SEC Filing – Sigilon Therapeutics, Inc.

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 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 September 30, 2022

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

For the transition period from to

Sigilon Therapeutics, Inc.

(Exact name of registrant as specified in its charter)

Delaware	001-39746	47-4005543
(State or other jurisdiction of incorporation or organization)	(Commission File No.)	(I.R.S. Employer Identification No.)

100 Binney Street, Suite 600

Cambridge, MA 02142

(Address, including zip code, of registrant’s principal executive offices)

(617) 336-7540

(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, $0.001 par value per share	SGTX	The Nasdaq Global Select Market

Securities Registered Pursuant to Section 12(g) of the Act: None

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

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and “emerging growth company” in Rule 12b-2 of the 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 November 1, 2022, there were 32,456,737 shares of the registrant’s Common Stock, par value $0.001 per share, outstanding

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Sigilon Therapeutics, Inc.

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		Page
PART I - Financial Information
Item 1.	Financial Statements (Unaudited)	5
	Condensed Consolidated Balance Sheets as of September 30, 2022 and December 31, 2021	5
	Condensed Consolidated Statements of Operations and Comprehensive Loss for the three and nine months ended September 30, 2022 and 2021	6
	Condensed Consolidated Statements of Stockholders’ Equity for the three and nine months ended September 30, 2022 and 2021	7
	Condensed Consolidated Statements of Cash Flows for the three and nine months ended September 30, 2022 and 2021	8
	Notes to 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 and Risk	34
Item 4.	Controls and Procedures	34
PART II - Other Information		35
Item 1.	Legal Proceedings	35
Item 1A.	Risk Factors	35
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	90
Item 3.	Defaults upon Senior Securities	90
Item 4.	Mine Safety Disclosures	90
Item 5.	Other Information	91
Item 6.	Exhibits	91
	Signatures	92

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RISK FACTORS SUMMARY

Our business is subject to a number of risks, including risks that may adversely affect our business, results of operations, cash flows, and prospects. These risks are discussed more fully in “Item 1.A Risk Factors” and include, but are not limited to, risks related to:

●

We have incurred significant losses since inception. We expect to incur losses for the foreseeable future and may never achieve or maintain profitability.

●

If we fail to achieve the expected financial and operational benefits of our corporate restructuring, our business and financial results may be harmed.

●

Negative results of preclinical or clinical studies of any of our product candidates may require us to discontinue or delay development of other product candidates, which are all based on the same SLTx platform.

●

The SLTx platform consists of novel technologies that are not yet clinically validated for human therapeutic use. The approaches we are taking to discover and develop novel therapeutics are unproven and may never lead to marketable products.

●

We may not be successful in our efforts to identify and develop product candidates. If these efforts are unsuccessful, we may never become a commercial stage company or generate any revenues.

●

We are early in our development efforts. It will be many years before we or our collaborators commercialize a product candidate, if ever.

●

We only have preliminary data from the patients dosed with SIG-001 and no results from our product candidates in clinical trials and any favorable preclinical results are not predictive of results that may be observed in future clinical trials.

●

Our product candidates are composed of engineered human cell lines, encapsulated in a biocompatible matrix sphere. To date, there have been no completed human clinical trials for product candidates arising from our SLTx platform or consisting of our cell or sphere technologies. There may be serious adverse events, undesirable side effects related to either component of our product candidates, or limited efficacy of product candidates arising from our SLTx platform.

●

If clinical trials of our current and future product candidates fail to demonstrate safety and efficacy to the satisfaction of regulatory authorities or do not otherwise produce positive results, we may incur additional costs or experience delays in completing, or ultimately be unable to complete, the development and commercialization of such product candidates.

●

If we are unable to obtain and maintain patent and other intellectual property protection for our product candidates and for our SLTx platform, or if the scope of the patent and other intellectual property protection obtained is not sufficiently broad, our SLTx platform may be adversely affected.

●

If we cannot comply with Nasdaq’s continued listing standards, our common stock could be delisted.

