10-Q 1 inzy-10q_20210331.htm 10-Q inzy-10q_20210331.htm

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2021

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____________________ to _____________________

Commission File Number: 001-39397

 

INOZYME PHARMA, INC.

(Exact name of registrant as specified in its charter)

 

 

Delaware

38-4024528

(State or other jurisdiction of

incorporation or organization)

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

321 Summer Street, Suite 400

Boston, Massachusetts

02210

(Address of principal executive offices)

(Zip Code)

 

Registrant’s telephone number, including area code: (857) 330-4340

 

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

 

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange on which registered

Common stock, par value $0.0001 per share

 

INZY

 

Nasdaq Global Select Market

 

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 May 7, 2021, the registrant had 23,483,093 shares of common stock, $0.0001 par value per share, outstanding.

 

 

 


 

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements, which reflect our current views with respect to, among other things, our operations and financial performance. All statements, other than statements of historical fact, contained in this Quarterly Report on Form 10-Q, including statements regarding our strategy, future operations, future financial position, future revenue, projected costs, prospects, plans, objectives of management and expected market growth, are forward-looking statements. The words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “outlook,” “plan,” “potential,” “predict,” “project,” “should,” “target,” “will,” “would,” and the negative version of these words and other similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. Such forward-looking statements are subject to various risks and uncertainties. Accordingly, there are or will be important factors that could cause actual outcomes or results to differ materially from those indicated in these statements. We believe these factors include but are not limited to those described in the “Risk Factors” section in our most recent Annual Report on Form 10-K and include, among other things:

 

the timing and conduct of our planned Phase 1/2 clinical trials of INZ-701 for ENPP1 and ABCC6 Deficiencies, including statements regarding the timing of initiation, enrollment and completion of the clinical trials and the period during which the results of the clinical trials will become available;

 

the timing of our additional planned clinical trial applications for INZ-701 for ENPP1 Deficiency;

 

our plan to file an investigational new drug application amendment for INZ-701 for ABCC6 Deficiency;

 

the timing and conduct of our planned later stage clinical trials of INZ-701 for patients with ENPP1 and ABCC6 Deficiencies;

 

our plans to conduct research and preclinical testing of INZ-701 for additional indications;

 

our plans to conduct research and preclinical testing of other product candidates;

 

the timing of, and our ability to obtain and maintain, marketing approvals of INZ-701, and the ability of INZ-701 and our other product candidates to meet existing or future regulatory standards;

 

our expectations regarding our ability to fund our operating expenses and capital expenditure requirements with our cash, cash equivalents and short-term and long-term investments;

 

the potential advantages of our product candidates;

 

the rate and degree of market acceptance and clinical utility of our product candidates;

 

our estimates regarding the potential market opportunity for our product candidates;

 

our commercialization and manufacturing capabilities and strategy;

 

our intellectual property position;

 

the impact of COVID-19 on our business and operations;

 

our ability to identify additional products, product candidates or technologies with significant commercial potential that are consistent with our commercial objectives;

 

our estimates regarding expenses, future revenue, capital requirements and needs for additional financing;

 

the impact of government laws and regulations;

 

our competitive position; and

 

our expectations regarding the time during which we will be an emerging growth company under the Jumpstart our Business Startups Act of 2012.

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. We have included important factors in the cautionary statements included in our most recent Annual Report on Form 10-K, particularly in the “Risk Factors” section, that we believe could cause actual results or events to differ materially from the forward-looking statements that we make. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, collaborations, joint ventures or investments we may make or enter into.

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. The forward-looking statements contained in this Quarterly Report on Form 10-Q are made as of the date of this Quarterly Report on Form 10-Q, and we do not assume any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law.

i


Table of Contents

 

 

 

 

ii


 

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

INOZYME PHARMA, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(amounts in thousands, except share and per share data)

(Unaudited)

 

 

 

March 31,

2021

 

 

December 31,

2020

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

16,486

 

 

$

28,040

 

Short-term investments

 

 

128,600

 

 

 

119,657

 

Prepaid expenses and other current assets

 

 

2,955

 

 

 

3,282

 

Total current assets

 

 

148,041

 

 

 

150,979

 

Property and equipment, net

 

 

2,688

 

 

 

2,648

 

Right-of-use assets

 

 

2,341

 

 

 

 

Restricted cash

 

 

354

 

 

 

354

 

Long-term investments

 

 

2,548

 

 

 

12,199

 

Prepaid expenses, net of current portion

 

 

2,943

 

 

 

3,183

 

Total assets

 

$

158,915

 

 

$

169,363

 

Liabilities and stockholders’ equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

1,709

 

