kura-10q_20190930.htm

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

(Mark One)

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

For the Quarterly Period Ended September 30, 2019

or

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

For the Transition Period From ________ To ________

Commission file number: 001-37620

 

KURA ONCOLOGY, INC.

(Exact name of registrant as specified in its charter)

 

 

Delaware

 

61-1547851

(State or Other Jurisdiction of
Incorporation or Organization)

 

(I.R.S. Employer
Identification No.)

 

 

 

3033 Science Park Road, Suite 220, San Diego, CA

 

92121

(Address of Principal Executive Offices)

 

(Zip Code)

(858) 500-8800

(Registrant’s Telephone Number, Including Area Code)

 

 

 

(Former Name, Former Address or Former Fiscal Year If Changed Since Last Report)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading Symbol(s)

 

Name of each exchange on which registered

Common Stock, par value $0.0001 per share

 

KURA

 

The Nasdaq Global Select Market

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

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

Accelerated filer

 

 

 

 

Non-accelerated filer

 

Smaller reporting company

 

 

 

 

 

 

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  

As of the close of business on November 1, 2019, the registrant had 45,314,684 shares of Common Stock ($0.0001 par value) outstanding.


 

 

 

KURA ONCOLOGY, INC.

TABLE OF CONTENTS

 

PART I. FINANCIAL INFORMATION

 

 

 

 

 

Item 1. Financial Statements

 

 

 

 

 

Condensed Balance Sheets − As of September 30, 2019 (unaudited) and December 31, 2018

1

 

 

 

 

Condensed Statements of Operations and Comprehensive Loss – Three and Nine Months Ended September 30, 2019 and 2018 (unaudited)

2

 

 

 

 

Condensed Statements of Stockholders’ Equity – Three and Nine Months Ended September 30, 2019 and 2018 (unaudited)

3

 

 

 

 

Condensed Statements of Cash Flows – Nine Months Ended September 30, 2019 and 2018 (unaudited)

5

 

 

 

 

Notes to Condensed Financial Statements (unaudited)

6

 

 

 

 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

14

 

 

 

 

Item 3. Quantitative and Qualitative Disclosures about Market Risk

21

 

 

 

 

Item 4. Controls and Procedures

21

 

 

PART II. OTHER INFORMATION

 

 

 

 

 

Item 1. Legal Proceedings

23

 

 

 

 

Item 1A. Risk Factors

23

 

 

 

 

Item 6. Exhibits

57

 

 

Signatures

58

 

 

 

 


PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

KURA ONCOLOGY, INC.

Condensed Balance Sheets

(In thousands, except par value data) 

 

 

 

 

September 30,

2019

 

 

December 31,

2018 (1)

 

 

 

(Unaudited)

 

 

 

 

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

54,742

 

 

$

16,119

 

Short-term investments

 

 

195,384

 

 

 

162,866

 

Accounts receivable, related party

 

 

47

 

 

 

224

 

Prepaid expenses and other current assets

 

 

2,775

 

 

 

1,988

 

Total current assets

 

 

252,948

 

 

 

181,197

 

Other long-term assets

 

 

1,517

 

 

 

1,166

 

Other long-term assets, related party

 

 

137

 

 

 

16

 

Total assets

 

$

254,602

 

 

$

182,379

 

 

 

 

 

 

 

 

 

 

Liabilities and Stockholders' Equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable and accrued expenses

 

$

12,865

 

 

$

13,385

 

Accounts payable and accrued expenses, related party

 

 

247

 

 

 

230

 

Total current liabilities

 

 

13,112

 

 

 

13,615

 

Long-term debt, net

 

 

7,500

 

 

 

7,500

 

Other long-term liabilities

 

 

406

 

 

 

279

 

Total liabilities

 

 

21,018

 

 

 

21,394

 

Stockholders' equity:

 

 

 

 

 

 

 

 

Preferred stock, $0.0001 par value; 10,000 shares authorized; no shares

     issued and outstanding

 

 

 

 

 

 

Common stock, $0.0001 par value; 200,000 shares authorized;

     45,297 and 38,148 shares issued and outstanding as of

     September 30, 2019 and December 31, 2018, respectively

 

 

5

 

 

 

4

 

Additional paid-in capital

 

 

428,259

 

 

 

310,849

 

Accumulated other comprehensive income (loss)

 

 

332

 

 

 

(131

)

Accumulated deficit

 

 

(195,012

)

 

 

(149,737

)

Total stockholders' equity

 

 

233,584

 

 

 

160,985

 

Total liabilities and stockholders' equity

 

$

254,602

 

 

$

182,379

 

(1)

The balance sheet data at December 31, 2018 has been derived from audited financial statements at that date. It does not include, however, all of the information and notes required by U.S. generally accepted accounting principles for complete financial statements.