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements. All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q are forward-looking statements. In some cases, forward-looking statements include terms such as "may," "will," "should," "expect," "plan," "anticipate," "could," "intend," "target," "project," "contemplate," "believe," "estimate," "predict," "potential" or "continue" or the negative of these terms or other similar expressions, although not all forward-looking statements contain these words. Forward-looking statements include, but are not limited to, statements concerning:

●

the timing and progress of our research and development programs and preclinical studies and the submission or approval of INDs or CTAs for our product candidates, including our plans to initiate IND-enabling studies for our optimized MPS-1 program in the second half of 2023, our plans to submit an Investigational New Drug, or IND, for our optimized MPS-1 program in 2024, and our plans to conduct IND-enabling studies for SIG-002 in 2023, with an expected IND submission in 2024;

●

our ability to advance any product candidates that we may develop and successfully complete any clinical studies, including the manufacture of any such product candidates;

●

our plans to expand our pipeline of product candidates in 2023 to include certain expansion areas of development in lysosomal disease;

●

the impact of the COVID-19 pandemic on our business operations, including our research and development programs, preclinical studies and clinical trials;

●

our ability to identify and enter into future license agreements and collaborations; and

●

estimates of our expenses, capital requirements and needs for additional financing.

There may be events in the future that we are not able to accurately predict or control and that may cause our actual results to differ materially from the expectations we describe in our forward-looking statements. We undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by law. You should, therefore, not rely on these forward-looking statements as representing our views as of any date subsequent to the date of this Quarterly Report on Form 10-Q. We cannot guarantee future results, levels of activity, performance or achievements.

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PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

Sigilon Therapeutics, Inc.

Condensed Consolidated Balance Sheets

(Unaudited, in thousands, except share and per share amounts)


	September 30,		December 31,
	2022		2021
Assets
Current assets:
Cash and cash equivalents	$	32,925	$	107,143
Marketable securities		45,344		16,213
Accounts receivable (inclusive of $23 and $23 from a related party at September 30, 2022 and December 31, 2021, respectively)		23		59
Prepaid expenses and other current assets		2,084		2,729
Restricted cash—current		250		250
Total current assets		80,626		126,394
Property and equipment, net		3,053		3,994
Right‑of‑use assets		9,908		12,863
Restricted cash		1,031		1,118
Total assets	$	94,618	$	144,369
Liabilities and stockholders’ equity (deficit)
Current liabilities:
Accounts payable	$	1,408	$	2,344
Accrued expenses and other current liabilities		5,947		8,998
Lease liabilities, current portion		4,462		4,845
Current portion of long‑term debt		6,667		1,667
Deferred revenue from related party, current portion		12,071		17,034
Total current liabilities		30,555		34,888
Deferred revenue from related party, net of current portion		—		5,333
Lease liability, net of current portion		5,856		8,577
Long‑term debt, net of discount and current portion		13,621		18,411
Other liabilities		176		—
Total liabilities		50,208		67,209
Commitments and contingencies (Note 9)
Stockholders’ equity
Common stock, par value $0.001 per share; 175,000,000 shares authorized at September 30, 2022 and December 31, 2021; 32,454,237 and 32,359,895 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively		32		32
Preferred stock, par value $0.001 per share; 25,000,000 shares authorized at September 30, 2022 and December 31, 2021; no shares issued and outstanding at September 30, 2022 and December 31, 2021		—		—
Additional paid‑in capital		295,129		290,377
Accumulated other comprehensive loss		(636)		(10)
Accumulated deficit		(250,115)		(213,239)
Total stockholders’ equity		44,410		77,160
Total liabilities and stockholders’ equity	$	94,618	$	144,369

