COMMITMENTS AND CONTINGENCIES

6 Months Ended

Jun. 30, 2020

Commitments and Contingencies Disclosure [Abstract]

COMMITMENTS AND CONTINGENCIES

COMMITMENTS AND CONTINGENCIES

Subcontract Agreement with Yale University

The Company is party to a subcontract agreement that began in October 2014 and a subaward agreement that began in March 2015 (the “Yale Agreements”) with Yale University (“Yale”), which were subsequently amended. Under the Yale Agreements, the Company is providing specified services regarding the development of a proprietary compound that targets miR-29 in the indication of idiopathic pulmonary fibrosis. Yale entered into the Yale Agreements in connection with a grant that Yale received from the National Institutes of Health (“NIH”) for the development of a miR-29 mimic as a potential therapy for pulmonary fibrosis.

In consideration of the Company’s services under the Yale Agreements, Yale has agreed to reimburse the Company up to a specified amount over five years, subject to the availability of funds under the grant and continued eligibility. Under the terms of the Yale Agreements, the Company retains all rights to any and all intellectual property developed solely by the Company in connection with the Yale Agreements. Yale has also agreed to provide the Company with an exclusive option to negotiate in good faith for an exclusive, royalty-bearing license from Yale for any intellectual property developed by Yale or jointly by the parties under the Yale Agreements. Yale is responsible for filing, prosecuting, and maintaining foreign and domestic patent applications and patents on all inventions jointly developed by the parties under the Yale Agreements. Through June 30, 2020, the Company has received $1.0 million under the Yale Agreements.

The Yale Agreements terminate automatically on the date that Yale delivers its final research report to the NIH under the terms of the grant underlying the Yale Agreements. Each party may also terminate the Yale Agreements upon a specified number of days’ notice in the event that the NIH’s grant funding is reduced or terminated or upon material breach by the other party.

Lease Obligation Payable

The Company is party to a multi-year, noncancelable lease agreement that began in December 2010 for its current office and lab space. The lease agreement includes rent escalation clauses through the lease term and a Company option to extend the lease term for up to two terms of three years each. Minimum base lease payments under the lease agreement, including the impact of tenant improvement allowances, are recognized on a straight-line basis over the full term of the lease. The lease term was amended in April 2020, which extended the lease term. As of June 30, 2020, the lease was scheduled to mature on December 31, 2021.

Upon adoption, the Company recognized a right-of-use asset and corresponding lease liability for the lease agreement of $0.4 million as of January 1, 2020, by calculating the present value of lease payments, discounted at 6%, the Company’s estimated incremental borrowing rate, over the 12 months expected remaining term. As a result of the transition to ASC 842, the Company recorded an immaterial prior-period adjustment, as a cumulative-effect adjustment, at January 1, 2020. In April 2020,

when the lease was amended, the Company accounted for the amendment as a lease modification in accordance with ASC 842, which resulted in an immaterial adjustment to the right-of-use asset and corresponding lease liability.

The interest rate implicit in the lease contract is not readily determinable and as such, the Company’s uses an incremental borrowing rate, based on prior borrowing rates, at the implementation date. This is an internally developed rate that would be incurred to borrow, with similar collateral, over the term of the lease.

Amortization of the operating lease right-of-use asset, and corresponding reduction of operating lease obligation, amounted to $0.1 million and $0.2 million for the three and six months ended June 30, 2020, respectively, and was included in operating expense in the condensed consolidated statement of operations and comprehensive loss. During the three and six months ended June 30, 2019, lease rental expense, and the corresponding cash outflow, was approximately $0.1 million and $0.2 million, respectively.

As of June 30, 2020, the remaining lease term was 1.5 years. Future minimum payments as of June 30, 2020 were approximately $0.6 million through December 31, 2021. As of June 30, 2020, the Company’s operating lease obligations were reflected as operating lease liabilities of $0.4 million as accrued liabilities and $0.2 million as other liabilities in the Company’s condensed consolidated balance sheets.

The Company is also required to pay for operating expenses related to the leased space, which were $0.1 million and $0.2 million for the three and six months ended June 30, 2020 and 2019, respectively. The operating expenses are incurred separately and were not included in the present value of lease payments.