SEC Filing - ARS Pharmaceuticals

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10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended June 30, 2021

☐ 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 001-39756

Silverback Therapeutics, Inc.

(Exact name of Registrant as specified in its Charter)



Delaware	81-1489190
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

500 Fairview Ave N, Suite 600 Seattle, Washington	98109
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (206) 456-2900

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



Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.0001 per share	SBTX	The Nasdaq Stock Market LLC

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 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 ☒

As of August 10, 2021 there were 35,036,477 shares of registrant’s common stock, $0.0001 par value per share, outstanding.

Table of Contents

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

SUMMARY OF RISKS ASSOCIATED WITH OUR BUSINESS



		Page
PART I	FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)	6
	Condensed Balance Sheets	6
	Condensed Statements of Operations and Comprehensive Loss	7
	Condensed Statements of Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit)	8
	Condensed Statements of Cash Flows	9
	Notes to Unaudited Condensed Financial Statements	10
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	27
Item 4.	Controls and Procedures	27

PART II	OTHER INFORMATION
Item 1.	Legal Proceedings	28
Item 1A.	Risk Factors	28
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	73
Item 3.	Defaults Upon Senior Securities	74
Item 4.	Mine Safety Disclosures	74
Item 5.	Other Information	74
Item 6.	Exhibits	75

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q (this “Quarterly Report”) contains forward-looking statements that involve risks and uncertainties. We make such forward-looking statements pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and other federal securities laws. All statements other than statements of historical facts contained in this Quarterly Report are forward-looking statements. In some cases, you can identify forward-looking statements by words such as “anticipate,” “believe,” “contemplate,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “seek,” “should,” “target,” “will,” “would,” or the negative of these words or other comparable terminology. These forward-looking statements include, but are not limited to, statements about:



our plans to research, develop, and commercialize SBT6050 and any future product candidates;



our ability to obtain and maintain regulatory approval of product candidates arising from our ImmunoTAC technology platform, including SBT6050, in any of the indications for which we plan to develop them;



our ability to obtain funding for our operations, including funding necessary to commence and complete the clinical trials, conduct additional manufacturing, and conduct preclinical studies of any of our product candidates, including SBT6050;



the success, cost, and timing of our research and development activities, including our ongoing and planned clinical trials and preclinical studies;



the size of the markets for our product candidates, and our ability to serve those markets;



our ability to successfully commercialize our product candidates;



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



our ability to develop and maintain sales and marketing capabilities, whether alone or with potential future collaborators;



regulatory developments in the United States and foreign countries;



the performance of our third-party service providers, including our contract research organizations, suppliers, and manufacturers;



the safety, efficacy, and market success of competing therapies that are or become available;



our ability to attract and retain key scientific and management personnel;



our ability to attract and retain collaborators with development, regulatory and commercialization expertise;



our expectations regarding the period during which we qualify as an emerging growth company under the Jumpstart Our Business Startups Act of 2012;



the accuracy of our estimates regarding expenses, future revenues, capital requirements and needs for additional financing;



our expectations regarding our ability to obtain and maintain intellectual property protection for our product candidates and our ability to operate our business without infringing upon the intellectual property rights of others;



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



other risks and uncertainties, including those described under Part II, Item 1A, “Risk Factors” of this Quarterly Report.

Any forward-looking statements in this Quarterly Report reflect our current views with respect to future events or to our future financial performance and involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements. Factors that may cause actual results to differ materially from current expectations include, among other things, those listed under Part II, Item 1A, “Risk Factors” of this Quarterly Report. Given these uncertainties, you should not place undue reliance on these forward-looking statements. Except as required by law, we assume no obligation to update or revise these forward-looking statements for any reason, even if new information becomes available in the future.

Unless the context otherwise indicates, references in this Quarterly Report to the terms “Silverback”, “the Company”, “we”, “our" and “us” refer to Silverback Therapeutics, Inc., and references to our “common stock” refers to our voting common stock.

