ICOSAVAX, INC. The following discussion and analysis and the unaudited interim condensed consolidated financial statements included in this Quarterly Report on Form 10-Q should be read in conjunction with the financial statements and notes thereto for the year endedDecember 31, 2020 and the related Management's Discussion and Analysis of Financial Condition and Results of Operations, both of which are contained in the Prospectus datedJuly 28, 2021 filed pursuant to Rule 424(b) under the Securities Act of 1933, as amended (the Securities Act), with theSecurities and Exchange Commission (SEC) onJuly 30, 2021 (the Prospectus). Forward-Looking Statements This Quarterly Report contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act). All statements other than statements of historical facts contained in this Quarterly Report, including statements regarding our future results of operations and financial position, business strategy, research and development plans, the anticipated timing, costs, design and conduct of our ongoing and planned preclinical studies and clinical trials for our vaccine candidates, the timing and likelihood of regulatory filings and approvals for our vaccine candidates, our ability to commercialize our vaccine candidates, if approved, the impact of COVID-19 on our business, the pricing and reimbursement of our vaccine candidates, if approved, the potential to develop future vaccine candidates, the potential benefits of strategic collaborations and our intent to enter into any strategic arrangements, the timing and likelihood of success, plans and objectives of management for future operations, and future results of anticipated product development efforts, are forward-looking statements. These statements involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. In some cases, you can identify forward-looking statements by terms such as "may," "will," "should," "expect," "plan," "anticipate," "could," "intend," "target," "project," "contemplates," "believes," "estimates," "predicts," "potential" or "continue" or the negative of these terms or other similar expressions. The forward-looking statements in this Quarterly Report are only predictions. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition and results of operations. These forward-looking statements speak only as of the date of this Quarterly Report and are subject to a number of risks, uncertainties and assumptions, including those described in Part II, Item 1A, "Risk Factors" of this Quarterly Report. The events and circumstances reflected in our forward-looking statements may not be achieved or occur and actual results could differ materially from those projected in the forward-looking statements. Moreover, we operate in an evolving environment. New risk factors and uncertainties may emerge from time to time, and it is not possible for management to predict all risk factors and uncertainties. Except as required by applicable law, we do not plan to 21 --------------------------------------------------------------------------------
publicly update or revise any forward-looking statements contained herein, whether as a result of any new information, future events, changed circumstances or otherwise.
Overview We are a biopharmaceutical company leveraging our innovative VLP platform technology to develop vaccines against infectious diseases, with an initial focus on life-threatening respiratory diseases. Our VLP platform technology is designed to enable multivalent, particle-based display of complex viral antigens, which we believe will induce broad, robust, and durable protection against the specific viruses targeted. Our pipeline includes vaccine candidates targeting some of the most prevalent viral causes of pneumonia. We are developing these candidates for older adults, a patient population with high unmet need. Our vaccine candidate IVX-A12 is a bivalent candidate, or a mixture of two different VLP candidates. IVX-A12 combines IVX-121, a vaccine candidate designed to target RSV, and IVX-241, a vaccine candidate designed to target hMPV. There are currently no vaccines approved for either RSV or hMPV, which are two common causes of pneumonia in older adults. We recently initiated a clinical trial of IVX-121 inBelgium , with interim topline data expected in the first half of 2022. Assuming favorable results from the IVX-121 clinical trial and favorable preclinical data for IVX-241, we plan to submit an IND to the FDA in the first half of 2022 and, thereafter, initiate a Phase 1 clinical trial for our combination vaccine candidate, IVX-A12. Additionally, we are developing two SARS-CoV-2 vaccine candidates, IVX-411 and IVX-421, and initiated a Phase 1/2 clinical trial of IVX-411 inAustralia inJune 2021 , with proof-of-concept data expected in the first half of 2022. Part 1 of this trial, in adults who have neither had COVID-19 nor been vaccinated with a licensed COVID-19 vaccine, has completed dosing, and Part 2 of this trial, in adults who have previously completed a vaccine regimen using a licensed COVID-19 vaccine, has now been initiated. We commenced our operations