EXICURE, INC. You should read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and the related notes and other financial information included elsewhere in this Annual Report on Form 10-K. Some of the information contained in this discussion and analysis or set forth elsewhere in this Annual Report on Form 10-K, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties as described under the heading "Cautionary Note Regarding Forward-Looking Statements" elsewhere in this Annual Report on Form 10-K. You should review the disclosure under the heading "Risk Factors" in this Annual Report on Form 10-K for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis. In addition, this section discusses 2021 and 2020 items and year-to-year comparisons between 2021 and 2020. Discussions of 2019 items and year-to-year comparisons between 2020 and 2019 are not included in this Annual Report and can be found in "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Part II, Item 7 of our Annual Report on Form 10-K for the year endedDecember 31, 2020 , filed with theSEC onMarch 11, 2021 .
Overview
We are an early-stage biotechnology company developing nucleic acid therapies targeting ribonucleic acid against validated targets to neurological disorders and hair loss. Our team includes a diverse scientific group with expertise in nucleic acid chemistry, drug development and neuroscience. Headquartered inChicago, Illinois , we conduct our discovery and development efforts in-house with a dedicated 30,000 square foot facility, including rapid and automated high throughput nucleic acid synthesis and screening. Our therapeutic discovery and development efforts are supported by our proprietary Spherical Nucleic Acid, or SNA, technology. SNAs are nanoscale constructs consisting of densely packed synthetic nucleic acid sequences that are radially arranged in three dimensions. We believe the design of our SNAs gives rise to distinct chemical and biological properties that may provide advantages over other nucleic acid therapeutics and enable therapeutic activity outside of the liver. Our platform for therapeutic nucleic acids has demonstrated potential high potency, broad uptake, and prolonged efficacy in both in vitro and in vivo neurological models. The basis of our discovery approach harnesses our expertise in oligonucleotide chemistry for use against validated targets where we can screen thousands of oligonucleotides efficiently and identify top candidates in the appropriate cell and live animal models. We are conducting preclinical studies for a non-opioid analgesic directed against SCN9A (Nav1.7); undisclosed targets in Huntington's disease and Angelman syndrome as part of our collaboration with Ipsen; and undisclosed targets in hair loss disorders as part of our collaboration with AbbVie.
Operating, financing, and cash flow considerations
Since our inception in 2011, we have devoted substantial resources to the research and development of SNAs and the protection and enhancement of our intellectual property. We have no products approved for sale and have primarily funded our operations through sales of our securities and collaborations. ThroughDecember 31, 2021 , we have raised gross proceeds of$201.6 million from the sale of common stock and preferred stock. We have also received$56.0 million in upfront payments from collaborations, including an upfront payment of$20.0 million we received inAugust 2021 in connection with our research collaboration, license, and option agreement with Ipsen, or the Ipsen Collaboration Agreement and an upfront payment of$25.0 million we received inNovember 2019 in connection with our research collaboration license and option agreement with AbbVie, or the AbbVie Collaboration Agreement. OnSeptember 25, 2020 , we also borrowed$17.5 million under the terms of a credit and security agreement withMidCap Financial Trust (as described further below). As ofDecember 31, 2021 , our cash, cash equivalents, short-term investments, and restricted cash were$48.3 million . Since our inception, we have incurred significant operating losses. As ofDecember 31, 2021 , we have generated an accumulated deficit of$188.9 million . Substantially all of our operating losses resulted from expenses incurred in connection with our research programs and from general and administrative costs associated with our operations. 88
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We expect to continue to incur losses for the foreseeable future. Our net losses may fluctuate significantly from quarter to quarter and year to year. We anticipate that our expenses will increase substantially as we:
•advance preclinical development targeting SCN9A in pain to drug candidate selection and IND-enabling studies;
•advance our SNA platform with our current and prospective suitable collaboration partners;
•initiate research and development, preclinical studies and clinical trials for any additional therapeutic candidates that we may pursue in the future;
•advance other therapeutic candidates through preclinical and clinical development;
•increase our research and development activities to enhance our technology platform;
•continue to manufacture increasing quantities of drug substance and drug product material for use in preclinical studies and clinical trials;
•seek regulatory approval for our therapeutic candidates that successfully complete clinical trials;
•maintain, expand and protect our intellectual property portfolio;
•acquire or in-license other approved drugs, drug candidates or technologies;
•hire additional operational, financial and management information systems and personnel, including personnel to support our product development and planned future commercialization efforts; and
•incur additional costs associated with operating as a public company.
We have not generated any revenue from commercial drug sales nor do we expect to generate substantial revenue from product sales unless or until we successfully complete development and obtain regulatory approval of and commercialize one or more of our therapeutic candidates. We do not anticipate generating revenue from drug sales for the next several years, if ever. If we obtain regulatory approval for any of our therapeutic candidates, we expect to incur significant commercialization expenses related to product sales, marketing, manufacturing and distribution. Other sources of revenue could include a combination of research and development payments, license fees and other upfront payments, milestone payments, and royalties in connection with our current and any future collaborations and licenses. Until such time, if ever, that we generate revenue from whatever source, we expect to finance our cash needs through a combination of public or private equity offerings, debt financings and research collaboration and license agreements. We may be unable to raise capital or enter into such other arrangements when needed or on favorable terms. 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 therapeutic candidates.
COVID-19 Business Update
As the global spread of the COVID-19 pandemic continues to affect our economy
and our industry, we continue to monitor closely the developments and continue
to take active measures to protect the health of our employees and their
families, and our communities. Our on-site activities continue with protocols
for safely accessing and working within our facilities. While we continue to
conduct research and development activities, the COVID-19 pandemic has impacted,
and may continue to impact, certain of our early-stage discovery efforts.
We are working closely with our third-party manufacturers and other partners to
manage our supply chain activities and mitigate potential disruptions as a
result of the COVID-19 pandemic. We have observed minor delays in receipt of key
chemicals, reagents and materials as certain manufacturers have had supply
disruptions related to the COVID-19 pandemic. If the COVID-19 pandemic continues
to persist for an extended period of time and impacts essential distribution
systems such as FedEx and postal delivery, we could experience future
disruptions to our supply chain and operations and associated delays in the
manufacturing and our clinical supply, which would adversely impact our
preclinical and clinical development activities.
