You should read the following discussion and analysis of our financial condition and results of operations together with the section entitled "Risk Factors" and our unaudited interim condensed financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q and with our audited financial statements and the notes thereto for the year endedDecember 31, 2019 included in our Annual Report on Form 10-K filed with theSecurities and Exchange Commission . Some of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report, including information with respect to our plans and strategy for our business and related financing, includes forward-looking statements that involve risks and uncertainties. As a result of many factors, including those factors set forth in the section entitled "Risk Factors," our actual results could differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis. You should carefully read the section entitled "Risk Factors" to gain an understanding of the important factors that could cause actual results to differ materially from our forward-looking statements.
Overview
We are a clinical-stage biotechnology company focused on the discovery and development of engineered T cell therapies, and exploring their potential to provide a deep and durable, perhaps curative, treatment, for patients with B cell-mediated autoimmune diseases. Our proprietary technology utilizes Chimeric AutoAntibody Receptor, or CAAR, T cells that are designed to selectively bind and eliminate only specific B cells that produce disease-causing autoantibodies, or pathogenic B cells, while sparing normal B cells. Our lead CAAR T cell product candidate was designed based on the clinically validated and commercially approved Chimeric Antigen Receptor, or CAR, T cell technology that is marketed for the treatment of B cell cancers. By harnessing the power of targeted cell therapy, we believe our CAAR T products candidates have the potential to provide responses that may be a safer and more effective option than current treatments. We believe our technology, in combination with our proprietary Cabaletta Approach for selective B cell Ablation platform, called our CABA platform, has applicability across over two dozen B cell-mediated autoimmune diseases that we have identified, evaluated and prioritized. In order to accelerate product development for our lead program and to access a proven cell therapy manufacturing platform, we have entered into a collaboration with theUniversity of Pennsylvania , or Penn. We hold multiple agreements with Penn to develop CAAR T cell therapies for the treatment of these diseases. Our goal is to leverage our team's expertise in autoimmunity and engineered T cell therapy and our collaboration with Penn to rapidly discover and develop our portfolio of CAAR T product candidates. Our initial focus is mucosal pemphigus vulgaris, or mPV, which is an autoimmune blistering skin disease. We submitted an Investigational New Drug, or IND, application for our lead product candidate, DSG3-CAART, to theU.S. Food and Drug Administration , or the FDA, inAugust 2019 and our IND was cleared inSeptember 2019 . The FDA granted DSG3-CAART orphan drug designation for the treatment of PV inJanuary 2020 , and fast track designation for improving healing of mucosal blisters in patients with mucosal pemphigus vulgaris, or mPV, inMay 2020 . Our lead product candidate, DSG3-CAART, designed to treat patients with mPV, is currently enrolling patients for a Phase 1 trial, or the DesCAARTesTM trial. We expect to report the acute safety data from the first cohort of patients in the DesCAARTesTM trial in the first half of 2021. Our lead preclinical product candidate is designed for the treatment of muscle-specific kinase myasthenia gravis, or MuSK MG, and is currently in IND enabling studies, with an IND submission expected in the 2nd half of 2021. We are also advancing additional product candidates currently in discovery-stage or preclinical development for the treatment of mucocutaneous PV, or mcPV, and Hemophilia A with Factor VIII, or FVIII, alloantibodies in addition to three undisclosed targets. We were incorporated inApril 2017 . InAugust 2018 , we entered into multiple agreements with Penn to develop the CAAR T technology to treat B cell-mediated autoimmune diseases. Our operations to date have been financed primarily by net proceeds of$86.4 million from the sale of convertible notes and convertible preferred stock and net proceeds of$71.0 million from the sale of common stock in our initial public offering, or IPO, inOctober 2019 . As ofSeptember 30, 2020 , we had$118.1 million in cash and cash equivalents and investments.