in 2017 and have devoted substantially all of our resources to date to organizing and staffing our company, business planning, raising capital, in-licensing intellectual property rights, developing vaccine candidates, scaling up manufacturing of vaccine candidates, and preparing for our ongoing and planned preclinical studies and clinical trials. Our operations to date have been funded primarily through the sale and issuance of convertible promissory notes and our convertible preferred stock. From our inception throughJune 30, 2021 , we had raised a total of$150.3 million to fund our operations, comprised of gross proceeds from the sale and issuance of convertible promissory notes and our convertible preferred stock. As ofJune 30, 2021 , we had cash of$110.6 million and restricted cash of$1.2 million . InAugust 2021 , we completed our initial public offering (IPO) with the sale of 13,953,332 shares of common stock, which included the exercise in full by the underwriters of their option to purchase 1,819,999 additional shares, at an IPO price of$15.00 per share and received net proceeds of approximately$190.6 million . We have incurred significant operating losses since inception. Our net loss for the six months endedJune 30, 2021 , was$14.4 million . As ofJune 30, 2021 , we had an accumulated deficit of$41.5 million . Our net losses may fluctuate significantly from quarter-to-quarter and year-to-year, depending on the timing of our clinical development activities, other research and development activities and capital expenditures. We expect to continue to incur significant expenses and increasing operating losses for the foreseeable future. We anticipate our expenses will increase substantially as we seek to advance our vaccine candidates through preclinical and clinical development, expand our research and development activities, develop new vaccine candidates, complete clinical trials, seek regulatory approval and, if we receive regulatory approval, commercialize our products, as well as hire additional personnel, protect our intellectual property and incur costs associated with being a public company. Based on our current operating plan, we believe that our existing cash and restricted cash will be sufficient to fund our operations through at least 2024. We have never generated any revenue from product sales and do not expect to generate any revenues from product sales unless and until we successfully complete development of and obtain regulatory approval for our vaccine candidates, which will not be for several years, if ever. As a result, we will need substantial additional funding to support our continuing operations and pursue our growth strategy. Until such time as we can generate significant revenue from sales of our vaccine candidates, if ever, we expect to finance our cash needs through equity offerings, or debt financings or other capital sources, including potential collaborations, licenses, and other similar arrangements. However, we may not be able to raise additional funds or enter into such other arrangements when needed or on favorable terms, or at all. If we are unable to raise additional capital or enter into such arrangements when needed, we could be forced to delay, limit, reduce or terminate our research and development programs or future commercialization efforts, or grant rights to develop and market our vaccine candidates to third parties where we might otherwise prefer to develop and market such vaccine candidates ourselves.
COVID-19
The global COVID-19 pandemic continues to evolve, and we will continue to
monitor the COVID-19 situation closely. The extent of the impact of the COVID-19
pandemic on our business, operations and clinical development timelines and
plans remains uncertain, and will depend on certain developments, including its
impact on our clinical trial enrollment, trial sites, manufacturers, contract
research organizations (CROs) and other third parties with whom we do business,
as well as its impact on regulatory authorities and our key scientific and
management personnel. The ultimate impact of the COVID-19 pandemic, including
the impact of new variants of the virus that causes COVID-19, or a similar
health epidemic is highly uncertain and subject to change. To the extent
possible, and consistent with applicable guidance from federal, state and local
authorities, we are conducting business as usual,
22
--------------------------------------------------------------------------------
with necessary or advisable modifications to employee travel. We will continue
to actively monitor the evolving situation related to COVID-19 and may take
further actions that alter our operations, including those that may be required
by federal, state or local authorities, or that we determine are in the best
interests of our employees and other third parties with whom we do business. At
this point, the extent to which the COVID-19 pandemic may affect our business,
operations and development timelines and plans, including the resulting impact
on our expenditures and capital needs, remains uncertain and is subject to
change.
