10-Q

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 September 30, 2019

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: 001-37718

Spring Bank Pharmaceuticals, Inc.

(Exact Name of Registrant as Specified in its Charter)

Delaware	52-2386345
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
35 Parkwood Drive, Suite 210 Hopkinton, MA	01748
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (508) 473-5993

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, $0.0001 par value per share	SBPH	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, 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 November 6, 2019, the registrant had 16,476,342 shares of common stock, $0.0001 par value per share, outstanding.

Spring Bank Pharmaceuticals, Inc.

INDEX

	PART I.FINANCIAL INFORMATION	Page
Item 1.	Consolidated Financial Statements (Unaudited)
	Consolidated Balance Sheets	3
	Consolidated Statements of Operations and Comprehensive Loss	4
	Consolidated Statements of Stockholders’ Equity	5
	Consolidated Statements of Cash Flows	7
	Notes to Unaudited Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	24
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	36
Item 4.	Controls and Procedures	36
	PART II.OTHER INFORMATION
Item 1.	Legal Proceedings	37
Item 1A.	Risk Factors	37
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	38
Item 6.	Exhibits	38
Exhibit Index		39
Signatures		40

i

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements that involve substantial risks and uncertainties. All statements, other than statements of historical facts, contained in this Quarterly Report on Form 10-Q, including statements regarding our strategy, future operations, future financial position, projected costs, prospects, plans and objectives of management, are forward-looking statements. In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “design,” “expect,” “seek,” “plan,” “anticipate,” “could,” “intend,” “target,” “project,” “believe,” “estimate,” “predict,” “potential” or “continue” or the negative of these terms or other similar expressions.

These forward-looking statements include, but are not limited to, statements about:

• our ongoing and planned preclinical studies and clinical trials;

• preclinical study data and clinical trial data and the timing of results of our ongoing clinical studies and/or trials;

• our plans to seek and enter into clinical trial collaborations and other broader collaborations; and

• our estimates regarding prospects, strategies, expenses, operating capital requirements, results of operations and needs for additional financing.

We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements we make. Factors that could cause actual results or events to differ materially from the forward-looking statements that we make include, but are not limited to, the following:

•Our business currently depends substantially on the success of clinical trials for inarigivir soproxil, which we refer to as inarigivir, which is still under development. If we are unable to obtain regulatory approval for, or successfully commercialize, inarigivir, our business will be materially harmed.

•We are very early in our development efforts and our product candidates may not be successful in later stage clinical trials. Results obtained in our preclinical studies and clinical trials to date are not necessarily indicative of results to be obtained in future clinical trials. As a result, our product candidates may never be approved as marketable therapeutics.

•We will need additional funding to complete the development of our product candidates and before we can expect to become profitable from the sales of our products, if approved. If we are unable to raise capital when needed, we could be forced to delay, reduce or eliminate our product development programs or commercialization efforts.

•We rely, and expect to continue to rely, on third parties to conduct our clinical trials and to manufacture our product candidates for preclinical and clinical testing. These third parties may not perform satisfactorily, which could delay our product development activities.

•If we are unable to adequately protect our proprietary technology or obtain and maintain issued patents which are sufficient to protect our product candidates, others could compete against us more directly, which would have a material adverse impact on our business, results of operations, financial condition and prospects.

•We may not be able to retain key executives or to attract, retain and motivate key personnel. If we are unable to retain such key personnel, it could have a material adverse impact on our business and prospects.

You should read this Quarterly Report on Form 10-Q and the documents that we have filed as exhibits to this Quarterly Report on Form 10-Q completely and with the understanding that our actual future results may be materially different from what we expect. You should also read carefully the factors described in “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2018, as filed with the Securities and Exchange Commission on March 11, 2019, to better understand the risks and uncertainties inherent in our business and underlying any forward-looking statements. You are advised, however, to consult any further disclosures we make on related subjects in our subsequent Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, press releases, and our website. Any forward-looking statements that we make in this Quarterly Report on Form 10-Q speak only as of the date of this Quarterly Report on Form 10-Q, and we undertake no obligation to update such statements to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q or to reflect the occurrence of unanticipated events.

2

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

SPRING BANK PHARMACEUTICALS, INC.

CONSOLIDATED BALANCE SHEETS

(In Thousands, Except Share and Per Share Data)

	September 30,			December 31,
	2019			2018
ASSETS	(unaudited)
Current assets:
Cash and cash equivalents	$	34,371		$	14,724
Marketable securities		28,778			32,914
Prepaid expenses and other current assets		1,727			1,649
Total current assets		64,876			49,287
Marketable securities, long-term		—			16,804
Property and equipment, net		2,264			2,319
Operating lease right-of-use assets		2,784			—
Restricted cash		234			234
Other assets		35			167
Total	$	70,193		$	68,811
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	2,986		$	1,880
Accrued expenses and other current liabilities		1,998			2,367
Operating lease liabilities, current		343			—
Total current liabilities		5,327			4,247
Term loan, net of unamortized discount		19,011			—
Warrant liabilities		450			8,511
Operating lease liabilities, noncurrent		2,962			—
Other long-term liabilities		27			193
Total liabilities		27,777			12,951
Commitments and contingencies (Note 11)
Stockholders’ equity:
Preferred stock, $0.0001 par value—authorized, 10,000,000 shares at September 30,      2019 and December 31, 2018; no shares issued or outstanding at September 30,      2019 and December 31, 2018		—			—
Common stock, $0.0001 par value—authorized, 200,000,000 shares at September 30,      2019 and December 31, 2018; 16,476,342 and 16,434,614 shares issued and      outstanding at September 30, 2019 and December 31, 2018, respectively		2			2
Additional paid-in capital		161,382			157,931
Accumulated deficit		(118,730	)		(102,068	)
Accumulated other comprehensive loss		(238	)		(5	)
Total stockholders’ equity		42,416			55,860
Total	$	70,193		$	68,811

See accompanying notes to consolidated financial statements.

3

SPRING BANK PHARMACEUTICALS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(Unaudited)

(In Thousands, Except Share and Per Share Data)

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2019			2018			2019			2018
Operating expenses:
Research and development	$	5,228		$	5,656		$	18,070		$	15,188
General and administrative		2,247			2,059			7,547			6,681
Total operating expenses		7,475			7,715			25,617			21,869
Loss from operations		(7,475	)		(7,715	)		(25,617	)		(21,869	)
Other income (expense):
Interest income		271			271			957			603
Interest expense		(63	)		—			(63	)		—
Change in fair value of warrant liabilities		355			(1,336	)		8,061			3,837
Net loss		(6,912	)		(8,780	)		(16,662	)		(17,429	)
Unrealized loss on marketable securities		(20	)		(14	)		(233	)		(13	)
Comprehensive loss	$	(6,932	)	$	(8,794	)	$	(16,895	)	$	(17,442	)
Net loss per common share:
Basic	$	(0.42	)	$	(0.59	)	$	(1.01	)	$	(1.27	)
Diluted	$	(0.42	)	$	(0.59	)	$	(1.01	)	$	(1.39	)
Weighted-average number of shares outstanding:
Basic		16,459,155			14,841,197			16,446,582			13,677,375
Diluted		16,459,155			14,841,197			16,446,582			15,311,152

See accompanying notes to consolidated financial statements.

4

SPRING BANK PHARMACEUTICALS, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2019 AND 2018

(In Thousands, Except Share and Per Share Data)

For the Three Months Ended	Common Stock				Additional Paid-in			Accumulated			Other Comprehensive			Total Stockholders’
September 30, 2019	Shares		Amount		Capital			Deficit			Income (Loss)			Equity
Balance at June 30, 2019		16,459,155	$	2	$	159,975		$	(111,818	)	$	(218	)	$	47,941
Stock-based compensation		—		—		752			—			—			752
Issuance of common stock for services rendered		17,187		—		59			—			—			59
Issuance of warrants in connection with term loan		—		—		552			—			—			552
Issuance of warrants to a service provider		—		—		19			—			—			19
Offering costs in connection with common stock      offering		—		—		25			—			—			25
Net unrealized loss on marketable securities		—		—		—			—			(20	)		(20	)
Net loss		—		—		—			(6,912	)		—			(6,912	)
Balance at September 30, 2019		16,476,342	$	2	$	161,382		$	(118,730	)	$	(238	)	$	42,416
For the Three Months Ended	Common Stock				Additional Paid-in			Accumulated			Other Comprehensive			Total Stockholders’
September 30, 2018	Shares		Amount		Capital			Deficit			Income (Loss)			Equity
Balance at June 30, 2018		13,182,567	$	1	$	118,541		$	(87,863	)	$	(22	)	$	30,657
Stock-based compensation		—		—		680			—			—			680
Issuance of common stock for services rendered		2,525		—		30			—			—			30
Issuance of common stock in connection with      offering, net of issuance costs		3,246,079		1		37,959			—			—			37,960
Issuance costs in connection with at-the-market      offering		—		—		(1	)		—			—			(1	)
Net unrealized gain (loss) on marketable securities		—		—		—			—			(14	)		(14	)
Net loss		—		—		—			(8,780	)		—			(8,780	)
Balance at September 30, 2018		16,431,171	$	2	$	157,209		$	(96,643	)	$	(36	)	$	60,532

See accompanying notes to consolidated financial statements.

5

SPRING BANK PHARMACEUTICALS, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2019 AND 2018

(In Thousands, Except Share and Per Share Data)

For the Nine Months Ended	Common Stock				Additional Paid-in		Accumulated			Other Comprehensive			Total Stockholders’
September 30, 2019	Shares		Amount		Capital		Deficit			Income (Loss)			Equity
Balance at December 31, 2018		16,434,614	$	2	$	157,931	$	(102,068	)	$	(5	)	$	55,860
Stock-based compensation		—		—		2,647		—			—			2,647
Issuance of common stock for services rendered		41,128		—		202		—			—			202
Issuance of common stock in connection with      at-the-market offering		600		—		6		—			—			6
Issuance of warrants in connection with term loan		—		—		552		—			—			552
Issuance of warrants to a service provider		—		—		19		—			—			19
Offering costs in connection with common stock      offering		—		—		25		—			—			25
Net unrealized loss on marketable securities		—		—		—		—			(233	)		(233	)
Net loss		—		—		—		(16,662	)		—			(16,662	)
Balance at September 30, 2019		16,476,342	$	2	$	161,382	$	(118,730	)	$	(238	)	$	42,416
For the Nine Months Ended	Common Stock				Additional Paid-in		Accumulated			Other Comprehensive			Total Stockholders’
September 30, 2018	Shares		Amount		Capital		Deficit			Income (Loss)			Equity
Balance at December 31, 2017		12,961,993	$	1	$	113,984	$	(79,214	)	$	(23	)	$	34,748
Stock-based compensation		—		—		1,978		—			—			1,978
Issuance of common stock for services rendered		5,770		—		76		—			—			76
Issuance of common stock in connection with      offering, net of issuance costs		3,246,079		1		37,959		—			—			37,960
Issuance of common stock in connection with      at-the-market offering, net of issuance costs		217,329		—		3,212		—			—			3,212
Net unrealized gain on marketable securities		—		—		—		—			(13	)		(13	)
Net loss		—		—		—		(17,429	)		—			(17,429	)
Balance at September 30, 2018		16,431,171	$	2	$	157,209	$	(96,643	)	$	(36	)	$	60,532

See accompanying notes to consolidated financial statements.

6

SPRING BANK PHARMACEUTICALS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In Thousands)

	For the Nine Months Ended September 30,
	2019			2018
Cash flows from operating activities:
Net loss	$	(16,662	)	$	(17,429	)
Adjustments for:
Depreciation and amortization		263			193
Loss on the disposal of property and equipment		—			16
Operating lease right-of-use asset amortization		196			—
Change in fair value of warrant liabilities		(8,061	)		(3,837	)
Non-cash interest expense		10			—
Non-cash investment income		(60	)		361
Non-cash stock-based compensation		2,825			2,062
Non-cash issuance of warrants to a service provider		19			—
Changes in operating assets and liabilities:
Prepaid expenses and other current assets		(78	)		(449	)
Other assets		132			(46	)
Accounts payable		1,106			(326	)
Accrued expenses and other liabilities		(82	)		1,098
Operating lease liabilities		(79	)		—
Net cash used in operating activities		(20,471	)		(18,357	)
Cash flows from investing activities:
Proceeds from sale of marketable securities		26,767			28,837
Purchases of marketable securities		(6,000	)		(50,000	)
Purchases of property and equipment		(208	)		(1,913	)
Net cash provided by (used in) investing activities		20,559			(23,076	)
Cash flows from financing activities:
Proceeds from term loan and warrants		20,000			—
Issuance costs in connection with term loan and warrants		(447	)		—
Proceeds from issuance of common stock in connection with at-the-market offering,      net of issuance costs		6			3,212
Proceeds from issuance of common stock, net of issuance costs		—			37,959
Cash provided by financing activities		19,559			41,171
Net increase (decrease) in cash, cash equivalents and restricted cash		19,647			(262	)
Cash, cash equivalents and restricted cash, beginning of period		14,958			24,133
Cash, cash equivalents and restricted cash, end of period	$	34,605		$	23,871
Supplemental disclosures of cash flow information:
Cash paid for taxes	$	21		$	3
Cash paid for interest, net	$	53		$	—

See accompanying notes to consolidated financial statements.

7

Spring Bank Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements

1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Business

Spring Bank Pharmaceuticals, Inc. (the “Company”) is a clinical-stage biopharmaceutical company engaged in the discovery and development of a novel class of therapeutics using a proprietary small molecule nucleotide platform. The Company is developing its most advanced product candidate, inarigivir soproxil (“inarigivir”), for the treatment of chronic hepatitis B virus. Since inception in 2002 and prior to its initial public offering (“IPO”) in May 2016, the Company built its technology platform and product candidate pipeline, supported by grants and through private financings. The Company has three wholly owned subsidiaries: Sperovie Biosciences, Inc. formed in September 2015, SBP Securities Corporation formed in December 2016 and SBP International Limited formed in May 2019.

The Company’s success is dependent upon its ability to successfully complete clinical development and obtain regulatory approval of its product candidates, successfully commercialize approved products, generate revenue, and, ultimately, attain profitable operations. The Company’s operations to date have been primarily limited to the development of inarigivir, SB 11285, SB 9225 and the Company’s other product candidates.

Basis of Presentation and Liquidity

The accompanying consolidated financial statements have been prepared in accordance with United States (“U.S.”) generally accepted accounting principles (“U.S. GAAP”).

The accompanying interim financial statements as of September 30, 2019 and for the three and nine months ended September 30, 2019 and 2018, and related interim information contained within the notes to the financial statements, are unaudited. In management’s opinion, the unaudited interim consolidated financial statements have been prepared on the same basis as the Company’s audited financial statements and include all adjustments (including normal recurring adjustments) necessary for the fair presentation of the Company’s financial position as of September 30, 2019, results of operations for the three and nine months ended September 30, 2019 and 2018, statement of stockholders’ equity for the three and nine months ended September 30, 2019 and 2018 and its cash flows for the nine months ended September 30, 2019 and 2018. These interim financial statements should be read in conjunction with the Company’s audited financial statements and accompanying notes contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018, as filed with the Securities and Exchange Commission (“SEC”) on March 11, 2019. The results for the three and nine months ended September 30, 2019 are not necessarily indicative of the results expected for the full fiscal year or any interim period.

As of September 30, 2019, the Company had an accumulated deficit of $118.7 million and $63.1 million in cash, cash equivalents and marketable securities.

The Company expects to continue to incur significant and increasing losses for the foreseeable future. The Company anticipates that its expenses will increase significantly as it continues to develop inarigivir, SB 11285, SB 9225 and its other product candidates. The Company does not have any committed external source of funds. As a result, the Company will need additional financing to support its continuing operations. Adequate additional funds may not be available to the Company on acceptable terms, or at all. To the extent that the Company raises additional capital through the sale of equity or convertible debt securities, stockholders’ ownership interests will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect common stockholder rights. If the Company raises additional funds through collaborations, strategic alliances or licensing arrangements with third parties, the Company may have to relinquish valuable rights to its technologies, future revenue streams, research programs, or product candidates or grant licenses on terms that may not be favorable to the Company.

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, Sperovie Biosciences, Inc., SBP Securities Corporation and SBP International Limited. Sperovie Biosciences, Inc. had operations consisting mainly of legal fees associated with intellectual property activities as of September 30, 2019. Sperovie Biosciences, Inc. is a joint borrower with the Company under the Company’s term loan (see Note 9). SBP Securities Corporation had assets primarily related to investments in marketable securities and operations consisting primarily of interest income as of September 30, 2019. SBP International Limited had operations consisting mainly of clinical trial oversight, including European data protection oversight, as of September 30, 2019. All intercompany balances and transactions have been eliminated in consolidation.

8

Use of Estimates

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, liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. The Company bases estimates and assumptions on historical experience when available and on various factors that it believes to be reasonable under the circumstances. Significant estimates relied upon in preparing the accompanying financial statements related to the fair value of warrants, accounting for stock-based compensation, income taxes, useful lives of long-lived assets, and accounting for certain accruals. The Company evaluates its estimates and assumptions on an ongoing basis. The Company’s actual results may differ from these estimates.

Cash and Cash Equivalents

Cash equivalents are stated at fair value and include short-term, highly liquid investments with remaining maturities of 90 days or less at the date of purchase. Included in cash and cash equivalents as of September 30, 2019 and December 31, 2018 are money market fund investments of $32.5 million and $13.3 million, respectively, which are reported at fair value (see Note 5).

Restricted Cash

As of September 30, 2019 and December 31, 2018, restricted cash consists of approximately $234,000, which is held as a security deposit required in conjunction with a lease agreement for the Company’s principal office and laboratory space entered into in October 2017.

Concentration of Credit Risk

Financial instruments that subject the Company to significant concentrations of credit risk consist primarily of cash, cash equivalents, restricted cash and marketable securities. Substantially all of the Company’s cash is held at financial institutions that management believes to be of high credit quality. Deposits with these financial institutions may exceed the amount of insurance provided on such deposits; however, these deposits may be redeemed upon demand and, therefore, bear minimal risk.

Investments in Marketable Securities

The Company invests excess cash balances in short-term and long-term marketable securities. The Company classifies investments in marketable securities as either held-to-maturity or available-for-sale based on facts and circumstances present at the time of purchase. At each balance sheet date presented, all investments in securities are classified as available-for-sale. The Company reports available-for-sale investments at fair value at each balance sheet date and includes any unrealized holding gains and losses (the adjustment to fair value) in accumulated other comprehensive income (loss), a component of stockholders’ equity. Realized gains and losses are determined using the specific identification method and are included in other income (expense). If any adjustment to fair value reflects a decline in the value of the investment, the Company considers all available evidence to evaluate the extent to which the decline is “other than temporary,” including the intention to sell and, if so, marks the investment to market through a charge to the Company’s consolidated statements of operations and comprehensive loss.

Property and Equipment, Net

Property and equipment are recorded at cost. Costs associated with maintenance and repairs are expensed as incurred. Depreciation is provided using the straight-line method over the estimated useful lives:

Asset Category	Useful Life
Equipment	5-7 years
Furniture and fixtures	5 years
Leasehold improvements	Lesser of 10 years or the remaining term of the respective lease

9

Leases

The Company determines if an arrangement is a lease at inception. Operating leases are included in operating lease right-of-use (“ROU”) assets, other current liabilities and operating lease liabilities in the Company’s consolidated balance sheets.

ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent its obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As the Company’s leases do not provide an implicit rate, the Company uses an incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. This is the rate the Company would have to pay if borrowing on a collateralized basis over a similar term to each lease. The operating lease ROU asset also includes any lease payments made and excludes lease incentives. The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Lease expense for lease payments is recognized on a straight-line basis over the lease term.

Impairment of Long-Lived Assets

Long-lived assets to be held and used are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. When such events occur, the Company compares the carrying amounts of the assets to their undiscounted expected future cash flows. If the undiscounted cash flows are insufficient to recover the carrying value, an impairment loss is recorded for the difference between the carrying value and fair value of the asset. As of September 30, 2019, no such impairment has occurred.

Research and Development Costs

Research and development expenses consist primarily of costs incurred for the Company’s research activities, including discovery efforts, and the development of product candidates, which include:

• expenses incurred under agreements with third parties, including contract research organizations, or CROs, that conduct research, preclinical activities and clinical trials on the Company’s behalf as well as contract manufacturing organizations, or CMOs, that manufacture drug products for use in the Company’s preclinical and clinical trials;

• salaries, benefits and other related costs, including stock-based compensation expense, for personnel in the Company’s research and development functions;

• costs of outside consultants, including their fees, stock-based compensation and related travel expenses;

• the cost of laboratory supplies and acquiring, developing and manufacturing preclinical study and clinical trial materials;

• costs related to compliance with regulatory requirements; and

• facility-related expenses, which include direct depreciation costs and allocated expenses for rent and maintenance of facilities and other operating costs.

The Company expenses research and development costs as incurred. The Company recognizes external development costs based on an evaluation of the progress to completion of specific tasks using information provided to the Company by its vendors and its clinical investigative sites. Payments for these activities are based on the terms of the individual agreements, which may differ from the pattern of costs incurred, and are reflected in the Company’s consolidated financial statements as prepaid or accrued research and development expenses.

Warrants

The Company accounts for freestanding warrants within stockholders equity or as liabilities based on the characteristics and provisions of each instrument. The Company evaluates outstanding warrants in accordance with ASC 480, Distinguishing Liabilities from Equity, and ASC 815, Derivatives and Hedging. If none of the criteria in the evaluation in these standards are met, the warrants are classified as a component of stockholders equity and initially recorded at their grant date fair value without subsequent remeasurement. Warrants that meet the criteria are classified as liabilities and remeasured to their fair value at the end of each reporting period.

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Stock-Based Compensation

The Company’s stock-based payments include stock options, performance-based restricted stock units (“RSUs”) and grants of common stock, including common stock subject to vesting. The Company accounts for all stock-based payment awards granted to employees and nonemployees using a fair value method. The measurement date for employee awards is the date of grant, and stock-based compensation costs are recognized as expense over the employees’ requisite service period, which is generally the vesting period, on a straight-line basis. The Company accounts for forfeitures as they occur.

The Company measures the fair value of the performance-based restricted stock units relating to the total share return performance using a Monte Carlo valuation model. The Company measures the fair value of the performance-based restricted stock units relating to the milestone performance goals using the fair value method and the probability that the specified performance criteria will be met. Each quarter the Company updates its assessment of the probability that the specified milestone criteria will be achieved and adjusts its estimate of the fair value, if necessary. Stock-based compensation expense is classified in the accompanying consolidated statements of operations and comprehensive loss based on the department to which the related services are provided.

Financial Instruments

The Company’s financial instruments consist of cash equivalents, marketable securities, accounts payable, a term loan and liability classified warrants. The carrying amounts of cash and cash equivalents and accounts payable approximate their fair value due to the short-term nature of those financial instruments. The fair value of the marketable securities and liability classified warrants are remeasured to fair value each reporting period (see Note 5). The fair value of the term loan approximates its face value given the close proximity of the execution of the term loan to September 30, 2019.

Fair Value Measurements

The Company is required to disclose information on all assets and liabilities reported at fair value that enables an assessment of the inputs used in determining the reported fair values. Accounting Standards Codification (“ASC”) 820, Fair Value Measurements and Disclosures (“ASC 820”), establishes a hierarchy of inputs used when available. Observable inputs are inputs that market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the inputs that market participants would use in pricing the asset or liability and are developed based on the best information available in the circumstances. The fair value hierarchy applies only to the valuation inputs used in determining the reported fair value of the investments and is not a measure of the investment credit quality. The three levels of the fair value hierarchy are described below:

Level 1—Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.

Level 2—Valuations based on quoted prices for similar assets or liabilities in markets that are not active or for which all significant inputs are observable, either directly or indirectly.

Level 3—Valuations that require inputs that reflect the Company’s own assumptions that are both significant to the fair value measurement and unobservable.

To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised by the Company in determining fair value is greatest for instruments categorized in Level 3. A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. The Company’s assets and liabilities measured at fair value on a recurring basis include cash equivalents, marketable securities and warrant liabilities.

Net Loss Per Share

Basic net loss per share is computed by dividing the net loss by the weighted-average number of shares of common stock outstanding for the period. Diluted net loss per share is computed by dividing the net loss by the weighted-average number of shares of common stock and dilutive common stock equivalents outstanding for the period, determined using the treasury-stock method and the as if-converted method, for convertible securities, if inclusion of these instruments is dilutive.

For the three and nine months ended September 30, 2019, both methods are equivalent and for the three months ended September 30, 2018, both methods are equivalent. For the nine months ended September 30, 2018, diluted net loss per share amounts were calculated based on the dilutive effect of the total number of shares of common stock related to the November 2016 Private Placement warrants and the change in the fair value of the warrant liability. Basic and diluted net loss per share is described further in Note 2.

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Income Taxes

Deferred tax assets and liabilities are determined based upon the differences between the financial statement carrying amounts and the tax basis of existing assets and liabilities and for loss and credit carryforwards using enacted tax rates expected to be in effect in the years in which the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance if it is more likely than not that some portion or all of the deferred tax asset will not be realized.

The Company assesses its income tax positions and records tax benefits based upon management’s evaluation of the facts, circumstances and information available at the reporting date. For those tax positions where it is more likely than not that a tax benefit will be sustained, the Company records the largest amount of tax benefit with a greater than 50% likelihood of being realized upon ultimate settlement with a taxing authority having full knowledge of all relevant information. For those income tax positions where it is not more likely than not that a tax benefit will be sustained, no tax benefit is recognized in the consolidated financial statements. The Company classifies interest and penalties associated with such uncertain tax positions as a component of interest expense. As of September 30, 2019 and December 31, 2018, the Company has not identified any material uncertain tax positions.

Guarantees and Indemnifications

As permitted under Delaware law, the Company indemnifies its officers and directors for certain events or occurrences while the officer or director is, or was, serving at the Company’s request in such capacity.

The Company leases its principal office and laboratory space in Hopkinton, Massachusetts and previously leased research and development space in Milford, Massachusetts under non-cancelable operating leases. The Company has standard indemnification arrangements under these leases that require it to indemnify the landlords against liability for injury, loss, accident, or damage from any claims, actions, proceedings, or costs resulting from certain acts, breaches, violations, or nonperformance under the Company’s lease.

Through September 30, 2019, the Company had not experienced any losses related to these indemnification obligations and no material claims were outstanding. The Company does not expect significant claims related to these indemnification obligations, and consequently, concluded that the fair value of these obligations is negligible, and no related reserves were established.

Segment Information

Operating segments are identified as components of an enterprise about which separate and discrete financial information is available for evaluation by the chief operating decision maker, the Company’s chief executive officer, in making decisions regarding resource allocation and assessing performance. The Company views its operations and manages its business in one operating segment and does not track expenses on a program-by-program basis.

Recently Issued Accounting Pronouncements

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820), Disclosure Framework – Changes to the Disclosure Requirement for Fair Value Measurement.This ASU removes, modifies and adds certain disclosure requirements of ASC Topic 820. The ASU is effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The Company is currently evaluating the impact that the adoption of this standard may have on the Company’s consolidated financial statements.

