7

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 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 September 30, 2021
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 001-37581

Aclaris Therapeutics, Inc.

(Exact Name of Registrant as Specified in Its Charter)

Delaware (State or Other Jurisdiction of Incorporation or Organization)	46-0571712 (I.R.S. Employer Identification No.)
640 Lee Road, Suite 200 Wayne, PA (Address of principal executive offices)	19087 (Zip Code)

Registrant’s telephone number, including area code: (484) 324-7933

N/A

(Former name, former address and former fiscal year, if changed since last report)

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

Title of Each Class:	Trading Symbol(s)	Name of Each Exchange on which Registered
Common Stock, $0.00001 par value	ACRS	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 Securities Exchange Act of 1934:

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 Securities Exchange Act of 1934).   Yes  ☐ No ☒

The number of outstanding shares of the registrant’s common stock, par value $0.00001 per share, as of the close of business on October 29, 2021 was 61,227,333.

ACLARIS THERAPEUTICS, INC.

INDEX TO FORM 10-Q

	PAGE
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements	2
Unaudited Condensed Consolidated Balance Sheets as of September 30, 2021 and December 31, 2020	2
Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss for the three and nine months ended September 30, 2021 and 2020	3
Unaudited Condensed Consolidated Statements of Stockholders’ Equity for the three and nine months ended September 30, 2021 and 2020	4
Unaudited Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2021 and 2020	5
Notes to Unaudited 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	35
Item 4. Controls and Procedures	35
PART II. OTHER INFORMATION
Item 1. Legal Proceedings	36
Item 1A. Risk Factors	37
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	37
Item 6. Exhibits	37
Signatures	39

Part I. FINANCIAL INFORMATION

Item 1. Financial Statements

ACLARIS THERAPEUTICS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In thousands, except share and per share data)

	September 30,		December 31,
	2021		2020
Assets
Current assets:
Cash and cash equivalents	$	53,602	$	22,063
Short-term marketable securities		144,280		32,068
Accounts receivable, net		811		772
Prepaid expenses and other current assets		7,089		2,590
Total current assets		205,782		57,493
Marketable securities		45,735		—
Property and equipment, net		1,170		1,654
Intangible assets		7,067		7,123
Other assets		3,740		4,514
Total assets	$	263,494	$	70,784
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	7,564	$	5,254
Accrued expenses		7,408		5,906
Current portion of lease liabilities		669		603
Discontinued operations - current liabilities		2,198		3,111
Total current liabilities		17,839		14,874
Other liabilities		2,507		3,179
Long-term debt, net		—		10,653
Contingent consideration		26,200		4,061
Deferred tax liability		367		367
Total liabilities		46,913		33,134
Commitments and contingencies (Note 17)
Stockholders’ Equity:
Preferred stock, $0.00001 par value; 10,000,000 shares authorized and no shares issued or outstanding at September 30, 2021 and December 31, 2020		—		—
Common stock, $0.00001 par value; 100,000,000 shares authorized at September 30, 2021 and December 31, 2020; 61,226,750 and 45,109,314 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively		1		—
Additional paid‑in capital		789,186		542,286
Accumulated other comprehensive loss		(3)		(94)
Accumulated deficit		(572,603)		(504,542)
Total stockholders’ equity		216,581		37,650
Total liabilities and stockholders’ equity	$	263,494	$	70,784

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

2

ACLARIS THERAPEUTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(Unaudited)

(In thousands, except share and per share data)

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2021		2020		2021		2020
Revenues:
Contract research	$	1,415	$	1,331	$	4,556	$	4,373
Other revenue		244		118		704		529
Total revenue		1,659		1,449		5,260		4,902
Costs and expenses:
Cost of revenue		1,099		1,189		3,564		3,847
Research and development		13,976		6,240		29,711		20,382
General and administrative		5,979		3,859		16,676		15,632
Revaluation of contingent consideration		900		626		22,139		2,393
Total costs and expenses		21,954		11,914		72,090		42,254
Loss from operations		(20,295)		(10,465)		(66,830)		(37,352)
Other expense, net		(851)		(194)		(1,231)		(205)
Loss from continuing operations		(21,146)		(10,659)		(68,061)		(37,557)
Loss from discontinued operations		—		—		—		(285)
Net loss	$	(21,146)	$	(10,659)	$	(68,061)	$	(37,842)
Net loss per share, basic and diluted	$	(0.35)	$	(0.25)	$	(1.23)	$	(0.90)
Weighted average common shares outstanding, basic and diluted		61,219,321		42,802,582		55,215,037		42,187,140
Other comprehensive income (loss):
Unrealized gain (loss) on marketable securities, net of tax of $0	$	5	$	(24)	$	(5)	$	(1)
Foreign currency translation adjustment		176		(36)		96		22
Total other comprehensive income (loss)		181		(60)		91		21
Comprehensive loss	$	(20,965)	$	(10,719)	$	(67,970)	$	(37,821)