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

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Sigilon Therapeutics, Inc.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(Unaudited, in thousands, except share and per share amounts)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Revenue
Collaboration revenue	$	4,252	$	1,947	$	10,300	$	7,609
Operating expenses:
Research and development		8,280		16,645		31,775		50,381
General and administrative		4,395		5,041		14,461		15,572
Total operating expenses		12,675		21,686		46,236		65,953
Loss from operations		(8,423)		(19,739)		(35,936)		(58,344)
Other income (expense), net:
Interest income		300		56		542		212
Interest expense		(606)		(499)		(1,640)		(1,481)
Other income, net		58		26		158		47
Total other expense, net		(248)		(417)		(940)		(1,222)
Net loss attributable to ordinary shareholders	$	(8,671)	$	(20,156)	$	(36,876)	$	(59,566)
Net loss per share attributable to common stockholders—basic and diluted	$	(0.27)	$	(0.63)	$	(1.14)	$	(1.88)
Weighted average common stock outstanding—basic and diluted		32,399,855		32,055,551		32,389,771		31,707,068

Other comprehensive loss
Unrealized loss on marketable debt securities		(80)		—		(626)		—
Total other comprehensive loss		(80)		—		(626)		—
Total comprehensive loss	$	(8,751)	$	(20,156)	$	(37,502)	$	(59,566)

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

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Sigilon Therapeutics, Inc.

Condensed Consolidated Statements of

Stock and Stockholders’ Equity

(Unaudited, in thousands, except share amounts)


						Accumulated				Total
				Additional		Other				Stockholders’
	Common Stock			Paid‑In		Comprehensive		Accumulated		Equity
	Shares	Amount		Capital		Loss		Deficit		(Deficit)
Balances at December 31, 2021	32,359,895	$	32	$	290,377	$	(10)	$	(213,239)	$	77,160
Issuance of common stock upon exercise of stock options	833		—		1		—		—		1
Issuance of ESPP shares	38,529		—		47		—		—		47
Stock‑based compensation expense	—		—		1,618		—		—		1,618
Unrealized loss on marketable debt securities	—		—		—		(379)		—		(379)
Net loss	—		—		—		—		(13,859)		(13,859)
Balances at March 31, 2022	32,399,257		32		292,043		(389)		(227,098)		64,588
Stock‑based compensation expense	—		—		1,731		—		—		1,731
Unrealized loss on marketable debt securities	—		—		—		(167)		—		(167)
Net loss	—		—		—		—		(14,346)		(14,346)
Balances at June 30, 2022	32,399,257		32		293,774		(556)		(241,444)		51,806
Issuance of common stock upon vesting of restricted stock units	25,460		—		—		—		—		—
Issuance of ESPP shares	29,520		—		13		—		—		13
Stock‑based compensation expense	—		—		1,342		—		—		1,342
Unrealized loss on marketable debt securities	—		—		—		(80)		—		(80)
Net loss	—		—		—		—		(8,671)		(8,671)
Balances at September 30, 2022	32,454,237	$	32	$	295,129	$	(636)	$	(250,115)	$	44,410

Balances at December 31, 2020	31,464,989	$	31	$	282,053	$	—	$	(135,928)	$	146,156
Issuance of common stock upon exercise of stock options	36,963		1		144		—		—		145
Stock‑based compensation expense	—		—		1,704		—		—		1,704
Net loss	—		—		—		—		(18,973)		(18,973)
Balances at March 31, 2021	31,501,952		32		283,901		—		(154,901)		129,032
Issuance of common stock upon exercise of stock options	362,068		—		486		—		—		486
Stock‑based compensation expense	—		—		1,986		—		—		1,986
Net loss	—		—		—		—		(20,437)		(20,437)
Balances at June 30, 2021	31,864,020		32		286,373		—		(175,338)		111,067
Issuance of common stock upon exercise of stock options	337,318		—		888		—		—		888
Stock‑based compensation expense	—		—		1,505		—		—		1,505
Net loss	—		—		—		—		(20,156)		(20,156)
Balances at September 30, 2021	32,201,338	$	32	$	288,766	$	—	$	(195,494)	$	93,304

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

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Sigilon Therapeutics, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited, in thousands)