In February 2016, the FASB issued ASU No. 2016-02, Leases (“ASU 2016-02”). ASU 2016-02 requires lessees to recognize most leases on their balance sheet as a right-of-use asset and a lease liability. Leases are classified as either operating or finance, and classification is based on criteria similar to current lease accounting, but without explicit bright lines. In July 2018, the FASB issuedASU No. 2018-10, “Codification Improvements to Topic 842, Leases” (“ASU 2018-10”), which provides narrow amendments to clarify how to apply certain aspects of the new lease standard, and ASU No. 2018-11, “Leases (Topic 842) – Targeted Improvements” (ASU 2018-11), which addresses implementation issues related to the new lease standard. The guidance is effective for annual reporting periods beginning after December 15, 2018 and interim periods within those fiscal years, and early adoption is permitted. Under this standard, disclosures are required to enable users of financial statements in assessing the amount, timing, and uncertainty of cash flows arising from leases. The standard permits two transition methods, (1) to apply the new lease requirements at the beginning of the earliest period presented, or (2) to apply the new lease requirements at the effective date. Under both transition methods there is a cumulative effect adjustment.

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The Company adopted the standard on the effective date of January 1, 2019 by applying the new lease requirements at the effective date. Prior periods continue to be presented based on the accounting standards originally in effect for such periods. The Company also elected the package of practical expedients permitted under the transition guidance within the new standard, which, among other things, allows the Company to carry forward the historical lease classification. The Company will also apply the practical expedient not to separate lease and non-lease components for new and modified leases commencing after adoption. The standard had an impact of approximately $3.0 million on the Company’s assets and $3.4 million on its liabilities, as of January 1, 2019, for the recognition of right-of-use assets and lease liabilities, which are primarily related to the lease of its corporate headquarters in Hopkinton, Massachusetts. The standard did not have a material impact on the Company’s results of operations or liquidity(see Note 10).

In July 2017, the FASB issued ASU 2017-11, Earnings Per Share (Topic 260), Distinguishing Liabilities from Equity (Topic 480), Derivatives and Hedging (Topic 815): I. Accounting for Certain Financial Instruments with Down Round Features and II. Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception. Part I applies to entities that issue financial instruments such as warrants, convertible debt or convertible preferred stock that contain down round features. Part II simply replaces the indefinite deferral for certain mandatorily redeemable noncontrolling interests and mandatorily redeemable financial instruments of nonpublic entities contained within Accounting Standards Codification (ASC) Topic 480with a scope exception and does not impact the accounting for these mandatorily redeemable instruments. This ASU is effective for public companies for the annual reporting periods beginning after December 15, 2018, and interim periods within those annual periods. Early adoption is permitted. The Company adopted this standard as of January 1, 2019; however, the adoption of this standard did not impact the Company’s consolidated financial statements.

2. NET LOSS PER SHARE

The following table summarizes the computation of basic and diluted net loss per share of the Company for such periods (in thousands, except share and per share data):

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2019			2018			2019			2018
Net loss	$	(6,912	)	$	(8,780	)	$	(16,662	)	$	(17,429	)
Less: decrease in change in fair value of warrant liabilities											(3,837	)
Net loss available to common shareholders										$	(21,266	)
Weighted-average number of shares outstanding:
Basic		16,459,155			14,841,197			16,446,582			13,677,375
Effect of dilutive securities:
Common stock warrants											1,633,777
Dilutive potential common shares											15,311,152
Net loss per common share:
Basic	$	(0.42	)	$	(0.59	)	$	(1.01	)	$	(1.27	)
Diluted	$	(0.42	)	$	(0.59	)	$	(1.01	)	$	(1.39	)

For the three and nine months ended September 30, 2019, the diluted net loss per common share is the same as basic net loss per common share and for the three months ended September 30, 2018, the diluted net loss per common share is the same as basic net loss per common share. For the nine months ended September 30, 2018, the diluted net loss per common share amounts were calculated based on the dilutive effect of the total number of shares of common stock related to the November 2016 Private Placement warrants of 1,633,777 shares and the change in the fair value of the warrant liability of $3.8 million.

The following potentially dilutive securities outstanding, prior to the use of the treasury stock method or if-converted method, have been excluded from the computation of diluted weighted-average shares outstanding, because such securities had an antidilutive impact due to the losses reported:

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2019		2018		2019		2018
Convertible debt		2,329,143		—		2,329,143		—
Common stock warrants		1,927,124		1,662,124		1,927,124		28,347
Stock options, RSUs and inducement awards		1,948,115		1,349,565		1,948,115		1,349,565

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3. INVESTMENTS

Cash in excess of the Company’s immediate requirements is invested in accordance with the Company’s investment policy that primarily seeks to maintain adequate liquidity and preserve capital.

The following table summarizes the Company’s investments, by category, as of September 30, 2019 and December 31, 2018 (in thousands):

	September 30,		December 31,
Investments - Current:	2019		2018
Debt securities - available for sale	$	28,778	$	32,914
Total	$	28,778	$	32,914
Investments - Noncurrent:
Debt securities - available for sale	$	—	$	16,804
Total	$	—	$	16,804

A summary of the Company’s available-for-sale classified investments as of September 30, 2019 and December 31, 2018 consisted of the following (in thousands):

	At September 30, 2019
	Cost Basis		Accumulated Unrealized Gains		Accumulated Unrealized Losses			Fair Value
Investments - Current:
Corporate bonds	$	11,055	$	—	$	(74	)	$	10,981
United States treasury securities		17,961		—		(164	)	$	17,797
Total	$	29,016	$	—	$	(238	)	$	28,778
	At December 31, 2018
	Cost Basis		Accumulated Unrealized Gains		Accumulated Unrealized Losses			Fair Value
Investments - Current:
Corporate bonds	$	16,028	$	—	$	(19	)	$	16,009
United States treasury securities		16,913		—		(8	)		16,905
Total	$	32,941	$	—	$	(27	)	$	32,914
Investments - Noncurrent:
Corporate bonds	$	4,930	$	2	$	—		$	4,932
United States treasury securities		11,852		20		—			11,872
Total	$	16,782	$	22	$	—		$	16,804

The amortized cost and fair value of the Company’s available-for-sale investments, by contract maturity, as of September 30, 2019 consisted of the following (in thousands):

	Amortized Cost		Fair Value
Due in one year or less	$	29,016	$	28,778
Due after one year through two years		—		—
Total	$	29,016	$	28,778

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4. PROPERTY AND EQUIPMENT, NET

Property and equipment as of September 30, 2019 and December 31, 2018 consisted of the following (in thousands):

	September 30,			December 31,
	2019			2018
Equipment	$	1,278		$	1,064
Furniture and fixtures		385			400
Leasehold improvements		1,356			1,347
Total property and equipment		3,019			2,811
Less: accumulated depreciation and amortization		(755	)		(492	)
Property and equipment, net	$	2,264		$	2,319

Depreciation expense for the three and nine months ended September 30, 2019 was $92,000 and $263,000, respectively. Depreciation expense for the three and nine months ended September 30, 2018 was $107,000 and $193,000, respectively.

5. FAIR VALUE MEASUREMENTS

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value are performed in a manner to maximize the use of observable inputs and minimize the use of unobservable inputs.

A summary of the assets and liabilities that are measured at fair value as of September 30, 2019 and December 31, 2018 is as follows (in thousands):

			Fair Value Measurement at September 30, 2019
Assets:	Carrying Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Money market funds(1)	$	32,526	$	32,526	$	—	$	—
Fixed income securities		28,778		—		28,778		—
Total	$	61,304	$	32,526	$	28,778	$	—
Liabilities:
Warrant liabilities	$	450	$	—	$	—	$	450
Total	$	450	$	—	$	—	$	450
			Fair Value Measurement at December 31, 2018
Assets:	Carrying Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Money market funds(1)	$	13,264	$	13,264	$	—	$	—
Fixed income securities		49,718		—		49,718		—
Total	$	62,982	$	13,264	$	49,718	$	—
Liabilities:
Warrant liabilities	$	8,511	$	—	$	—	$	8,511
Total	$	8,511	$	—	$	—	$	8,511

(1) Money market funds are included within cash and cash equivalents in the accompanying consolidated balance sheets and are recognized at fair value.

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The Company classified its money market funds within Level 1 because their fair values are based on their quoted market prices. The Company classified its commercial paper, corporate bonds and United States treasury securities within Level 2 because their fair values are determined using alternative pricing sources or models that utilized market observable inputs.

The following table reflects the change in the Company’s Level 3 liabilities, which consists of the warrants issued in a private placement in November 2016 (see Note 7), for the period ended September 30, 2019 (in thousands):

	November Private Placement Warrants
Balance at December 31, 2017	$	13,128
Change in fair value		(4,617	)
Balance at December 31, 2018		8,511
Change in fair value		(8,061	)
Balance at September 30, 2019	$	450

6. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

Accrued expenses as of September 30, 2019 and December 31, 2018 consisted of the following (in thousands):

	September 30,		December 31,
	2019		2018
Clinical	$	1,032	$	941
Compensation and benefits		526		830
Accounting and legal		238		227
Other		202		369
Total accrued expenses and other current liabilities	$	1,998	$	2,367

7. WARRANTS

In connection with the amendment and restatement of a license agreement with BioHEP Technologies Ltd. (“BioHEP”) in February 2016, the Company issued a warrant to purchase 125,000 shares of the Company’s common stock to BioHEP (the “BioHEP Warrant”). The BioHEP Warrant had an exercise price of $16.00 per share and expired unexercised on August 1, 2018. The Company evaluated the terms of the warrant and concluded that it should be equity-classified. The fair value of the warrant, $0.8 million, was estimated on the issuance date using a Black-Scholes pricing model based on the following assumptions: an expected term of two and a half years, expected stock price volatility of 71%, a risk-free interest rate of 1.01%, and a dividend yield of 0%. The fair value was expensed as research and development costs.

In connection with the Company’s IPO, the Company issued to the sole book-running manager for the IPO a warrant to purchase 27,600 shares of common stock in May 2016 and a warrant to purchase 747 shares of common stock in June 2016 (together, the “IPO Warrants”). The IPO Warrants are exercisable at an exercise price of $15.00 per share and expire on May 5, 2021. The Company evaluated the terms of the IPO Warrants and concluded that they should be equity-classified. The fair value of the May 2016 IPO Warrants was estimated on the applicable issuance dates using a Black-Scholes pricing model based on the following assumptions: an expected term of 4.99 years; expected stock price volatility of 87%; a risk-free interest rate of 1.20%; and a dividend yield of 0%. The fair value of the June 2016 IPO Warrants was estimated on the applicable issuance dates using a Black-Scholes pricing model based on the following assumptions: an expected term of 4.92 years; expected stock price volatility of 87%; a risk-free interest rate of 1.23%; and a dividend yield of 0%. The aggregate fair value of the IPO Warrants was approximately $0.2 million.

In November 2016, the Company entered into a definitive agreement with respect to the private placement of 1,644,737 shares of common stock and warrants to purchase 1,644,737 shares of common stock (the “November 2016 Private Placement Warrants”) to a group of accredited investors. These investors paid $9.12 for each share of common stock and warrant to purchase one share of common stock. The November 2016 Private Placement Warrants are exercisable at an exercise price of $10.79 per share and expire on November 23, 2021. The Company evaluated the terms of these warrants and concluded that they are liability-classified. In November 2016, the Company recorded the fair value of these warrants of approximately $8.3 million using a Black-Scholes pricing model. The Company must recognize any change in the value of the warrant liability each reporting period in the statement of operations. As of September 30, 2019 and December 31, 2018, the fair value of the November 2016 Private Placement Warrants was approximately $0.5 million and $8.5 million, respectively (see Note 5).

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A summary of the Black-Scholes pricing model assumptions used to record the fair value of the warrants is as follows:

	September 30, 2019			December 31,  2018
Risk-free interest rate		1.6	%		2.5	%
Expected term (in years)		2.1			2.9
Expected volatility		62.3	%		78.1	%
Expected dividend yield		0	%		0	%

In September 2019, the Company entered into a Loan and Security Agreement (the “Loan and Security Agreement”) with Pontifax Medison Finance (Israel) L.P. and Pontifax Medison Finance (Cayman) L.P., as lenders, and Pontifax Medison Finance GP, L.P., in its capacity as administrative agent and collateral agent for itself and the lenders, providing for a $20.0 million term loan (see Note 9). In connection with the Company’s Loan and Security Agreement, the Company issued to certain lenders warrants to purchase 250,000 shares of common stock (the “Pontifax Warrants”). The Pontifax Warrants are exercisable at an exercise price of $6.57 per share and expire on September 19, 2025. The Company evaluated the terms of the Pontifax Warrants and concluded that they are equity-classified. The fair value of the Pontifax Warrants was estimated on the issuance date using a Black-Scholes pricing model based on the following assumptions: an expected term of 6.0 years; expected stock price volatility of 83.2%; a risk-free interest rate of 1.7%; and a dividend yield of 0%. The aggregate fair value of the Pontifax Warrants was approximately $0.6 million and was recorded as a discount to the term loan and will be amortized over the life of the term loan using the effective interest rate method.

In September 2019, the Company issued warrants to a service provider to purchase 15,000 shares of common stock (the “September 2019 Warrants”). The September 2019 Warrants are exercisable at an exercise price of $4.21 per share and expire on September 19, 2021. The Company evaluated the terms of the September 2019 Warrants and concluded that they are equity-classified. The fair value of the September 2019 Warrants was estimated on the applicable issuance date using a Black-Scholes pricing model based on the following assumptions: an expected term of 2.0 years; expected stock price volatility of 69.4%; a risk-free interest rate of 1.7%; and a dividend yield of 0%. The aggregate fair value of the September 2019 Warrants was approximately $19,000 and will be expensed over the life of the service contract.

A summary of the warrant activity for the nine months ended September 30, 2019 and for the year ended December 31, 2018 is as follows:

	Warrants
Outstanding at December 31, 2017		1,787,124
Grants		—
Exercises		—
Expirations/cancellations		(125,000	)
Outstanding at December 31, 2018		1,662,124
Grants		265,000
Exercises		—
Expirations/cancellations		—
Outstanding at September 30, 2019		1,927,124

8. STOCKHOLDERS’ EQUITY

Common and Preferred Stock

In August 2017, the Company entered into a Controlled Equity Offering^SMSales Agreement (the “Sales Agreement”) with Cantor Fitzgerald & Co. (“Cantor”), pursuant to which the Company may offer and sell, from time to time through Cantor, shares of the Company’s common stock having an aggregate offering price of up to $50.0 million. The Company pays Cantor a commission rate equal to 3.0% of the aggregate gross proceeds from each sale. During the year ended December 31, 2018, the Company sold an aggregate of 217,329 shares of its common stock pursuant to the Sales Agreement at a weighted-average selling price of $15.42 per share, which resulted in $3.2 million of net proceeds to the Company.

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In August 2018, the Company issued and sold in an underwritten public offering an aggregate of 3,246,079 shares of its common stock at $12.50 per share, which included 246,079 shares pursuant to the exercise of an option to purchase additional shares granted to the underwriters in connection with the offering. The offering resulted in $38.0 million of net proceeds, after deducting underwriting discounts and commissions and other offering expenses payable by the Company.

2014 Stock Incentive Plan and 2015 Stock Incentive Plan

In April 2014, the Company’s Board of Directors approved the 2014 Stock Incentive Plan (the “2014 Plan”) and authorized 750,000 shares of common stock to be issued under the 2014 Plan.

The Company’s 2015 Stock Incentive Plan (the “2015 Plan”) became effective immediately prior to the closing of the Company’s IPO on May 11, 2016. Upon the effectiveness of the 2015 Plan, 116,863 shares of common stock that remained available for grant under the 2014 Plan became available for grant under the 2015 Plan, and no further awards were available to be issued under the 2014 Plan.

The Company’s Board of Directors initially adopted the 2015 Plan in December 2015, subject to stockholder approval, and authorized 750,000 shares of Common Stock to be issued under the 2015 Plan. The 2014 Plan and 2015 Plan provide for the issuance of common stock, stock options and other stock-based awards to employees, officers, directors, consultants and advisors of the Company.

Amended and Restated 2015 Stock Incentive Plan

In June 2018, upon receipt of stockholder approval at the Company’s 2018 annual meeting, the 2015 Plan was amended and restated in its entirety increasing the authorized number of shares of common stock reserved for issuance by 800,000 shares (together with the 2014 Plan, the 2015 Plan, the “Stock Incentive Plans”). The Board approved the Amended and Restated 2015 Plan on March 9, 2018. Pursuant to the Amended and Restated 2015 Plan, there are 1,666,863 shares authorized for issuance. In addition, to the extent any outstanding awards under the 2014 Plan expire, terminate or are otherwise surrendered, cancelled or forfeited after the closing of the Company’s IPO, those shares are added to the authorized shares under the Amended and Restated 2015 Plan. The total amount of shares authorized for issuance under both the 2014 Plan and the Amended and Restated 2015 Plan is 2,300,000. As of September 30, 2019, the Company had 339,644 shares available for issuance under the Amended and Restated 2015 Plan.

The exercise price of stock options cannot be less than the fair value of the common stock on the date of grant. Stock options awarded under the Stock Incentive Plans expire 10 years after the grant date, unless the Board sets a shorter term. There were no stock options granted prior to 2015.

The following table summarizes the option activity under the Stock Incentive Plans for the nine months ended September 30, 2019 and the year ended December 31, 2018:

	Options			Weighted-Average Exercise Price Per Share		Aggregate Intrinsic Value
Options outstanding at December 31, 2017		988,565		$	10.83	$	2,617,859
Granted		311,000			12.28		—
Exercised		—			—		—
Cancelled		—			—		—
Outstanding at December 31, 2018		1,299,565			11.18		881,385
Granted		395,500			9.61		—
Exercised		—			—		—
Cancelled		(22,750	)		13.36		—
Options outstanding at September 30, 2019		1,672,315		$	10.78	$	—
Options exercisable at September 30, 2019		1,016,449		$	11.23	$	—

As of September 30, 2019, all options outstanding have a weighted-average remaining contractual life of 7.5 years. The weighted-average fair value of all stock options granted for the nine months ended September 30, 2019 was $6.74. Intrinsic value at September 30, 2019 and December 31, 2018 is based on the closing price of the Company’s common stock on that date of $3.44 per share and $10.39 per share, respectively.

In January 2018, the Company issued a stock option award as an inducement grant for the purchase of an aggregate of 50,000 shares of the Company’s common stock, outside of the Stock Incentive Plans, at an exercise price of $12.02 per share. In February 2019, the Company issued a stock option award as an inducement grant for the purchase of an aggregate of 40,000 shares of the Company’s

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common stock, outside of the Stock Incentive Plans, at an exercise price of $10.39 per share. These inducement grantsare excluded from the option activity table above.

The assumptions the Company used to determine the fair value of stock options granted to employees and directors during the nine months ended September 30, 2019 and 2018 are as follows, presented on a weighted-average basis:

	For the Nine Months Ended September 30,
	2019			2018
Risk-free interest rate		2.5	%		2.5	%
Expected term (in years)		5.9			6.1
Expected volatility		81.1	%		82.5	%
Expected dividend yield		0	%		0	%

Performance-Based Restricted Stock Units

In January 2019, the Company issued RSUs to senior management under the 2015 Plan that represent shares potentially issuable in the future subject to the satisfaction of certain performance milestones as well as a service condition. The vesting of 50% of the RSUs is based upon the Company’s performance relative to a peer group over a two-year performance period, from January 1, 2019 through December 31, 2020, measured by the Company’s relative total shareholder return. The vesting of 25% of the RSUs is based on the achievement of a performance goal milestone as of December 31, 2019 and the vesting of the remaining 25% of the RSUs is based upon the achievement of a performance goal milestone as of December 31, 2020.

The Company estimates the fair value of total shareholder return RSUs at the date of grant using a Monte Carlo valuation methodology and amortizes those fair values over the requisite service period for each separately vesting tranche of the award. The Monte Carlo methodology that the Company uses to estimate the fair value of total shareholder return RSUs at the date of grant incorporates into the valuation the possibility that the market condition may not be satisfied. Provided that the requisite service is rendered, the total fair value of the total shareholder return RSUs at the date of grant must be recognized as compensation expense even if the market condition is not achieved. However, the number of shares that ultimately vest can vary significantly with the performance of the specified market criteria.

The Company estimates the fair value of milestone-based RSUs at the date of grant using the fair value method and the probability that the specified performance criteria will be met. Each quarter the Company updates its assessment of the probability that the specified milestone criteria will be achieved and adjusts its estimate of the fair value, if necessary. The Company amortizes the fair values of milestone-based RSUs over the requisite service period for each separately vesting tranche of the award. As of September 30, 2019, the Company estimates that it is currently not probable that it will achieve the December 31, 2019 clinical milestone applicable to the milestone-based RSUs and has not recognized stock-based compensation expense for these RSUs as it relates to the December 31, 2019 milestone base goal. As of September 30, 2019, the Company estimates that it is currently probable that it will achieve the December 31, 2020 clinical milestone applicable to the milestone-based RSUs and has recognized the stock-based compensation expense for these RSUs as it relates to the December 31, 2020 milestone.

The total stock-based compensation recognized for the three and nine months ended September 30, 2019 for the RSUs was approximately $0.1 million and $0.4 million, respectively. As of September 30, 2019, the Company adjusted stock-based compensation approximately $0.1 million for previously recognized stock-based compensation for the December 31, 2019 clinical milestone currently estimated to be not probable.

The following table is a rollforward of RSU activity under the Stock Incentive Plans for the nine months ended September 30, 2019:

	Restricted Stock Units			Weighted-Average Grant Date Fair Value
Total nonvested units at December 31, 2018		—		$	—
Granted		203,700			8.49
Exercised		—			—
Vested		—			—
Cancelled		(17,900	)		8.49
Total nonvested units at September 30, 2019		185,800		$	8.49

The assumptions used to determine the fair value of the RSUs granted to management during the nine months ended September 30, 2019 for the performance goal milestone units is based on the market price of the award on the grant date, which was a weighted

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average fair value for the nine months ended September 30, 2019 of $10.35 per share. The fair value of the performance-based RSUs granted to management in 2019 for the Company’s relative total share return units is based on the Monte Carlo Simulation method on the grant date, which the weighted average fair value as of the nine months ended September 30, 2019 was $6.62 per share.

Stock-Based Compensation

The following table summarizes the Company’s stock-based compensation expense for the three and nine months ended September 30, 2019 and 2018 (in thousands):

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
Stock-based compensation:	2019		2018		2019		2018
Research and development	$	314	$	214	$	971	$	628
General and administrative		497		499		1,854		1,434
Total Stock-based compensation	$	811	$	713	$	2,825	$	2,062

The fair value of stock options vested during the nine months ended September 30, 2019 was $2.4 million. At September 30, 2019, there was $4.6 million of unrecognized stock-based compensation expense relating to stock options granted pursuant to the Stock Incentive Plans, which will be recognized over the weighted-average remaining vesting period of 2.6 years.

The expense recognized is partially dependent upon the Company’s estimate of the number of shares that will ultimately be issued. At September 30, 2019, there was $0.7 million of unrecognized stock-based compensation expense relating to performance-based RSUs granted pursuant to the Stock Incentive Plans, which will be recognized over the weighted-average remaining vesting period of 1.3 years.

Reserved Shares

As of September 30, 2019 and December 31, 2018, the Company reserved the following shares of common stock for issuance of shares resulting from exercise of outstanding warrants, convertible shares from the Loan and Security Agreement, options and performance-based RSUs, as well as issuance of shares available for grant under the Stock Incentive Plans:

	September 30,		December 31,
	2019		2018
IPO warrants		28,347		28,347
November private placement warrants		1,633,777		1,633,777
Loan and security agreement		2,329,143		—
Pontifax warrants		250,000		—
September 2019 warrants		15,000		—
2015 amended and restated stock incentive plan		2,197,759		2,238,887
Inducement awards		90,000		50,000
Total		6,544,026		3,951,011

9. CONVERTIBLE DEBT

In September 2019, the Company entered into a Loan and Security Agreement with Pontifax Medison Finance (Israel) L.P. and Pontifax Medison Finance (Cayman) L.P., as lenders, and Pontifax Medison Finance GP, L.P., in its capacity as administrative agent and collateral agent for itself and the lenders (collectively, the “Lenders”), providing for a $20.0 million term loan (the “Convertible Term Loan”), which the Company received on September 19, 2019 (the “Closing Date”). The Convertible Term Loan bears interest at an annual rate of 8.0%. The Loan and Security Agreement provides for interest-only payments for twenty-four months and repayment of the aggregate outstanding principal balance of the Convertible Term Loan in quarterly installments starting upon expiration of the interest only period and continuing through September 19, 2023 (the “Maturity Date”). The Company incurred issuance costs of $0.4 million. The Convertible Term Loan issuance costs are shown as an offset to the Convertible Term Loan on the balance sheet and are amortized using the effective interest method to interest expense through the Maturity Date.

The Company may, at its option, prepay some or all of the then outstanding principal balance and all accrued and unpaid interest on the Convertible Term Loan, together with a prepayment charge equal to 3% of the principal amount being prepaid.The Lenders may, at their option, elect to convert the then outstanding Convertible Term Loan amount and all accrued and unpaid interest thereon into shares of the Company’s common stock at a conversion price of $8.76 per share, which is equal to two times the weighted average closing price of the Company’s common stock during the 30 trading days prior to the execution of the Loan and Security Agreement (the “30-day VWAP”).

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The Company’s obligations are secured by a security interest, senior to any current and future debts and to any security interest, in all of the Company’s right, title, and interest in, to and under all of its property and other assets, subject to limited exceptions including the Company’s intellectual property.The Loan and Security Agreement containscustomary events of default, representations, warranties and covenants, including a material adverse effect clause. The Company must maintain a minimum cash balance of $7.0 million in Spring Bank Pharmaceuticals, Inc. accounts, or it is in breach of the Loan and Security Agreement, which the Company is in compliance with as of September 30, 2019.

Upon the occurrence of an event of default, a default interest rate of an additional 4% per annum may be applied to the outstanding loan balances, and the Lenders may declare all outstanding obligations immediately due and payable and exercise all of its rights and remedies as set forth in the Loan and Security Agreement and under applicable law.

In addition, the Company issued the Lenders warrants to purchase an aggregate of 250,000 shares of the Company’s common stock. The Pontifax Warrants are exercisable for a period of six years from the Closing Date at an exercise price of $6.57 per share, which is equal to 1.5 times 30-day VWAP. The aggregate fair value of the Pontifax Warrants was approximately $0.6 million and was recorded as a discount to the term loan and will be amortized over the life of the term loan using the effective interest rate method (see Note 7).

During the three and nine months ended September 30, 2019, the Company recorded interest expense of approximately $63,000 in connection with the Convertible Term Loan. The fair value of the term loan as of September 30, 2019 approximates its face value given the close proximity of the execution to September 30, 2019 and due to market terms.

The Company evaluated the accounting for the Loan and Security Agreement and identified an embedded derivative related to the contingent interest feature. The Company determined the fair value of the contingent interest feature to be di minimis and will re-value the derivative at the end of each reporting period.

The following table summarizes the Company’s future principal debt payments on the Convertible Term Loan as of September 30, 2019 (in thousands):

	September 30, 2019
2019	$	—
2020		—
2021		2,500
2022		10,000
2023		7,500
Total principal payments	$	20,000
Less: unamortized debt discount		(989	)
Term loan, long-term	$	19,011

10. LEASES

The Company has operating leases for its principal office and laboratory space and the Company’s former headquarters. The Company’s leases have remaining lease terms of approximately 8.5 years for its principal office and laboratory space, which includes an option to extend the lease for up to 5 years, and approximately 2 years for its former headquarters. The Company’s former headquarters location is subleased through the remainder of the lease term.