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

3

ACLARIS THERAPEUTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF

STOCKHOLDERS’ EQUITY

(Unaudited)

(In thousands, except share data)

						Accumulated
	Common Stock			Additional		Other				Total
		Par		Paid‑in		Comprehensive		Accumulated		Stockholders’
	Shares	Value		Capital		Loss		Deficit		Equity
Balance at December 31, 2020	45,109,314	$	—	$	542,286	$	(94)	$	(504,542)	$	37,650
Issuance of common stock in connection with exercise of stock options and warrants and vesting of restricted stock units	666,144		—		(2,579)		—		—		(2,579)
Issuance of common stock in connection with public offering, net of offering costs of $7,011	6,306,271		—		103,348		—		—		103,348
Unrealized loss on marketable securities	—		—		—		(35)		—		(35)
Foreign currency translation adjustment	—		—		—		(11)		—		(11)
Stock-based compensation expense	—		—		2,675		—		—		2,675
Net loss	—		—		—		—		(28,754)		(28,754)
Balance at March 31, 2021	52,081,729	$	—	$	645,730	$	(140)	$	(533,296)	$	112,294
Issuance of common stock in connection with exercise of stock options and vesting of restricted stock units	1,024,666		—		1,041		—		—		1,041
Issuance of common stock in connection with public offering, net of offering costs of $8,899	8,098,592		1		134,851		—		—		134,852
Unrealized gain on marketable securities	—		—		—		25		—		25
Foreign currency translation adjustment	—		—		—		(69)		—		(69)
Stock-based compensation expense	—		—		3,833		—		—		3,833
Net loss	—		—		—		—		(18,161)		(18,161)
Balance at June 30, 2021	61,204,987	$	1	$	785,455	$	(184)	$	(551,457)	$	233,815
Issuance of common stock in connection with vesting of restricted stock units	21,763		—		29		—		—		29
Unrealized gain on marketable securities	—		—		—		5		—		5
Foreign currency translation adjustment	—		—		—		176		—		176
Stock-based compensation expense	—		—		3,702		—		—		3,702
Net loss	—		—		—		—		(21,146)		(21,146)
Balance at September 30, 2021	61,226,750	$	1	$	789,186	$	(3)	$	(572,603)	$	216,581

						Accumulated
	Common Stock			Additional		Other				Total
		Par		Paid‑in		Comprehensive		Accumulated		Stockholders’
	Shares	Value		Capital		Income (Loss)		Deficit		Equity
Balance at December 31, 2019	41,485,638	$	—	$	523,505	$	(66)	$	(453,527)	$	69,912
Issuance of common stock in connection with vesting of restricted stock units	346,582		—		(121)		—		—		(121)
Fair value of warrants issued	—		—		378		—		—		378
Unrealized gain on marketable securities	—		—		—		60		—		60
Foreign currency translation adjustment	—		—		—		53		—		53
Stock-based compensation expense	—		—		3,453		—		—		3,453
Net loss	—		—		—		—		(15,586)		(15,586)
Balance at March 31, 2020	41,832,220	$	—	$	527,215	$	47	$	(469,113)	$	58,149
Issuance of common stock in connection with vesting of restricted stock units	858,894		—		(463)		—		—		(463)
Unrealized loss on marketable securities	—		—		—		(37)		—		(37)
Foreign currency translation adjustment	—		—		—		5		—		5
Stock-based compensation expense	—		—		3,309		—		—		3,309
Net loss	—		—		—		—		(11,597)		(11,597)
Balance at June 30, 2020	42,691,114	$	—	$	530,061	$	15	$	(480,710)	$	49,366
Issuance of common stock in connection with vesting of restricted stock units	103,689		—		(95)		—		—		(95)
Issuance of common stock in connection with equity purchase agreement	121,584		—		263		—		—		263
Unrealized loss on marketable securities	—		—		—		(24)		—		(24)
Foreign currency translation adjustment	—		—		—		(35)		—		(35)
Stock-based compensation expense	—		—		1,941		—		—		1,941
Net loss	—		—		—		—		(10,659)		(10,659)
Balance at September 30, 2020	42,916,387	$	—	$	532,170	$	(44)	$	(491,369)	$	40,757

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

4

ACLARIS THERAPEUTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)