Components of Results of Operations
Grant Revenue
To date, we have not generated any revenues from the commercial sale of approved products, and we do not expect to generate revenues from the commercial sale of our vaccine candidates for at least the foreseeable future, if ever. For the three and six months endedJune 30, 2021 , revenue was derived from ourSeptember 2020 grant agreement (the Grant Agreement) with theBill & Melinda Gates Foundation (BMGF), pursuant to which BMGF awarded a grant totaling up to$10.0 million , in support of our development of a SARS-CoV-2 vaccine. We have received the full$10.0 million under the Grant Agreement. Unless terminated earlier by BMGF, the Grant Agreement will continue in effect untilMarch 31, 2022 . We do not currently expect future grant revenues to be a material source of funding. No revenue was recognized for the three and six months endedJune 30, 2020 .
Operating Expenses
Research and Development
Research and development expenses consist primarily of external and internal costs related to the development of vaccine candidates. Research and development expenses are recognized as incurred and payments made prior to the receipt of goods or services to be used in research and development are capitalized until the goods or services are received.
External costs include:
?
expenses incurred in connection with outsourced research and preclinical
studies;
?
expenses incurred in connection with conducting clinical trials and site
payments for time and pass-through expenses and expenses incurred under
agreements with CROs, other vendors, or service providers engaged to conduct our
trials;
?
expenses incurred in connection with manufacturing of our vaccine candidates and
related intermediates under agreements with contract development and
manufacturing organizations or other service providers;
?
the cost of consultants engaged in research and development related services and
the cost to manufacture vaccine candidates for use in our preclinical studies
and clinical trials;
?
costs related to regulatory compliance; and
?
the cost of annual license fees and milestone payments under our license
agreements.
Internal costs include:
?
employee-related expenses, including salaries, related benefits, travel and
stock-based compensation expenses for employees engaged in research and
development functions;
?
facilities, depreciation and other expenses, which include allocated expenses
for rent and maintenance of facilities, insurance, laboratory consumables and
supplies.
Research and development activities are central to our business model. There are
numerous factors associated with the successful development and regulatory
approval of any of our vaccine candidates, including future trial design and
various regulatory requirements, as well as the safety and efficacy of our
vaccine candidates, which cannot be determined with accuracy at this time. We
may never succeed in obtaining regulatory approval for any of our vaccine
candidates. Vaccine candidates in later stages of clinical development generally
have higher development costs than those in earlier stages of clinical
development, primarily due to the increased size and duration of later-stage
clinical trials. At this time, we cannot reasonably estimate or know the nature,
timing and costs of the efforts that will be necessary to complete the
preclinical and clinical development of any of our vaccine candidates. In
addition, we cannot forecast which vaccine candidates may be subject to future
collaborations, when such arrangements will be secured, if at all, and to what
degree such arrangements would affect our development plans and capital
requirements. However, we expect that our research and development expenses will
increase substantially in connection with our planned preclinical and clinical
development activities in the near term and in the future.
23
--------------------------------------------------------------------------------Our future development costs may vary significantly based on factors such as:
? the number and scope of preclinical and regulatory filing-enabling studies; ? the number of trials required for approval; ? the number of sites included in the trials; ? the countries in which the trials are conducted; ? the length of time required to enroll eligible subjects; ? the number of subjects that participate in the trials; ? the number of doses evaluated in the trials; ? the costs and timing of manufacturing our vaccine candidates; ? the drop-out or discontinuation rates of clinical trial subjects; ? potential additional safety monitoring requested by regulatory agencies; ? the duration of subject participation in the trials and follow-up; ? the phase of development of the vaccine candidate; ? the impact of any interruptions to our operations or to those of the third parties with whom we work due to the ongoing COVID-19 pandemic; and ? the efficacy and safety profile of the vaccine candidate.