SUMMARY OF RISKS ASSOCIATED WITH OUR BUSINESS

An investment in shares of our common stock involves a high degree of risk. Below is a list of the more significant risks associated with our business. This summary does not address all of the risks that we face. Additional discussion of the risks listed in this summary, as well as other risks that we face, are set forth under Part II, Item 1A, “Risk Factors” in this Quarterly Report. Some of the material risks associated with our business include the following:



We have a limited operating history, have incurred net losses since our inception, and anticipate that we will continue to incur significant losses for the foreseeable future. We may never generate any revenue or become profitable or, if we achieve profitability, may not be able to sustain it.



The COVID-19 pandemic could continue to adversely impact our business, including our ongoing and planned clinical trials, supply chain, and business development activities.



Preclinical and clinical development is a lengthy, expensive, and uncertain process. The results of preclinical studies and early clinical trials are not always predictive of future results. Any product candidate that we advance into clinical trials, including SBT6050, may not achieve favorable results in later clinical trials, if any, or receive marketing approval.



Serious adverse events, undesirable side effects, or other unexpected properties of our product candidates may be identified during development or after approval, which could lead to the discontinuation of our clinical development programs, refusal by regulatory authorities to approve our product candidates or, if discovered following marketing approval, revocation of marketing authorizations or limitations on the use of our product candidates thereby limiting the commercial potential of such product candidate.



The market opportunities for our product candidates may be relatively small as it will be limited to those patients who are ineligible for or have failed prior treatments and our estimates of the prevalence of our target patient populations may be inaccurate.



Our product candidates are based on novel technologies, which make it difficult to predict the timing, results and cost of product candidate development and likelihood of obtaining regulatory approval.



If we are required by the U.S. Food and Drug Administration (FDA) to obtain approval of a companion diagnostic in connection with approval of any of our product candidates, and we do not obtain or face delays in obtaining FDA approval of a diagnostic device or test, we will not be able to commercialize such product candidate and our ability to generate revenue will be materially impaired.



Even if we obtain regulatory approval for our product candidates, they will remain subject to ongoing regulatory oversight. Additionally, our product candidates, if approved, could be subject to labeling and other restrictions on marketing or withdrawal from the market, and we may be subject to penalties if we fail to comply with regulatory requirements or if we experience unanticipated problems with our product candidates, when and if any of them are approved.



We contract with third parties for the manufacture and supply of certain of our product candidates for use in preclinical testing and clinical trials and will rely on third parties for commercial supply, which supply may become limited or interrupted at any time or may not be of satisfactory quality and quantity.



Any approved products may fail to achieve the degree of market acceptance by physicians, patients, hospitals, cancer treatment centers, healthcare payors, and others in the medical community necessary for commercial success.



If the market opportunities for any of our product candidates are smaller than we believe they are, our revenue may be adversely affected, and our business may suffer.



If we are unable to obtain and maintain sufficient intellectual property protection for our platform technologies and product candidates, or if the scope of the intellectual property protection is not sufficiently broad, our competitors could develop and commercialize products similar or identical to ours, and our ability to successfully commercialize our products may be adversely affected.



We may not realize the benefits of any acquisitions, in-license, or strategic alliances that we enter into.



We may rely on trade secret and proprietary know-how, which can be difficult to trace and enforce, and if we are unable to protect the confidentiality of our trade secrets, our business and competitive position would be harmed.



If any of our product candidates are approved for marketing and commercialization and we are unable to establish sales and marketing capabilities or enter into agreements with third parties to sell and market our product candidates, we will be unable to successfully commercialize our product candidates if and when they are approved.



We face substantial competition, which may result in others discovering, developing, or commercializing products more quickly or marketing them more successfully than us.



We are highly dependent on our key personnel, and if we are not successful in attracting and retaining highly qualified personnel, we may not be able to successfully implement our business strategy.



The price of our common stock is subject to volatility related or unrelated to our operations.



We are currently party to an in-license agreement under which we were granted rights to manufacture certain components of our product candidates. If we breach our obligations under these agreements, we may be required to pay damages, lose our rights to these technologies or both, which would adversely affect our business and prospects.

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

Silverback Therapeutics, Inc.

