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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

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

For the quarterly period ended June 30, 2020

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: 001-37773

 

MERUS N.V.

(Exact name of registrant as specified in its charter)

 

 

The Netherlands

Not Applicable

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

 

Yalelaan 62

3584 CM Utrecht

The Netherlands

Not Applicable

(Address of principal executive offices)

(Zip code)

 

+31 85 016 2500

(Registrant’s telephone number, including area code)

 

 

N/A

(Former name, former address and 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 shares, nominal value €0.09 per share

MRUS

The Nasdaq Stock Market LLC

(Nasdaq Global 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 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 the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  

 


 

As of August 3, 2020, the registrant had 29,057,121 common shares, nominal value €0.09 per share, outstanding.

 

 

 

 

 


 

 

PART I — FINANCIAL INFORMATION

 

 

 

Item 1. Financial Statements

2

 

 

Condensed Consolidated Balance Sheets
as of June 30, 2020 and December 31, 2019

2

 

 

Condensed Consolidated Statements of Operations and Comprehensive Loss
for the three and six months ended June 30, 2020 and 2019

3

 

 

Condensed Consolidated Statements of Cash Flows
for the six months ended June 30, 2020 and 2019

4

 

 

Condensed Consolidated Statements of Changes in Stockholders’ Equity
for three and six months ended June 30, 2020 and 2019  

5

 

 

Notes to Condensed Consolidated Financial Statements

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

20

 

 

Item 4. Controls and Procedures

20

 

 

PART II — OTHER INFORMATION

 

 

 

Item 1. Legal Proceedings

21

 

 

Item 1A. Risk Factors

21

 

 

Item 5. Other Information

61

 

 

Item 6. Exhibits

61

 

 

Signatures

62

 

 


 

Cautionary Note Regarding Forward-looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the safe harbor provisions of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q are 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,” “contemplate,” “believe,” “estimate,” “predict,” “potential” or “continue” or the negative of these terms or other similar expressions, although not all forward-looking statements contain these words. All statements other than statements of historical fact contained in this Quarterly Report on Form 10-Q, including without limitation statements regarding our plans to develop and commercialize our product candidates, the timing of our ongoing or planned clinical trials, the timing of and our ability to obtain and maintain regulatory approvals, the anticipated impact of the COVID-19 pandemic on our business and operations, the clinical utility of our product candidates, our commercialization, marketing and manufacturing capabilities and strategy, our expectations surrounding our collaborations, our expectations about the willingness of healthcare professionals to use our product candidates, the sufficiency of our cash, cash equivalents and investments, and the plans and objectives of management for future operations and capital expenditures are forward-looking statements.

The forward-looking statements in this Quarterly Report on Form 10-Q are only predictions and are based 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 on Form 10-Q and are subject to a number of known and unknown risks, uncertainties and assumptions, including those described under the sections in this Quarterly Report on Form 10-Q entitled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this Quarterly Report on Form 10-Q.

Because forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified and some of which are beyond our control, you should not rely on these forward-looking statements as predictions of future events. 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 publicly update or revise any forward-looking statements contained herein, whether as a result of any new information, future events, changed circumstances or otherwise.

 

 

 


 

PART I – FINANCIAL INFORMATION

Item 1.Financial Statements

MERUS N.V.

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

(Amounts in thousands, except per share data)

 

 

 

June 30,

2020

 

 

December 31,

2019

 

ASSETS

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

152,088

 

 

$

197,612

 

Marketable securities

 

 

45,278

 

 

 

42,153

 

Accounts receivable

 

 

142

 

 

 

941

 

Accounts receivable (related party)

 

 

1,809

 

 

 

1,711

 

Prepaid expenses and other current assets

 

 

12,087

 

 

 

4,951

 

Total current assets

 

 

211,404

 

 

 

247,368

 

Marketable securities

 

 

 

 

 

2,009

 

Property and equipment, net

 

 

3,617

 

 

 

3,715

 

Operating lease right-of-use assets

 

 

4,531

 

 

 

5,215

 

Intangible assets, net

 

 

2,731

 

 

 

2,876

 

Deferred tax assets

 

 

210

 

 

 

288

 

Other assets

 

 

1,168

 

 

 

1,905

 

Total assets

 

$

223,661

 

 

$

263,376

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

2,362

 

 

$

3,029

 

Accrued expenses

 

 

15,931

 

 

 