Impact of the COVID-19 Pandemic
InDecember 2019 , a novel strain of coronavirus (COVID-19) was reported to have surfaced inWuhan, China and, inMarch 2020 was declared a pandemic by theWorld Health Organization . The virus continues to spread globally, including inthe United States , and efforts to contain the spread of COVID-19, including severe travel restrictions, social distancing requirements, stay-at-home orders and other measures, have delayed the commencement of non-COVID-19-related clinical trials, among other restrictions. As a result, the COVID-19 pandemic has caused significant disruptions to theU.S. , regional and global economies and has contributed to significant volatility and negative pressure in financial markets. We have been carefully monitoring the COVID-19 pandemic and its potential impact on our business and have taken important steps to help ensure the safety of employees and their families and to reduce the spread of COVID-19 community-wide. We have a work-from-home policy for all employees, other than those performing or supporting business-critical operations, such as certain members of our laboratory staff. For those employees, we have implemented stringent safety measures designed to comply with applicable federal, state and local guidelines instituted in response to the COVID-19 pandemic. We have also maintained efficient 18
--------------------------------------------------------------------------------
communication with our partners and potential clinical sites as the COVID-19 situation has progressed. We have taken these precautionary steps while maintaining business continuity so that we can continue to progress our programs.
The Company's financial results for the three and nine months endedSeptember 30, 2020 were not significantly impacted by COVID-19. However, the future impact of the COVID-19 pandemic on our industry, the healthcare system and our current and future operations and financial condition will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the scope, severity and duration of the pandemic, the actions taken to contain the pandemic or mitigate its impact, and the direct and indirect economic effects of the pandemic and containment measures, among others. The Company cannot at this time predict the specific extent, duration, or full impact that the COVID-19 pandemic will have on its financial condition, operations, and business plans for 2020, including its ability to raise additional capital, the timing and enrollment of patients in its planned clinical trials, future financings and other expected milestones of its product candidates.
See "Item 1A. Risk Factors" for a discussion of the potential adverse impact of COVID-19 on our business, results of operations and financial condition.
Key Agreements
Amended and Restated License Agreement with the Trustees of the
InJuly 2019 , we entered into an amended and restated license agreement, or the License Agreement, as amended inMay 2020 , with Penn and theChildren's Hospital of Philadelphia , or CHOP and collectively with Penn, the Institutions, pursuant to which we obtained (a) a non-exclusive, non-sublicensable, worldwide research license to make, have made and use products in two subfields of use, (b) effective as ofOctober 2018 , an exclusive, worldwide, royalty-bearing license, with the right to sublicense, under certain patent rights of the Institutions to make, use, sell, offer for sale and import products in the same two subfields of use, and (c) effective as ofOctober 2018 , a non-exclusive, worldwide, royalty-bearing license, with limited rights to sublicense, under certain of Penn's know-how, which know-how satisfies certain criteria and is listed on a mutually agreed to schedule, to make, have made, use, sell, offer for sale, import and have imported products in the same two subfields of use. Our rights are subject to the rights of theU.S. government and certain rights retained by the Institutions. Unless earlier terminated, the License Agreement will expire with respect to a product upon the later of (a) the expiration of the last to expire patent or patent application covering such product or (b) 10 years after the first commercial sale of such product. We may terminate the License Agreement in its entirety or on a subfield-by-subfield basis at any time for convenience upon a certain number of days' prior written notice. Penn may terminate the License Agreement in its entirety or on a subfield-by-subfield basis for our uncured material breach, including for our failure to meet certain diligence obligations and milestone events. We, however, may extend the achievement date of any milestone event for an additional period of time by making a payment in a certain amount, subject to certain limitations in the number of times each event may be extended.
Sponsored Research Agreements
We have two sponsored research agreements, or SRAs, with Penn for the laboratories of Drs. Payne and Milone,who are also our scientific co-founders and members of our scientific advisory board. InMay 2020 , one of the agreements was amended to expand the scope of research. InAugust 2020 , this agreement was further amended to extend the term of the original research plan. Under the amended agreements, we are committed to funding a defined research plan throughFebruary 2023 . The total estimated cost of the agreements is$11.8 million , which satisfies the$2.0 million annual obligation under the License Agreement.
