SEC Filing – C4 Therapeutics

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

View:

Download DOC

Download PDF

Download XLS

Download XBRL

cccc-10q_20220331.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 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 March 31, 2022

☐	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: 001-39567

C4 Therapeutics, Inc.

(Exact Name of Registrant as Specified in its Charter)

Delaware	47-5617627
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

490 Arsenal Way, Suite 200 Watertown, MA	02472
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (617) 231-0700

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, $0.0001 par value per share

CCCC

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, 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.

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 April 25, 2022, the registrant had 48,797,226 shares of common stock, $0.0001 par value per share, outstanding.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q, or Form 10-Q, including the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” contains express or implied forward-looking statements that are based on our management’s belief and assumptions and on information currently available to our management. Although we believe that the expectations reflected in these forward-looking statements are reasonable, these statements relate to future events or our future operational or financial performance, and involve known and unknown risks, uncertainties, and other factors that may cause our actual results, performance, or achievements to be materially different from any future results, performance, or achievements expressed or implied by these forward-looking statements. Forward-looking statements in this Form 10-Q may include, but are not limited to, statements about:

•

the initiation, timing, progress, results, safety and efficacy, and cost of our research and development programs and our current and future preclinical studies and clinical trials, including statements regarding the timing of initiation and completion of studies or trials, the period during which the results of the trials will become available, and our research and development programs;

•

the ultimate impact of the ongoing coronavirus, or COVID-19, pandemic, or any other health epidemic, on our business, manufacturing, clinical trials, research programs, supply chain, regulatory review, healthcare systems or the global economy as a whole;

•

risks related to the direct or indirect impact of the ongoing COVID-19 pandemic or any future large-scale adverse health event, such as the scope and duration of the pandemic, government actions and restrictive measures implemented in response, material delays in diagnoses, initiation or continuation of treatment for diseases that may be addressed by our development candidates and investigational medicines, or in patient enrollment in clinical trials, potential clinical trials, regulatory review or supply chain disruptions, and other potential impacts to our business, the effectiveness or timeliness of steps taken by us to mitigate the impact of the pandemic or other future large-scale adverse health event, and our ability to execute business continuity plans to address disruptions caused by the ongoing COVID-19 pandemic or future large-scale adverse health event;

•

our ability to obtain funding for our operations necessary to complete further development, manufacturing and commercialization of our product candidates;

•

our ability to obtain and maintain regulatory approval for any of our current or future product candidates;

•

the period of time over which we anticipate our existing cash and cash equivalents, and marketable securities will be sufficient to fund our operating expenses and capital expenditure requirements;

•

our ability to identify and develop product candidates for treatment of additional disease indications;

•

the potential attributes and benefits of our product candidates;

•

the rate and degree of market acceptance and clinical utility for any product candidates we may develop;

•

the pricing and reimbursement of our product candidates, if approved;

•

the effects of competition with respect to any of our current or future product candidates, as well as innovations by current and future competitors in our industry;

•

the implementation of our strategic plans for our business, any product candidates we may develop and our TORPEDO^® platform;

•

the ability and willingness of our third-party strategic collaborators to continue research, development and manufacturing activities relating to our product candidates, including our ability to advance programs under our existing collaboration agreements with F. Hoffmann-La Roche Ltd and Hoffmann-La Roche Inc., or Roche, Biogen MA, Inc., or Biogen, and Calico Life Sciences LLC, or Calico, or other new collaboration agreements;

•

the scope of protection we are able to establish and maintain for intellectual property rights covering our product candidates;

•

estimates of our future expenses, revenues, capital requirements, and our needs for additional financing;

•

future agreements with third parties in connection with the manufacturing and commercialization of our product candidates, if approved;

•

the size and growth potential of the markets for our product candidates and our ability to serve those markets;

•

our financial performance;

•

regulatory developments in the United States and foreign countries;

•

our ability to contract with third-party suppliers and manufacturers and their ability to perform adequately;

•

the success of competing therapies that are or may become available;

•

our ability to attract and retain key scientific or management personnel;

•

developments relating to our competitors and our industry; and

•

other risks and uncertainties, including those discussed in Part II, Item 1A - Risk Factors in this Form 10-Q.