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Other information related to leases was as follows:

	For the Nine Months Ended September 30,
Cash paid for amounts included in the measurement of lease liabilities:	2019
Operating cash flow from operating leases (in thousands)	$	273
Right-of-use assets obtained in exchange for lease obligations:
Operating leases (in thousands)	$	2,980
Weighted Average Remaining Lease Term
Operating leases	8.5 years
Weighted Average Discount Rate
Operating leases		8.0	%

Operating lease costs under the leases for the three and nine months ended September 30, 2019 were approximately $130,000 and $390,000, respectively. Total operating lease costs for the three and nine months ended September 30, 2019 were offset by $22,000 and $59,000, respectively, for sublease income and variable lease cost payments. Total rent expense for the three and nine months ended September 30, 2018 was $144,000 and $286,000 respectively, which included payments for a lease of the Company’s research and development facility. The lease term of the research and development facility ended as of June 30, 2018.

The following table summarizes the Company’s maturities of operating lease liabilities as of September 30, 2019 (in thousands):

Year
2019 (excluding the nine months ended September 30, 2019)	$	144
2020		588
2021		508
2022		450
2023		462
Thereafter		2,405
Total lease payments	$	4,557
Less: present value discount		(1,252	)
Total	$	3,305

For comparative purposes, the Company’s aggregate future minimum non-cancellable commitments under operating leases as of December 31, 2018 were as follows (in thousands):

Year
2019	$	417
2020		588
2021		508
2022		450
Thereafter		2,867
Total minimum lease payments	$	4,830

11. COMMITMENTS AND CONTINGENCIES

BioHEP Technologies Ltd. License Agreement

In January 2016, the Company entered into an amended and restated license agreement with BioHEP, which became effective on February 1, 2016.

Under the amended and restated license agreement, the Company agreed to pay BioHEP up to $3.5 million in development and regulatory milestone payments for disease(s) caused by each distinct virus for which the Company develops licensed product(s). BioHEP is also eligible to receive tiered royalties in the low-to-mid single-digits on net product sales of licensed products by the Company and its affiliates and sub licensees, and a specified share of non-royalty sublicensing revenues the Company and its affiliates

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receive from sub licensees, which share of sublicensing revenues is capped at a maximum aggregate of $2.0 million under all such sublicenses. Milestone and royalty payments associated with the Company’s amended and restated license agreement with BioHEP cannot be reasonably estimated as to whether or when they will occur. As of September 30, 2019, there have been no milestone or royalty payments made to BioHEP.

Contingencies

The Company accrues for contingent liabilities to the extent that the liability is probable and estimable. There are no accruals for contingent liabilities in these consolidated financial statements.

12. SUBSEQUENT EVENTS

The Company has evaluated subsequent events through the date on which the consolidated financial statements were issued, to ensure that this submission includes appropriate disclosure of events both recognized in the consolidated financial statements and events which occurred subsequently but were not recognized in the consolidated financial statements.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following information should be read in conjunction with the unaudited financial information and the notes thereto included in this Quarterly Report on Form 10-Q and the consolidated financial statements and notes thereto for the year ended December 31, 2018, and the related Management’s Discussion and Analysis of Financial Condition and Results of Operations, contained in our Annual Report on Form 10-K filed with the United States Securities and Exchange Commission, or the SEC, on March 11, 2019.

This report contains forward-looking statements that are being made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, or PSLRA, with the intention of obtaining the benefits of the “safe harbor” provisions of the PSLRA. Forward-looking statements involve risks and uncertainties. In this Quarterly Report on Form 10-Q, words such as “may,” “will,” “expect,” “anticipate,” “estimate,” “intend,” and similar expressions (as well as other words or expressions referencing future events, conditions or circumstances) are intended to identify forward-looking statements.

Our actual results and the timing of certain events may differ materially from the results discussed, projected, anticipated, or indicated in any forward-looking statements. We caution our readers that forward-looking statements are not guarantees of future performance and that our actual results of operations, financial condition and liquidity, and the development of the industry in which we operate may differ materially from those expressed or implied by the forward-looking statements contained in this Quarterly Report on Form 10-Q.

We caution readers not to place undue reliance on any forward-looking statements made by us, which speak only as of the date they are made. We disclaim any obligation, except as specifically required by law and the rules of the SEC, to publicly update or revise any such statements to reflect any change in our expectations or in events, conditions or circumstances on which any such statements may be based, or that may affect the likelihood that actual results will differ from those set forth in the forward-looking statements.

Overview

We are a clinical-stage biopharmaceutical company engaged in the discovery and development of a novel class of therapeutics for the treatment of viral infections, inflammatory diseases and certain cancers using our proprietary small molecule nucleotide platform. We design our compounds to selectively target and modulate the activity of specific proteins implicated in various disease states. We are developing our lead product candidate, inarigivir soproxil, or inarigivir, for the treatment of chronic hepatitis B virus, or HBV. We have designed our antiviral product candidates, including inarigivir, to selectively activate within infected hepatic cells the cellular protein, retinoic acid-inducible gene 1 (RIG-I), to inhibit viral replication and to cause the induction of intracellular interferon signaling pathways for antiviral defense. We believe that inarigivir, as a RIG-I agonist, could play an important role in antiviral therapy as a result of its dual mechanism of action that is designed to selectively modulate the body’s immune response and inhibit viral replication. We are also developing additional product candidates, including our STING (STimulator of INterferon Genes) agonist product candidate, SB 11285, which is an immunotherapeutic agent for the potential treatment of selected cancers.

The World Health Organization estimates that 257 million people are chronically infected with chronic HBV worldwide, and nearly 900,000 people worldwide die every year due to complications from chronic HBV infection despite the availability of vaccines against the virus. There is no approved cure for chronic HBV and currently approved direct-acting antiviral therapies for the treatment of chronic HBV lack a broadly sustained response following the discontinuation of treatment.

We are developing inarigivir, an orally-administered investigational selective immunomodulator, as a potential backbone in a combinatorial treatment for chronic HBV, with a goal to accelerate and substantially increase functional cure rates in a simple, safe and selective manner. We recently completed our global Phase 2 ACHIEVE trial of inarigivir and have launched two Phase 2 global trials (CATALYST 1 and CATALYST 2) examining the administration of inarigivir 400mg as monotherapy and co-administered with a nucleotide in naïve and virally suppressed chronic HBV patients. We anticipate presenting initial results from these trials throughout 2020. We are also pursuing the development of SB 9225, a co-formulation of inarigivir with tenofovir disoproxil fumarate, or TDF, as a potential fixed-dose combination product for the treatment of patients with chronic HBV. In addition to our inarigivir clinical trials, we continue to explore collaborations, including with siRNA compounds targeting hepatitis B surface antigen, or HBsAg, as well as other antiviral and immunomodulatory mechanisms. We believe the immunomodulatory activity of inarigivir could become a key component of a future combinatorial treatment for patients infected with chronic HBV, increasing the percentage of chronic HBV patients who achieve a functional cure.

We entered into a clinical trial supply and collaboration agreement with Gilead Sciences, Inc., or Gilead, which has been subsequently amended, under which Gilead is funding and conducting a Phase 2 clinical trial examining inarigivir (50mg, 200mg and 400mg) co-administered with Vemlidy® 25 mg (tenofovir alafenamide) in patients infected with chronic HBV. In October 2019, we announced interim top-line results at 12 weeks from the first 50mg cohort of this Phase 2 trial. In this trial, 30 patients with HBV

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infection received low-dose inarigivir 50mg plus Vemlidy for 12 weeks. At week 12, 7 of the 30 patientswere HBsAg responders and met the primary efficacy study endpoint of having greater than or equal to 0.5 log₁₀ IU/mL reduction in HBsAg from baseline. In the inarigivir 50mg monotherapy cohort of the Company’s completed Phase 2 ACHIEVE trial, only 1 of 14 patients was a HBsAg responder at week 12.The co-administration of inarigivir 50mg and Vemlidy was generally safe and well tolerated with no serious adverse events observed over the 12-week treatment period. Treatment-emergent adverse events ranged from mild to moderate in severity. Interim top-line results from the remaining cohorts of this trial are expected in 2020.

We are also developing novel chimeric antisense oligonucleotide compounds, which we refer to as CASOs, for the treatment of HBV. In July 2019, we entered into a research agreement with The National Institute of Allergy and Infectious Diseases (NIAID), part of the National Institutes of Health, to evaluate our CASOs. We plan to evaluate a triple combination for HBV consisting of the lead CASO co-administered with inarigivir and a nucleo(s)tide analog for potentially achieving functional cure.

In addition to our inarigivir clinical development program, we are also developing a STING program consisting of STING agonists and antagonists. Our lead STING agonist product candidate, SB 11285, is a potential next-generation immunotherapeutic agent for the treatment of selected cancers. In our preclinical studies in multiple tumor-derived cell lines, SB 11285 has been observed to cause the induction of cytokines consistent with engagement of the target, as well as cell death and apoptosis. Based on our preclinical studies performed to date, SB 11285 has reduced tumor volumes, without dose-limiting toxicities, in multiple rodent tumor models when administered intravenously or intratumorally. These findings lead us to believe that SB 11285 has the potential to be administered clinically by either route of administration, and that SB 11285 may be used to target a variety of tumors at various anatomic sites and, if approved, has the potential to be used in combination with other therapeutic modalities to enhance efficacy.

In June 2019, we filed an investigational new drug application for a Phase 1 clinical trial for the intravenously-administered (IV) SB 11285 for the clinical study of advanced solid tumors, which was accepted by the U.S. Food and Drug Administration in July 2019. Part 1 of this Phase 1 trial is a dose-escalation study with IV SB 11285 monotherapy followed by combination with a checkpoint inhibitor and is designed to determine a recommended phase 2 dose. Part 2 of this Phase 1 trial will explore IV SB 11285 antitumor activity in combination with a checkpoint inhibitor in selected tumor types. The trial will be conducted at multiple sites in the United States. We initiated this Phase 1 trial in the third quarter of 2019 and anticipate that top-line results from this trial will be available in 2020.

In July 2019, we presented pre-clinical data from a novel STING antagonist compound, which showed potent inhibition of interferon and pro-inflammatory cytokines in wild type and mutant STING in vitro models. In vivo administration of this compound antagonized STING-agonist-induced interferon and cytokine production in the blood, spleen and liver in mice, illustrating the potential that this compound has for therapeutic applications in interferonopathies, as well as autoimmune and inflammatory diseases. Furthermore, in August 2019, we entered into a research agreement with the University of Texas Southwestern Medical School to evaluate our small molecule STING antagonist compounds.

To date, we have devoted substantially all of our resources to research and development efforts, including conducting clinical trials for our product candidates, protecting our intellectual property and providing general and administrative support for these operations. We have not generated any revenue to date other than from grants from the National Institutes of Health, or NIH. No additional funding remains available to us under any grant for the development of any of our product candidates. We have funded our operations primarily through proceeds received from private placements of convertible notes, common stock and/or warrants; the exercise of options and warrants; NIH grant funding; and public offerings of securities.

We have incurred significant annual net operating losses in every year since our inception and expect to continue to incur significant expenses and net operating losses for the foreseeable future. Our net losses for the three and nine months ended September 30, 2019 were $6.9 million and $16.7 million, respectively, and our net losses for the three and nine months ended September 30, 2018 were $8.8 million and $17.4 million, respectively. As of September 30, 2019, we had an accumulated deficit of $118.7 million. Our net losses may fluctuate significantly from quarter to quarter and year to year. We expect to continue to incur significant expenses and increasing operating losses for the next several years.

We anticipate that our expenses will increase significantly as we continue to develop inarigivir, SB 11285 and our other product candidates. See “—Liquidity and Capital Resources—Funding Requirements.” As a result, we will need additional financing to support our continuing operations. Until such time as we can generate significant revenue from product sales, if ever, we expect to finance our operations through a combination of public or private equity or debt financings, including our at-the-market offering program with Cantor Fitzgerald & Co., or other sources, which may include collaborations with third parties. Arrangements with collaborators or others may require us to relinquish rights to certain of our technologies or product candidates. Adequate additional financing may not be available to us on acceptable terms, or at all. Our inability to raise capital as and when needed would have a negative impact on our financial condition and our ability to pursue our business strategy. We will need to generate significant revenue to achieve and sustain profitability, and we may never be able to do so.

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As of September 30, 2019, we had $63.1 million in cash, cash equivalents and marketable securities. Based on our current operating plan, we expect that our cash, cash equivalents and marketable securities as of September 30, 2019 will enable us to fund our operating expenses and capital expenditure requirements into 2022. See “—Liquidity and Capital Resources.”

We do not expect to generate revenue from product sales unless and until we successfully complete development and obtain regulatory approval for one or more of our product candidates, which we expect will take a number of years and is subject to significant uncertainty. We have no manufacturing facilities, and all of our manufacturing activities are contracted out to third parties. Additionally, we currently utilize third-party contract research organizations, or CROs, to carry out our clinical development activities, and we do not yet have a sales organization. If we obtain regulatory approval for any of our product candidates, we expect to incur significant commercialization expenses related to product sales, marketing, manufacturing and distribution. Accordingly, we will seek to continue to fund our operations through public or private equity or debt financings or other sources including geographic partnerships. However, we may be unable to raise additional funds or enter into other arrangements when needed on favorable terms or at all. Our failure to raise capital or enter into such other arrangements as and when needed would have a negative impact on our financial condition and our ability to develop our products.

Recent Developments

In September 2019, we entered into a loan and security agreement with certain affiliates of Pontifax Medison Finance that provides for a $20.0 million term loan and bears annual interest at a rate of 8.0%, which we refer to as the Loan and Security Agreement. The lenders may, at their option, elect to convert some or all of the then outstanding term loan amount and all accrued and unpaid interest thereon into shares of our common stock at a conversion price of $8.76 per share. The Loan and Security Agreement contains customary events of default, representations, warranties and covenants. The Loan and Security Agreement is described further in Note 9 to the notes to the consolidated financial statements contained in this Quarterly Report on Form 10-Q.

Financial Operations Overview

Operating expenses

Our operating expenses since inception have consisted primarily of research and development expense and general and administrative costs.

Research and development

Research and development expenses consist primarily of costs incurred for our research activities, including our discovery efforts, and the development of our product candidates, which include:

• expenses incurred under agreements with third parties, including contract research organizations, or CROs, that conduct research, preclinical activities and clinical trials on our behalf as well as contract manufacturing organizations, or CMOs, that manufacture drug products for use in our preclinical and clinical trials;

• salaries, benefits and other related costs, including stock-based compensation expense, for personnel in our research and development functions;

• costs of outside consultants, including their fees, stock-based compensation and related travel expenses;

• the cost of laboratory supplies and acquiring, developing and manufacturing preclinical study and clinical trial materials;

• costs related to compliance with regulatory requirements; and

• facility-related expenses, which include direct depreciation costs and allocated expenses for rent and maintenance of facilities and other operating costs.

We expense research and development costs as incurred. We recognize external development costs based on an evaluation of the progress to completion of specific tasks using information provided to us by our vendors and our clinical investigative sites. Payments for these activities are based on the terms of the individual agreements, which may differ from the pattern of costs incurred, and are reflected in our consolidated financial statements as prepaid or accrued research and development expenses.

Our direct research and development expenses are not currently tracked on a program-by-program basis. Our primary focus has been on the research and development of inarigivir. Our direct research and development expenses consist primarily of

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external costs, such as fees paid to investigators, consultants and CROs in connection with our preclinical studies and clinical trial and regulatory fees. We do not allocate employee-related costs and other indirect costs to specific research and development programs because our primary focus has been on the research and development of inarigivir.

The successful development of our product candidates is highly uncertain. Accordingly, at this time, we cannot reasonably estimate the nature, timing and costs of the efforts that will be necessary to complete the development of any of our product candidates. We are also unable to predict when, if ever, we will generate revenues from inarigivir or any of our other product candidates. This is due to the numerous risks and uncertainties associated with developing medicines, including the uncertainties of:

• establishing an appropriate safety profile with investigational new drug, or IND, application enabling toxicology studies;

• successful enrollment in and completion of clinical trials;

• receipt of marketing approvals from applicable regulatory authorities;

• establishing commercial manufacturing capabilities or making arrangements with third-party manufacturers;

• obtaining and maintaining patent and trade secret protection and regulatory exclusivity for our product candidates;

• launching commercial sales of the products, if and when approved, whether alone or in collaboration with others; and

• if a product is approved, a continued acceptable safety profile of the product.

A change in the outcome of any of these variables with respect to any of our product candidates would significantly change the costs and timing associated with the development of that product candidate.

Research and development activities are central to our business model. Product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials. We expect that our research and development expenses will continue to increase in the foreseeable future as we initiate clinical trials for certain product candidates and pursue later stages of clinical development of other product candidates. However, we do not believe that it is possible at this time to accurately project total program-specific expenses through commercialization. There are numerous factors associated with the successful commercialization of any of our product candidates, including future trial design and various regulatory requirements, many of which cannot be determined with accuracy at this time based on our stage of development. Additionally, future commercial and regulatory factors beyond our control will impact our clinical development programs and plans.

General and administrative

General and administrative expenses consist primarily of salaries and other related costs, including stock-based compensation, for personnel in our executive, finance, corporate and business development and administrative functions. General and administrative expenses also include legal fees relating to patent and corporate matters; professional fees for accounting, auditing, tax and consulting services; insurance costs; travel expenses; and facility-related expenses, which include direct depreciation costs and allocated expenses for rent and maintenance of facilities and other operating costs.

We anticipate that our general and administrative expenses will increase in the future as we increase our headcount to support the expected growth in our research and development activities and the potential commercialization of our product candidates. We also expect to incur increased expenses associated with being a public company, including increased costs of accounting, audit, legal, regulatory and tax-related services associated with maintaining compliance with exchange listing and SEC requirements, director and officer insurance premiums, and investor and public relations costs.

Other income (expense)

Other income (expense) consists of interest income earned on our cash, cash equivalents, restricted cash and marketable securities.

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Change in fair value of warrant liabilities

Change in fair value of warrant liabilities consists of a gain or (loss) related to the change in the fair value of the warrants issued in connection with our private placement offering in November 2016, resulting from a change factors such as a change in our stock price and a change in expected stock price volatility.

Critical Accounting Policies and Significant Judgments and Estimates

Our consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States of America. The preparation of our consolidated financial statements and related disclosures requires us to make estimates and assumptions that affect the reported amount of assets, liabilities, revenue, costs and expenses and related disclosures. We believe that the estimates and assumptions involved in the accounting policies described therein may have the greatest potential impact on our consolidated financial statements and, therefore, consider these to be our critical accounting policies. We evaluate our estimates and assumptions on an ongoing basis. Our actual results may differ from these estimates under different assumptions and conditions.

Accrued Research and Development Expenses

As part of the process of preparing our consolidated financial statements, we are required to estimate our accrued research and development expenses. This process involves reviewing open contracts and purchase orders, communicating with our personnel to identify services that have been performed on our behalf and estimating the level of service performed and the associated costs incurred for the services when we have not yet been invoiced or otherwise notified of the actual costs. The majority of our service providers invoice us in arrears for services performed, on a predetermined schedule or when contractual milestones are met; however, some require advanced payments. We make estimates of our accrued expenses as of each balance sheet date in our consolidated financial statements based on facts and circumstances known to us at that time. Examples of estimated accrued research and development expenses include fees paid to:

• CROs in connection with performing research services on our behalf and clinical trials;

• investigative sites or other providers in connection with clinical trials;

• vendors in connection with preclinical and clinical development activities; and

• vendors related to product manufacturing, development and distribution of preclinical and clinical supplies.

We base our expenses related to preclinical studies and clinical trials on our estimates of the services received and efforts expended pursuant to quotes and contracts with multiple CROs that conduct and manage clinical trials on our behalf. The financial terms of these agreements are subject to negotiation, vary from contract to contract and may result in uneven payment flows. There may be instances in which payments made to our vendors will exceed the level of services provided and result in a prepayment of the clinical expense. Payments under some of these contracts depend on factors such as the successful enrollment of patients and the completion of clinical trial milestones. In accruing service fees, we estimate the time period over which services will be performed, enrollment of patients, number of sites activated and the level of effort to be expended in each period. If the actual timing of the performance of services or the level of effort varies from our estimate, we adjust the accrual or amount of prepaid expense accordingly. Although we do not expect our estimates to be materially different from amounts actually incurred, our understanding of the status and timing of services performed relative to the actual status and timing of services performed may vary and may result in us reporting amounts that are too high or too low in any particular period. To date, we have not made any material adjustments to our prior estimates of accrued research and development expenses.

Warrants Issued in 2016 Private Placement

In connection with our private placement offering in November 2016, or the November private placement, we issued warrants to purchase 1,644,737 shares of common stock, which we refer to as the November 2016 Warrants. These warrants are exercisable at an exercise price of $10.79 per share. We evaluated the terms of these warrants and concluded that they should be liability-classified. In November 2016, we recorded the fair value of these warrants of approximately $8.3 million. We recognize any change in the value of the warrant liability each reporting period in the statement of operations. As of September 30, 2019, the fair value of the warrants was approximately $0.5 million, which is a decrease of $8.0 million from the fair value of approximately $8.5 million as of December 31, 2018. See Note 7 of the notes to the unaudited financial statements included elsewhere in this Quarterly Report on Form 10-Q.

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Stock-Based Compensation

We issue stock-based awards to employees and non-employees, generally in the form of stock options or performance-based restricted stock units. We account for our stock-based compensation awards in accordance with Financial Accounting Standards Board, (FASB) ASC Topic 718, Compensation—Stock Compensation, or ASC 718. ASC 718 requires all stock-based payments to employees, including grants of employee stock options and modifications to existing stock awards, to be recognized in the statements of operations and comprehensive loss based on their fair values. We adopted ASU 2018-07, Improvements to Nonemployee Share-Based Payment Accounting, effective July 1, 2018, which aligns the accounting treatment of nonemployee awards with employee awards. Described below is the methodology we have utilized in measuring stock-based compensation expense. Stock option, common stock and restricted stock values are determined based on a blend of our stock price and the quoted market price of our comparable public companies.

We measure stock options and other stock-based awards granted to employees, nonemployees and directors based on the fair value on the date of grant and recognize the corresponding compensation expense of those awards, over the requisite service period, which is generally the vesting period of the respective award. We account for forfeitures as they occur. Generally, we issue stock options and performance based restricted stock units with service-based vesting conditions and record the expense for these awards using the straight-line method. Each quarter we update our assessment of the probability that the specified performance criteria will be achieved and adjust our estimate of the fair value of the performance-based RSUs if necessary.

We estimate the fair value of each stock option grant using the Black-Scholes option-pricing model. Use of this model requires that we make assumptions as to the fair value of our common stock, the volatility of our common stock, the expected term of our stock options, the risk-free interest rate for a period that approximates the expected term of our stock options and our expected dividend yield. Because we lack company-specific historical and implied volatility information due in part to the limited time in which we have operated as a publicly traded company, we estimate our expected volatility based on the historical volatility of a group of publicly traded peer companies. We expect to continue to do so until such time as we have adequate historical data regarding the volatility of our traded stock price. We use the simplified method prescribed by the SEC’s Staff Accounting Bulletin No. 107, Share-Based Payment, to calculate the expected term of options granted to employees and directors. We base the expected term of options granted to consultants and nonemployees on the contractual term of the options. We determine the risk-free interest rate by reference to the United States Treasury yield curve in effect at the time of grant of the award for time periods approximately equal to the expected term of the award. Expected dividend yield is based on the fact that we have never paid cash dividends and do not expect to pay any cash dividends in the foreseeable future.

There were no stock options granted prior to 2015. We recognize forfeitures as they occur and the compensation expense is reversed in the period that the forfeiture occurs. The assumptions we used to determine the fair value of granted stock options in nine months ended September 30, 2019 and 2018 are as follows:

	For the Nine Months Ended September 30,
	2019			2018
Risk-free interest rate		2.5	%		2.5	%
Expected term (in years)		5.9			6.1
Expected volatility		81.1	%		82.5	%
Expected dividend yield		0	%		0	%

The assumptions used to determine the fair value of the performance-based restricted stock units granted to management during the nine months ended September 30, 2019 for the performance goal milestone units is based on the market price of the award on the grant date, which was a weighted average fair value for the nine months ended September 30, 2019 of $10.35 per share. The fair value of the performance-based restricted stock units granted to management in 2019 for the Company’s relative total share return units is based on the Monte Carlo Simulation method on the grant date, which the weighted average fair value as of the nine months ended September 30, 2019 was $6.62 per share.

These assumptions represented our best estimates, but the estimates involve inherent uncertainties and the application of our judgment. As a result, if factors change and we use significantly different assumptions or estimates, our stock-based compensation expense could be materially different. We recognize compensation expense for only the portion of awards that are expected to vest.

We expect the impact of our stock-based compensation expense for stock options and performance based restricted stock units granted to employees and non-employees to grow in future periods due to the potential increases in the fair value of our common stock and the increase in the number of grants as a result of an increase in headcount.

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The following table summarizes the classification of our stock-based compensation expenses recognized in our consolidated statements of operations and comprehensive loss (in thousands):

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
Stock-based compensation:	2019		2018		2019		2018
Research and development	$	314	$	214	$	971	$	628
General and administrative		497		499		1,854		1,434
Total Stock-based compensation	$	811	$	713	$	2,825	$	2,062

JOBS Act

In April 2012, the Jumpstart Our Business Startups Act of 2012, or the JOBS Act, was enacted. Section 107 of the JOBS Act provides that an “emerging growth company,” or EGC, can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. Thus, an EGC can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have irrevocably elected not to avail ourselves of this extended transition period and, as a result, we adopt new or revised accounting standards on the relevant dates on which adoption of such standards is required for other public companies.

Subject to certain conditions, as an EGC, we intend to rely on certain exemptions afforded by the JOBS Act, including the exemption from: certain requirements related to the disclosure of executive compensation in our periodic reports and proxy statements, and the requirement that we hold a nonbinding advisory vote on executive compensation and any golden parachute payments; the requirement that the auditors provide an attestation report on our system of internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act; and complying with any requirement that may be adopted by the Public Company Accounting Oversight Board, or PCAOB, regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements, known as the auditor discussion and analysis. We will remain an EGC until the earliest of the last day of the fiscal year in which we have total annual gross revenues of approximately $1.07 billion or more; the last day of the fiscal year following the fifth anniversary of the date of the completion of the closing of our IPO, which is December 31, 2021; the date on which we have issued more than $1 billion in nonconvertible debt during the previous three years; or the date on which we are deemed to be a large accelerated filer under the rules of the SEC.

Results of Operations

Comparison of the Three and Nine Months Ended September 30, 2019 and 2018

The following table summarizes our results of operations for the three and nine months ended September 30, 2019 and 2018 (in thousands):

	For the Three Months Ended September 30,									For the Nine Months Ended September 30,
	2019			2018			Change			2019			2018			Change
Operating expenses:
Research and development	$	5,228		$	5,656		$	(428	)	$	18,070		$	15,188		$	2,882
General and administrative		2,247			2,059			188			7,547			6,681			866
Total operating expenses		7,475			7,715			(240	)		25,617			21,869			3,748
Loss from operations		(7,475	)		(7,715	)		240			(25,617	)		(21,869	)		(3,748	)
Other income(expense)		208			271			(63	)		894			603			291
Change in fair value of warrant liabilities		355			(1,336	)		1,691			8,061			3,837			4,224
Net loss	$	(6,912	)	$	(8,780	)	$	1,868		$	(16,662	)	$	(17,429	)	$	767

Research and development expenses.

