SEC Filing | Revolution Medicines, Inc.

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rvmd-10q_20200331.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, 2020

☐	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: 001-39219

Revolution Medicines, Inc.

(Exact Name of Registrant as Specified in its Charter)

Delaware	47-2029180
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
700 Saginaw Drive Redwood City, CA	94063
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (650) 481-6801

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

RVMD

The Nasdaq Stock Market LLC

(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.

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 May 8, 2020, the registrant had 59,013,920 shares of common stock, $0.0001 par value per share, outstanding.

Table of Contents

		Page
Special Note Regarding Forward Looking Statements		ii
PART I.	FINANCIAL INFORMATION	1
Item 1.	Financial Statements (unaudited)	1
	Condensed Consolidated Balance Sheets	1
	Condensed Consolidated Statements of Operations	2
	Condensed Consolidated Statements of Comprehensive Loss	3
	Condensed Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholder’s Equity (Deficit)	4
	Condensed Consolidated Statements of Cash Flows	5
	Notes to Condensed Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	29
Item 4.	Controls and Procedures	30

PART II.	OTHER INFORMATION	31
Item 1.	Legal Proceedings	31
Item 1A.	Risk Factors	31
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	76
Item 3.	Defaults Upon Senior Securities	76
Item 4.	Mine Safety Disclosures	76
Item 5.	Other Information	77
Item 6.	Exhibits	78
	Signatures	79

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements concerning our business, operations and financial performance and condition, as well as our plans, objectives and expectations for our business, operations and financial performance and condition. Any statements contained herein that are not statements of historical facts may be deemed to be forward-looking statements. These statements involve known and unknown risks, uncertainties and other important factors that are in some cases beyond our control and may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements.

In some cases, you can identify forward-looking statements by terminology such as “aim,” “anticipate,” “assume,” “believe,” “contemplate,” “continue,” “could,” “due,” “estimate,” “expect,” “goal,” “intend,” “may,” “objective,” “plan,” “predict,” “potential,” “positioned,” “seek,” “should,” “target,” “will,” “would,” and other similar expressions that are predictions of or indicate future events and future trends, or the negative of these terms or other comparable terminology. These forward-looking statements include, but are not limited to, statements about:

•

the scope, progress, results and costs of developing our product candidates or any other future product candidates, and conducting preclinical studies and clinical trials, including our RMC-4630 Phase 1/2 clinical program;

•

the scope, progress, results and costs related to the research and development of our pipeline;

•

the timing of and costs involved in obtaining and maintaining regulatory approval for any of current or future product candidates, and any related restrictions, limitations and/or warnings in the label of an approved product candidate;

•

our expectations regarding the potential market size and size of the potential patient populations for RMC-4630, our other product candidates and any future product candidates, if approved for commercial use;

•

our ability to maintain existing and establish new collaborations, licensing or other arrangements and the financial terms of any such agreements, including our collaboration with Sanofi;

•

our commercialization, marketing and manufacturing capabilities and expectations;

•

the rate and degree of market acceptance of our product candidates, as well as the pricing and reimbursement of our product candidates, if approved;

•

the implementation of our business model and strategic plans for our business, product candidates and technology, including additional indications for which we may pursue;

•

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

•

estimates of our expenses, future revenue, capital requirements, our needs for additional financing and our ability to obtain additional capital;

•

developments and projections relating to our competitors and our industry, including competing therapies and procedures;

•

regulatory and legal developments in the United States and foreign countries;

•

the performance of our third-party suppliers and manufacturers;

•

the impact of COVID-19 on our business and operations, including clinical trials, manufacturing, use of contract research organizations and employees;

•

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

•

our expectations regarding the period during which we will qualify as an emerging growth company under the Jumpstart Our Business Startups Act of 2012;

•

our expectations regarding our ability to obtain, maintain, enforce and defend our intellectual property protection for our product candidates; and

•

other risks and uncertainties, including those listed under the caption “Risk Factors.”