	Nine Months Ended September 30,
	2022		2021
Cash flows from operating activities:
Net loss	$	(36,876)	$	(59,566)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization expense		949		816
Gain on disposal of fixed assets		(48)		—
Stock‑based compensation expense		4,691		5,195
Non‑cash lease expense		3,023		3,562
Non‑cash interest expense		210		202
Amortization of premium on marketable securities		17		—
Changes in operating assets and liabilities:
Accounts receivable		36		150
Prepaid expenses and other current assets		698		(1,802)
Accounts payable		(733)		1,560
Accrued expenses and other current liabilities		(2,932)		(138)
Other liabilities		176		—
Lease liabilities		(3,172)		(3,538)
Deferred revenue		(10,296)		(7,467)
Net cash used in operating activities		(44,257)		(61,026)
Cash flows from investing activities:
Purchases of marketable securities		(42,524)		—
Proceeds from maturities of marketable securities		12,750		—
Purchase of property and equipment		(512)		(1,532)
Proceed from the sale of fixed assets		177		—
Net cash used in investing activities		(30,109)		(1,532)
Cash flows from financing activities:
Payments of deferred offering costs		—		(622)
Proceeds from the exercise of common stock options and employee equity plans		61		1,519
Net cash provided by financing activities		61		897
Net decrease in cash, cash equivalents and restricted cash		(74,305)		(61,661)
Cash, cash equivalents and restricted cash at beginning of period		108,511		203,422
Cash, cash equivalents and restricted cash at end of period	$	34,206	$	141,761
Supplemental disclosure of cash flow information:
Cash paid for interest	$	1,422	$	1,274
Supplemental disclosures of noncash investing and financing activities:
Right-of-use assets obtained in exchange for lease liabilities	$	68	$	1,399
Deferred offering costs included in accounts payable	$	—	$	622
Sale of property and equipment in prepaid expenses and other current assets	$	53	$	—
Purchases of property and equipment included in accounts payable and accrued expenses	$	—	$	238

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

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Sigilon Therapeutics, Inc.

Notes to the Condensed Consolidated Financial Statements

(Unaudited)

1. Nature of the Business and Basis of Presentation

Sigilon Therapeutics, Inc. (the “Company” or “Sigilon”) is a clinical stage biotechnology company pioneering a new class of therapeutics and seeking to develop functional cures for patients with a wide range of diseases by providing stable and durable levels of therapeutic molecules to patients. The Company was incorporated on May 14, 2015 under the laws of the State of Delaware.

The Company is subject to risks and uncertainties common to early-stage companies in the biotechnology industry, including, but not limited to, the successful completion of research and development, development by competitors of new technological innovations, dependence on key personnel, protection of technology, compliance with government regulations, and the ability to secure additional capital to fund operations and commercial success of its product candidates.

Since its inception, the Company has devoted substantially all of its efforts to raising capital, obtaining financing, and incurring research and development costs related to advancing its biomedical platform. Product candidates currently under development will require significant additional research and development efforts, including extensive preclinical 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.

Basis of Presentation

The accompanying Unaudited Condensed Consolidated Financial Statements have been prepared in accordance with (i) U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information and (ii) the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, such financial statements do not include all the information and footnotes required by U.S. GAAP for a complete set of financial statements. In the opinion of management, the Unaudited Condensed Financial Statements include all adjustments, consisting of normal recurring accruals and other adjustments, considered necessary for a fair statement of the Company’s financial position, results of operations, stockholders’ equity and cash flows as of and for the periods presented. The accompanying Condensed Consolidated Balance Sheet as of December 31, 2021 was derived from the Company’s audited financial statements at that date but does not include all of the footnote disclosures required by U.S. GAAP.

The Unaudited Condensed Consolidated Financial Statements should be read in conjunction with the Company’s audited financial statements and related notes included in its Annual Report on Form 10-K for the year ended December 31, 2021 (the “2021 Form 10-K”). The Company’s significant accounting policies are described in Note 2 to the Notes to Financial Statements in the 2021 Form 10-K and are updated, as necessary, in subsequent Form 10-Q filings.

Going Concern

The Company has evaluated whether there are conditions and events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date the financial statements are issued.