See accompanying notes to unaudited condensed financial statements.

 

1


KURA ONCOLOGY, INC.

Condensed Statements of Operations and Comprehensive Loss

(In thousands, except per share data)

(Unaudited)

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Operating Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

$

12,407

 

 

$

11,480

 

 

$

34,078

 

 

$

33,846

 

Research and development, related party

 

 

133

 

 

 

181

 

 

 

284

 

 

 

857

 

General and administrative

 

 

5,047

 

 

 

4,251

 

 

 

13,892

 

 

 

11,353

 

General and administrative, related party

 

 

87

 

 

 

70

 

 

 

262

 

 

 

193

 

Total operating expenses

 

 

17,674

 

 

 

15,982

 

 

 

48,516

 

 

 

46,249

 

Other Income (Expense):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Management fee income, related party

 

 

31

 

 

 

180

 

 

 

231

 

 

 

555

 

Interest income

 

 

1,396

 

 

 

1,047

 

 

 

3,448

 

 

 

2,121

 

Interest expense

 

 

(145

)

 

 

(252

)

 

 

(438

)

 

 

(777

)

Total other income

 

 

1,282

 

 

 

975

 

 

 

3,241

 

 

 

1,899

 

Net Loss

 

$

(16,392

)

 

$

(15,007

)

 

$

(45,275

)

 

$

(44,350

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss per share, basic and diluted

 

$

(0.36

)

 

$

(0.40

)

 

$

(1.11

)

 

$

(1.30

)

Weighted average number of shares used in

     computing net loss per share,

     basic and diluted

 

 

45,241

 

 

 

37,789

 

 

 

40,805

 

 

 

34,218

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Comprehensive Loss:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

$

(16,392

)

 

$

(15,007

)

 

$

(45,275

)

 

$

(44,350

)

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized gain (loss) on marketable securities

 

 

171

 

 

 

(30

)

 

 

463

 

 

 

(74

)

Comprehensive Loss

 

$

(16,221

)

 

$

(15,037

)

 

$

(44,812

)

 

$

(44,424

)

 

 See accompanying notes to unaudited condensed financial statements.

 

 

 

2


KURA ONCOLOGY, INC.

Condensed Statements of Stockholders’ Equity

(In thousands)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

Other

 

 

 

 

 

 

Total

 

 

Common Stock

 

 

Paid-In

 

 

Comprehensive

 

 

Accumulated

 

 

Stockholders'

 

 

Shares

 

 

Par Value

 

 

Capital

 

 

Income (Loss)

 

 

Deficit

 

 

Equity

 

Balance at December 31, 2018

 

38,148

 

 

$

4

 

 

$

310,849

 

 

$

(131

)

 

$

(149,737

)

 

$

160,985

 

Issuance of common stock, net of offering costs

 

6,785

 

 

 

1

 

 

 

108,108

 

 

 

 

 

 

 

 

 

108,109

 

Share-based compensation expense

 

 

 

 

 

 

 

6,970

 

 

 

 

 

 

 

 

 

6,970

 

Issuance of common stock from exercise of options

     and employee stock purchase plan

 

364

 

 

 

 

 

 

2,332

 

 

 

 

 

 

 

 

 

2,332

 

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

463

 

 

 

 

 

 

463

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

(45,275

)

 

 

(45,275

)

Balance at September 30, 2019

 

45,297

 

 

$

5

 

 

$

428,259

 

 

$

332

 

 

$

(195,012

)

 

$

233,584

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

Other

 

 

 

 

 

 

Total

 

 

Common Stock

 

 

Paid-In

 

 

Comprehensive

 

 

Accumulated

 

 

Stockholders'

 

 

Shares

 

 

Par Value

 

 

Capital

 

 

Income (Loss)

 

 

Deficit

 

 

Equity

 

