10-Q
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

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

 

For the quarterly period ended September 30, 2021

OR

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

 

For the transition period from to

Commission file number: 001-36591

 

Otonomy, Inc.

(Exact name of registrant as specified in its charter)

 

 

Delaware

 

26-2590070

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification Number)

 

4796 Executive Drive

San Diego, California 92121

(619) 323-2200

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

 

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 $0.001 per share

 

OTIC

 

The 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, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the 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 ☒

The number of shares of the registrant’s common stock, par value $0.001, outstanding as of November 5, 2021 was 56,681,315.

 

 


 

TABLE OF CONTENTS

 

 

Page

 

 

PART I. FINANCIAL INFORMATION

2

 

 

Item 1. Financial Statements

2

 

 

Condensed Balance Sheets

2

 

 

Condensed Statements of Operations

3

 

 

Condensed Statements of Comprehensive Loss

4

 

 

Condensed Statements of Stockholders’ Equity

5

 

 

Condensed Statements of Cash Flows

7

 

 

Notes to Condensed Financial Statements

8

 

 

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

17

 

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk

27

 

 

Item 4. Controls and Procedures

27

 

 

PART II. OTHER INFORMATION

28

 

 

Item 1. Legal Proceedings

28

 

 

Item 1A. Risk Factors

28

 

 

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

63

 

 

Item 3. Default Upon Senior Securities

63

 

 

Item 4. Mine Safety Disclosures

63

 

 

Item 5. Other Information

63

 

 

Item 6. Exhibits

64

 

 

 

 


 

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Otonomy, Inc.

Condensed Balance Sheets

(in thousands, except share and per share data)

 

 

September 30,

 

 

December 31,

 

 

2021

 

 

2020

 

 

(unaudited)

 

 

 

 

Assets

 

 

 

 

 

Current assets:

 

 

 

 

 

Cash and cash equivalents

$

81,843

 

 

$

30,767

 

Short-term investments

 

5,253

 

 

 

55,576

 

Prepaid and other current assets

 

2,191

 

 

 

2,372

 

Total current assets

 

89,287

 

 

 

88,715

 

Restricted cash

 

702

 

 

 

702

 

Property and equipment, net

 

1,598

 

 

 

2,766

 

Right-of-use assets

 

13,079

 

 

 

14,082

 

Other long-term assets

 

212

 

 

 

Total assets

$

104,878

 

 

$

106,265

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Accounts payable

$

467

 

 

$

849

 

Accrued expenses

 

2,998

 

 

 

2,953

 

Accrued compensation

 

2,937

 

 

 

3,927

 

Leases, current

 

3,340

 

 

 

3,265

 

Total current liabilities

 

9,742

 

 

 

10,994

 

Long-term debt, net

 

15,955

 

 

 

15,158

 

Leases, net of current

 

12,643

 

 

 

13,847

 

Total liabilities

 

38,340

 

 

 

39,999

 

Commitments and Contingencies

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

Preferred stock, $0.001 par value; 10,000,000 shares authorized at September 30, 2021
   and December 31, 2020;
no shares issued or outstanding at September 30, 2021 and
   December 31, 2020

 

 

 

 

 

Common stock, $0.001 par value; 200,000,000 shares authorized at September 30, 2021
   and December 31, 2020;
56,681,315 and 48,318,970 shares issued and outstanding
   at September 30, 2021 and December 31, 2020, respectively

 

57

 

 

 

48

 

Additional paid-in capital

 

608,707

 

 

 

570,841

 

Accumulated other comprehensive income

 

 

 

 

1

 

Accumulated deficit

 

(542,226

)

 

 

(504,624

)

Total stockholders’ equity

 

66,538

 

 

 

66,266

 

Total liabilities and stockholders’ equity

$

104,878

 

 

$

106,265

 

 

See accompanying notes.

 

-2-


 

Otonomy, Inc.

