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OFFON

PLIANT THERAPEUTICS, INC.

(PLRX)
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PLIANT THERAPEUTICS : Management's Discussion and Analysis of Financial Condition and Results of Operations. (form 10-Q)

08/09/2021 | 04:24pm EST
The following discussion and analysis should be read in conjunction with our
condensed financial statements and related notes appearing elsewhere in this
Report, as well as our audited financial statements and related notes included
in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020,
filed with the SEC. This discussion and analysis contains forward-looking
statements based upon current beliefs, plans and expectations that involve
risks, uncertainties and assumptions, such as statements regarding our plans,
objectives, expectations, intention, beliefs and projections. Our actual results
and the timing of events could differ materially from those anticipated in or
implied by these forward-looking statements as a result of several factors,
including those set forth in the section titled "Risk Factors" under Part II,
Item 1A of this Report and under Part I, Item 1A of our Annual Report on Form
10-K for the fiscal year ended December 31, 2020. In some cases, you can
identify forward-looking statements by terminology such as "anticipate,"
"believe," "continue," "could," "estimate," "expect," "intend," "may," "plan,"
"potentially," "predict," "should," "will" or the negative of these terms or
other similar expressions.
In addition, statements that "we believe" and similar statements reflect our
beliefs and opinions on the relevant subject. These statements are based upon
information available to us as of the date of this Report, and while we believe
such information forms a reasonable basis for such statements, such information
may be limited or incomplete, and our statements should not be read to indicate
we have conducted exhaustive inquiry into, or review of, all potentially
available relevant information. These statements are inherently uncertain and
investors are cautioned not to unduly rely upon these statements.
                                    Overview
We are a clinical stage biopharmaceutical company focused on discovering and
developing novel therapies for the treatment of fibrosis and related diseases.
Our initial focus is on treating fibrosis by inhibiting integrin-mediated
activation of TGF-ß. We have applied our deep understanding of fibrosis biology,
along with our medicinal chemistry and translational medicine expertise to
develop a set of proprietary tools designed to discover and de-risk product
candidates quickly and efficiently. Our wholly owned lead product candidate,
PLN-74809, is an oral, small-molecule, dual selective inhibitor of ?v?6 and ?v?1
integrins that we are developing for the treatment of idiopathic pulmonary
fibrosis, or IPF, and primary sclerosing cholangitis, or PSC. We have completed
a Phase 1a SAD/MAD trial and a Phase 1b proof-of-mechanism trial of PLN-74809 in
IPF and are currently recruiting three Phase 2a trials in our lead indications:
two in IPF and one in PSC.
Our second product candidate, PLN-1474, is a small-molecule selective inhibitor
of ?v?1 for the treatment of liver fibrosis associated with nonalcoholic
steatohepatitis, or NASH, which we have partnered with Novartis. PLN-1474
successfully completed a Phase 1 SAD/MAD trial in March 2021, and the
Investigational New Drug, or IND, application was transferred to Novartis in the
first quarter of 2021. Novartis is responsible for all PLN-1474 development,
manufacturing and commercialization activities after the initial development
period.
In addition to our clinical programs, we currently have preclinical
integrin-based programs targeting oncology and muscular dystrophies.
Second Quarter and Recent Highlights
•Single ascending dose (SAD) cohorts up to 640mg and multiple ascending dose
(MAD) cohorts up to 320mg completed in extended Phase 1a dose escalation trial
of PLN-74809 in healthy volunteers. PLN-74809 has completed dosing of additional
SAD cohorts of up to 640 mg and MAD cohorts of up to 320 mg once daily dose in
an extended dose escalation trial. The pharmacokinetic profile remains generally
dose proportional with PLN-74809 continuing to be generally well tolerated, with
no severe adverse events or serious adverse events reported.
•Enrollment on track for PLN-74809 Phase 2a trial in idiopathic pulmonary
fibrosis (IPF). INTEGRIS-IPF is a 12-week randomized, dose-ranging,
double-blind, placebo-controlled trial evaluating the safety, tolerability, and
pharmacokinetics of PLN-74809 in IPF patients. This trial is evaluating
exploratory endpoints including quantitative lung fibrosis score, or QLF,
imaging as well as pulmonary function tests. Enrollment is currently on track to
be completed by the end of 2021.
•Enrollment on track for PLN-74809 Phase 2a trial in primary sclerosing
cholangitis (PSC). INTEGRIS-PSC is a 12-week randomized, dose-ranging,
double-blind, placebo-controlled trial evaluating the safety, tolerability, and
pharmacokinetics of PLN-74809 in PSC patients. The
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trial is evaluating exploratory endpoints including fibrosis biomarkers such as
Pro-C3 and ELF, changes in ALP, and liver imaging. Enrollment is currently on
track to be completed in the first half of 2022.
•Image analysis from PLN-74809 Phase 2a positron emission tomography (PET) trial
underway, including addition of a 320 mg cohort, with preliminary data
anticipated upon completion of the analysis. This open-label, dose ranging trial
is evaluating target receptor occupancy levels of PLN-74809 in the lungs of IPF
patients across ascending single-dose cohorts, utilizing a PET tracer of the
integrin ?v?6. The Company recently amended the protocol to increase the maximum
dose to 320 mg. In the second quarter, the first patients were dosed in this
cohort.