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Given the global risks and uncertainties associated with COVID-19, our business, results of operations, and prospects could be materially adversely affected. For additional information, see "Item 1A. Risk Factors" of this Annual Report on Form 10-K. Recent Developments Restructuring OnDecember 10, 2021 , we announced our commitment to a plan to wind down our immuno-oncology program for cavrotolimod (AST-008) and our XCUR-FXN preclinical program for the treatment of Friedreich's ataxia. We intend to realign our research and development resources to support (i) the development of our preclinical program targeting SCN9A for neuropathic pain, (ii) the continued advancement of our partnered programs with Ipsen to develop SNA-based treatments in neuroscience targeting Huntington's disease and Angelman syndrome, (iii) our continued advancement of our partnered program with AbbVie to develop SNA-based treatments for hair loss disorders, as well as (iv) the continued research and development of other undisclosed therapeutic product candidates. This plan resulted in a reduction in force where we eliminated approximately 50% of our existing workforce on a staggered basis throughJanuary 2022 as well as other cost-cutting measures. AtDecember 31, 2021 , the accrued liability balance associated with the strategic reduction in force announced in the fourth quarter of 2021 is$1.2 million , presented within accrued expense and other current liabilities on the accompanying consolidated balance sheet. As previously reported in our Quarterly Report on Form 10-Q filed with theU.S. Securities and Exchange Commission , orSEC , onNovember 19, 2021 , onNovember 9, 2021 , the Audit Committee of the Board was notified of a claim regarding alleged improprieties that a former senior researcher of us claimed to have committed with respect to our XCUR-FXN preclinical program for the treatment of Friedreich's ataxia. The senior researcher had voluntarily resigned from the Company onNovember 8, 2021 . The Audit Committee retained outside counsel to conduct an internal investigation of the claims. Based on the results of outside counsel's investigation, the Audit Committee and we concluded that the subject matters under investigation did not have a material adverse impact on our financial condition or results of operations, and did not require any change in our financial statements. The Audit Committee and we investigated statements made by Dr.Grant Corbett , our former Group Leader of Neuroscience. As a part of his resignation from the Company onNovember 8, 2021 ,Dr. Corbett claimed that when he was employed by us, he intentionally misreported certain raw data related to the research and development of XCUR-FXN. The investigation began promptly after the receipt ofDr. Corbett's resignation and allegations and was substantially completed in earlyDecember 2021 . The Audit Committee provided outside counsel with significant resources, without imposing limitations on the investigation's scope, timing or access to information. The investigation involved collection and review of a significant number of documents. communications and data, and interviews of numerous witnesses.Dr. Corbett was also interviewed during the investigation. The investigation revealed that: (1) beginning in the autumn of 2020,Dr. Corbett misreported raw data from certain research and development experiments related to XCUR-FXN? (2)Dr. Corbett misreported the results of at least three different experiments that were conducted through at leastFebruary 2021 ; (3) the misreported data related solely to efficacy rather than safety of XCUR-FXN; (4) the misreported data was included in various public presentations andSEC filings from as early asJanuary 7, 2021 through as late asAugust 12, 2021 ; (5)Dr. Corbett acted alone in misreporting the data, without the assistance or knowledge of anyone else at the Company, including our management and other research and development employees and did not inform anyone at the Company of his actions until his resignation inNovember 2021 ; (6) our management reasonably relied onDr. Corbett's analysis when making public statements that includedDr. Corbett's misreported data; and (7) none of our other programs were impacted byDr. Corbett's misreporting of the XCUR-FXN data. The Board and the Audit Committee began a process with the assistance of counsel to address the results of the investigation and intend to continue to enhance our policies and procedures regarding data management and integrity. 90
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Registered Direct Offering
OnDecember 16, 2021 , we completed a securities purchase agreement, or Purchase Agreement, with certain institutional purchasers, or Purchasers, entered into onDecember 14, 2021 , pursuant to which we offered to the Purchasers, in a registered direct offering priced at-the-market consistent with the rules of theNasdaq Stock Market , or the Registered Direct Offering, (i) an aggregate of 13,006,614 shares of our common stock,$0.0001 par value per share, (ii) pre-funded warrants to purchase up to an aggregate of 21,569,454 shares of our common stock Pre-Funded Warrants, and (iii) warrants to purchase up to 17,288,034 shares of common stock, Warrants. The combined purchase price of each share of common stock and accompanying Warrant is$0.3326 per share. The combined purchase price of each Pre-Funded Warrant and accompanying Warrant is$0.3316 (equal to the combined purchase price per share of common stock and accompanying Warrant, minus$0.001 ). The per share exercise price for the Warrants is$0.2701 , the closing bid price of our common stock onDecember 13, 2021 . The Warrants will be exercisable immediately from the closing onDecember 16, 2021 , and will expire on the five-year anniversary of the date of issuance, orDecember 16, 2026 . The gross proceeds to us from the Registered Direct Offering were$11.5 million and net proceeds after deducting the placement agent's fees and other offering expenses payable by us were$10.2 million . The securities were offered by us pursuant to an effective shelf registration statement on Form S-3 (File No. 333-251555) previously filed with theSEC onDecember 21, 2020 , and which was declared effective by theSEC onJanuary 7, 2021 .
MidCap Credit Agreement
OnDecember 10, 2021 , we entered into Amendment No. 4 to our Credit and Security Agreement, dated as ofSeptember 25, 2020 , as amended onOctober 21, 2020 ,July 30, 2021 andSeptember 30, 2021 , withMidCap Financial Trust , as agent, or MidCap, and the lenders party thereto from time to time, or as amended, the MidCap Credit Agreement, amongst other things, provide for the prepayment of$10 million of our outstanding loans under the MidCap Credit Agreement. OnMarch 15, 2022 , pursuant to the terms of the MidCap Credit Agreement, we repaid in full all outstanding indebtedness and other obligations under the MidCap Credit Agreement and the other Financial Documents (as defined in the MidCap Credit Agreement), including but not limited to the outstanding principal balance of$7.5 million and an exit fee of approximately$0.5 million , and terminated all obligations thereunder.
Changes in Board of Directors
OnFebruary 4, 2022 , we announced thatAndrew Sassine , a member of the Board and a member of the Audit Committee, resigned from the Board and the Audit Committee of the Board, effectiveFebruary 3, 2022 . OnFebruary 4, 2022 , we announced thatTimothy P. Walbert , our then chair of the Board, resigned from the Board, effectiveFebruary 4, 2022 and Bosun Hau, a member of the Board and chair of the Board's Compensation Committee, resigned from the Board and the Compensation Committee of the Board, effectiveFebruary 4, 2022 . Upon recommendation of theNominating and Corporate Governance Committee of the Board, the Board appointedElizabeth ("Betsy") Garofalo , M.D. to serve as chair of the Board to succeedMr. Walbert and to serve on the Compensation Committee to fill the vacancy on the Compensation Committee resulting fromMr. Hau's resignation from the Board, effectiveFebruary 4, 2022 .
