financial instruments. The fair value of the Company’s term loan approximates its carrying value, or amortized cost, due to the prevailing market rates of interest it bears.

Cash and Cash Equivalents

The Company considers all highly liquid investments purchased with original maturities of three months or less from the purchase date to be cash equivalents. Cash equivalents primarily consist of amounts invested in money market funds, commercial paper and U.S. government Treasury securities and are carried at fair value.

Marketable Securities

The Company invests its excess cash in marketable securities with high credit ratings including money market funds, commercial paper, securities issued by the U.S. government and its agencies and corporate debt securities. The Company accounts for all marketable securities as available-for-sale, as the sale of such securities may be required prior to maturity. These marketable securities are carried at fair value, with unrealized gains and losses reported as accumulated other comprehensive income (loss) until realized. The cost of debt securities is adjusted for accretion of premiums and amortization of discounts to maturity. Such amortization and accretion, as well as interest and dividends, are included in interest income and other, net. Realized gains and losses from the sale of marketable securities, if any, are determined on a specific identification basis and are also included in interest income and other, net. The Company’s marketable securities are classified as current assets, which reflects management’s intention to use the proceeds from sales of these securities to fund its operations, as necessary, even though the stated maturity date may be one year or more beyond the current balance sheet date.

The Company periodically assesses its marketable securities for impairment. For marketable securities in an unrealized loss position, this assessment first takes into account the Company’s intent to sell, or whether it is more likely than not that it will be required to sell the security before recovery of its amortized cost basis. If either of these criteria are met, the marketable security’s amortized cost basis is written down to fair value through interest income and other, net. For marketable securities in an unrealized loss position that do not meet the aforementioned criteria, the Company assesses whether the decline in fair value has resulted from credit losses or other factors. In making this assessment, the Company considers the extent to which fair value is less than amortized cost, any changes to the rating of the security by a rating agency, and any adverse conditions specifically related to the security, among other factors. If this assessment indicates that a credit loss may exist, the present value of cash flows expected to be collected from the security are compared to the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an allowance for credit losses will be recorded in interest income and other, net, limited by the amount that the fair value is less than the amortized cost basis. Any additional impairment not recorded through an allowance for credit losses is recognized in other comprehensive loss. Changes in the allowance for credit losses are recorded as provision for (or reversal of) credit loss expense. Losses are charged against the allowance when management believes the uncollectability of a security is confirmed or when either of the criteria regarding intent or requirement to sell is met. These changes are recorded in interest income and other, net.

6


 

Income Taxes

The Company accounts for uncertain tax positions using a more-likely-than-not threshold for recognizing and resolving uncertain tax positions. This evaluation is based on factors including, but not limited to, changes in facts or circumstances, changes in tax law, effectively settled issues under audit, and new audit activity. Interest and penalties related to unrecognized tax benefits are included within income tax expense. For the three months ended March 31, 2024, the Company recorded income tax expense of $0.1 million for the accrual of additional interest related to unrecognized tax benefits.

Basic and Diluted Net Loss per Share

Basic and diluted net loss per share is calculated based upon the weighted-average number of shares of common stock outstanding during the period. Shares of common stock that are potentially issuable for little or no cash consideration at issuance, such as the Company’s pre-funded warrants issued in July 2022 and December 2023 are included in the calculation of basic and diluted net loss per share, even if they are antidilutive. During periods of income, participating securities are allocated a proportional share of income determined by dividing total weighted-average participating securities by the sum of the total weighted-average common shares and participating securities (the “two-class method”). Shares of the Company’s common stock warrants participate in any dividends that may be declared by the Company and are therefore considered to be participating securities. Participating securities have the effect of diluting both basic and diluted earnings per share during periods of income. During periods of loss, no loss is allocated to participating securities since they have no contractual obligation to share in the losses of the Company. Diluted loss per share is computed after giving consideration to the dilutive effect of stock options, restricted stock units (“RSUs”), performance stock units (“PSUs”) and common stock warrants, except where such non-participating securities would be anti-dilutive. As the Company incurred net losses for the periods presented, basic net loss per share is the same as diluted net loss per share since the effects of potentially dilutive securities are antidilutive.

Recently Adopted Accounting Standards

The Company did not adopt any new standards or updates issued by the Financial Accounting Standards Board (“FASB”) during the three months ended March 31, 2024 that had a material impact on the Company’s consolidated financial statements and related disclosures.

