You should read the following discussion and analysis of our financial condition and results of operations together with our audited financial statements and the related notes thereto included elsewhere in this Annual Report on Form 10-K. This discussion and analysis, and other parts of this report, contain forward-looking statements, including, but not limited to, statements related to the potential of our therapeutic programs. Such forward-looking statements involve substantial risks and uncertainties that could cause our research and clinical development programs, future results, performance or achievements to differ significantly from those expressed or implied by the forward-looking statements, including interim results obtained may differ from those at completion of the studies and clinical trials. Such risks and uncertainties include, among others, the uncertainties inherent in the drug development process, including our programs' early stage of development, the process of designing and conducting preclinical and clinical trials, the regulatory approval processes, the timing of regulatory filings, the challenges associated with manufacturing drug products, our ability to successfully establish, protect and defend its intellectual property and other matters that could affect the sufficiency of existing cash to fund operations. Our actual results could differ materially from those discussed in these forward-looking statements. For a further description of the risks and uncertainties that could cause actual results to differ from those expressed in these forward-looking statements, as well as risks relating to our business in general, see the section titled "Risk Factors" included elsewhere in this Annual Report on Form 10-K. These forward-looking statements speak only as of the date hereof. Except as required by law, we assume no obligation to update or revise these forward-looking statements for any reason.
Overview
We discover, develop, manufacture, and deliver next generation cancer and
infectious disease immunotherapy candidates with the aim of improving patient
outcomes and eliminating disease. The immune system sits at the nexus of many
diseases, and manipulation of the immune system has enormous potential to drive
transformational therapeutic and preventative benefits. Our approach seeks to
generate a potent therapeutic or protective immune response by leveraging
insights into the immune system's ability to recognize and destroy diseased
cells and eliminate virally-infected cells. Our programs are built on two key
platforms, the first being our proprietary Gritstone EDGE™ artificial
intelligence platform, which enables us to identify antigens that can be
recognized by the immune system with a high degree of accuracy. The second
platform is our potent, flexible, vaccine platform, which we have engineered to
deliver selected immunogens to the patient's immune system to drive the
destruction of tumors or virally-infected cells. We accomplish this by
leveraging our two proprietary vaccine vectors, self-amplifying mRNA (samRNA)
and chimpanzee adenovirus (
The table below summarizes key information about our clinical-stage pipeline.
Commercial Program Phase Status Indication(s) Collaborator Rights GRANITE 1/2 Enrollment Early stage & NA Gritstone Complete; advanced solid Treatment tumors Ongoing GRANITE 2/3 1Q 2022 MSS-CRC* first line NA Gritstone Initiation maintenance GRANITE 2 1Q 2022 MSS-CRC adjuvant NA Gritstone Initiation SLATE 1/2 Complete p53, KRAS Advanced NA Gritstone Solid Tumors SLATE 2 Enrollment KRASmut NA Gritstone Ongoing; Treatment Ongoing CORAL 1 Enrolling COVID-19 naïve & NIAID, IDCRC Gritstone booster CORAL 1 Enrolling COVID-19 booster NA Gritstone (60+) CORAL 1 1Q 2022 COVID-19 NA Gritstone Initiation immunocompromised CORAL 1 1Q 2022 COVID-19 in South CEPI Gritstone Initiation Africa (naïve, convalescent, HIV+) HIV 1 4Q 2021 IND HIV treatment/cure Gilead Sciences Gilead Cleared
*MSS-CRC = microsatellite stable colorectal cancer
Funding Sources
We have funded our operations to date primarily through private placements of our convertible preferred stock, the sale of our common stock in public offerings and under our "at-the-market" offering program, private placements of our common stock and pre-funded warrants and with proceeds received from our collaboration arrangements. We also have received targeted funding from charitable foundations. We do not expect to generate revenue from any product candidates that we develop until we obtain regulatory
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approval for one or more of such product candidates and commercialize our products or enter into additional collaboration agreements with third parties. Substantially all of our net losses have resulted from costs incurred in connection with our research and development programs and from general and administrative costs associated with our operations. Our programs will require substantial additional development time and resources before we (or our collaboration partners) would be able to apply for or receive regulatory approvals and begin generating revenue from product sales. In addition, we incur substantial costs associated with operating as a public company. We also do not yet have a sales organization or commercial infrastructure and, accordingly, we will incur significant expenses to develop a sales organization or commercial infrastructure in advance of generating any commercial product sales. As a result, we will need substantial additional capital to support our operating activities.