Nasdaq Listing Requirements Deficiency Notice
OnDecember 30, 2021 , we received a letter from the staff ofThe Nasdaq Stock Market LLC , or Nasdaq, notifying us that, for the previous 30 consecutive business days, the bid price for the Company's common stock had closed below the minimum$1.00 per share requirement for continued listing on The Nasdaq Global Select Market under Nasdaq Listing Rule 5550(a)(2). In accordance with Nasdaq Listing Rule 5810(c)(3)(A) we have been provided an initial period of 180 calendar days, or untilJune 28, 2022 , to regain compliance with Nasdaq's bid price requirement. If, at any time beforeJune 28, 2022 , the bid price for our common stock closes at$1.00 or more for a 91
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minimum of 10 consecutive business days, we will regain compliance with the bid price requirement, unless the Nasdaq staff exercises its discretion to extend this 10-day period pursuant to Nasdaq rules. We have not regained compliance with Nasdaq Listing Rules as of the filing date of this Annual Report. If we do not regain compliance with Nasdaq Listing Rule 5550(a)(2) byJune 28, 2022 , we may be eligible for additional time to comply. To qualify, we will be required to meet certain continued listing requirements for market value of publicly held shares and all other initial listing standards for Nasdaq. If we meet these requirements, Nasdaq may grant us an additional 180 calendar days to regain compliance with the bid price requirement.
If we do not regain compliance with the bid price requirement and are not eligible for an additional compliance period our common stock may be delisted.
Basis of Presentation
The audited financial statements of
Segment Reporting
We view our operations and manage our business as one segment, which is the discovery, research and development of treatments based on our SNA technology.
Critical Accounting Policies and Estimates
Our management's discussion and analysis of financial condition and results of operations is based on our financial statements, which have been prepared in accordance with GAAP. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the revenue and expenses incurred during the reported periods. We base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not apparent from other sources. Changes in estimates are reflected in reported results for the period in which they become known. Actual results may differ from these estimates under different assumptions or conditions.
While our significant accounting policies are described in the notes to our financial statements appearing in this Annual Report on Form 10-K, we believe that the following critical accounting policies are most important to understanding and evaluating our reported financial results.
Revenue recognition
EffectiveJanuary 1, 2018 , we adopted the provisions of Accounting Standards Codification, or ASC, 606, Revenue from Contracts with Customers using the modified retrospective method for all contracts not completed as of the date of adoption. Under ASC 606, we recognize revenue when our customer obtains control of promised goods or services, in an amount that reflects the consideration which we expect to receive in exchange for those goods or services. To determine revenue recognition for arrangements that are within the scope of ASC 606, we perform the following five steps: 1.Identify the contract with the customer. A contract with a customer exists when (i) we enter into an enforceable contract with a customer that defines each party's rights and obligations regarding the goods or services to be transferred and identifies the related payment terms, (ii) the contract has commercial substance, and (iii) we determine that collection of substantially all consideration for goods and services that are transferred is probable based on the customer's intent and ability to pay the promised consideration. We apply judgment in determining the customer's intent and ability to pay, which is based on a variety of 92
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factors including the customer's historical payment experience, or in the case
of a new customer, published credit and financial information pertaining to the
customer.
2.Identify the performance obligations in the contract. Performance obligations
promised in a contract are identified based on the goods and services that will
be transferred to the customer that are both capable of being distinct, whereby
the customer can benefit from the good or service either on its own or together
with other available resources, and are distinct in the context of the contract,
whereby the transfer of the good or service is separately identifiable from
other promises in the contract. To the extent a contract includes multiple
promised goods and services, we must apply judgment to determine whether
promised goods and services are both capable of being distinct and distinct in
the context of the contract. If these criteria are not met, the promised goods
and services are accounted for as a combined performance obligation.
3.Determine the transaction price. The transaction price is determined based on
the consideration to which we will be entitled in exchange for transferring
goods and services to the customer. To the extent the transaction price includes
variable consideration, we estimate the amount of variable consideration that
should be included in the transaction price utilizing either the expected value
method or the most likely amount method, depending on the nature of the variable
consideration. Variable consideration is included in the transaction price if,
in our judgment, it is probable that a significant future reversal of cumulative
revenue under the contract will not occur. Any estimates, including the effect
of the constraint on variable consideration, are evaluated at each reporting
period for any changes. Determining the transaction price requires significant
judgment.
4.Allocate the transaction price to performance obligations in the contract. If
the contract contains a single performance obligation, the entire transaction
price is allocated to the single performance obligation. However, if a series of
distinct services that are substantially the same qualifies as a single
performance obligation in a contract with variable consideration, we must
determine if the variable consideration is attributable to the entire contract
or to a specific part of the contract. Contracts that contain multiple
performance obligations require an allocation of the transaction price to each
performance obligation on a relative standalone selling price basis unless the
transaction price is variable and meets the criteria to be allocated entirely to
a performance obligation or to a distinct service that forms part of a single
performance obligation. The consideration to be received is allocated among the
separate performance obligations based on relative standalone selling prices.
5.Recognize revenue when or as the Company satisfies a performance obligation.
We satisfy performance obligations either over time or at a point in time.
Revenue is recognized over time if either (i) the customer simultaneously
receives and consumes the benefits provided by the entity's performance, (ii)
the entity's performance creates or enhances an asset that the customer controls
as the asset is created or enhanced, or (iii) the entity's performance does not
create an asset with an alternative use to the entity and the entity has an
enforceable right to payment for performance completed to date. If the entity
does not satisfy a performance obligation over time, the related performance
obligation is satisfied at a point in time by transferring the control of a
promised good or service to a customer. Examples of control are using the asset
to produce goods or services, enhance the value of other assets, or settle
liabilities, and holding or selling the asset.