Accounting Pronouncements Not Yet Adopted

In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (“ASU 2023-07”), which is intended to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant expenses. ASU 2023-07 requires disclosures to include significant segment expenses that are regularly provided to the chief operating decision maker (“CODM”), a description of other segment items by reportable segment, and any additional measures of a segment’s profit or loss used by the CODM when deciding how to allocate resources. The ASU also requires all annual disclosures required by Topic 280 to be included in interim periods. All disclosure requirements under this ASU are also required for public entities with a single reportable segment. The ASU is effective for the Company’s annual periods beginning on January 1, 2024 and interim periods beginning on January 1, 2025. Early adoption is permitted and requires retrospective application to all prior periods presented in the financial statements. The Company expects to adopt ASU 2023-07 in its Annual Report on Form 10-K for the year ending December 31, 2024 and in the interim periods thereafter. The Company is in the process of evaluating the requirements of this update, which is expected to result in expanded disclosures within the consolidated financial statements upon adoption.

In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU 2023-09”), which requires companies to disclose, on an annual basis, specific categories in the effective tax rate reconciliation and provide additional information for reconciling items that meet a quantitative threshold. In addition, ASU 2023-09 requires companies to disclose additional information about income taxes paid. The ASU is effective for the Company’s annual periods beginning on January 1, 2025 and will be applied on a prospective basis with the option to apply the standard retrospectively. Early adoption is permitted. The Company expects to adopt ASU 2023-09 in its Annual Report on Form 10-K for the year ending December 31, 2025 and in annual periods thereafter. The Company is in the process of evaluating the requirements of this update, which is expected to result in expanded disclosures within the consolidated financial statements upon adoption.

7


 

3. Fair Value Measurements

The following tables present the Company’s financial assets measured at fair value on a recurring basis by level within the fair value hierarchy for the periods indicated (in thousands):

 

 

 

 

March 31, 2024

 

 

 

Valuation

 

Amortized

 

 

Unrealized

 

 

Unrealized

 

 

Fair

 

 

 

Hierarchy

 

Cost

 

 

Gains

 

 

Losses

 

 

Value

 

Money market funds

 

Level 1

 

$

4,073

 

 

$

 

 

$

 

 

$

4,073

 

Commercial paper

 

Level 2

 

 

124,016

 

 

 

 

 

 

(71

)

 

 

123,945

 

U.S. government bonds

 

Level 2

 

 

194,344

 

 

 

47

 

 

 

(377

)

 

 

194,014

 

Agency bonds

 

Level 2

 

 

53,252

 

 

 

10

 

 

 

(107

)

 

 

53,155

 

Corporate debt securities

 

Level 2

 

 

5,184

 

 

 

 

 

 

(22

)

 

 

5,162

 

U.S. Treasury securities

 

Level 2

 

 

49,505

 

 

 

 

 

 

(8

)

 

 

49,497

 

Total cash equivalents and marketable securities

 

 

 

$

430,374

 

 

$

57

 

 

$

(585

)

 

$

429,846

 

Classified as:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents

 

 

 

 

 

 

 

 

 

 

 

 

$

85,131

 

Marketable securities

 

 

 

 

 

 

 

 

 

 

 

 

 

344,715

 

Total cash equivalents and marketable securities

 

 

 

 

 

 

 

 

 

 

 

 

$

429,846

 

 

 

 

 

 

December 31, 2023

 

 

 

Valuation

 

Amortized

 

 

Unrealized

 

 

Unrealized

 

 

Fair

 

 

 

Hierarchy

 

Cost

 

 

Gains

 

 

Losses

 

 

Value

 

Money market funds

 

Level 1

 

$

493

 

 

$

 

 

$

 

 

$

493

 

Commercial paper

 

Level 2

 

 

94,261

 

 

 

 

 

 

(55

)

 

 

94,206

 

U.S. government bonds

 

Level 2

 

 

137,976

 

 

 

250

 

 

 

(142

)

 

 

138,084

 

Agency bonds

 

Level 2

 

 

45,481

 

 

 

152

 

 

 

(44

)

 

 

45,589

 

Corporate debt securities

 

Level 2

 

 

3,177

 

 

 

 

 

 

(12

)

 

 

3,165

 

U.S. Treasury securities

 

Level 2

 

 

71,754

 

 

 

36

 

 

 

(1

)

 

 

71,789

 

Agency discount securities

 

Level 2

 