•Preclinical stage integrin-based programs continue to progress. The Company's
early-stage programs targeting oncology and muscular dystrophies continue to
advance toward the clinic. The oncology program is focused on increasing tumor
checkpoint sensitivity through small molecule inhibition of ?v?8. The muscular
dystrophy program is focused on improving muscle function through activation of
an integrin compensatory mechanism with a monoclonal antibody.

•Resources redeployed in support of ongoing PLN-74809 Phase 2a trials in IPF and
PSC. Despite the rise of recently identified COVID-19 variants, the broad
availability of vaccines, as well as the increased and successful measures taken
over the past nine months to contain the virus have resulted in a dramatic
decrease in the number of severe and critical COVID-19 patients with acute
respiratory distress syndrome (ARDS). Given the declining number of addressable
patients, the Company has discontinued enrollment in the PLN-74809 Phase 2a
COVID-19-related ARDS trial allowing for resources to be directed toward our
lead indications.

Since inception, we have had significant operating losses. Our net loss was
$22.8 million and $45.7 million for the three and six months ended June 30,
2021. As of June 30, 2021, we had an accumulated deficit of $163.5 million and
cash, cash equivalents and short-term investments of $244.0 million. We expect
to continue to incur net losses for the foreseeable future, and we expect our
research and development expenses, general and administrative expenses, and
capital expenditures will increase in connection with our ongoing activities, as
we:
•perform research and development activities to identify and develop product
candidates;
•advance product candidates into and through clinical development;
•require the manufacture of supplies to support research and development,
preclinical studies and clinical trials;
•seek regulatory approvals for any product candidates that successfully complete
clinical trials;
•expand our operational, financial and management systems and increase personnel
to support our clinical development, manufacturing and commercialization efforts
and our operations as a public company;
•maintain, expand and protect our intellectual property portfolio; and
•invest in or in-license other technologies or product candidates.
COVID-19 Pandemic
In March 2020, the World Health Organization declared the outbreak of a novel
coronavirus, or COVID-19, as a pandemic, which, to date, continues to spread
throughout the United States and worldwide. We have been, and in the future
could be, materially and adversely affected by the risks, or the public
perception of the risks, related to an epidemic, pandemic, outbreak, or other
public health crisis, such as the outbreak of COVID-19. While difficult to
predict or quantify the overall impact to our operations, among other things,
our clinical trials have experienced delays, and may experience additional
delays in the future, extending the timelines and increasing the overall costs
to finish the clinical trials, as our fixed costs are not substantially reduced
while the clinical trials are delayed. For example, the clinical site conducting
our Phase 2a PET trial of PLN-74809 in IPF was closed to clinical research in
March 2020, but resumed enrollment and trial activities in the third quarter of
2020. The ultimate extent of the impact of any epidemic, pandemic, outbreak, or
other public health crisis on our business,
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financial condition and results of operations will depend on future
developments, which are highly uncertain and cannot be predicted, including new
information that may emerge concerning the severity of such epidemic, pandemic,
outbreak, or other public health crisis and actions taken to contain or prevent
the further spread, among others. Accordingly, we cannot predict the extent to
which our business, financial condition and results of operations have been and
will be affected. We remain focused on maintaining a strong balance sheet,
liquidity and financial flexibility and continue to monitor developments as we
deal with the disruptions and uncertainties from a business and financial
perspective relating to COVID-19.