We currently anticipate that we will seek to fund our operations through equity or debt financings or other sources, such as additional collaboration agreements we may enter into with third parties. Adequate funding may not be available to us on acceptable terms, or at all, particularly in light of the current COVID-19 pandemic and associated economic uncertainty and potential local and/or global economic recession. If sufficient funds on acceptable terms are not available when needed, we will be required to significantly reduce our operating expenses and delay, reduce the scope of, or eliminate one or more of our development programs. See "Liquidity and Capital Resources" below and Note 2 to the consolidated financial statements and related notes included elsewhere for additional information.
Manufacturing is a vital component of our platform approach to immunotherapy,
and we have invested significantly in our manufacturing facility, which opened
in
Since we commenced operations in
Following our IPO, in
In
In
On
COVID-19 Update
The COVID-19 pandemic has placed strains on the providers of healthcare services, including the healthcare institutions where we conduct our clinical trials. These strains have resulted in institutions prohibiting the initiation of new clinical trials, slowing or halting enrollment in existing trials and restricting the on-site monitoring of clinical trials. Our operations have not been materially impacted by
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the COVID-19 pandemic. However, we have experienced slowing of patient recruitment and sample collection in our ongoing clinical trials. Additionally, as a result of the COVID-19 pandemic, competition for potential patients in our trials may be further exaggerated as a result of multiple clinical site closures. To date, the COVID-19 pandemic has not materially affected our supply chain or production schedule, but further escalation of the health crisis has the potential to cause delays in our supply chain and manufacturing operations, which could materially adversely impact our business.
We have not experienced any material disruptions in our supply chain necessary to conduct our ongoing clinical trials. In response to the COVID-19 pandemic, we have implemented heightened health and safety measures designed to comply with applicable federal, state and local guidelines. In particular, we transitioned to a flexible work environment, allowing employees who can work from home effectively to do so. We are further supporting all of our employees by leveraging virtual meeting and messaging technology and by encouraging employees to follow local health authority guidance. As the pandemic continues to evolve, we may need to undertake additional actions that could impact our operations if required by applicable laws or regulations or if we determine such actions to be in the best interests of our employees.
Components of Our Operating Results
Collaboration and License, Grant and Contribution Revenue
To date, we have not generated any revenue from product sales and do not expect
to generate any revenue from product sales for the foreseeable future. For the
years ended
In the future, we will continue to recognize revenue from the 2seventy Agreement and the Gilead Collaboration Agreement and may generate revenue from product sales or other collaboration agreements, strategic alliances and licensing arrangements. We expect that our revenue will fluctuate from quarter-to-quarter and year-to-year as a result of the timing and amount of license fees, milestones, reimbursement of costs incurred and other payments and product sales, to the extent that any are successfully commercialized. If we fail to complete the development of our product candidates in a timely manner or obtain regulatory approval for them, our ability to generate future revenue, and our results of operations and financial position, would be materially adversely affected.
Operating Expenses
Research and Development Expenses
Since our inception, we have focused significant resources on our research and development activities, including conducting preclinical studies, manufacturing development efforts and related development activities for our product candidates.
Research and development activities account for a significant portion of our operating expenses. Research and development costs are expensed as incurred. These costs include:
•
External research and development expenses, including:
•
Expenses incurred under arrangements with third parties, including clinical research organizations, or CROs, preclinical testing organizations, CMOs, academic and non-profit institutions and consultants;
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Fees related to our license agreements;
•
Internal research and development expenses, including:
•
Headcount-related expenses, including salaries, payroll taxes, benefits, non-cash stock-based compensation and travel, for employees contributing to research and development activities, including the costs associated with the development of our EDGE™ platform; and
•
Other expenses, which include direct and allocated expenses for laboratories, facilities and other costs.
In 2019, we reimbursed Arbutus for materials and personnel costs totaling
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We expect our research and development expenses to increase substantially in the future as we continue to advance our product candidates into and through clinical studies and pursue regulatory approval. Conducting the necessary clinical studies to obtain regulatory approval is costly and time-consuming, and such clinical studies generally become larger and more costly to conduct as they advance into later stages. The successful development of our product candidates is highly uncertain. The actual probability of success for our product candidates may be affected by a variety of risks and uncertainties associated with drug development, including those set forth in the section entitled "Risk Factors" included in Part II, Section 1A and elsewhere in this report.