 

7,975

 

 

 

1

 

 

 

 

 

 

7,976

 

Total cash equivalents and marketable securities

 

 

 

$

361,117

 

 

$

439

 

 

$

(254

)

 

$

361,302

 

Classified as:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents

 

 

 

 

 

 

 

 

 

 

 

 

$

98,593

 

Marketable securities

 

 

 

 

 

 

 

 

 

 

 

 

 

262,709

 

Total cash equivalents and marketable securities

 

 

 

 

 

 

 

 

 

 

 

 

$

361,302

 

The valuation techniques used to measure the fair values of the Company’s Level 2 financial instruments, which generally have counterparties with high credit ratings, are based on quoted market prices when available. If quoted market prices are not available, the fair value for the security is estimated under the market or income approach using pricing models with market observable inputs.

The following table summarizes the estimated fair value of investments in marketable securities by effective contractual maturity dates as of March 31, 2024 (in thousands):

Within one year

 

$

314,373

 

After one year through two years

 

 

115,473

 

Total cash equivalents and marketable securities

 

$

429,846

 

As of March 31, 2024, the Company’s marketable securities in an unrealized loss position include primarily fixed-rate debt securities of varying maturities, which are sensitive to changes in the yield curve and other market conditions. Substantially all of the fixed-rate debt securities in a loss position are investment-grade debt securities. The Company has the intent and ability to hold such securities until recovery of the unrealized losses. Based on the Company’s assessment, the unrealized losses as of March 31, 2024 were primarily due to changes in interest rates and not due to increased credit risks associated with specific securities. No allowance for credit losses was recorded as of March 31, 2024 and December 31, 2023.

4. Balance Sheet Components

Prepaid and other current assets consist of the following as of the periods presented (in thousands):

8


 

 

 

March 31,
2024

 

 

December 31,
2023

 

Prepaid research and development

 

$

9,009

 

 

$

11,579

 

Prepaid taxes

 

 

615

 

 

 

614

 

Prepaid other

 

 

2,870

 

 

 

2,471

 

Total prepaid and other current assets

 

$

12,494

 

 

$

14,664

 

Accrued expenses consist of the following as of the periods presented (in thousands):

 

 

March 31,
2024

 

 

December 31,
2023

 

Accrued research and development expenses

 

$

15,881

 

 

$

13,017

 

Accrued employee and related expenses

 

 

2,603

 

 

 

6,248

 

Accrued professional and legal fees

 

 

1,776

 

 

 

1,110

 

Accrued other expenses

 

 

35

 

 

 

155

 

Total accrued expenses

 

$

20,295

 

 

$

20,530

 

 

5. Commitments and Contingencies

Asset Transfer and License Agreement with Teva Pharmaceutical Industries Ltd

In April 2018, the Company concurrently entered into two Asset Transfer and License Agreements (the “Teva Agreements”) with Teva Pharmaceutical Industries Ltd (“Teva”) under which it acquired certain patents and intellectual property relating to two programs: (1) Teva’s glycoPEGylated FGF21 program, including the compound TEV-47948 (pegozafermin), a glycoPEGylated long-acting FGF21 and (2) Teva’s development program of small molecule inhibitors of Fatty Acid Synthase. Pursuant to the Teva Agreements, the Company paid Teva an initial nonrefundable upfront payment of $6.0 million. Under each license agreement, the Company is required to pay Teva $2.5 million upon the achievement of a specified clinical development milestone, and additional payments totaling up to $65.0 million upon achievement of certain commercial milestones. Each milestone payment shall be payable once, upon the first occurrence of the applicable milestone. The Company is also obligated to pay Teva tiered royalties at percentages in the low-to-mid single-digits on worldwide net sales on all products containing the Teva compounds.

The Teva Agreements can be terminated (i) by the Company without cause upon 120 days’ written notice to Teva, (ii) by either party, if the other party materially breaches any of its obligations under the Teva Agreements and fails to cure such breach within 60 days after receiving notice thereof, or (iii) by either party, if a bankruptcy petition is filed against the other party and is not dismissed within 60 days. In addition, Teva can also terminate the agreement related to their glycoPEGylated FGF21 program in the event the Company, or any of its affiliates or sublicensees, challenges any of the Teva patents licensed to the Company, and the challenge is not withdrawn within 30 days of written notice from Teva.