 

$

3,069

 

Accrued expenses

 

 

4,451

 

 

 

6,904

 

Operating lease liabilities

 

 

672

 

 

 

 

Total current liabilities

 

 

6,832

 

 

 

9,973

 

Operating lease liabilities, net of current portion

 

 

3,194

 

 

 

1,287

 

Total liabilities

 

 

10,026

 

 

 

11,260

 

Stockholders’ equity:

 

 

 

 

 

 

 

 

Preferred Stock, $0.0001 par value – 5,000,000 shares authorized at March 31, 2021 and December 31, 2020; No shares issued and outstanding at March 31, 2021 or December 31, 2020

 

 

 

 

 

 

Common Stock, $0.0001 par value – 200,000,000 shares authorized at March 31, 2021 and December 31, 2020; 23,473,703 shares issued and outstanding at March 31, 2021 and 23,384,969 shares issued and outstanding at December 31, 2020

 

 

2

 

 

 

2

 

Additional paid in-capital

 

 

251,001

 

 

 

249,175

 

Accumulated other comprehensive income

 

 

12

 

 

 

2

 

Accumulated deficit

 

 

(102,126

)

 

 

(91,076

)

Total stockholders’ equity

 

 

148,889

 

 

 

158,103

 

Total liabilities and stockholders’ equity

 

$

158,915

 

 

$

169,363

 

 

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

1


INOZYME PHARMA, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(amounts in thousands, except share and per share data)

(Unaudited)

 

 

 

Three Months Ended March 31,

 

 

 

2021

 

 

2020

 

Operating expenses:

 

 

 

 

 

 

 

 

Research and development

 

$

6,603

 

 

$

6,406

 

General and administrative

 

 

4,369

 

 

 

1,500

 

Total operating expenses

 

 

10,972

 

 

 

7,906

 

Loss from operations

 

 

(10,972

)

 

 

(7,906

)

Other income (expense):

 

 

 

 

 

 

 

 

Interest income

 

 

63

 

 

 

171

 

Other expenses

 

 

(141

)

 

 

(3

)

Other income (expense), net

 

 

(78

)

 

 

168

 

Net loss

 

$

(11,050

)

 

$

(7,738

)

Other comprehensive income:

 

 

 

 

 

 

 

 

Unrealized gains on available-for-sale securities

 

 

10

 

 

 

23

 

Total other comprehensive income

 

 

10

 

 

 

23

 

Comprehensive loss

 

$

(11,040

)

 

$

(7,715

)

Net loss attributable to common stockholders—basic

   and diluted

 

$

(11,050

)

 

$

(7,738

)

Net loss per share attributable to common

   stockholders—basic and diluted

 

$

(0.47

)

 

$

(6.42

)

Weighted-average common shares outstanding—basic

   and diluted

 

 

23,429,507

 

 

 

1,205,346

 

 

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

 

 

2


 

INOZYME PHARMA, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT)

(amounts in thousands, except share data)

(Unaudited)

 

 

Series A Convertible Preferred Stock

 

 

Series A-2 Convertible Preferred Stock

 

 

 

Common Stock

 

 

Additional

Paid-in

 

 

Accumulated

Other

Comprehensive

 

 

Accumulated

 

 

Total

Stockholders’

Equity

 

 

Shares

 

Amount

 

 

Shares

 

Amount

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Income

 

 

Deficit

 

 

(Deficit)

 

Balance at December 31, 2020

 

 

$

 

 

 

 

$

 

 

 

 

23,384,969

 

 

$

2

 

 

$

249,175

 

 

$

2

 

 

$

(91,076

)

 

$

158,103

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,577

 

 

 

 

 

 

 

 

 

1,577

 

Exercise of stock options

 

 

 

 

 

 

 

 

 

 

 

 

88,734

 

 

 

 

 

 

249

 

 

 

 

 

 

 

 

 

249

 

Comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized gain on investments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

10

 

 

 

 

 

 

10

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(11,050

)

 

 

(11,050

)

Balance at March 31, 2021

 

 

$

 

 

 

 

$

 

 

 

 

23,473,703

 

 

$

2

 

 

$

251,001

 

 

$

12

 

 

$

(102,126

)

 

$

148,889

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at December 31, 2019

 

48,850,000

 

$

44,657

 

 

 

23,566,431

 

$

33,270

 

 

 

 

1,204,630

 

 

$

 

 

$

1,428

 

 

$

5

 

 

$

(34,652

)

 

$

(33,219

)

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

129

 

 

 

 

 

 

 

 

 

129

 

Exercise of stock options

 

 

 

 

 

 

 

 

 

 

 

 