13,536

 

Current portion of lease obligation

 

 

1,451

 

 

 

1,380

 

Current portion of deferred revenue

 

 

727

 

 

 

941

 

Current portion of deferred revenue (related party)

 

 

17,844

 

 

 

17,901

 

Total current liabilities

 

 

38,315

 

 

 

36,787

 

Lease obligation

 

 

3,119

 

 

 

3,872

 

Deferred revenue, net of current portion

 

 

457

 

 

 

780

 

Deferred revenue, net of current portion (related party)

 

 

81,474

 

 

 

90,637

 

Total liabilities

 

 

123,365

 

 

 

132,076

 

 

 

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

 

 

Common shares, €0.09 par value; 45,000,000 shares authorized;

29,047,344 and 28,882,217 shares issued and outstanding as at

June 30, 2020 and December 31, 2019, respectively

 

$

2,935

 

 

$

2,918

 

Additional paid-in capital

 

 

445,754

 

 

 

441,395

 

Accumulated other comprehensive (loss) income

 

 

680

 

 

 

1,586

 

Accumulated deficit

 

 

(349,073

)

 

 

(314,599

)

Total stockholders’ equity

 

 

100,296

 

 

 

131,300

 

Total liabilities and stockholders’ equity

 

$

223,661

 

 

$

263,376

 

 

See accompanying notes to the Unaudited Condensed Consolidated Financial Statements.

2


 

MERUS N.V.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(UNAUDITED)

(Amounts in thousands, except per share data)

 

 

 

Three Months Ended

June 30,

 

 

Six Months Ended

June 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Collaboration revenue

 

$

184

 

 

$

336

 

 

$

512

 

 

$

1,938

 

Collaboration revenue (related party)

 

 

5,872

 

 

 

6,144

 

 

 

11,845

 

 

 

13,371

 

Grant revenue

 

 

 

 

 

(123

)

 

 

 

 

 

(123

)

Total revenue

 

 

6,056

 

 

 

6,357

 

 

 

12,357

 

 

 

15,186

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

13,709

 

 

 

10,768

 

 

 

30,696

 

 

 

22,567

 

General and administrative

 

 

8,043

 

 

 

8,214

 

 

 

16,925

 

 

 

14,955

 

Total operating expenses

 

 

21,752

 

 

 

18,982

 

 

 

47,621

 

 

 

37,522

 

Operating loss

 

 

(15,696

)

 

 

(12,625

)

 

 

(35,264

)

 

 

(22,336

)

Other income (loss), net:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income, net

 

 

99

 

 

 

535

 

 

 

379

 

 

 

1,165

 

Foreign exchange gains (losses)

 

 

(2,346

)

 

 

(1,214

)

 

 

539

 

 

 

1,006

 

Other income (loss), net

 

 

(2,247

)

 

 

(679

)

 

 

918

 

 

 

2,171

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss before income taxes

 

 

(17,943

)

 

 

(13,304

)

 

 

(34,346

)

 

 

(20,165

)

Tax expense

 

 

31

 

 

 

71

 

 

 

128

 

 

 

293

 

Net loss

 

$

(17,974

)

 

$

(13,375

)

 

$

(34,474

)

 

$

(20,458

)

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Currency translation adjustment

 

 

2,201

 

 

 

1,098

 

 

 

(906

)

 

 

(802

)

Comprehensive loss

 

$

(15,773

)

 

$

(12,277

)

 

$

(35,380

)

 

$

(21,260

)

Net loss per share attributable to common stockholders:

      Basic and diluted

 

$

(0.54

)

 

$

(0.52

)

 

$

(1.22

)

 

$

(0.91

)

Weighted-average common shares outstanding:

      Basic and diluted

 

 

29,034

 

 

 

23,388

 

 

 

28,990

 

 

 

23,380

 

 

See accompanying notes to the Unaudited Condensed Consolidated Financial Statements.