Balance at June 30, 2019

 

45,189

 

 

$

5

 

 

$

425,035

 

 

$

161

 

 

$

(178,620

)

 

$

246,581

 

Share-based compensation expense

 

 

 

 

 

 

 

2,452

 

 

 

 

 

 

 

 

 

2,452

 

Issuance of common stock from exercise of options

 

108

 

 

 

 

 

 

772

 

 

 

 

 

 

 

 

 

772

 

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

171

 

 

 

 

 

 

171

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

(16,392

)

 

 

(16,392

)

Balance at September 30, 2019

 

45,297

 

 

$

5

 

 

$

428,259

 

 

$

332

 

 

$

(195,012

)

 

$

233,584

 

See accompanying notes to unaudited condensed financial statements.

3


KURA ONCOLOGY, INC.

Condensed Statements of Stockholders’ Equity

(In thousands)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

Other

 

 

 

 

 

 

Total

 

 

Common Stock

 

 

Paid-In

 

 

Comprehensive

 

 

Accumulated

 

 

Stockholders'

 

 

Shares

 

 

Par Value

 

 

Capital

 

 

Income (Loss)

 

 

Deficit

 

 

Equity

 

Balance at December 31, 2017

 

29,424

 

 

$

3

 

 

$

169,201

 

 

$

(49

)

 

$

(89,290

)

 

$

79,865

 

Issuance of common stock, net of offering costs

 

7,737

 

 

 

1

 

 

 

131,898

 

 

 

 

 

 

 

 

 

131,899

 

Share-based compensation expense

 

 

 

 

 

 

 

6,938

 

 

 

 

 

 

 

 

 

6,938

 

Restricted stock awards vested

 

790

 

 

 

 

 

 

2

 

 

 

 

 

 

 

 

 

2

 

Issuance of common stock from exercise of options

 

63

 

 

 

 

 

 

327

 

 

 

 

 

 

 

 

 

327

 

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

(74

)

 

 

 

 

 

(74

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

(44,350

)

 

 

(44,350

)

Balance at September 30, 2018

 

38,014

 

 

$

4

 

 

$

308,366

 

 

$

(123

)

 

$

(133,640

)

 

$

174,607

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

Other

 

 

 

 

 

 

Total

 

 

Common Stock

 

 

Paid-In

 

 

Comprehensive

 

 

Accumulated

 

 

Stockholders'

 

 

Shares

 

 

Par Value

 

 

Capital

 

 

Income (Loss)

 

 

Deficit

 

 

Equity

 

Balance at June 30, 2018

 

33,173

 

 

$

3

 

 

$

231,120

 

 

$

(93

)

 

$

(118,633

)

 

$

112,397

 

Issuance of common stock, net of offering costs

 

4,600

 

 

 

1

 

 

 

74,520

 

 

 

 

 

 

 

 

 

74,521

 

Share-based compensation expense

 

 

 

 

 

 

 

2,523

 

 

 

 

 

 

 

 

 

2,523

 

Restricted stock awards vested

 

200

 

 

 

 

 

 

1

 

 

 

 

 

 

 

 

 

1

 

Issuance of common stock from exercise of options

 

41

 

 

 

 

 

 

202

 

 

 

 

 

 

 

 

 

202

 

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

(30

)

 

 

 

 

 

(30

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

(15,007

)

 

 

(15,007

)

Balance at September 30, 2018

 

38,014

 

 

$

4

 

 

$

308,366

 

 

$

(123

)

 

$

(133,640

)

 

$

174,607

 

See accompanying notes to unaudited condensed financial statements.

 

 

 

 

4


KURA ONCOLOGY, INC.

Condensed Statements of Cash Flows

(In thousands)

(Unaudited)

 

 

 

Nine Months Ended

 

 

 

September 30,

 

 

 

2019

 

 

2018

 

Operating Activities

 

 

 

 

 

 

 

 

Net loss

 

$

(45,275

)

 

$

(44,350

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

 

 

Share-based compensation expense

 

 

6,970

 

 

 

6,938

 

Non-cash interest expense

 

 

 

 

 

167

 

Depreciation expense

 

 

 

 

 

10

 

Amortization of premium and accretion of discount on marketable securities, net

 

 

(987

)

 

 

(1,299

)

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable, related party

 

 

193

 

 