Condensed Balance Sheets

(in thousands, except share and par value data)


	June 30,			December 31,
	2021			2020
	(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	359,689		$	386,569
Prepaid expenses and other current assets		3,338			4,087
Total current assets		363,027			390,656
Property and equipment, net		1,984			1,618
Restricted cash		350			350
Right-of-use asset		1,615			2,180
Total assets	$	366,976		$	394,804
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	1,805		$	2,583
Accrued expenses		12,785			5,278
Term loan payable, net		—			844
Current portion of lease liability		958			896
Total current liabilities		15,548			9,601
Lease liability, net of current portion		1,778			2,326
Total liabilities		17,326			11,927
Commitments and contingencies (Note 10)
Stockholders’ equity:
Preferred Stock, $0.0001 par value per share; 10,000,000 shares authorized at June 30, 2021 and December 31, 2020; no shares issued and outstanding at June 30, 2021 and December 31, 2020		—			—
Common stock, $0.0001 par value per share; 200,000,000 shares authorized at June 30, 2021 and December 31, 2020, 34,998,372 and 34,801,537 shares issued and 34,963,085 and 34,701,274 shares outstanding at June 30, 2021 and December 31, 2020, respectively		4			3
Additional paid-in capital		489,743			479,608
Accumulated deficit		(140,097	)		(96,734	)
Total stockholders’ equity		349,650			382,877
Total liabilities, and stockholders’ equity	$	366,976		$	394,804

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

Silverback Therapeutics, Inc.

Condensed Statements of Operations and Comprehensive Loss

(in thousands, except share and per share data)

(unaudited)


	Three Months Ended June 30,						Six Months Ended June 30,
	2021			2020			2021			2020
Operating expenses:
Research and development	$	17,749		$	5,126			29,988		$	9,540
General and administrative		6,762			1,337			13,408			2,165
Total operating expenses		24,511			6,463			43,396			11,705
Loss from operations		(24,511	)		(6,463	)		(43,396	)		(11,705	)
Interest income (expense), net		15			(4	)		33			(41	)
Net loss and comprehensive loss		(24,496	)		(6,467	)		(43,363	)	$	(11,746	)
Net loss per share applicable to common stockholders, basic and diluted	$	(0.70	)	$	(9.65	)	$	(1.25	)	$	(17.54	)
Weighted-average shares used in computing net loss per share attributable to common stockholders, basic and diluted		34,876,050			670,451			34,825,281			669,742

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

Silverback Therapeutics, Inc.

Condensed Statements of Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit)

(in thousands, except share data)

(unaudited)


	Redeemable Convertible Preferred Stock				Common Stock				Additional Paid-in		Accumulated			Total Stockholders’
	Shares		Amount		Shares		Amount		Capital		Deficit			Equity
Balance as of December 31, 2020		—	$	—		34,701,274	$	3	$	479,608	$	(96,734	)	$	382,877
Exercise of common stock options and vesting of early exercised common stock options		—		—		125,930		—		254		—			254
Stock-based compensation		—		—		—		—		4,285		—			4,285
Net loss and comprehensive loss		—		—		—		—		—		(18,867	)		(18,867	)
Balance as of March 31, 2021		—	$	—		34,827,204	$	3	$	484,147	$	(115,601	)	$	368,549
Exercise of common stock options, shares issued under the employee stock purchase plan, and vesting of early exercised common stock options		—		—		135,881		1		866		—			867
Stock-based compensation		—		—		—		—		4,730		—			4,730
Net loss and comprehensive loss		—		—		—		—		—		(24,496	)		(24,496	)
Balance as of June 30, 2021		—	$	—		34,963,085	$	4	$	489,743	$	(140,097	)	$	349,650

	Redeemable Convertible Preferred Stock				Common Stock				Additional Paid-in		Accumulated			Total Stockholders’ 'Equity
	Shares		Amount		Shares		Amount		Capital		Deficit			(Deficit)
Balance as of December 31, 2019		15,714,283	$	53,174		664,431	$	—	$	5,010	$	(63,787	)	$	(58,777	)
Issuance of Series B redeemable convertible preferred stock for cash, net of $76 in issuance costs (Note 7)		10,027,666		21,458		—		—		—		—			—
Issuance of Series B redeemable convertible preferred stock upon conversion of convertible notes		4,673,388		10,095		—		—		—		—			—
Exercise of common stock options and vesting of early exercised common stock options		—		—		5,350		—		6		—			6
Stock-based compensation		—		—		—		—		47		—			47
Net loss and comprehensive loss		—		—		—		—		—		(5,279	)		(5,279	)
Balance as of March 31, 2020		30,415,337	$	84,727		669,781	$	—	$	5,063	$	(69,066	)	$	(64,003	)
Proceeds received in advance of issuance of Series B redeemable convertible preferred stock (Note 7)				12,048		—		—		—		—			—
Exercise of common stock options and vesting of early exercised common stock options		—		—		1,843		—		2		—			2
Stock-based compensation		—		—		—		—		128		—			128
Net Loss and comprehensive income		—		—		—		—		—		(6,467	)		(6,467	)
Balance as of June 30, 2020		30,415,337	$	96,775		671,624	$	—	$	5,193	$	(75,533	)	$	(70,340	)