In the fourth quarter of 2023, the Company made a $2.5 million milestone payment to Teva following the achievement of a clinical development milestone under the FGF21 program in SHTG. As of March 31, 2024, the timing and likelihood of achieving any remaining milestones are uncertain. Milestone payment obligations will be recognized when payment becomes probable and reasonably estimable, which is generally upon achievement of the applicable milestone.

6. Term Loan Facility

In January 2023, the Company entered into a Loan and Security Agreement (“the Loan Agreement”) with the lender parties thereto (the “Lenders”), K2 HealthVentures LLC as administrative agent and Ankura Trust Company, LLC as collateral agent. The Loan Agreement provides for up to $100.0 million in aggregate principal in term loans, consisting of an initial tranche of $25.0 million that was funded at closing, second and third tranches of $15.0 million and $10.0 million, respectively, that may be funded upon the achievement of certain time-based, clinical and regulatory milestones, and a fourth tranche of up to $50.0 million that may be funded upon discretionary approval by the Lenders. As of March 31, 2024, the second $15.0 million tranche expired undrawn. The third $10.0 million tranche is available through June 30, 2024 and the fourth $50.0 million tranche remains available, at the sole discretion of the Lenders.

Borrowings under the Loan Agreement are secured by substantially all of the assets of the Company, excluding the Company’s intellectual property. The Loan Agreement contains customary representations and warranties, restricts certain activities and includes customary events of default, including payment default, breach of covenants, change of control, and material adverse effects. In addition, starting January 1, 2024, the Company is required to maintain minimum unrestricted cash and cash equivalents equal to 5.0 times the average change in cash and cash equivalents measured over the trailing three-month period. As of March 31, 2024, the Company was in compliance with all covenants under the Loan Agreement.

9


 

Borrowings under the Loan Agreement mature on January 1, 2027 and provide for interest-only payments until February 1, 2025. Consecutive equal payments of principal and interest are due once the interest-only period has elapsed. Borrowings under the Loan Agreement bear interest equal to the greater of (i) 8.45% and (ii) the sum of (a) the Prime Rate as reported in The Wall Street Journal plus (b) 2.25%. The interest rate on the term loan was 9.75% at inception and 10.75% as of March 31, 2024. In addition, a final payment fee of 5.95% of the principal amount of the term loans is due upon the earlier of prepayment or maturity of the term loans. The Company has the option to prepay the entire outstanding balance of borrowings under the Loan Agreement, subject to a prepayment fee ranging from 1.0% to 3.0% depending on the timing of such prepayment. A commitment fee equal to 0.6% of the principal amount of the fourth tranche is also payable if drawn.

At any time prior to full repayment of outstanding borrowings under the Loan Agreement, the Lenders may elect to convert up to an aggregate of $7.5 million of the principal amount of outstanding borrowings into shares of the Company's common stock at a conversion price of $12.6943 per share. The embedded conversion option qualifies for a scope exception from derivative accounting because it is both indexed to the Company’s own stock and met the conditions for equity classification.

Total debt issuance costs related to the term loan facility of $0.8 million, which includes the fair value of warrants issued in connection with the facility, were recorded as debt discount. The debt discount, together with the final payment fee, are recognized as interest expense using the effective interest method over the term of the loan facility.

The expected repayments of principal amount due on borrowings as of March 31, 2024 are as follows (in thousands):

2024 (remaining nine months)

 

$

 

2025

 

 

10,774

 

2026

 

 

13,036

 

2027

 

 

1,190

 

Total principal outstanding

 

 

25,000

 

Plus accumulated accretion of final payment fee

 

 

493

 

Less unamortized debt discount

 

 

(536

)

Total net carrying value

 

 

24,957

 

Term loan, current

 

 

(1,892

)

Term loan, noncurrent, net

 

$

23,065

 

 

In connection with the Loan Agreement, the Company issued the Lenders a warrant to purchase up to an aggregate of 204,815 shares of the Company’s common stock at an exercise price of $9.7649 per share (the “warrant shares”). The warrant shares become exercisable upon the funding of each tranche and have a 10-year term. In connection with the first tranche that was funded at closing, 51,204 of the warrant shares became exercisable. The warrant shares cannot be settled for cash and include a cashless exercise feature allowing the holder to receive shares net of shares withheld in lieu of the exercise price. The warrant shares also provide for automatic cashless exercise under certain specific conditions and settlement is permitted in unregistered shares. The 51,204 warrant shares met the requirements for equity classification.