We have based these forward-looking statements largely on our current expectations and projections about our business, the industry in which we operate and financial trends that we believe may affect our business, financial condition, results of operations and prospects, and these forward-looking statements are not guarantees of future performance or development. 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 risks, uncertainties and assumptions described in the section titled “Risk Factors” 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, 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. We undertake no obligation to publicly update or revise any forward-looking statements contained herein for any reason after the date of this report to conform these statements to new information, actual results or changes in our expectations, except as required by applicable law.

In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this report, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain, and you are cautioned not to unduly rely upon these statements.

Investors and others should note that we may announce material business and financial information to our investors using our investor relations website (https://ir.revmed.com), Securities and Exchange Commission, or SEC, filings, webcasts, press releases and conference calls. We use these mediums, including our website, to communicate with the public about our company, our business and other issues. It is possible that the information that we make available may be deemed to be material information. We, therefore, encourage investors and others interested in our company to review the information that we make available on our website.

iii

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

REVOLUTION MEDICINES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)

(unaudited)

	March 31,			December 31,
	2020			2019
Assets
Current assets:
Cash and cash equivalents	$	182,669		$	16,659
Marketable securities		165,279			106,099
Receivable from related party		8,450			8,737
Prepaid expenses and other current assets		5,688			2,486
Total current assets		362,086			133,981
Property and equipment, net		6,775			7,147
Operating lease right-of-use asset		8,468			—
Intangible assets, net		61,746			62,013
Goodwill		14,608			14,608
Restricted cash		214			214
Other noncurrent assets		444			2,566
Total assets	$	454,341		$	220,529
Liabilities, redeemable convertible preferred stock and stockholders' equity (deficit)
Current liabilities:
Accounts payable	$	7,877		$	11,400
Accrued expenses and other current liabilities		13,950			14,528
Operating lease liability, current		3,285			—
Deferred revenue, related party, current		16,402			17,124
Total current liabilities		41,514			43,052
Deferred rent, noncurrent		—			1,741
Deferred revenue, related party, noncurrent		12,416			14,727
Deferred tax liability		7,103			7,819
Operating lease liability, noncurrent		7,403			—
Other noncurrent liabilities		589			655
Total liabilities		69,025			67,994
Commitments and contingencies (Note 7)
Redeemable convertible preferred stock, $0.0001 par value; zero and 192,904,770 shares authorized at March 31, 2020 and December 31, 2019, respectively; zero and 39,600,423 shares issued and outstanding at March 31, 2020 and December 31, 2019, respectively; aggregate liquidation preference of zero and $308,688 and at March 31, 2020 and December 31, 2019, respectively		—			305,109
Stockholders' equity (deficit):
Preferred stock, $0.0001 par value; 10,000,000 and zero shares authorized at March 31, 2020 and December 31, 2019, respectively; zero shares issued and outstanding at March 31, 2020 and December 31, 2019, respectively		—			—
Common stock, $0.0001 par value; 300,000,000 and 249,000,000 shares authorized at March 31, 2020 and December 31, 2019, respectively; 59,003,644 and 3,292,124 shares issued and outstanding at March 31, 2020 and December 31, 2019, respectively		6			—
Additional paid-in capital		562,179			4,738
Accumulated other comprehensive income		36			74
Accumulated (deficit)		(176,905	)		(157,386	)
Total stockholders' equity (deficit)		385,316			(152,574	)
Total liabilities, redeemable convertible preferred stock and stockholders' equity	$	454,341		$	220,529

The accompanying notes are an integral part of these condensed consolidated financial statements.

REVOLUTION MEDICINES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except share and per share data)

(unaudited)

	Three Months Ended March 31,
	2020			2019
Revenue:
Collaboration revenue, related party	$	11,546		$	13,166
Total revenue		11,546			13,166
Operating expenses:
Research and development		27,457			21,186
General and administrative		5,171			2,416
Total operating expenses		32,628			23,602
Loss from operations		(21,082	)		(10,436	)
Other income, net:
Interest income		909			335
Interest and other expense		(21	)		(30	)
Total other income, net		888			305
Loss before income taxes		(20,194	)		(10,131	)
Benefit from income taxes		675			—
Net loss	$	(19,519	)	$	(10,131	)
Redeemable convertible preferred stock dividends - undeclared and cumulative		(2,219	)		(2,676	)
Net loss attributable to common stockholders	$	(21,738	)	$	(12,807	)
Net loss per share attributable to common stockholders - basic and diluted	$	(0.74	)	$	(4.84	)
Weighted-average common shares used to compute net loss per share, basic and diluted		29,297,698			2,643,649

The accompanying notes are an integral part of these condensed consolidated financial statements.