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

Silverback Therapeutics, Inc.

Condensed Statements of Cash Flows

(in thousands)

(unaudited)


	Six Months Ended June 30,
	2021			2020
Cash flows from operating activities:
Net loss	$	(43,363	)	$	(11,746	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation expense		393			277
Amortization of debt issuance costs		2			25
Stock-based compensation		9,015			175
Non-cash lease expense		565			527
Changes in operating assets and liabilities:
Prepaid expenses and other current assets		749			(261	)
Accounts payable and accrued expenses		6,789			(1,639	)
Lease liability		(486	)		(429	)
Net cash used in operating activities		(26,336	)		(13,071	)
Cash flows from investing activities:
Purchase of property and equipment		(735	)		(38	)
Net cash used in investing activities		(735	)		(38	)
Cash flows from financing activities:
Proceeds from issuance of redeemable convertible preferred stock, net of issuance costs		—			33,707
Principal payments on term loan payable		(846	)		(467	)
Proceeds from exercise of common stock options and employee stock purchase plan		1,037			8
Net cash provided by financing activities		191			33,248
Change in cash, cash equivalents, and restricted cash		(26,880	)		20,139
Cash, cash equivalents, and restricted cash at beginning of period		386,919			10,526
Cash, cash equivalents, and restricted cash at end of period	$	360,039		$	30,665
Supplemental disclosure of cash flow information:
Proceeds for the issuance of redeemable preferred stock on July 1, 2020 included in proceeds from issuance of redeemable preferred stock, net of issuance costs	$	—		$	12,048
Issuance of Series B redeemable convertible preferred stock upon conversion of convertible notes	$	—		$	10,095

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

Silverback Therapeutics, Inc.

Notes to Unaudited Condensed Financial Statements

1. Nature of Business

Silverback Therapeutics, Inc. (“Silverback” or “the Company”) is a clinical-stage biopharmaceutical company focused on leveraging its proprietary ImmunoTAC technology platform to develop systemically delivered and tissue targeted therapeutics for the treatment of cancer, chronic viral infections, and other serious diseases. The Company’s platform enables us to strategically pair proprietary linker-payloads that modulate key disease-modifying pathways with monoclonal antibodies directed at specific disease sites. The Company was formed in Seattle, Washington and incorporated in the state of Delaware on January 4, 2016.

Initial Public Offering and Related Transaction

On December 3, 2020, the Company’s registration statement on Form S-1 (File No. 333-250009) for its initial public offering of common stock (“IPO”) was declared effective by the Securities and Exchange Commission (“SEC”). On December 8, 2020, the Company issued and sold 13,225,000 shares of common stock in the IPO at a public offering price of $21.00 per share, resulting in net proceeds of $255.3 million after deducting underwriting discounts and commissions and offering expenses paid by the Company.

In connection with the IPO, all 77,074,884 shares of redeemable convertible preferred stock outstanding at the time of the IPO converted into 20,758,098 shares of the Company’s common stock.

Risks and Uncertainties

The Company is subject to a number of inherent risks which include, but are not limited to, the need to obtain adequate additional funding, possible failure of clinical trials or other events demonstrating a lack of clinical safety or efficacy of its product candidates, dependence on key personnel, reliance on third-party service providers for manufacturing drug product and conducting clinical trials, the ability to successfully secure its proprietary technology, and risks related to the regulatory approval and commercialization of a product candidate. Additionally, the development and commercialization of new drug products is highly competitive. Products or technologies developed by competitors may diminish or render obsolete the Company’s existing products under development.