                            Components of Operations

Revenue

We have not generated any revenue from product sales and do not expect to do so
in the near future. Our revenue to date is derived from a Collaboration and
License Agreement with Novartis, or the "Novartis Agreement," that was executed
in 2019. Our revenue from Novartis is included under the caption "Revenue -
related party" because Novartis had aggregate holdings of our outstanding common
stock of greater than 5% upon the close of our IPO. As of June 30, 2021 and
December 31, 2020, Novartis owned approximately 6.0% and 6.1%, respectively, of
our outstanding shares of common stock on a fully diluted basis.
The Novartis Agreement is for the development and commercialization of PLN-1474
and up to three additional integrin research targets. Under the terms of the
Novartis Agreement, we received an upfront license fee payment of $50.0 million
for the worldwide, exclusive license to PLN-1474 and an additional $25.0 million
upon first patient dosed in our Phase 1 trial of PLN-1474 in the first quarter
of 2020. We are eligible to receive additional milestone payments of up to
$391.0 million in total, if defined developmental, regulatory and
commercialization milestones are achieved, and tiered royalties on a
product-by-product basis based on annual nets sales of products. Additionally,
Novartis is providing up to $19.6 million and up to $13.4 million in funding for
the initial research and development activities associated with PLN-1474 and
integrin research targets, respectively.
Operating Expenses
Research and Development
Our research and development expenses consist of expenses incurred in connection
with the development of our product candidates. Research and development
expenses include:
•employee-related expenses, which include salaries, benefits and stock-based
compensation for our research and development personnel;
•expenses incurred under agreements with third-party contract organizations for
pre-clinical studies, clinical trials and consultants that conduct research and
development activities on our behalf;
•costs associated with the manufacture of supplies to support research and
development, preclinical studies and clinical trials;
•depreciation of laboratory equipment and costs of equipment and supplies;
•costs associated with technology and intellectual property licenses; and
•facilities and other allocated expenses, which include expenses for rent and
other facility related costs and other supplies.
General and Administrative
Our general and administrative expenses consist primarily of salaries, benefits
and stock-based compensation for our general and administrative personnel,
allocated facilities costs, insurance and other expenses for outside
professional services, including legal, marketing, investor relations, human
resource and accounting services.
Interest and Other Income (Expense), net
Our interest and other income (expense), net consists of interest income earned
on cash and cash equivalents, money market funds and short-term investments,
realized gains and losses on investments and foreign exchange transactions.
                                       25
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                         Financial Operations Overview

Comparison of the three months ended June 30, 2021 and 2020 (in thousands)

                                                                 Three months ended June 30,
                                                                   2021                  2020             $ Change
Revenue-related party                                        $        1,789          $   3,600          $  (1,811)
Operating expenses:
Research and development                                            (19,218)           (17,536)            (1,682)
General and administrative                                           (5,475)            (3,040)            (2,435)
Total operating expenses                                            (24,693)           (20,576)            (4,117)
Loss from operations                                                (22,904)           (16,976)            (5,928)
Interest and other income (expense), net                                 73                (25)                98
Net loss                                                     $      (22,831)         $ (17,001)         $  (5,830)



Revenue-Related Party
Revenue-related party was $1.8 million for the three months ended June 30, 2021
compared to $3.6 million for the three months ended June 30, 2020. The decrease
of $1.8 million is primarily attributable to development work associated with
the Phase 1 clinical trial of PLN-1474 in healthy volunteers which had completed
prior to the second quarter of 2021.
Research and Development Expenses
The following table summarizes our research and development expenses for the
three months ended June 30, 2021 and 2020 (in thousands):
                                                                Three months ended June 30,
                                                                  2021                  2020             $ Change
Employee-related expenses                                   $        4,810 

$ 3,418 $ 1,392 Outside and consulting services for preclinical studies and research and development activities by third party contract organizations