Research and development expenses during the three months ended September 30, 2019 and 2018 were $5.2 million and $5.7 million, respectively. The decrease of $0.5 million during the three months ended September 30, 2019 was primarily due to a decrease in spending on preclinical studies and clinical trial-related activities for inarigivir and SB 11285 of $0.7 million and an increase in other research and development related expenses of $0.2 million, including laboratory supplies and non-cash charges for stock-based compensation.

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Research and development expenses during the nine months ended September 30, 2019 and 2018 were $18.1 million and $15.2 million, respectively. The increase of $2.9 million during the nine months ended September 30, 2019 was primarily due to an increase in spending on preclinical studies and clinical trial-related activities for inarigivir and SB 11285 of $1.6 million, salaries and benefits associated with higher research and development headcount of $0.5 million andother research and development related expenses of $0.8 million including laboratory supplies, lease-related costs, non-cash charges for stock-based compensation and non-cash charges for depreciation.

General and administrative expenses.

General and administrative expenses during the three months ended September 30, 2019 and 2018 were $2.2 million and $2.1 million, respectively. The increase of $0.1 million during the three months ended September 30, 2019 was primarily due to an increase in other general and administrative related expenses of $0.1 million, including consulting-related costs and public company related costs, offset by salaries and benefits and legal-related costs.

General and administrative expenses during the nine months ended September 30, 2019 and 2018 were $7.5 million and $6.7 million, respectively. The increase of $0.8 million during the nine months ended September 30, 2019 was primarily due to an increase in non-cash charges for stock-based compensation of $0.4 million and other general and administrative related expenses of $0.4 million, including salaries and benefits, legal-related costs, public company related costs and consulting-related costs, offset by lease-related costs.

Other income(expense). Other income(expense) during the three and nine months ended September 30, 2019 is comprised of interest income, offset by interest expense. Interest income during the three and nine months ended September 30, 2019 was $0.3 million and $1.0 million, respectively, and was primarily due to the interest earned on marketable securities. Interest expense during the three and nine months ended September 30, 2019 was $0.1 million and was due to the interest expense incurred on the Convertible Term Loan. Other income(expense) during the three and nine months ended September 30, 2018 was comprised solely of interest income of $0.3 million and $0.6 million, respectively, and was primarily due to the interest earned on marketable securities. The increase in interest income during the three and nine months ended September 30, 2019 was due to a higher average balance of marketable securities.

Change in fair value of warrant liabilities. The change in fair value of warrant liabilities during the three and nine months ended September 30, 2019 was a gain of $0.4 million and $8.1 million, respectively. The change in fair value of warrant liabilities during the three and nine months ended September 30, 2018 was a loss of $1.3 million and a gain $3.8 million, respectively. The change in value each period was solely due to the change in the fair value of the November 2016 Warrants, primarily as a result of the change in our stock price and stock price volatility.

Liquidity and Capital Resources

Sources of Liquidity

From our inception through September 30, 2019, we have financed our operations through proceeds received from private placements of convertible notes, common stock and/or warrants, the exercise of options and warrants, NIH grant funding and public offerings of securities. As of September 30, 2019, we had cash, cash equivalents and marketable securities totaling $63.1 million and an accumulated deficit of $118.7 million.

In August 2017, we entered into a Controlled Equity Offering^SM Sales Agreement, or Sales Agreement, with Cantor Fitzgerald & Co., or Cantor, pursuant to which we may offer and sell, from time to time through Cantor, shares of our common stock having an aggregate offering price of up to $50.0 million. We pay Cantor a commission rate equal to 3.0% of the aggregate gross proceeds from each sale. Shares sold under the Sales Agreement are offered and sold pursuant to our Registration Statement on Form S-3 (Registration No. 333-218399) that was declared effective by the SEC on June 12, 2017, which we refer to as the S-3 Registration Statement, and a prospectus supplement and accompanying base prospectus that we filed with the Securities and Exchange Commission on August 18, 2017. During the year ended December 31, 2018, we sold an aggregate of 217,329 shares of our common stock under the Sales Agreement at a weighted average selling price of $15.42 per share, which resulted in $3.2 million of net proceeds.

In August 2018, we issued and sold in an underwritten public offering an aggregate of 3,246,079 shares of our common stock at $12.50 per share, which included 246,079 shares pursuant to the exercise of an option to purchase additional shares granted to the underwriters in connection with the offering. The shares issued in this offering were registered under the Securities Act pursuant to our S-3 Registration Statement and a prospectus supplement and base prospectus filed on August 9, 2018. The offering resulted in $38.0 million of net proceeds, after deducting underwriting discounts and commissions and other offering expenses payable by us.

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In September 2019, we entered into the Loan and Security Agreement that provides for a $20.0 million term loan and bears annual interest at a rate of 8.0%. TheLoan and Security Agreement provides for interest-only payments for twenty-four months and repayment of the aggregate outstanding principal balance of the term loan in quarterly installments starting upon expiration of the interest only period and continuing through September 19, 2023. The lenders may, at their option, elect to convert some or all of the then outstanding term loan amount and all accrued and unpaid interest thereon into shares of the Company’s common stock at a conversion price of $8.76 per share, which is equal to two times the weighted average closing price of the Company’s common stock during the 30 trading days prior to the execution of the Loan and Security Agreement. The Loan and Security Agreement contains customary affirmative and negative covenants and events of default. The Loan and Security Agreement is describedin Note 9 to the notes to the condensed consolidated financial statements contained in this Quarterly Report on Form 10-Q.

Cash Flows

The following table summarizes sources and uses of cash for each of the periods presented (in thousands):

	For the Nine Months Ended September 30,
	2019			2018
Net cash used in operating activities	$	(20,471	)	$	(18,357	)
Net cash provided by (used in) investing activities		20,559			(23,076	)
Net cash provided by financing activities		19,559			41,171
Net increase (decrease) in cash, cash equivalents and restricted cash	$	19,647		$	(262	)

Net cash used in operating activities. The use of cash in both periods resulted primarily from our net losses adjusted for non-cash charges and changes in components of working capital. Net cash used in operating activities during the nine months ended September 30, 2019 and 2018 was $20.5 million and $18.4 million, respectively. The increase in cash used in operating activities during the nine months ended September 30, 2019 compared to nine months ended September 30, 2018 of $2.1 million was primarily due to an increase in accrued expenses and other current and non-current liabilities of $1.2 million, offset by a decrease in accounts payable of $1.4 million, net loss of $0.8 million and other net changes of $0.4 million. In addition, there was an increase in the non-cash change in the fair value of the warrant liability of $4.2 million and non-cash stock-based compensation of $0.8 million, offset by other non-cash changes of $0.1 million.

Net cash provided by (used in) investing activities. Net cash provided by (used in) investing activities during the nine months ended September 30, 2019 and 2018 was $20.6 million and $(23.1) million, respectively. The cash provided by investing activities during the nine months ended September 30, 2019 was primarily the result of $26.8 million in proceeds from the sale of marketable securities, which was offset by $6.0 million for the purchase of marketable securities and $0.2 million for the purchase of property and equipment. The cash used in investing activities during the nine months ended September 30, 2018 was primarily the result of $28.8 million in proceeds from the sale of marketable securities, which was offset by $50.0 million for the purchase of marketable securities and $1.9 million for the purchase of property and equipment.

Net cash provided by financing activities. Net cash provided by financing activities during the nine months ended September 30, 2019 and 2018 was $19.6 million and $41.2 million, respectively. The cash provided by financing activities during the nine months ended September 30, 2019 was primarily the result of $20.0 million of proceeds from the Convertible Term Loan and Pontifax Warrants, offset by $0.4 million of issuance costs in connection with the Convertible Term Loan and Pontifax Warrants. The cash provided by financing activities during the nine months ended September 30, 2018 was primarily the result of $38.0 million of net proceeds from the issuance of common stock and $3.2 million of net proceeds from our at-the-market offering program under the Sales Agreement.

Funding Requirements

We expect to continue to incur significant and increasing losses for the foreseeable future. We anticipate these losses to increase as our expenses increase, and we expect that our expenses will increase if and as we:

• continue to develop and conduct clinical trials of inarigivir, including our Phase 2 CATALYST clinical trials of inarigivir for chronic HBV;

• continue to develop and initiate clinical trials of SB 11285, our lead STING agonist product candidate;

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• initiate and continue research and preclinical and clinical development efforts for our other product candidates, including SB 9225, a potential fixed-dose co-formulation product that combines inarigivir and tenofovir disoproxil fumarate;

• seek to identify and develop additional product candidates;

• seek regulatory and marketing approvals for our product candidates that successfully complete clinical trials, if any;

• establish sales, marketing, distribution and other commercial infrastructure in the future to commercialize various products for which we may obtain marketing approval, if any;

• require the manufacture and supply of larger quantities of product candidates for clinical development and potentially commercialization;

• maintain, expand and protect our intellectual property portfolio;

• hire and retain additional personnel, including clinical, quality control and scientific personnel;

• add operational, financial and management information systems and personnel, including personnel to support our product development and help us comply with our obligations as a public company; and

• add equipment and physical infrastructure to support our research and development programs.

Based on our current operating plan, we expect that our existing cash, cash equivalents and marketable securities as of September 30, 2019 will enable us to fund our operating expenses and capital expenditure requirements into 2022. We have based this estimate on assumptions that may prove to be wrong, and we may use our available capital resources sooner than we currently expect. Because of the numerous risks and uncertainties associated with the development of our product candidates, we are unable to estimate the amounts of increased capital outlays and operating expenses associated with completing the research and development of our product candidates. Our future capital requirements, both near and long-term, will depend on many factors, including, but not limited to:

• initiation, progress, timing, costs and results of clinical trials evaluating inarigivir, SB 11285 and SB 9225;

• initiation, progress, timing, costs and results of preclinical studies and clinical trials of any other product candidates we may develop;

• our obligation to make royalty and non-royalty sublicense payments to third-party licensors, if any, under our licensing agreements;

• the timing, receipt, and amount of milestone payments or royalties, if any, from inarigivir, SB 11285, SB 9225 or any of our other product candidates;

• the number and characteristics of product candidates that we discover or in-license and develop;

• the outcome, timing and cost of seeking regulatory review by the FDA and comparable foreign regulatory authorities, including the potential for the FDA or comparable foreign regulatory authorities to require that we perform more studies than those we currently expect;

• the costs of filing, prosecuting, defending and enforcing any patent claims and maintaining and enforcing other intellectual property rights;

• subject to receipt of marketing approval, revenue, if any, received from commercial sales of inarigivir and any other products;

• the costs and timing of the implementation of commercial-scale manufacturing activities;

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• the costs and timing of establishing sales, marketing and distribution capabilities for any product candidates for which we may receive regulatory approval; and

• the costs of operating as a public company.

Identifying potential product candidates and conducting preclinical testing and clinical trials is a time-consuming, expensive and uncertain process that takes years to complete, and we may never generate the necessary data or results required to obtain marketing approval and achieve product sales. In addition, our product candidates, if approved, may not achieve commercial success. Our commercial revenues, if any, will be derived from sales of products that we do not expect to be commercially available for many years, if ever. Accordingly, we will need to obtain substantial additional funds to achieve our business objectives.

Adequate additional funds may not be available to us on acceptable terms, or at all. We do not currently have any committed external source of funds. As of September 30, 2019, we had up to $59.6 million in securities available for future issuance under the S-3 Registration Statement, which includes $42.7 million in shares issuable pursuant to our at-the-market program and our Sales Agreement with Cantor. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interests of our stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our common stockholders. Additional debt financing and equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends and may require the issuance of warrants, which could potentially dilute the ownership interests of our stockholders.

If we raise additional funds through collaborations, strategic alliances or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs, or product candidates or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our product development programs or any future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.

Contractual Obligations and Commitments

We have contractual obligations pursuant to our amended and restated license agreement with BioHEP Technologies Ltd., or BioHEP. Under this agreement, we have agreed to pay up to $3.5 million in development and regulatory milestone payments to BioHEP for each distinct viral indication for which we develop licensed product(s). BioHEP is also eligible to receive tiered royalties in the low-to-mid single-digits on net product sales of licensed products by us and our affiliates and sub licensees, and a specified share of non-royalty sublicensing revenues we and our affiliates receive from sub licensees, which share of sublicensing revenues is capped at a maximum aggregate of $2.0 million under all such sublicenses. Milestone and royalty payments associated with our amended and restated license agreement with BioHEP have not been included in the above table of contractual obligations as we cannot reasonably estimate if or when they will occur. As of September 30, 2019, there have been no milestone or royalty payments made to BioHEP.

In September 2019, we entered into the Loan and Security Agreement that provides for a $20.0 million term loan that bears annual interest at a rate of 8.0%. The Loan and Security Agreement provides for interest-only payments for twenty-four months and repayment of the aggregate outstanding principal balance of the term loan in quarterly installments starting upon expiration of the interest only period and continuing through September 19, 2023. The Loan and Security Agreement is described in Note 9 to the notes to the consolidated financial statements contained in this Quarterly Report on Form 10-Q.

We enter into contracts in the normal course of business with third party service providers for clinical trials, preclinical research studies and testing, manufacturing and other services and products for operating purposes. We have not included our payment obligations under these contracts in the table as these contracts generally provide for termination upon notice, and therefore we believe that our non-cancelable obligations under these agreements are not material. We could also enter into additional research, manufacturing, supplier and other agreements in the future, which may require up-front payments and even long-term commitments of cash.

Off-Balance Sheet Arrangements

We did not have during the periods presented, and we do not currently have, any off-balance sheet arrangements, as defined in the rules and regulations of the SEC.

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Recently Issued Accounting Pronouncements

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820), Disclosure Framework – Changes to the Disclosure Requirement for Fair Value Measurement.This ASU removes, modifies and adds certain disclosure requirements of ASC Topic 820. The ASU is effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 31, 2019. We are currently evaluating the impact that the adoption of this standard may have on our consolidated financial statements.

In February 2016, the FASB issued ASU No. 2016-02, Leases (“ASU 2016-02”). ASU 2016-02 requires lessees to recognize most leases on their balance sheet as a right-of-use asset and a lease liability. Leases are classified as either operating or finance, and classification is based on criteria similar to current lease accounting, but without explicit bright lines. In July 2018, the FASB issuedASU No. 2018-10, “Codification Improvements to Topic 842, Leases” (“ASU 2018-10”), which provides narrow amendments to clarify how to apply certain aspects of the new lease standard, and ASU No. 2018-11, “Leases (Topic 842) – Targeted Improvements” (ASU 2018-11), which addresses implementation issues related to the new lease standard. The guidance is effective for annual reporting periods beginning after December 15, 2018 and interim periods within those fiscal years, and early adoption is permitted. Under this standard, disclosures are required to enable users of financial statements in assessing the amount, timing, and uncertainty of cash flows arising from leases. The standard permits two transition methods, (1) to apply the new lease requirements at the beginning of the earliest period presented, or (2) to apply the new lease requirements at the effective date. Under both transition methods there is a cumulative effect adjustment.

We adopted the standard on the effective date of January 1, 2019 by applying the new lease requirements at the effective date. Prior periods continue to be presented based on the accounting standards originally in effect for such periods. We also elected the package of practical expedients permitted under the transition guidance within the new standard, which, among other things, allows us to carry forward the historical lease classification. We will also apply the practical expedient not to separate lease and non-lease components for new and modified leases commencing after adoption. The standard had an impact of approximately $3.0 million on our assets and $3.4 million on our liabilities, as of January 1, 2019, for the recognition of right-of-use assets and lease liabilities, which are primarily related to the lease of our corporate headquarters in Hopkinton, Massachusetts. The standard did not have a material impact on our results of operations or liquidity.

In July 2017, the FASB issued ASU 2017-11, Earnings Per Share (Topic 260), Distinguishing Liabilities from Equity (Topic 480), Derivatives and Hedging (Topic 815): I. Accounting for Certain Financial Instruments with Down Round Features and II. Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception. Part I applies to entities that issue financial instruments such as warrants, convertible debt or convertible preferred stock that contain down round features. Part II simply replaces the indefinite deferral for certain mandatorily redeemable noncontrolling interests and mandatorily redeemable financial instruments of nonpublic entities contained within Accounting Standards Codification (“ASC”) Topic 480with a scope exception and does not impact the accounting for these mandatorily redeemable instruments. This ASU is effective for public companies for the annual reporting periods beginning after December 15, 2018, and interim periods within those annual periods. Early adoption is permitted. We adopted this standard as of January 1, 2019; however, the adoption of this standard did not impact our consolidated financial statements.

Other accounting standards that have been issued or proposed by the FASB or other standards-setting bodies that do not require adoption until a future date are not expected to have a material impact on our consolidated financial statements upon adoption.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk.

We are exposed to market risk related to changes in interest rates. Our cash, cash equivalents and marketable securities of $63.1 million as of September 30, 2019, consisted of cash, cash equivalents and marketable securities. Our primary exposure to market risk is interest income sensitivity, which is affected by changes in the general level of U.S. interest rates. However, because a significant amount of the marketable securities in our investment portfolio are short-term in nature, an immediate 10% change in market interest rates would not be expected to have a material impact on the fair market value of our investment portfolio or on our financial condition or results of operations.

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our principal executive officer and our principal financial officer, evaluated, as of the end of the period covered by this Quarterly Report on Form 10-Q, the effectiveness of our disclosure controls and procedures. Based on that evaluation of our disclosure controls and procedures as of September 30, 2019, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures as of such date are effective at the reasonable assurance level. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act are recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and principal financial and accounting officer, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and our management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Inherent Limitations of Internal Controls

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the nine months ended September 30, 2019, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II—OTHER INFORMATION

Item 1. Legal Proceedings.

From time to time, we may become involved in legal proceedings arising in the ordinary course of our business. We are not presently a party to any material litigation.

Item 1A. Risk Factors.

In addition to the other information set forth in this report, you should carefully consider the risk factors discussed in Part I, Item 1A. “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2018, or the Form 10-K, which could materially affect our business, financial condition, or results of operations. Other than the addition of the following risk factors, there have been no material changes in or additions to the risk factors included in our Annual Report on Form 10-K for the year ended December 31, 2018.

The terms of our loan and security agreement with Pontifax Medison Finance require us to meet certain operating covenants and place restrictions on our operating and financial flexibility. If we raise additional capital through debt financing, the terms of any new debt could further restrict our ability to operate our business.

In September 2019, we entered into a loan and security agreement with Pontifax Medison Finance (the “Loan and Security Agreement”) that is secured by a lien covering all of our assets, other than our intellectual property. The Loan and Security Agreement contains customary affirmative and negative covenants and events of default. Affirmative covenants include, among others, covenants requiring us to protect and maintain our intellectual property, deliver certain financial reports, maintain minimum cash balances of $7.0 million and maintain insurance coverage. Negative covenants include, among others, restrictions on transferring any part of our business or intellectual property; incurring additional indebtedness; engaging in mergers or acquisitions; paying dividends or making other distributions; making investments; and creating other liens on our assets, in each case subject to customary exceptions. Events of default include, among others, non-payment, breaches or defaults in the performance of covenants, insolvency, bankruptcy and the occurrence of a material adverse effect on us. After the occurrence of an event of default the selling shareholders may (i) accelerate payment of all obligations and impose a prepayment charge, (ii) sign and file in our name any notices, assignment or agreements necessary to perfect payment, or (iii) notify any of our account debtors to make payment directly to it.. If we raise any additional debt financing, the terms of such additional debt could further restrict our operating and financial flexibility. These restrictions may include, among other things, limitations on borrowing and specific restrictions on the use of our assets, as well as prohibitions on our ability to create liens, pay dividends, redeem capital stock or make investments. If we default under the terms of the Loan and Security Agreement or any future debt facility, the lender may accelerate all of our repayment obligations and take control of our pledged assets, potentially requiring us to renegotiate our agreement on terms less favorable to us or to immediately cease operations. Further, if we are liquidated, the lender’s right to repayment would be senior to the rights of the holders of our common stock. The lender could declare a default upon the occurrence of any event that they interpret as a material adverse effect as defined under the Loan and Security Agreement. Any declaration by the lender of an event of default could significantly harm our business and prospects and could cause the price of our common stock to decline.

Repayment of our convertible notes, if they are not otherwise converted, will require a significant amount of cash, and we may not have sufficient cash flow from our business to make payments on our indebtedness.

Our ability to pay the principal of or interest on the convertible notes issued under the Loan and Security Agreement (the “Convertible Notes”) depends on our future performance, which is subject to economic, financial, competitive and other factors beyond our control. Our business may not generate cash flow from operations in the future sufficient to service the Convertible Notes or other future indebtedness and make necessary capital expenditures. If we are unable to generate such cash flow, we may be required to adopt one or more alternatives, such as selling assets, restructuring indebtedness or obtaining additional debt financing or equity financing on terms that may be onerous or highly dilutive. Our ability to refinance the Convertible Notes or other future indebtedness will depend on the capital markets and our financial condition at such time. We may not be able to engage in any of these activities or engage in these activities on desirable terms, which could result in a default on our debt obligations, including the Convertible Notes.

The issuance of shares of our common stock upon conversion of the Convertible Notes and exercise of the warrants issued under the Loan and Security Agreement could substantially dilute your investment and could impede our ability to obtain additional financing.

The Convertible Notes are convertible into and the warrants issued under the Loan and Security Agreement (the “Pontifax Warrants”) are exercisable for shares of our common stock and give the holders an opportunity to profit from a rise in the market price of our common stock such that conversion or exercise thereof could result in dilution of the equity interests of our shareholders. We

37

have no control over whether the holders will exercise their right to convert their Convertible Notes or exercise their Pontifax Warrants. While the Convertible Notes are convertible at a fixed price $8.76 per share and the Pontifax Warrants are exercisable at a fixed price $6.57, both of which are higher than our current market price, we cannot predict the market price of our commonstock at any future date, and therefore, cannot predict whether the Convertible Notes will be converted or whether the Pontifax Warrants will be exercised. The existence and potentially dilutive impact of the Convertible Notes and the Pontifax Warrants may prevent us from obtaining additional financing in the future on acceptable terms, or at all.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

On September 19, 2019, we issued a warrant to a service provider to purchase 15,000 shares of our common stock pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended in exchange for services rendered by the service provider. These warrants have an exercise price of $4.21 per share and expire on September 19, 2021.

Item 6. Exhibits.

The exhibits filed as part of this Quarterly Report on Form 10-Q are set forth on the Exhibit Index.

38

EXHIBIT INDEX

Exhibit Number	Description
4.1	Form of Pontifax Warrants issued under the Loan and Security Agreement, dated September 3, 2019 (Incorporated by reference to Exhibit 4.2 to the Registrant’s Registration Statement on Form S-3 filed November 1, 2019 (Commission File No. 333-234436)).
10.1	Loan and Security Agreement, dated September 3, 2019, by and among Spring Bank Pharmaceuticals, Inc., Pontifax Medison Finance (Israel) L.P. and Pontifax Medison Finance (Cayman) L.P. (Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed September 4, 2019 (Commission File No. 001-37718)).
10.2	Registration Rights Agreement, dated September 19, 2019, among Spring Bank Pharmaceuticals, Inc. and the Lender parties thereto (Incorporated by reference to Exhibit 10.2 to the Registrant’s Registration Statement on Form S-3 filed November 1, 2019  (Commission File No. 333-234436)).
31.1	Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification of Principal Executive Officer and Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

39

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	Spring Bank Pharmaceuticals, Inc.
Date: November 7, 2019	By:	/s/ Jonathan Freve
		Jonathan Freve
		Chief Financial Officer and Treasurer (Principal Financial and Accounting Officer)

40

EX-31.1

Exhibit 31.1

CERTIFICATION PURSUANT TO

SECTION 302 OF

THE SARBANES-OXLEY ACT OF 2002

I, Martin Driscoll, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Spring Bank Pharmaceuticals, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 7, 2019	By:	/s/ Martin Driscoll
		Martin Driscoll
		President and Chief Executive Officer
		(Principal Executive Officer)

EX-31.2

Exhibit 31.2

CERTIFICATION PURSUANT TO

SECTION 302 OF

THE SARBANES-OXLEY ACT OF 2002

I, Jonathan Freve, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Spring Bank Pharmaceuticals, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

	b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: November 7, 2019			By:	/s/ Jonathan Freve
				Jonathan Freve
				Chief Financial Officer and Treasurer
				(Principal Financial and Accounting Officer)

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Spring Bank Pharmaceuticals, Inc. (the “Company”) on Form 10-Q for the period ending September 30, 2019 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), each of the undersigned certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that to the best of his knowledge:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

Date: November 7, 2019	By:	/s/ Martin Driscoll
		Martin Driscoll
		President and Chief Executive Officer
		(Principal Executive Officer)

Date: November 7, 2019	By:	/s/ Jonathan Freve
		Jonathan Freve
		Chief Financial Officer and Treasurer
		(Principal Financial and Accounting Officer)

This certification accompanies the Form 10-Q to which it relates, is not deemed filed with the Securities and Exchange Commission and is not to be incorporated by reference into any filing of Spring Bank Pharmaceuticals, Inc. under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended (whether made before or after the date of the Form 10-Q), irrespective of any general incorporation language contained in such filing.

XML

Convertible Debt - Future Principal Debt Payments on Convertible Term Loan (Details) $ in Thousands	Sep. 30, 2019 USD ($)
Debt Disclosure [Abstract]
2021	$ 2,500
2022	10,000
2023	7,500
Total principal payments	20,000
Less: unamortized debt discount	(989)
Term loan, long-term	$ 19,011

XML

Leases - Summary of Aggregate Future Minimum Non-Cancellable Commitments Under Operating Leases (Detail) $ in Thousands	Dec. 31, 2018 USD ($)
Leases [Abstract]
2019	$ 417
2020	588
2021	508
2022	450
Thereafter	2,867
Total minimum lease payments	$ 4,830

XML

Investments - Summary of Available-for-Sale Classified Investments (Detail) - USD ($) $ in Thousands	Sep. 30, 2019	Dec. 31, 2018
Schedule Of Available For Sale Securities [Line Items]
Cost Basis	$ 29,016
Fair Value	28,778
Investments - Current [Member]
Schedule Of Available For Sale Securities [Line Items]
Cost Basis	29,016	$ 32,941
Accumulated Unrealized Losses	(238)	(27)
Fair Value	28,778	32,914
Investments - Current [Member] | Corporate Bonds [Member]
Schedule Of Available For Sale Securities [Line Items]
Cost Basis	11,055	16,028
Accumulated Unrealized Losses	(74)	(19)
Fair Value	10,981	16,009
Investments - Current [Member] | United States Treasury Securities [Member]
Schedule Of Available For Sale Securities [Line Items]
Cost Basis	17,961	16,913
Accumulated Unrealized Losses	(164)	(8)
Fair Value	$ 17,797	16,905
Investments - Noncurrent [Member]
Schedule Of Available For Sale Securities [Line Items]
Cost Basis		16,782
Accumulated Unrealized Gains		22
Fair Value		16,804
Investments - Noncurrent [Member] | Corporate Bonds [Member]
Schedule Of Available For Sale Securities [Line Items]
Cost Basis		4,930
Accumulated Unrealized Gains		2
Fair Value		4,932
Investments - Noncurrent [Member] | United States Treasury Securities [Member]
Schedule Of Available For Sale Securities [Line Items]
Cost Basis		11,852
Accumulated Unrealized Gains		20
Fair Value		$ 11,872

XML

Net Loss Per Share - Summary of Computation of Basic and Diluted Net Loss Per Share (Detail) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Earnings Per Share Basic And Diluted [Abstract]
Net loss	$ (6,912)	$ (8,780)	$ (16,662)	$ (17,429)
Less: decrease in change in fair value of warrant liabilities	$ (355)	$ 1,336	$ (8,061)	(3,837)
Net loss available to common shareholders				$ (21,266)
Weighted-average number of shares outstanding:
Basic	16,459,155	14,841,197	16,446,582	13,677,375
Effect of dilutive securities:
Common stock warrants				1,633,777
Dilutive potential common shares				15,311,152
Net loss per common share:
Basic	$ (0.42)	$ (0.59)	$ (1.01)	$ (1.27)
Diluted	$ (0.42)	$ (0.59)	$ (1.01)	$ (1.39)

XML

Fair Value Measurements

9 Months Ended

Sep. 30, 2019

Fair Value Disclosures [Abstract]

Fair Value Measurements

5. FAIR VALUE MEASUREMENTS

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value are performed in a manner to maximize the use of observable inputs and minimize the use of unobservable inputs.