General and Administrative
General and administrative expenses consist of personnel-related costs, including salaries, payroll taxes, employee benefits, and stock-based compensation charges for personnel in executive, finance and other administrative functions. Other significant costs include facility-related costs, legal fees relating to intellectual property and corporate matters, professional fees for accounting and consulting services, and insurance costs. We anticipate that our general and administrative expenses will increase substantially for the foreseeable future to support our continued research and development activities, pre-commercial preparation activities for our vaccine candidates, and, if any vaccine candidate receives marketing approval, commercialization activities. We also anticipate increased expenses related to audit, legal, regulatory, and tax-related services associated with maintaining compliance with exchange listing andSEC requirements, director and officer insurance premiums, and investor relations costs associated with operating as a public company.
Change in Fair Value of Derivative Liability
We issued a convertible promissory note inAugust 2020 . We bifurcated certain embedded features that were required to be accounted for separately as a single derivative liability. The initial recognition of the fair value of the derivative resulted in a reduction to the carrying value of the convertible promissory note, a discount which is then amortized to interest expense over the term of the note. We adjusted the carrying value of the derivative liability to its estimated fair value at each reporting date, with any related changes in fair value recorded as change in fair value of derivative liability in our statements of operations and comprehensive loss. The convertible promissory note converted into 2,805,850 shares of our Series B-2 convertible preferred stock inMarch 2021 . Prior to the conversion of the convertible promissory note into our Series B-2 convertible preferred stock inMarch 2021 , the fair value of the derivative liability was estimated using a scenario-based analysis comparing the probability-weighted present value of the convertible promissory note payoff at maturity with and without the bifurcated features, considering possible outcomes available to the noteholders, including various financing dissolution scenarios.
Loss on Extinguishment of Convertible Promissory Note
We recorded a loss on extinguishment of convertible promissory note of$0.8 million during the three and six months endedJune 30, 2021 in connection with the conversion of our convertible promissory note issued inAugust 2020 . See Note 8 to the unaudited interim condensed financial statements included elsewhere in this Quarterly Report for more information on this transaction.
Interest and Other Income (Expense)
Interest income consists of interest income earned on interest bearing demand accounts.
24
--------------------------------------------------------------------------------
Interest expense consisted of interest on our outstanding convertible promissory
note at a per annum interest rate of 6.0% and non-cash interest expense related
to discount amortization prior to its conversion into shares of our Series B-2
convertible preferred stock in March 2021 .
Results of Operations
Comparison of the Three and Six Months Ended
The following table summarizes our results of operations for the three and six
months ended
Three Months Ended Six Months Ended
June 30, June 30,
2021 2020 Change 2021 2020 Change
Grant revenue 1,904 $ - $ 1,904 $ 3,905 $ - $ 3,905
Operating expenses:
Research and development 8,277 4,666 3,611 13,830 7,586 6,244
General and administrative 2,221 541 1,680 3,312 1,153 2,159
Total operating expenses 10,498 5,207 5,291 17,142 8,739 8,403
Loss from operations (8,594 ) (5,207 ) (3,387 ) (13,237 ) (8,739 ) (4,498 )
Other income (expense)
Change in fair value of embedded
derivative liability - - - (205 ) - (205 )
Loss on extinguishment of
convertible promissory note - - - (754 ) - (754 )
Interest and other income
(expense) 42 9 33
(207 ) 70 (277 )
Net loss and comprehensive loss
Grant Revenue We recognized$1.9 million in grant revenue for the three months endedJune 30, 2021 compared to$0 for the three months endedJune 30, 2020 . We recognized$3.9 million in grant revenue for the six months endedJune 30, 2021 , compared to$0 for the six months endedJune 30, 2020 . For the three and six months endedJune 30, 2021 , revenue was derived from the Grant Agreement we entered into inSeptember 2020 with BMGF, under which we were awarded a grant totaling up to$10.0 million , in support of our development of a SARS-CoV-2 vaccine.