Revenue allocated to performance obligations relating to provision of research
and development activities is recognized as the performance obligations are
satisfied using an input method to measure progress, based on an estimate of the
percentage of completion of the project based on the actual hours incurred on
the project as a percentage of the total expected project hours. The
determination of the percentage of completion requires management to estimate
the total expected project hours. A detailed estimate of the total expected
project hours is re-assessed every reporting period based on the latest project
plan and discussions with project teams. If a change in facts or circumstances
occurs, the estimate will be adjusted and the revenue will be recognized based
on the revised estimate. The difference between the cumulative revenue
recognized based on the previous estimate and the revenue recognized based on
the revised estimate would be recognized as an adjustment to revenue in the
period in which the change in estimate occurs. Determining the estimate of total
project hours requires significant judgment and may have a significant impact on
the amount and timing of revenue recognition. For example, revenue recognized
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under the AbbVie Collaboration Agreement for the year endedDecember 31, 2021 was$(2.8) million due primarily to the cumulative catchup adjustment (reduction) of revenue recorded in connection with a change in estimate that occurred during the third quarter of 2021(see Note 3 to the accompanying consolidated financial statements). A 10% increase in the estimate of total projected hours for the AbbVie Collaboration Agreement atDecember 31, 2021 would decrease collaboration revenue by approximately$1.3 million . A 10% decrease in the estimate of total projected hours for the AbbVie Collaboration Agreement atDecember 31, 2021 would increase collaboration revenue by approximately$1.5 million . A 10% increase or decrease in the estimate of total projected hours for the Ipsen Collaboration Agreement atDecember 31, 2021 would decrease or increase, respectively, the collaboration revenue by less than$0.3 million . Licenses of intellectual property: If the license to our intellectual property is determined to be distinct from the other performance obligations identified in the arrangement, we recognize revenues from consideration allocated to the license when the license is transferred to the customer and the customer is able to use and benefit from the licenses. For licenses that are combined with other promises, we utilize judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress for purposes of recognizing revenue. We evaluate the measure of progress each reporting period and, if necessary, adjusts the measure of performance and related revenue recognition. Milestone payments: At the inception of each arrangement that includes development milestone payments, we evaluate the probability of reaching the milestones and estimates the amount to be included in the transaction price using the most likely amount method. If it is probable that a significant revenue reversal would not occur in the future, the associated milestone value is included in the transaction price. Milestone payments that are not within our control or the licensee, such as regulatory approvals, are not considered probable of being achieved until those approvals are received and therefore revenue recognized is constrained as management is unable to assert that a reversal of revenue would not be possible. The transaction price is then allocated to each performance obligation on a relative standalone selling price basis, for which we recognize revenue as or when the performance obligations under the contract are satisfied. At the end of each subsequent reporting period, we re-evaluate the probability of achievement of such development milestones and any related constraint, and if necessary, adjusts its estimate of the overall transaction price. Any such adjustments are recorded on a cumulative catch-up basis, which would affect collaboration revenues and earnings in the period of adjustment. To date, we have not recognized any milestone payment revenue from any of its collaboration agreements. Royalties: For arrangements that include sales-based royalties, including milestone payments based on levels of sales, and the license is deemed to be the predominant item to which the royalties relate, we recognize revenue at the later of (i) when the related sales occur, or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied). To date, we have not recognized any royalty revenue resulting from any of its collaboration agreements.
Recent accounting pronouncements not yet adopted
Refer to Note 2 of the accompanying consolidated financial statements for a description of recent accounting pronouncements not yet adopted.
Components of Statements of Operations
Revenue
We have earned all of our revenue throughDecember 31, 2021 through the AbbVie Collaboration Agreement, the Ipsen Collaboration Agreement, our research collaboration, license, and option agreement withPurdue Pharma L.P. , or the Purdue Collaboration Agreement, or through our research collaboration license and option agreement with Dermelix. We have also earned revenue as a primary contractor or as a subcontractor on government grants. We do not intend for government grants to be a principal commercial or strategic focus, but will evaluate opportunities when consistent with our strategic priorities. We have not generated any commercial product revenue and do not expect to generate any product revenue for the foreseeable future. 94
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In the future, we may generate revenue from partnership activities including a combination of research and development payments, license fees and other upfront payments, milestone payments, product sales and royalties, and reimbursement of certain research and development expenses, in connection with the AbbVie Collaboration Agreement, the Ipsen Collaboration Agreement, the Dermelix Collaboration Agreement, or any future collaborations and licenses. We expect that any such revenue we generate will fluctuate in future periods as a result of the timing of achievement, if at all, of preclinical, clinical, regulatory and commercialization milestones, the timing and amount of any payments to us relating to such milestones and the extent to which any of our therapeutic candidates are approved and successfully commercialized by us or potential development partners. If we, or any potential development partner fails to develop therapeutic candidates in a timely manner or obtain regulatory approval for them, our ability to generate future revenue, and our results of operations and financial position, would be materially and adversely affected.
Research and development expense
Research and development expense consists of costs associated with our research activities, including basic research on our SNA platform, discovery and development of novel SNAs as prospective therapeutic candidates, preclinical and clinical development activities for SNAs we have nominated for clinical development as well as maintaining and protecting our intellectual property. Our research and development expenses include:
•employee-related expenses, including salaries, bonuses, benefits and equity-based compensation expense;
•early research and development expenses incurred under arrangements with third parties, such as contract research organizations, contract manufacturing organizations, and consultants;
•preclinical and clinical development expenses with third parties such as contract research organizations, contract manufacturing organizations, and consultants;
•costs of maintaining and protecting our intellectual property portfolio, including legal advisory fees, license fees, sublicense fees, patent maintenance and other similar fees;
•laboratory materials and supplies;
•facilities, depreciation and other allocated expenses, which include direct and allocated expenses for rent and maintenance of facilities, depreciation of leasehold improvements and equipment and laboratory and other supplies.
We expense research and development costs as they are incurred. A significant
portion of our research and development costs are not tracked by project as they
benefit multiple projects or our technology.
We expect our research and development expenses to increase for the foreseeable
future as we advance our therapeutic candidates through preclinical studies and
clinical trials. The process of conducting preclinical studies and clinical
trials necessary to obtain regulatory approval is costly and time-consuming. We
or future development partners may never succeed in obtaining marketing approval
for any of our therapeutic candidates. The probability of success for each
therapeutic candidate may be affected by numerous factors, including preclinical
data, clinical data, competition, manufacturing capability and commercial
viability.
All of our research and development programs are at an early stage and
successful development of future therapeutic candidates from these programs is
highly uncertain and may not result in approved products. Completion dates and
completion costs can vary significantly for each future therapeutic candidate
and are difficult to predict. We anticipate we will make determinations as to
which therapeutic candidates to pursue and how much funding to direct to each
therapeutic candidate on an ongoing basis in response to the early scientific,
preclinical and clinical success of each therapeutic candidate, our ability to
maintain or enter into development partnerships with respect to a given
therapeutic candidate, as well as ongoing assessments of the commercial
potential of therapeutic candidates.