Master Translational Research Services Agreement
InOctober 2018 , we entered into a Master Translational Services Agreement with Penn, or the Services Agreement, pursuant to which Penn agreed to perform certain services related to the research and development of the technology licensed to us under the License Agreement, as well as certain clinical, regulatory and manufacturing services. The Services Agreement will expire on the later of (i)October 19, 2021 or (ii) completion of the services for which we have engaged Penn under the Services Agreement. Either party may terminate this agreement with or without cause upon a certain number of days' prior written notice. The services encompassed by the Services Agreement are performed by different organizations at Penn pursuant to certain addenda to the Services Agreement, including theCenter for Advanced Retinal and Ocular Therapeutics , or CAROT, Addendum, as amended inMay 2020 , and the CVPF Addendum. In addition, inJuly 2019 we entered into an Alliance Agreement with Penn, pursuant to which we will pay Penn a nominal annual fee in order for Penn to provide an adequate and consistent level of support to the services that it provides to us. 19
--------------------------------------------------------------------------------
Components of Operating Results
Revenue
To date, we have not generated any revenue from product sales and do not expect to generate any revenue from the sales of products for several years, if at all. If our development efforts for our current or future product candidates are successful and result in marketing approval, we may generate revenue in the future from product sales. We cannot predict if, when or to what extent we will generate revenue from the commercialization and sale of our product candidates. We may never succeed in obtaining regulatory approval for any of our product candidates. We may also in the future enter into license or collaboration agreements for our product candidates or intellectual property, and we may generate revenue in the future from payments as a result of such license or collaboration agreements. Operating Expenses Research and Development
Our research and development expenses include:
• personnel costs, which include salaries, benefits and stock-based compensation expense;
• expenses incurred under agreements with consultants and third-party
contract organizations that conduct research and development activities on
our behalf; • costs related to sponsored research service agreements;
• costs related to production of preclinical and clinical materials,
including fees paid to contract manufacturers; • licensing fees for intellectual property and know-how;
• laboratory and vendor expenses related to the execution of preclinical
studies and planned clinical trials; and • laboratory supplies and equipment used for internal research and development activities and related depreciation expense. We have not reported program costs since inception because historically we have not tracked or recorded our research and development expenses on a pre-clinical program-by-program basis. We use our personnel and infrastructure resources across the breadth of our research and development activities, which are directed toward identifying and developing product candidates. We expense all research and development costs in the periods in which they are incurred. Costs for certain research and development activities are recognized based on an evaluation of the progress to completion of specific tasks using information and data provided to us by Penn, our vendors and third-party service providers. We expect our research and development expenses to increase substantially for the foreseeable future as we continue to invest in research and development activities related to developing our product candidates, including investments in manufacturing, as our programs advance and we conduct clinical trials. The process of conducting the necessary clinical research to obtain regulatory approval is costly and time-consuming, and the successful development of our product candidates is highly uncertain. As a result, we are unable to determine the duration and completion costs of our research and development projects or when and to what extent we will generate revenue from the commercialization and sale of any of our product candidates. Because of the numerous risks and uncertainties associated with product development, we cannot determine with certainty the duration and completion costs of the current or future preclinical studies and clinical trials or if, when, or to what extent we will generate revenues from the commercialization and sale of our product candidates. We may never succeed in achieving regulatory approval for our product candidates. The duration, costs and timing of preclinical studies and clinical trials and development of our product candidates will depend on a variety of factors, including:
• successful completion of preclinical studies and IND-enabling studies;
• development of chemistry, manufacturing and controls, or CMC, processes
and procedures for purposes of IND applications;
• successful patient enrollment in, and the initiation and completion of, clinical trials; 20
--------------------------------------------------------------------------------
• the impact of any business interruptions to our operations, including the
timing and enrollment of patients in our planned clinical trials, or to
those of our clinical sites, manufacturers, suppliers, or other vendors
resulting from the COVID-19 pandemic or similar public health crisis;
• receipt of regulatory approvals from applicable regulatory authorities;
• establishing commercial manufacturing capabilities or arrangements with
third-party manufacturers; • obtaining and maintaining patent and trade secret protection and non-patent exclusivity; • launching commercial sales of our product candidates, if and when approved, whether alone or in collaboration with others;
• acceptance of our product candidates, if and when approved, by patients,
the medical community and third-party payors; • effectively competing with other therapies and treatment options;
• a continued acceptable safety and efficacy profile following approval;
• enforcing and defending intellectual property and proprietary rights and
claims; and
• achieving desirable medicinal properties for the intended indications.