REVOLUTION MEDICINES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(in thousands)

(unaudited)

	Three Months Ended March 31,
	2020			2019
Net loss	$	(19,519	)	$	(10,131	)
Other comprehensive income (loss):
Unrealized loss on investments, net		(38	)		—
Total comprehensive loss	$	(19,557	)	$	(10,131	)

The accompanying notes are an integral part of these condensed consolidated financial statements.

REVOLUTION MEDICINES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT)

(in thousands, except share and per share data)

(unaudited)

														Accumulated
	Redeemable Convertible											Additional		other						Total
	Preferred Stock						Common Stock					Paid-in		comprehensive			Accumulated			Stockholders'
	Shares			Amount			Shares			Amount		Capital		income			Deficit			Equity/(Deficit)
Balance at December 31, 2019		39,600,423		$	305,109			3,292,124		$	—	$	4,738	$	74		$	(157,386	)	$	(152,574	)
Conversion of redeemable convertible preferred stock into common stock		(39,600,423	)		(305,109	)		39,600,423			4		305,105		—			—			305,109
Issuance of common stock upon initial public offering, net of offering cost of $23,003		—			—			16,100,000			2		250,695		—			—			250,697
Issuance of common stock pursuant to stock option exercises		—			—			11,097			—		27		—			—			27
Vesting of early exercised stock options		—			—						—		47		—			—			47
Stock-based compensation expense		—			—			—			—		1,567		—			—			1,567
Net unrealized loss on marketable securities		—			—			—			—		—		(38	)		—			(38	)
Net loss		—			—			—			—		—		—			(19,519	)		(19,519	)
Balance at March 31, 2020		—		$	—			59,003,644		$	6	$	562,179	$	36		$	(176,905	)	$	385,316


														Accumulated
	Redeemable Convertible											Additional		other						Total
	Preferred Stock						Common Stock					Paid-in		comprehensive			Accumulated			Stockholders'
	Shares			Amount			Shares			Amount		Capital		income			Deficit			Equity/(Deficit)
Balance at December 31, 2018		29,595,909		$	205,081			3,208,924		$	—	$	1,300	$	—		$	(109,722	)	$	(108,422	)
Issuance of common stock pursuant to stock option exercises		—			—			3,766			—		14		—			—			14
Issuance of common stock pursuant to early exercised stock options		—			—			13,640			—		—		—			—			—
Vesting of early exercised stock options		—			—			—			—		27		—			—			27
Repurchases of early exercised stock		—			—			(1,948	)		—		—		—			—			—
Stock-based compensation expense		—			—			—			—		403		—			—			403
Net loss		—			—			—			—		—		—			(10,131	)		(10,131	)
Balance at March 31, 2019		29,595,909		$	205,081			3,224,382		$	—	$	1,744	$	—		$	(119,853	)	$	(118,109	)

The accompanying notes are an integral part of these condensed consolidated financial statements.