A summary of the assets and liabilities that are measured at fair value as of September 30, 2019 and December 31, 2018 is as follows (in thousands):

			Fair Value Measurement at September 30, 2019
Assets:	Carrying Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Money market funds(1)	$	32,526	$	32,526	$	—	$	—
Fixed income securities		28,778		—		28,778		—
Total	$	61,304	$	32,526	$	28,778	$	—
Liabilities:
Warrant liabilities	$	450	$	—	$	—	$	450
Total	$	450	$	—	$	—	$	450
			Fair Value Measurement at December 31, 2018
Assets:	Carrying Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Money market funds(1)	$	13,264	$	13,264	$	—	$	—
Fixed income securities		49,718		—		49,718		—
Total	$	62,982	$	13,264	$	49,718	$	—
Liabilities:
Warrant liabilities	$	8,511	$	—	$	—	$	8,511
Total	$	8,511	$	—	$	—	$	8,511

(1) Money market funds are included within cash and cash equivalents in the accompanying consolidated balance sheets and are recognized at fair value.

The Company classified its money market funds within Level 1 because their fair values are based on their quoted market prices. The Company classified its commercial paper, corporate bonds and United States treasury securities within Level 2 because their fair values are determined using alternative pricing sources or models that utilized market observable inputs.

The following table reflects the change in the Company’s Level 3 liabilities, which consists of the warrants issued in a private placement in November 2016 (see Note 7), for the period ended September 30, 2019 (in thousands):

	November Private Placement Warrants
Balance at December 31, 2017	$	13,128
Change in fair value		(4,617	)
Balance at December 31, 2018		8,511
Change in fair value		(8,061	)
Balance at September 30, 2019	$	450

XML

Convertible Debt

9 Months Ended

Sep. 30, 2019

Debt Disclosure [Abstract]

Convertible Debt

9. CONVERTIBLE DEBT

In September 2019, the Company entered into a Loan and Security Agreement with Pontifax Medison Finance (Israel) L.P. and Pontifax Medison Finance (Cayman) L.P., as lenders, and Pontifax Medison Finance GP, L.P., in its capacity as administrative agent and collateral agent for itself and the lenders (collectively, the “Lenders”), providing for a $20.0 million term loan (the “Convertible Term Loan”), which the Company received on September 19, 2019 (the “Closing Date”). The Convertible Term Loan bears interest at an annual rate of 8.0%. The Loan and Security Agreement provides for interest-only payments for twenty-four months and repayment of the aggregate outstanding principal balance of the Convertible Term Loan in quarterly installments starting upon expiration of the interest only period and continuing through September 19, 2023 (the “Maturity Date”). The Company incurred issuance costs of $0.4 million. The Convertible Term Loan issuance costs are shown as an offset to the Convertible Term Loan on the balance sheet and are amortized using the effective interest method to interest expense through the Maturity Date.

The Company may, at its option, prepay some or all of the then outstanding principal balance and all accrued and unpaid interest on the Convertible Term Loan, together with a prepayment charge equal to 3% of the principal amount being prepaid.The Lenders may, at their option, elect to convert the then outstanding Convertible Term Loan amount and all accrued and unpaid interest thereon into shares of the Company’s common stock at a conversion price of $8.76 per share, which is equal to two times the weighted average closing price of the Company’s common stock during the 30 trading days prior to the execution of the Loan and Security Agreement (the “30-day VWAP”).

The Company’s obligations are secured by a security interest, senior to any current and future debts and to any security interest, in all of the Company’s right, title, and interest in, to and under all of its property and other assets, subject to limited exceptions including the Company’s intellectual property. The Loan and Security Agreement contains customary events of default, representations, warranties and covenants, including a material adverse effect clause. The Company must maintain a minimum cash balance of $7.0 million in Spring Bank Pharmaceuticals, Inc. accounts, or it is in breach of the Loan and Security Agreement, which the Company is in compliance with as of September 30, 2019.

Upon the occurrence of an event of default, a default interest rate of an additional 4% per annum may be applied to the outstanding loan balances, and the Lenders may declare all outstanding obligations immediately due and payable and exercise all of its rights and remedies as set forth in the Loan and Security Agreement and under applicable law.

In addition, the Company issued the Lenders warrants to purchase an aggregate of 250,000 shares of the Company’s common stock. The Pontifax Warrants are exercisable for a period of six years from the Closing Date at an exercise price of $6.57 per share, which is equal to 1.5 times 30-day VWAP. The aggregate fair value of the Pontifax Warrants was approximately $0.6 million and was recorded as a discount to the term loan and will be amortized over the life of the term loan using the effective interest rate method (see Note 7).

During the three and nine months ended September 30, 2019, the Company recorded interest expense of approximately $63,000 in connection with the Convertible Term Loan. The fair value of the term loan as of September 30, 2019 approximates its face value given the close proximity of the execution to September 30, 2019 and due to market terms.

The Company evaluated the accounting for the Loan and Security Agreement and identified an embedded derivative related to the contingent interest feature. The Company determined the fair value of the contingent interest feature to be di minimis and will re-value the derivative at the end of each reporting period.

The following table summarizes the Company’s future principal debt payments on the Convertible Term Loan as of September 30, 2019 (in thousands):

	September 30, 2019
2019	$	—
2020		—
2021		2,500
2022		10,000
2023		7,500
Total principal payments	$	20,000
Less: unamortized debt discount		(989	)
Term loan, long-term	$	19,011

XML

Nature of Business and Summary of Significant Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2019

Accounting Policies [Abstract]

Basis of Presentation and Liquidity

Basis of Presentation and Liquidity

The accompanying consolidated financial statements have been prepared in accordance with United States (“U.S.”) generally accepted accounting principles (“U.S. GAAP”).

The accompanying interim financial statements as of September 30, 2019 and for the three and nine months ended September 30, 2019 and 2018, and related interim information contained within the notes to the financial statements, are unaudited. In management’s opinion, the unaudited interim consolidated financial statements have been prepared on the same basis as the Company’s audited financial statements and include all adjustments (including normal recurring adjustments) necessary for the fair presentation of the Company’s financial position as of September 30, 2019, results of operations for the three and nine months ended September 30, 2019 and 2018, statement of stockholders’ equity for the three and nine months ended September 30, 2019 and 2018 and its cash flows for the nine months ended September 30, 2019 and 2018. These interim financial statements should be read in conjunction with the Company’s audited financial statements and accompanying notes contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018, as filed with the Securities and Exchange Commission (“SEC”) on March 11, 2019. The results for the three and nine months ended September 30, 2019 are not necessarily indicative of the results expected for the full fiscal year or any interim period.

As of September 30, 2019, the Company had an accumulated deficit of $118.7 million and $63.1 million in cash, cash equivalents and marketable securities.

The Company expects to continue to incur significant and increasing losses for the foreseeable future. The Company anticipates that its expenses will increase significantly as it continues to develop inarigivir, SB 11285, SB 9225 and its other product candidates. The Company does not have any committed external source of funds. As a result, the Company will need additional financing to support its continuing operations. Adequate additional funds may not be available to the Company on acceptable terms, or at all. To the extent that the Company raises additional capital through the sale of equity or convertible debt securities, stockholders’ ownership interests will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect common stockholder rights. If the Company raises additional funds through collaborations, strategic alliances or licensing arrangements with third parties, the Company may have to relinquish valuable rights to its technologies, future revenue streams, research programs, or product candidates or grant licenses on terms that may not be favorable to the Company.

Principles of Consolidation

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, Sperovie Biosciences, Inc., SBP Securities Corporation and SBP International Limited. Sperovie Biosciences, Inc. had operations consisting mainly of legal fees associated with intellectual property activities as of September 30, 2019. Sperovie Biosciences, Inc. is a joint borrower with the Company under the Company’s term loan (see Note 9). SBP Securities Corporation had assets primarily related to investments in marketable securities and operations consisting primarily of interest income as of September 30, 2019. SBP International Limited had operations consisting mainly of clinical trial oversight, including European data protection oversight, as of September 30, 2019. All intercompany balances and transactions have been eliminated in consolidation.

Use of Estimates

Use of Estimates

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, liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. The Company bases estimates and assumptions on historical experience when available and on various factors that it believes to be reasonable under the circumstances. Significant estimates relied upon in preparing the accompanying financial statements related to the fair value of warrants, accounting for stock-based compensation, income taxes, useful lives of long-lived assets, and accounting for certain accruals. The Company evaluates its estimates and assumptions on an ongoing basis. The Company’s actual results may differ from these estimates.

Cash and Cash Equivalents

Cash and Cash Equivalents

Cash equivalents are stated at fair value and include short-term, highly liquid investments with remaining maturities of 90 days or less at the date of purchase. Included in cash and cash equivalents as of September 30, 2019 and December 31, 2018 are money market fund investments of $32.5 million and $13.3 million, respectively, which are reported at fair value (see Note 5).

Restricted Cash

Restricted Cash

As of September 30, 2019 and December 31, 2018, restricted cash consists of approximately $234,000, which is held as a security deposit required in conjunction with a lease agreement for the Company’s principal office and laboratory space entered into in October 2017.

Concentration of Credit Risk

Concentration of Credit Risk

Financial instruments that subject the Company to significant concentrations of credit risk consist primarily of cash, cash equivalents, restricted cash and marketable securities. Substantially all of the Company’s cash is held at financial institutions that management believes to be of high credit quality. Deposits with these financial institutions may exceed the amount of insurance provided on such deposits; however, these deposits may be redeemed upon demand and, therefore, bear minimal risk.

Investments in Marketable Securities

Investments in Marketable Securities

The Company invests excess cash balances in short-term and long-term marketable securities. The Company classifies investments in marketable securities as either held-to-maturity or available-for-sale based on facts and circumstances present at the time of purchase. At each balance sheet date presented, all investments in securities are classified as available-for-sale. The Company reports available-for-sale investments at fair value at each balance sheet date and includes any unrealized holding gains and losses (the adjustment to fair value) in accumulated other comprehensive income (loss), a component of stockholders’ equity. Realized gains and losses are determined using the specific identification method and are included in other income (expense). If any adjustment to fair value reflects a decline in the value of the investment, the Company considers all available evidence to evaluate the extent to which the decline is “other than temporary,” including the intention to sell and, if so, marks the investment to market through a charge to the Company’s consolidated statements of operations and comprehensive loss.

Property and Equipment, Net

Property and Equipment, Net

Property and equipment are recorded at cost. Costs associated with maintenance and repairs are expensed as incurred. Depreciation is provided using the straight-line method over the estimated useful lives:

Asset Category	Useful Life
Equipment	5-7 years
Furniture and fixtures	5 years
Leasehold improvements	Lesser of 10 years or the remaining term of the respective lease

Leases

Leases

The Company determines if an arrangement is a lease at inception. Operating leases are included in operating lease right-of-use (“ROU”) assets, other current liabilities and operating lease liabilities in the Company’s consolidated balance sheets.

ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent its obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As the Company’s leases do not provide an implicit rate, the Company uses an incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. This is the rate the Company would have to pay if borrowing on a collateralized basis over a similar term to each lease. The operating lease ROU asset also includes any lease payments made and excludes lease incentives. The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Lease expense for lease payments is recognized on a straight-line basis over the lease term.

Impairment of Long-Lived Assets

Impairment of Long-Lived Assets

Long-lived assets to be held and used are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. When such events occur, the Company compares the carrying amounts of the assets to their undiscounted expected future cash flows. If the undiscounted cash flows are insufficient to recover the carrying value, an impairment loss is recorded for the difference between the carrying value and fair value of the asset. As of September 30, 2019, no such impairment has occurred.

Research and Development Costs

Research and Development Costs

Research and development expenses consist primarily of costs incurred for the Company’s research activities, including discovery efforts, and the development of product candidates, which include:

• expenses incurred under agreements with third parties, including contract research organizations, or CROs, that conduct research, preclinical activities and clinical trials on the Company’s behalf as well as contract manufacturing organizations, or CMOs, that manufacture drug products for use in the Company’s preclinical and clinical trials;

• salaries, benefits and other related costs, including stock-based compensation expense, for personnel in the Company’s research and development functions;

• costs of outside consultants, including their fees, stock-based compensation and related travel expenses;

• the cost of laboratory supplies and acquiring, developing and manufacturing preclinical study and clinical trial materials;

• costs related to compliance with regulatory requirements; and

• facility-related expenses, which include direct depreciation costs and allocated expenses for rent and maintenance of facilities and other operating costs.

The Company expenses research and development costs as incurred. The Company recognizes external development costs based on an evaluation of the progress to completion of specific tasks using information provided to the Company by its vendors and its clinical investigative sites. Payments for these activities are based on the terms of the individual agreements, which may differ from the pattern of costs incurred, and are reflected in the Company’s consolidated financial statements as prepaid or accrued research and development expenses.

Warrants

Warrants

The Company accounts for freestanding warrants within stockholders equity or as liabilities based on the characteristics and provisions of each instrument. The Company evaluates outstanding warrants in accordance with ASC 480, Distinguishing Liabilities from Equity, and ASC 815, Derivatives and Hedging. If none of the criteria in the evaluation in these standards are met, the warrants are classified as a component of stockholders equity and initially recorded at their grant date fair value without subsequent remeasurement. Warrants that meet the criteria are classified as liabilities and remeasured to their fair value at the end of each reporting period.

Stock-Based Compensation

Stock-Based Compensation

The Company’s stock-based payments include stock options, performance-based restricted stock units (“RSUs”) and grants of common stock, including common stock subject to vesting. The Company accounts for all stock-based payment awards granted to employees and nonemployees using a fair value method. The measurement date for employee awards is the date of grant, and stock-based compensation costs are recognized as expense over the employees’ requisite service period, which is generally the vesting period, on a straight-line basis. The Company accounts for forfeitures as they occur.

The Company measures the fair value of the performance-based restricted stock units relating to the total share return performance using a Monte Carlo valuation model. The Company measures the fair value of the performance-based restricted stock units relating to the milestone performance goals using the fair value method and the probability that the specified performance criteria will be met. Each quarter the Company updates its assessment of the probability that the specified milestone criteria will be achieved and adjusts its estimate of the fair value, if necessary. Stock-based compensation expense is classified in the accompanying consolidated statements of operations and comprehensive loss based on the department to which the related services are provided.

Financial Instruments

Financial Instruments

The Company’s financial instruments consist of cash equivalents, marketable securities, accounts payable, a term loan and liability classified warrants. The carrying amounts of cash and cash equivalents and accounts payable approximate their fair value due to the short-term nature of those financial instruments. The fair value of the marketable securities and liability classified warrants are remeasured to fair value each reporting period (see Note 5). The fair value of the term loan approximates its face value given the close proximity of the execution of the term loan to September 30, 2019.

Fair Value Measurements

Fair Value Measurements

The Company is required to disclose information on all assets and liabilities reported at fair value that enables an assessment of the inputs used in determining the reported fair values. Accounting Standards Codification (“ASC”) 820, Fair Value Measurements and Disclosures (“ASC 820”), establishes a hierarchy of inputs used when available. Observable inputs are inputs that market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the inputs that market participants would use in pricing the asset or liability and are developed based on the best information available in the circumstances. The fair value hierarchy applies only to the valuation inputs used in determining the reported fair value of the investments and is not a measure of the investment credit quality. The three levels of the fair value hierarchy are described below:

Level 1—Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.

Level 2—Valuations based on quoted prices for similar assets or liabilities in markets that are not active or for which all significant inputs are observable, either directly or indirectly.

Level 3—Valuations that require inputs that reflect the Company’s own assumptions that are both significant to the fair value measurement and unobservable.

To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised by the Company in determining fair value is greatest for instruments categorized in Level 3. A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. The Company’s assets and liabilities measured at fair value on a recurring basis include cash equivalents, marketable securities and warrant liabilities.

Net Loss Per Share

Net Loss Per Share

Basic net loss per share is computed by dividing the net loss by the weighted-average number of shares of common stock outstanding for the period. Diluted net loss per share is computed by dividing the net loss by the weighted-average number of shares of common stock and dilutive common stock equivalents outstanding for the period, determined using the treasury-stock method and the as if-converted method, for convertible securities, if inclusion of these instruments is dilutive.

For the three and nine months ended September 30, 2019, both methods are equivalent and for the three months ended September 30, 2018, both methods are equivalent. For the nine months ended September 30, 2018, diluted net loss per share amounts were calculated based on the dilutive effect of the total number of shares of common stock related to the November 2016 Private Placement warrants and the change in the fair value of the warrant liability. Basic and diluted net loss per share is described further in Note 2.

Income Taxes

Income Taxes

Deferred tax assets and liabilities are determined based upon the differences between the financial statement carrying amounts and the tax basis of existing assets and liabilities and for loss and credit carryforwards using enacted tax rates expected to be in effect in the years in which the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance if it is more likely than not that some portion or all of the deferred tax asset will not be realized.

The Company assesses its income tax positions and records tax benefits based upon management’s evaluation of the facts, circumstances and information available at the reporting date. For those tax positions where it is more likely than not that a tax benefit will be sustained, the Company records the largest amount of tax benefit with a greater than 50% likelihood of being realized upon ultimate settlement with a taxing authority having full knowledge of all relevant information. For those income tax positions where it is not more likely than not that a tax benefit will be sustained, no tax benefit is recognized in the consolidated financial statements. The Company classifies interest and penalties associated with such uncertain tax positions as a component of interest expense. As of September 30, 2019 and December 31, 2018, the Company has not identified any material uncertain tax positions.

Guarantees and Indemnifications

Guarantees and Indemnifications

As permitted under Delaware law, the Company indemnifies its officers and directors for certain events or occurrences while the officer or director is, or was, serving at the Company’s request in such capacity.

The Company leases its principal office and laboratory space in Hopkinton, Massachusetts and previously leased research and development space in Milford, Massachusetts under non-cancelable operating leases. The Company has standard indemnification arrangements under these leases that require it to indemnify the landlords against liability for injury, loss, accident, or damage from any claims, actions, proceedings, or costs resulting from certain acts, breaches, violations, or nonperformance under the Company’s lease.

Through September 30, 2019, the Company had not experienced any losses related to these indemnification obligations and no material claims were outstanding. The Company does not expect significant claims related to these indemnification obligations, and consequently, concluded that the fair value of these obligations is negligible, and no related reserves were established.

Segment Information

Segment Information

Operating segments are identified as components of an enterprise about which separate and discrete financial information is available for evaluation by the chief operating decision maker, the Company’s chief executive officer, in making decisions regarding resource allocation and assessing performance. The Company views its operations and manages its business in one operating segment and does not track expenses on a program-by-program basis.

Recently Issued Accounting Pronouncements

Recently Issued Accounting Pronouncements

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820), Disclosure Framework – Changes to the Disclosure Requirement for Fair Value Measurement.This ASU removes, modifies and adds certain disclosure requirements of ASC Topic 820. The ASU is effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The Company is currently evaluating the impact that the adoption of this standard may have on the Company’s consolidated financial statements.

In February 2016, the FASB issued ASU No. 2016-02, Leases (“ASU 2016-02”). ASU 2016-02 requires lessees to recognize most leases on their balance sheet as a right-of-use asset and a lease liability. Leases are classified as either operating or finance, and classification is based on criteria similar to current lease accounting, but without explicit bright lines. In July 2018, the FASB issuedASU No. 2018-10, “Codification Improvements to Topic 842, Leases” (“ASU 2018-10”), which provides narrow amendments to clarify how to apply certain aspects of the new lease standard, and ASU No. 2018-11, “Leases (Topic 842) – Targeted Improvements” (ASU 2018-11), which addresses implementation issues related to the new lease standard. The guidance is effective for annual reporting periods beginning after December 15, 2018 and interim periods within those fiscal years, and early adoption is permitted. Under this standard, disclosures are required to enable users of financial statements in assessing the amount, timing, and uncertainty of cash flows arising from leases. The standard permits two transition methods, (1) to apply the new lease requirements at the beginning of the earliest period presented, or (2) to apply the new lease requirements at the effective date. Under both transition methods there is a cumulative effect adjustment.

The Company adopted the standard on the effective date of January 1, 2019 by applying the new lease requirements at the effective date. Prior periods continue to be presented based on the accounting standards originally in effect for such periods. The Company also elected the package of practical expedients permitted under the transition guidance within the new standard, which, among other things, allows the Company to carry forward the historical lease classification. The Company will also apply the practical expedient not to separate lease and non-lease components for new and modified leases commencing after adoption. The standard had an impact of approximately $3.0 million on the Company’s assets and $3.4 million on its liabilities, as of January 1, 2019, for the recognition of right-of-use assets and lease liabilities, which are primarily related to the lease of its corporate headquarters in Hopkinton, Massachusetts. The standard did not have a material impact on the Company’s results of operations or liquidity (see Note 10).

In July 2017, the FASB issued ASU 2017-11, Earnings Per Share (Topic 260), Distinguishing Liabilities from Equity (Topic 480), Derivatives and Hedging (Topic 815): I. Accounting for Certain Financial Instruments with Down Round Features and II. Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception. Part I applies to entities that issue financial instruments such as warrants, convertible debt or convertible preferred stock that contain down round features. Part II simply replaces the indefinite deferral for certain mandatorily redeemable noncontrolling interests and mandatorily redeemable financial instruments of nonpublic entities contained within Accounting Standards Codification (ASC) Topic 480with a scope exception and does not impact the accounting for these mandatorily redeemable instruments. This ASU is effective for public companies for the annual reporting periods beginning after December 15, 2018, and interim periods within those annual periods. Early adoption is permitted. The Company adopted this standard as of January 1, 2019; however, the adoption of this standard did not impact the Company’s consolidated financial statements.

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Nature of Business and Summary of Significant Accounting Policies

9 Months Ended

Sep. 30, 2019

Accounting Policies [Abstract]

Nature of Business and Summary of Significant Accounting Policies

1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Business

Spring Bank Pharmaceuticals, Inc. (the “Company”) is a clinical-stage biopharmaceutical company engaged in the discovery and development of a novel class of therapeutics using a proprietary small molecule nucleotide platform. The Company is developing its most advanced product candidate, inarigivir soproxil (“inarigivir”), for the treatment of chronic hepatitis B virus. Since inception in 2002 and prior to its initial public offering (“IPO”) in May 2016, the Company built its technology platform and product candidate pipeline, supported by grants and through private financings. The Company has three wholly owned subsidiaries: Sperovie Biosciences, Inc. formed in September 2015, SBP Securities Corporation formed in December 2016 and SBP International Limited formed in May 2019.

The Company’s success is dependent upon its ability to successfully complete clinical development and obtain regulatory approval of its product candidates, successfully commercialize approved products, generate revenue, and, ultimately, attain profitable operations. The Company’s operations to date have been primarily limited to the development of inarigivir, SB 11285, SB 9225 and the Company’s other product candidates.

Basis of Presentation and Liquidity

The accompanying consolidated financial statements have been prepared in accordance with United States (“U.S.”) generally accepted accounting principles (“U.S. GAAP”).

The accompanying interim financial statements as of September 30, 2019 and for the three and nine months ended September 30, 2019 and 2018, and related interim information contained within the notes to the financial statements, are unaudited. In management’s opinion, the unaudited interim consolidated financial statements have been prepared on the same basis as the Company’s audited financial statements and include all adjustments (including normal recurring adjustments) necessary for the fair presentation of the Company’s financial position as of September 30, 2019, results of operations for the three and nine months ended September 30, 2019 and 2018, statement of stockholders’ equity for the three and nine months ended September 30, 2019 and 2018 and its cash flows for the nine months ended September 30, 2019 and 2018. These interim financial statements should be read in conjunction with the Company’s audited financial statements and accompanying notes contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018, as filed with the Securities and Exchange Commission (“SEC”) on March 11, 2019. The results for the three and nine months ended September 30, 2019 are not necessarily indicative of the results expected for the full fiscal year or any interim period.

As of September 30, 2019, the Company had an accumulated deficit of $118.7 million and $63.1 million in cash, cash equivalents and marketable securities.

The Company expects to continue to incur significant and increasing losses for the foreseeable future. The Company anticipates that its expenses will increase significantly as it continues to develop inarigivir, SB 11285, SB 9225 and its other product candidates. The Company does not have any committed external source of funds. As a result, the Company will need additional financing to support its continuing operations. Adequate additional funds may not be available to the Company on acceptable terms, or at all. To the extent that the Company raises additional capital through the sale of equity or convertible debt securities, stockholders’ ownership interests will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect common stockholder rights. If the Company raises additional funds through collaborations, strategic alliances or licensing arrangements with third parties, the Company may have to relinquish valuable rights to its technologies, future revenue streams, research programs, or product candidates or grant licenses on terms that may not be favorable to the Company.

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, Sperovie Biosciences, Inc., SBP Securities Corporation and SBP International Limited. Sperovie Biosciences, Inc. had operations consisting mainly of legal fees associated with intellectual property activities as of September 30, 2019. Sperovie Biosciences, Inc. is a joint borrower with the Company under the Company’s term loan (see Note 9). SBP Securities Corporation had assets primarily related to investments in marketable securities and operations consisting primarily of interest income as of September 30, 2019. SBP International Limited had operations consisting mainly of clinical trial oversight, including European data protection oversight, as of September 30, 2019. All intercompany balances and transactions have been eliminated in consolidation.

Use of Estimates

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, liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. The Company bases estimates and assumptions on historical experience when available and on various factors that it believes to be reasonable under the circumstances. Significant estimates relied upon in preparing the accompanying financial statements related to the fair value of warrants, accounting for stock-based compensation, income taxes, useful lives of long-lived assets, and accounting for certain accruals. The Company evaluates its estimates and assumptions on an ongoing basis. The Company’s actual results may differ from these estimates.

Cash and Cash Equivalents

Cash equivalents are stated at fair value and include short-term, highly liquid investments with remaining maturities of 90 days or less at the date of purchase. Included in cash and cash equivalents as of September 30, 2019 and December 31, 2018 are money market fund investments of $32.5 million and $13.3 million, respectively, which are reported at fair value (see Note 5).