We may never succeed in achieving regulatory approval for any of our product candidates. We may obtain unexpected results from our preclinical studies and clinical trials. We may elect to discontinue, delay or modify clinical trials of some product candidates or focus on others. A change in the outcome of any of these factors could mean a significant change in the costs and timing associated with the development of our current and future preclinical and clinical product candidates. For example, if the FDA or another regulatory authority, were to require us to conduct clinical trials beyond those that we currently anticipate will be required for the completion of clinical development, or if we experience significant delays in execution of or enrollment in any of our preclinical studies or clinical trials, we could be required to expend significant additional financial resources and time on the completion of preclinical and clinical development. We expect our research and development expenses to increase for the foreseeable future as we continue the development of product candidates. General and Administrative Our general and administrative expenses consist primarily of personnel costs, costs related to maintenance and filing of intellectual property, depreciation expense and other expenses for outside professional services, including legal, human resources, audit and accounting services. Personnel costs consist of salaries, benefits and stock-based compensation expense. We expect our general and administrative expenses to increase over the next several years to support our continued research and development activities, manufacturing activities, increased costs of operating as a public company and the potential commercialization of our product candidates. We anticipate our general and administrative costs will increase with respect to the hiring of additional personnel, developing commercial infrastructure, fees to outside consultants, lawyers and accountants, and increased costs associated with being a public company such as expenses related to services associated with maintaining compliance with Nasdaq listing rules andSEC requirements, insurance and investor relations costs.
Other Income
Other income consists of interest earned on our cash equivalents, amortization of bond discount or premium and investment gains and losses realized during the period. 21
--------------------------------------------------------------------------------
Results of Operations for the Three Months ended
The following sets forth our results of operations for the three months endedSeptember 30, 2020 and 2019: Three Months Ended September 30, 2020 2019 Change (in thousands) Statements of Operations Data: Operating expenses: Research and development $ 5,650 $ 3,220$ 2,430 General and administrative 2,766 1,811 955 Total operating expenses 8,416 5,031 3,385 Loss from operations (8,416 ) (5,031 ) (3,385 ) Other income: Interest income 23 381 (358 ) Net loss$ (8,393 ) $ (4,650 ) $ (3,743 ) Research and Development Research and development expenses were$5.7 million for the three months endedSeptember 30, 2020 as compared to$3.2 million for the three months endedSeptember 30, 2019 . The table below summarizes our research and development expenses: Three Months Ended September 30, 2020 2019 Change (in thousands) Sponsored research activities $ 645 $ 733$ (88 ) License of intellectual property and subscription fee 10 267 (257 ) Manufacturing of preclinical and clinical supplies 1,209 262 947 Clinical trials 297 152 145 Personnel 1,857 1,218 639 Development services 1,591 519 1,072 Other 41 69 (28 ) $ 5,650 $ 3,220$ 2,430
Specific changes in our research and development expenses include a:
•$1.0 million net increase in costs under our development services and sponsored research agreements from increased outsourced preclinical research activities and increased purchases of lab supplies;
•
and cell processing capabilities and related activities;
•
employees, including an increase of$0.2 million of stock-based compensation expense;
•
costs of the DesCAARTesTM Trial; and • a$0.3 million decrease in license of intellectual property and
subscription fees due to a non-refundable payment made to Penn under a
Subscription and Technology Transfer Agreement in the third quarter of 2019. General and Administrative General and administrative expenses were$2.8 million for the three months endedSeptember 30, 2020 compared to$1.8 million for the three months endedSeptember 30, 2019 . The increase of$1.0 million in our general and administrative expenses includes:
•
additional employees, including an increase of
compensation expense;
•$0.6 million of increased insurance costs, primarily as a result of being a public company; and 22
--------------------------------------------------------------------------------
• a
consulting and legal costs as the result of transitioning to more
full-time employees.