Condensed Statements of Operations

(in thousands, except share and per share data)

 

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

 

 

(unaudited)

 

Product sales, net

 

$

 

 

$

50

 

 

$

125

 

 

$

220

 

Costs and operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Cost of product sales

 

 

 

 

 

189

 

 

 

370

 

 

 

914

 

Research and development

 

 

8,978

 

 

 

7,016

 

 

 

24,995

 

 

 

21,623

 

Selling, general and administrative

 

 

3,501

 

 

 

3,363

 

 

 

11,213

 

 

 

10,883

 

Total costs and operating expenses

 

 

12,479

 

 

 

10,568

 

 

 

36,578

 

 

 

33,420

 

Loss from operations

 

 

(12,479

)

 

 

(10,518

)

 

 

(36,453

)

 

 

(33,200

)

Other income (expense)

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

9

 

 

 

42

 

 

 

35

 

 

 

296

 

Interest expense

 

 

(410

)

 

 

(391

)

 

 

(1,184

)

 

 

(1,180

)

Net loss

 

$

(12,880

)

 

$

(10,867

)

 

$

(37,602

)

 

$

(34,084

)

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss per share, basic and diluted

 

$

(0.19

)

 

$

(0.22

)

 

$

(0.61

)

 

$

(0.92

)

Weighted-average shares used to compute net loss per share, basic and diluted

 

 

67,792,425

 

 

 

49,220,921

 

 

 

61,969,780

 

 

 

37,014,253

 

 

See accompanying notes.

-3-


 

Otonomy, Inc.

Condensed Statements of Comprehensive Loss

(in thousands)

 

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

 

 

(unaudited)

 

Net loss

 

$

(12,880

)

 

$

(10,867

)

 

$

(37,602

)

 

$

(34,084

)

Other comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized loss on available-for-sale securities

 

 

(1

)

 

 

(22

)

 

 

(1

)

 

 

(16

)

Comprehensive loss

 

$

(12,881

)

 

$

(10,889

)

 

$

(37,603

)

 

$

(34,100

)

 

See accompanying notes.

-4-


 

Otonomy, Inc.

Condensed Statements of Stockholders’ Equity

(in thousands, except share data)

 

 

Common Stock

 

 

Additional
Paid-in

 

 

Accumulated
Other
Comprehensive

 

 

Accumulated

 

 

Total
Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Income

 

 

Deficit

 

 

Equity

 

Balance at June 30, 2021
   (unaudited)

 

 

56,681,315

 

 

$

57

 

 

$

606,941

 

 

$

1

 

 

$

(529,346

)

 

$

77,653

 

Stock-based compensation
   expense (unaudited)

 

 

 

 

 

 

 

 

1,766

 

 

 

 

 

 

 

 

 

1,766

 

Net loss (unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(12,880

)

 

 

(12,880

)

Unrealized loss on available-
   for-sale securities (unaudited)

 

 

 

 

 

 

 

 

 

 

 

(1

)

 

 

 

 

 

(1

)

Balance at September 30, 2021
   (unaudited)

 

 

56,681,315

 

 

$

57

 

 

$

608,707

 

 

$

 

 

$

(542,226

)

 

$

66,538

 

 

 

 

Common Stock

 

 

Additional
Paid-in

 

 

Accumulated
Other
Comprehensive

 

 

Accumulated

 

 

Total
Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Income (Loss)

 

 

Deficit

 

 

Equity

 

Balance at June 30, 2020
   (unaudited)

 

 

30,951,421

 

 

$

31

 

 

$

503,311

 

 

$

17

 

 

$

(483,110

)

 

$

20,249

 

Issuance of common stock and pre-
   funded warrants, net of issuance
   costs (unaudited)

 

 

17,275,000

 

 

 

17

 

 

 

64,170

 

 

 

 

 

 

 

 

 

64,187

 

Issuance of common stock
   upon exercise of stock
   options (unaudited)

 

 

1,000

 

 

 

 

 

 

2

 

 

 

 

 

 

 

 

 

2

 

Stock-based compensation
   expense (unaudited)

 

 

 

 

 

 

 

 

1,576

 

 

 

 

 

 

 

 

 

1,576

 

Net loss (unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(10,867

)

 

 

(10,867

)

Unrealized loss on available-
   for-sale securities (unaudited)

 

 

 

 

 

 

 

 

 

 

 

(22

)

 

 

 

 

 

(22

)

Balance at September 30, 2020
   (unaudited)

 

 

48,227,421

 

 

$

48

 

 

$

569,059

 

 

$

(5

)

 

$

(493,977

)

 

$

75,125

 

 

See accompanying notes.

-5-


 

Otonomy, Inc.