In some cases, forward-looking statements can be identified by terminology such as “will,” “may,” “should,” “could,” “expects,” “intends,” “plans,” “aims,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” “continue,” or the negative of these terms or other comparable terminology, although not all forward-looking statements contain these words. These statements are only predictions. You should not place undue reliance on forward-looking statements because they involve known and unknown risks, uncertainties, and other factors, which are, in some cases, beyond our control and which could materially affect results. Factors that may cause actual results to differ materially from current expectations include, among other things, those listed under the section titled “Risk Factors” and elsewhere in this Form 10-Q. If one or more of these risks or uncertainties occur, or if our underlying assumptions prove to be incorrect, actual events or results may vary significantly from those expressed or implied by the forward-looking statements. No forward-looking statement is a promise or a guarantee of future performance.

The forward-looking statements in this Form 10-Q represent our views as of the date of this Form 10-Q. We anticipate that subsequent events and developments will cause our views to change. However, while we may elect to update these forward-looking statements at some point in the future, we have no current intention of doing so except to the extent required by applicable law. You should therefore not rely on these forward-looking statements as representing our views as of any date subsequent to the date of this Form 10-Q.

SUMMARY OF RISK FACTORS

Our ability to implement our business strategy is subject to numerous risks that you should be aware of before making an investment decision. These risks are described more fully in Part II, Item 1A - Risk Factors in this Form 10-Q. These risks include, among others:

•

We are a clinical-stage biopharmaceutical company with a limited operating history and have incurred significant losses since our inception. To date, we have not generated any revenue from product sales. We expect to continue to incur significant expenses and increasing operating losses for at least the next several years and may never achieve or maintain profitability. Our net loss was $31.6 million and $21.0 million for the three months ended March 31, 2022 and 2021, respectively.

•

We will need substantial additional funding to pursue our business objectives and continue our operations. If we are unable to raise capital when needed, we may be required to delay, limit, reduce or terminate our research or product development programs or future commercialization efforts.

•

Our approach to the discovery and development of product candidates based on our TORPEDO platform is unproven, which makes it difficult to predict the time, cost of development and likelihood of successfully developing any products.

•

Most of our product candidates are still in preclinical development and we have never completed a clinical trial of any of our product candidates. Our business could be harmed if we are unable to advance to clinical development, develop, obtain regulatory approval for and/or commercialize our product candidates, if we experience significant delays in doing any of these things, or if we experience significant cost increases.

•

We cannot be certain of the timely completion or outcome of our preclinical testing and clinical trials. In addition, the results of preclinical studies may not be predictive of the results of clinical trials and the results of any early-stage clinical trials we commence may not be predictive of the results of later-stage clinical trials.

•

Our preclinical studies and clinical trials may fail to demonstrate adequately the safety, potency and efficacy of any of our product candidates, which would prevent, delay, or require additional research or analysis to proceed with development, regulatory approval and commercialization of our current and future product candidates.

•

We have entered into collaboration agreements with Roche, Biogen and Calico, and may in the future seek to enter into collaborations with third parties for the development and/or commercialization of certain of our product candidates, but we may never realize the full potential benefits under these existing or potential collaboration arrangements.

•

The continuing effects of the ongoing COVID-19 pandemic, including the spread of new strains or variants of the virus, could adversely impact our business, including our preclinical studies and clinical trials.

•

We face substantial competition, which may result in others discovering, developing or commercializing products for the same indication and/or patient population before or more successfully than we do.

•

We rely, and expect to continue to rely, on third parties for the manufacture of our product candidates for preclinical and clinical testing, as well as for commercial manufacture if any of our product candidates receive marketing approval. This reliance on third parties may increase the risk that we will not have sufficient quantities of our product candidates in a timely manner, or at an acceptable cost or quality.

•

If we are unable to obtain required marketing approvals for, commercialize, manufacture, obtain and maintain patent protection for or gain market acceptance of our product candidates, or if we experience significant delays in doing so, our business will be materially harmed and our ability to generate revenue from product sales will be materially impaired.

•

If we are unable to obtain and maintain patent protection for our technology and products or if the scope of the patent protection obtained is not sufficiently broad or enforceable, our competitors could develop and commercialize technology, product candidates and products similar or identical to ours, and our ability to successfully commercialize our technology, product candidates and products may be impaired.

NOTE REGARDING COMPANY REFERENCES

Unless the context otherwise requires, the terms “C4 Therapeutics,” “the Company,” “we,” “us,” and “our” in this Form 10-Q refer to C4 Therapeutics, Inc. and its consolidated subsidiary.