From its inception through September 30, 2022, the Company has funded its operations primarily with proceeds from its initial public offering, sales of convertible preferred stock, payments received under its collaboration agreement and proceeds from borrowings under loan and security agreements. The Company has incurred recurring losses since inception, including net losses of $8.7 million and $36.9 million for the three and nine months ended September 30, 2022, respectively, and $77.3 million for the year ended December 31, 2021. In addition, as of September 30, 2022, the Company

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had an accumulated deficit of $250.1 million. The Company expects to generate significant losses and negative cash flows from operations for the foreseeable future.

Based on its current operating plans, the Company believes its cash, cash equivalents and marketable securities of $78.3 million as of September 30, 2022 will be sufficient to fund its anticipated level of operations, capital expenditures and satisfy debt repayments for a period of at least 12 months from the issuance date of this Quarterly Report. The Company expects to generate operating losses for the foreseeable future. Accordingly, the Company will seek additional funding through equity financings, debt financing, or additional collaboration agreements. If the Company is unable to raise additional funds through equity financing, debt financings or additional collaboration agreements the Company may be required to delay, limit, reduce or terminate product development or future commercialization efforts or grant rights to develop and market products or product candidates that the Company would otherwise prefer to develop and market itself.

Impact of COVID-19

The COVID-19 pandemic has impacted and may continue to impact the clinical sites, the operations of the Company’s third-party manufacturing, clinical research organizations and logistics providers, which has disrupted the supply chain or the availability or cost of materials, and it may affect the Company’s ability to timely complete clinical trials and delay the initiation and/or enrollment of any future clinical trials, disrupt research, supply chain, research and regulatory activities or have other adverse effects on the Company’s business and operations.

The Company is monitoring the potential impact of COVID-19 on its business and financial statements. The effects of the public health directives may negatively impact productivity, disrupt its business and delay clinical programs and timelines and future clinical trials, the magnitude of which will depend, in part, on the length and severity of the restrictions and other limitations on its ability to conduct business in the ordinary course. These and similar, and perhaps more severe, disruptions in the Company’s operations could negatively impact business, results of operations and financial condition, including its ability to obtain financing.

To date, the Company has not incurred impairment losses in the carrying values of its assets as a result of the COVID-19 pandemic and are not aware of any specific related event or circumstance that would require the Company to revise its estimates reflected in financial statements.

The Company cannot be certain what the overall impact of the COVID-19 pandemic will be on its business and prospects. The extent to which the COVID-19 pandemic will directly or indirectly impact its business, results of operations, financial condition and liquidity, including planned and future clinical trials and research and development costs, will depend on future developments that are highly uncertain, including as a result of new information that may emerge concerning COVID-19, the actions taken to contain or treat it, and the duration and intensity of the related effects.

2. Summary of Significant Accounting Policies

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the period. Estimates and assumptions reflected in these financial statements include, but are not limited to, revenue recognition, research and development expenses and stock-based awards. The Company bases its estimates on historical experience, known trends and other market-specific or other relevant factors that it believes to be reasonable under the circumstances. On an ongoing basis, management evaluates its estimates as there are changes in circumstances, facts and experience. Changes in estimates are recorded in the period in which they become known. Actual results may differ from those estimates or assumptions.

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Concentration of Credit Risk and of Significant Suppliers

The financial instruments that potentially subject the Company to concentrations of credit risk are cash and accounts receivable. The Company does not believe that it is subject to unusual credit risk beyond the normal credit risk associated with commercial banking relationships. As of September 30, 2022, the Company’s accounts receivable was related to one customer and as of December 31, 2021, the Company’s accounts receivable were related to two customers. As of September 30, 2022 and December 31, 2021, 100% and 39%, respectively, of the Company’s total receivables were related to the Company’s collaboration agreements with Eli Lilly and Company (Note 8).

The Company is dependent on third-party manufacturers to supply certain products for research and development activities in its programs. The Company currently has a supplier of certain raw materials that would be considered a sole supplier. If the Company cannot access additional suppliers or secure sufficient inventory of these raw materials, its programs could be adversely affected by an interruption in the availability of these raw materials.