2,677

 

 

 

 

 

 

5

 

 

 

 

 

 

 

 

 

5

 

Comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized gain on investments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

23

 

 

 

 

 

 

23

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(7,738

)

 

 

(7,738

)

Balance at March 31, 2020

 

48,850,000

 

$

44,657

 

 

 

23,566,431

 

$

33,270

 

 

 

 

1,207,307

 

 

$

 

 

$

1,562

 

 

$

28

 

 

$

(42,390

)

 

$

(40,800

)

 

 

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

 

3


 

INOZYME PHARMA, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(amounts in thousands)

(Unaudited)

 

 

 

Three Months Ended

March 31,

 

 

 

2021

 

 

2020

 

Operating activities

 

 

 

 

 

 

 

 

Net loss

 

$

(11,050

)

 

$

(7,738

)

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

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

158

 

 

 

25

 

Stock-based compensation expense

 

 

1,577

 

 

 

129

 

Amortization of premiums and discounts on marketable securities

 

 

68

 

 

 

(46

)

Reduction in the carrying value of right-of-use assets

 

 

90

 

 

 

 

Unrealized gains on available for sale securities

 

 

(10

)

 

 

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Prepaid expenses and other current assets

 

 

327

 

 

 

(95

)

Accounts payable

 

 

(1,373

)

 

 

668

 

Accrued expenses

 

 

(2,272

)

 

 

814

 

Operating lease liabilities

 

 

(131

)

 

 

 

Prepaid expenses - noncurrent

 

 

240

 

 

 

 

Other assets

 

 

 

 

 

(22

)

Net cash used in operating activities

 

 

(12,376

)

 

 

(6,265

)

Investing activities

 

 

 

 

 

 

 

 

Purchases of marketable securities

 

 

(38,549

)

 

 

(13,408

)

Maturities of marketable securities

 

 

39,210

 

 

 

10,101

 

Purchases of property and equipment

 

 

(88

)

 

 

(101

)

Net cash provided by (used in) investing activities

 

 

573

 

 

 

(3,408

)

Financing activities

 

 

 

 

 

 

 

 

Proceeds from exercise of stock options

 

 

249

 

 

 

5

 

Net cash provided by financing activities

 

 

249

 

 

 

5

 

Net decrease in cash, cash equivalents and restricted cash

 

 

(11,554

)

 

 

(9,668

)

Cash, cash equivalents and restricted cash at beginning of period

 

 

28,394

 

 

 

31,735

 

Cash, cash equivalents and restricted cash at end of period

 

$

16,840

 

 

$

22,067

 

Supplemental cash flow information:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

16,486

 

 

$

21,937

 

Restricted cash

 

 

354

 

 

 

130

 

Cash, cash equivalents and restricted cash at end of period

 

$

16,840

 

 

$

22,067

 

Property and equipment unpaid at end of period

 

$

110

 

 

$

 

Right-of-use asset at adoption of ASC 842

 

$

2,431

 

 

$

 

Operating lease liabilities at adoption of ASC 842

 

$

3,997

 

 

$

 

Deferred offering costs unpaid at end of period

 

$

 

 

$

191

 

 

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

4


Inozyme Pharma, Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Organization and Basis of Presentation

Inozyme Pharma, Inc. (the “Company”) is a clinical-stage rare disease biopharmaceutical company developing novel therapeutics for the treatment of diseases of abnormal mineralization impacting the vasculature, soft tissue and skeleton.

The Company is pursuing the development of therapeutics to address the underlying causes of these debilitating diseases. It is well established that two genes, ENPP1 and ABCC6, play key roles in a critical mineralization pathway and that defects in these genes lead to abnormal mineralization. The Company is initially focused on developing a novel therapy to treat rare genetic diseases of ENPP1 and ABCC6 Deficiencies.

The Company’s lead product candidate, INZ-701, is a soluble, recombinant, or genetically engineered, fusion protein that is designed to correct a defect in the mineralization pathway caused by ENPP1 and ABCC6 Deficiencies. This pathway is central to the regulation of calcium deposition throughout the body and is further associated with neointimal proliferation, or the overgrowth of smooth muscle cells inside blood vessels.

        

Basis of Presentation

The Company’s consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”). Any reference in these notes to applicable guidance is meant to refer to authoritative U.S. GAAP as found in the Accounting Standards Codification (“ASC”) and Accounting Standards Update (“ASU”) of the Financial Accounting Standards Board (“FASB”). All adjustments considered necessary for a fair presentation have been included.