REVOLUTION MEDICINES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

	Three Months Ended March 31,
	2020			2019
Cash flows from operating activities
Net loss	$	(19,519	)	$	(10,131	)
Adjustments to reconcile net loss to net cash used in operating activities:
Amortization of intangible assets		267			267
Stock-based compensation expense		1,567			403
Depreciation and amortization		632			526
Gain on disposal of property and equipment		—			(4	)
Loss on disposal of held-for-sale assets		—			597
Net amortization (accretion) of premium (discount) on marketable securities		(105	)		—
Amortization of operating lease right-of-use asset		645			—
Changes in operating assets and liabilities:
Receivable from related party		287			(629	)
Prepaid expenses and other current assets		(3,202	)		(29	)
Accounts payable		(3,084	)		197
Accrued expenses and other current liabilities		(963	)		(391	)
Deferred revenue, related party		(3,033	)		(3,510	)
Deferred tax liability		(716	)		—
Deferred rent		—			(96	)
Operating lease liability		(775	)		—
Other noncurrent assets		—			(65	)
Other noncurrent liabilities		(19	)		260
Net cash used in operating activities		(28,018	)		(12,605	)
Cash flows from investing activities
Purchases of marketable securities		(100,038	)		—
Maturities of marketable securities		40,925			—
Purchases of property and equipment		(603	)		(341	)
Proceeds from sale of property and equipment		—			102
Proceeds from sale of held-for-sale assets		—			6,000
Net cash provided by (used in) investing activities		(59,716	)		5,761
Cash flows from financing activities
Proceeds from issuance of common stock in initial public offering, net of issuance costs		253,717			—
Proceeds from issuance of common stock under equity incentive plans		27			14
Net cash provided by financing activities		253,744			14
Net increase (decrease) in cash, cash equivalents and restricted cash		166,010			(6,830	)
Cash, cash equivalents and restricted cash - beginning of year		16,873			69,800
Cash, cash equivalents and restricted cash - end of year	$	182,883		$	62,970
Reconciliation of cash, cash equivalents and restricted cash to consolidated balance sheets
Cash and cash equivalents		182,669			62,756
Restricted cash		214			214
Cash, cash equivalents and restricted cash - end of year	$	182,883		$	62,970
Supplemental disclosure of non-cash investing and financing activities
Vesting of early exercised options and restricted stock	$	47		$	27
Purchases of property and equipment in accounts payable and accrued expenses and other current liabilities		37			238
Unpaid offering costs		1,417			—

The accompanying notes are an integral part of these condensed consolidated financial statements.

REVOLUTION MEDICINES, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

1.	Organization

Revolution Medicines, Inc. (the Company) is a clinical-stage precision oncology company focused on developing novel targeted therapies to inhibit targets primarily within the RAS and mTOR signaling pathways. The Company was founded in October 2014 and is headquartered in Redwood City, California.

Liquidity

The Company has incurred net operating losses in each year since inception. As of March 31, 2020, the Company had an accumulated deficit of $176.9 million. Management believes that its existing cash, cash equivalents and marketable securities enable the Company to fund planned operations for at least 12 months following the issuance date of these condensed consolidated financial statements. The Company has been able to fund its operations through the issuance and sale of common stock and redeemable convertible preferred stock in addition to upfront payments and research and development cost reimbursement received under the Company’s collaboration agreement with Genzyme Corporation, an affiliate of Sanofi. Future capital requirements will depend on many factors, including the timing and extent of spending on research and development and payments the Company may receive under the Sanofi collaboration agreement or future collaboration agreements, if any. There can be no assurance that, in the event the Company requires additional financing, such financing will be available at terms acceptable to the Company if at all. Failure to generate sufficient cash flows from operations, raise additional capital and reduce discretionary spending should additional capital not become available could have a material adverse effect on the Company’s ability to achieve its intended business objectives.

Initial Public Offering

On February 18, 2020, the Company closed its initial public offering, (IPO), and issued 16,100,000 shares of its common stock (including the exercise in full by the underwriters of their option to purchase an additional 2,100,000 shares of common stock) at a price to the public of $17.00 per share for net proceeds of $250.7 million, after deducting underwriting discounts and commissions of $19.2 million and expenses of $3.8 million.

2.	Summary of Significant Accounting Policies

Basis of Presentation

The condensed consolidated financial statements have been prepared in conformity with generally accepted accounting principles in the United States (GAAP) and applicable rules of the Securities and Exchange Commission (SEC) regarding interim financial reporting and, in the opinion of management, include all normal and recurring adjustments which are necessary to state fairly the Company's financial position and results of operations for the reported periods. The accompanying condensed consolidated financial statements and related financial information should be read in conjunction with the audited consolidated financial statements and the related notes thereto for the year ended December 31, 2019 included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 filed with the SEC on March 30, 2020. Certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted in accordance with such rules and regulations. The condensed consolidated financial statements for the periods ended March 31, 2020 and March 31, 2019 include the accounts of the Company and its wholly owned subsidiary, Warp Drive Bio, Inc. (Warp Drive). All intercompany balances and transactions have been eliminated in consolidation. The functional and reporting currency of the Company and its subsidiary is the U.S. dollar.

Reverse Stock Split

On February 7, 2020, the Company amended and restated its amended and restated certificate of incorporation to effect a 1-for-4.8661 reverse stock split of the Company’s common stock and redeemable convertible preferred stock. The par value and authorized shares of the common stock and redeemable convertible preferred stock were not adjusted as a result of the reverse stock split. All issued and outstanding common stock, options to purchase common stock and per share amounts contained in the financial statements have been retroactively adjusted to give effect to the reverse stock split for all periods presented.

Use of Estimates

The preparation of consolidated financial statements in conformity with 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 financial statements and the reported amounts of revenues and expenses during the reporting period. On an ongoing basis, management evaluates its estimates, including those related to revenue recognition, clinical accruals, valuation of in-process research and development and developed technologies, valuation of the redeemable convertible preferred stock liability, income taxes, useful lives of property and equipment and intangible assets, impairment of goodwill, and stock-based compensation. The extent to which the COVID-19 pandemic may directly or indirectly impact the Company’s business, financial condition and results of operations is highly uncertain and subject to change. The Company considered the potential impact of the COVID-19 pandemic on the its estimates and assumptions and there was not a material impact to the Company’s condensed consolidated financial statements as of and for the three months ended March 31, 2020. Actual results could materially differ from the Company’s estimates, and there may be changes to the estimates in future periods.

Concentration of Credit Risk and Other Risks and Uncertainties

Financial instruments that potentially subject the Company to concentration of credit risk consist of cash, cash equivalents and marketable securities. The Company’s cash is held by one financial institution in the United States, which management believes to be of high credit quality. The Company invests in money market funds, U.S. government debt securities, U.S. government agency bonds, commercial paper and corporate bonds. The Company has not experienced any losses on its deposits of cash and cash equivalents.

The Company is subject to credit risk as its receivable and collaboration revenue, related party are entirely related to its collaboration agreement with Sanofi. See Note 8, “Sanofi collaboration agreement.”

All of the Company’s clinical trial sites for its RMC-4630 clinical studies are currently located in the U.S. and may be affected by the COVID-19 outbreak due to prioritization of hospital resources toward the COVID-19 outbreak, travel or quarantine restrictions imposed by federal, state or local governments, and the inability to access sites for initiation and patient monitoring and enrollment. As a result, patient screening, new patient enrollment, monitoring and data collection may be affected or delayed. The Company is aware of several clinical sites involved in our RMC-4630 clinical studies that have temporarily stopped or delayed enrolling new patients, with exemptions if appropriate. These developments may delay the Company’s clinical trial timelines. Some of the Company’s third-party manufacturers which it uses for the supply of materials for product candidates or other materials necessary to manufacture product to conduct preclinical tests and clinical trials are located in countries affected by COVID-19, and should they experience disruptions, such as temporary closures or suspension of services, the Company would likely experience delays in advancing clinical trials.

Leases

The Company determines if an arrangement is, or contains, a lease at inception and then classifies the lease as operating or financing based on the underlying terms and conditions of the contract. Leases with terms greater than one year are initially recognized on the balance sheet as right-of-use assets and lease liabilities based on the present value of lease payments over the expected lease term. The interest rate implicit in lease contracts is typically not readily determinable. As such, the Company utilizes the incremental borrowing rate, which is the rate incurred to borrow, on a collateralized basis, an amount equal to the lease payments over a similar term and in a similar economic environment of the applicable country or region. Variable lease payments are excluded from the right-of-use assets and operating lease liabilities and are recognized in the period in which the obligation for those payments is incurred.

Recently Adopted Accounting Pronouncements

In February 2016, the FASB issued ASU No. 2016-02, Leases (ASU 2016-02). ASU 2016-02 provides accounting guidance for both lessee and lessor accounting models. In July 2018, the FASB issued supplemental adoption guidance and clarification to ASC 842 within ASU 2018-10, Codification Improvements to Topic 842, Leases, ASU 2018-11, Leases (Topic 842): Targeted Improvements and ASU 2019-01, Leases (Topic 842): Codification Improvements. ASU 2018-11 provides another transition method in addition to the existing modified retrospective transition method by allowing entities to initially apply the new leasing standard at the adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption.

The Company adopted these ASUs on January 1, 2020. For its operating leases with a term greater than twelve months, the Company recognizes a right-of-use asset and a lease liability on its condensed consolidated balance sheets. The Company adopted the new standard using the modified retrospective approach, which resulted in the initial recognition of a lease liability of $11.5 million, and a right‑to‑use asset of $9.1 million, with no adjustment to the accumulated deficit balance. In connection with the lease adoption, the Company also derecognized deferred rent of $2.4 million. The adoption of the new standard did not have an impact on the condensed consolidated statements of operations. The lease liability is determined as the present value of future lease payments using an estimated rate of interest that the Company would pay to borrow equivalent funds on a collateralized basis at the lease commencement date. In order to estimate the incremental borrowing rate, management estimated its credit rating, adjusted the credit

rating for the nature of the collateral, and benchmarked the borrowing rate against observable yields on comparable securities with a similar term. As of the adoption date, the Company estimated the incremental borrowing rate to be approximately 5%. The Company determined the lease term at the commencement date by considering whether renewal options and termination options are reasonably assured of exercise. The Company elected the practical expedients permitted under ASU 2018-11, which among other things, allowed the Company to carry forward the historical lease classification of those leases in place as of January 1, 2020. The Company elected to exclude from its condensed consolidated balance sheets recognition of leases having a term of 12 months or less (short-term leases). The Company elected to apply the practical expedient and accounted for each lease component and related non-lease component as one single component.

In June 2018, the FASB issued ASU No. 2018-07, Compensation—Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting (ASU 2018-07). ASU 2018-07 simplifies the accounting for share-based payments to nonemployees by aligning it with the accounting for share-based payments to employees, with certain exceptions. The Company adopted ASU 2018-07 on January 1, 2020 and concluded that adoption of the standard did not have a material impact on its condensed consolidated financial statements.

In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement Disclosure Framework (ASU 2018-13). ASU 2018-13 is part of a broader disclosure framework project by the FASB to improve the effectiveness of disclosures by more clearly communicating the information to the user. ASU 2018-13 is applicable to the Company for the fiscal year beginning after December 15, 2019. The Company adopted the standard on January 1, 2020 and concluded that adoption of the standard did not have a material impact on its condensed consolidated financial statements.

In November 2018, the FASB issued ASU No. 2018-18, Collaborative Arrangements (Topic 808): Clarifying the Interaction between Topic 808 and Topic 606 (ASU 2018-18). ASU 2018-18 clarifies that certain transactions between collaborative arrangement participants should be accounted for as revenue under Topic 606 when the counterparty is a customer for a distinct good or service (i.e. a unit of account). For units of account that are in the scope of Topic 606, all of the guidance in Topic 606 should be applied, including the guidance on recognition, measurement, presentation and disclosure. ASU 2018-18 also adds a reference in ASC Topic 808, Collaborative Arrangements (Topic 808) to the unit of account guidance in Topic 606 and requires that it be applied only to assess whether transactions in a collaborative arrangement are in the scope of Topic 606. ASU 2018-18 preclude entities from presenting amounts related to transactions with a counterparty in a collaborative arrangement that is not a customer as revenue from contracts with customers. The Company adopted the standard on January 1, 2020 and concluded that adoption of the standard did not have a material impact on its condensed consolidated financial statements.

Recent Accounting Pronouncements Not Yet Adopted

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (ASU 2016-13), which requires the measurement and recognition of expected credit losses for financial assets held at amortized cost. ASU 2016-13 replaces the existing incurred loss impairment model with an expected loss model. It also eliminates the concept of other-than-temporary impairment and requires credit losses related to available-for-sale debt securities to be recorded through an allowance for credit losses rather than as a reduction in the amortized cost basis of the securities. These changes will result in earlier recognition of credit losses. In November 2018, the FASB issued ASU No. 2018-19, Codification Improvements to Topic 326, Financial Instruments—Credit Losses (ASU 2018-19) which narrowed the scope and changed the effective date for non-public entities for ASU 2016-13. The FASB subsequently issued supplemental guidance within ASU No. 2019-05, Financial Instruments—Credit Losses (Topic 326): Targeted Transition Relief (ASU 2019-05). ASU 2019-05 provides an option to irrevocably elect the fair value option for certain financial assets previously measured at amortized cost basis. ASU 2016-13 is applicable to the Company for the fiscal year beginning after December 15, 2021. Early adoption is permitted. The Company is currently evaluating the impact the adoption of these ASUs will have on its consolidated financial statements and related disclosures.

In August 2018, the FASB issued ASU No. 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 (ASU 2018-15). ASU 2018-15 aligns the requirements for capitalizing implementation costs incurred in a cloud computing arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use-software. This ASU is effective for the Company for the fiscal year beginning after December 31, 2020, and interim periods within fiscal years beginning after December 31, 2021. The Company is currently evaluating the impact of this ASU on the Company’s consolidated financial statements.

In December 2019, the Financial Accounting Standards Board (FASB) issued ASU 2019-12, Income Taxes (Topic 740)-Simplifying the Accounting for Income Taxes (ASU 2019-12). ASU 2019-12 simplifies the accounting for income taxes by removing

certain exceptions to the general principles in Topic 740 and clarifying and amending existing guidance. ASU 2019-12 will be effective for the Company in the first quarter of 2021 with early adoption permitted. The Company is currently assessing the impact of ASU 2019-12 on its consolidated financial statements.

3.	Fair Value Measurements

The following table presents information about the Company’s financial assets that are measured at fair value and indicates the fair value hierarchy of the valuation:

	March 31, 2020
	Total		Level 1		Level 2		Level 3
	(in thousands)
Assets:
Money market funds ⁽¹⁾	$	27,747	$	27,747	$	—	$	—
Commercial paper ^{(1, 2)}		184,422		—		184,422		—
U.S. government and agency securities^{(1, 2)}		100,927		—		100,927		—
Corporate bonds ^{(1, 2)}		36,145		—		36,145		—
Total	$	349,241	$	27,747	$	321,494	$	—


	December 31, 2019
	Total		Level 1		Level 2		Level 3
	(in thousands)
Assets:
Money market funds ⁽¹⁾	$	9,369	$	9,369	$	—	$	—
Commercial paper ^{(1, 2)}		32,597		—		32,597		—
U.S. government and agency securities⁽²⁾		42,814		—		42,814		—
Corporate bonds ⁽²⁾		38,837		—		38,837		—
Total	$	123,617	$	9,369	$	114,248	$	—

(1)	Included in cash and cash equivalents on the consolidated balance sheets.

(2)	Included in marketable securities on the consolidated balance sheets.

Money market funds are measured at fair value on a recurring basis using quoted prices. U.S. government debt securities, U.S. government agency bonds, commercial paper and corporate bonds are measured at fair value, which is derived from independent pricing sources based on quoted prices in active markets for similar securities.

There were no transfers between Levels 1, 2 or 3 for any of the periods presented.

4.	Available-For-Sale Securities

The following tables summarize the estimated value of the Company’s available-for-sale marketable securities and cash equivalents and the gross unrealized gains and losses:

	March 31, 2020
			Gross		Gross
	Amortized		unrealized		unrealized			Estimated
	cost		gain		loss			fair value
	(in thousands)
Marketable securities:
Commercial paper	$	48,337	$	1	$	(118	)	$	48,220
U.S. government and agency securities		81,653		193