Net Income (Loss) per Share

The Company only has one class of shares outstanding and basic net income (loss) per common share is computed by dividing the net income (loss) by the weighted average number of shares of common stock outstanding for the period. Diluted net income (loss) per common share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding for the period, including potential dilutive common shares assuming the dilutive effect of outstanding stock awards. For periods in which the Company reports 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.

Recently Issued Accounting Pronouncements

In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 362): Measurement of Credit Losses on Financial Statements (“ASU 2016-13”). The new standard requires that expected credit losses relating to financial assets measured on an amortized cost basis and available-for-sale debt securities be recorded through an allowance for credit losses. It also limits the amount of credit losses to be recognized for available-for-sale debt securities to the amount by which carrying value exceeds fair value and also requires the reversal of previously recognized credit losses if fair value increases. The targeted transition relief standard allows filers an option to irrevocably elect the fair value option of ASC 825-10, Financial Instruments-Overall, applied on an instrument-by-instrument basis for eligible instruments. For public entities that are Securities and Exchange Commission (“SEC”) filers, excluding entities eligible to be smaller reporting companies, ASU 2016-13 is effective for annual periods beginning after December 15, 2019, including interim periods within those fiscal years. For all other entities, ASU 2016-13 is effective for annual periods beginning after December 15, 2022, including interim periods within those fiscal years. Early adoption is permitted and the Company adopted ASU 2016-13 on January 1, 2022. The adoption of this standard did not have a material impact on its financial statements.

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”), which is intended to simplify the accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. The new standard will be effective for public business entities, for fiscal years beginning after December 15, 2020, and for all other entities, for fiscal years beginning after December 15, 2021 and the Company adopted ASU 2016-13 on January 1, 2022. The adoption of ASU 2019-12 did not have a material impact on the Company’s financial statements.

In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU 2020-04”), which provide optional expedients and exceptions for applying generally accepted accounting principles to contracts, hedging relationships, and other transactions that reference the London Interbank Offered Rate (“LIBOR”) or another reference rate expected to be discontinued because of reference rate reform if contract modifications are made on or before December 31, 2022. The amendments in this update are effective for all entities as of March 12, 2020 and do not apply to contract modifications made, and hedging

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relationships entered into or evaluated, after December 31, 2022. The Company is currently evaluating the potential impact ASU 2020-04 may have on its financial statements.

3. Fair Value Measurements and marketable securities

Value Measurements

The following tables present information about the Company’s financial assets that have been measured at fair value as of September 30, 2022 and indicate the fair value of the hierarchy of the valuation inputs utilized to determine such fair value. In general, fair values determined by Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities. Fair value determined by Level 2 inputs utilize observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted market prices in markets that are not active or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the related assets or liabilities. Fair values determined by Level 3 inputs are unobservable data points for the asset or liability, and include situations where there is little, if any, market activity for the asset or liability. During the three and nine months ended September 30, 2022, there were no transfers between Level 1 and Level 2 financial assets.

The following table summarizes the Company’s cash equivalents and marketable securities as of September 30, 2022 and December 31, 2021 (in thousands):


	Fair value measurements as of
	September 30, 2022
	Level 1		Level 2		Level 3		Total
Cash equivalents
Money market funds	$	10,564	$	—	$	—	$	10,564
Commercial paper		—		9,978		—		9,978
U.S. Treasuries		—		3,981		—		3,981
Total cash equivalents		10,564		13,959		—		24,523
Marketable securities
Corporate bonds		—		22,498		—		22,498
Commercial paper		—		10,681		—		10,681
U.S. Government Agencies		—		1,225		—		1,225
U.S. Treasuries		—		10,940		—		10,940
Total marketable securities		—		45,344		—		45,344
Total	$	10,564	$	59,303	$	—	$	69,867