The accompanying consolidated financial statements and footnotes to the financial statements have been prepared on the same basis as the most recently audited annual financial statements, except for disclosures related to the Company’s adoption of ASU 2016-02, Leases (“Topic 842”) as of January 1, 2021 as disclosed in Note 3 “Recent Accounting Pronouncements”. In the opinion of management, the accompanying consolidated financial statements and footnotes to the financial statements reflect all normal recurring adjustments necessary for the fair presentation of the Company’s financial position as of March 31, 2021 and the results of its operations and its cash flows for the three months ended March 31, 2021 and 2020. The results for the three months ended March 31, 2021 are not necessarily indicative of results to be expected for the year ending December 31, 2021, any other interim periods, or any future year or period. These consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and the notes thereto for the year ended December 31, 2020 included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”) on March 25, 2021 (the “Annual Report on Form 10-K”).

Liquidity

Since the Company’s incorporation in 2017 and through March 31, 2021, the Company has devoted substantially all of its efforts to raising capital, building infrastructure, developing intellectual property and conducting research and development. The Company incurred net losses of $11.1 million in the three months ended March 31, 2021 and $56.4 million in the year ended December 31, 2020 and had an accumulated deficit of $102.1 million as of March 31, 2021. The Company had cash, cash equivalents, and short-term and long-term investments of $147.6 million as of March 31, 2021.  

The accompanying condensed consolidated financial statements have been prepared on the basis of continuity of operations, realization of assets, and the satisfaction of liabilities and commitments in the ordinary course of business. The Company has incurred recurring losses and negative cash flows from operations since inception and has primarily funded its operations with proceeds from the issuance of convertible preferred stock, and the Company’s initial public offering (“IPO”) completed on July 28, 2020. The Company expects its operating losses and negative operating cash flows to continue into the foreseeable future as it continues to expand its research and development efforts.

The Company believes that its cash, cash equivalents, and short-term and long-term investments as of March 31, 2021 will be sufficient to fund its operating expenses and capital expenditure requirements for at least twelve months from the date of filing this Quarterly Report on Form 10-Q. The Company will need additional funding to support its planned operating activities. If the Company is unable to obtain additional funding, it would be forced to delay, reduce or eliminate some or all of its research and development programs, product portfolio expansion, or commercialization efforts, which could adversely affect its business prospects.

5


2. Summary of Significant Accounting Policies

 

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany transactions and balances have been eliminated.

Summary of Significant Accounting Policies

The significant accounting policies and estimates used in the preparation of the accompanying consolidated financial statements are described in the Company’s audited consolidated financial statements for the year ended December 31, 2020 included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 25, 2021. Apart from the Company’s adoption of Topic 842, there have been no material changes in the Company’s significant accounting policies during the three months ended March 31, 2021.

Use of Estimates

The preparation of the Company’s financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Estimates and judgments are based on historical information and other market-specific or various relevant assumptions, including, in certain circumstances, future projections that management believes to be reasonable under the circumstances. Actual results could differ materially from estimates. Significant estimates and assumptions are used for, but not limited to, the accruals for research and development expenses and, for equity instruments issued prior to the completion of the Company’s IPO, stock-based compensation expense, inclusive of the measurement of fair value of equity instruments. For equity instruments issued prior to the completion of the Company’s IPO, the Company utilized various valuation methodologies in accordance with the framework of the 2013 American Institute of Certified Public Accountants Technical Practice Aid, Valuation of Privately-Held Company Equity Securities Issued as Compensation, to estimate the fair value of its equity instruments. The Company evaluates its estimates and assumptions on an ongoing basis. All revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected.

 

Accrued Research and Development Costs

The Company records accrued liabilities for estimated costs of research and development activities conducted by service providers for sponsored research, preclinical studies, clinical trials, and contract manufacturing activities. The Company records the estimated costs of research and development activities based upon the estimated amount of services provided but not yet invoiced and includes these costs in accrued expenses in the accompanying consolidated balance sheets and within research and development expense in the accompanying consolidated statements of operations and comprehensive loss.

The Company accrues for these costs based on factors such as estimates of the work completed and in accordance with agreements established with service providers. The Company makes significant judgments and estimates in determining the accrued liabilities balance in each reporting period. As actual costs become known, the Company adjusts its accrued liabilities. The Company has not experienced any material differences between accrued costs and actual costs incurred since its inception.

Research and Development Costs

Research and development costs are expensed as incurred. Research and development costs consist of direct and indirect internal costs related to specific projects as well as fees paid to other entities that conduct certain research and development activities on the Company’s behalf. Research and development costs also include the write-off of acquired in-process research and development assets with no alternative future use.