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We will need to raise additional capital to fund our research and development activities. We have entered into, and may in the future seek, collaborations, licensing or other commercial relationships with other companies in order to advance our various therapeutic candidates. Such collaborations may provide near-term cash payments from the collaborators to us in exchange for license rights or for expense reimbursement, but may also materially reduce the long-term economic benefits that could otherwise be realized from a therapeutic candidate subject to a collaboration in the event that such therapeutic candidate becomes commercially viable. Additional private or public financings may not be available to us on acceptable terms, or at all. Our failure to raise capital as and when needed would have a material adverse effect on our financial condition and our ability to pursue our business strategy.
General and administrative expense
General and administrative expense consists primarily of salaries and related benefits, including equity-based compensation, related to our executive, finance, legal, business development and support functions. Other general and administrative expenses include travel expenses, professional fees for auditing, tax and legal services and allocated facility-related costs not otherwise included in research and development expenses. We anticipate that our general and administrative expenses will increase in the future as we increase our headcount to support our continued research activities and development of our product candidates. We also anticipate that we will incur significantly increased accounting, audit, legal, regulatory, compliance and director and officer insurance costs as well as investor and public relations expenses associated with operating as a public company.
Dividend income
Dividend income consists of income earned on our money market funds that are recorded as cash equivalents on our consolidated balance sheets.
Interest income
Interest income consists of income earned on our available for sale securities that are recorded as short-term investments on our consolidated balance sheets, as well as income earned on our cash balances.
Interest expense
Interest expense includes amounts pursuant to the MidCap Credit Agreement and also the loan and security agreement withHercules Technology Growth Capital , or Hercules, for which we repaid all remaining outstanding obligations under the Hercules loan agreement at its maturity onMarch 1, 2020 .
Other income (loss), net
Other income (loss), net consists of fair value adjustments of our common stock warrant liabilities and gains and losses on foreign currency transactions.
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Results of Operations
Comparison of the Year Ended
The following table summarizes the results of our operations for the years endedDecember 31, 2021 and 2020: Year Ended December 31, (dollars in thousands) 2021 2020 Change Revenue: Collaboration revenue$ (483) $ 16,613 $ (17,096) (103) % Total revenue (483) 16,613 (17,096) (103) % Operating expenses: Research and development expense 48,979 32,094 16,885 53 % General and administrative expense 13,087 9,955 3,132 31 % Total operating expenses 62,066 42,049 20,017 48 % Operating loss (62,549) (25,436) (37,113) 146 % Other income, net: Dividend income 8 47 (39) (83) % Interest income 141 972 (831) (85) % Interest expense (1,691) (573) (1,118) 195 % Other income, net (11) 322 (333) (103) % Total other income, net (1,553) 768 (2,321) (302) % Net loss before provision for income taxes (64,102) (24,668) (39,434) 160 % Provision for income taxes - - - - % Net loss$ (64,102) $ (24,668) $ (39,434) 160 % Revenue The following table summarizes our revenue earned during the periods indicated: Year Ended December 31, (dollars in thousands) 2021 2020 Change Collaboration revenue: AbbVie Collaboration Agreement$ (2,792) $ 16,486 $ (19,278) (117) % Ipsen Collaboration Agreement 2,309 - 2,309
n/m
Dermelix Collaboration Agreement - 127 (127) (100) % Total collaboration revenue$ (483) $ 16,613 $ (17,096) (103) % Total revenue$ (483) $ 16,613 $ (17,096) (103) % Collaboration revenue was$(0.5) million during the year endedDecember 31, 2021 , reflecting a decrease of$17.1 million , or 103%, from collaboration revenue of$16.6 million for the year endedDecember 31, 2020 . The decrease in collaboration revenue of$17.1 million is mostly due to a decrease in revenue related to the AbbVie Collaboration Agreement of$19.3 million partially offset by revenue related to the Ipsen Collaboration Agreement of$2.3 million . As discussed further in Note 3,Collaborative Research and License Agreements, of the accompanying consolidated financial statements, revenue recognized under the AbbVie Collaboration Agreement for the year endedDecember 31, 2021 reflects the cumulative catchup adjustment (reduction) of revenue in connection with the change in estimate that resulted from a change in workplan during the third quarter of 2021. We currently estimate 97
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significant additional efforts will be required to satisfy the performance obligation under the AbbVie Collaboration Agreement. These increased estimated efforts in connection with the change in workplan resulted in less progress occurring relative to the increased estimate of total project hours to complete the research services during the year endedDecember 31, 2021 as compared to the amount of revenue recognized atDecember 31, 2020 , which led to a full year revenue reversal of$(2.8) million in the current year As ofDecember 31, 2021 , deferred revenue under the AbbVie Collaboration Agreement was$11.1 million and is expected to be recognized as revenue over the next 21 to 24 months as we satisfy our obligations under the AbbVie Collaboration Agreement. InAugust 2021 , we received an upfront payment of$20.0 million in connection with the Ipsen Collaboration Agreement for which revenue has been deferred and will be recognized as revenue in future periods as we satisfy our obligations under the Ipsen Collaboration Agreement. AtDecember 31, 2021 , deferred revenue under the Ipsen Collaboration Agreement was$17.7 million and is expected to be recognized as revenue over the next 30 to 39 months as we satisfy our obligations under the Ipsen Collaboration Agreement.
Refer to Note 3,
We do not expect to generate any product revenue for the foreseeable future. However, future revenue may include amounts attributable to partnership activities including, a combination of research and development payments, license fees and other upfront payments, milestone payments, product sales and royalties, and reimbursement of certain research and development expenses, in connection with the AbbVie Collaboration Agreement, the Ipsen Collaboration Agreement, the Dermelix Collaboration Agreement or any future collaboration and licenses.