The Company determined the fair value of the 51,204 warrant shares issued using the Black-Scholes option-pricing model with the following assumptions: risk-free interest rate of 3.9%, no dividends, expected volatility of 93.8% and expected term of 10.0 years.

Of the remaining 153,611 warrant shares (the “contingent warrants”), 122,889 warrant shares remain outstanding and 30,722 warrant shares associated with the second tranche were forfeited as of March 31, 2024. The contingent warrants did not meet the derivative scope exception or equity classification criteria and were accounted for as a derivative liability. The initial fair value and the fair value as of March 31, 2024 of the contingent warrants was insignificant. The contingent warrants derivative liability is remeasured each reporting period until settled or extinguished with subsequent changes in fair value recorded as interest expense in the condensed consolidated statements of operations and comprehensive loss. The initial fair value of the contingent warrants derivative liability was determined using a probability weighted Black-Scholes option pricing model based on the same Black-Scholes input assumptions described above.

10


 

7. Stockholders’ Equity

Common Stock Reserved for Issuance

The Company had the following shares of common stock reserved for future issuance, on an as-if-converted basis, as of the periods presented:

 

 

March 31,
2024

 

 

December 31,
2023

 

Stock options outstanding

 

 

6,891,349

 

 

 

4,686,577

 

RSUs and PSUs outstanding

 

 

1,508,546

 

 

 

987,550

 

Shares available for future grants under equity incentive plans

 

 

2,600,491

 

 

 

1,790,684

 

Shares available for future issuance under the employee stock purchase plan

 

 

1,207,607

 

 

 

1,207,607

 

Warrants to purchase common stock outstanding

 

 

10,075,092

 

 

 

10,412,806

 

Pre-funded warrants to purchase common stock outstanding

 

 

1,881,081

 

 

 

1,881,081

 

Conversion feature related to outstanding term loan

 

 

590,816

 

 

 

590,816

 

Total available for future issuance

 

 

24,754,982

 

 

 

21,557,121

 

At-the-Market (“ATM”) Offerings

In March 2021, the Company entered into an ATM sales agreement (as amended, the “Sales Agreement”) with Leerink Partners LLC and Cantor Fitzgerald & Co. (the “Sales Agents”) pursuant to which the Company may offer and sell shares up to $75.0 million of its common stock (the “2021 ATM Facility”) from time to time pursuant to an effective registration statement. The Sales Agents are entitled to compensation at a commission of up to 3.0% of the aggregate gross sales price per share sold under the Sales Agreement. For the three months ended March 31, 2023, the Company sold 968,000 shares of its common stock under the 2021 ATM Facility and received net proceeds of $13.4 million, after deducting commissions and offering costs of $0.4 million.

In February 2023, the Company entered into an amendment to the Sales Agreement, establishing a new ATM facility with an aggregate offering amount of up to $150.0 million of its common stock (the “2023 ATM Facility”) pursuant to an effective registration statement. For the three months ended March 31, 2024, the Company sold 1,396,888 shares of its common stock under the 2023 ATM Facility resulting in net proceeds of $21.0 million, after deducting commissions and offering costs of $0.5 million. As of March 31, 2024, there was $104.4 million remaining for future sales under the 2023 ATM Facility.

Underwritten Public Offerings

In March 2023, the Company completed an underwritten public offering of its common stock. The Company sold 19,461,538 shares of its common stock at a public offering price of $16.25 per share and received net proceeds of $296.8 million, net of underwriting discounts and commissions of $19.0 million and other offering costs of $0.5 million.

Common Stock Warrants

As of March 31, 2024, the Company’s outstanding warrants to purchase shares of its common stock were as follows:

Shares of
Common Stock
Underlying
Warrants

 

Exercise Price
Per Share

 

Expiration
Date

Warrant issued in connection with term loan (SVB)

 

25,000

 

 

$

22.06

 

 

June 30, 2025

Warrant issued in connection with term loan (SVB)

 

33,923

 

 

 

19.12

 

 

May 28, 2031

Warrants issued in connection with term loan facility

 

174,093

 

 

 

9.76

 

 

January 27, 2033

Warrants issued in connection with public offering

 

 

9,842,076

 

 

 

5.325

 

 

July 1, 2024

Pre-funded warrants issued in connection with public offerings

 

1,881,081

 

 

 

0.001

 

 

Do not expire

Total outstanding

 

11,956,173

 

 

 

11


 

 

8. Stock-Based Compensation

Equity Incentive Plans

The Company has issued stock-based awards from various equity incentive and stock purchase plans, as more fully described in Note 8—Stock-Based Compensation of the Company’s Notes to Consolidated Financial Statements section in its Annual Report on Form 10-K for the year ended December 31, 2023.