Liquidity and Capital Resources

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. The Company has incurred net operating losses since its inception and had an accumulated deficit of $140.1 million as of June 30, 2021. The Company had cash, cash equivalents, and restricted cash of $360.0 million as of June 30, 2021 and has not generated positive cash flows from operations. To date, the Company has funded its operations primarily through the issuance of redeemable convertible preferred stock, convertible notes, and the sale of common stock in connection with the IPO. The Company’s currently available cash, cash equivalents, and restricted cash as of June 30, 2021 are sufficient to meet its anticipated cash requirements for the 12 months following the date the financial statements are issued. Management considers that there are no conditions or events, in the aggregate, that raise substantial doubt about the entity’s ability to continue as a going concern for a period of at least 12 months from the date the financial statements are issued.

Management expects operating losses to continue for the foreseeable future. There can be no assurance that the Company will ever earn revenues or achieve profitability, or if achieved, that they will be sustained on a continuing basis. In addition, the manufacturing, clinical and preclinical development activities as well as the commercialization of the Company’s products, if approved, will require significant additional financing. The Company may be unable to secure such financing when needed, or if available, such financings may be under terms that are unfavorable to the Company or the current stockholders. If the Company is unable to raise additional funds when needed, it may be required to delay, reduce the scope of, or eliminate development programs, which may adversely affect its business and operations.

2. Summary of Significant Accounting Policies

Basis of Presentation

The financial statements have been prepared in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”). Any reference in these notes to applicable guidance is meant to refer to the authoritative U.S. GAAP as found in the Accounting Standards Codification (“ASC”), and Accounting Standards Update (“ASU”), of the Financial Accounting Standards Board (“FASB”).

Unaudited Interim Condensed Financial Statements

The accompanying condensed balance sheet as of June 30, 2021, the condensed statements of operations and comprehensive loss and condensed statements of redeemable convertible preferred stock and stockholders’ equity (deficit) for the three and six months ended June 30, 2021 and 2020, and the condensed statements of cash flows for the six months ended June 30, 2021 and 2020, are unaudited. The balance sheet as of December 31, 2020 was derived from the audited financial statements as of and for the year ended December 31, 2020. The unaudited interim condensed financial statements have been prepared on a basis consistent with the audited annual financial statements as of and for the year ended December 31, 2020, and, in the opinion of management, reflect all adjustments, consisting solely of normal recurring adjustments, necessary for the fair presentation of the Company’s financial position as of June 30, 2021, the condensed results of its operations for the three and six months ended June 30, 2021 and 2020, and its cash flows for the six months ended June 30, 2021 and 2020. The financial data and other information disclosed in these notes related to the six months ended June 30, 2021 and 2020 are also unaudited. The condensed results of operations for the three and six months ended June 30, 2021 are not necessarily indicative of the results to be expected for the full year ending December 31, 2021 or any other period.

Use of Estimates

The preparation of the Company’s financial statements requires it to make estimates and assumptions that impact the reported amounts of assets, liabilities and expenses in the Company’s financial statements and accompanying notes. The most significant estimates in the Company’s financial statements relate to accruals for research and development expenses, valuation of equity awards, and valuation allowances for deferred tax assets. These estimates and assumptions are based on current facts, historical experience and various other factors believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the recording of expenses that are not readily apparent from other sources. Actual results may differ materially and adversely from these estimates.

The full extent to which the coronavirus (“COVID-19”) pandemic will directly or indirectly impact the Company’s business, results of operations and financial condition, including expenses, clinical trials and research and development costs, will depend on future developments that are highly uncertain, including as a result of new information that may emerge concerning COVID-19 and the actions taken to contain or treat COVID-19, as well as the economic impact on local, regional, national and international markets. The Company has considered potential impacts arising from the COVID-19 pandemic and is not presently aware of any events or circumstances that would require the Company to update its estimates, judgments or revise the carrying value of its assets or liabilities.

Fair Value of Financial Instruments

Cash and cash equivalents, and restricted cash are carried at fair value. Financial instruments, including accounts payable and accrued expenses are carried at cost, which approximates fair value given their short-term nature. Term loan payable is carried at cost, which approximates fair value as its effective interest rate approximates current market rates.