Condensed Statements of Stockholders’ Equity

(in thousands, except share data)

 

 

Common Stock

 

 

Additional
Paid-in

 

 

Accumulated
Other
Comprehensive

 

 

Accumulated

 

 

Total
Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Income

 

 

Deficit

 

 

Equity

 

Balance at December 31, 2020

 

 

48,318,970

 

 

$

48

 

 

$

570,841

 

 

$

1

 

 

$

(504,624

)

 

$

66,266

 

Issuance of common stock and pre-
   funded warrants, net of issuance
   costs (unaudited)

 

 

8,298,890

 

 

 

9

 

 

 

32,198

 

 

 

 

 

 

 

 

 

32,207

 

Issuance of common stock upon
   exercise of stock options (unaudited)

 

 

2,836

 

 

 

 

 

 

6

 

 

 

 

 

 

 

 

 

6

 

Issuance of common stock
   under employee stock
   purchase plan (unaudited)

 

 

60,619

 

 

 

 

 

 

122

 

 

 

 

 

 

 

 

 

122

 

Stock-based compensation
   expense (unaudited)

 

 

 

 

 

 

 

 

5,540

 

 

 

 

 

 

 

 

 

5,540

 

Net loss (unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(37,602

)

 

 

(37,602

)

Unrealized loss on available-
   for-sale securities (unaudited)

 

 

 

 

 

 

 

 

 

 

 

(1

)

 

 

 

 

 

(1

)

Balance at September 30, 2021
   (unaudited)

 

 

56,681,315

 

 

$

57

 

 

$

608,707

 

 

$

 

 

$

(542,226

)

 

$

66,538

 

 

 

 

Common Stock

 

 

Additional
Paid-in

 

 

Accumulated
Other
Comprehensive

 

 

Accumulated

 

 

Total
Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Income (Loss)

 

 

Deficit

 

 

Equity

 

Balance at December 31, 2019

 

 

30,814,211

 

 

$

31

 

 

$

500,084

 

 

$

11

 

 

$

(459,893

)

 

$

40,233

 

Issuance of common stock and pre-
   funded warrants, net of issuance
   costs (unaudited)

 

 

17,275,000

 

 

 

17

 

 

 

64,170

 

 

 

 

 

 

 

 

 

64,187

 

Issuance of common stock
   upon exercise of stock
   options (unaudited)

 

 

72,713

 

 

 

 

 

 

151

 

 

 

 

 

 

 

 

 

151

 

Issuance of common stock
   under employee stock
   purchase plan (unaudited)

 

 

65,497

 

 

 

 

 

 

127

 

 

 

 

 

 

 

 

 

127

 

Stock-based compensation
   expense (unaudited)

 

 

 

 

 

 

 

 

4,527

 

 

 

 

 

 

 

 

 

4,527

 

Net loss (unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(34,084

)

 

 

(34,084

)

Unrealized loss on available-
   for-sale securities (unaudited)

 

 

 

 

 

 

 

 

 

 

 

(16

)

 

 

 

 

 

(16

)

Balance at September 30, 2020
   (unaudited)

 

 

48,227,421

 

 

$

48

 

 

$

569,059

 

 

$

(5

)

 

$

(493,977

)

 

$

75,125

 

 

See accompanying notes.

-6-


 

Otonomy, Inc.

Condensed Statements of Cash Flows

(in thousands)

 

 

 

Nine Months Ended September 30,

 

 

 

2021

 

 

2020

 

 

 

(unaudited)

 

Cash flows from operating activities:

 

 

 

 

 

 

Net loss

 

$

(37,602

)

 

$

(34,084

)

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

 

 

 

 

 

 

Depreciation

 

 

648

 

 

 

843

 

Stock-based compensation

 

 

5,540

 

 

 

4,527

 

Amortization of premiums (accretion of discounts) on short-term investments

 

 

77

 

 

 

(33

)

Amortization of debt discount

 

 

130

 

 

 

147

 

Impairment of property, plant and equipment

 

 

727

 

 

 

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

Prepaid and other assets

 

 

(911

)

 

 

(321

)

Accounts payable

 

 

(315

)

 

 

(655

)

Accrued expenses

 

 

172

 

 

 

(1,455

)

Accrued compensation

 

 

(990

)

 

 

545

 

Right-of-use assets and lease liabilities, net

 

 

(126

)

 

 

(88

)

Net cash used in operating activities

 

 

(32,650

)

 

 

(30,574

)

Cash flows from investing activities:

 

 

 

 

 

 

Purchases of short-term investments

 

 

 

 

 

(43,257

)

Maturities of short-term investments

 

 

50,245

 

 

 

38,500

 

Purchases of property and equipment

 

 

(296

)

 

 

(92

)

Proceeds from disposition of business

 

 

768

 

 

 

 

Net cash provided by (used in) investing activities

 

 

50,717

 

 

 

(4,849

)

Cash flows from financing activities:

 

 

 

 

 

 

Proceeds from issuance of common stock and pre-funded warrants, net of issuance costs