NOTE REGARDING TRADEMARKS

We own or have rights to various trademarks, service marks and trade names that are used in connection with the operation of our business, including our company name, C4 Therapeutics, our logo, the name of our TORPEDO technology platform and the names of our BIDAC and MONODAC protein degrader product candidates. This Form 10-Q may also contain trademarks, service marks and trade names of third parties, which are the property of their respective owners. Our use or display of third parties’ trademarks, service marks, trade names or products in this prospectus is not intended to and does not imply a relationship with, or endorsement or sponsorship by us. Solely for convenience, the trademarks, service marks and trade names referred to in this prospectus may appear without the ®, ^TM or ^SM symbols, but the omission of such references is not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights or the right of the applicable owner of these trademarks, service marks and trade names.

Table of Contents

		Page
PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)	1
	Condensed Consolidated Balance Sheets	1
	Condensed Consolidated Statement of Operations and Comprehensive Loss	2
	Condensed Consolidated Statement of Stockholder’s Equity (Deficit)	3
	Condensed Consolidated Statements of Cash Flows	5
	Notes to Unaudited Condensed Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	26
Item 4.	Controls and Procedures	26
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	28
Item 1A.	Risk Factors	28
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	66
Item 3.	Defaults Upon Senior Securities	66
Item 4.	Mine Safety Disclosures	66
Item 5.	Other Information	66
Item 6.	Exhibits	67
	SIGNATURES	68

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

C4 Therapeutics, Inc.

Condensed Consolidated Balance Sheets

(in thousands, except share and per share amounts)

(Unaudited)

	March 31, 2022			December 31, 2021
Assets
Current assets:
Cash and cash equivalents	$	46,004		$	76,124
Marketable securities, current		245,170			233,155
Accounts receivable		1,773			5,716
Prepaid expenses and other current assets		9,999			10,694
Total current assets		302,946			325,689
Marketable securities, non-current		130,478			142,200
Property and equipment, net		3,026			3,108
Right-of-use asset		74,828			31,945
Restricted cash		3,279			3,279
Other assets		928			544
Total assets	$	515,485		$	506,765
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	3,405		$	4,506
Accrued expenses and other current liabilities		9,840			13,606
Deferred revenue, current		31,266			31,800
Operating lease liability, current		1,727			1,334
Long-term debt − related party, current		750			—
Total current liabilities		46,988			51,246
Deferred revenue, net of current		19,020			24,368
Operating lease liability, net of current		74,754			30,777
Long-term debt − related party, net of current		10,194			10,768
Total liabilities		150,956			117,159
Commitments and contingencies
Stockholders’ equity:
Preferred stock, par value of $0.0001 per share; 10,000,000 shares authorized, and no shares issued or outstanding as of March 31, 2022 and December 31, 2021, respectively		—			—
Common stock, par value of $0.0001 per share; 150,000,000 shares authorized, and 48,751,490 and 48,688,875 shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively		5			5
Additional paid-in capital		667,509			658,091
Accumulated other comprehensive (loss) income		(3,650	)		(775	)
Accumulated deficit		(299,335	)		(267,715	)
Total stockholders’ equity		364,529			389,606
Total liabilities and stockholders’ equity	$	515,485		$	506,765

See accompanying notes to unaudited condensed consolidated financial statements.

C4 Therapeutics, Inc.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(in thousands, except share and per share amounts)

(Unaudited)

	Three Months Ended March 31,
	2022			2021
Revenue from collaboration agreements	$	7,654		$	7,426
Operating expenses:
Research and development		26,203			20,526
General and administrative		12,820			7,409
Total operating expenses		39,023			27,935
Loss from operations		(31,369	)		(20,509	)
Other (expense) income, net:
Interest expense and amortization of long-term debt − related party		(527	)		(534	)
Interest and other income, net		276			72
Total other (expense) income, net		(251	)		(462	)
Loss before income taxes		(31,620	)		(20,971	)
Income tax benefit		—			—
Net loss	$	(31,620	)	$	(20,971	)
Net loss per share attributable to common stockholders − basic and diluted	$	(0.65	)	$	(0.49	)
Weighted-average number of shares used in computed net loss per share − basic and diluted	$	48,734,827		$	43,084,978

Other comprehensive income (loss)
Unrealized gain (loss) on marketable securities		(2,875	)		(107	)
Comprehensive loss	$	(34,495	)	$	(21,078	)

See accompanying notes to unaudited condensed consolidated financial statements.