                                                        3,536              2,090               1,446
Clinical trials expenses                                             8,085              7,420                 665

Depreciation of lab equipment and costs of equipment and supplies

                                                             1,411              1,006                 405
Technology and intellectual property licenses                            5              2,429              (2,424)
Facilities and other allocated expenses                              1,371              1,173                 198
Total research and development expenses                     $       19,218  

$ 17,536 $ 1,682



Research and development expenses for the three months ended June 30, 2021 was
$19.2 million compared to $17.5 million for the three months ended June 30,
2020. The increase of $1.7 million is primarily attributable to employee related
expenses, driven by headcount, salaries and stock-based compensation expense,
and an increase in clinical trial expenses largely due to underlying clinical
conduct associated with our Phase 2 trials for PLN 74809. The increases were
partially offset by a decrease in expenses related to intellectual property
rights as we expensed a $2.4 million milestone payment due to the University of
California upon the close of our IPO associated with certain patents and
technology relating to ?vß1.
We do not allocate our costs by product candidates or by preclinical programs as
these are in early stages of clinical trials or development, and our internal
expenses are not allocated between product candidates and programs. Although
external third-party costs are allocable between product candidates and
programs, we do not perform this allocation. We expect our research and
development expenses to increase for the foreseeable future as we continue to
invest in research and development activities related to developing our product
candidates and our preclinical programs and as they advance into later stages of
development.
General and Administrative Expenses
General and administrative expenses for the three months ended June 30, 2021 was
$5.5 million compared to $3.0 million for the three months ended June 30, 2020.
The increase of $2.4 million is primarily attributable to employee related
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expenses, driven by salaries and stock-based compensation expense, and increased
costs associated with our operating as a public company, for example, insurance
premiums and accounting and audit expenses.
We expect our general and administrative expenses to increase for the
foreseeable future as we continue to build our administrative function to
support our growth in operations and to meet the requirements of operating as a
public company, particularly as we expect to cease being an emerging growth
company on December 31, 2021.
Interest and Other Income (Expense), net
Interest and other income (expense), net for the three months ended June 30,
2021 was $73,000 compared to a net expense of $25,000 for the three months ended
June 30, 2020. The increase of $98,000 resulted from higher interest income in
the current period owing to larger investment balances following the increase in
cash, cash equivalents and short-term investments resulting from our IPO.

Comparison of the six months ended June 30, 2021 and 2020 (in thousands)

                                            Six Months Ended June 30,
                                                2021                 2020        $ Change
     Revenue-related party            $        3,963              $ 32,538      $ (28,575)
     Operating expenses:
     Research and development                (37,745)              (31,455)        (6,290)
     General and administrative              (12,041)               (7,051)        (4,990)
     Total operating expenses                (49,786)              (38,506)       (11,280)
     Loss from operations                    (45,823)               (5,968)       (39,855)
     Interest and other income, net              136                    (4)           140
     Net loss                         $      (45,687)             $ (5,972)     $ (39,715)



Revenue-Related Party
Revenue-related party was $4.0 million for the six months ended June 30, 2021
compared to $32.5 million for the six months ended June 30, 2020. The decrease
of $28.6 million is primarily attributable to a $25.0 million milestone achieved
in the first quarter of 2020 for first-patient-first-dose in our Phase 1
clinical trial of PLN-1474 in healthy volunteers.
Research and Development Expenses
The following table summarizes our research and development expenses for the six
months ended June 30, 2021 and 2020 (in thousands):
                                                                 Six Months 

Ended June 30,

                                                                  2021                 2020             $ Change
Employee-related expenses                                   $      10,313   

$ 6,669 $ 3,644 Outside and consulting services for preclinical studies and research and development activities by third party contract organizations

                                                       6,227              7,085                (858)
Clinical trials expenses                                           15,344             10,935               4,409

Depreciation of lab equipment and costs of equipment and supplies

                                                            3,021              2,197                 824
Technology and intellectual property licenses                          20              2,436              (2,416)
Facilities and other allocated expenses                             2,820              2,133                 687
Total research and development expenses                     $      37,745   