 

 

32,207

 

 

 

64,187

 

Proceeds from issuance of long-term debt, net of issuance costs

 

 

674

 

 

 

 

Proceeds from short-term debt

 

 

 

 

 

1,126

 

Principal payments on short-term debt

 

 

 

 

 

(1,126

)

Proceeds from exercise of stock options

 

 

6

 

 

 

151

 

Proceeds from issuance of common stock under employee stock purchase plan

 

 

122

 

 

 

127

 

Net cash provided by financing activities

 

 

33,009

 

 

 

64,465

 

Net change in cash, cash equivalents and restricted cash

 

 

51,076

 

 

 

29,042

 

Cash, cash equivalents and restricted cash at beginning of period

 

 

31,469

 

 

 

25,895

 

Cash, cash equivalents and restricted cash at end of period

 

$

82,545

 

 

$

54,937

 

 

 

 

 

 

 

 

Cash and cash equivalents at end of period

 

$

81,843

 

 

$

54,235

 

Restricted cash at end of period

 

 

702

 

 

 

702

 

Cash, cash equivalents and restricted cash at end of period

 

$

82,545

 

 

$

54,937

 

 

 

 

 

 

 

 

Supplemental cash flow disclosures

 

 

 

 

 

 

Cash paid for interest

 

$

1,054

 

 

$

1,028

 

 

 

 

 

 

 

 

Supplemental disclosure of non-cash investing activities:

 

 

 

 

 

 

Purchase of property and equipment in accounts payable and accrued expenses

 

$

 

 

$

14

 

 

See accompanying notes.

-7-


 

Otonomy, Inc.

Notes to Condensed Financial Statements

(unaudited)

 

1. Description of Business and Basis of Presentation

Description of Business

Otonomy, Inc. (Otonomy or the Company) was incorporated in the state of Delaware on May 6, 2008. Otonomy is a biopharmaceutical company dedicated to the development of innovative therapeutics for neurotology. The Company pioneered the application of drug delivery technology to the ear and is utilizing that expertise and proprietary position to develop products that achieve sustained drug exposure from a single local administration. The Company’s primary focus is currently on the advancement of three programs in its broad pipeline: OTO-313 in a Phase 2 trial for tinnitus; OTO-413 in a Phase 2a cohort for hearing loss; and OTO-825, a gene therapy for congenital hearing loss, in investigational new drug (IND)-enabling activities. Additionally, the Company is conducting preclinical development for OTO-510 in otoprotection and OTO-6XX for severe hearing loss.

OTO-313 is a sustained-exposure formulation of the potent and selective N-Methyl-D-Aspartate (NMDA) receptor antagonist gacyclidine that demonstrated positive top-line results in a Phase 1/2 clinical trial in tinnitus patients. The Company is conducting a Phase 2 clinical trial for OTO-313 with top-line results expected in mid-2022. OTO-413 is a sustained-exposure formulation of brain-derived neurotrophic factor (BDNF) that demonstrated positive top-line results in a Phase 1/2 clinical trial in hearing loss patients. The Company has nearly completed enrollment in a Phase 2a cohort for OTO-413 with top-line results expected early in the second quarter of 2022, and plans to initiate clinical safety evaluation of higher dosing for OTO-413. OTO-825 is a gene therapy targeting mutations in the gap junction beta-2 (GJB2) gene, which is the most common cause of congenital hearing loss. Otonomy is conducting IND-enabling activities for OTO-825 in conjunction with Applied Genetic Technologies Corporation (AGTC), the Company’s strategic collaborator for the program. In addition, Otonomy is conducting preclinical development for OTO-510, a novel molecule in development for the prevention of cisplatin-induced hearing loss, and OTO-6XX, a hair cell repair and regeneration program for severe hearing loss that includes a novel compound exclusively licensed to Otonomy from Kyorin Pharmaceutical Co., Ltd. (Kyorin).

Liquidity and Financial Condition

The Company follows Accounting Standards Codification (ASC) Topic 205-40, Presentation of Financial Statements—Going Concern, which requires that management evaluate whether there are relevant conditions and events that in the aggregate raise substantial doubt about the entity’s ability to continue as a going concern and to meet its obligations as they become due within one year after the date that the financial statements are issued.