 

(16

)

Prepaid expenses and other current assets

 

 

(538

)

 

 

(1,282

)

Other long-term assets

 

 

(250

)

 

 

(355

)

Other long-term assets, related party

 

 

163

 

 

 

 

Accounts payable and accrued expenses

 

 

(948

)

 

 

1,537

 

Accounts payable and accrued expenses, related party

 

 

(282

)

 

 

38

 

Other long-term liabilities

 

 

127

 

 

 

168

 

Net cash used in operating activities

 

 

(40,827

)

 

 

(38,444

)

 

 

 

 

 

 

 

 

 

Investing Activities

 

 

 

 

 

 

 

 

Purchases of marketable securities

 

 

(196,824

)

 

 

(203,461

)

Maturities and sales of marketable securities

 

 

165,756

 

 

 

119,543

 

Net cash used in investing activities

 

 

(31,068

)

 

 

(83,918

)

 

 

 

 

 

 

 

 

 

Financing Activities

 

 

 

 

 

 

 

 

Proceeds from issuance of common stock, net

 

 

108,186

 

 

 

132,170

 

Proceeds from exercise of stock options

     and purchases under employee stock purchase plan

 

 

2,332

 

 

 

327

 

Repayment of long-term debt

 

 

 

 

 

(1,000

)

Net cash provided by financing activities

 

 

110,518

 

 

 

131,497

 

Net increase in cash and cash equivalents

 

 

38,623

 

 

 

9,135

 

Cash and cash equivalents at beginning of period

 

 

16,119

 

 

 

11,433

 

Cash and cash equivalents at end of period

 

$

54,742

 

 

$

20,568

 

See accompanying notes to unaudited condensed financial statements.

 

5


KURA ONCOLOGY, INC.

Notes to Unaudited Condensed Financial Statements

 

1. Organization and Basis of Presentation

The Company

Kura Oncology, Inc. is a clinical-stage biopharmaceutical company committed to realizing the promise of precision medicines for the treatment of cancer. Our pipeline consists of small molecule product candidates that target cancer signaling pathways where there is a strong scientific and clinical rationale to improve outcomes, and we intend to pair them with molecular or cellular diagnostics to identify those patients most likely to respond to treatment. We plan to advance our product candidates through a combination of internal development and strategic partnerships and maintain significant development and commercial rights.

References in these Notes to Unaudited Condensed Financial Statements to the “Company,” “we,” “our” or “us,” refer to Kura Oncology, Inc.

Basis of Presentation

The accompanying unaudited condensed financial statements should be read in conjunction with the audited financial statements and notes thereto in our Annual Report on Form 10-K for the fiscal year ended December 31, 2018, as filed with the Securities and Exchange Commission on March 5, 2019, from which we derived our balance sheet as of December 31, 2018. The accompanying unaudited condensed financial statements have been prepared in accordance with U.S. generally accepted accounting principles, or GAAP, for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, since they are interim statements, the accompanying unaudited condensed financial statements do not include all of the information and notes required by GAAP for complete financial statements. The accompanying unaudited condensed financial statements reflect all adjustments, consisting of normal recurring adjustments, that are, in the opinion of our management, necessary to a fair statement of the results for the interim periods presented. Interim results are not necessarily indicative of results for a full year.

The preparation of the unaudited condensed financial statements in accordance with GAAP requires our management to make estimates and assumptions that affect the amounts reported on our unaudited condensed financial statements and accompanying notes. The amounts reported could differ under different estimates and assumptions. On an ongoing basis, we evaluate our estimates and judgments, which are based on historical and anticipated results and trends and on various other assumptions that management believes to be reasonable under the circumstances. By their nature, estimates are subject to an inherent degree of uncertainty and, as such, actual results may differ from management’s estimates.

 

 

2. Summary of Significant Accounting Policies

Comprehensive Loss

Comprehensive loss is defined as the change in equity during the period from transactions and other events and non-owner sources. For the periods presented, accumulated other comprehensive income (loss) consists of unrealized gains and losses on marketable securities and foreign currency.

Net Loss per Share

Net loss per common share is calculated by dividing the net loss by the weighted-average number of common shares outstanding for the period, without consideration for common stock equivalents. Diluted net loss per share is calculated by dividing the net loss by the weighted-average number of common shares and common stock equivalents outstanding for the period determined using the treasury-stock method. Dilutive common stock equivalents are comprised of outstanding stock options, an outstanding warrant, employee stock purchase plan rights and unvested restricted stock awards.