	Fair value measurements as of
	December 31, 2021
	Level 1		Level 2		Level 3		Total
Cash equivalents
Money market funds	$	50,847	$	—	$	—	$	50,847
Commercial paper		—		25,995		—		25,995
Corporate bonds		—		1,000		—		1,000
Total cash equivalents		50,847		26,995		—		77,842
Marketable securities
Corporate bonds		—		10,238		—		10,238
Commercial paper		—		5,975		—		5,975
Total marketable securities		—		16,213		—		16,213
Total	$	50,847	$	43,208	$	—	$	94,055

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Marketable Securities

The following tables summarizes the Company’s available-for-sale marketable debt securities as of September 30, 2022 and December 31, 2021 (in thousands):


	Fair value measurements as of
	September 30, 2022
			Gross		Gross
	Amortized		Unrealized		Unrealized		Credit
	Cost		Gains		Losses		Losses		Total
Corporate bonds	$	23,027	$	—	$	(529)	$	—	$	22,498
Commercial paper		10,722		—		(41)		—		10,681
U.S. Treasuries		1,229		—		(4)		—		1,225
U.S. Government Agencies		11,010		—		(70)		—		10,940
Total	$	45,988	$	—	$	(644)	$	—	$	45,344


	Fair value measurements as of
	December 31, 2021
			Gross		Gross
	Amortized		Unrealized		Unrealized
	Cost		Gains		Losses		Total
Commercial paper	$	10,244	$	—	$	(6)	$	10,238
Corporate bonds		5,977		—		(2)		5,975
Total	$	16,221	$	—	$	(8)	$	16,213

The unrealized losses at September 30, 2022 were attributed to changes in interest rates and unrealized losses do not represent credit losses. No declines in value were deemed to be other than temporary as of December 31, 2021.

The following table summarizes the Company’s available-for-sale marketable debt securities by contractual maturity as of September 30, 2022 and December 31, 2021 (in thousands):


	September 30,		December 31,
	2022		2021
Maturities in one year or less	$	40,082	$	9,004
Maturities between one and two years		5,262		7,209
Total	$	45,344	$	16,213

The carrying value of the Company’s long-term debt approximates its fair value at September 30, 2022 and December 31, 2021 because the debt bears interest at a variable market rate and the Company’s credit risk has not materially changed since the inception of the agreement.

As of September 30, 2022 and December 31, 2021 the Company did not have any other financial assets and liabilities that were measured at fair value on a recurring basis.

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4. Property and Equipment, Net

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


	September 30,		December 31,
	2022		2021
Laboratory equipment	$	6,216	$	6,297
Leasehold improvements		78		78
Furniture and fixtures		620		620
Computers and software		147		163
		7,061		7,158
Less: Accumulated depreciation and amortization		(4,008)		(3,164)
Total property and equipment, net	$	3,053	$	3,994

Depreciation and amortization expense for the three and nine months ended September 30, 2022 and 2021 was $0.3 million, $0.9 million, $0.3 million and $0.8 million, respectively.

5. Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consisted of the following (in thousands):


	September 30,		December 31,
	2022		2021
Employee compensation and benefits	$	3,059	$	3,071
External research and development costs		2,125		5,056
Legal and professional fees		553		656
Other		210		215
Total accrued expenses and other current liabilities	$	5,947	$	8,998

6. Debt

The following discussion of the Company’s debt should be read in conjunction with Note 8 to the Notes to the Consolidated Financial Statements in the 2021 Form 10-K.

As of September 30, 2022 and December 31, 2021, long-term debt consisted of the following (in thousands):


	September 30,		December 31,
	2022		2021
Principal amount of long‑term debt	$	20,000	$	20,000
Less: Current portion of long‑term debt		(6,667)		(1,667)
Long‑term debt, net of current portion		13,333		18,333
Final debt payment liability		700		700
Debt discount, net of accretion		(412)		(622)
Long‑term debt, net of discount and current portion	$	13,621	$	18,411

As of September 30, 2022 and December 31, 2021, the interest rate applicable to borrowings under the loan and security agreement with Oxford Finance LLC (the “2020 Credit Facility”) was 10.80% and 8.40%, respectively.