Research and Development Expenses
Research and development expenses were$8.3 million for the three months endedJune 30, 2021 , compared to$4.7 million for the three months endedJune 30, 2020 . The increase of$3.6 million was primarily due to a$2.3 million increase in direct costs related to clinical development and manufacturing, a$0.5 million increase in personnel related expenses due to increased headcount to support our development activities, a$0.4 million increase in direct costs related to non-clinical development and manufacturing, and a$0.4 million increase related to stock-based compensation expense. For the six months endedJune 30, 2021 , research and development expenses were$13.8 million compared to$7.6 million for the same period in 2020. The increase of$6.2 million was primarily due to a$4.2 million increase in direct costs related to clinical development and manufacturing, a$0.8 million increase in personnel related expenses due to increased headcount to support our development activities, a$0.7 million increase in direct costs related to non-clinical development and manufacturing, and a$0.5 million increase related to stock-based compensation expense.
We track outsourced development, outsourced personnel costs and other external research and development costs of specific programs. We do not track our internal research and development costs on a program-by-program basis.
25
--------------------------------------------------------------------------------
Research and development expenses are summarized by program in the table below
(in thousands):
Three Months Ended Six Months Ended
June 30, June 30,
2021 2020 2021 2020
IVX-121 $ 1,174 $ 3,772 $ 3,352 $ 5,864
IVX-241 1,880 13 2,319 13
IVX-411 3,450 4 5,442 4
Unallocated research and development expense 1,773 877 2,717 1,705
Total research and development expense $ 8,277 $ 4,666 $ 13,830 $ 7,586 General and Administrative Expenses
General and administrative expenses were$2.2 million for the three months endedJune 30, 2021 , compared to$0.5 million for the three months endedJune 30, 2020 . The increase of$1.7 million consisted of increased stock-based compensation expense of$0.9 million , increased professional services including legal fees of$0.4 million , and increased personnel-related expenses of$0.3 million . General and administrative expenses were$3.3 million for the six months endedJune 30, 2021 , compared to$1.2 million for the six months endedJune 30, 2020 . The increase of$2.1 million consisted of increased stock-based compensation expense of$1.1 million , increased professional services including legal fees of$0.6 million , and increased personnel-related expenses of$0.4 million .
Other Income (Expense)
Other income (expense) was expense of$1.2 million for the six months endedJune 30, 2021 , compared to income of$0.1 million for the six months endedJune 30, 2020 . The increase of$1.1 million in expense for the six months endedJune 30, 2021 was the result of a loss on extinguishment of convertible promissory note of$0.8 million , an increase in interest expense of$0.2 million , and an increase in expense recognized on the change in fair value of derivative liability of$0.2 million .
Liquidity and Capital Resources
We have incurred significant operating losses since our inception and anticipate we will continue to incur significant operating losses for the foreseeable future as we continue to develop our current and future vaccine candidates and may never become profitable. As ofJune 30, 2021 , we had been financed primarily through net proceeds of approximately$149.5 million from the sale of our equity securities and convertible promissory notes. As ofJune 30, 2021 , we had cash of$110.6 million , restricted cash of$1.2 million and an accumulated deficit of$41.5 million . InAugust 2021 , we completed our IPO with the sale of 13,953,332 shares of common stock, which included the exercise in full by the underwriters of their option to purchase 1,819,999 additional shares, at an IPO price of$15.00 per share and received net proceeds of approximately$190.6 million . Additionally, inJuly 2021 , we received the final$3.3 million in restricted cash awarded under the Grant Agreement.
Funding Requirements
Based on our current operating plan we believe that our existing cash and restricted cash will be sufficient to meet our anticipated operating expenses and capital expenditures through at least 2024. However, our forecast of the period of time through which our financial resources will be adequate to support our operations is a forward-looking statement that involves risks and uncertainties, and actual results could vary materially. We have based this estimate on assumptions that may prove to be wrong, and we could deplete our capital resources sooner than we expect. Additionally, the process of testing vaccine candidates in clinical trials is costly, and the timing of progress and expenses in these trials is uncertain.