Research and development expense
The following table summarizes our research and development expenses incurred during the periods indicated:
Year Ended
December 31,
(dollars in thousands) 2021 2020 Change
Clinical development programs expense$ 18,899 $ 8,259 $ 10,640 129 % Platform and discovery-related expense 13,650 13,361 289 2 % Employee-related expense 12,362 7,725 4,637 60 % Facilities, depreciation, and other expenses 4,068 2,749
1,319 48 %
Total research and development expense
Full time employees 37 54 (17) Research and development expense was$49.0 million for the year endedDecember 31, 2021 , reflecting an increase of$16.9 million , or 53%, from research and development expense of$32.1 million for the year endedDecember 31, 2020 . The increase in research and development expense for the year endedDecember 31, 2021 of$16.9 million reflects an increase in clinical trial activities during the year as well as the impact of higher average headcount during 2021 as compared to the prior year period. More specifically, the increase in research and development expense for the year endedDecember 31, 2021 of$16.9 million was primarily due to a net increase in costs related to our clinical development programs of$10.6 million , higher employee-related expenses of$4.6 million , higher facilities, depreciation, and other expenses of$1.3 million , and higher platform and discovery-related expense of$0.3 million . The net increase in clinical development programs expense for the year endedDecember 31, 2021 of$10.6 million was primarily due to manufacturing and toxicology study costs in connection with IND-enabling and Phase 1 clinical trial preparation activities for XCUR-FXN, in addition to higher clinical trial costs in connection with our Phase 1b/2 clinical trial for cavrotolimod (AST-008), partially offset by lower manufacturing costs for cavrotolimod 98
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(AST-008). In
The increase in employee-related expense for the year endedDecember 31, 2021 of$4.6 million was due to higher compensation and related costs in connection with a higher average headcount during the period as well as certain salary increases in 2021 for existing employees, in addition to one-time severance costs of approximately$0.6 million associated with theDecember 2021 restructuring. These higher costs in 2021 were partially offset by lower bonus expense of$0.5 million in 2021 resulting from the reduction of the 2021 bonus liability to zero atDecember 31, 2021 . The increase in platform and discovery-related expense of$0.3 million was mostly due to the license fee paid toNorthwestern University of$3.0 million in connection with the receipt of the upfront payment of$20.0 million from Ipsen, mostly offset by lower costs for materials and reagents, as well as lower intellectual property costs. The increase in facilities, depreciation, and other expenses for the year endedDecember 31, 2021 of$1.3 million was mostly due to higher lease costs related to ourChicago lease that commenced onJuly 1, 2020 as well as higher depreciation expense in connection with the acquisition of additional scientific equipment that were placed in service since the prior-year period. In connection with the restructuring activities discussed further above in "Recent Developments - Restructuring" and based on our current operating plan, we expect our research and development expenses to decrease by approximately 30-35% during 2022 as compared to 2021.
General and administrative expense
Year Ended
December 31,
(dollars in thousands) 2021 2020 Change
General and administrative expense
31 % Full time employees 10 9 1 General and administrative expense was$13.1 million for the year endedDecember 31, 2021 , representing an increase of$3.1 million , or 31%, from$10.0 million for the year endedDecember 31, 2020 . The increase for the year endedDecember 31, 2021 is mostly due to higher compensation and related costs mostly due to salary increases in 2021 and an increase in headcount, in addition to one-time severance costs of approximately$0.6 million associated with theDecember 2021 restructuring, higher legal and consulting costs, higher D&O insurance premium costs, and higher recruiting costs. This increase was partially offset by lower bonus expense of$0.5 million in 2021 resulting from the reduction of the 2021 bonus liability to zero atDecember 31, 2021 , as well as lower investor relations and franchise tax costs.
Interest income
The decrease in interest income of$0.8 million for the year endedDecember 31, 2021 was primarily the result of lower average balances invested in available for sale securities during the year endedDecember 31, 2021 as compared to the prior-year period. Interest expense
The increase in interest expense of
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Liquidity and Capital Resources
Since our inception, we have incurred significant operating losses. We have generated limited revenue to date from our collaboration agreements. We have not yet commercialized any of our product candidates, which are in various phases of preclinical development and clinical trials; and we do not expect to generate revenue from sales of any product for several years, if at all. We have funded our operations to date with proceeds received from equity financings and payments received in connection with collaboration agreements. As ofDecember 31, 2021 , our cash, cash equivalents, short-term investments, and restricted cash were$48.3 million as compared to$83.3 million as ofDecember 31, 2020 . To date, we have funded our operations primarily with proceeds received from equity financings and to a lesser extent, payments received in connection with collaboration agreements. We have generated limited revenue to date from our collaboration agreements. We have no products approved for commercial sale and have not generated any product revenues from product sales to date, and we do not expect to generate revenue from sales of any product for several years, if at all. InDecember 2021 , we closed a registered direct offering with certain institutional investors where we sold (i) an aggregate of 13,006,614 shares of our common stock, (ii) pre-funded warrants to purchase up to an aggregate of 21,569,454 shares of common stock, and (iii) warrants to purchase up to 17,288,034 shares of common stock, for net proceeds of$10.4 million , after deducting placement agent fees and other offering expenses payable by us. We have incurred significant operating losses since inception. We incurred net losses of approximately$64.1 million and$24.7 million for the year endedDecember 31, 2021 and 2020, respectively. As ofDecember 31, 2021 , we have generated an accumulated deficit of$188.9 million since inception and expect to incur significant expenses and negative cash flows for the foreseeable future. Based on our current operating plans and existing working capital atDecember 31, 2021 , it is uncertain whether our current liquidity is sufficient to fund operations over the next twelve months from the date of the issuance of the accompanying consolidated financial statements. As a result, there is substantial doubt about our ability to continue as a going concern. We have no committed sources of additional capital at this time and substantial additional financing will be needed by us to fund our operations. If we are unable to raise capital, we may be required to delay, reduce the scope of or eliminate research and development programs, or obtain funds through arrangements with collaborators or others that may require us to relinquish rights to assets or preclinical programs that we might otherwise seek to develop independently.
See "-Funding Requirements" below for additional information on our future capital needs.
MidCap Credit Facility
OnDecember 10, 2021 , we entered into Amendment No. 4 to our Credit and Security Agreement, dated as ofSeptember 25, 2020 , as amended onOctober 21, 2020 ,July 30, 2021 andSeptember 30, 2021 , withMidCap Financial Trust , as agent, or MidCap, and the lenders party thereto from time to time, or the MidCap Credit Agreement), to prepay$10.0 million of our outstanding loans under the MidCap Credit Agreement. Additionally, in connection with Amendment No. 4, we are required to maintain a balance of$20.0 million in accounts atSilicon Valley Bank , including$8.0 million in a blocked account atSilicon Valley Bank . The balance of$8.0 million in the blocked account atSilicon Valley Bank is restricted cash and is presented within other noncurrent assets on the accompanying consolidated balance sheet.