Cash and Cash Equivalents

Cash equivalents are comprised of short-term, highly-liquid investments with maturities of 90 days or less at the date of purchase. At June 30, 2021 and December 31, 2020, the Company’s cash equivalents consisted of money market funds.

Restricted Cash

Restricted cash consists of a deposit securing a collateral letter of credit issued in connection with the Company’s facility operating lease.

The following table provides a reconciliation of cash and cash equivalents and restricted cash reported within the condensed balance sheets that sum to the amounts shown in the condensed statements of cash flows (in thousands):


	June 30, 2021		December 31, 2020
Cash and cash equivalents	$	359,689	$	386,569
Restricted cash		350		350
Total cash and cash equivalents and restricted cash	$	360,039	$	386,919

Concentrations of Credit Risk

The Company is subject to credit risk from holding its cash and cash equivalents at one commercial bank. The Company limits its exposure to credit losses by investing in money market funds through a U.S. bank with high credit ratings. Cash may consist of deposits held with banks that may at times exceed federally insured limits, however, exposure to credit risk in the event of default by the financial institution is limited to the extent of amounts recorded on the balance sheets. The Company has not experienced any losses in such accounts and management believes that the Company is not exposed to significant credit risk due to the financial position of the depository institutions in which those deposits are held.

Leases

Leases consist of the Company’s operating lease. In accordance with ASC 842, Leases, the Company determines if an arrangement is a lease at inception and evaluates each lease agreement to determine whether the lease is an operating or finance lease. For leases where the Company is the lessee, right-of-use (“ROU”) assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent an obligation to make lease payments arising from the lease. ROU assets and lease liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. The Company uses its incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments. The operating lease ROU asset also includes any prepaid lease payments, lease incentives received, and costs which will be incurred in exiting a lease. The Company’s lease includes options to extend or terminate the lease. Periods covered by an option to extend the lease are included in the lease term when it is reasonably certain that the Company will exercise that option. Periods covered by an option to terminate the lease are included in the lease term when it is reasonably certain that the Company will not exercise that option. At the inception of the lease and as of June 30, 2021, the Company was not reasonably certain that it will exercise its option to extend the lease and was not reasonably certain that it will not exercise its option to terminate the lease, therefore, the periods covered by the options are not included within the lease term. Short-term leases with an initial term of 12 months or less are not recorded on the balance sheet. The Company does not have material short-term lease costs. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term. For real estate leases, the Company does not separate lease and non-lease components. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.

Research and Development Expenses

All research and development costs are expensed in the period incurred. Research and development expenses consist primarily of direct and indirect costs incurred in connection with the development of the Company’s ImmunoTAC technology platform, discovery efforts, and preclinical study and clinical trial activities related to the Company’s program pipeline, including the Company’s lead product candidate, SBT6050, and other pipeline programs, including SBT6290 and SBT8230. Direct costs include expenses incurred under agreements with contract research organizations (“CROs”) and other vendors that conduct the Company’s preclinical and clinical activities, expenses associated with manufacturing the Company’s product candidates including under agreements with contract development and manufacturing organizations (“CDMOs”) and other vendors, and consulting fees. Indirect costs include personnel-related expenses, consisting of employee salaries, bonuses, benefits, and stock-based compensation expense and recruiting costs for personnel engaged in research and development activities, facility and equipment related expenses, consisting of indirect and allocated expenses for rent, depreciation, and equipment maintenance, and other unallocated research and development expenses incurred in connection with the Company’s research and development programs, including laboratory materials and supplies and license fees. Research and development expenses are charged to operating expenses as incurred when these expenditures relate to the Company’s research and development efforts and have no alternative future uses.

The Company is obligated to make upfront payments upon execution of certain research and development agreements. Advance payments, including nonrefundable amounts, for goods or services that will be used or rendered for future research and development activities are capitalized until such goods are delivered or the related services are performed, or such time when the Company does not expect the goods to be delivered or services to be performed. The Company estimates the period over which such services will be performed and the level of effort to be expended in each period. If actual timing of performance or the level of effort varies from the estimate, the Company will adjust the amounts recorded accordingly. Since inception, the Company has not experienced any material differences between accrued or prepaid costs and actual costs.