Other Income
Interest income decreased$0.4 million for the three months endedSeptember 30, 2020 compared to the three months endedSeptember 30, 2019 on a higher balance of cash and cash equivalents and investments, as a result of a significant decrease in interest rates beginning inMarch 2020 .
Results of Operations for the Nine Months ended
The following sets forth our results of operations for the nine months endedSeptember 30, 2020 and 2019: Nine Months Ended September 30, 2020 2019 Change (in thousands)
Statements of Operations Data:
Operating expenses: Research and development $ 15,601 $ 8,645$ 6,956 General and administrative 8,902 4,178 4,724 Total operating expenses 24,503 12,823 11,680 Loss from operations (24,503 ) (12,823 ) (11,680 ) Other income: Interest income 473 1,283 (810 ) Net loss$ (24,030 ) $ (11,540 ) $ (12,490 ) Research and Development Research and development expenses were$15.6 million for the nine months endedSeptember 30, 2020 as compared to$8.6 million for the nine months endedSeptember 30, 2019 . The table below summarizes our research and development expenses: Nine Months Ended September 30, 2020 2019 Change (in thousands) Sponsored research activities $ 2,026 $ 2,199$ (173 ) License of intellectual property and subscription fee 43 275 (232 ) Manufacturing of preclinical and clinical supplies 3,920 1,899 2,021 Clinical trials 840 152 688 Personnel 5,493 2,519 2,974 Development services 3,182 1,471 1,711 Other 97 130 (33 ) $ 15,601 $ 8,645$ 6,956
Specific changes in our research and development expenses include a:
•
employees, including an increase of$0.5 million of stock-based compensation expense;
•
manufacturing;
•$1.5 million net increase in costs under our development services and sponsored research agreements from increased outsourced preclinical research activities and increased purchases of lab supplies;
•
DesCAARTesTM Trial, and • a$0.2 million decrease in license of intellectual property and
subscription fees due to a non-refundable payment made to Penn under a
Subscription and Technology Transfer Agreement in the third quarter of 2019. 23
--------------------------------------------------------------------------------
General and Administrative
General and administrative expenses were$8.9 million for the nine months endedSeptember 30, 2020 compared to$4.2 million for the nine months endedSeptember 30, 2019 . The increase of$4.7 million in our general and administrative expenses includes:
•
additional employees, including an increase of
compensation expense;
•
a public company; and
•
accounting, public relations, recruiting and other consulting fees, primarily as a result of being a public company. Other Income Interest income decreased$0.8 million , to$0.5 million for the nine months endedSeptember 30, 2020 from$1.3 million for the nine months endedSeptember 30, 2019 on a higher balance of cash and cash equivalents and investments, as a result of a significant decrease in interest rates beginning inMarch 2020 .
