Summary of significant accounting policies

3 Months Ended

Mar. 31, 2021

Accounting Policies [Abstract]

Summary of significant accounting policies

Summary of significant accounting policies

(a)Basis of presentation

The accompanying unaudited condensed consolidated financial statements are presented in United States (“U.S.”) dollars and have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and pursuant to the rules and regulations of the United States Securities and Exchange Commission (“SEC”) for interim financial information.  Accordingly, these consolidated financial statements do not include all of the information and footnotes required for complete consolidated financial statements and should be read in conjunction with the audited consolidated financial statements and accompanying notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, filed with the Securities and Exchange Commission on March 25, 2021.

In July 2020, the Company sold all of the issued and outstanding capital stock of Aquinox Pharmaceuticals, Inc. (Canada) (“Aquinox Canada”) to an unrelated third party. On December 31, 2020, Neoleukin Corporation, the Company's wholly owned subsidiary, was merged into the Company. As a result, the Company has consisted of a single operating company since December 31, 2020.

In management’s opinion, the unaudited condensed consolidated financial statements reflect all adjustments (including reclassifications and normal recurring adjustments) necessary to present fairly the financial position of the Company as of March 31, 2021, and results of operations and cash flows for all periods presented. The interim results presented are not necessarily indicative of results that can be expected for a full year.

(b)Use of estimates and assumptions

The preparation of 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 the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of expenses during the reporting period. Significant areas requiring estimates include valuation and recognition of stock-based compensation, the incremental borrowing rate utilized in the measurement of operating and finance lease liabilities, amortization and depreciation of property, plant and equipment and intangible assets, and pre-clinical, clinical, and other accruals. Actual results could differ from those estimates.

(c)Reclassification

The Company reclassified prior year changes in operating lease right-of-use assets and operating lease liabilities in the condensed consolidated statements of cash flows to conform to current year presentation. This reclassification had no effect on net cash used in operating activities.

(d)Leases

At contract inception, the Company determines if the contract is or contains a lease. Lease liabilities are recognized on the lease commencement date based on the estimated present value of lease payments over the lease term. To determine the present value of the lease payments, the Company utilizes its estimated incremental borrowing rate based on information available at the lease commencement date as the interest rate implicit in the lease is typically not readily determinable. The related right-of-use assets are recorded net of any lease incentives received. Variable lease cost primarily includes building operating expenses as charged to the Company by its landlords and payments for lessor-owned assets that are not covered by a tenant improvement allowance.

The Company includes options to extend the lease in its lease liability and right-of-use asset when it is reasonably certain that it will exercise that option. None of the Company's options to extend the rental term of any of its existing leases were considered reasonably certain as of March 31, 2021.

For leases of office space and equipment, the Company has elected to not separate the lease components from the non-lease components.

For leases of office space with a lease term of 12 months or less and which do not include an option to purchase the underlying asset, the Company has elected to recognize the lease payments in the statement of operations on a straight-line basis over the lease term.

(e)Fair value of financial instruments

The carrying amounts of certain of the Company’s financial instruments, including cash and cash equivalents, restricted cash, receivables, accounts payable and other liabilities, approximate their fair values because of their nature and/or short maturities.    

At March 31, 2021, and December 31, 2020, the Company had $156.3 million and $108.3 million in money market funds, respectively. Money market funds are level one financial instruments as they are valued at fair value, which is the closing price reported by the fund sponsor from an actively traded exchange.

(f)Earnings (loss) per share

Basic net loss per share is calculated by dividing the net loss by the weighted average number of shares of common stock outstanding for the period, without consideration for common stock equivalents. Common stock equivalents such as outstanding stock options and unvested restricted stock units are included in the calculation of diluted earnings per share only in periods of net income. Such common stock equivalents are excluded in the calculation of diluted net loss per share in periods of net loss as inclusion of such amounts would be anti-dilutive. Outstanding pre-funded warrants as of March 31, 2021 of 12,663,010 are considered outstanding as of their issuance date and are included in the basic and diluted net loss per share calculation because they are fully vested and exercisable at any time after 61 days' notice for a nominal cash consideration.

(g)Recently issued and recently adopted accounting standards

In December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2019-12 “Simplifying the Accounting for Income Taxes.” The objective of the standard is to improve areas of GAAP by removing certain exceptions permitted by Accounting Standards Codification (“ASC”) Topic 740 - Income Taxes and clarifying existing guidance to facilitate consistent application. ASU 2019-12 became effective for fiscal years and interim periods beginning after December 15, 2020. The Company adopted this standard on January 1, 2021 on a prospective basis. The adoption of this ASU did not have a material impact on the Company's financial condition, results of operations, cash flows, and financial statement disclosures.