The MidCap Credit Agreement provides for a secured term loan facility in an
aggregate principal amount of up to
Tranche 1 bears interest at a floating rate equal to 6.25% per annum, plus the greater of (i) 1.50% or (ii) one-month LIBOR. Interest on each loan advance is due and payable monthly in arrears. Principal on each loan advance is payable in 36 equal monthly installments beginningOctober 1, 2022 until paid in full onOctober 1, 2025 , or the 100
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Maturity Date. Prepayments of the loans under the MidCap Credit Agreement, in whole or in part, will be subject to early termination fees in an amount equal to 3.0% of principal prepaid if prepayment occurs on or prior to the first anniversary of the Closing Date and 1.0% of principal prepaid if prepayment occurs after the first anniversary of the Closing Date and prior to the maturity date. In connection with Amendment No. 4, the early termination fee associated with the prepayment of$10.0 million made inDecember 2021 was waived and if the remaining principal amount is repaid on or prior toMarch 31, 2022 , the associated early termination fee for that prepayment will be waived. In connection with execution of the MidCap Credit Agreement, the Company paid MidCap a$0.1 million origination fee. At the Maturity Date or on any earlier date on which all amounts advanced to us become due and payable in full, or are otherwise paid in full, we are required to pay an exit fee equal to 3.75% of the principal amount of all loans advanced to us under the MidCap Credit Agreement. Upon the advance of Tranche 1, we accrued$0.7 million for the related exit fee. In connection with Amendment No. 4, if the remaining principal amount is repaid on or prior toMarch 31, 2022 , a portion of the related exit fee that has not been earned by MidCap will be waived. Our obligations under the MidCap Credit Agreement are secured by a security interest in substantially all of its assets, excluding intellectual property (which is subject to a negative pledge). Additionally, the Company's future subsidiaries, if any, may be required to become co-borrowers or guarantors under the MidCap Credit Agreement.
The MidCap Credit Agreement contains customary affirmative covenants and customary negative covenants limiting our ability and the ability of our subsidiaries, if any, to, among other things, dispose of assets, undergo a change in control, merge or consolidate, make acquisitions, incur debt, incur liens, pay dividends, repurchase stock and make investments, in each case subject to certain exceptions.
The MidCap Credit Agreement also contains customary events of default relating to, among other things, payment defaults, breaches of covenants, a material adverse change, delisting of our common stock, bankruptcy and insolvency, cross defaults with certain material indebtedness and certain material contracts, judgments, and inaccuracies of representations and warranties. Upon an event of default, the agent and the lenders may declare all or a portion of our outstanding obligations to be immediately due and payable and exercise other rights and remedies provided for under the agreement. During the existence of an event of default, interest on the obligations could be increased by 2.0%. OnMarch 15, 2022 , we repaid in full all outstanding indebtedness and other obligations under the MidCap Credit Agreement and the other Financing Documents (as defined in the MidCap Credit Agreement), including but not limited to the outstanding principal balance of$7.5 million and an exit fee of approximately$0.5 million , and terminated all obligations thereunder.
At-the-Market Facility Program
OnDecember 21, 2020 , we entered into an equity distribution agreement, or the Sales Agreement, withBMO Capital Markets Corp. , aDelaware corporation, or BMO, with respect to an "at-the-market offering" program under which we could offer and sell, from time to time at its sole discretion, shares of our common stock, par value$0.0001 per share, having aggregate gross proceeds of up to$50.0 million through BMO as its sales agent. OnJanuary 4, 2022 , BMO delivered written notice to us, effective as of such date, to terminate the Sales Agreement pursuant to Section 6(b) thereof. We and BMO agreed to terminate the Sales Agreement, effective as of such date. Through the date of termination of the Sales Agreement, we have not sold any shares under the Sales Agreement. 101
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Cash Flows
The following table shows a summary of our cash flows for the years endedDecember 31, 2021 and 2020: Years Ended December 31, (in thousands) 2021 2020 Net cash used in operating activities$ (34,819) $ (39,270) Net cash provided by investing activities 43,085 10,142 Net cash provided by financing activities 1,116 15,130 Net increase (decrease) in cash, cash equivalents, and restricted cash$ 9,382 $ (13,998) Operating activities Net cash used in operating activities was$34.8 million and$39.3 million for the years endedDecember 31, 2021 and 2020, respectively. The decrease in cash used in operating activities for the years endedDecember 31, 2021 of$4.5 million was primarily due to the receipt of the upfront payment of$20.0 million from Ipsen in connection with the Ipsen Collaboration Agreement, partially offset by higher cash used for working capital and the license fee paid toNorthwestern University of$3.0 million in connection with receipt of the Ipsen Upfront Payment. Investing activities Net cash provided by investing activities was$43.1 million and$10.1 million for the years endedDecember 31, 2021 and 2020, respectively. The increase in cash provided by investing activities of$32.9 million was primarily due to higher proceeds from the maturity, net of purchases, of available-for-sale securities, as well as a decrease in the purchase of scientific equipment of$2.2 million . Financing activities Net cash provided by financing activities of$1.1 million for year endedDecember 31, 2021 is due primarily due to the net proceeds we received of$10.4 million in connection with the sale of common stock and warrants in the registered direct offering inDecember 2021 , as well as proceeds received from the exercise of stock options and the issuance of common stock in connection with our employee stock purchase plan, mostly offset by the prepayment of$10 million of the outstanding principal balance associated with our MidCap Credit Agreement (as discussed above) inDecember 2021 . Net cash provided by financing activities of$15.1 million for the year endedDecember 31, 2020 is primarily due to the net proceeds we received of$17.3 million during the period in connection with the MidCap Credit Agreement, as well as the net proceeds received from the sale of shares of our common stock in the amount of$2.8 million pursuant to the partial exercise of the option to purchase additional shares by the underwriters from ourDecember 2019 financing, partially offset by the repayment of the Hercules loan in the amount of$5.0 million upon the loan's maturity.
Funding Requirements
We expect our expenses to increase as we continue our ongoing activities,
particularly as we continue our research and development, initiate preclinical
studies or clinical trials, and seek marketing approval for our current and any
of our future product candidates. In addition, if we obtain marketing approval
for any of our current or our future product candidates, we expect to incur
significant commercialization expenses related to product sales, marketing,
manufacturing and distribution, which costs we may seek to offset through entry
into collaboration agreements with third parties. In addition, our losses from
operations may fluctuate significantly from quarter-to-quarter and year-to-year,
depending on the timing and expenditures of our preclinical studies and our
research and development activities. Accordingly, we will need to obtain
substantial additional funding in connection with our continuing operations. If
we are unable to raise capital when needed or on acceptable terms, we would be
forced to delay, reduce or eliminate our research and development programs or
future commercialization efforts.