Our future capital requirements will depend on many factors, including:
?
the initiation, type, number, scope, results, costs and timing of, our ongoing
and planned clinical trials and preclinical studies or clinical trials of other
potential vaccine candidates we may choose to pursue in the future, including
feedback received from regulatory authorities;
?
the costs and timing of manufacturing for current or future vaccine candidates,
including commercial scale manufacturing if any vaccine candidate is approved;
?
the costs, timing and outcome of regulatory review of current or future vaccine
candidates;
?
any delays and cost increases that may result from the COVID-19 pandemic;
?
the costs of obtaining, maintaining and enforcing our patents and other
intellectual property rights;
26
-------------------------------------------------------------------------------- ? our efforts to enhance operational systems and hire additional personnel to satisfy our obligations as a public company, including enhanced internal controls over financial reporting; ? the costs associated with hiring additional personnel and consultants as our business grows, including additional executive officers and clinical development personnel; ? the terms and timing of establishing and maintaining collaborations, licenses and other similar arrangements; ? the timing and amount of the milestone or other payments we must make to current and future licensors; ? the costs and timing of establishing or securing sales and marketing capabilities if a current or future vaccine candidate is approved; ? our ability to achieve sufficient market acceptance, coverage and adequate reimbursement from third-party payors and adequate market share and revenue for any approved products; ? patients' willingness to pay out-of-pocket for any approved products in the absence of coverage and/or adequate reimbursement from third-party payors; and ? costs associated with any products or technologies that we may in-license or acquire.
Our existing cash and restricted cash, will not be sufficient to complete development of IVX-A12, IVX-411, IVX-421 or any other vaccine candidate. Accordingly, we will be required to obtain further funding to achieve our business objectives.
Until such time, if ever, as we can generate substantial product revenues to support our cost structure, we expect to finance our cash needs through equity offerings, debt financings or other capital sources, including potential 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. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of our stockholders could be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our common stockholders. Debt financing and equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we raise funds through collaborations, or other similar arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or vaccine candidates or grant licenses on terms that may not be favorable to us and/or may reduce the value of our common stock. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market our vaccine candidates to third parties where we might otherwise prefer to develop and market such vaccine candidates ourselves.
Cash Flows
The following table sets forth a summary of the net cash flow activity for each of the periods set forth below (in thousands):
Six Months Ended
June 30,
2021 2020
(Unaudited)
Net cash (used in) provided by
Operating activities $ (16,178 ) $ (8,083 )
Investing activities (568 ) -
Financing activities 113,012 66
Net change in cash and restricted cash
Operating Activities We have incurred significant operating losses since inception. Net cash used in operating activities for the six months endedJune 30, 2021 was$16.2 million , consisting primarily of our net loss incurred during the period of$14.4 million adjusted for$4.7 million for net changes in operating assets and liabilities, and$2.9 million of non-cash charges. Non-cash charges consisted primarily of$1.7 million in stock-based compensation expense,$0.8 million loss on extinguishment of convertible promissory note,$0.2 million non-cash interest expense, and$0.2 million of non-cash expense recognized related to the change in fair value of the derivative liability. The net change in operating assets and liabilities consisted of a$3.5 million decrease in prepaids and other current assets and a$1.2 million decrease in deferred revenue. 27 -------------------------------------------------------------------------------- Net cash used in operating activities for the six months endedJune 30, 2020 was$8.1 million , consisting primarily of our net loss incurred during the period of$8.7 million adjusted for net changes in operating assets and liabilities of$0.5 million , and non-cash charges of$0.1 million . Non-cash charges consisted of a decrease in accounts payable and accrued other current liabilities of$0.9 million offset by changes in operating assets consisted of a decrease in prepaid and other current assets of$0.4 million and stock-based compensation of$0.1 million . Investing Activities Net cash used in investing activities for the six months endedJune 30, 2021 and 2020 was$0.6 million and less than$0.1 million , respectively, and related to purchases of property and equipment.