The condensed financial statements have been prepared assuming the Company will continue as a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has incurred operating losses and negative cash flows from operating activities since inception. In April 2021, the Company sold in a public offering 8,298,890 shares of its common stock, which includes the underwriters’ full exercise of their option to purchase additional shares, and the Company sold pre-funded warrants to purchase 7,111,110 shares of its common stock for $32.2 million in total net proceeds after deducting underwriting discounts and commissions and offering expenses. As of September 30, 2021, the Company had cash, cash equivalents and short-term investments of $87.1 million, outstanding debt of $16.0 million and an accumulated deficit of $542.2 million. The Company anticipates that it will continue to incur net losses into the foreseeable future as it: (i) develops and seeks regulatory approvals for its product candidates; and (ii) works to develop additional product candidates through research and development programs. When additional financing is required, the Company anticipates that it will seek additional funding through future debt and/or equity financings or other sources, such as potential collaboration agreements. Additional capital may not be available in sufficient amounts or on reasonable terms, if at all. If the Company is not able to secure adequate additional funding, if or when necessary, the Company may be forced to make reductions in spending, extend payment terms with suppliers, liquidate assets where possible, and/or suspend or curtail planned programs. Any of these actions could materially harm the Company’s business, results of operations, and future prospects. The Company believes that its existing cash, cash equivalents and short-term investments will be sufficient to fund its operations for a period of at least twelve months from the date of this report.

Basis of Presentation

The accompanying interim condensed financial statements are unaudited. These unaudited interim condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) and following the requirements of the United States Securities and Exchange Commission (SEC) for interim reporting. As permitted under those rules, certain footnotes or other financial information that are normally required by GAAP can be condensed or omitted. In the Company’s opinion, the unaudited interim condensed financial statements have been prepared on the same basis as the audited financial statements and include all adjustments, which include only normal recurring adjustments necessary for the fair presentation of the Company’s financial position, results of operations and cash flows for the periods presented. These condensed financial statements do not include all disclosures required by GAAP and should be read in conjunction with the Company’s audited financial statements and accompanying notes for the year ended December 31, 2020 included in the Company’s Annual Report on Form 10-K,

-8-


 

as filed with the SEC on February 11, 2021. The results presented in these unaudited condensed financial statements are not necessarily indicative of the results expected for the full fiscal year or any other interim period or any future year or period. 

 

2. Summary of Significant Accounting Policies

Use of Estimates

The condensed financial statements have been prepared in accordance with GAAP. The preparation of financial statements in conformity with GAAP requires the Company 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 product sales and expense during the reporting period. Although these estimates are based on the Company’s knowledge of current events and anticipated actions it may undertake in the future, actual results may ultimately materially differ from these estimates and assumptions.

Short-term Investments

The Company carries short-term investments classified as available-for-sale debt securities at fair value as determined by prices for identical or similar securities at the balance sheet date. Short-term investments consist of both Level 1 and Level 2 financial instruments in the fair value hierarchy (see Note 6 – Fair Value).

Realized gains or losses of available-for-sale securities are determined using the specific identification method and net realized gains and losses are included in interest income. The Company periodically reviews available-for-sale securities for other-than-temporary declines in fair value below the cost basis, and whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Company records unrealized gains and losses on available-for-sale debt securities as a component of other comprehensive loss within the condensed statements of comprehensive loss and as a separate component of stockholders’ equity on the condensed balance sheets. The Company does not hold equity securities in its investment portfolio.

Fair Value of Financial Instruments

The Company’s financial instruments include cash, cash equivalents, short-term investments, prepaid expenses and other assets, accounts payable, accrued expenses, accrued compensation and long-term debt. The carrying value of the Company’s cash and cash equivalents, short-term investments, prepaid expenses and other current assets, other long-term assets, accounts payable, accrued expenses, and accrued compensation approximate fair value due to the short-term nature of these items. Based on Level 3 inputs and the borrowing rates currently available for loans with similar terms, the Company believes the fair value of long-term debt approximates its carrying value.

Risks and Uncertainties Related to COVID-19

In March 2020, the World Health Organization declared COVID-19 a global pandemic. The COVID-19 pandemic could pose significant risks to the Company’s business; however, the ultimate impact of the pandemic is highly uncertain.

Given the unprecedented and evolving nature of the COVID-19 pandemic, including the rise of new variants, there continues to be significant uncertainty about the progression and ultimate impact of the pandemic on the Company’s operations. The Company has taken steps to mitigate the impact of the COVID-19 pandemic on its clinical trials, including developing processes to ensure the integrity of data collection from enrolled patients and supporting sites able to enroll patients, among other activity. Nonetheless the Company does not know the full extent of potential future delays or impacts on its business operations, its preclinical programs and clinical trials, healthcare systems, its financial condit