  

Net Loss Per Share

 

The Company follows the two-class method when computing net loss allocable to common securities per share as the Company had previously issued shares that meet the definition of participating securities, which include shares of: (i) Series A Convertible Preferred Stock; and (ii) Series A-2 Convertible Preferred Stock. The two-class method requires a portion of net income to be allocated to the participating securities to determine net income allocable to the common securities. During periods of loss, there is no allocation required under the two-class method since the participating securities do not have a contractual obligation to fund the losses of the Company.

 

6


 

Basic net loss per share attributable to common stockholders is computed by dividing the net loss attributable to common stockholders by the weighted-average number of shares of common stock outstanding during the period, without consideration for potentially dilutive securities. Diluted net loss per share is computed by dividing the net loss attributable to common stockholders by the weighted-average number of shares of common stock and potentially dilutive securities outstanding during the period determined using the treasury-stock and if-converted methods. For purposes of the diluted net loss per share calculation, diluted net loss per share attributable to common stockholders is calculated by dividing net loss attributable to common stockholders by the weighted average number of common shares outstanding after giving consideration to the dilutive effect of convertible preferred stock, restricted common stock, and stock options that are outstanding during the period. The Company has generated a net loss in all periods presented, therefore the basic and diluted net loss per share attributable to common stockholders are the same as the inclusion of the potentially dilutive securities would be anti-dilutive.

 

Fair Value Measurements

 

The Company categorizes its assets and liabilities measured at fair value in accordance with the authoritative accounting guidance that establishes a consistent framework for measuring fair value and expands disclosures for each major asset and liability category measured at fair value on either a recurring or nonrecurring basis. Fair value is defined as the exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, the guidance establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:

 

 

Level 1- Unadjusted quoted prices in active markets that are accessible at the measurement date for identical assets or liabilities;

 

Level 2- Quoted prices for similar assets and liabilities in active markets, quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability; or

 

Level 3- Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported by little or no market activity).

Concentration of Credit Risk and Off-Balance Sheet Risk

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash, cash equivalents and short-term and long-term investments. The Company maintains deposits in federally insured financial institutions in excess of federally insured limits and limits its exposure to credit risk by placing its cash with high credit quality financial institutions. The Company’s investments are comprised of U.S. Treasury and U.S. government agency debt securities and commercial paper of corporations. The Company mitigates credit risk by maintaining a diversified portfolio and limiting the amount of investment exposure as to institution, maturity and investment type.

The Company has no significant off-balance sheet risk such as foreign exchange contracts, option contracts, or other foreign hedging arrangements.

 

3. Recent Accounting Pronouncements

From time to time, new accounting pronouncements are issued by the FASB or other standard setting bodies that are adopted by the Company as of the specified effective date. Unless otherwise discussed, the Company believes that the impact of recently issued standards that are not yet effective will not have a material impact on its financial position or results of operations upon adoption.

Recently Issued and Adopted Accounting Standards

In February 2016, the FASB issued Topic 842. The new standard, as amended, establishes a right-of-use model and requires a lessee to recognize on the balance sheet a right-of-use asset and corresponding lease liability for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the consolidated statements of operations and comprehensive loss. As a result of the FASB’s issuance of ASU No. 2020-05, “Revenue From Contracts With Customers (Topic 606) and Leases (Topic 842): Effective Dates for Certain Entities”, the new standard is effective for annual periods beginning after December 15, 2021 for nonpublic entities, with early adoption permitted. On January 1, 2021, the Company adopted Topic 842 using the modified retrospective approach. The Company recorded operating lease assets (right-of-use assets) of $2.4 million and operating lease liabilities of $4.0 million and reversed a lease liability of $1.6 million related to straight-line rent and incentives. There was no impact to accumulated deficit upon adoption of Topic 842. The underlying assets of the Company’s leases are primarily office and laboratory space.

7


In August 2018, the FASB issued ASU 2018-15, Intangibles-Goodwill and Other-Internal Use Software: Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (ASU 2018-15). ASU 2018-15 aligns the requirements for capitalizing implementation costs incurred in a cloud computing arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The accounting for the service element of a hosting arrangement that is a service contract is not affected by these amendments. ASU 2018-15 is effective for fiscal years beginning after December 15, 2020, and interim periods within fiscal years beginning after December 15, 2021, with early adoption permitted. On January 1 2021, the Company adopted this standard and the adoption did not have a material impact on its consolidated financial statements.

Recently Issued Accounting Standards Not Yet Adopted

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. ASU 2016-13 and its subsequent related updates establish a new forward-looking “expected loss model” that requires entities to estimate current expected credit losses on accounts receivable and financial instruments by using all practical and relevant information. The new standard and its subsequent related updates are effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years, with early adoption permitted. The Company is currently assessing the impact that adopting this standard will have on its consolidated financial statements but does not expect it to be material.