	Nine Months Ended
	September 30,
	2021		2020
Cash flows from operating activities:
Net loss	$	(68,061)	$	(37,842)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		726		1,773
Stock-based compensation expense		10,209		8,703
Revaluation of contingent consideration		22,139		2,393
Loss on extinguishment of debt		752		—
Changes in operating assets and liabilities:
Accounts receivable		(39)		4,783
Prepaid expenses and other assets		(8)		1,303
Accounts payable		1,293		(5,448)
Accrued expenses		(2,070)		(5,441)
Net cash used in operating activities		(35,059)		(29,776)
Cash flows from investing activities:
Purchases of property and equipment		(108)		(445)
Purchases of marketable securities		(199,862)		(39,898)
Proceeds from sales and maturities of marketable securities		41,514		49,035
Net cash provided by (used in) investing activities		(158,456)		8,692
Cash flows from financing activities:
Proceeds from issuance of common stock in connection with public offerings, net of issuance costs		238,200		—
Proceeds from debt financing (including warrants), net of issuance costs		—		10,913
Repayment of debt		(11,483)		—
Restricted stock unit employee tax withholdings		(3,122)		—
Finance lease payments		—		(128)
Deferred issuance costs		—		(242)
Proceeds from exercise of employee stock options and the issuance of stock		1,459		—
Net cash provided by financing activities		225,054		10,543
Net increase (decrease) in cash, cash equivalents and restricted cash		31,539		(10,541)
Cash, cash equivalents and restricted cash at beginning of period		22,063		35,937
Cash, cash equivalents and restricted cash at end of period	$	53,602	$	25,396
Supplemental disclosure of non-cash investing and financing activities:
Fair value of warrants issued in connection with debt financing	$	—	$	378
Fair value of common stock issued in connection with an equity purchase agreement	$	—	$	263

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

5

ACLARIS THERAPEUTICS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. Organization and Nature of Business

Overview

Aclaris Therapeutics, Inc. was incorporated under the laws of the State of Delaware in 2012.  In July 2015, Aclaris Therapeutics International Limited (“ATIL”) was established under the laws of the United Kingdom as a wholly-owned subsidiary of Aclaris Therapeutics, Inc.  In August 2017, Confluence Life Sciences, Inc. (now known as Aclaris Life Sciences, Inc.) (“Confluence”) was acquired by Aclaris Therapeutics, Inc. and became a wholly-owned subsidiary thereof.  Aclaris Therapeutics, Inc., ATIL and Confluence are referred to collectively as the “Company.”  The Company is a clinical-stage biopharmaceutical company focused on developing novel drug candidates for immuno-inflammatory diseases.  In addition to developing its novel drug candidates, the Company is pursuing strategic alternatives, including identifying and consummating transactions with third-party partners, to further develop, obtain marketing approval for and/or commercialize its novel drug candidates.  

Liquidity

The Company’s condensed consolidated financial statements have been prepared on the basis of continuity of operations, realization of assets and the satisfaction of liabilities in the ordinary course of business.  As of September 30, 2021, the Company had cash, cash equivalents and marketable securities of $243.6 million and an accumulated deficit of $572.6 million.  Since inception, the Company has incurred net losses and negative cash flows from its operations.  Prior to the acquisition of Confluence in August 2017, the Company had never generated revenue.  There can be no assurance that profitable operations will ever be achieved, and, if achieved, will be sustained on a continuing basis.  In addition, development activities, including clinical and preclinical testing of the Company’s drug candidates, will require significant additional financing.  The future viability of the Company is dependent on its ability to successfully develop its drug candidates and to generate revenue from identifying and consummating transactions with third-party partners to further develop, obtain marketing approval for and/or commercialize its development assets or to raise additional capital to finance its operations.  The Company will require additional capital to complete the clinical development of zunsemetinib (ATI-450) and ATI-1777, to develop its preclinical compounds, and to support its discovery efforts.  

Additional funds may not be available on a timely basis, on commercially acceptable terms, or at all, and such funds, if raised, may not be sufficient to enable the Company to continue to implement its long-term business strategy.  The Company’s ability to raise additional capital may be adversely impacted by potential worsening global economic conditions and the recent disruptions to, and volatility in, the credit and financial markets in the United States and worldwide resulting from the ongoing COVID-19 pandemic.  If the Company is unable to raise sufficient additional capital or generate revenue from transactions with potential third-party partners for the development and/or commercialization of its drug candidates, it may need to substantially curtail planned operations. The Company’s failure to raise capital as and when needed could have a negative impact on its financial condition and ability to pursue its business strategies.  

