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Nature of the Business
3 Months Ended
Mar. 31, 2020
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Nature of the Business
Nature of the Business
Neon Therapeutics, Inc. (the "Company") is a clinical-stage immuno-oncology company and a leader in the field of neoantigen-targeted therapies, dedicated to transforming the treatment of cancer by directing the immune system towards neoantigens. The Company is leveraging over a decade of insights from its founders to develop neoantigen-targeted therapies that use two distinct approaches: the first approach utilizes fully personal therapies that target neoantigens specific to each individual, and the second approach utilizes shared therapies that target neoantigens that are shared across subsets of patients or tumor types. Both the personal neoantigen approach and the shared neoantigen approach focus on targeting a prioritized set of what the Company believes are the most therapeutically-relevant neoantigens.
The Company is subject to risks common to early-stage companies in the biotechnology industry including, but not limited to, development by competitors of new technological innovations, protection of proprietary technology, dependence on key personnel, compliance with government regulations and the ability to obtain additional financing to fund operations. Product candidates currently under development will require significant additional research and development efforts, including extensive preclinical and clinical testing and regulatory approval, prior to commercialization. These efforts require significant amounts of additional capital, adequate personnel infrastructure and extensive compliance-reporting capabilities. Even if the Company's development efforts are successful, it is uncertain when, if ever, the Company will realize significant revenue from product sales.
Merger Agreement with BioNTech SE
On January 15, 2020, the Company entered into an agreement with BioNTech SE, a Societas Europaea organized and existing under the laws of Germany ("BioNTech"), and Endor Lights, Inc., a Delaware corporation and a direct, wholly-owned subsidiary of BioNTech ("Merger Sub" and, together with BioNTech, the "Acquiring Parties"), pursuant to which, subject to the satisfaction or waiver of the conditions therein, Merger Sub will merge with and into the Company, with the Company surviving as a wholly-owned subsidiary of BioNTech (the "Merger Agreement" and such transaction, the "Merger"). The Merger Agreement was unanimously approved by the members of the board of directors of the Company (the "Board") and the Board resolved to recommend approval of the Merger Agreement to the Company’s shareholders. The closing of the Merger is subject to approval of the Company's shareholders and the satisfaction of customary closing conditions. Certain of the Company's stockholders who collectively own approximately 36% of the outstanding shares of the Company's common stock have entered into voting agreements, pursuant to which they have agreed, among other things, and subject to the terms and conditions of the agreements, to vote in favor of the Merger. The special meeting of the Company’s shareholders to consider approval of the Merger is scheduled to be held on May 4, 2020.
Subject to the terms of the Merger Agreement, at the effective time of the Merger (the "Effective Time"), each share of the Company’s common stock issued and outstanding immediately prior to the Effective Time shall automatically be canceled and converted into the right to receive 0.063 of an American Depositary Share of BioNTech ("BioNTech ADS"), with each BioNTech ADS representing one ordinary share of BioNTech, without interest but subject to any withholding required under applicable law.
The Merger is expected to close during the second quarter of 2020.
Liquidity
In accordance with Accounting Standards Update ("ASU") No. 2014-15, Disclosure of Uncertainties about an Entity's Ability to Continue as a Going Concern (Subtopic 205-40), management must evaluate whether there are conditions or events, when considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the financial statements are issued. This evaluation initially does not take into consideration the potential mitigating effect of management’s plans that have not been fully implemented as of the date the financial statements are issued. When substantial doubt exists under this methodology, management evaluates whether the mitigating effect of its plans sufficiently alleviates substantial doubt about the company’s ability to continue as a going concern. The mitigating effect of management’s plans, however, is only considered if both (1) it is probable that the plans will be effectively implemented within one year after the date that the financial statements are issued, and (2) it is probable that the plans, when implemented, will mitigate the relevant conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date that the financial statements are issued. Generally, to be considered probable of being effectively implemented, the plans must have been approved before the date that the financial statements are issued.
The Company's financial statements have been prepared on the basis of continuity of operations, realization of assets and the satisfaction of liabilities in the ordinary course of business. Through March 31, 2020, the Company has funded its operations primarily with net proceeds of $89.9 million from its initial public offering ("IPO") in June 2018, as well as an aggregate of $161.1 million of net proceeds from sales of the Company’s preferred stock and convertible debt. Since inception, the Company has incurred recurring losses and negative cash flows from operations in each period and on an aggregate basis. As of March 31, 2020 and December 31, 2019, the Company had an accumulated deficit of $270.1 million and $253.5 million, respectively. The Company expects its operating losses and negative operating cash flows to continue into the foreseeable future as it continues to develop, manufacture and commercialize its products.
As of March 31, 2020, the Company had cash and cash equivalents of $15.0 million. The Company expects that, based on its current operating plan, its cash and cash equivalents will be sufficient to fund its operating expenses and capital expenditure requirements into the third quarter of 2020. The future viability of the Company beyond that point is dependent on its ability to raise additional capital to finance its operations. Although the Company has been successful in raising capital in the past, there is no assurance that it will be successful in obtaining such additional financing on terms acceptable to the Company, if at all.
The Company expects that it will continue to incur significant expenses in connection with its ongoing business activities. As a result, the Company will need substantial additional funding to support its continuing operations and pursue its growth strategy. Until such time as the Company can generate significant revenue from product sales, if ever, it expects to finance its operations through the pursuit of a strategic transaction, sale of equity, debt financings or other capital sources, including collaborations with other companies. The Company may be unable to raise additional funds or enter into such other agreements or arrangements, including a strategic transaction, when needed on favorable terms, or at all. If the Company is unable to obtain funding on a timely basis, the Company may be required to curtail, delay or discontinue one or more of its research and development programs or may be unable to expand its operations or otherwise capitalize on its business opportunities, as desired, which could materially affect the Company's business, financial condition and results of operations.
The Company has determined that its cash runway of less than twelve months, along with its accumulated deficit, history of losses and future expected losses, raises substantial doubt about the Company's ability to continue as a going concern within one year from the issuance date of these condensed consolidated financial statements. While the Company has plans in place to mitigate this risk, which primarily consist of pursuing a strategic transaction and reducing cash expenditures, there is no guarantee that the Company will be successful in these mitigation efforts.