3


 

MERUS N.V.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

(Amounts in thousands)

 

 

 

Six Months Ended

June 30,

 

 

 

2020

 

 

2019

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

 

 

Net loss

 

$

(34,474

)

 

$

(20,458

)

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

 

 

 

 

 

 

 

 

Depreciation and amortization of property and equipment

 

 

532

 

 

 

393

 

Amortization of intangible assets

 

 

134

 

 

 

112

 

Foreign exchange gain

 

 

(503

)

 

 

(789

)

Loss on disposal of property and equipment

 

 

16

 

 

 

 

Stock-based compensation expense

 

 

3,483

 

 

 

3,120

 

Amortization of discount on investments

 

 

(79

)

 

 

(365

)

Deferred tax expense

 

 

78

 

 

 

158

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

681

 

 

 

1,648

 

Operating lease right-of-use assets and lease obligations

 

 

3

 

 

 

(143

)

Prepaid expenses and other current assets

 

 

(6,441

)

 

 

(2,739

)

Accounts payable

 

 

(599

)

 

 

(1,323

)

Accrued expenses

 

 

2,556

 

 

 

(318

)

Deferred revenue

 

 

(9,255

)

 

 

(8,576

)

Net cash used in operating activities

 

$

(43,868

)

 

$

(29,280

)

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

 

 

 

Purchases of marketable securities

 

$

(28,947

)

 

$

(34,417

)

Proceeds from maturities of marketable securities

 

 

28,181

 

 

 

50,934

 

Purchases of intangible assets

 

 

 

 

 

(178

)

Purchases of property and equipment

 

 

(512

)

 

 

(770

)

Net cash (used in) provided by investing activities

 

$

(1,278

)

 

$

15,569

 

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

 

 

 

Payment of offering costs

 

$

(164

)

 

$

 

Proceeds from stock options exercised

 

 

893

 

 

 

31

 

Net cash provided by financing activities

 

$

729

 

 

$

31

 

Foreign exchange impact on cash, cash equivalents and restricted cash

 

 

(1,107

)

 

 

(701

)

Net decrease in cash, cash equivalents and restricted cash

 

 

(45,524

)

 

 

(14,381

)

Cash, cash equivalents, and restricted cash, beginning of period

 

 

197,813

 

 

 

164,730

 

Cash, cash equivalents, and restricted cash, end of period

 

$

152,289

 

 

$

150,349

 

SUPPLEMENTAL DISCLOSURES:

 

 

 

 

 

 

 

 

Income taxes paid

 

$

25

 

 

$

171

 

Non-cash purchases of property, equipment and intangibles

 

$

35

 

 

$

230

 

CASH, CASH EQUIVALENTS AND RESTRICTED CASH

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

 

152,088

 

 

 

150,209

 

Restricted cash included in non-current other assets

 

 

201

 

 

 

140

 

 

 

$

152,289

 

 

$

150,349

 

 

See accompanying notes to the Condensed Consolidated Financial Statements.

4


 

MERUS N.V.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(UNAUDITED)

(Amounts in thousands, except share amounts)

 

 

 

Common Stock

 

 

Additional

Paid-In

 

 

Accumulated

 

 

Accumulated

Other

Comprehensive

 

 

Total

Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Income (Loss)

 

 

Equity

 

Balance at January 1, 2019

 

 

23,358,977

 

 

$

2,366

 

 

$

360,045

 

 

$

(259,448

)

 

$

2,894

 

 

$

105,857

 

Exercise of stock options and vesting of restricted stock units

 

 

20,678

 

 

 

2

 

 

 

26

 

 

 

 

 

 

 

 

 

28

 

Stock-based compensation

 

 

 

 

 

 

 

 

1,260

 

 

 

 

 

 

 

 

 

1,260

 

Currency translation adjustment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,900

)

 

 

(1,900

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

(7,083

)

 

 

 

 

 

(7,083

)

Balance at March 31, 2019

 

 

23,379,655

 

 

$

2,368

 

 

$

361,331

 

 

$

(266,531

)

 

$

994

 

 

$

98,162

 

Exercise of stock options and vesting of restricted stock units

 

 

13,632

 

 

 

2

 

 

 

2

 

 

 

 

 

 

 

 

 

4

 

Stock-based compensation

 

 

 

 

 

 

 

 

1,860

 

 

 

 

 

 

 

 

 

1,860

 

Currency translation adjustment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,098

 

 

 

1,098

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(13,375

)

 

 

 

 

 

(13,375

)

Balance at June 30, 2019

 

 

23,393,287

 

 

$

2,370

 

 

$

363,193

 

 

$

(279,906

)

 

$

2,092

 

 

$

87,749

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at January 1, 2020

 

 

28,882,217

 

 

$

2,918

 

 

$

441,395

 

 

$

(314,599

)

 

$

1,586

 

 

$

131,300

 