Financing Activities
Net cash provided by financing activities for the six months endedJune 30, 2021 was$113.0 million consisting of$21.0 million in proceeds related to the issuance of Series A-1 convertible preferred stock inFebruary 2021 ,$92.6 million in proceeds related to the issuance of Series B-1 convertible preferred stock inMarch 2021 ,$0.1 million proceeds from exercises of stock options, including early exercises, offset by the payment of$0.7 million in deferred offering costs.
Net cash provided by financing activities for the six months ended
Contractual Obligations and Commitments
We had no contractual obligations and commitments as of
Under our license agreements, we have milestone payment obligations that are contingent upon the achievement of specified development, regulatory, and commercial sales milestones and are required to make certain royalty payments in connection with the sale of products developed under the agreements. As ofJune 30, 2021 andDecember 31, 2020 , we are unable to estimate the timing or likelihood of achieving the milestones or making future product sales and, therefore, any related payments are not reflected as contractual obligations herein. See the descriptions of these agreements provided above and in the section of the Prospectus titled "Business-Material Agreements" for additional information on these license agreements. We enter into contracts in the normal course of business for contract research services, contract manufacturing services, professional services and other services and products for operating purposes. These contracts generally provide for termination after a notice period, and, therefore, are cancelable contracts and not included as contractual obligations herein.
Critical Accounting Policies and Significant Judgments and Estimates
Our financial statements are prepared in accordance with generally accepted accounting principles inthe United States (GAAP). The preparation of our financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, costs, and expenses and the disclosure of contingent assets and liabilities in our financial statements and accompanying notes. We base our estimates and assumptions on historical experience and other factors that we believe to be reasonable under the circumstances. We evaluate our estimates and judgments on an ongoing basis. We base our estimates on historical experience, known trends and events, and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Our actual results may differ materially from these estimates under different assumptions or conditions. There have been no significant changes in our critical accounting policies for the year endedDecember 31, 2020 discussed in the Prospectus.
Applicability of JOBS Act and Smaller Reporting Company Rules
As an emerging growth company under the Jumpstart Our Business Startups Act of 2012 (JOBS Act), we can take advantage of an extended transition period for complying with new or revised accounting standards. This allows an emerging growth company to delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to avail ourselves of this exemption from new or revised accounting standards and, therefore, will not be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies. We intend to rely on other exemptions provided by the JOBS Act, including without limitation, not being required to comply with the auditor attestation requirements of Section 404(b) of Sarbanes-Oxley. 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. We will remain an emerging growth company until the earliest of (i) the last day of the fiscal year following the fifth anniversary of the consummation of our IPO, (ii) the last day of the fiscal year in which we have total annual gross revenue of at least$1.07 billion , (iii) the last day of the fiscal year in which we are deemed to be a "large accelerated filer" as defined in Rule 12b-2 28
-------------------------------------------------------------------------------- under the Exchange Act, which would occur if the market value of our common stock held by non-affiliates exceeded$700.0 million as of the last business day of the second fiscal quarter of such year, or (iv) the date on which we have issued more than$1.0 billion in non-convertible debt securities during the prior three-year period. We are also a smaller reporting company as defined in the Exchange Act. We may continue to be a smaller reporting company even after we are no longer an emerging growth company. We may take advantage of certain of the scaled disclosures available to smaller reporting companies and will be able to take advantage of these scaled disclosures for so long as our voting and non-voting common stock held by non-affiliates is less than$250.0 million measured on the last business day of our second fiscal quarter, or our annual revenue is less than$100.0 million during the most recently completed fiscal year and our voting and non-voting common stock held by non-affiliates is less than$700.0 million measured on the last business day of our second fiscal quarter.
Recent Accounting Pronouncements
See Note 2 to our unaudited interim condensed financial statements included for discussion of recent accounting pronouncements, if any.
Off-Balance Sheet Arrangements
During the periods presented we did not have, nor do we currently have, any
off-balance sheet arrangements as defined under
© Edgar Online, source