For all periods presented, there is no difference in the number of shares used to calculate basic and diluted shares outstanding due to the antidilutive effect of the securities. Because of our net loss, outstanding stock options, an outstanding warrant, employee stock purchase plan rights and unvested restricted stock awards are excluded from the calculation of diluted net loss per common share for the periods presented, due to the anti-dilutive effect of the securities.

6


The following table summarizes the number of potentially dilutive securities that were excluded from our calculation of diluted net loss per share, in thousands:

 

 

Three and Nine Months Ended

 

 

September 30,

 

 

2019

 

 

2018

 

Stock options

 

4,054

 

 

 

3,302

 

Warrant

 

34

 

 

 

34

 

Employee stock purchase plan rights

 

11

 

 

 

4

 

Unvested restricted stock awards

 

 

 

 

3

 

Total

 

4,099

 

 

 

3,343

 

 

Recent Accounting Pronouncements

In February 2016, the Financial Accounting Standards Board, or FASB, issued Accounting Standards Update, or ASU, 2016-02, Leases (Topic 842), which amended prior accounting standards for leases. ASU 2016-02 requires lessees to recognize right-of-use, or ROU, assets and lease liabilities on the balance sheet and requires expanded disclosures about leasing arrangements. Subsequently, the FASB issued ASU 2018-11, Leases (Topic 842): Targeted Improvements. ASU 2018-11 provides entities another option for transition, allowing entities to not apply the new standard in the comparative periods they present in the financial statements in the year of adoption. We adopted the new lease standard on January 1, 2019, using the alternative modified transition method provided by ASU 2018-11 and did not retrospectively apply to prior periods. We elected the “package of practical expedients” permitted under the transition which allows us not to reassess our historical assessment of whether existing contracts are or contain a lease and the classification of existing lease arrangements, and to calculate the present value of the fixed payments without performing an allocation of lease and non-lease components. As a result of the adoption of the new standard, we recognized operating lease ROU assets and operating lease liabilities of $0.6 million on our unaudited condensed balance sheet as of January 1, 2019. ROU assets are recorded in Other Long-Term Assets and Other Long-Term Assets, Related Party on our unaudited condensed balance sheets. Current and non-current lease liabilities are recorded in Accounts Payable and Accrued Expenses and Accounts Payable and Accrued Expenses, Related Party and Other Long-Term Liabilities and Other Long-Term Liabilities, Related Party, respectively, on our unaudited condensed balance sheets. The adoption of the new lease standard had no impact on our accumulated deficit. The adoption of the new lease standard did not have a material impact on our results of operations and cash flows. See Note 6, Leases, for further details.

In June 2018, the FASB issued ASU 2018-07, Improvements to Nonemployee Share-Based Payment Accounting (Topic 718), which expands the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees. The new guidance is intended to simplify aspects of share-based compensation issued to nonemployees by aligning the accounting for share-based payment awards issued to employees and nonemployees as it relates to measurement date and impact of performance conditions. This standard is effective for fiscal years beginning after December 15, 2018, and interim periods within those annual periods. We adopted ASU 2018-07 on January 1, 2019. The adoption of ASU 2018-07 did not have a material impact on our unaudited condensed financial statements.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses: Measurement of Credit Losses on Financial Instruments, which changes the impairment model for most financial assets and certain other instruments. For trade receivables and other instruments, entities will be required to use a new forward-looking expected loss model that generally will result in the earlier recognition of allowances for losses. For available-for-sale debt securities with unrealized losses, the losses will be recognized as allowances rather than as reductions in the amortized cost of the securities. This guidance is effective for annual reporting periods beginning after December 15, 2019, including interim periods within those years, with early adoption permitted only as of annual reporting periods beginning after December 15, 2018. We are currently evaluating the timing and impact of the adoption of ASU 2016-13 on our unaudited condensed financial statements or related financial statement disclosures.

 

 

7


3. Investments

We invest in available-for-sale securities consisting of money market funds, U.S. Treasury securities, corporate debt securities and commercial paper. Available-for-sale securities are classified as part of either cash and cash equivalents or short-term investments on our unaudited condensed balance sheets.