Exercise of stock options and vesting of restricted stock units

 

 

127,205

 

 

 

13

 

 

 

589

 

 

 

 

 

 

 

 

 

602

 

Stock-based compensation

 

 

 

 

 

 

 

 

2,291

 

 

 

 

 

 

 

 

 

2,291

 

Currency translation adjustment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(3,107

)

 

 

(3,107

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

(16,500

)

 

 

 

 

 

(16,500

)

Balance at March 31, 2020

 

 

29,009,422

 

 

$

2,931

 

 

$

444,275

 

 

$

(331,099

)

 

$

(1,521

)

 

$

114,586

 

Exercise of stock options and vesting of restricted stock units

 

 

37,922

 

 

 

4

 

 

 

287

 

 

 

 

 

 

 

 

 

291

 

Stock-based compensation

 

 

 

 

 

 

 

 

1,192

 

 

 

 

 

 

 

 

 

1,192

 

Currency translation adjustment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,201

 

 

 

2,201

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(17,974

)

 

 

 

 

 

(17,974

)

Balance at June 30, 2020

 

 

29,047,344

 

 

$

2,935

 

 

$

445,754

 

 

$

(349,073

)

 

$

680

 

 

$

100,296

 

 

See accompanying notes to the Unaudited Condensed Consolidated Financial Statements.

5


 

MERUS N.V.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

1. Overview

Merus N.V. is a clinical-stage oncology company developing innovative antibody therapeutics, headquartered in Utrecht, the Netherlands. Merus US, Inc. is a wholly-owned subsidiary of Merus N.V. located at 139 Main Street, Cambridge, Massachusetts, United States (collectively, the “Company”).

Since inception, the Company has generated an accumulated deficit of $349.1 million as of June 30, 2020. The Company expects to continue to incur significant expenses and operating losses for the foreseeable future as its antibody candidates advance through discovery, pre-clinical development and clinical trials and as it seeks regulatory approval and pursues commercialization of any approved antibody candidate.

As a result, the Company may need additional financing to support its continuing operations. Until the Company can generate significant revenue from product sales, if ever, the Company expects to finance its operations through public equity offerings, debt financings, or other sources, which may include collaborations with third parties and business development opportunities. Adequate additional financing may not be available to the Company on acceptable terms, or at all. The Company’s inability to raise capital as and when needed would have a negative impact on its financial condition and ability to pursue its business strategy. The Company will need to generate significant revenues to achieve profitability and may never do so.

Based on the Company’s current operating plan, the Company expects that its existing cash and cash equivalents and marketable securities of $197.4 million as of June 30, 2020 will be sufficient to fund its operations into the second half of 2022.

2. Summary of Significant Accounting Policies

The principal accounting policies applied in the preparation of these unaudited condensed consolidated financial statements are described in the Company’s audited financial statements as of and for the year ended December 31, 2019, and the notes thereto, which are included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019, filed with the SEC on March 16, 2020 (as amended, the “Annual Report on Form 10-K”). There have been no material changes in the Company’s significant accounting policies during the six months ended June 30, 2020.

Basis of Presentation

The Company prepared its unaudited consolidated condensed financial statements in compliance with generally accepted accounting principles in the U.S. ("U.S. GAAP"). Any reference in these notes to applicable guidance is meant to refer to authoritative U.S. GAAP as found in the Accounting Standards Codification ("ASC") and Accounting Standards Update ("ASU") of the Financial Accounting Standards Board ("FASB").

The unaudited condensed consolidated financial statements include the accounts of Merus N.V. and its wholly owned, controlled subsidiary, Merus US, Inc. All intercompany transactions and balances of subsidiaries have been eliminated in consolidation. In the opinion of management, these financial statements reflect all adjustments, all of which are of a normal and recurring nature, necessary for a fair presentation of the results for the reported interim periods. The Company considers events or transactions that occur after the balance sheet date but before the unaudited condensed consolidated financial statements are issued to provide additional evidence relative to certain estimates or to identify matters that require additional disclosure. The three months ended June 30, 2020 and 2019 are referred to as the second quarter of 2020 and 2019, respectively. The results of operations for interim periods are not necessarily indicative of results to be expected for the full year or any other interim period.

The unaudited condensed consolidated financial statements presented herein do not contain the required disclosures under U.S. GAAP for annual financial statements. Therefore, these unaudited condensed consolidated financial statements should be read in conjunction with the annual audited consolidated financial statements and related notes as of and for the year ended December 31, 2019, included in the Annual Report on Form 10-K.