C4 Therapeutics, Inc.

Condensed Consolidated Statements of Stockholders’ Equity (Deficit)

(in thousands, except share amounts)

(Unaudited)

	Common Stock				Additional Paid-In		Accumulated Other Comprehensive			Accumulated			Total Stockholders'
	Shares		Amount		Capital		Income (Loss)			Deficit			Equity
Balance as of December 31, 2021		48,688,875	$	5	$	658,091		(775	)	$	(267,715	)	$	389,606
Exercise of stock options		52,707		—		260		—			—			260
Issuances of common stock under 2020 ESPP		8,028		—		220		—			—			220
Stock-based compensation		—		—		8,879		—			—			8,879
Unrealized loss on marketable securities		—		—		—		(2,875	)		—			(2,875	)
Net loss		—		—		—		—			(31,620	)		(31,620	)
Other		1,880		—		59		—			—			59
Balance as of March 31, 2022		48,751,490	$	5	$	667,509	$	(3,650	)	$	(299,335	)	$	364,529

See accompanying notes to unaudited condensed consolidated financial statements.

C4 Therapeutics, Inc.

Condensed Consolidated Statements of Stockholders’ Equity (Deficit) - Continued

(in thousands, except share amounts)

(Unaudited)

	Common Stock				Additional Paid-In			Accumulated Other Comprehensive			Accumulated			Total Stockholders'
	Shares		Amount		Capital			Income (Loss)			Deficit			Deficit
Balance as of December 31, 2020		43,059,632	$	4	$	464,597		$	13		$	(183,823	)	$	280,791
Exercise of stock options		49,328		—		166			—			—			166
Stock-based compensation		—		—		3,845			—			—			3,845
Unrealized loss on marketable securities		—		—		—			(107	)		—			(107	)
Net loss		—		—		—			—			(20,971	)		(20,971	)
Other		—		—		(19	)		—			—			(19	)
Balance as of March 31, 2021		43,108,960	$	4	$	468,589		$	(94	)	$	(204,794	)	$	263,705

See accompanying notes to unaudited condensed consolidated financial statements.

C4 Therapeutics, Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(Unaudited)

	Three Months Ended March 31,
	2022			2021
Cash flows used in operating activities:
Net loss	$	(31,620	)	$	(20,971	)
Adjustments to reconcile net loss to cash used in operating activities:
Stock-based compensation expense		8,938			3,845
Depreciation expense		305			451
Reduction in carrying amount of right-of-use asset		1,184			320
Accretion of discount on marketable securities		664			102
Amortization of debt discount − related party		176			182
Changes in operating assets and liabilities:
Accounts receivable		3,944			828
Prepaid expenses and other current and long-term assets		309			(40	)
Accounts payable		(1,152	)		(1,965	)
Accrued expenses and other current liabilities		(3,766	)		(3,666	)
Operating lease liability		304			(251	)
Deferred revenue		(5,882	)		(3,769	)
Net cash used in operating activities		(26,596	)		(24,934	)
Cash flows used in investing activities:
Proceeds from maturities of marketable securities		72,387			114,994
Purchases of marketable securities		(76,219	)		(176,303	)
Purchases of property and equipment		(172	)		(421	)
Net cash used in investing activities		(4,004	)		(61,730	)
Cash flows provided by (used in) financing activities:
Proceeds from exercises of stock options		260			166
Payment of initial public offering costs		—			(314	)
Other		220			(3	)
Net cash provided by (used in) financing activities		480			(151	)

Net change in cash, cash equivalents and restricted cash		(30,120	)		(86,815	)
Cash, cash equivalents and restricted cash at beginning of period		79,403			184,304
Cash, cash equivalents and restricted cash at end of period	$	49,283		$	97,489

Reconciliation of cash, cash equivalents and restricted cash:
Cash, cash equivalents and restricted cash at end of period	$	49,283		$	97,489
Less: restricted cash		(3,279	)		(2,577	)
Cash and cash equivalents at end of the period	$	46,004		$	94,912

C4 Therapeutics, Inc.

Condensed Consolidated Statements of Cash Flows - Continued

(in thousands)

(Unaudited)

	Three Months Ended March 31,
	2022		2021
Supplemental disclosures of cash flow information:
Cash paid for interest − related party	$	473	$	358

Supplemental disclosures of non-cash investing and financing activities:
Operating lease liabilities arising from obtaining right-of-use assets	$	44,067	$	—
Capital expenditures in accounts payable and accrued expenses	$	52	$	722

See accompanying notes to unaudited condensed consolidated financial statements.