$ 31,455 $ 6,290



Research and development expenses for the six months ended June 30, 2021 was
$37.7 million compared to $31.5 million for the six months ended June 30, 2020.
The increase of $6.3 million is primarily attributable to employee related
expenses, driven by headcount, salaries and stock-based compensation expense,
and an increase in clinical trial expenses largely due to underlying clinical
conduct associated with our Phase 2 trials for PLN 74809. The increases were
partially offset by a decrease in expenses related to intellectual property
rights as we expensed a $2.4 million milestone payment due to the University of
California upon the close of our IPO associated with certain patents and
technology relating to ?vß1.
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We do not allocate our costs by product candidates or by preclinical programs as
these are in early stages of clinical trials or development, and our internal
expenses are not allocated between product candidates and programs. Although
external third-party costs are allocable between product candidates and
programs, we do not perform this allocation. We expect our research and
development expenses to increase for the foreseeable future as we continue to
invest in research and development activities related to developing our product
candidates and our preclinical programs and as they advance into later stages of
development.
General and Administrative Expenses
General and administrative expenses for the six months ended June 30, 2021 was
$12.0 million compared to $7.1 million for the six months ended June 30, 2020.
The increase of $5.0 million is primarily attributable to employee related
expenses, driven by salaries and stock-based compensation expense, and increased
costs associated with our operating as a public company, for example, insurance
premiums and accounting and audit expenses.
We expect our general and administrative expenses to increase for the
foreseeable future as we continue to build our administrative function to
support our growth in operations and to meet the requirements of operating as a
public company, particularly as we expect to cease being an emerging growth
company on December 31, 2021.
Interest and Other Income (Expense), net
Interest and other income (expense), net for the six months ended June 30, 2021
was $136,000 compared to a net expense of $4,000 for the six months ended June
30, 2020. The increase of $140,000 resulted from higher interest income in the
current period owing to larger investment balances following the increase in
cash, cash equivalents and short-term investments resulting from our IPO.
Liquidity and Capital Resources
Overview
As of June 30, 2021, we had $244.0 million of cash, cash equivalents and
short-term investments. Our short-term investments consist of U.S. Treasury
securities, U.S. Government agency securities and highly rated, investment-grade
corporate debt securities. Subsequent to period end, we established an
"at-the-market" facility for the sale of up to $150.0 million worth of shares of
common stock from time to time by entering into a controlled offering equity
sales agreement with Cantor Fitzgerald & Co., as sales agent. We have not issued
any shares pursuant to any at-the-market offerings but may do so at a future
date. Based on our current operating plan, we anticipate that the aggregate of
our current cash, cash equivalents and short-term investments will be sufficient
to fund our planned operations, commitments and contractual obligations for a
period of at least one year following the date of this Report and into 2023.
However, our future capital requirements and the period for which our existing
resources will support our operations may vary significantly from what we
expect, and we will in any event require additional capital in order to complete
clinical development of any of our current programs.
Our operations have been financed primarily through the issuance and sale of
convertible preferred stock, our collaboration with Novartis and issuance of
common stock via our IPO. We completed our IPO in June 2020 and received $148.3
million, net of underwriting discounts, commissions and offering expenses.
Concurrent with the completion of the IPO, we also issued 625,000 shares of our
common stock to Novartis for proceeds of $10.0 million.
Funding Requirements
Our primary use of cash is to fund operating expenses, primarily research and
development 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 accounts payable, accrued expenses and prepaid expenses.
Our future funding requirements will depend on many factors, including the
following:
•the initiation, progress, timing, costs and results of preclinical studies and
clinical trials for our product candidates;
•the clinical development plans we establish for these product candidates;
•the timelines of our clinical trials and the overall costs to conduct and
complete the clinical trials, which may be impacted by the COVID-19 pandemic;
•the number and characteristics of product candidates that we develop;
•the outcome, timing and cost of meeting regulatory requirements established by
the U.S. Food and Drug Administration, or FDA, and other comparable foreign
regulatory authorities;
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•whether we enter into any collaboration agreements and the terms of any such
agreements;
•the cost of filing, prosecuting, defending and enforcing our patent claims and
other intellectual property rights;
•the cost of defending intellectual property disputes, including patent
infringement actions brought by third parties against us or our product
candidates;
•the effect of competing technological and market developments;
•the cost and timing of completion of commercial-scale outsourced manufacturing
activities;
•the cost of establishing sales, marketing and distribution capabilities for any
product candidates for which we may receive regulatory approval in regions where
we choose to commercialize our products on our own; and
•the cost of operating as a public company.
Further, our operating plan may change, and we may need additional funds to meet
operational needs and capital requirements for clinical trials and other
research and development expenditures. If we need to raise additional capital to
fund our operations, funding may not be available to us on acceptable terms, or
at all. If we are unable to obtain adequate financing when needed, we may have
to delay, reduce the scope of or suspend one or more of our preclinical studies,
clinical trials, research and development programs or commercialization efforts.
We may seek to raise any necessary additional capital through a combination of
public or private equity offerings, debt financings, collaborations and other
licensing arrangements. 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. If we raise additional capital through marketing and
distribution arrangements or other collaborations, strategic alliances or
licensing arrangements with third parties, we may have to relinquish certain
valuable rights to our product candidates, technologies, future revenue streams
or research programs or grant licenses on terms that may not be favorable to us.
Cash Flows
Comparison of the six months ended June 30, 2021 and 2020
The following summarizes our cash flows for the periods indicated (in
thousands):
                                                                       Six Months Ended June 30,               $ Change
                                                                       2021                  2020
Net cash used in operating activities                            $      (33,068)         $   (4,994)            (28,074)
Net cash provided by/(used in) investing activities                      15,816            (117,692)            133,508
Net cash provided by financing activities                                 1,562             215,340            (213,778)
Net (decrease)/increase in cash and cash equivalents             $      