The following table summarizes our research and development expenses by program and category (in thousands):
Year Ended December 31, 2021 2020 GRANITE program external expenses$ 11,962 $ 10,875 SLATE program external expenses 3,706 6,747 CORAL program external expenses 4,879 2,067 Other program external research and development expenses 26,362 22,721 Personnel-related expenses (1) 34,138 29,764 Other unallocated research and development expenses 16,443 16,469 Total research and development expenses$ 97,490 $ 88,643
(1) Personnel-related expenses include stock-based compensation expense of
We do not track internal related expenses on a program-by-program basis, because our research and development employees and infrastructure resources are utilized across our development programs.
General and Administrative Expenses
Our general and administrative expenses consist primarily of salaries and
related costs, including payroll taxes, benefits, non-cash stock-based
compensation and travel. Other general and administrative expenses include legal
costs of pursuing patent protection of our intellectual property, and
professional service fees for auditing, tax and general legal services. We
expect our general and administrative expenses to continue to increase in the
future as we expand our operating activities and prepare for potential
commercialization of our current and future product candidates, increase our
headcount and support our operations as a public company, including increased
expenses related to legal, accounting, regulatory and tax-related services
associated with maintaining compliance with requirements of the Nasdaq Global
Select Market and the
Interest Income, Net
Interest income, net, consists primarily of interest income and investment income earned on our cash, cash equivalents and marketable securities.
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Results of Operations
Comparison of the Years Ended
The following table sets forth the significant components of our results of operations (in thousands): Year Ended December 31, 2021 2020 Change Revenues: Collaboration and license revenues$ 46,717 $ 3,462 $ 43,255 Grant revenues 1,497 575 922 Total revenues 48,214 4,037 44,177 Operating expenses: Research and development 97,490 88,643 8,847 General and administrative 25,933 21,411 4,522 Total operating expenses 123,423 110,054 13,369 Loss from operations (75,209 ) (106,017 ) 30,808 Interest income, net 127 703 (576 ) Net loss$ (75,082 ) $ (105,314 ) $ 30,232
Collaboration and License, Grant and Contribution Revenues
Collaboration and licenses revenues were
Research and Development Expenses
Research and development expenses were
General and Administrative Expenses
General and administrative expenses were
Interest Income, Net
Interest income, net was
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Comparison of the Years Ended
The following table sets forth the significant components of our results of operations (in thousands): Year Ended December 31, 2020 2019 Change Revenues: Collaboration and license revenues$ 3,462 $ 4,365 $ (903 ) Grant revenues 575 - 575 Total revenues 4,037 4,365 (328 ) Operating expenses: Research and development 88,643 82,896 5,747 General and administrative 21,411 19,409 2,002 Total operating expenses 110,054 102,305 7,749 Loss from operations (106,017 ) (97,940 ) (8,077 ) Interest income, net 703 3,507 (2,804 ) Net loss$ (105,314 ) $ (94,433 ) $ (10,881 )
Collaboration and License and Contribution Revenues
Collaboration revenue was
Research and Development Expenses
Research and development expenses were
General and Administrative Expenses
General and administrative expenses were
Interest Income, Net
Interest income, net was
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Liquidity and Capital Resources
Sources of Liquidity
From our inception through
In
In
In
In
In
Future Funding Requirements
We do not expect positive cash flows from operations in the foreseeable future. Historically, we have incurred operating losses as a result of ongoing efforts to develop our cancer immunotherapy candidates, including conducting ongoing research and development, clinical and preclinical studies and providing general and administrative support for these operations. We do not have any products approved for sale, and we do not expect to generate any meaningful revenue unless and until we obtain regulatory approval of and commercialize any of our current and future product candidates and/or enter into additional significant collaboration or grant agreements with third parties, and we do not know when, or if, either will occur. We expect to continue to incur net operating losses for at least the next several years and we expect the losses to increase as we advance our CORAL, GRANITE, and SLATE programs, as well as any future product candidates, through clinical development, seek regulatory approval, prepare for and, if approved, proceed to commercialization, continue our research and development efforts and invest in our manufacturing facility. We are subject to all the risks typically related to the development of new product candidates, and we may encounter unforeseen expenses, difficulties, complications, delays and other unknown factors that may adversely affect our business. Moreover, we incur substantial costs associated with operating as a public company. We anticipate that we will need substantial additional funding in connection with our continuing operations.