Restricted Cash

As of September 30, 2019 and December 31, 2018, restricted cash consists of approximately $234,000, which is held as a security deposit required in conjunction with a lease agreement for the Company’s principal office and laboratory space entered into in October 2017.

Concentration of Credit Risk

Financial instruments that subject the Company to significant concentrations of credit risk consist primarily of cash, cash equivalents, restricted cash and marketable securities. Substantially all of the Company’s cash is held at financial institutions that management believes to be of high credit quality. Deposits with these financial institutions may exceed the amount of insurance provided on such deposits; however, these deposits may be redeemed upon demand and, therefore, bear minimal risk.

Investments in Marketable Securities

The Company invests excess cash balances in short-term and long-term marketable securities. The Company classifies investments in marketable securities as either held-to-maturity or available-for-sale based on facts and circumstances present at the time of purchase. At each balance sheet date presented, all investments in securities are classified as available-for-sale. The Company reports available-for-sale investments at fair value at each balance sheet date and includes any unrealized holding gains and losses (the adjustment to fair value) in accumulated other comprehensive income (loss), a component of stockholders’ equity. Realized gains and losses are determined using the specific identification method and are included in other income (expense). If any adjustment to fair value reflects a decline in the value of the investment, the Company considers all available evidence to evaluate the extent to which the decline is “other than temporary,” including the intention to sell and, if so, marks the investment to market through a charge to the Company’s consolidated statements of operations and comprehensive loss.

Property and Equipment, Net

Property and equipment are recorded at cost. Costs associated with maintenance and repairs are expensed as incurred. Depreciation is provided using the straight-line method over the estimated useful lives:

Asset Category	Useful Life
Equipment	5-7 years
Furniture and fixtures	5 years
Leasehold improvements	Lesser of 10 years or the remaining term of the respective lease

Leases

The Company determines if an arrangement is a lease at inception. Operating leases are included in operating lease right-of-use (“ROU”) assets, other current liabilities and operating lease liabilities in the Company’s consolidated balance sheets.

ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent its obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As the Company’s leases do not provide an implicit rate, the Company uses an incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. This is the rate the Company would have to pay if borrowing on a collateralized basis over a similar term to each lease. The operating lease ROU asset also includes any lease payments made and excludes lease incentives. The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Lease expense for lease payments is recognized on a straight-line basis over the lease term.

Impairment of Long-Lived Assets

Long-lived assets to be held and used are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. When such events occur, the Company compares the carrying amounts of the assets to their undiscounted expected future cash flows. If the undiscounted cash flows are insufficient to recover the carrying value, an impairment loss is recorded for the difference between the carrying value and fair value of the asset. As of September 30, 2019, no such impairment has occurred.

Research and Development Costs

Research and development expenses consist primarily of costs incurred for the Company’s research activities, including discovery efforts, and the development of product candidates, which include:

• expenses incurred under agreements with third parties, including contract research organizations, or CROs, that conduct research, preclinical activities and clinical trials on the Company’s behalf as well as contract manufacturing organizations, or CMOs, that manufacture drug products for use in the Company’s preclinical and clinical trials;

• salaries, benefits and other related costs, including stock-based compensation expense, for personnel in the Company’s research and development functions;

• costs of outside consultants, including their fees, stock-based compensation and related travel expenses;

• the cost of laboratory supplies and acquiring, developing and manufacturing preclinical study and clinical trial materials;

• costs related to compliance with regulatory requirements; and

• facility-related expenses, which include direct depreciation costs and allocated expenses for rent and maintenance of facilities and other operating costs.

The Company expenses research and development costs as incurred. The Company recognizes external development costs based on an evaluation of the progress to completion of specific tasks using information provided to the Company by its vendors and its clinical investigative sites. Payments for these activities are based on the terms of the individual agreements, which may differ from the pattern of costs incurred, and are reflected in the Company’s consolidated financial statements as prepaid or accrued research and development expenses.

Warrants

The Company accounts for freestanding warrants within stockholders equity or as liabilities based on the characteristics and provisions of each instrument. The Company evaluates outstanding warrants in accordance with ASC 480, Distinguishing Liabilities from Equity, and ASC 815, Derivatives and Hedging. If none of the criteria in the evaluation in these standards are met, the warrants are classified as a component of stockholders equity and initially recorded at their grant date fair value without subsequent remeasurement. Warrants that meet the criteria are classified as liabilities and remeasured to their fair value at the end of each reporting period.

Stock-Based Compensation

The Company’s stock-based payments include stock options, performance-based restricted stock units (“RSUs”) and grants of common stock, including common stock subject to vesting. The Company accounts for all stock-based payment awards granted to employees and nonemployees using a fair value method. The measurement date for employee awards is the date of grant, and stock-based compensation costs are recognized as expense over the employees’ requisite service period, which is generally the vesting period, on a straight-line basis. The Company accounts for forfeitures as they occur.

The Company measures the fair value of the performance-based restricted stock units relating to the total share return performance using a Monte Carlo valuation model. The Company measures the fair value of the performance-based restricted stock units relating to the milestone performance goals using the fair value method and the probability that the specified performance criteria will be met. Each quarter the Company updates its assessment of the probability that the specified milestone criteria will be achieved and adjusts its estimate of the fair value, if necessary. Stock-based compensation expense is classified in the accompanying consolidated statements of operations and comprehensive loss based on the department to which the related services are provided.

Financial Instruments

The Company’s financial instruments consist of cash equivalents, marketable securities, accounts payable, a term loan and liability classified warrants. The carrying amounts of cash and cash equivalents and accounts payable approximate their fair value due to the short-term nature of those financial instruments. The fair value of the marketable securities and liability classified warrants are remeasured to fair value each reporting period (see Note 5). The fair value of the term loan approximates its face value given the close proximity of the execution of the term loan to September 30, 2019.

Fair Value Measurements

The Company is required to disclose information on all assets and liabilities reported at fair value that enables an assessment of the inputs used in determining the reported fair values. Accounting Standards Codification (“ASC”) 820, Fair Value Measurements and Disclosures (“ASC 820”), establishes a hierarchy of inputs used when available. Observable inputs are inputs that market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the inputs that market participants would use in pricing the asset or liability and are developed based on the best information available in the circumstances. The fair value hierarchy applies only to the valuation inputs used in determining the reported fair value of the investments and is not a measure of the investment credit quality. The three levels of the fair value hierarchy are described below:

Level 1—Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.

Level 2—Valuations based on quoted prices for similar assets or liabilities in markets that are not active or for which all significant inputs are observable, either directly or indirectly.

Level 3—Valuations that require inputs that reflect the Company’s own assumptions that are both significant to the fair value measurement and unobservable.

To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised by the Company in determining fair value is greatest for instruments categorized in Level 3. A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. The Company’s assets and liabilities measured at fair value on a recurring basis include cash equivalents, marketable securities and warrant liabilities.

Net Loss Per Share

Basic net loss per share is computed by dividing the net loss by the weighted-average number of shares of common stock outstanding for the period. Diluted net loss per share is computed by dividing the net loss by the weighted-average number of shares of common stock and dilutive common stock equivalents outstanding for the period, determined using the treasury-stock method and the as if-converted method, for convertible securities, if inclusion of these instruments is dilutive.

For the three and nine months ended September 30, 2019, both methods are equivalent and for the three months ended September 30, 2018, both methods are equivalent. For the nine months ended September 30, 2018, diluted net loss per share amounts were calculated based on the dilutive effect of the total number of shares of common stock related to the November 2016 Private Placement warrants and the change in the fair value of the warrant liability. Basic and diluted net loss per share is described further in Note 2.

Income Taxes

Deferred tax assets and liabilities are determined based upon the differences between the financial statement carrying amounts and the tax basis of existing assets and liabilities and for loss and credit carryforwards using enacted tax rates expected to be in effect in the years in which the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance if it is more likely than not that some portion or all of the deferred tax asset will not be realized.

The Company assesses its income tax positions and records tax benefits based upon management’s evaluation of the facts, circumstances and information available at the reporting date. For those tax positions where it is more likely than not that a tax benefit will be sustained, the Company records the largest amount of tax benefit with a greater than 50% likelihood of being realized upon ultimate settlement with a taxing authority having full knowledge of all relevant information. For those income tax positions where it is not more likely than not that a tax benefit will be sustained, no tax benefit is recognized in the consolidated financial statements. The Company classifies interest and penalties associated with such uncertain tax positions as a component of interest expense. As of September 30, 2019 and December 31, 2018, the Company has not identified any material uncertain tax positions.

Guarantees and Indemnifications

As permitted under Delaware law, the Company indemnifies its officers and directors for certain events or occurrences while the officer or director is, or was, serving at the Company’s request in such capacity.

The Company leases its principal office and laboratory space in Hopkinton, Massachusetts and previously leased research and development space in Milford, Massachusetts under non-cancelable operating leases. The Company has standard indemnification arrangements under these leases that require it to indemnify the landlords against liability for injury, loss, accident, or damage from any claims, actions, proceedings, or costs resulting from certain acts, breaches, violations, or nonperformance under the Company’s lease.

Through September 30, 2019, the Company had not experienced any losses related to these indemnification obligations and no material claims were outstanding. The Company does not expect significant claims related to these indemnification obligations, and consequently, concluded that the fair value of these obligations is negligible, and no related reserves were established.

Segment Information

Operating segments are identified as components of an enterprise about which separate and discrete financial information is available for evaluation by the chief operating decision maker, the Company’s chief executive officer, in making decisions regarding resource allocation and assessing performance. The Company views its operations and manages its business in one operating segment and does not track expenses on a program-by-program basis.

Recently Issued Accounting Pronouncements

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820), Disclosure Framework – Changes to the Disclosure Requirement for Fair Value Measurement.This ASU removes, modifies and adds certain disclosure requirements of ASC Topic 820. The ASU is effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The Company is currently evaluating the impact that the adoption of this standard may have on the Company’s consolidated financial statements.

In February 2016, the FASB issued ASU No. 2016-02, Leases (“ASU 2016-02”). ASU 2016-02 requires lessees to recognize most leases on their balance sheet as a right-of-use asset and a lease liability. Leases are classified as either operating or finance, and classification is based on criteria similar to current lease accounting, but without explicit bright lines. In July 2018, the FASB issuedASU No. 2018-10, “Codification Improvements to Topic 842, Leases” (“ASU 2018-10”), which provides narrow amendments to clarify how to apply certain aspects of the new lease standard, and ASU No. 2018-11, “Leases (Topic 842) – Targeted Improvements” (ASU 2018-11), which addresses implementation issues related to the new lease standard. The guidance is effective for annual reporting periods beginning after December 15, 2018 and interim periods within those fiscal years, and early adoption is permitted. Under this standard, disclosures are required to enable users of financial statements in assessing the amount, timing, and uncertainty of cash flows arising from leases. The standard permits two transition methods, (1) to apply the new lease requirements at the beginning of the earliest period presented, or (2) to apply the new lease requirements at the effective date. Under both transition methods there is a cumulative effect adjustment.

The Company adopted the standard on the effective date of January 1, 2019 by applying the new lease requirements at the effective date. Prior periods continue to be presented based on the accounting standards originally in effect for such periods. The Company also elected the package of practical expedients permitted under the transition guidance within the new standard, which, among other things, allows the Company to carry forward the historical lease classification. The Company will also apply the practical expedient not to separate lease and non-lease components for new and modified leases commencing after adoption. The standard had an impact of approximately $3.0 million on the Company’s assets and $3.4 million on its liabilities, as of January 1, 2019, for the recognition of right-of-use assets and lease liabilities, which are primarily related to the lease of its corporate headquarters in Hopkinton, Massachusetts. The standard did not have a material impact on the Company’s results of operations or liquidity (see Note 10).

In July 2017, the FASB issued ASU 2017-11, Earnings Per Share (Topic 260), Distinguishing Liabilities from Equity (Topic 480), Derivatives and Hedging (Topic 815): I. Accounting for Certain Financial Instruments with Down Round Features and II. Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception. Part I applies to entities that issue financial instruments such as warrants, convertible debt or convertible preferred stock that contain down round features. Part II simply replaces the indefinite deferral for certain mandatorily redeemable noncontrolling interests and mandatorily redeemable financial instruments of nonpublic entities contained within Accounting Standards Codification (ASC) Topic 480with a scope exception and does not impact the accounting for these mandatorily redeemable instruments. This ASU is effective for public companies for the annual reporting periods beginning after December 15, 2018, and interim periods within those annual periods. Early adoption is permitted. The Company adopted this standard as of January 1, 2019; however, the adoption of this standard did not impact the Company’s consolidated financial statements.

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Property and Equipment, Net (Tables)

9 Months Ended

Sep. 30, 2019

Property Plant And Equipment [Abstract]

Schedule of Property and Equipment

Property and equipment as of September 30, 2019 and December 31, 2018 consisted of the following (in thousands):

	September 30,			December 31,
	2019			2018
Equipment	$	1,278		$	1,064
Furniture and fixtures		385			400
Leasehold improvements		1,356			1,347
Total property and equipment		3,019			2,811
Less: accumulated depreciation and amortization		(755	)		(492	)
Property and equipment, net	$	2,264		$	2,319

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Consolidated Balance Sheets (Parenthetical) - $ / shares	Sep. 30, 2019	Dec. 31, 2018
Statement Of Financial Position [Abstract]
Preferred stock, par value	$ 0.0001	$ 0.0001
Preferred stock, shares authorized	10,000,000	10,000,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Common stock, par value	$ 0.0001	$ 0.0001
Common stock, shares authorized	200,000,000	200,000,000
Common stock, shares issued	16,476,342	16,434,614
Common stock, shares outstanding	16,476,342	16,434,614

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Stockholders' Equity (Tables)

9 Months Ended

Sep. 30, 2019

Equity [Abstract]

Summary of Option Activity

The following table summarizes the option activity under the Stock Incentive Plans for the nine months ended September 30, 2019 and the year ended December 31, 2018:

	Options			Weighted-Average Exercise Price Per Share		Aggregate Intrinsic Value
Options outstanding at December 31, 2017		988,565		$	10.83	$	2,617,859
Granted		311,000			12.28		—
Exercised		—			—		—
Cancelled		—			—		—
Outstanding at December 31, 2018		1,299,565			11.18		881,385
Granted		395,500			9.61		—
Exercised		—			—		—
Cancelled		(22,750	)		13.36		—
Options outstanding at September 30, 2019		1,672,315		$	10.78	$	—
Options exercisable at September 30, 2019		1,016,449		$	11.23	$	—

Summary of Assumptions to Determine Fair Value of Stock Options Granted to Employees and Directors

The assumptions the Company used to determine the fair value of stock options granted to employees and directors during the nine months ended September 30, 2019 and 2018 are as follows, presented on a weighted-average basis:

	For the Nine Months Ended September 30,
	2019			2018
Risk-free interest rate		2.5	%		2.5	%
Expected term (in years)		5.9			6.1
Expected volatility		81.1	%		82.5	%
Expected dividend yield		0	%		0	%

Summary of RSU Activity

The following table is a rollforward of RSU activity under the Stock Incentive Plans for the nine months ended September 30, 2019:

	Restricted Stock Units			Weighted-Average Grant Date Fair Value
Total nonvested units at December 31, 2018		—		$	—
Granted		203,700			8.49
Exercised		—			—
Vested		—			—
Cancelled		(17,900	)		8.49
Total nonvested units at September 30, 2019		185,800		$	8.49

Summary of Stock-Based Compensation Expense

The following table summarizes the Company’s stock-based compensation expense for the three and nine months ended September 30, 2019 and 2018 (in thousands):

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
Stock-based compensation:	2019		2018		2019		2018
Research and development	$	314	$	214	$	971	$	628
General and administrative		497		499		1,854		1,434
Total Stock-based compensation	$	811	$	713	$	2,825	$	2,062

Summary of Shares of Common Stock Reserved

As of September 30, 2019 and December 31, 2018, the Company reserved the following shares of common stock for issuance of shares resulting from exercise of outstanding warrants, convertible shares from the Loan and Security Agreement, options and performance-based RSUs, as well as issuance of shares available for grant under the Stock Incentive Plans:

	September 30,		December 31,
	2019		2018
IPO warrants		28,347		28,347
November private placement warrants		1,633,777		1,633,777
Loan and security agreement		2,329,143		—
Pontifax warrants		250,000		—
September 2019 warrants		15,000		—
2015 amended and restated stock incentive plan		2,197,759		2,238,887
Inducement awards		90,000		50,000
Total		6,544,026		3,951,011

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Stockholders' Equity - Additional Information (Detail) - USD ($)		1 Months Ended					3 Months Ended		9 Months Ended		12 Months Ended
	May 11, 2016	Feb. 28, 2019	Jan. 31, 2019	Aug. 31, 2018	Jun. 18, 2018	Jan. 31, 2018	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018	Dec. 31, 2018	Dec. 31, 2015	Mar. 09, 2018	Aug. 31, 2017	Apr. 30, 2014
Class of Stock [Line Items]
Net proceeds from initial public offering of common stock										$ 37,959,000
Stock options granted												0
Stock-based compensation expense									$ 2,825,000	$ 2,062,000
2018 New Hire Inducement Stock Option Award [Member]
Class of Stock [Line Items]
Issuance of common stock						50,000
Shares issued price per share						$ 12.02
2019 New Hire Inducement Stock Option Award [Member]
Class of Stock [Line Items]
Issuance of common stock		40,000
Shares issued price per share		$ 10.39
Performance-Based Restricted Stock Units [Member]
Class of Stock [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Description									In January 2019, the Company issued RSUs to senior management under the 2015 Plan that represent shares potentially issuable in the future subject to the satisfaction of certain performance milestones as well as a service condition.
Share-based Compensation Arrangement by Share-based Payment Award, Award, Vesting Description									The vesting of 50% of the RSUs is based upon the Company’s performance relative to a peer group over a two-year performance period, from January 1, 2019 through December 31, 2020, measured by the Company’s relative total shareholder return. The vesting of 25% of the RSUs is based on the achievement of a performance goal milestone as of December 31, 2019 and the vesting of the remaining 25% of the RSUs is based upon the achievement of a performance goal milestone as of December 31, 2020.
Stock-based compensation expense							$ 100,000		$ 400,000
Adjusted stock-based compensation							$ 100,000		$ 100,000
Weighted-average fair value of restricted stock units granted									$ 8.49
Performance-Based Restricted Stock Units [Member] | Performance Relative to a Peer Group over a Two-year Performance Period, from January 1, 2019 through December 31, 2020 [Member]
Class of Stock [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Vesting percentage			50.00%
Performance-Based Restricted Stock Units [Member] | Achievement of a Performance Goal Milestone as of December 31, 2019 [Member]
Class of Stock [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Vesting percentage			25.00%
Performance-Based Restricted Stock Units [Member] | Achievement of a Performance Goal Milestone as of December 31, 2020 [Member]
Class of Stock [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Vesting percentage			25.00%
Performance Goal Milestone Units [Member]
Class of Stock [Line Items]
Weighted-average fair value of restricted stock units granted									10.35
Relative Total Share Return Units [Member]
Class of Stock [Line Items]
Weighted-average fair value of restricted stock units granted									$ 6.62
2014 Stock Incentive Plan [Member]
Class of Stock [Line Items]
Number of authorized shares of common stock to be issued															750,000
Number of shares remain available for grant	0
Weighted-average remaining contractual life									7 years 6 months
Weighted-average fair value of all stock options granted									$ 6.74
2015 Stock Incentive Plan [Member]
Class of Stock [Line Items]
Number of authorized shares of common stock to be issued													1,666,863
Number of shares remain available for grant							339,644		339,644
Number of shares common stock reserved for issuance, increase					800,000
Expiry date of stock options awarded	10 years
2014 and 2015 Stock Incentive Plans [Member]
Class of Stock [Line Items]
Number of authorized shares of common stock to be issued					2,300,000
Stock options granted									395,500		311,000
Fair value of stock options vested									$ 2,400,000
Unrecognized stock-based compensation expense							$ 4,600,000		$ 4,600,000
Weighted-average remaining vesting period									2 years 7 months 6 days
2014 and 2015 Stock Incentive Plans [Member] | Performance-Based Restricted Stock Units [Member]
Class of Stock [Line Items]
Unrecognized stock-based compensation expense							$ 700,000		$ 700,000
Weighted-average remaining vesting period									1 year 3 months 18 days
Common Stock [Member]
Class of Stock [Line Items]
Issuance of common stock								3,246,079		3,246,079
Common Stock [Member] | 2014 Stock Incentive Plan [Member]
Class of Stock [Line Items]
Shares issued price per share							$ 3.44		$ 3.44		$ 10.39
Common Stock [Member] | 2014 Stock Incentive Plan [Member]
Class of Stock [Line Items]
Issuance of common stock				3,246,079
Net proceeds from initial public offering of common stock				$ 38,000,000
Shares issued price per share				$ 12.50
Exercise of an option to purchase additional shares granted to underwriters in connection with offering				246,079
Maximum [Member] | 2015 Stock Incentive Plan [Member]
Class of Stock [Line Items]
Number of shares remain available for grant	116,863
Sales Agreement [Member] | Cantor Fitzgerald & Co. [Member]
Class of Stock [Line Items]
Sales commission percentage on common stock														3.00%
Issuance of common stock											217,329
Weighted average selling price per share											$ 15.42
Net proceeds from initial public offering of common stock											$ 3,200,000
Sales Agreement [Member] | Cantor Fitzgerald & Co. [Member] | Maximum [Member]
Class of Stock [Line Items]
Aggregate offering price														$ 50,000,000

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Accrued Expenses and Other Current Liabilities - Schedule of Accrued Expenses (Detail) - USD ($) $ in Thousands	Sep. 30, 2019	Dec. 31, 2018
Accrued Liabilities And Other Liabilities [Abstract]
Clinical	$ 1,032	$ 941
Compensation and benefits	526	830
Accounting and legal	238	227
Other	202	369
Total accrued expenses and other current liabilities	$ 1,998	$ 2,367

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Consolidated Statements of Cash Flows - USD ($) $ in Thousands	3 Months Ended		9 Months Ended		12 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018	Dec. 31, 2018
Cash flows from operating activities:
Net loss			$ (16,662)	$ (17,429)
Adjustments for:
Depreciation and amortization			263	193
Loss on the disposal of property and equipment				16
Operating lease right-of-use asset amortization			196
Change in fair value of warrant liabilities	$ (355)	$ 1,336	(8,061)	(3,837)
Non-cash interest expense			10
Non-cash investment income			(60)	361
Non-cash stock-based compensation			2,825	2,062
Non-cash issuance of warrants to a service provider			19
Changes in operating assets and liabilities:
Prepaid expenses and other current assets			(78)	(449)
Other assets			132	(46)
Accounts payable			1,106	(326)
Accrued expenses and other liabilities			(82)	1,098
Operating lease liabilities			(79)
Net cash used in operating activities			(20,471)	(18,357)
Cash flows from investing activities:
Proceeds from sale of marketable securities			26,767	28,837
Purchases of marketable securities			(6,000)	(50,000)
Purchases of property and equipment			(208)	(1,913)
Net cash provided by (used in) investing activities			20,559	(23,076)
Cash flows from financing activities:
Proceeds from term loan and warrants			20,000
Issuance costs in connection with term loan and warrants			(447)
Proceeds from issuance of common stock in connection with at-the-market offering, net of issuance costs			6	3,212
Proceeds from issuance of common stock, net of issuance costs				37,959
Cash provided by financing activities			19,559	41,171
Net increase (decrease) in cash, cash equivalents and restricted cash			19,647	(262)
Cash, cash equivalents and restricted cash, beginning of period			14,958	24,133	$ 24,133
Cash, cash equivalents and restricted cash, end of period	$ 34,605	$ 23,871	34,605	23,871	$ 14,958
Supplemental disclosures of cash flow information:
Cash paid for taxes			21	$ 3
Cash paid for interest, net			$ 53

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Investments (Tables)

9 Months Ended

Sep. 30, 2019

Investments Debt And Equity Securities [Abstract]

Summary of Investments by Category

The following table summarizes the Company’s investments, by category, as of September 30, 2019 and December 31, 2018 (in thousands):

	September 30,		December 31,
Investments - Current:	2019		2018
Debt securities - available for sale	$	28,778	$	32,914
Total	$	28,778	$	32,914
Investments - Noncurrent:
Debt securities - available for sale	$	—	$	16,804
Total	$	—	$	16,804

Summary of Available-for-Sale Classified Investments

A summary of the Company’s available-for-sale classified investments as of September 30, 2019 and December 31, 2018 consisted of the following (in thousands):

	At September 30, 2019
	Cost Basis		Accumulated Unrealized Gains		Accumulated Unrealized Losses			Fair Value
Investments - Current:
Corporate bonds	$	11,055	$	—	$	(74	)	$	10,981
United States treasury securities		17,961		—		(164	)	$	17,797
Total	$	29,016	$	—	$	(238	)	$	28,778
	At December 31, 2018
	Cost Basis		Accumulated Unrealized Gains		Accumulated Unrealized Losses			Fair Value
Investments - Current:
Corporate bonds	$	16,028	$	—	$	(19	)	$	16,009
United States treasury securities		16,913		—		(8	)		16,905
Total	$	32,941	$	—	$	(27	)	$	32,914
Investments - Noncurrent:
Corporate bonds	$	4,930	$	2	$	—		$	4,932
United States treasury securities		11,852		20		—			11,872
Total	$	16,782	$	22	$	—		$	16,804

Schedule of Amortized Cost and Fair Value of Available-for-Sale Investments, by Contract Maturity

The amortized cost and fair value of the Company’s available-for-sale investments, by contract maturity, as of September 30, 2019 consisted of the following (in thousands):

	Amortized Cost		Fair Value
Due in one year or less	$	29,016	$	28,778
Due after one year through two years		—		—
Total	$	29,016	$	28,778

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Consolidated Balance Sheets - USD ($) $ in Thousands	Sep. 30, 2019	Dec. 31, 2018
Current assets:
Cash and cash equivalents	$ 34,371	$ 14,724
Marketable securities	28,778	32,914
Prepaid expenses and other current assets	1,727	1,649
Total current assets	64,876	49,287
Marketable securities, long-term		16,804
Property and equipment, net	2,264	2,319
Operating lease right-of-use assets	2,784
Restricted cash	234	234
Other assets	35	167
Total	70,193	68,811
Current liabilities:
Accounts payable	2,986	1,880
Accrued expenses and other current liabilities	1,998	2,367
Operating lease liabilities, current	343
Total current liabilities	5,327	4,247
Term loan, net of unamortized discount	19,011
Warrant liabilities	450	8,511
Operating lease liabilities, noncurrent	2,962
Other long-term liabilities	27	193
Total liabilities	27,777	12,951
Commitments and contingencies (Note 11)
Stockholders’ equity:
Preferred stock, $0.0001 par value—authorized, 10,000,000 shares at September 30, 2019 and December 31, 2018; no shares issued or outstanding at September 30, 2019 and December 31, 2018
Common stock, $0.0001 par value—authorized, 200,000,000 shares at September 30, 2019 and December 31, 2018; 16,476,342 and 16,434,614 shares issued and outstanding at September 30, 2019 and December 31, 2018, respectively	2	2
Additional paid-in capital	161,382	157,931
Accumulated deficit	(118,730)	(102,068)
Accumulated other comprehensive loss	(238)	(5)
Total stockholders’ equity	42,416	55,860
Total	$ 70,193	$ 68,811