(15,690) $ 92,654 $ (108,344)



Cash Used in Operating Activities
Net cash used in operating activities increased by $28.1 million to
$33.1 million for the six months ended June 30, 2021 compared to the same period
in 2020. The change over prior year is primarily attributable to an increase in
operating expenses of approximately $12 million during the current year and less
revenues owing to the achievement, and receipt, of a $25.0 million milestone in
the first quarter of 2020 associated with the PLN-1474 collaboration with
Novartis.
Cash Provided by/Used in Investing Activities
Net cash provided by investing activities increased by $133.5 million to
$15.8 million for the six months ended June 30, 2021 compared to the same period
in 2020. The difference is due to maturities within the investment portfolio
exceeding current period purchases, while the six months ended 2020 saw
significantly greater purchases relative to maturities as the second quarter of
2020 included our initial investment of financing cash flows associated with the
IPO and private placement offering with Novartis.
Cash Provided by Financing Activities
Net cash provided by financing activities decreased by $213.8 million to $1.6
million for the six months ended June 30, 2021 compared to the same period in
2020. The decrease is attributable to proceeds from the IPO, private placement
                                       29
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and Series C preferred stock being received in 2020 whereas the only financing
activity during 2021 was derived from the exercise of stock options.
Contractual Obligations and Other Commitments
There have been no material changes to our contractual obligations and other
commitments as of June 30, 2021, as compared to those disclosed in our Annual
Report on Form 10-K for the fiscal year ended December 31, 2020.
Off-Balance Sheet Arrangements
During the periods presented, we did not have, nor do we currently have,
any off-balance sheet arrangements or holdings in any variable interest
entities.
Critical Accounting Polices and Estimates
Our management's discussion and analysis of our financial condition and results
of operations is based on our financial statements, which have been prepared in
accordance with U.S. GAAP. The preparation of these financial statements
requires us to make estimates and assumptions that affect the reported amounts
of assets and liabilities and the disclosure of contingent assets and
liabilities at the date of the financial statements, as well as the reported
expenses incurred during the reporting periods. Our estimates are based on our
historical experience 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 value of assets and liabilities that are not
readily apparent from other sources. Actual results may differ from these
estimates under different assumptions or conditions.
There have been no material changes to our critical accounting policies and
estimates from those described in "Part II, Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operations" included in our
Annual Report on Form 10-K for the fiscal year ended December 31, 2020 filed
with the SEC.
Recent Accounting Pronouncements
See Note 2 to our condensed financial statements appearing elsewhere in this
Report for more information.
Emerging Growth Company Status and JOBS Act Accounting Election
We are currently 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. We have elected to
avail ourselves of this exemption and adopt ASU No. 2016-02 (Topic 842), Leases
when the standard is effective for private companies which is for fiscal years
beginning after December 15, 2021. 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.
In addition, we intend to rely on the other exemptions and reduced reporting
requirements provided by the JOBS Act for the duration that we remain as an
"emerging growth company". Subject to certain conditions set forth in the JOBS
Act, if as an "emerging growth company" we intend to rely on such exemptions, we
are not required to, among other things, (i) provide an auditor's attestation
report on our system of internal controls over financial reporting pursuant to
Section 404(b) of the Sarbanes-Oxley Act of 2002, (ii) provide all of the
compensation disclosure that may be required of non-emerging growth public
companies under the Dodd-Frank Wall Street Reform and Consumer Protection Act,