In December 2019, the FASB issued ASU 2019-12, Income Taxes – Simplifying the Accounting for Income Taxes. The new guidance simplifies the accounting for income taxes by removing several exceptions in the current standard and adding guidance to reduce complexity in certain areas, such as requiring that an entity reflect the effect of an enacted change in tax laws or rates in the annual effective tax rate computation in the interim period that includes the enactment date. The new standard is effective for fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022 for non-public entities, with early adoption permitted. The Company is currently assessing the impact that adopting this standard will have on its consolidated financial statements.

4. Balance Sheet Details

Short-term investments consisted of the following (dollar amounts in thousands):

 

 

 

March 31, 2021

 

Description

 

Maturity

 

Amortized

Costs

 

 

Gross

Unrealized

Gains

 

 

Gross

Unrealized

Losses

 

 

Estimated

Fair Value

 

Commercial paper

 

1 year or less

 

$

101,881

 

 

$

8

 

 

$

(4

)

 

$

101,885

 

U.S. Treasury securities

 

1 year or less

 

 

12,626

 

 

 

3

 

 

 

 

 

 

12,629

 

U.S. government agency debt securities

 

1 year or less

 

 

14,082

 

 

 

4

 

 

 

 

 

 

14,086

 

 

 

 

 

$

128,589

 

 

$

15

 

 

$

(4

)

 

$

128,600

 

 

 

 

December 31, 2020

 

Description

 

Maturity

 

Amortized

Costs

 

 

Gross

Unrealized

Gains

 

 

Gross

Unrealized

Losses

 

 

Estimated

Fair Value

 

Commercial paper

 

1 year or less

 

$

94,873

 

 

$

5

 

 

$

(6

)

 

$

94,872

 

U.S. Treasury securities

 

1 year or less

 

 

11,614

 

 

 

2

 

 

 

(1

)

 

 

11,615

 

U.S. government debt securities

 

1 year or less

 

 

13,169

 

 

 

1

 

 

 

 

 

 

13,170

 

 

 

 

 

$

119,656

 

 

$

8

 

 

$

(7

)

 

$

119,657

 

 

Long-term investments consisted of the following (dollar amounts in thousands):

 

 

 

March 31, 2021

 

Description

 

Maturity

 

Amortized

Costs

 

 

Gross

Unrealized

Gains

 

 

Gross

Unrealized

Losses

 

 

Estimated

Fair Value

 

U.S. Treasury securities

 

After 1 year through 5 years

 

$

2,547

 

 

$

1

 

 

$

 

 

$

2,548

 

 

 

 

 

$

2,547

 

 

$

1

 

 

$

 

 

$

2,548

 

 

8


 

 

 

 

December 31, 2020

 

Description

 

Maturity

 

Amortized

Costs

 

 

Gross

Unrealized

Gains

 

 

Gross

Unrealized

Losses

 

 

Estimated

Fair Value

 

U.S. Treasury securities

 

After 1 year through 5 years

 

$

5,126

 

 

$

 

 

$

 

 

$

5,126

 

U.S. government agency debt securities

 

After 1 year through 5 years

 

 

7,072

 

 

 

1

 

 

 

 

 

 

7,073

 

 

 

 

 

$

12,198

 

 

$

1

 

 

$

 

 

$

12,199

 

 

The Company concluded that the net declines in market value of available-for-sale securities were temporary in nature and did not consider any of the investments to be other-than-temporarily impaired. In accordance with its investment policy, the Company invests in investment grade securities with high credit quality issuers, and generally limits the amount of credit exposure to any one issuer. The Company evaluates securities for other-than-temporary impairment at the end of each reporting period. Impairment is evaluated considering numerous factors, and their relative significance varies depending on the situation. Factors considered include the length of time and extent to which fair value has been less than the cost basis, the financial condition and near-term prospects of the issuer, and the Company’s intent and ability to hold the investment to allow for an anticipated recovery in fair value. Furthermore, the aggregate of individual unrealized losses that had been outstanding for 12 months or less was not significant as of March 31, 2021 and December 31, 2020. The Company does not intend to sell these investments and it is not more likely than not that the Company will be required to sell the investments before a recovery of their amortized cost bases, which may be maturity. The Company also believes that it will be able to collect both principal and interest amounts due at maturity.