Until we can generate a sufficient amount of revenue from the commercialization of immunotherapy product candidates or from additional significant collaboration or license agreements with third parties, if ever, we expect to finance our future cash needs through private and public equity offerings, including our ATM Offering Program, debt financings, and potential future collaboration, license and development agreements. Additional capital may not be available on reasonable terms, if at all. If we are unable to raise additional capital in sufficient amounts or on terms acceptable to us, we may have to significantly delay, scale back or discontinue the development or commercialization of one or more of our current or future product candidates. If we raise additional funds by issuing equity or convertible debt securities, it could result in dilution to our existing stockholders and increased fixed payment obligations. In addition, as a condition to providing additional funds to us, future investors may demand, and may be granted, rights superior to those of existing stockholders. If we incur indebtedness, we could become subject to covenants that would restrict our operations and
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potentially impair our competitiveness, such as limitations on our ability to incur additional debt, limitations on our ability to acquire, sell or license intellectual property rights and other operating restrictions that could adversely impact our ability to conduct our business. Additionally, any future collaborations we enter into with third parties may provide capital in the near term, but we may have to relinquish valuable rights to our product candidates or grant licenses on terms that are not favorable to us. Any of the foregoing could significantly harm our business, financial condition and prospects.
Since our inception, we have incurred significant losses and negative cash flows
from operations. We have an accumulated deficit of
•
the scope, progress, results and costs of developing our product candidates, and of conducting preclinical studies and clinical trials, including our clinical trials for GRANITE, SLATE and CORAL;
•
potential delays in our ongoing clinical trials as a result of the COVID-19 pandemic;
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the timing of, and the costs involved in, obtaining regulatory approvals for our oncology and infectious disease immunotherapy product candidates; in particular, any costs incurred in connection with any future regulatory requirements that may be imposed by the FDA or foreign regulatory bodies;
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the number and characteristics of any additional product candidates we develop or acquire;
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the timing and amount of any milestone, royalty or other payments we are required to make pursuant to any current or future collaboration or license agreements;
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the cost of manufacturing our product candidates we successfully commercialize, including the cost of scaling up our internal manufacturing operations;
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the cost of building a sales force in anticipation of product commercialization;
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the cost of commercialization activities, including building a commercial infrastructure, marketing, sales and distribution costs;
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our ability to maintain existing, and establish new, strategic collaborations, licensing or other arrangements and the financial terms of any such agreements, including the timing and amount of any future milestone, royalty or other payments due under any such agreement;
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any product liability or other lawsuits related to our products;
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the costs to attract, hire and retain skilled personnel;
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the costs associated with being a public company;
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the costs involved in preparing, filing, prosecuting, maintaining, defending and enforcing our intellectual property portfolio; and
•
the timing, receipt and amount of sales of any future approved products, if any.
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A change in the outcome of any of these or other variables with respect to the development of any of our current and future product candidates could significantly change the costs and timing associated with the development of that product candidate. Furthermore, our operating plans may change in the future, and we will need additional funds to meet operational needs and capital requirements associated with such operating plans.
Cash Flows
The following table sets forth a summary of the primary sources and uses of cash for each of the periods presented below (in thousands):
Year Ended December 31, 2021 2020 2019 Cash used in operating activities$ (50,678 ) $ (89,102 ) $ (85,011 ) Cash provided by (used in) investing activities (118,553 ) 65,949 15,841 Cash provided by financing activities 108,760 135,801 74,395 Net increase (decrease) in cash and cash equivalents$ (60,471 ) $ 112,648 $ 5,225
Cash Used in Operating Activities
During the year ended
During the year ended
During the year ended
Cash Provided by (Used in) Investing Activities
During the year ended
During the year ended
During the year ended
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Cash Provided by Financing Activities
During the year ended
During the year ended
During the year ended
Off-Balance Sheet Arrangements
We have not entered into any off-balance sheet arrangements, as defined under
Contractual Obligations and Commitments
We lease office, laboratory and storage space in facilities at several locations
in
We are party to license agreements pursuant to which we have in-licensed various
intellectual property rights. The license agreements obligate us to make certain
milestone payments related to achievement of specified events, as well as
royalties in the low-single digits based on sales of licensed products. In
In
In
We enter into contracts in the normal course of business with CROs for clinical trials and CMOs for clinical supply manufacturing and with vendors for preclinical research studies and other services and products for operating purposes, which generally provide for termination within 30 days of notice, and therefore are cancelable contracts and not included in the table above.