C4 THERAPEUTICS, INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Note 1. Nature of the business and basis of presentation

C4 Therapeutics, Inc., or, together with its subsidiary, the Company, is a clinical-stage biopharmaceutical company dedicated to advancing targeted protein degradation science to develop a new generation of small-molecule medicines to transform how disease is treated. The Company leverages its proprietary technology platform, TORPEDO (Target ORiented ProtEin Degrader Optimizer), to efficiently design and optimize small-molecule medicines that harness the body’s natural protein recycling system to rapidly degrade disease-causing proteins, offering the potential to overcome drug resistance, drug undruggable targets and improve patient outcomes. The Company is advancing multiple targeted oncology programs to the clinic and expanding its research platform to deliver the next wave of medicines for difficult-to-treat diseases. The Company was incorporated in Delaware on October 7, 2015 and has its principal office in Watertown, Massachusetts.

Liquidity and capital resources

Since its inception, the Company’s primary activities have been focused on research and development activities, building the Company’s intellectual property, recruiting personnel and raising capital to support these activities. To date, the Company has funded its operations primarily with proceeds received from the sales of redeemable convertible preferred stock, public offerings of the Company’s common stock, through its collaboration agreements, and debt financing.

The Company has incurred recurring losses since its inception, including net losses of $31.6 million and $21.0 million for the three months ended March 31, 2022 and 2021, respectively. In addition, as of March 31, 2022, the Company had an accumulated deficit of $299.3 million. To date, the Company has not generated any revenue from product sales as none of its product candidates has been approved for commercialization. The Company expects to continue to generate operating losses for the foreseeable future.

The Company expects that its cash, cash equivalents and marketable securities of $421.7 million as of March 31, 2022 will be sufficient to fund its operations for at least the next twelve months from the date of issuance of these condensed consolidated financial statements. Accordingly, the condensed consolidated financial statements have been prepared on a basis that assumes the Company will continue as a going concern and contemplates the realization of assets and satisfaction of liabilities and commitments in the ordinary course of business.

Risks and uncertainties

The Company is subject to risks common to other life science companies in the early development stage including, but not limited to, uncertainty of product development and commercialization, lack of marketing and sales history, development by its competitors of new technological innovations, dependence on key personnel, market acceptance of products, product liability, protection of proprietary technology and intellectual property, ability to raise additional financing and compliance with the Food and Drug Administration, or the FDA, and other government regulations. If the Company does not successfully advance its programs into and through human clinical trials and commercialize any of its product candidates either directly or through collaborations with other companies, the Company may be unable to produce product revenue or achieve profitability. There can be no assurance that the Company’s research and development efforts will be successful, adequate protection for the Company’s intellectual property will be obtained and maintained, any products developed will obtain necessary government regulatory approval, or any approved products will be commercially viable. Even if the Company’s product development efforts are successful, it is uncertain when, if ever, the Company will generate significant revenue from product sales. The Company operates in an environment of rapid change in technology and substantial competition from pharmaceutical and biotechnology companies.

Note 2. Summary of significant accounting policies

Basis of presentation and consolidation

The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States, or U.S. GAAP, and applicable rules and regulations of the Securities and Exchange Commission, or the SEC, regarding interim financial reporting, and the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. These condensed consolidated financial statements include the accounts of C4 Therapeutics, Inc. and its subsidiary, C4T Securities Corporation. All intercompany balances and transactions have been eliminated in consolidation.

Unaudited interim financial information

The accompanying condensed consolidated balance sheet as of March 31, 2022, the condensed consolidated statements of operations and comprehensive loss for the three months ended March 31, 2022 and 2021, the condensed consolidated statements of stockholders’

equity (deficit) for the three months ended March 31, 2022 and 2021, the condensed consolidated statements of cash flows for the three months ended March 31, 2022 and 2021, and the related interim disclosures are unaudited. These unaudited condensed consolidated financial statements include all adjustments necessary, consisting of only normal recurring adjustments, to fairly state the financial position and the results of the Company’s operations and cash flows for interim periods in accordance with U.S. GAAP. Interim period results are not necessarily indicative of results of operations or cash flows for a full year or any subsequent interim period. The accompanying condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements as of and for year ended December 31, 2021, and notes thereto, which are included in the Company’s Annual Report on Form 10-K that was filed with the SEC on February 24, 2022.