The following tables summarize, by major security type, our investments that are measured at fair value on a recurring basis, in thousands:

 

 

 

 

As of September 30, 2019

 

 

Maturities

(years)

 

Amortized

Cost

 

 

Unrealized

Gains

 

 

Unrealized

Losses

 

 

Fair Value

 

Cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

1 or less

 

$

43,505

 

 

$

 

 

$

 

 

$

43,505

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Short-term investments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate debt securities

2 or less

 

 

123,909

 

 

 

232

 

 

 

 

 

 

124,141

 

U.S. Treasury securities

2 or less

 

 

68,149

 

 

 

100

 

 

 

 

 

 

68,249

 

Commercial paper

1 or less

 

 

2,994

 

 

 

 

 

 

 

 

 

2,994

 

Total short-term investments

 

 

 

195,052

 

 

 

332

 

 

 

 

 

 

195,384

 

Total

 

 

$

238,557

 

 

$

332

 

 

$

 

 

$

238,889

 

 

 

 

 

As of December 31, 2018

 

 

Maturities

(years)

 

Amortized

Cost

 

 

Unrealized

Gains

 

 

Unrealized

Losses

 

 

Fair Value

 

Cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

1 or less

 

$

8,508

 

 

$

 

 

$

 

 

$

8,508

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Short-term investments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate debt securities

1 or less

 

 

56,779

 

 

 

6

 

 

 

(77

)

 

 

56,708

 

U.S. Treasury securities

1 or less

 

 

39,780

 

 

 

 

 

 

(57

)

 

 

39,723

 

Commercial paper

1 or less

 

 

66,435

 

 

 

 

 

 

 

 

 

66,435

 

Total short-term investments

 

 

 

162,994

 

 

 

6

 

 

 

(134

)

 

 

162,866

 

Total

 

 

$

171,502

 

 

$

6

 

 

$

(134

)

 

$

171,374

 

The available-for-sale investments are classified as current assets, even though the stated maturity date may be one year or more beyond the current balance sheet date, which reflects management’s intention to use the proceeds from sales of these securities to fund our operations, as necessary. As of September 30, 2019, $144.8 million of our short-term investments had maturities less than one year, and $50.6 million had maturities between one to two years. Realized gains and losses were de minimus for the three and nine months ended September 30, 2019. As of September 30, 2019, none of our marketable securities were in gross unrealized loss positions.

At each reporting date, we perform an evaluation of our marketable securities to determine if any unrealized losses are other-than-temporary. Factors considered in determining whether a loss is other-than-temporary include (i) the financial strength of the issuing institution, (ii) the length of time and extent for which fair value has been less than the cost basis and (iii) our intent and ability to hold our investments in unrealized loss positions until their amortized cost basis has been recovered. We did not have unrealized losses at September 30, 2019, and based on our evaluation, determined that our unrealized losses were not other-than-temporary at December 31, 2018.

8


4. Fair Value Measurements

As a basis for considering assumptions that market participants would use in pricing an asset or liability, the guidance establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:

Level 1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities;

Level 2 - Inputs other than quoted prices included within Level 1 that are either directly or indirectly observable; and

Level 3 - Unobservable inputs in which little or no market activity exists, therefore requiring an entity to develop its own assumptions about the assumptions that market participants would use in pricing.

Available-for-sale marketable securities consist of U.S. Treasury securities, which were measured at fair value using Level 1 inputs, and corporate debt securities and commercial paper, which were measured at fair value using Level 2 inputs. We determine the fair value of Level 2 related securities with the aid of valuations provided by third parties using proprietary valuation models and analytical tools. These valuation models and analytical tools use market pricing or prices for similar instruments that are both objective and publicly available, including matrix pricing or reported trades, benchmark yields, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids and/or offers. We validate the fair values of Level 2 financial instruments by comparing these fair values to a third-party pricing source. No transfers between levels have occurred during the periods presented.

The following tables summarize, by major security type, our cash equivalents and short-term investments that are measured at fair value on a recurring basis and are categorized using the fair value hierarchy, in thousands:

 

 

 

As of September 30, 2019

 

 

 

Balance

 

 

Level 1

 

 

Level 2

 

Cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

$

43,505

 

 

$

43,505

 

 

$

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Short-term investments: