10-Q
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75

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

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: 001-38542

 

Kezar Life Sciences, Inc.

(Exact Name of Registrant as Specified in its Charter)

 

 

Delaware

47-3366145

(State or other jurisdiction of

incorporation or organization)

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

4000 Shoreline Court, Suite 300

South San Francisco, CA, 94080

(650) 822-5600

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

 

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

 

Title of each class

Trading symbol

Name of each exchange on which registered

Common Stock, $0.001 par value

KZR

The Nasdaq Stock Market LLC

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

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

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

 

Large accelerated filer

 

 

Accelerated filer

 

Non-accelerated filer

 

 

Smaller reporting company

 

Emerging growth company

 

 

 

 

 

 

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

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

As of May 6, 2022, the registrant had 60,415,586 shares of common stock, $0.001 par value per share, outstanding.

 

 

 


 

Table of Contents

 

 

 

Page

PART I.

FINANCIAL INFORMATION

 

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 Statement of Stockholders’ Equity

4

 

Condensed Consolidated Statements of Cash Flows

5

 

Notes to Unaudited Condensed Consolidated Financial Statements

6

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

16

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

24

Item 4.

Controls and Procedures

24

PART II.

OTHER INFORMATION

 

Item 1.

Legal Proceedings

25

Item 1A.

Risk Factors

25

Item 6.

Exhibits

63

 

 

 

 

 

i


 

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), that involve substantial risks and uncertainties. In some cases, you can identify these statements by forward-looking words such as “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “could,” “should,” “would,” “potential,” “project,” “plan,” “expect,” “seek,” “should,” “target” or similar expressions, or the negative or plural of these words or expressions. These forward-looking statements include statements concerning the following:

statements regarding the impact of the ongoing COVID-19 pandemic and its effects on our operations, research and development, clinical trials and financial position, and its potential effects on the operations of third-party manufacturers, contract research organizations, other service providers, and collaborators with whom we conduct business;
our plans to develop and commercialize our product candidates;
the initiation, timing, progress and expected results of our current and future clinical trials and our research and development programs;
our estimates regarding expenses, future revenue, capital requirements and needs for additional financing;
our ability to successfully acquire or in-license additional product candidates or other technology on reasonable terms;
our ability to maintain and establish collaborations or strategic relationships or obtain additional funding;
the timing and likelihood of obtaining regulatory approval of our current and future product candidates;
our expectations regarding the potential market size and the rate and degree of market acceptance of such product candidates;
our ability to fund our working capital requirements and expectations regarding the sufficiency of our capital resources;
the implementation of our business model and strategic plans for our business and product candidates;
the scope of protection we are able to establish and maintain for intellectual property rights and the duration of our patent rights covering our product candidates;
developments or disputes concerning our intellectual property or other proprietary rights;
the scalability and commercial viability of our manufacturing methods and processes;
our expectations regarding government and third-party payor coverage and reimbursement;
our ability to compete in the markets for our product candidates;
the impact of government laws and regulations;
developments relating to our competitors and our industry; and
the factors that may impact our financial results.

These statements are only current predictions and are subject to known and unknown risks, uncertainties and other factors that may cause our or our industry’s actual results, levels of activity, performance or achievements to be materially different from those anticipated by the forward-looking statements. We discuss many of these risks in greater detail under the heading “Risk Factors” and elsewhere in this report. You should not rely upon forward-looking statements as predictions of future events.

Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Except as required by law, we are under no duty to update or revise any of the forward-looking statements in this report, whether as a result of new information, future events or otherwise, after the date of this report.

Unless the context otherwise requires, the terms “Kezar,” “Kezar Life Sciences,” “the Company,” “we,” “us,” “our” and similar references in this Quarterly Report on Form 10-Q refer to Kezar Life Sciences, Inc. and our wholly owned Australian subsidiary, Kezar Life Sciences Australia Pty Ltd.

 

 

 

 

 

ii


 

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

KEZAR LIFE SCIENCES, INC.

Condensed Consolidated Balance Sheets

(in thousands, except share and per share amounts)

 

 

 

March 31, 2022

 

 

December 31, 2021

 

 

 

(Unaudited)

 

 

 

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

38,908

 

 

$

62,882

 

Marketable securities

 

 

203,701

 

 

 

145,473

 

Prepaid expenses

 

 

2,331

 

 

 

2,570

 

Other current assets

 

 

1,056

 

 

 

729

 

Total current assets

 

 

245,996

 

 

 

211,654

 

Property and equipment, net

 

 

3,041

 

 

 

3,283

 

Operating lease right-of-use asset

 

 

2,547

 

 

 

2,714

 

Other assets

 

 

282

 

 

 

282

 

Total assets

 

$

251,866

 

 

$

217,933

 

Liabilities and Stockholders' Equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

1,359

 

 

$

2,028

 

Accrued and other current liabilities

 

 

4,378

 

 

 

4,985

 

Operating lease liabilities, current

 

 

1,241

 

 

 

1,199

 

Total current liabilities

 

 

6,978

 

 

 

8,212

 

Operating lease liabilities, noncurrent

 

 

2,898

 

 

 

3,223

 

Debt, noncurrent

 

 

9,675

 

 

 

9,622

 

Total liabilities

 

 

19,551

 

 

 

21,057

 

Stockholders' equity:

 

 

 

 

 

 

Common stock, $0.001 par value, 125,000,000 shares authorized as of March 31,
   2022 (unaudited) and December 31, 2021;
59,564,659 and 56,259,747 shares issued
   and outstanding as of March 31, 2022 (unaudited) and December 31, 2021,
   respectively

 

 

60

 

 

 

56

 

Preferred stock, $0.001 par value, 10,000,000 shares authorized, zero shares issued
   and outstanding as of March 31, 2022 (unaudited) and December 31, 2021

 

 

 

 

 

 

Additional paid-in capital

 

 

429,715

 

 

 

377,765

 

Accumulated other comprehensive loss

 

 

(782

)

 

 

(291

)

Accumulated deficit

 

 

(196,678

)

 

 

(180,654

)

Total stockholders' equity

 

 

232,315

 

 

 

196,876

 

Total liabilities and stockholders' equity

 

$

251,866

 

 

$

217,933

 

 

See accompanying notes to the unaudited condensed consolidated financial statements

 

 

1


 

KEZAR LIFE SCIENCES, INC.

Condensed Consolidated Statements of Operations

(Unaudited)

(In thousands, except share and per share amounts)

 

 

 

Three Months Ended

 

 

 

 

March 31,

 

 

 

 

2022

 

 

2021

 

 

Operating expenses:

 

 

 

 

 

 

 

Research and development

 

$

10,944

 

 

$

9,286

 

 

General and administrative

 

 

4,934

 

 

 

3,762

 

 

Total operating expenses

 

 

15,878

 

 

 

13,048

 

 

Loss from operations

 

 

(15,878

)

 

 

(13,048

)

 

Interest income

 

 

108

 

 

 

54

 

 

Interest expense

 

 

(254

)

 

 

 

 

Net loss

 

$

(16,024

)

 

$

(12,994

)

 

Net loss per common share, basic and diluted

 

$

(0.26

)

 

$

(0.25

)

 

Weighted-average shares used to compute net loss per common
   share, basic and diluted

 

 

60,630,389

 

 

 

51,058,039

 

 

 

See accompanying notes to the unaudited condensed consolidated financial statements

 

2


 

KEZAR LIFE SCIENCES, INC.

Condensed Consolidated Statements of Comprehensive Loss

(Unaudited)

(In thousands)

 

 

 

Three Months Ended

 

 

 

 

March 31,

 

 

 

 

2022

 

 

2021

 

 

Net loss

 

$

(16,024

)

 

$

(12,994

)

 

Other comprehensive (loss) income

 

 

 

 

 

 

 

Foreign currency translation adjustments

 

 

25

 

 

 

(11

)

 

Unrealized (loss) gain on marketable securities

 

 

(516

)

 

 

8

 

 

Total other comprehensive loss, net of tax

 

 

(491

)

 

 

(3

)

 

Comprehensive loss

 

$

(16,515

)

 

$

(12,997

)

 

 

See accompanying notes to the unaudited condensed consolidated financial statements

 

3


 

KEZAR LIFE SCIENCES, INC.

Condensed Consolidated Statements of Stockholders' Equity

(Unaudited)

(In thousands, except share amounts)

 

 

 

COMMON STOCK

 

 

ADDITIONAL
PAID-IN

 

 

ACCUMULATED
OTHER
COMPREHENSIVE

 

 

ACCUMULATED

 

 

TOTAL
STOCKHOLDERS'

 

 

 

SHARES

 

 

AMOUNTS

 

 

CAPITAL

 

 

INCOME/(LOSS)

 

 

DEFICIT

 

 

EQUITY

 

Balance at December 31, 2021

 

 

56,259,747

 

 

$

56

 

 

$

377,765

 

 

$

(291

)

 

$

(180,654

)

 

$

196,876

 

Issuance of common stock under the ATM Agreement,
   net of offering costs of $
1,504

 

 

3,245,738

 

 

 

4

 

 

 

48,638

 

 

 

 

 

 

 

 

 

48,642

 

Issuance of common stock under employee stock incentive plans

 

 

59,174

 

 

 

 

 

 

208

 

 

 

 

 

 

 

 

 

208

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

3,104

 

 

 

 

 

 

 

 

 

3,104

 

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

(491

)

 

 

 

 

 

(491

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(16,024

)

 

 

(16,024

)

Balance at March 31, 2022

 

 

59,564,659

 

 

$

60

 

 

$

429,715

 

 

$

(782

)

 

$

(196,678

)

 

$

232,315

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

COMMON STOCK

 

 

ADDITIONAL
PAID-IN

 

 

ACCUMULATED
OTHER
COMPREHENSIVE

 

 

ACCUMULATED

 

 

TOTAL
STOCKHOLDERS'

 

 

 

SHARES

 

 

AMOUNTS

 

 

CAPITAL

 

 

LOSS

 

 

DEFICIT

 

 

EQUITY

 

Balance at December 31, 2020

 

 

46,359,743

 

 

$

46

 

 

$

267,093

 

 

$

(137

)

 

$

(126,024

)

 

$

140,978

 

Issuance of common stock under the ATM Agreement,
   net of offering costs of $
330

 

 

1,705,800

 

 

 

2

 

 

 

10,671

 

 

 

 

 

 

 

 

 

10,673

 

Issuance of common stock under employee stock incentive plans

 

 

14,325

 

 

 

 

 

 

48

 

 

 

 

 

 

 

 

 

48

 

Vesting related to shares of common stock issued
   pursuant to early exercises

 

 

 

 

 

 

 

 

7

 

 

 

 

 

 

 

 

 

7

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

1,928

 

 

 

 

 

 

 

 

 

1,928

 

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

(3

)

 

 

 

 

 

(3

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(12,994

)

 

 

(12,994

)

Balance at March 31, 2021

 

 

48,079,868

 

 

$

48

 

 

$

279,747

 

 

$

(140

)

 

$

(139,018

)

 

$

140,637

 

 

See accompanying notes to the unaudited condensed consolidated financial statements

 

4


 

KEZAR LIFE SCIENCES, INC.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(In thousands)

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2022

 

 

2021

 

Cash flows from operating activities:

 

 

 

 

 

 

Net loss

 

$

(16,024

)

 

$

(12,994

)

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

 

 

 

 

 

 

Depreciation and amortization

 

 

417

 

 

 

372

 

Stock-based compensation

 

 

3,104

 

 

 

1,928

 

Amortization of premiums and discounts on marketable securities

 

 

339

 

 

 

514

 

Amortization of debt discount and issuance costs and other
   non-cash interest

 

 

53

 

 

 

 

Changes in operating assets and liabilities

 

 

 

 

 

 

Prepaid expenses, other current assets and other long-term assets

 

 

(86

)

 

 

980

 

Accounts payable, accrued and other current liabilities

 

 

(834

)

 

 

1,088

 

Operating lease liabilities

 

 

(283

)

 

 

(245

)

Net cash used in operating activities

 

 

(13,314

)

 

 

(8,357

)

Cash flows from investing activities:

 

 

 

 

 

 

Purchases of property and equipment

 

 

(450

)

 

 

 

Purchases of marketable securities

 

 

(74,522

)

 

 

(26,187

)

Maturities of marketable securities

 

 

15,439

 

 

 

25,500

 

Net cash used in investing activities

 

 

(59,533

)

 

 

(687

)

Cash flows from financing activities:

 

 

 

 

 

 

Proceeds from issuance of common stock and warrants, net of issuance costs

 

 

48,642

 

 

 

10,673

 

Proceeds from issuance of common stock under employee stock incentive plans

 

 

206

 

 

 

62

 

Net cash provided by financing activities

 

 

48,848

 

 

 

10,735

 

Effect of exchange rate changes on cash and cash equivalents

 

 

25

 

 

 

(11

)

Net (decrease) increase in cash and cash equivalents

 

 

(23,974

)

 

 

1,680

 

Cash and cash equivalents at the beginning of period

 

 

62,882

 

 

 

21,228

 

Cash and cash equivalents at the end of period

 

$

38,908

 

 

$

22,908

 

Supplemental disclosures of noncash investing and financing information:

 

 

 

 

 

 

Reclassification of employee stock liability to equity upon vesting

 

$

 

 

$

7

 

Unpaid offering costs in accrued liabilities

 

$

 

 

$

25

 

Supplemental disclosures

 

 

 

 

 

 

Cash paid for interest

 

$

201

 

 

$

 

 

 

 

 

 

 

 

 

See accompanying notes to the unaudited condensed consolidated financial statements

 

5


 

Kezar Life Sciences, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

1. Organization and Description of the Business

Description of Business

Kezar Life Sciences, Inc. (the “Company,” “we,” “us,” or “our”) was incorporated in the state of Delaware in February 2015 and commenced operations in June 2015. The Company is a clinical-stage biotechnology company discovering and developing breakthrough treatments in immune-mediated and oncologic disorders. The Company’s principal operations are in South San Francisco, California, and it operates in one segment.

Liquidity

Since commencing operations in mid-2015, substantially all of the Company’s efforts have been focused on research, development, and the advancement of the Company’s product candidates, KZR-616 (zetomipzomib) and KZR-261. The Company’s ultimate success depends on the outcome of these ongoing research and development activities. The Company has not yet generated product sales and as a result has experienced operating losses since inception and had an accumulated deficit of $196.7 million as of March 31, 2022. The Company expects to incur additional losses in the future to conduct research and development and will need to raise additional capital to fully implement management’s business plan. The Company intends to raise such capital through the issuance of additional equity, and potentially through borrowings, strategic alliances with partner companies and other licensing transactions. However, if such financing is not available at adequate levels, the Company may need to reevaluate its operating plans. Management believes that its existing cash, cash equivalents and marketable securities will be sufficient to fund the Company’s cash requirements for at least 12 months following the issuance of these financial statements.

In December 2021, the Company entered into a Sales Agreement (the “ATM Agreement”) with Cowen and Company, LLC (“Cowen”), pursuant to which the Company can offer and sell, from time to time at its sole discretion through Cowen, as its sales agent, shares of its common stock having an aggregate offering price of up to $200.0 million. Any shares of its common stock sold will be issued pursuant to the Company’s shelf registration statement on Form S-3ASR (File No. 333-261774). The Company will pay Cowen a commission equal to 3.0% of the gross sales proceeds of any shares of its common stock sold through Cowen under the ATM Agreement and also has provided Cowen with indemnification and contribution rights.

During the three months ended March 31, 2022, the Company sold an aggregate of 3,245,738 shares of its common stock at a weighted average purchase price of $15.45 per share pursuant to the ATM Agreement for net proceeds of approximately $48.6 million. Subsequent to March 31, 2022, the Company sold an additional 820,000 shares of its common stock pursuant to the ATM Agreement for net proceeds of approximately $13.4 million at a weighted average purchase price of $16.82 per share.

2. Summary of Significant Accounting Policies

Significant Accounting Policies

The Company’s significant accounting policies are disclosed in the audited consolidated financial statements for the year ended December 31, 2021 and the notes thereto, which are included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021, filed with the U.S. Securities and Exchange Commission (“SEC”) on March 17, 2022 (the “Annual Report”), and there have been no material changes during the three months ended March 31, 2022.

Basis of Presentation and Consolidation

The condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) and include the Company’s accounts and those of its wholly owned Australian subsidiary, Kezar Life Sciences Australia Pty Ltd., which is a proprietary company limited by shares. All intercompany balances and transactions have been eliminated upon consolidation.

The condensed consolidated balance sheet at December 31, 2021 has been derived from the audited consolidated financial statements at that date but does not include all information and footnotes required by GAAP for complete financial statements. These unaudited condensed consolidated financial statements should be read in conjunction with the audited financial statements included in the Annual Report.

 

6


 

Unaudited Condensed Consolidated Financial Statements

The accompanying financial information as of March 31, 2022 is unaudited. The interim condensed consolidated financial statements included in this report reflect all adjustments (consisting only of normal recurring adjustments) that our management considers necessary for the fair statement of the results of operations for the interim periods covered and of our financial condition at the date of the interim balance sheet. The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with GAAP for interim financial information. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. The results for interim periods are not necessarily indicative of the results for the entire year or any other interim period. The accompanying condensed consolidated financial statements and related financial information should be read in conjunction with the audited financial statements and the related notes thereto included in our Annual Report.

Use of Estimates

The preparation of 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 at the date of the financial statements and the reported amounts of expenses during the reporting period. Significant items subject to such estimates and assumptions include the stock-based compensation, and accrued research and development costs. Management bases its estimates on historical experience and on various other market-specific relevant assumptions that management believes to be reasonable under the circumstances. Actual results may differ from those estimates.

The Company anticipates that the ongoing COVID-19 pandemic, recent geopolitical events and supply-chain concerns could have an impact on our clinical development timelines. Estimates and assumptions about future events and their effects cannot be determined with certainty and therefore require the exercise of judgment. As of the date of issuance of these financial statements, the Company is not aware of any specific event or circumstance that would require the Company to update its estimates, assumptions and judgments or revise the carrying value of its assets or liabilities. These estimates may change as new events occur and additional information is obtained and are recognized in the consolidated financial statements as soon as they become known. Actual results could differ from those estimates and any such differences may be material to the Company’s consolidated financial statements.

Significant Risks and Uncertainties

The Company has implemented business continuity plans designed to address and mitigate the impact of the COVID-19 pandemic on its business. The extent to which the COVID-19 pandemic impacts the Company’s business, preclinical and clinical development and regulatory efforts, corporate development objectives and the value of and market for its common stock, will depend on future developments that are highly uncertain and cannot be predicted with confidence at this time, such as the ultimate duration of the pandemic, travel restrictions, quarantines, social distancing, safety measures and business closure requirements in the United States, Europe, China and other countries where we conduct clinical trials and/or manufacture our product candidates. The global economic slowdown, the overall disruption of global healthcare systems and the other risks and uncertainties associated with the pandemic, geopolitical events and global supply chains could have a material adverse effect on the Company’s business, financial condition, results of operations and growth prospects.

In addition, the Company is subject to other challenges and risks specific to its business and its ability to execute on its strategy, as well as risks and uncertainties common to companies in the biotechnology industry with development operations, including, without limitation, risks and uncertainties associated with: obtaining regulatory feedback regarding the Company’s product candidates; delays or problems in the supply of its product candidates; loss of single source suppliers or their failure to comply with manufacturing regulations; identifying, acquiring or in-licensing additional technologies or product candidates; clinical development and the inherent uncertainty of clinical success; the challenges of protecting and enhancing its intellectual property rights; and complying with applicable regulatory requirements.

Recent Accounting Pronouncements

The Company continues to monitor new accounting pronouncements issued by the Financial Accounting Standards Board and does not believe any accounting pronouncements issued through the date of this report will have a material impact on the Company’s condensed consolidated financial statements.

 

7


 

3. Fair Value Measurements

Financial assets and liabilities are recorded at fair value. The carrying amount of certain financial instruments, including cash and cash equivalents, marketable securities, other current assets, accounts payable and accrued liabilities, approximate fair value due to their relatively short maturities. Assets and liabilities recorded at fair value on a recurring basis in the condensed consolidated balance sheets are categorized based upon the level of judgment associated with the inputs used to measure their fair values. Fair value is defined as the exchange price that would be received for an asset or an exit price that would be paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The authoritative guidance on fair value measurements establishes a three-tier fair value hierarchy for disclosure of fair value measurements as follows:

Level 1: Quoted prices in active markets for identical assets or liabilities.

Level 2: Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3: Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

Assets and liabilities measured at fair value are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires management to make judgments and consider factors specific to the asset or liability.

The Company applies fair value accounting for all financial assets and liabilities and nonfinancial assets and liabilities that are required to be recognized or disclosed at fair value in the financial statements. The Company determines the fair value of Level 1 assets using quoted prices in active markets for identical assets. The Company reviews trading activity and pricing for Level 2 investments as of each measurement date. Level 2 inputs, which are obtained from various third-party data providers, represent quoted prices for similar assets in active markets and were derived from observable market data, or, if not directly observable, were derived from or corroborated by other observable market data.