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We believe that our existing cash and cash equivalents will enable us to fund our operating expenses and capital expenditure requirements into the fourth quarter of 2022. However, 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. Our future capital requirements are difficult to forecast and will depend on many factors, including:
•the terms and timing of any other collaboration, licensing and other arrangements that we may establish;
•the initiation, progress, timing and completion of preclinical studies and clinical trials for our potential therapeutic candidates;
•the effects of health epidemics, including the ongoing COVID-19 pandemic, on our operations or the business or operations of our contract research organizations, or CROs, or other third parties with whom we conduct business;
•the number and characteristics of therapeutic candidates that we pursue;
•the progress, costs and results of our preclinical studies;
•the outcome, timing and cost of regulatory approvals;
•delays that may be caused by changing regulatory requirements;
•the cost and timing of hiring new employees to support our growth;
•unknown legal, administrative, regulatory, accounting, and information technology costs as well as additional costs associated with operating as a public company;
•the costs involved in filing and prosecuting patent applications and enforcing and defending patent claims;
•the costs of filing and prosecuting intellectual property rights and enforcing and defending any intellectual property-related claims;
•the costs and timing of procuring clinical and commercial supplies of our therapeutic candidates;
•the extent to which we acquire or in-license other therapeutic candidates and technologies; and
•the extent to which we acquire or invest in other businesses, therapeutic candidates or technologies.
Until such time, if ever, as we can generate substantial product revenue, we expect to finance our cash needs through a combination of equity offerings, debt financings, collaborations, and distribution or licensing arrangements with third parties. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of our stockholders may be materially diluted, and the terms of such securities could include liquidation or other preferences that adversely affect the rights of our stockholders. Debt financing and preferred equity financing, if available, may involve agreements that include restrictive covenants that limit our ability to take specified actions, such as incurring additional debt, making capital expenditures or declaring dividends. Further, the global financial markets have experienced significant disruptions over the past couple years due to the COVID-19 pandemic and most recently, the conflict betweenRussia andUkraine . Any further disruption or slowdown in the global financial markets and economy may negatively affect our ability to raise funding through equity or debt financings on attractive terms or at all, which could in the future negatively affect our operations. 103
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If we raise funds through collaborations or marketing, distribution 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 when needed, we may be required to delay, limit, reduce or terminate our research and development programs, product development or future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves. Going Concern In accordance with Accounting Standards Codification 205-40, Going Concern, we have evaluated whether there are conditions and events, considered in the aggregate, that raise substantial doubt about our ability to continue as a going concern within one year after the date that the consolidated financial statements are issued. In the absence of a significant source of recurring revenue, our continued viability is dependent on our ability to continue to raise additional capital to finance our operations. We have no committed sources of additional capital at this time and substantial additional financing will be needed by us to fund our operations. Changes in our business strategy, our operating plans, our existing and anticipated working capital needs, increased expenses, or other events will also affect our ability to continue as a going concern. If we are unable to obtain additional funding, we may be forced to delay, reduce or eliminate some or all of our research and development programs, product portfolio expansion or commercialization efforts, which could adversely affect our business prospects, or we may be unable to continue operations.
Contractual Obligations and Commitments
Chicago Lease
InFebruary 2020 , we entered into a new lease signed inFebruary 2020 to secure approximately 30,000 square feet of office and laboratory space at2430 N. Halsted St. ,Chicago, Illinois , or the Chicago Lease. The Chicago Lease commenced onJuly 1, 2020 , which is when the premises leased thereunder were ready for occupancy, and expires 10 years fromJuly 1, 2020 with an option to renew for two additional successive periods of five years each. The initial annual base rent during the original term of the Chicago Lease is approximately$1.1 million for the first 12-month period of the original term, payable in monthly installments beginning on the lease commencement. Base rent thereafter is subject to annual increases of 3%, for an aggregate amount of$12.8 million over the initial term. We must also pay our proportionate share of certain operating expenses and taxes for each calendar year during the term. During the first 12 months, the base rent and our proportionate share of operating expenses and taxes are subject to certain abatements. In connection with the Chicago Lease, we will maintain a letter of credit for the benefit of the landlord in an initial amount of$1.2 million , which amount is subject to reduction over time, which is secured by a restricted certificate of deposit account and presented within other noncurrent assets on our consolidated balance sheet atDecember 31, 2021 .
MidCap Credit and Security Agreement
OnDecember 10, 2021 , we entered into Amendment No. 4 to the MidCap Credit Agreement to prepay$10.0 million of our outstanding loans under the MidCap Credit Agreement. Additionally, in connection with Amendment No. 4, we are required to maintain a balance of$20.0 million in accounts atSilicon Valley Bank , including$8.0 million in a blocked account atSilicon Valley Bank . The balance of$8.0 million in the blocked account atSilicon Valley Bank is restricted cash and is presented within other noncurrent assets on the accompanying consolidated balance sheet. The MidCap Credit Agreement provides for a secured term loan facility in an aggregate principal amount of up to$25.0 million . We borrowed the first advance of$17.5 million onSeptember 25, 2020 . Amendment No. 4 terminated the availability of the second advance of$7.5 million effective as ofDecember 9, 2021 , that was previously available under the MidCap Credit Agreement subject to certain conditions. 104
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OnMarch 15, 2022 , we repaid in full all outstanding indebtedness and other obligations under the MidCap Credit Agreement and the other Financing Documents (as defined in the MidCap Credit Agreement), including but not limited to the outstanding principal balance of$7.5 million and an exit fee of approximately$0.5 million , and terminated all obligations thereunder.
Other
We enter into agreements in the normal course of business with contract research organizations and vendors for clinical trials, preclinical studies, and other services and products for operating purposes which are cancelable at any time by us, generally upon 30 days prior written notice. We also have obligations to make future payments toNorthwestern that become due and payable on the achievement of certain commercial milestones. These payments are not included in this table of contractual obligations.
JOBS Act
We are an emerging growth company, as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. Under the JOBS Act, an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards. Thus, an emerging growth company 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 will adopt new or revised accounting standards on the relevant dates on which adoption of such standards is required for other public companies. In addition, as an emerging growth company, we will not be required to provide an auditor's attestation report on our internal control over financial reporting in future annual reports on Form 10-K as otherwise required by Section 404(b) of the Sarbanes-Oxley Act.
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