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The estimated future principal payments due were as follows (in thousands):


	September 30,
	2022
2022 (Remaining three months)	$	1,666
2023		6,667
2024		6,667
2025		5,000
2026		—
	$	20,000

As of September 30, 2022, the Company was in full compliance with all financial covenants of the Loan Agreement.

7. Stock Based Compensation

The Company uses stock options to provide long-term incentives to its employees, non-employee directors and certain consultants. The Company has two equity compensation plans under which awards are currently authorized for issuance: the 2020 Employee Stock Purchase Plan and the 2020 Equity Incentive Plan. The Company also has outstanding stock-based awards under its 2016 Equity Incentive Plan but is no longer granting awards under this plan. As of September 30, 2022, there were 1,722,783 shares available for issuance under the 2020 Equity Incentive Plan and 853,407 shares available for issuance under the 2020 Employee Stock Purchase Plan.

The fair value of each option is estimated on the date of grant using the Black-Scholes option-pricing model. The Company was a private company prior to the initial public offering and lacked company-specific historical and implied volatility information for its stock. Therefore, it estimates its expected stock price volatility based on the historical volatility of a publicly traded set of peer companies and expects to continue to do so until such time as it has adequate historical data regarding the volatility of its own traded stock price. The expected term of the Company’s stock options has been determined utilizing the “simplified” method for awards that qualify as “plain-vanilla” options. The expected term of options granted to non-employees 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. The expected dividend yield of 0% is based on the fact that the Company has never paid cash dividends on common stock and does not expect to pay any cash dividends in the foreseeable future.

The following table presents, on a weighted average basis, the assumptions used in the Black-Scholes option-pricing model to determine the grant-date fair value of stock options granted to employees and directors:


	Three months ended						Nine months ended
	September 30,						September 30,
	2022			2021			2022			2021
Risk-free interest rate		2.77	%		0.96	%		1.74	%		0.76	%
Expected dividend yield		0.00	%		0.00	%		0.00	%		0.00	%
Expected term (in years)		6.0			6.0			6.0			6.1
Expected volatility		85.10	%		78.36	%		84.28	%		78.34	%

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Stock Option Activity

The following table summarizes the Company’s stock option activity since December 31, 2021:


				Weighted
				average
		Weighted		remaining	Aggregate
	Number of	average		contractual term	intrinsic value
	options	exercise price		(in years)	(in thousands)
Balances at December 31, 2021	3,138,646	$	10.74	7.6	$	328
Options granted	2,551,030		2.23
Options cancelled	(687,610)		8.40
Options exercised	(833)		0.57
Outstanding and expected to vest at September 30, 2022	5,001,233		6.72	8.0		—
Exercisable at September 30, 2022	2,041,630	$	7.61	6.3	$	—

The aggregate intrinsic value of options is calculated as the difference between the exercise price of the stock options and the fair value of the Company’s common stock for those options that had exercise prices lower than the fair value of the Company’s common stock.

The aggregate intrinsic value of stock options exercised during the three and nine months ended September 30, 2022 and 2021 were $0, less than $0.1 million, $1.1 million and $5.8 million, respectively. The weighted average grant date fair value of stock options during the three and nine months ended September 30, 2022 and 2021 were $0.74, $2.23, $8.22 and $30.61 respectively.

Restricted Stock Units

The Company has granted restricted stock units with time-based vesting conditions to employees. The restricted stock units primarily vest over 3 years from the grant date. The Company values restricted stock units on the grant-date using the market price of the Company’s common stock.

The following table summarizes restricted stock unit activity since December 31, 2021:


		Weighted
		average grant
	Shares	date fair value
Unvested shares as of December 31, 2021	275,400	$	5.57
Vested	(25,460)		5.65
Forfeited	(85,600)		5.62
Unvested shares as of September 30, 2022	164,340	$	5.53

Stock-based Compensation Expense

Stock-based compensation expense related to stock options and restricted stock units was classified in the statement of operations and comprehensive loss as follows (in thousands):

Three months ended

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September 30,

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2021

2022

2021

Research and development

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