In certain cases, where there is limited activity or less transparency around inputs to valuation, securities are classified as Level 3 within the valuation hierarchy. The Company did not have any assets or liabilities measured using Level 3 inputs as of March 31, 2022 or December 31, 2021.

The following table summarizes the Company’s financial assets measured at fair value on a recurring basis and classified under the appropriate level of the fair value hierarchy as described above (in thousands):

 

 

 

March 31, 2022

 

 

 

Total

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

Financial Assets:

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury money market funds

 

$

22,334

 

 

$

22,334

 

 

$

 

 

$

 

U.S. Treasury securities

 

 

141,731

 

 

 

141,731

 

 

 

 

 

 

 

Commercial paper

 

 

74,744

 

 

 

 

 

 

74,744

 

 

 

 

U.S. agency bonds

 

 

1,197

 

 

 

 

 

 

1,197

 

 

 

 

Total

 

$

240,006

 

 

$

164,065

 

 

$

75,941

 

 

$

 

 

 

 

December 31, 2021

 

 

 

Total

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

Financial Assets:

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury money market funds

 

$

60,375

 

 

$

60,375

 

 

$

 

 

$

 

U.S. Treasury securities

 

 

82,106

 

 

 

82,106

 

 

 

 

 

 

 

Commercial paper

 

 

46,687

 

 

 

 

 

 

46,687

 

 

 

 

Corporate debt securities

 

 

15,481

 

 

 

 

 

 

15,481

 

 

 

 

U.S. agency bonds

 

 

1,199

 

 

 

 

 

 

1,199

 

 

 

 

Total

 

$

205,848

 

 

$

142,481

 

 

$

63,367

 

 

$

 

 

 

 

 

8


 

4. Available-for-Sale Securities

The following table is a summary of available-for-sale securities recorded in cash and cash equivalents or marketable securities in the Company’s condensed consolidated balance sheets (in thousands):

 

 

 

March 31, 2022

 

Financial Assets

 

Amortized Cost

 

 

Unrealized
Gains

 

 

Unrealized
Losses

 

 

Fair Value

 

U.S. Treasury money market funds

 

$

22,334

 

 

$

 

 

$

 

 

$

22,334

 

U.S. Treasury securities

 

 

142,185

 

 

 

 

 

 

(454

)

 

 

141,731

 

Commercial paper

 

 

74,898

 

 

 

 

 

 

(154

)

 

 

74,744

 

U.S. agency bonds

 

 

1,200

 

 

 

 

 

 

(3

)

 

 

1,197

 

Total

 

$

240,617

 

 

$

 

 

$

(611

)

 

$

240,006

 

 

 

 

December 31, 2021

 

Financial Assets

 

Amortized Cost

 

 

Unrealized
Gains

 

 

Unrealized
Losses

 

 

Fair Value

 

U.S. Treasury money market funds

 

$

60,375

 

 

$

 

 

$

 

 

$

60,375

 

U.S. Treasury securities

 

 

82,204

 

 

 

 

 

 

(98

)

 

 

82,106

 

Commercial paper

 

 

46,678

 

 

 

13

 

 

 

(4

)

 

 

46,687

 

Corporate debt securities

 

 

15,486

 

 

 

 

 

 

(5

)

 

 

15,481

 

U.S. agency bonds

 

 

1,200

 

 

 

 

 

 

(1

)

 

 

1,199

 

Total

 

$

205,943

 

 

$

13

 

 

$

(108

)

 

$

205,848

 

As of March 31, 2022 and December 31, 2021, the Company has not recognized an allowance for credit losses on any securities in an unrealized loss position.

The following table displays additional information regarding gross unrealized losses and fair value by major security type for available-for-sale securities in an unrealized loss position as of March 31, 2022 and December 31, 2021 (in thousands):

 

 

March 31, 2022

 

 

December 31, 2021

 

 

 

Less than 12 consecutive months

 

 

Less than 12 consecutive months

 

 

 

Fair Value

 

 

Unrealized Losses

 

 

Fair Value

 

 

Unrealized Losses

 

U.S. Treasury securities

 

$

141,731