Liquidity and Capital Resources
Since our inception inApril 2017 throughSeptember 30, 2020 , our operations have been financed by proceeds of$86.4 million from the sale of convertible notes and our convertible preferred stock and proceeds of$71.0 million from the sale of common stock in our initial public offering. As ofSeptember 30, 2020 , we had$118.1 million in cash and cash equivalents and investments. Cash in excess of immediate requirements is invested in accordance with our investment policy, primarily with a view to liquidity and capital preservation. We have incurred losses since our inception and, as ofSeptember 30, 2020 , we had an accumulated deficit of$57.0 million . Our primary use of cash is to fund operating expenses, which consist primarily of research and development expenditures, and to a lesser extent, general and administrative expenditures. Cash used to fund operating expenses is impacted by the timing of when we pay these expenses, as reflected in the change in our outstanding prepaid expenses and other current assets, accounts payable and accrued expenses. Any product candidates we may develop may never achieve commercialization and we anticipate that we will continue to incur losses for the foreseeable future. We expect that our research and development expenses, general and administrative expenses, and capital expenditures will continue to increase. As a result, until such time, if ever, as we can generate substantial product revenue, we expect to finance our cash needs through a combination of equity offerings, debt financings or other capital sources, including potentially collaborations, licenses and other similar arrangements. Our primary uses of capital are, and we expect will continue to be, compensation and related expenses, third-party clinical research, manufacturing and development services, costs relating to the build-out of our headquarters, laboratories and manufacturing facility, license payments or milestone obligations that may arise, laboratory and related supplies, clinical costs, manufacturing costs, legal and other regulatory expenses and general overhead costs. Based upon our current operating plan, we believe that our existing cash and cash equivalents and investments as ofSeptember 30, 2020 will enable us to fund our operating expenses and capital expenditure requirements through at least the third quarter of 2022. We have based this estimate on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we currently expect. We will continue to require additional financing to advance our current product candidates through clinical development, to develop, acquire or in-license other potential product candidates and to fund operations for the foreseeable future. We will continue to seek funds through equity offerings, debt financings or other capital sources, including potentially collaborations, licenses and other similar arrangements. However, we may be unable to raise additional funds or enter into such other arrangements when needed on favorable terms or at all. Market volatility resulting from the COVID-19 pandemic or other factors could also adversely impact our ability to access capital as and when needed. If we do raise additional capital through public or private equity offerings, the ownership interest of our existing stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect our stockholders' rights. If we raise additional capital through debt financing, we may be subject to covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. Any failure to raise capital as and when needed could have a negative impact on our financial condition and on our ability to pursue our business plans and strategies. If we are unable to raise capital, we will need to delay, reduce or terminate planned activities to reduce costs. 24
--------------------------------------------------------------------------------
Because of the numerous risks and uncertainties associated with research, development and commercialization of pharmaceutical products, we are unable to estimate the exact amount of our operating capital requirements. Our future funding requirements will depend on many factors, including, but not limited to:
• the scope, progress, results and costs of researching, developing and manufacturing our lead product candidates or any future product candidates, and conducting preclinical studies and clinical trials;
• the timing of, and the costs involved in, obtaining regulatory approvals
or clearances for our lead product candidates or any future product candidates;
• the impact of any business interruptions to our operations, including the
timing and enrollment of patients in our planned clinical trials, or to
those of our clinical sites, manufacturers, suppliers, or other vendors
resulting from the COVID-19 pandemic or similar public health crisis;
• the number and characteristics of any additional product candidates we
develop or acquire;
• the timing of any cash milestone payments if we successfully achieve
certain predetermined milestones;
• the cost of manufacturing our lead product candidate or any future product
candidates and any products we successfully commercialize, including costs
associated with building-out our manufacturing capabilities;
• our ability to establish and maintain strategic collaborations, licensing
or other arrangements and the financial terms of any such agreements that
we may enter into; • the expenses needed to attract and retain skilled personnel; • the costs associated with being a public company; and
• the timing, receipt and amount of sales of any future approved or cleared
products, if any.
Further, our operating plans may change, and we may need additional funds to meet operational needs and capital requirements for clinical trials and other research and development activities. We currently have no credit facility or committed sources of capital. Because of the numerous risks and uncertainties associated with the development and commercialization of our product candidates, we are unable to estimate the amounts of increased capital outlays and operating expenditures associated with our current and anticipated product development programs. Cash Flows
The following table summarizes our cash flows for the periods indicated:
Nine Months Ended September 30, 2020 2019 (in thousands) Net cash (used in) provided by: Operating activities$ (17,597 ) $ (8,162 ) Investing activities (9,872 ) (420 ) Financing activities (56 ) 46,606
Net (decrease) increase in cash and cash equivalents
$ 38,024 Operating Activities During the nine months endedSeptember 30, 2020 , cash used in operating activities of$17.6 million was attributable to a net loss of$24.0 million , partially offset by non-cash charges of$3.4 million , primarily from stock-based compensation and depreciation expense and a net change of$3.0 million in our net operating assets and liabilities. During the nine months endedSeptember 30, 2019 , cash used in operating activities of$8.2 million was attributable to our net loss of$11.5 million , partially offset by non-cash charges of$1.5 million from stock-based compensation and depreciation expense and a net change of$1.8 million in our net operating assets and liabilities.