In accordance with Accounting Standards Update (“ASU”) 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern (Subtopic 205-40), the Company evaluated whether there are conditions and events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that its condensed consolidated financial statements are issued.  As of the report date, the Company does not believe that substantial doubt exists about its ability to continue as a going concern.  The Company believes its existing cash, cash equivalents and marketable securities are sufficient to fund its operating and capital expenditure requirements for a period greater than 12 months from the date of issuance of these condensed consolidated financial statements.

6

2. Summary of Significant Accounting Policies

Unaudited Interim Financial Information

The accompanying condensed consolidated balance sheet as of September 30, 2021, the condensed consolidated statements of operations and comprehensive loss for the three and nine months ended September 30, 2021 and 2020, the condensed consolidated statement of stockholders’ equity for the three and nine months ended September 30, 2021 and 2020, and the condensed consolidated statements of cash flows for the nine months ended September 30, 2021 and 2020 are unaudited.  The unaudited interim condensed consolidated financial statements have been prepared on the same basis as the audited annual financial statements contained in the Company’s annual report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on February 25, 2021 and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments necessary for the fair statement of the Company’s financial position as of September 30, 2021, the results of its operations and comprehensive loss for the three and nine months ended September 30, 2021 and 2020, its changes in stockholders’ equity for the three and nine months ended September 30, 2021 and 2020 and its cash flows for the nine months ended September 30, 2021 and 2020.  The condensed consolidated balance sheet data as of December 31, 2020 was derived from audited financial statements but does not include all disclosures required by generally accepted accounting principles in the United States (“GAAP”).  The financial data and other information disclosed in these notes related to the three and nine months ended September 30, 2021 and 2020 are unaudited. The results for the three and nine months ended September 30, 2021 are not necessarily indicative of results to be expected for the year ending December 31, 2021, any other interim periods, or any future year or period.  The unaudited interim financial statements of the Company included herein have been prepared, pursuant to the rules and regulations of the SEC. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted from this report, as is permitted by such rules and regulations. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto for the year ended December 31, 2020 included in the Company’s annual report on Form 10-K filed with the SEC on February 25, 2021.  

Basis of Presentation

The accompanying condensed consolidated financial statements have been prepared in conformity with GAAP.  The condensed consolidated financial statements of the Company include the accounts of the operating parent company, Aclaris Therapeutics, Inc., and its wholly-owned subsidiaries, ATIL and Confluence.  All intercompany transactions have been eliminated.  Based upon the Company’s revenue, the Company believes that gross profit does not provide a meaningful measure of profitability and, therefore, has not included a line item for gross profit on the condensed consolidated statement of operations.  

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, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting periods.  Significant estimates and assumptions reflected in these financial statements include, but are not limited to, research and development expenses, contingent consideration and the valuation of stock-based awards.  Estimates are periodically reviewed in light of changes in circumstances, facts and experience. The COVID-19 pandemic has resulted in a global slowdown in economic activity. As of the date of issuance of these financial statements, the Company is not aware of any specific event or circumstance that would require an update to its estimates, assumptions and judgments or revise the carrying value of its assets or liabilities.  Actual results could differ from the Company’s estimates.

Reclassifications

Certain prior year amounts have been reclassified to conform to the current year financial statement presentation.

7

Significant Accounting Policies

The Company’s significant accounting policies are disclosed in the audited consolidated financial statements for the year ended December 31, 2020 included in the Company’s annual report on Form 10-K filed with the SEC on February 25, 2021.  Except as set forth below, there have been no changes to the Company’s significant accounting policies from those disclosed in the annual report.

Contingent Consideration

The Company initially recorded a contingent consideration liability at fair value on the date of acquisition related to future potential payments resulting from the acquisition of Confluence based upon significant unobservable inputs including the achievement of development, regulatory and commercial milestones, as well as estimated future sales levels and the discount rates applied to calculate the present value of the potential payments. Significant judgement was involved in determining the appropriateness of these assumptions.  These assumptions are considered Level 3 inputs.  Revaluation of the contingent consideration liability can result from changes to one or more of these assumptions.  The Company evaluates the fair value estimate of the contingent consideration liability on a quarterly basis with changes, if any, recorded as income or expense in the condensed consolidated statement of operations.

The fair value of contingent consideration is estimated using a probability-weighted expected payment model for regulatory milestone payments and a Monte Carlo simulation model for commercial milestone and royalty payments and then applying a risk-adjusted discount rate to calculate the present value of the potential payments.  Significant assumptions used in the Company’s estimates include the probability of achieving regulatory milestones and commencing commercialization, which are based on an asset’s current stage of development and a review of existing clinical data. Probability of success assumptions ranged between 4% and 40%.  Additionally, estimated future sales levels and the risk-adjusted discount rate applied to the potential payments are also significant assumptions used in calculating the fair value.  The discount rate ranged between 5.9% and 7.8% depending on the year of each potential payment.