Going Concern

At each reporting period, the Company evaluates whether there are conditions or events that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the financial statements are issued. The Company is required to make certain additional disclosures if it concludes substantial doubt exists and it is not alleviated by the Company’s plans or when its plans alleviate substantial doubt about the Company’s ability to continue as a going concern.

The Company’s evaluation entails analyzing prospective operating budgets and forecasts for expectations of the Company’s cash needs, and comparing those needs to the current cash, cash equivalent and marketable securities balances. After considering the

6


 

Company’s current research and development plans, the timing expectations related to the progress of its clinical-stage programs and its plans to pursue commercialization of any approved antibody candidate, and after considering its existing cash, cash equivalents and marketable securities as of June 30, 2020, the Company did not identify conditions or events that raise substantial doubt about the Company’s ability to continue as a going concern within one year from the date these financial statements were issued.

Pending Accounting Pronouncements

In August 2018, the FASB issued ASU 2018-15, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract. The new guidance aligns the requirements for capitalizing implementation costs incurred in a cloud-based hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). This ASU is effective for the Company at the beginning of 2021, including interim periods within that reporting period, although early adoption is permitted. The Company does not expect the impact of adoption to be significant.

In November 2018, the FASB issued ASU 2018-18, Collaborative Arrangements (Topic 808), which clarifies that certain transactions between collaborative arrangement participants should be accounted for as revenue when the collaborative arrangement participant is a customer in the context of a unit of account and precludes recognizing as revenue consideration received from a collaborative arrangement participant if the participant is not a customer. The ASU will be effective for the Company in the first quarter of 2021, with early adoption permitted. As of June 30, 2020, none of the Company’s arrangements fall within the scope of ASC 808. However, as the Company may engage in future collaborative arrangements in the future, this ASU may apply to those new arrangements.

3. Investments in Debt Securities

The following tables summarize the Company’s investments in debt securities and their presentation in the condensed consolidated balance sheet:

 

 

 

June 30,

2020

 

 

December 31,

2019

 

 

 

(in thousands)

 

Money market funds

 

$

21,906

 

 

$

34,053

 

Corporate paper and notes

 

 

30,749

 

 

 

38,679

 

U.S. government agency securities

 

 

2,498

 

 

 

3,987

 

U.S. treasuries

 

 

12,031

 

 

 

1,496

 

Total

 

$

67,184

 

 

$

78,215

 

 

 

 

 

 

 

 

 

 

Fair value of debt securities

 

$

67,355

 

 

$

78,254

 

 

 

 

June 30,

2020

 

 

December 31,

2019

 

 

 

(in thousands)

 

Cash equivalents

 

$

21,906

 

 

$

34,053

 

Current marketable securities

 

 

45,278

 

 

 

42,153

 

Non-current marketable securities

 

 

 

 

 

2,009

 

Total

 

$

67,184

 

 

$

78,215

 

 

The Company does not intend to sell and it is unlikely that the Company will be required to sell the above investments before recovery of their amortized cost bases, which may be maturity. The Company determined that there was no material change in the credit risk of any of its investments.

 

The fair value of money market funds is determined based on publicly available market price for these funds (Level 1). The fair value of other debt securities is determined based on the publicly available inputs which includes a market price for the same or similar instruments adjusted for estimates in interest yield (Level 2).

7


 

4. Supplemental Balance Sheet Information

Prepaid expenses and other current assets consisted of the following:

 

 

 

June 30,

2020

 

 

December 31,

2019

 

 

 

(In thousands)

 

Prepaid clinical and manufacturing costs

 

$

5,379

 

 

$

2,779

 

Prepaid general and administrative expenses

 

 

2,910

 

 

 

789

 

Interest receivable

 

 

155

 

 

 

259

 

Other

 

 

3,643

 

 

 

1,124

 

Total

 

$

12,087

 

 

$

4,951

 

 

Accrued expenses consisted of the following:

 

 

 

June 30,

2020

 

 

December 31,

2019

 

 

 

(In thousands)

 

Accrued research and development expenses

 

$

11,780

 

 

$

6,618

 

Accrued general and administrative expenses

 

 

1,932

 

 

 

2,402

 

Accrued personnel costs

 

 

2,206

 

 

 

4,495

 

Other