Investing Activities
During the nine months endedSeptember 30, 2020 , cash used in investing activities of$9.9 million was attributable to$11.1 million of purchases of available-for-sale investments and$0.4 million of purchases of property and equipment, partially offset by proceeds of$1.6 million from maturities of available-for-sale investments. 25
--------------------------------------------------------------------------------
During the nine months ended
Financing Activities
During the nine months ended
During the nine months ended
Contractual Obligations and Commitments
For a discussion of contractual obligations and other commitments affecting us,
see the discussion under the heading "Management Discussion and Analysis of
Financial Condition and Results of Operations - Contractual obligations and
other commitments" included in our Annual Report on Form 10-K for the year
ended
InMay 2020 , we entered into (i) an amendment to one of our SRAs with Penn, which increased our research commitment by$3.3 million , (ii) an amendment to our License Agreement with Penn and CHOP, which added certain intellectual property relating to an undisclosed disease target, and (iii) an amendment to our CAROT agreement, which increased future expenses by$1.3 million . Otherwise, there have been not been any material changes sinceDecember 31, 2019 to the Company's contractual obligations and other commitments.
Off-Balance Sheet Arrangements
During the period presented, we did not have, nor do we currently have,
any off-balance sheet arrangements as defined under
Critical Accounting Policies and Significant Judgments and Estimates
Aside from the Investments accounting policy described in the notes to our
financial statements, the Critical Accounting Policies and Significant Judgments
and Estimates included in our Annual Report on Form 10-K for the year
ended
Emerging Growth Company Status
We are an emerging growth company, as defined in the JOBS Act. Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies. Section 107 of the JOBS Act provides that an emerging growth company may take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act of 1933 for complying with new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies. Section 107 of the JOBS Act provides that we can elect to opt out of the extended transition period at any time, which election is irrevocable. We have elected to use this extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date we (i) are no longer an emerging growth company or (ii) affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act. As a result, our financial statements may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates. Subject to certain conditions, as an emerging growth company, we may rely on certain other exemptions and reduced reporting requirements, including without limitation (i) providing an auditor's attestation report on our system of internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act and (ii) complying with any requirement that may be adopted by thePublic Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor's report providing additional information about the audit and the consolidated financial statements, known as the auditor discussion and analysis. We will remain an emerging growth company until the earlier of (a) the last day of the fiscal year in which we have total annual gross revenue of$1.07 billion or more; (b) the last day of the fiscal year following the fifth anniversary of the date of the 26
-------------------------------------------------------------------------------- completion of our initial public offering; (c) the date on which we have issued more than$1.0 billion in nonconvertible debt during the previous three years; or (d) the date on which we are deemed to be a large accelerated filer under the rules of theSEC .
Recently Issued Accounting Pronouncements
InFebruary 2016 , theFinancial Accounting Standards Board , or the FASB, issued ASU 2016-02, Leases (Topic 842), with guidance regarding the accounting for and disclosure of leases. The update requires lessees to recognize the liabilities related all leases, including operating leases, with a term greater than 12 months on the balance sheet. This update also requires lessees and lessors to disclose key information about their leasing transactions. This guidance was effective for public companies for annual and interim periods beginning afterDecember 15, 2018 . For all other entities this standard is effective for annual reporting periods beginning afterDecember 15, 2020 , and interim periods within annual periods beginning afterDecember 15, 2021 . Early adoption is permitted. We will adopt Topic 842 for our annual period endingDecember 31, 2021 , and we have yet to evaluate the effect that ASU 2016-02 will have on our financial statements or financial statement disclosures.
© Edgar Online, source