Prepaid expenses and other current assets consisted of the following (dollar amounts in thousands):

 

 

 

At March 31,

2021

 

 

At December 31,

2020

 

Interest receivable

 

$

122

 

 

$

155

 

Prepaid insurance

 

 

1,034

 

 

 

1,723

 

Prepaid research studies

 

 

1,260

 

 

 

804

 

Prepaid other

 

 

539

 

 

 

600

 

Total

 

$

2,955

 

 

$

3,282

 

 

Prepaid expenses, net of current portion consisted of the following (dollar amounts in thousands):

 

 

 

At March 31,

2021

 

 

At December 31,

2020

 

Prepaid clinical trial and other

 

$

2,943

 

 

$

3,183

 

 

 

$

2,943

 

 

$

3,183

 

 

Property and equipment consisted of the following (dollar amounts in thousands):

 

 

 

At March 31,

2021

 

 

At December 31,

2020

 

Laboratory equipment and manufacturing equipment

 

$

522

 

 

$

339

 

Furniture and fixtures

 

 

254

 

 

 

254

 

Computer equipment and software

 

 

302

 

 

 

287

 

Leasehold improvements

 

 

2,095

 

 

 

2,095

 

 

 

 

3,173

 

 

 

2,975

 

Less accumulated depreciation

 

 

(485

)

 

 

(327

)

Total

 

$

2,688

 

 

$

2,648

 

 

Depreciation expense for the three months ended March 31, 2021 and 2020 was $158 thousand and $25 thousand, respectively.   

9


Accrued expenses consisted of the following (dollar amounts in thousands):

 

 

 

At March 31,

2021

 

 

At December 31,

2020

 

Payroll and related liabilities

 

$

1,123

 

 

$

2,296

 

Professional fees

 

 

418

 

 

 

454

 

Research and development costs

 

 

2,259

 

 

 

2,997

 

Deferred rent

 

 

 

 

 

279

 

Other

 

 

651

 

 

 

878

 

Total

 

$

4,451

 

 

$

6,904

 

 

5. Fair Value Measurement

The following table represents the Company’s financial assets measured at fair value on a recurring basis and indicate the level of fair value hierarchy utilized to determine such fair values (in thousands):

 

 

 

 

 

 

 

Fair Value Measurements at Reporting Date

Using

 

Description

 

March 31,

2021

 

 

Quoted

Prices in

Active

Markets for

Identical

Assets

(Level 1)

 

 

Significant

Other

Observable

Inputs

(Level 2)

 

 

Significant

Unobservable

Inputs

(Level 3)

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds (included in cash and cash

   equivalents)

 

$

1,524

 

 

$

1,524

 

 

$

 

 

$

 

Commercial paper

 

 

101,884

 

 

 

 

 

 

101,884

 

 

 

 

U.S. Treasury securities

 

 

15,177

 

 

 

15,177

 

 

 

 

 

 

 

U.S. government agency debt securities

 

 

14,086

 

 

 

 

 

 

14,086

 

 

 

 

Total assets

 

$

132,671

 

 

$

16,701

 

 

$

115,970

 

 

$

 

 

 

 

 

 

 

 

Fair Value Measurements at Reporting Date

Using

 

Description

 

December 31,

2020

 

 

Quoted

Prices in

Active

Markets for

Identical

Assets

(Level 1)

 

 

Significant

Other

Observable

Inputs

(Level 2)

 

 

Significant

Unobservable

Inputs

(Level 3)

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds (included in cash and cash

   equivalents)

 

$

15,739

 

 

$

15,739

 

 

$

 

 

$

 

Commercial paper

 

 

94,872

 

 

 

 

 

 

94,872

 

 

 

 

U.S. Treasury securities

 

 

16,741

 

 

 

16,741

 

 

 

 

 

 

 

U.S. government agency debt securities

 

 

20,243

 

 

 

 

 

 

20,243

 

 

 

 

Total assets

 

$

147,595

 

 

$

32,480

 

 

$

115,115

 

 

$

 

 

There have been no transfers between fair value levels during the three months ended March 31, 2021.

 

6. License and Sponsored Research Agreements

In January 2017, the Company entered into a license agreement with Yale University (“Yale”), which was amended in May 2020 and July 2020, under which the Company licensed certain intellectual property related to ectonucleotide pyrophosphatase/phosphodiesterase enzymes, that is the basis for the Company’s INZ-701 development program. Pursuant to the license agreement, as partial upfront consideration, the Company made a payment of approximately $60,000 to Yale, which amount reflected unreimbursed patent expenses incurred by Yale prior to the date of the license agreement. The Company is responsible for paying Yale an annual license maintenance fee in varying amounts throughout the term ranging from the low tens of thousands of dollars to the high tens of thousands of dollars. As of March 31, 2021, the Company incurred a total of $99,000 in license maintenance