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Critical Accounting Policies and Use of Estimates
This discussion and analysis of financial condition and results of operation is
based on our consolidated financial statements, which have been prepared in
accordance with accounting principles generally accepted in
While our significant accounting policies are more fully described in the notes to our financial statements, we believe that the following accounting policies are critical to the process of making significant judgments and estimates in the preparation of our financial statements and understanding and evaluating our reported financial results.
Revenue Recognition
We perform research and development under collaboration, license, grant, and
clinical development agreements. Our revenue primarily consists of collaboration
agreements and grant funding agreements. At contract inception, we analyze a
revenue arrangement to determine the appropriate accounting under
For collaboration agreements, we analyze each agreement to assess whether such arrangements involve joint operating activities performed by parties that are both active participants in the activities and exposed to significant risks and rewards dependent on the commercial success of such activities. This assessment is performed throughout the life of the arrangement based on changes in the responsibilities of all parties in the arrangement. For collaboration arrangements that are considered to be in the scope of the collaboration guidance and that contain multiple elements, we first determine which elements of the collaboration are deemed to be within the scope of the collaboration guidance and those that are more reflective of a vendor-customer relationship and, therefore, within the scope of the revenue with contracts with customer guidance. For elements of collaboration arrangements that are accounted for pursuant to the revenue from contracts with customer guidance, an appropriate recognition method is determined and applied consistently, generally by analogy to the revenue from contracts with customers guidance.
The terms of the collaboration and license agreements entered into typically include payment of one or more of the following: non-refundable, up-front fees; development, regulatory, and commercial milestone payments; payments for manufacturing supply services; and royalties on net sales of licensed products. Each of these payments results in license, collaboration, and other revenues, except for revenues from royalties on net sales of licensed products, which are classified as royalty revenues. The core principle of the accounting for revenue from contracts with customers guidance is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration that is expected to be received in exchange for those goods or services.
In determining the appropriate amount of revenue to be recognized as we fulfill our obligations under each of our agreements, we perform the following steps: (i) identification of the promised goods or services in the contract; (ii) determination of whether the promised goods or services are performance obligations including whether they are distinct in the context of the contract; (iii) measurement of the transaction price, including the constraint on variable consideration; (iv) allocation of the transaction price to the performance obligations based on estimated selling prices; and (v) recognition of revenue when (or as) we satisfy each performance obligation.
Amounts received prior to satisfying the revenue recognition criteria are recorded as deferred revenue in our consolidated balance sheets. If the related performance obligation is expected to be satisfied within the next twelve (12) months this will be classified in current liabilities. Amounts recognized as revenue prior to receipt are recorded as contract assets in our consolidated balance sheets. If we expect to have an unconditional right to receive consideration in the next twelve (12) months, this will be classified in current assets. A net contract asset or liability is presented for each contract with a customer.
At contract inception, we assess the goods or services promised in a contract with a customer and identify those distinct goods and services that represent a performance obligation. A promised good or service may not be identified as a performance obligation if it is immaterial in the context of the contract with the customer, if it is not separately identifiable from other promises in the contract (either because it is not capable of being separated or because it is not separable in the context of the contract), or if the performance obligation does not provide the customer with a material right.
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We consider the terms of the contract and our customary business practices to determine the transaction price. The transaction price is the amount of consideration to which we expect to be entitled in exchange for transferring promised goods or services to a customer. The consideration promised in a contract with a customer may include fixed amounts, variable amounts, or both. Variable consideration will only be included in the transaction price when it is not considered constrained, which is when it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur.
If it is determined that multiple performance obligations exist, the transaction price is allocated at the inception of the agreement to all identified performance obligations based on the relative standalone selling prices. The relative selling price for each deliverable is estimated using objective evidence if it is available. If objective evidence is not available, we use our best estimate of the selling price for the deliverable.
Revenue is recognized when, or as, we satisfy a performance obligation by transferring a promised good or service to a customer. An asset is transferred when, or as, the customer obtains control of that asset, which for a service, is considered to be as the services are received and used. We recognize revenue over time by measuring the progress toward complete satisfaction of the relevant performance obligation using an appropriate input or output method based on the nature of the good or service promised to the customer.
After contract inception, the transaction price is reassessed at every period end and updated for changes such as resolution of uncertain events. Any change in the transaction price is allocated to the performance obligations on the same basis as at contract inception.