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Warrants (Tables)

9 Months Ended

Sep. 30, 2019

Warrants And Rights Note Disclosure [Abstract]

Summary of Assumptions Used to Record Fair Value of Warrants

A summary of the Black-Scholes pricing model assumptions used to record the fair value of the warrants is as follows:

	September 30, 2019			December 31,  2018
Risk-free interest rate		1.6	%		2.5	%
Expected term (in years)		2.1			2.9
Expected volatility		62.3	%		78.1	%
Expected dividend yield		0	%		0	%

Summary of Warrant Activity

A summary of the warrant activity for the nine months ended September 30, 2019 and for the year ended December 31, 2018 is as follows:

	Warrants
Outstanding at December 31, 2017		1,787,124
Grants		—
Exercises		—
Expirations/cancellations		(125,000	)
Outstanding at December 31, 2018		1,662,124
Grants		265,000
Exercises		—
Expirations/cancellations		—
Outstanding at September 30, 2019		1,927,124

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Stockholders' Equity - Summary of Option Activity (Detail) - USD ($)	9 Months Ended	12 Months Ended
	Sep. 30, 2019	Dec. 31, 2018	Dec. 31, 2015
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Options Granted			0
2014 and 2015 Stock Incentive Plans [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Options outstanding, Beginning Balance	1,299,565	988,565
Options Granted	395,500	311,000
Options Cancelled	(22,750)
Options outstanding, Ending balance	1,672,315	1,299,565
Options exercisable	1,016,449
Weighted-Average Exercise Price Per Share, Options outstanding, Beginning Balance	$ 11.18	$ 10.83
Weighted-Average Exercise Price Per Share, Granted	9.61	12.28
Weighted-Average Exercise Price Per Share, Cancelled	13.36
Weighted-Average Exercise Price Per Share, Options outstanding, Ending Balance	10.78	$ 11.18
Weighted-Average Exercise Price Per Share, Options exercisable	$ 11.23
Aggregate Intrinsic Value, Options outstanding, Beginning Balance	$ 881,385	$ 2,617,859
Aggregate Intrinsic Value, Options outstanding, Ending Balance		$ 881,385

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Warrants - Additional Information (Detail) - USD ($) $ / shares in Units, $ in Thousands	1 Months Ended				9 Months Ended
	Sep. 30, 2019	Nov. 30, 2016	Jun. 30, 2016	May 31, 2016	Sep. 30, 2019	Sep. 30, 2018	Sep. 19, 2019	Dec. 31, 2018
Class of Warrant or Right [Line Items]
Dividend yield					0.00%	0.00%
Expected life (in years)					5 years 10 months 24 days	6 years 1 month 6 days
Long-term debt	$ 20,000				$ 20,000
Loan and Security agreement [Member] | Convertible Term Loan [Member]
Class of Warrant or Right [Line Items]
Long-term debt							$ 20,000
May 2016 IPO warrants [Member]
Class of Warrant or Right [Line Items]
Expected volatility of common stock Minimum				87.00%
Risk free interest rate				1.20%
Dividend yield				0.00%
Expected life (in years)				4 years 11 months 26 days
June 2016 IPO warrants [Member]
Class of Warrant or Right [Line Items]
Expected volatility of common stock Minimum			87.00%
Risk free interest rate			1.23%
Dividend yield			0.00%
Expected life (in years)			4 years 11 months 1 day
September 2019 Warrants [Member]
Class of Warrant or Right [Line Items]
Fair value of equity	$ 19,000				$ 19,000
Expected volatility of common stock Minimum	69.40%
Risk free interest rate	1.70%
Dividend yield	0.00%
Expected life (in years)	2 years
Exercise price	$ 4.21				$ 4.21
Warrants expiration date	Sep. 19, 2021
Warrants issued to purchase shares of common stock	15,000				15,000
IPO [Member]
Class of Warrant or Right [Line Items]
Fair value of equity	$ 200				$ 200
Exercise price				$ 15.00
Warrants expiration date					May 05, 2021
Warrants issued to purchase shares of common stock			747	27,600
Private Placement [Member]
Class of Warrant or Right [Line Items]
Issuance of common stock		1,644,737
Exercise price		$ 10.79
Warrants expiration date		Nov. 23, 2021
Warrants issued to purchase shares of common stock		1,644,737
Shares issued price per share		$ 9.12
Common Stock Warrants [Member] | Pontifax [Member]
Class of Warrant or Right [Line Items]
Fair value of equity	$ 600				$ 600
Expected volatility of common stock Minimum	83.20%
Risk free interest rate	1.70%
Dividend yield	0.00%
Expected life (in years)	6 years				6 years
Exercise price	$ 6.57				$ 6.57
Warrants expiration date	Sep. 19, 2025
Warrants issued to purchase shares of common stock	250,000				250,000
Common Stock Warrants [Member] | Private Placement [Member]
Class of Warrant or Right [Line Items]
Fair value of equity	$ 500	$ 8,300			$ 500			$ 8,500
Common Stock Warrants [Member] | BioHEP Technologies Ltd. [Member]
Class of Warrant or Right [Line Items]
Issuance of common stock					125,000
Fair value of equity	$ 800				$ 800
Expected volatility of common stock Minimum					71.00%
Risk free interest rate					1.01%
Dividend yield					0.00%
Expected life (in years)					2 years 6 months
Exercise price	$ 16.00				$ 16.00
Warrants expiration date					Aug. 01, 2018

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Convertible Debt - Additional Information (Details)	1 Months Ended	3 Months Ended	9 Months Ended
	Sep. 30, 2019 USD ($) $ / shares shares	Sep. 30, 2019 USD ($) $ / shares shares	Sep. 30, 2019 USD ($) Day $ / shares shares	Sep. 30, 2018	Sep. 19, 2019 USD ($)
Debt Instrument [Line Items]
Long-term debt	$ 20,000,000	$ 20,000,000	$ 20,000,000
Expected life (in years)			5 years 10 months 24 days	6 years 1 month 6 days
Pontifax [Member] | Common Stock Warrants [Member]
Debt Instrument [Line Items]
Warrants issued to purchase shares of common stock | shares	250,000	250,000	250,000
Exercise price | $ / shares	$ 6.57	$ 6.57	$ 6.57
Expected life (in years)	6 years		6 years
Fair value of equity	$ 600,000	$ 600,000	$ 600,000
Convertible Term Loan [Member]
Debt Instrument [Line Items]
Debt instrument, convertible, conversion price | $ / shares	$ 8.76	$ 8.76	$ 8.76
Prepayment charge percentage	3.00%	3.00%	3.00%
Debt instrument, convertible, threshold trading days | Day			30
Interest expense, debt		$ 63,000	$ 63,000
Loan and Security agreement [Member]
Debt Instrument [Line Items]
Minimum cash balance maintained in accounts	$ 7,000,000	$ 7,000,000	$ 7,000,000
Loan and Security agreement [Member] | Convertible Term Loan [Member]
Debt Instrument [Line Items]
Long-term debt					$ 20,000,000
Debt instrument, interest rate, stated percentage	8.00%	8.00%	8.00%
Debt instrument, payment terms			The Loan and Security Agreement provides for interest-only payments for twenty-four months and repayment of the aggregate outstanding principal balance of the Convertible Term Loan in quarterly installments starting upon expiration of the interest only period and continuing through September 19, 2023 (the “Maturity Date”).
Debt instrument, maturity date			Sep. 19, 2023
Debt issuance cost	$ 400,000	$ 400,000	$ 400,000
Additional interest rate upon occurrence of an event of default			4.00%

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Leases - Summary of Maturities of Operating Lease Liabilities (Detail) $ in Thousands	Sep. 30, 2019 USD ($)
Leases [Abstract]
2019 (excluding the nine months ended September 30, 2019)	$ 144
2020	588
2021	508
2022	450
2023	462
Thereafter	2,405
Total lease payments	4,557
Less: present value discount	(1,252)
Total	$ 3,305

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Investments - Schedule of Amortized Cost and Fair Value of Available-for-Sale Investments, by Contract Maturity (Detail) $ in Thousands	Sep. 30, 2019 USD ($)
Investments Debt And Equity Securities [Abstract]
Due in one year or less, Amortized Cost	$ 29,016
Cost Basis	29,016
Due in one year or less, Fair Value	28,778
Total, Fair Value	$ 28,778

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Net Loss Per Share - Additional Information (Detail) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018	Dec. 31, 2018
Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items]
Common stock warrant	6,544,026		6,544,026		3,951,011
Change in fair value of warrant liabilities	$ 355	$ (1,336)	$ 8,061	$ 3,837
Private Placement [Member]
Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items]
Common stock warrant		1,633,777		1,633,777

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Subsequent Events

9 Months Ended

Sep. 30, 2019

Subsequent Events [Abstract]

Subsequent Events

12. SUBSEQUENT EVENTS

The Company has evaluated subsequent events through the date on which the consolidated financial statements were issued, to ensure that this submission includes appropriate disclosure of events both recognized in the consolidated financial statements and events which occurred subsequently but were not recognized in the consolidated financial statements.

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Property and Equipment, Net

9 Months Ended

Sep. 30, 2019

Property Plant And Equipment [Abstract]

Property and Equipment, Net

4. PROPERTY AND EQUIPMENT, NET

Property and equipment as of September 30, 2019 and December 31, 2018 consisted of the following (in thousands):

	September 30,			December 31,
	2019			2018
Equipment	$	1,278		$	1,064
Furniture and fixtures		385			400
Leasehold improvements		1,356			1,347
Total property and equipment		3,019			2,811
Less: accumulated depreciation and amortization		(755	)		(492	)
Property and equipment, net	$	2,264		$	2,319

Depreciation expense for the three and nine months ended September 30, 2019 was $92,000 and $263,000, respectively. Depreciation expense for the three and nine months ended September 30, 2018 was $107,000 and $193,000, respectively.

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Stockholders' Equity

9 Months Ended

Sep. 30, 2019

Equity [Abstract]

Stockholders' Equity

8. STOCKHOLDERS’ EQUITY

Common and Preferred Stock

In August 2017, the Company entered into a Controlled Equity Offering^SMSales Agreement (the “Sales Agreement”) with Cantor Fitzgerald & Co. (“Cantor”), pursuant to which the Company may offer and sell, from time to time through Cantor, shares of the Company’s common stock having an aggregate offering price of up to $50.0 million. The Company pays Cantor a commission rate equal to 3.0% of the aggregate gross proceeds from each sale. During the year ended December 31, 2018, the Company sold an aggregate of 217,329 shares of its common stock pursuant to the Sales Agreement at a weighted-average selling price of $15.42 per share, which resulted in $3.2 million of net proceeds to the Company.

In August 2018, the Company issued and sold in an underwritten public offering an aggregate of 3,246,079 shares of its common stock at $12.50 per share, which included 246,079 shares pursuant to the exercise of an option to purchase additional shares granted to the underwriters in connection with the offering. The offering resulted in $38.0 million of net proceeds, after deducting underwriting discounts and commissions and other offering expenses payable by the Company.

2014 Stock Incentive Plan and 2015 Stock Incentive Plan

In April 2014, the Company’s Board of Directors approved the 2014 Stock Incentive Plan (the “2014 Plan”) and authorized 750,000 shares of common stock to be issued under the 2014 Plan.

The Company’s 2015 Stock Incentive Plan (the “2015 Plan”) became effective immediately prior to the closing of the Company’s IPO on May 11, 2016. Upon the effectiveness of the 2015 Plan, 116,863 shares of common stock that remained available for grant under the 2014 Plan became available for grant under the 2015 Plan, and no further awards were available to be issued under the 2014 Plan.

The Company’s Board of Directors initially adopted the 2015 Plan in December 2015, subject to stockholder approval, and authorized 750,000 shares of Common Stock to be issued under the 2015 Plan. The 2014 Plan and 2015 Plan provide for the issuance of common stock, stock options and other stock-based awards to employees, officers, directors, consultants and advisors of the Company.

Amended and Restated 2015 Stock Incentive Plan

In June 2018, upon receipt of stockholder approval at the Company’s 2018 annual meeting, the 2015 Plan was amended and restated in its entirety increasing the authorized number of shares of common stock reserved for issuance by 800,000 shares (together with the 2014 Plan, the 2015 Plan, the “Stock Incentive Plans”). The Board approved the Amended and Restated 2015 Plan on March 9, 2018. Pursuant to the Amended and Restated 2015 Plan, there are 1,666,863 shares authorized for issuance. In addition, to the extent any outstanding awards under the 2014 Plan expire, terminate or are otherwise surrendered, cancelled or forfeited after the closing of the Company’s IPO, those shares are added to the authorized shares under the Amended and Restated 2015 Plan. The total amount of shares authorized for issuance under both the 2014 Plan and the Amended and Restated 2015 Plan is 2,300,000. As of September 30, 2019, the Company had 339,644 shares available for issuance under the Amended and Restated 2015 Plan.

The exercise price of stock options cannot be less than the fair value of the common stock on the date of grant. Stock options awarded under the Stock Incentive Plans expire 10 years after the grant date, unless the Board sets a shorter term. There were no stock options granted prior to 2015.

The following table summarizes the option activity under the Stock Incentive Plans for the nine months ended September 30, 2019 and the year ended December 31, 2018:

	Options			Weighted-Average Exercise Price Per Share		Aggregate Intrinsic Value
Options outstanding at December 31, 2017		988,565		$	10.83	$	2,617,859
Granted		311,000			12.28		—
Exercised		—			—		—
Cancelled		—			—		—
Outstanding at December 31, 2018		1,299,565			11.18		881,385
Granted		395,500			9.61		—
Exercised		—			—		—
Cancelled		(22,750	)		13.36		—
Options outstanding at September 30, 2019		1,672,315		$	10.78	$	—
Options exercisable at September 30, 2019		1,016,449		$	11.23	$	—

As of September 30, 2019, all options outstanding have a weighted-average remaining contractual life of 7.5 years. The weighted-average fair value of all stock options granted for the nine months ended September 30, 2019 was $6.74. Intrinsic value at September 30, 2019 and December 31, 2018 is based on the closing price of the Company’s common stock on that date of $3.44 per share and $10.39 per share, respectively.

In January 2018, the Company issued a stock option award as an inducement grant for the purchase of an aggregate of 50,000 shares of the Company’s common stock, outside of the Stock Incentive Plans, at an exercise price of $12.02 per share. In February 2019, the Company issued a stock option award as an inducement grant for the purchase of an aggregate of 40,000 shares of the Company’s common stock, outside of the Stock Incentive Plans, at an exercise price of $10.39 per share. These inducement grants are excluded from the option activity table above.

The assumptions the Company used to determine the fair value of stock options granted to employees and directors during the nine months ended September 30, 2019 and 2018 are as follows, presented on a weighted-average basis:

	For the Nine Months Ended September 30,
	2019			2018
Risk-free interest rate		2.5	%		2.5	%
Expected term (in years)		5.9			6.1
Expected volatility		81.1	%		82.5	%
Expected dividend yield		0	%		0	%

Performance-Based Restricted Stock Units

In January 2019, the Company issued RSUs to senior management under the 2015 Plan that represent shares potentially issuable in the future subject to the satisfaction of certain performance milestones as well as a service condition. The vesting of 50% of the RSUs is based upon the Company’s performance relative to a peer group over a two-year performance period, from January 1, 2019 through December 31, 2020, measured by the Company’s relative total shareholder return. The vesting of 25% of the RSUs is based on the achievement of a performance goal milestone as of December 31, 2019 and the vesting of the remaining 25% of the RSUs is based upon the achievement of a performance goal milestone as of December 31, 2020.

The Company estimates the fair value of total shareholder return RSUs at the date of grant using a Monte Carlo valuation methodology and amortizes those fair values over the requisite service period for each separately vesting tranche of the award. The Monte Carlo methodology that the Company uses to estimate the fair value of total shareholder return RSUs at the date of grant incorporates into the valuation the possibility that the market condition may not be satisfied. Provided that the requisite service is rendered, the total fair value of the total shareholder return RSUs at the date of grant must be recognized as compensation expense even if the market condition is not achieved. However, the number of shares that ultimately vest can vary significantly with the performance of the specified market criteria.

The Company estimates the fair value of milestone-based RSUs at the date of grant using the fair value method and the probability that the specified performance criteria will be met. Each quarter the Company updates its assessment of the probability that the specified milestone criteria will be achieved and adjusts its estimate of the fair value, if necessary. The Company amortizes the fair values of milestone-based RSUs over the requisite service period for each separately vesting tranche of the award. As of September 30, 2019, the Company estimates that it is currently not probable that it will achieve the December 31, 2019 clinical milestone applicable to the milestone-based RSUs and has not recognized stock-based compensation expense for these RSUs as it relates to the December 31, 2019 milestone base goal. As of September 30, 2019, the Company estimates that it is currently probable that it will achieve the December 31, 2020 clinical milestone applicable to the milestone-based RSUs and has recognized the stock-based compensation expense for these RSUs as it relates to the December 31, 2020 milestone.

The total stock-based compensation recognized for the three and nine months ended September 30, 2019 for the RSUs was approximately $0.1 million and $0.4 million, respectively. As of September 30, 2019, the Company adjusted stock-based compensation approximately $0.1 million for previously recognized stock-based compensation for the December 31, 2019 clinical milestone currently estimated to be not probable.

The following table is a rollforward of RSU activity under the Stock Incentive Plans for the nine months ended September 30, 2019:

	Restricted Stock Units			Weighted-Average Grant Date Fair Value
Total nonvested units at December 31, 2018		—		$	—
Granted		203,700			8.49
Exercised		—			—
Vested		—			—
Cancelled		(17,900	)		8.49
Total nonvested units at September 30, 2019		185,800		$	8.49

The assumptions used to determine the fair value of the RSUs granted to management during the nine months ended September 30, 2019 for the performance goal milestone units is based on the market price of the award on the grant date, which was a weighted average fair value for the nine months ended September 30, 2019 of $10.35 per share. The fair value of the performance-based RSUs granted to management in 2019 for the Company’s relative total share return units is based on the Monte Carlo Simulation method on the grant date, which the weighted average fair value as of the nine months ended September 30, 2019 was $6.62 per share.

Stock-Based Compensation

The following table summarizes the Company’s stock-based compensation expense for the three and nine months ended September 30, 2019 and 2018 (in thousands):

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
Stock-based compensation:	2019		2018		2019		2018
Research and development	$	314	$	214	$	971	$	628
General and administrative		497		499		1,854		1,434
Total Stock-based compensation	$	811	$	713	$	2,825	$	2,062

The fair value of stock options vested during the nine months ended September 30, 2019 was $2.4 million. At September 30, 2019, there was $4.6 million of unrecognized stock-based compensation expense relating to stock options granted pursuant to the Stock Incentive Plans, which will be recognized over the weighted-average remaining vesting period of 2.6 years.

The expense recognized is partially dependent upon the Company’s estimate of the number of shares that will ultimately be issued. At September 30, 2019, there was $0.7 million of unrecognized stock-based compensation expense relating to performance-based RSUs granted pursuant to the Stock Incentive Plans, which will be recognized over the weighted-average remaining vesting period of 1.3 years.

Reserved Shares

As of September 30, 2019 and December 31, 2018, the Company reserved the following shares of common stock for issuance of shares resulting from exercise of outstanding warrants, convertible shares from the Loan and Security Agreement, options and performance-based RSUs, as well as issuance of shares available for grant under the Stock Incentive Plans:

	September 30,		December 31,
	2019		2018
IPO warrants		28,347		28,347
November private placement warrants		1,633,777		1,633,777
Loan and security agreement		2,329,143		—
Pontifax warrants		250,000		—
September 2019 warrants		15,000		—
2015 amended and restated stock incentive plan		2,197,759		2,238,887
Inducement awards		90,000		50,000
Total		6,544,026		3,951,011

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Nature of Business and Summary of Significant Accounting Policies (Tables)

9 Months Ended

Sep. 30, 2019

Accounting Policies [Abstract]

Summary of Estimated Useful Lives of Property and Equipment

Depreciation is provided using the straight-line method over the estimated useful lives:

Asset Category	Useful Life
Equipment	5-7 years
Furniture and fixtures	5 years
Leasehold improvements	Lesser of 10 years or the remaining term of the respective lease

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Consolidated Statements of Operations and Comprehensive Loss - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Operating expenses:
Research and development	$ 5,228	$ 5,656	$ 18,070	$ 15,188
General and administrative	2,247	2,059	7,547	6,681
Total operating expenses	7,475	7,715	25,617	21,869
Loss from operations	(7,475)	(7,715)	(25,617)	(21,869)
Other income (expense):
Interest income	271	271	957	603
Interest expense	(63)		(63)
Change in fair value of warrant liabilities	355	(1,336)	8,061	3,837
Net loss	(6,912)	(8,780)	(16,662)	(17,429)
Unrealized loss on marketable securities	(20)	(14)	(233)	(13)
Comprehensive loss	$ (6,932)	$ (8,794)	$ (16,895)	$ (17,442)
Net loss per common share:
Basic	$ (0.42)	$ (0.59)	$ (1.01)	$ (1.27)
Diluted	$ (0.42)	$ (0.59)	$ (1.01)	$ (1.39)
Weighted-average number of shares outstanding:
Basic	16,459,155	14,841,197	16,446,582	13,677,375
Diluted	16,459,155	14,841,197	16,446,582	15,311,152

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Fair Value Measurements (Tables)

9 Months Ended

Sep. 30, 2019

Fair Value Disclosures [Abstract]

Summary of Assets and Liabilities Measured at Fair Value

A summary of the assets and liabilities that are measured at fair value as of September 30, 2019 and December 31, 2018 is as follows (in thousands):

			Fair Value Measurement at September 30, 2019
Assets:	Carrying Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Money market funds(1)	$	32,526	$	32,526	$	—	$	—
Fixed income securities		28,778		—		28,778		—
Total	$	61,304	$	32,526	$	28,778	$	—
Liabilities:
Warrant liabilities	$	450	$	—	$	—	$	450
Total	$	450	$	—	$	—	$	450
			Fair Value Measurement at December 31, 2018
Assets:	Carrying Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Money market funds(1)	$	13,264	$	13,264	$	—	$	—
Fixed income securities		49,718		—		49,718		—
Total	$	62,982	$	13,264	$	49,718	$	—
Liabilities:
Warrant liabilities	$	8,511	$	—	$	—	$	8,511
Total	$	8,511	$	—	$	—	$	8,511

(1) Money market funds are included within cash and cash equivalents in the accompanying consolidated balance sheets and are recognized at fair value.

Summary of Change in Company's Level 3 Liabilities, Warrants Issued in Private Placement

The following table reflects the change in the Company’s Level 3 liabilities, which consists of the warrants issued in a private placement in November 2016 (see Note 7), for the period ended September 30, 2019 (in thousands):

	November Private Placement Warrants
Balance at December 31, 2017	$	13,128
Change in fair value		(4,617	)
Balance at December 31, 2018		8,511
Change in fair value		(8,061	)
Balance at September 30, 2019	$	450

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Net Loss Per Share

9 Months Ended

Sep. 30, 2019

Earnings Per Share [Abstract]

Net Loss Per Share

2. NET LOSS PER SHARE

The following table summarizes the computation of basic and diluted net loss per share of the Company for such periods (in thousands, except share and per share data):

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2019			2018			2019			2018
Net loss	$	(6,912	)	$	(8,780	)	$	(16,662	)	$	(17,429	)
Less: decrease in change in fair value of warrant liabilities											(3,837	)
Net loss available to common shareholders										$	(21,266	)
Weighted-average number of shares outstanding:
Basic		16,459,155			14,841,197			16,446,582			13,677,375
Effect of dilutive securities:
Common stock warrants											1,633,777
Dilutive potential common shares											15,311,152
Net loss per common share:
Basic	$	(0.42	)	$	(0.59	)	$	(1.01	)	$	(1.27	)
Diluted	$	(0.42	)	$	(0.59	)	$	(1.01	)	$	(1.39	)

For the three and nine months ended September 30, 2019, the diluted net loss per common share is the same as basic net loss per common share and for the three months ended September 30, 2018, the diluted net loss per common share is the same as basic net loss per common share. For the nine months ended September 30, 2018, the diluted net loss per common share amounts were calculated based on the dilutive effect of the total number of shares of common stock related to the November 2016 Private Placement warrants of 1,633,777 shares and the change in the fair value of the warrant liability of $3.8 million.

The following potentially dilutive securities outstanding, prior to the use of the treasury stock method or if-converted method, have been excluded from the computation of diluted weighted-average shares outstanding, because such securities had an antidilutive impact due to the losses reported:

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2019		2018		2019		2018
Convertible debt		2,329,143		—		2,329,143		—
Common stock warrants		1,927,124		1,662,124		1,927,124		28,347
Stock options, RSUs and inducement awards		1,948,115		1,349,565		1,948,115		1,349,565

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Convertible Debt (Tables)

9 Months Ended

Sep. 30, 2019

Debt Disclosure [Abstract]

Schedule of Future Principal Payments on Convertible Term Loan

The following table summarizes the Company’s future principal debt payments on the Convertible Term Loan as of September 30, 2019 (in thousands):

	September 30, 2019
2019	$	—
2020		—
2021		2,500
2022		10,000
2023		7,500
Total principal payments	$	20,000
Less: unamortized debt discount		(989	)
Term loan, long-term	$	19,011

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Stockholders' Equity - Summary of RSU Activity (Detail) - Performance-Based Restricted Stock Units [Member]	9 Months Ended
	Sep. 30, 2019 $ / shares shares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Nonvested units, Granted | shares	203,700
Nonvested units, Cancelled | shares	(17,900)
Nonvested units, Ending Balance | shares	185,800
Weighted-Average Grant Date Fair Value Granted | $ / shares	$ 8.49
Weighted-Average Grant Date Fair Value Cancelled | $ / shares	8.49
Weighted-Average Grant Date Fair Value Nonvested units, Ending Balance | $ / shares	$ 8.49

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Warrants - Summary of Warrant Activity (Detail) - Common Stock Warrants [Member] - shares	9 Months Ended	12 Months Ended
	Sep. 30, 2019	Dec. 31, 2018
Class of Warrant or Right [Line Items]
Outstanding, Beginning Balance	1,662,124	1,787,124
Grants	265,000	0
Exercises	0	0
Expirations/cancellations	0	(125,000)
Outstanding, Ending balance	1,927,124	1,662,124

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Fair Value Measurements - Summary of Change in Company's Level 3 Liabilities, Warrants Issued in Private Placement (Detail) - Private Placement [Member] - Warrants [Member] - USD ($) $ in Thousands	9 Months Ended	12 Months Ended
	Sep. 30, 2019	Dec. 31, 2018
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Beginning balance	$ 8,511	$ 13,128
Change in fair value	(8,061)	(4,617)
Ending balance	$ 450	$ 8,511

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Stockholders' Equity - Summary of Stock-Based Compensation Expense (Detail) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock-based compensation expense			$ 2,825	$ 2,062
2014 and 2015 Stock Incentive Plans [Member] | Stock Options [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock-based compensation expense	$ 811	$ 713	2,825	2,062
2014 and 2015 Stock Incentive Plans [Member] | Stock Options [Member] | Research and Development [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock-based compensation expense	314	214	971	628
2014 and 2015 Stock Incentive Plans [Member] | Stock Options [Member] | General and Administrative [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock-based compensation expense	$ 497	$ 499	$ 1,854	$ 1,434

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Leases - Additional Information (Detail) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Lessee Lease Description [Line Items]
Operating leases, remaining lease term	8 years 6 months		8 years 6 months
Operating lease costs	$ 130,000		$ 390,000
Sublease income and variable lease cost payments	$ 22,000		$ 59,000
Operating leases, total rent expense		$ 144,000		$ 286,000
Principal Office and Laboratory Space [Member]
Lessee Lease Description [Line Items]
Operating leases, remaining lease term	8 years 6 months		8 years 6 months
Operating leases, extendable lease term	5 years		5 years
Operating leases, option to extend lease			an option to extend the lease for up to 5 years
Operating Lease, existence of option to extend			true
Former Headquarters [Member]
Lessee Lease Description [Line Items]
Operating leases, remaining lease term	2 years		2 years
Research and Development Facility [Member]
Lessee Lease Description [Line Items]
Lease term expiration date			Jun. 30, 2018

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Commitments and Contingencies - Additional Information (Detail)	9 Months Ended
	Sep. 30, 2019 USD ($)
Commitments And Contingencies [Line Items]
Accruals for contingent liabilities	$ 0
License Agreement [Member] | BioHEP Technologies Ltd. [Member]
Commitments And Contingencies [Line Items]
Maximum estimated development and regulatory milestone payments	3,500,000
Maximum aggregate sublicensing revenues	2,000,000
Milestone and royalty payments	$ 0

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Accrued Expenses and Other Current Liabilities

9 Months Ended

Sep. 30, 2019

Payables And Accruals [Abstract]

Accrued Expenses and Other Current Liabilities

6. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

Accrued expenses as of September 30, 2019 and December 31, 2018 consisted of the following (in thousands):

	September 30,		December 31,
	2019		2018
Clinical	$	1,032	$	941
Compensation and benefits		526		830
Accounting and legal		238		227
Other		202		369
Total accrued expenses and other current liabilities	$	1,998	$	2,367

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Leases

9 Months Ended

Sep. 30, 2019

Leases [Abstract]

Leases

10. LEASES

The Company has operating leases for its principal office and laboratory space and the Company’s former headquarters. The Company’s leases have remaining lease terms of approximately 8.5 years for its principal office and laboratory space, which includes an option to extend the lease for up to 5 years, and approximately 2 years for its former headquarters. The Company’s former headquarters location is subleased through the remainder of the lease term.