10


fees to Yale. The Company is required to pay Yale $3.0 million, based on the achievement of a specified net product sales milestone or specified development and commercialization milestones, for each therapeutic and prophylactic licensed product developed. In addition, the Company is required to pay Yale an amount in the several hundreds of thousands of dollars, based on the achievement of a specified net product sales milestone or specified development and commercialization milestones, for each diagnostic licensed product developed. While the agreement remains in effect, the Company is required to pay Yale low single-digit percentage royalties on aggregate worldwide net sales of certain licensed products. Yale is guaranteed a minimum royalty payment amount (ranging in dollar amounts from the mid six figures to low seven figures) for each year after the first sale of a therapeutic or prophylactic licensed product that results in net sales. Yale is guaranteed a minimum royalty payment amount (ranging from the low tens of thousands of dollars to the mid tens of thousands of dollars) for each year after the first sale of a diagnostic licensed product that results in net sales. The Company must also pay Yale a percentage in the twenties of certain types of income it receives from sublicensees. The Company is also responsible for costs relating to the prosecution and maintenance of the licensed patents. Finally, subject to certain conditions, all payments due by the Company to Yale will be tripled following any patent challenge or challenge to a claim by Yale that a product is a licensed product under the agreement made by the Company against Yale if Yale prevails in such challenge. The Company is not aware of any currently ongoing patent challenges.

In January 2017, the Company also entered into a corporate sponsored research agreement with Yale (the “Sponsored Research Agreement”), which was amended in February 2019, under which the Company agreed to provide research support funding in the aggregate amount of $2.4 million over the five year period from contract inception through 2021. The Company recorded research and development expenses associated with this arrangement of $0.1 million and $0.2 million in the three months ended March 31, 2021 and 2020, respectively.   

    

7. Commitments and Contingencies

Operating Leases

The Company adopted Topic 842 on January 1, 2021. Topic 842 allows the Company to elect a package of practical expedients, which provide that an entity need not reassess: (i) whether any expired or existing contracts are or contain leases; (ii) the lease classification for any expired or existing leases; and (iii) any initial direct costs for any existing leases. Another practical expedient allows the Company to use hindsight in determining the lease term when considering lessee options to extend or terminate the lease and to purchase the underlying asset. The Company has elected to utilize this package of practical expedients and has not elected the hindsight methodology in its implementation of Topic 842.

 

The Company elected to adopt this standard using the optional modified retrospective approach and recognized a cumulative-effect adjustment to the condensed consolidated balance sheet on the date of adoption. Comparative periods have not been restated. With the adoption of Topic 842, the Company’s condensed consolidated balance sheet now contains the following line items: Right-of-use assets, Operating lease liabilities and Operating lease liabilities, net of current portion.

 

The Company determined that it held the following significant operating leases of office and laboratory space as of January 1, 2021:

 

An operating lease for 8,499 square feet of office space in Boston, Massachusetts that expires in 2025, with an option to extend the term for five years; and

 

An operating lease for 6,244 square feet of laboratory space in Boston, Massachusetts that expires in 2025.

In connection with the Company’s lease of office space, the Company provided a security deposit to the landlord in the form of a letter of credit totaling $130 thousand. The cash collateralizing the letter of credit is included in restricted cash in the accompanying balance sheets as of March 31, 2021 and December 31, 2020.

The Company has elected to not recognize right-of-use assets and lease liabilities arising from short-term leases, which are leases that, at the commencement date, have a lease term of 12 months or less and do not include an option to purchase the underlying asset that the lessee is reasonably certain to exercise.               

As all the existing leases subject to Topic 842 were previously classified as operating leases by the Company, they were similarly classified as operating leases under Topic 842. The Company has determined that the identified leases did not contain non-lease components and require no further allocation of the total lease cost. Additionally, the agreements in place did not contain information to determine the rate implicit in the lease. As such, the Company calculated the incremental borrowing rate based on the remaining lease terms as of January 1, 2021. At January 1, 2021 and March 31, 2021, the weighted average incremental borrowing rate and the weighted average remaining lease term for the operating leases held by the Company were 8.0% and 5.0 years, respectively.

11


As of March 31, 2021, right-of-use assets and liabilities arising from operating leases were $2.3 million and $3.9 million, respectively. During the three months ended March 31, 2021, cash paid for amounts included for the measurement of lease liabilities was $0.2 million and the Company recorded operating lease expense of $0.2 million.

Future lease payments under non-cancelable leases as of March 31, 2021 are as follows (dollar amounts in thousands):

 

Year Ending December 31,

 

 

 

 

2021 (remaining 9 months)

 

$

709

 

2022