Management may be required to exercise considerable judgment in estimating revenue to be recognized. Judgment is required in identifying performance obligations, estimating the transaction price, estimating the stand-alone selling prices of identified performance obligations, which may include forecasted revenue, development timelines, reimbursement rates for personnel costs, discount rates and probabilities of technical and regulatory success, and estimating the progress towards satisfaction of performance obligations.
For grant funding agreements, grant revenue is recognized during the period that the research and development services occur, as qualifying expenses are incurred. We concluded that payments received under these grants represent nonreciprocal contributions, as described in ASC 958, Not-for-Profit Entities, and that the grants are not within the scope of ASC 606 as the organization providing the grant does not meet the definition of a customer. Grant revenue relates primarily to the CEPI Funding Agreement (see Note 7).
Research and Development Expenses
We record research and development expenses to operations as incurred. Research and development expenses represent costs incurred by us for the discovery and development of our product candidates and the development of our technology and include: internal research and development expense, including employee-related expenses (such as salaries, benefits, travel and non-cash stock-based compensation expense); external research and development expenses incurred under arrangements with third parties, such as CROs, preclinical testing organizations, contract manufacturing organizations (CMOs), academic and non-profit institutions and consultants; license fees; other expenses, which include direct and allocated expenses for laboratory, facilities and other costs; and costs incurred related to our collaboration agreements. Costs to develop our technologies are recorded as research and development expense unless the criteria to be capitalized as internal-use software costs is met.
As part of the process of preparing financial statements, we are required to estimate and accrue expenses. We record the estimated expenses of research and development activities conducted by third-party service providers based upon the estimated amount of services provided within research and development expense in the consolidated statements of operations and comprehensive loss. These services include the conduct of clinical and preclinical studies, contract manufacturing activities and consulting services. Payments made prior to the receipt of goods or services to be used in research and development are deferred and recognized as expense in the period in which the related goods are received or services are realized or consumed. If the costs have been prepaid, this expense reduces the prepaid expenses in the consolidated balance sheets, and if not yet invoiced, the costs are included in accrued liabilities in the consolidated balance sheets. These costs are a significant component of our research and development expenses. We record amortization of prepaid expenses or accrued expenses for these costs based on the estimated amount of work completed and in accordance with agreements established with these third parties. Such payments are evaluated for current or long-term classification based on when they will be realized.
Costs for certain research and development activities are recognized based on an evaluation of the progress to completion of specific tasks. We estimate the amount of work completed through discussions with internal personnel and external service providers as to the progress or stage of completion of the services and the agreed-upon fee to be paid for such services. We make judgments and estimates in determining the accrued balance in each reporting period. As actual costs become known, we adjust our accrued estimates. Although we do not expect our estimates to be materially different from amounts actually incurred, our understanding of the status and
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timing of services performed may vary from our estimates and could result in us reporting amounts that are too high or too low in any particular period. Our accrued expenses are dependent, in part, upon the receipt of timely and accurate reporting from external CROs, CMOs, and other third-party service providers. To date, we have not experienced material differences between our accrued expenses and actual expenses.
Leases
We determine whether the arrangement is or contains a lease at the inception of the arrangement and if such a lease is classified as a financing lease or operating lease. Leases with a term greater than one year are recognized on the consolidated balance sheets as right-of-use assets, lease liabilities and, if applicable, long-term lease liabilities. Lease liabilities and their corresponding right-of-use assets are recorded based on the present value of lease payments over the expected lease term. The interest rate implicit in lease contracts is typically not readily determinable. As such, we utilize the appropriate incremental borrowing rate, which is the rate incurred to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment. We derived our incremental borrowing rate by assessing rates in recent market transactions, as adjusted for security interests and our credit quality. Certain adjustments to the right-of-use asset may be required for items such as initial direct costs paid or incentives received and impairment charges if we determine the right-of-use asset is impaired.
JOBS Act
We are an emerging growth company under the Jumpstart Our Business Startups Act of 2012. As an emerging growth company, we may delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have nonetheless irrevocably elected not to avail ourselves of this exemption and, as a result, we will adopt new or revised accounting standards on the relevant dates on which adoption of such standards is required for other public companies.
We will remain an emerging growth company until the earliest of (1)
Recent Accounting Pronouncements
Refer to "Note 2. Summary of Significant Accounting Policies" to our audited financial statements for a discussion of recent accounting pronouncements.
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