Equity Incentive Plans Activity

Stock Options

The following table summarizes stock option activity under the Company's equity incentive plans for the three months ended March 31, 2024:

 

 

 

 

 

 

 

 

Weighted

 

 

 

 

 

 

 

 

 

Weighted

 

 

Average

 

 

 

 

 

 

 

 

 

Average

 

 

Remaining

 

 

Aggregate

 

 

 

Number of

 

 

Exercise

 

 

Contractual

 

 

Intrinsic

 

 

 

Options

 

 

Price

 

 

Term

 

 

Value

 

 

 

 

 

 

 

 

 

(In years)

 

 

(In thousands)

 

Balance outstanding as of December 31, 2023

 

 

4,686,577

 

 

$

14.11

 

 

 

7.9

 

 

$

11,712

 

Granted

 

 

2,241,000

 

 

 

9.99

 

 

 

 

 

 

 

Exercised

 

 

(1,626

)

 

 

4.44

 

 

 

 

 

 

 

Cancelled and forfeited

 

 

(34,602

)

 

 

12.94

 

 

 

 

 

 

 

Balance outstanding as of March 31, 2024

 

 

6,891,349

 

 

$

12.78

 

 

 

8.3

 

 

$

16,139

 

Exercisable as of March 31, 2024

 

 

2,617,844

 

 

$

14.76

 

 

 

6.8

 

 

$

9,011

 

The fair value of stock option awards granted for the periods indicated was estimated at the date of grant using a Black-Scholes option-pricing model with the following assumptions:

 

 

Three Months Ended
March 31,

 

 

2024

 

2023

Expected term (years)

 

5.56.1

 

5.56.1

Expected volatility

 

89.490.4%

 

91.693.2%

Risk-free interest rate

 

3.84.1%

 

3.43.8%

Expected dividend

 

 

As of March 31, 2024, total unrecognized stock-based compensation expense related to unvested stock options was $34.8 million, which is expected to be recognized over a weighted-average period of 3.0 years.

RSU and PSUs

RSUs generally vest annually over a two or three-year period. PSUs generally contain performance conditions associated with corporate goals, such as achievement of certain development milestones, that vests upon achievement over a one to three-year period.

12


 

The following table summarizes RSU and PSU activity for the three months ended March 31, 2024:

 

 

RSUs

 

 

PSUs

 

 

 

Number of
Shares

 

 

Weighted-Average
Grant Date Fair Value per Share

 

 

Number of
Shares

 

 

Weighted-Average
Grant Date Fair Value per Share

 

Balance outstanding as of December 31, 2023

 

 

688,382

 

 

$

10.72

 

 

 

299,168

 

 

$

5.96

 

Granted

 

 

651,950

 

 

 

9.98

 

 

 

192,000

 

 

 

9.98

 

Vested

 

 

(157,172

)

 

 

13.43

 

 

 

(159,168

)

 

 

7.00

 

Canceled

 

 

(6,614

)

 

 

10.78

 

 

 

 

 

 

 

Balance outstanding as of March 31, 2024

 

 

1,176,546

 

 

$

9.95

 

 

 

332,000

 

 

$

7.79

 

As of March 31, 2024, total unrecognized stock-based compensation expense related to RSUs and PSUs was $12.3 million, which is expected to be recognized over a weighted-average period of 1.9 years.

Stock-Based Compensation

The Company recorded stock-based compensation expense for the periods indicated as follows (in thousands):

 

 

Three Months Ended
March 31,

 

 

 

2024

 

 

2023

 

Research and development

 

$

2,315

 

 

$

1,486

 

General and administrative

 

 

2,683

 

 

 

2,065

 

Total stock-based compensation

 

$

4,998

 

 

$

3,551

 

 

9. Net Loss Per Share

The following table presents the weighted-average shares outstanding used to calculate basic and diluted net loss per share for the periods indicated:

 

 

Three Months Ended
March 31,

 

2024

 

 

2023

 

Common stock

 

93,965,659

 

 

 

52,371,370

 

Pre-funded warrants

 

1,881,081

 

 

800,000

 

  Total<