3. Fair Value of Financial Assets and Liabilities

The following tables present information about the fair value measurements of the Company’s financial assets and liabilities which are measured at fair value on a recurring and non-recurring basis, and indicate the level of the fair value hierarchy utilized to determine such fair values:

	September 30, 2021
(In thousands)	Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents	$	50,631	$	—	$	—	$	50,631
Marketable securities		—		190,015		—		190,015
Total assets	$	50,631	$	190,015	$	—	$	240,646
Liabilities:
Contingent consideration	$	—	$	—	$	26,200	$	26,200
Total liabilities	$	—	$	—	$	26,200	$	26,200

8

	December 31, 2020
(In thousands)	Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents	$	14,955	$	1,500	$	—	$	16,455
Marketable securities		—		32,068		—		32,068
Total assets	$	14,955	$	33,568	$	—	$	48,523
Liabilities:
Contingent consideration	$	—	$	—	$	4,061	$	4,061
Total liabilities	$	—	$	—	$	4,061	$	4,061

As of September 30, 2021 and December 31, 2020, the Company’s cash equivalents consisted of a money market fund, which was valued based upon Level 1 inputs.  The Company’s cash equivalents as of December 31, 2020 also included commercial paper, which was valued based upon Level 2 inputs.  The Company’s marketable securities as of September 30, 2021 and December 31, 2020 consisted of commercial paper and asset-backed and U.S. government agency debt securities, which were valued based upon Level 2 inputs.  The Company’s marketable securities as of September 30, 2021 also included corporate debt securities and foreign government agency debt securities, which were valued based upon Level 2 inputs.

In determining the fair value of its Level 2 investments, the Company relied on quoted prices for identical securities in markets that are not active. These quoted prices were obtained by the Company with the assistance of a third-party pricing service based on available trade, bid and other observable market data for identical securities.  Quarterly, the Company compares the quoted prices obtained from the third-party pricing service to other available independent pricing information to validate the reasonableness of the quoted prices provided.  The Company evaluates whether adjustments to third-party pricing are necessary and, historically, the Company has not made adjustments to quoted prices obtained from the third-party pricing service.  During the nine months ended September 30, 2021 and 2020, there were no transfers between Level 1, Level 2 and Level 3.

The increase in contingent consideration of $22.1 million during the nine months ended September 30, 2021 resulted from updates to the Company’s probability of achieving regulatory milestones and commencing commercialization and estimated future sales level assumptions as a result of the completion of a Phase 2a clinical trial of zunsemetinib in subjects with moderate to severe rheumatoid arthritis and the inclusion of estimated future sales of zunsemetinib for the potential treatment of psoriatic arthritis and moderate to severe hidradenitis suppurativa, which are additional planned indications for zunsemetinib, as well as a result of the completion of a Phase 2a clinical trial of ATI-1777 in subjects with moderate to severe atopic dermatitis.

As of September 30, 2021 and December 31, 2020, the fair value of the Company’s available for sale marketable securities by type of security was as follows:

	September 30, 2021
			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
(In thousands)	Cost		Gain		Loss		Value
Marketable securities:
Corporate debt securities	$	36,725	$	3		(10)	$	36,718
Commercial paper		81,828		—		—		81,828
Asset-backed debt securities		37,229		3		(7)		37,225
Foreign government agency debt securities		4,112		—		(2)		4,110
U.S. government agency debt securities		30,124		10		—		30,134
Total marketable securities	$	190,018	$	16	$	(19)	$	190,015

9

	December 31, 2020
			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
(In thousands)	Cost		Gain		Loss		Value
Marketable securities:
Commercial paper	$	20,483	$	—	$	—	$	20,483
Asset-backed debt securities		4,036		1		—		4,037
U.S. government agency debt securities		7,547		1		—		7,548
Total marketable securities	$	32,066	$	2	$	—	$	32,068

4. Property and Equipment, Net

Property and equipment, net consisted of the following:

		September 30,		December 31,
(In thousands)	2021		2020
Computer equipment	$	1,253	$	1,197
Lab equipment		1,389		1,340
Furniture and fixtures		620		617
Leasehold improvements		1,123		1,123
Property and equipment, gross		4,385		4,277
Accumulated depreciation		(3,215)		(2,623)
Property and equipment, net	$	1,170	$	1,654

Depreciation expense was $0.2 million and $0.3 million for the three months ended September 30, 2021 and 2020, respectively, and $0.6 million and $0.9 million for the nine months ended September 30, 2021 and 2020, respectively.