Reclassifications

Certain amounts that were previously reported have been reclassified to conform to current year presentation. The reclassifications had no effect on the reported results of operations.

Use of estimates

The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. The Company bases its estimates and assumptions on historical experience when available and on various factors that it believes to be reasonable under the circumstances. This process may result in actual results differing materially from those estimated amounts used in the preparation of the condensed consolidated financial statements if these results differ from historical experience or other assumptions do not turn out to be substantially accurate, even if such assumptions are reasonable when made. Significant estimates and assumptions reflected in these condensed consolidated financial statements include, but are not limited to, amounts and timing of revenues recognized under the Company’s research and development collaboration arrangements, prepaid and accrued research and development expense, incremental borrowing rate used in the measurement of lease liability, and estimated volatility used in fair valuation of stock options. The Company assesses estimates on an ongoing basis; however, actual results could materially differ from those estimates.

Significant accounting policies

The Company’s significant accounting policies are disclosed in the audited consolidated financial statements for the year ended December 31, 2021, which are included in the Company’s Annual Report on Form 10-K that was filed with the SEC on February 24, 2022. Since the date of those consolidated financial statements, there have been no material changes to the Company’s significant accounting policies.

Recently issued accounting standards

In March 2020, the Financial Accounting Standards Board, or FASB, issued Accountings Standards Update, or ASU, 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides temporary optional guidance for a limited time to ease the potential accounting impacts associated with transitioning away from reference rates that are expected to be discontinued, such as the London Interbank Offered Rate, or LIBOR. Optional expedients in Topic 848 are generally available until December 31, 2022.

In January 2021, the FASB also issued ASU 2021-01, Reference Rate Reform (Topic 848): Scope, which extends some of Topic 848’s optional expedients to derivative contracts modified as a result of rate reform, including certain derivatives that do not reference LIBOR or other reference rates that are expected to be discontinued. The amendments in this ASU affect the guidance in ASU 2020-04 and are effective in the same timeframe as ASU 2020-04. The adoptions of ASU 2020-04 and ASU 2021-01 did not have a material effect on the Company’s condensed consolidated financial statements.

Note 3. Fair value measurements

The following table presents information about the Company’s financial assets measured at fair value on a recurring basis and indicates the level of the fair value hierarchy utilized to determine these fair values as of March 31, 2022 (in thousands):

	Fair Value		Level 1		Level 2		Level 3
Cash equivalents:
Money market funds	$	40,248	$	40,248	$	—	$	—
Corporate debt securities		5,501		—		5,501		—
Marketable securities:
Corporate debt securities		298,738		—		298,738		—
U.S. government debt securities		51,058		—		51,058		—
U.S. Treasury securities		25,852		—		25,852		—
Total cash equivalents and marketable securities	$	421,397	$	40,248	$	381,149	$	—

There have been no transfers between fair value levels during the three months ended March 31, 2022.

	Fair Value		Level 1		Level 2		Level 3
Cash equivalents:
Money market funds	$	59,162	$	59,162	$	—	$	—
Corporate debt securities		11,649		—		11,649		—
U.S. Treasury securities		5,000		—		5,000		—
Marketable securities:
Corporate debt securities		308,300		—		308,300		—
U.S. government debt securities		37,883		—		37,883		—
U.S. Treasury securities		29,172		—		29,172		—
Total cash equivalents and marketable securities	$	451,166	$	59,162	$	392,004	$	—

The Company classifies its money market funds, which are valued based on quoted market prices in active markets, with no valuation adjustment, as Level 1 assets within the fair value hierarchy.

Marketable securities consist of U.S. Treasury securities, U.S. government debt securities, and corporate debt securities, all of which are classified as available-for-sale pursuant to Accounting Standards Codification, ASC, 320, Investments – Debt and Equity Securities. Marketable securities are classified within Level 2 of the fair value hierarchy because pricing inputs are other than quoted prices in active markets, which are either directly or indirectly observable as of the reporting date, and fair value is determined using models or other valuation methodologies on a recurring basis.

Note 4. Marketable securities

Marketable securities as of March 31, 2022 consisted of the following (in thousands):

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Marketable securities, current:
Corporate debt securities	$	220,349	$	—	$	(1,040	)	$	219,309
U.S. Treasury securities		16,043