Other information related to leases was as follows:

	For the Nine Months Ended September 30,
Cash paid for amounts included in the measurement of lease liabilities:	2019
Operating cash flow from operating leases (in thousands)	$	273
Right-of-use assets obtained in exchange for lease obligations:
Operating leases (in thousands)	$	2,980
Weighted Average Remaining Lease Term
Operating leases	8.5 years
Weighted Average Discount Rate
Operating leases		8.0	%

Operating lease costs under the leases for the three and nine months ended September 30, 2019 were approximately $130,000 and $390,000, respectively. Total operating lease costs for the three and nine months ended September 30, 2019 were offset by $22,000 and $59,000, respectively, for sublease income and variable lease cost payments. Total rent expense for the three and nine months ended September 30, 2018 was $144,000 and $286,000 respectively, which included payments for a lease of the Company’s research and development facility. The lease term of the research and development facility ended as of June 30, 2018.

The following table summarizes the Company’s maturities of operating lease liabilities as of September 30, 2019 (in thousands):

Year
2019 (excluding the nine months ended September 30, 2019)	$	144
2020		588
2021		508
2022		450
2023		462
Thereafter		2,405
Total lease payments	$	4,557
Less: present value discount		(1,252	)
Total	$	3,305

For comparative purposes, the Company’s aggregate future minimum non-cancellable commitments under operating leases as of December 31, 2018 were as follows (in thousands):

Year
2019	$	417
2020		588
2021		508
2022		450
Thereafter		2,867
Total minimum lease payments	$	4,830

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Property and Equipment, Net - Additional Information (Detail) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Property Plant And Equipment [Abstract]
Depreciation expense	$ 92	$ 107	$ 263	$ 193

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Investments - Summary of Investments by Category (Detail) - USD ($) $ in Thousands	Sep. 30, 2019	Dec. 31, 2018
Investments - Current:
Debt securities - available for sale	$ 28,778	$ 32,914
Total	$ 28,778	32,914
Investments - Noncurrent:
Debt securities - available for sale		16,804
Total		$ 16,804

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Nature of Business and Summary of Significant Accounting Policies - Summary of Estimated Useful Lives of Property and Equipment (Detail)	9 Months Ended
	Sep. 30, 2019
Equipment [Member] | Minimum [Member]
Property, Plant and Equipment [Line Items]
Estimated useful life	5 years
Equipment [Member] | Maximum [Member]
Property, Plant and Equipment [Line Items]
Estimated useful life	7 years
Furniture and Fixtures [Member]
Property, Plant and Equipment [Line Items]
Estimated useful life	5 years
Leasehold Improvements [Member]
Property, Plant and Equipment [Line Items]
Estimated useful life	Lesser of 10 years or the remaining term of the respective lease

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Stockholders' Equity - Summary of Shares of Common Stock Reserved (Detail) - shares	Sep. 30, 2019	Dec. 31, 2018
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares of common stock reserved	6,544,026	3,951,011
IPO Warrants [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares of common stock reserved	28,347	28,347
November Private Placement Warrants [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares of common stock reserved	1,633,777	1,633,777
Loan and Security agreement [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares of common stock reserved	2,329,143
Pontifax Warrants [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares of common stock reserved	250,000
September 2019 Warrants [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares of common stock reserved	15,000
2015 Amended and Restated Stock Incentive Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares of common stock reserved	2,197,759	2,238,887
Inducement Awards [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares of common stock reserved	90,000	50,000

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Leases - Summary of Other Information Related to Leases (Detail) $ in Thousands	9 Months Ended
	Sep. 30, 2019 USD ($)
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flow from operating leases (in thousands)	$ 273
Right-of-use assets obtained in exchange for lease obligations:
Operating leases (in thousands)	$ 2,980
Weighted Average Remaining Lease Term
Operating leases	8 years 6 months
Weighted Average Discount Rate
Operating leases	8.00%

XML

Warrants

9 Months Ended

Sep. 30, 2019

Warrants And Rights Note Disclosure [Abstract]

Warrants

7. WARRANTS

In connection with the amendment and restatement of a license agreement with BioHEP Technologies Ltd. (“BioHEP”) in February 2016, the Company issued a warrant to purchase 125,000 shares of the Company’s common stock to BioHEP (the “BioHEP Warrant”). The BioHEP Warrant had an exercise price of $16.00 per share and expired unexercised on August 1, 2018. The Company evaluated the terms of the warrant and concluded that it should be equity-classified. The fair value of the warrant, $0.8 million, was estimated on the issuance date using a Black-Scholes pricing model based on the following assumptions: an expected term of two and a half years, expected stock price volatility of 71%, a risk-free interest rate of 1.01%, and a dividend yield of 0%. The fair value was expensed as research and development costs.

In connection with the Company’s IPO, the Company issued to the sole book-running manager for the IPO a warrant to purchase 27,600 shares of common stock in May 2016 and a warrant to purchase 747 shares of common stock in June 2016 (together, the “IPO Warrants”). The IPO Warrants are exercisable at an exercise price of $15.00 per share and expire on May 5, 2021. The Company evaluated the terms of the IPO Warrants and concluded that they should be equity-classified. The fair value of the May 2016 IPO Warrants was estimated on the applicable issuance dates using a Black-Scholes pricing model based on the following assumptions: an expected term of 4.99 years; expected stock price volatility of 87%; a risk-free interest rate of 1.20%; and a dividend yield of 0%. The fair value of the June 2016 IPO Warrants was estimated on the applicable issuance dates using a Black-Scholes pricing model based on the following assumptions: an expected term of 4.92 years; expected stock price volatility of 87%; a risk-free interest rate of 1.23%; and a dividend yield of 0%. The aggregate fair value of the IPO Warrants was approximately $0.2 million.

In November 2016, the Company entered into a definitive agreement with respect to the private placement of 1,644,737 shares of common stock and warrants to purchase 1,644,737 shares of common stock (the “November 2016 Private Placement Warrants”) to a group of accredited investors. These investors paid $9.12 for each share of common stock and warrant to purchase one share of common stock. The November 2016 Private Placement Warrants are exercisable at an exercise price of $10.79 per share and expire on November 23, 2021. The Company evaluated the terms of these warrants and concluded that they are liability-classified. In November 2016, the Company recorded the fair value of these warrants of approximately $8.3 million using a Black-Scholes pricing model. The Company must recognize any change in the value of the warrant liability each reporting period in the statement of operations. As of September 30, 2019 and December 31, 2018, the fair value of the November 2016 Private Placement Warrants was approximately $0.5 million and $8.5 million, respectively (see Note 5).

A summary of the Black-Scholes pricing model assumptions used to record the fair value of the warrants is as follows:

	September 30, 2019			December 31,  2018
Risk-free interest rate		1.6	%		2.5	%
Expected term (in years)		2.1			2.9
Expected volatility		62.3	%		78.1	%
Expected dividend yield		0	%		0	%

In September 2019, the Company entered into a Loan and Security Agreement (the “Loan and Security Agreement”) with Pontifax Medison Finance (Israel) L.P. and Pontifax Medison Finance (Cayman) L.P., as lenders, and Pontifax Medison Finance GP, L.P., in its capacity as administrative agent and collateral agent for itself and the lenders, providing for a $20.0 million term loan (see Note 9). In connection with the Company’s Loan and Security Agreement, the Company issued to certain lenders warrants to purchase 250,000 shares of common stock (the “Pontifax Warrants”). The Pontifax Warrants are exercisable at an exercise price of $6.57 per share and expire on September 19, 2025. The Company evaluated the terms of the Pontifax Warrants and concluded that they are equity-classified. The fair value of the Pontifax Warrants was estimated on the issuance date using a Black-Scholes pricing model based on the following assumptions: an expected term of 6.0 years; expected stock price volatility of 83.2%; a risk-free interest rate of 1.7%; and a dividend yield of 0%. The aggregate fair value of the Pontifax Warrants was approximately $0.6 million and was recorded as a discount to the term loan and will be amortized over the life of the term loan using the effective interest rate method.

In September 2019, the Company issued warrants to a service provider to purchase 15,000 shares of common stock (the “September 2019 Warrants”). The September 2019 Warrants are exercisable at an exercise price of $4.21 per share and expire on September 19, 2021. The Company evaluated the terms of the September 2019 Warrants and concluded that they are equity-classified. The fair value of the September 2019 Warrants was estimated on the applicable issuance date using a Black-Scholes pricing model based on the following assumptions: an expected term of 2.0 years; expected stock price volatility of 69.4%; a risk-free interest rate of 1.7%; and a dividend yield of 0%. The aggregate fair value of the September 2019 Warrants was approximately $19,000 and will be expensed over the life of the service contract.

A summary of the warrant activity for the nine months ended September 30, 2019 and for the year ended December 31, 2018 is as follows:

	Warrants
Outstanding at December 31, 2017		1,787,124
Grants		—
Exercises		—
Expirations/cancellations		(125,000	)
Outstanding at December 31, 2018		1,662,124
Grants		265,000
Exercises		—
Expirations/cancellations		—
Outstanding at September 30, 2019		1,927,124

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Commitments and Contingencies

9 Months Ended

Sep. 30, 2019

Commitments And Contingencies Disclosure [Abstract]

Commitments and Contingencies

11. COMMITMENTS AND CONTINGENCIES

BioHEP Technologies Ltd. License Agreement

In January 2016, the Company entered into an amended and restated license agreement with BioHEP, which became effective on February 1, 2016.

Under the amended and restated license agreement, the Company agreed to pay BioHEP up to $3.5 million in development and regulatory milestone payments for disease(s) caused by each distinct virus for which the Company develops licensed product(s). BioHEP is also eligible to receive tiered royalties in the low-to-mid single-digits on net product sales of licensed products by the Company and its affiliates and sub licensees, and a specified share of non-royalty sublicensing revenues the Company and its affiliates receive from sub licensees, which share of sublicensing revenues is capped at a maximum aggregate of $2.0 million under all such sublicenses. Milestone and royalty payments associated with the Company’s amended and restated license agreement with BioHEP cannot be reasonably estimated as to whether or when they will occur. As of September 30, 2019, there have been no milestone or royalty payments made to BioHEP.

Contingencies

The Company accrues for contingent liabilities to the extent that the liability is probable and estimable. There are no accruals for contingent liabilities in these consolidated financial statements.

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Net Loss Per Share - Summary of Potentially Dilutive Securities Outstanding Excluded from Computation of Diluted Weighted-Average Shares Outstanding (Detail) - shares	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Convertible Debt [Member]
Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items]
Potentially dilutive securities outstanding excluded from the computation of diluted weighted-average shares outstanding	2,329,143		2,329,143
Common Stock Warrants [Member]
Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items]
Potentially dilutive securities outstanding excluded from the computation of diluted weighted-average shares outstanding	1,927,124	1,662,124	1,927,124	28,347
Stock Options, Restricted Stock Units and Inducement Awards [Member]
Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items]
Potentially dilutive securities outstanding excluded from the computation of diluted weighted-average shares outstanding	1,948,115	1,349,565	1,948,115	1,349,565

XML

Nature of Business and Summary of Significant Accounting Policies - Additional Information (Detail)	9 Months Ended
	Sep. 30, 2019 USD ($) Subsidiary Segment	Jan. 01, 2019 USD ($)	Dec. 31, 2018 USD ($)
Nature Of Business And Summary Of Significant Accounting Policies [Line Items]
Number of wholly owned subsidiaries | Subsidiary	3
Accumulated deficit	$ (118,730,000)		$ (102,068,000)
Cash, cash equivalents and marketable securities	63,100,000
Restricted cash	234,000		234,000
Impairment of long-lived assets	0
Income tax benefit	0
Uncertain tax positions	0		0
Indemnification obligations loss	0
Outstanding material claims	0
Indemnification obligation reserve	$ 0
Number of operating segment | Segment	1
Right-of-use-assets	$ 2,784,000
Lease liabilities	3,305,000
ASU 2016-02 [Member]
Nature Of Business And Summary Of Significant Accounting Policies [Line Items]
Right-of-use-assets		$ 3,000,000
Lease liabilities		$ 3,400,000
Money Market Funds [Member]
Nature Of Business And Summary Of Significant Accounting Policies [Line Items]
Cash and cash equivalents fair value	$ 32,500,000		$ 13,300,000

XML

Property and Equipment, Net - Schedule of Property and Equipment (Detail) - USD ($) $ in Thousands	Sep. 30, 2019	Dec. 31, 2018
Property, Plant and Equipment [Line Items]
Total property and equipment	$ 3,019	$ 2,811
Less: accumulated depreciation and amortization	(755)	(492)
Property and equipment, net	2,264	2,319
Equipment [Member]
Property, Plant and Equipment [Line Items]
Total property and equipment	1,278	1,064
Furniture and Fixtures [Member]
Property, Plant and Equipment [Line Items]
Total property and equipment	385	400
Leasehold Improvements [Member]
Property, Plant and Equipment [Line Items]
Total property and equipment	$ 1,356	$ 1,347

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Investments

9 Months Ended

Sep. 30, 2019

Investments Debt And Equity Securities [Abstract]

Investments

3. INVESTMENTS

Cash in excess of the Company’s immediate requirements is invested in accordance with the Company’s investment policy that primarily seeks to maintain adequate liquidity and preserve capital.

The following table summarizes the Company’s investments, by category, as of September 30, 2019 and December 31, 2018 (in thousands):

	September 30,		December 31,
Investments - Current:	2019		2018
Debt securities - available for sale	$	28,778	$	32,914
Total	$	28,778	$	32,914
Investments - Noncurrent:
Debt securities - available for sale	$	—	$	16,804
Total	$	—	$	16,804

A summary of the Company’s available-for-sale classified investments as of September 30, 2019 and December 31, 2018 consisted of the following (in thousands):

	At September 30, 2019
	Cost Basis		Accumulated Unrealized Gains		Accumulated Unrealized Losses			Fair Value
Investments - Current:
Corporate bonds	$	11,055	$	—	$	(74	)	$	10,981
United States treasury securities		17,961		—		(164	)	$	17,797
Total	$	29,016	$	—	$	(238	)	$	28,778
	At December 31, 2018
	Cost Basis		Accumulated Unrealized Gains		Accumulated Unrealized Losses			Fair Value
Investments - Current:
Corporate bonds	$	16,028	$	—	$	(19	)	$	16,009
United States treasury securities		16,913		—		(8	)		16,905
Total	$	32,941	$	—	$	(27	)	$	32,914
Investments - Noncurrent:
Corporate bonds	$	4,930	$	2	$	—		$	4,932
United States treasury securities		11,852		20		—			11,872
Total	$	16,782	$	22	$	—		$	16,804

The amortized cost and fair value of the Company’s available-for-sale investments, by contract maturity, as of September 30, 2019 consisted of the following (in thousands):

	Amortized Cost		Fair Value
Due in one year or less	$	29,016	$	28,778
Due after one year through two years		—		—
Total	$	29,016	$	28,778

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Leases (Tables)

9 Months Ended

Sep. 30, 2019

Leases [Abstract]

Summary of Other Information Related to Leases

Other information related to leases was as follows:

	For the Nine Months Ended September 30,
Cash paid for amounts included in the measurement of lease liabilities:	2019
Operating cash flow from operating leases (in thousands)	$	273
Right-of-use assets obtained in exchange for lease obligations:
Operating leases (in thousands)	$	2,980
Weighted Average Remaining Lease Term
Operating leases	8.5 years
Weighted Average Discount Rate
Operating leases		8.0	%

Summary of Maturities of Operating Lease Liabilities

The following table summarizes the Company’s maturities of operating lease liabilities as of September 30, 2019 (in thousands):

Year
2019 (excluding the nine months ended September 30, 2019)	$	144
2020		588
2021		508
2022		450
2023		462
Thereafter		2,405
Total lease payments	$	4,557
Less: present value discount		(1,252	)
Total	$	3,305

Summary of Aggregate Future Minimum Non-Cancellable Commitments Under Operating Leases

For comparative purposes, the Company’s aggregate future minimum non-cancellable commitments under operating leases as of December 31, 2018 were as follows (in thousands):

Year
2019	$	417
2020		588
2021		508
2022		450
Thereafter		2,867
Total minimum lease payments	$	4,830

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Net Loss Per Share (Tables)

9 Months Ended

Sep. 30, 2019

Earnings Per Share [Abstract]

Summary of Computation of Basic and Diluted Net Loss Per Share

The following table summarizes the computation of basic and diluted net loss per share of the Company for such periods (in thousands, except share and per share data):

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2019			2018			2019			2018
Net loss	$	(6,912	)	$	(8,780	)	$	(16,662	)	$	(17,429	)
Less: decrease in change in fair value of warrant liabilities											(3,837	)
Net loss available to common shareholders										$	(21,266	)
Weighted-average number of shares outstanding:
Basic		16,459,155			14,841,197			16,446,582			13,677,375
Effect of dilutive securities:
Common stock warrants											1,633,777
Dilutive potential common shares											15,311,152
Net loss per common share:
Basic	$	(0.42	)	$	(0.59	)	$	(1.01	)	$	(1.27	)
Diluted	$	(0.42	)	$	(0.59	)	$	(1.01	)	$	(1.39	)

Summary of Potentially Dilutive Securities Outstanding Excluded from Computation of Diluted Weighted-Average Shares Outstanding

The following potentially dilutive securities outstanding, prior to the use of the treasury stock method or if-converted method, have been excluded from the computation of diluted weighted-average shares outstanding, because such securities had an antidilutive impact due to the losses reported:

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2019		2018		2019		2018
Convertible debt		2,329,143		—		2,329,143		—
Common stock warrants		1,927,124		1,662,124		1,927,124		28,347
Stock options, RSUs and inducement awards		1,948,115		1,349,565		1,948,115		1,349,565

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Consolidated Statements of Stockholders' Equity - USD ($) $ in Thousands	Total	At-The-Market Offering [Member]	Common Stock [Member]	Common Stock [Member] At-The-Market Offering [Member]	Additional Paid-in Capital [Member]	Additional Paid-in Capital [Member] At-The-Market Offering [Member]	Accumulated Deficit [Member]	Other Comprehensive Income (Loss) [Member]
Balance at Dec. 31, 2017	$ 34,748		$ 1		$ 113,984		$ (79,214)	$ (23)
Balance, shares at Dec. 31, 2017			12,961,993
Stock-based compensation	1,978				1,978
Issuance of common stock for services rendered	76				76
Issuance of common stock for services rendered, shares			5,770
Issuance of common stock in connection with offering, net of issuance costs	37,960	$ 3,212	$ 1		37,959	$ 3,212
Issuance of common stock in connection with offering, net of issuance costs, shares			3,246,079	217,329
Net unrealized gain (loss) on marketable securities	(13)							(13)
Net loss	(17,429)						(17,429)
Balance at Sep. 30, 2018	60,532		$ 2		157,209		(96,643)	(36)
Balance, shares at Sep. 30, 2018			16,431,171
Balance at Dec. 31, 2017	34,748		$ 1		113,984		(79,214)	(23)
Balance, shares at Dec. 31, 2017			12,961,993
Balance at Dec. 31, 2018	55,860		$ 2		157,931		(102,068)	(5)
Balance, shares at Dec. 31, 2018			16,434,614
Balance at Jun. 30, 2018	30,657		$ 1		118,541		(87,863)	(22)
Balance, shares at Jun. 30, 2018			13,182,567
Stock-based compensation	680				680
Issuance of common stock for services rendered	30				30
Issuance of common stock for services rendered, shares			2,525
Issuance of common stock in connection with offering, net of issuance costs	37,960		$ 1		37,959
Issuance of common stock in connection with offering, net of issuance costs, shares			3,246,079
Issuance costs in connection with at-the-market offering		(1)				(1)
Net unrealized gain (loss) on marketable securities	(14)							(14)
Net loss	(8,780)						(8,780)
Balance at Sep. 30, 2018	60,532		$ 2		157,209		(96,643)	(36)
Balance, shares at Sep. 30, 2018			16,431,171
Balance at Dec. 31, 2018	55,860		$ 2		157,931		(102,068)	(5)
Balance, shares at Dec. 31, 2018			16,434,614
Stock-based compensation	2,647				2,647
Issuance of common stock for services rendered	202				202
Issuance of common stock for services rendered, shares			41,128
Issuance of common stock in connection with offering, net of issuance costs		$ 6				$ 6
Issuance of common stock in connection with offering, net of issuance costs, shares				600
Issuance of warrants in connection with term loan	552				552
Issuance of warrants to a service provider	19				19
Offering costs in connection with common stock offering	25				25
Net unrealized gain (loss) on marketable securities	(233)							(233)
Net loss	(16,662)						(16,662)
Balance at Sep. 30, 2019	42,416		$ 2		161,382		(118,730)	(238)
Balance, shares at Sep. 30, 2019			16,476,342
Balance at Jun. 30, 2019	47,941		$ 2		159,975		(111,818)	(218)
Balance, shares at Jun. 30, 2019			16,459,155
Stock-based compensation	752				752
Issuance of common stock for services rendered	59				59
Issuance of common stock for services rendered, shares			17,187
Issuance of warrants in connection with term loan	552				552
Issuance of warrants to a service provider	19				19
Offering costs in connection with common stock offering	25				25
Net unrealized gain (loss) on marketable securities	(20)							(20)
Net loss	(6,912)						(6,912)
Balance at Sep. 30, 2019	$ 42,416		$ 2		$ 161,382		$ (118,730)	$ (238)
Balance, shares at Sep. 30, 2019			16,476,342

XML

Accrued Expenses and Other Current Liabilities (Tables)

9 Months Ended

Sep. 30, 2019

Payables And Accruals [Abstract]

Schedule of Accrued Expenses

Accrued expenses as of September 30, 2019 and December 31, 2018 consisted of the following (in thousands):

	September 30,		December 31,
	2019		2018
Clinical	$	1,032	$	941
Compensation and benefits		526		830
Accounting and legal		238		227
Other		202		369
Total accrued expenses and other current liabilities	$	1,998	$	2,367

XML

Document and Entity Information - shares	9 Months Ended
	Sep. 30, 2019	Nov. 06, 2019
Cover [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Sep. 30, 2019
Document Fiscal Year Focus	2019
Document Fiscal Period Focus	Q3
Trading Symbol	SBPH
Title of 12(b) Security	Common Stock, $0.0001 par value per share
Security Exchange Name	NASDAQ
Entity Registrant Name	Spring Bank Pharmaceuticals, Inc.
Entity Central Index Key	0001566373
Current Fiscal Year End Date	--12-31
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		16,476,342
Entity Small Business	true
Entity Emerging Growth Company	true
Entity Ex Transition Period	true
Entity Current Reporting Status	Yes
Entity Shell Company	false
Entity File Number	001-37718
Entity Address, Address Line One	35 Parkwood Drive
Entity Address, Address Line Two	Suite 210
Entity Address, City or Town	Hopkinton
Entity Address, State or Province	MA
City Area Code	508
Entity Address, Postal Zip Code	01748
Local Phone Number	473-5993
Entity Tax Identification Number	52-2386345
Entity Incorporation, State or Country Code	DE
Entity Interactive Data Current	Yes
Document Quarterly Report	true
Document Transition Report	false

XML

Warrants - Summary of Assumptions Used to Record Fair Value of Warrants (Detail) - Warrants [Member]	Sep. 30, 2019	Dec. 31, 2018
Risk-Free Interest Rate [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Fair value input	1.60%	2.50%
Expected Term [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Fair value input (in years)	2 years 1 month 6 days	2 years 10 months 24 days
Expected Volatility [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Fair value input	62.30%	78.10%
Expected Dividend Yield [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Fair value input	0.00%	0.00%

XML

Fair Value Measurements - Summary of Assets and Liabilities Measured at Fair Value (Detail) - USD ($) $ in Thousands	Sep. 30, 2019	Dec. 31, 2018
Money Market Funds [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash and cash equivalents	$ 32,500	$ 13,300
Carrying Value [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Total	61,304	62,982
Liabilities, Total	450	8,511
Carrying Value [Member] | Money Market Funds [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash and cash equivalents	32,526	13,264
Carrying Value [Member] | Fixed Income Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fixed income securities	28,778	49,718
Carrying Value [Member] | Warrant Liabilities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Warrant liabilities	450	8,511
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Total	32,526	13,264
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Money Market Funds [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash and cash equivalents	32,526	13,264
Significant Other Observable Inputs (Level 2) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Total	28,778	49,718
Significant Other Observable Inputs (Level 2) [Member] | Fixed Income Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fixed income securities	28,778	49,718
Significant Unobservable Inputs (Level 3) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Liabilities, Total	450	8,511
Significant Unobservable Inputs (Level 3) [Member] | Warrant Liabilities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Warrant liabilities	$ 450	$ 8,511

XML

Stockholders' Equity - Summary of Assumptions to Determine Fair Value of Stock Options Granted to Employees and Directors (Detail)	9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]
Risk-free interest rate	2.50%	2.50%
Expected term (in years)	5 years 10 months 24 days	6 years 1 month 6 days
Expected volatility	81.10%	82.50%
Expected dividend yield	0.00%	0.00%