(iii) comply with any requirement that may be adopted by the Public 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 financial statements (auditor discussion and analysis) and
(iv) disclose certain executive compensation-related items such as the
correlation between executive compensation and performance and comparisons of
the Chief Executive Officer's compensation to median employee compensation.
These exemptions will apply until we no longer meet the requirements of being an
emerging growth company. We will remain an emerging growth company until the
earliest of (i) December 31, 2025; (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 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.
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Based on the market value of our common stock held by our non-affiliates as of
June 30, 2021, we currently expect to be deemed a "large accelerated filer" on
December 31, 2021 and thus lose our status as an emerging growth company as of
such date.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
The primary objectives of our investment activities are to ensure liquidity and
to preserve capital. We are exposed to market risks in the ordinary course of
our business. These risks primarily include interest rate sensitivities. We had
cash, cash equivalents and short-term investments of $244.0 million as of
June 30, 2021 which consisted of bank deposits, highly liquid money market funds
and short-term investments in U.S. treasury securities, U.S. government agency
securities and corporate debt securities. Historical fluctuations in interest
rates have not been significant for us. We had no outstanding debt as of
June 30, 2021. Due to the short-term maturities of our cash equivalents and
short-term investments, an immediate 100 basis point change in interest rates
would not have a material effect on the fair market value of our cash
equivalents or short-term investments. To minimize the risk, we maintain our
portfolio of cash equivalents and short-term investments in institutional market
funds that are composed of U.S. Treasury and U.S. Treasury-backed repurchase
agreements or short-term U.S. Treasury securities, U.S. government agency
securities and corporate debt securities. We do not believe that inflation,
interest rate changes, or exchange rate fluctuations had a significant impact on
our results of operations for any periods presented herein.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
As of June 30, 2021, our management, with the participation of our Chief
Executive Officer and Chief Financial Officer, performed an evaluation of the
effectiveness of the design and operation of our disclosure controls and
procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act.
Our disclosure controls and procedures are designed to ensure that information
required to be disclosed by us in the reports we file or submit under the
Exchange Act is recorded, processed, summarized and reported within the time
periods specified in the SEC's rules and forms, and that such information is
accumulated and communicated to our management, including our Chief Executive
Officer and Chief Financial Officer, to allow timely decisions regarding
required disclosures.
Any controls and procedures, no matter how well designed and operated, can
provide only reasonable assurance of achieving the desired control objective and
management necessarily applies its judgment in evaluating the cost-benefit
relationship of possible controls and procedures. Based on this evaluation, our
Chief Executive Officer and Chief Financial Officer concluded that, as of
June 30, 2021, the design and operation of our disclosure controls and
procedures were effective at a reasonable assurance level.
Changes in Internal Control over Financial Reporting
There was no change in our internal controls over financial reporting identified
in connection with the evaluation required by Rule 13a-15(d) and 15d-15(d) under
the Exchange Act that occurred during the quarter ended June 30, 2021 that has
materially affected, or is reasonably likely to materially affect, our internal
control over financial reporting. We considered our internal controls over
financial reporting in regards to the impact of COVID-19 and concluded that our
controls continue to operate in a remote environment without material effect on
our internal controls over financial reporting.

© Edgar Online, source Glimpses

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