Stock-Based Compensation

The cost of employee services received in exchange for an award of an equity instrument is measured at the grant date based on the award’s estimated fair value using the Black-Scholes option pricing model. The estimated fair value of the awards is recognized into expense on a straight-line basis over the requisite service period. Stock-based compensation expense for an award with a

performance condition is recognized when the achievement of such performance condition is determined to be probable. If the outcome of such performance condition is not determined to be probable or is not met, no compensation expense is recognized, and any previously recognized compensation expense is reversed. Management evaluates when the achievement of a performance condition is probable based on the expected satisfaction of the performance condition at each reporting date. Forfeitures are recognized as a reduction of stock-based compensation expense as they occur. The option plan permits, but does not require, the inclusion of early exercise provisions in individual awards. Proceeds from early option exercises are recorded as a liability until the underlying restricted shares vest. While the restricted shares have voting rights, they are not considered outstanding for accounting purposes.

Comprehensive Loss

Comprehensive loss is defined as a change in equity during a period from transactions and other events and circumstances from non-owner sources. The Company’s comprehensive loss was equal to net loss for the three and six months ended June 30, 2021 and 2020.

Net Loss Per Share Attributable to Common Stockholders

Basic net loss per share attributable to common stockholders is calculated by dividing the net loss attributable to common stockholders by the weighted-average number of shares of common stock outstanding for the period, without consideration of potentially dilutive securities. Diluted net loss per share attributable to common stockholders is the same as basic net loss per share attributable to common stockholders since the effect of potentially dilutive securities is anti-dilutive given the net loss of the Company. For purposes of this calculation, redeemable convertible preferred stock, stock options, employee stock purchase rights, and unvested common stock subject to repurchase are considered to be common stock equivalents but are not included in the calculations of diluted net loss per share for the periods presented as their effect would be antidilutive.

Emerging Growth Company Status

The Company is an emerging growth company, as defined in the Jumpstart Our Business Startups Act of 2012 (“JOBS Act”). Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies. The Company has elected to use this extended transition period for complying with certain new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date that it is (1) no longer an emerging growth company or (2) affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act. As a result, these financial statements may not be comparable to companies that comply with the new or revised accounting pronouncements as of public company effective dates.

Recently Issued Accounting Pronouncements Not Yet Adopted

In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The objective of the standard is to provide information about expected credit losses on financial instruments at each reporting date and to change how other-than temporary impairments on investment securities are recorded. The guidance is effective for the Company beginning on January 1, 2023, with early adoption permitted. The Company is currently evaluating the impact the standard may have on its financial statements and related disclosures.

3. Fair Value Measurements

The Company follows authoritative accounting guidance, which among other things, defines fair value, establishes a consistent framework for measuring fair value, and expands disclosure for each major asset and liability category measured at fair value on either a recurring or nonrecurring basis. Fair value is defined as the exchange price that would be received to sell an asset or paid to transfer a liability (at exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The three levels of inputs that may be used to measure fair value include:

Level 1: Quoted prices in active markets for identical assets or liabilities. The Company’s Level 1 assets consist of money market funds.

Level 2: Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities in active markets or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3: Unobservable inputs that are supported by little or no market activity.

The following table identifies the Company’s assets and liabilities that were measured at fair value on a recurring basis (in thousands):


June 30, 2021	Level 1		Level 2		Level 3
Assets:
Money market funds	$	359,689		—		—
December 31, 2020	Level 1		Level 2		Level 3
Assets:
Money market funds	$	386,369		—		—

There were no transfers between the Level 1 and Level 2 categories or into or out of the Level 3 category during the periods presented.

4. Accrued Expenses

Accrued expenses consisted of the following (in thousands):


	June 30,		December 31,
	2021		2020
Research and development expenses	$	9,665	$	2,063
Employee compensation and benefits		2,175		2,634
Professional services and other		945		581
Total accrued expenses	$	12,785	$	5,278

5. Leases

The Company leases an office and laboratory space in Seattle, Washington. The components of lease expense and related cash flows were as follows (in thousands):


	Three Months Ended June 30,		Six Months Ended June 30,
	2021	2020	2021	2020
Lease expense
Operating lease expense	347	347	694	694
Variable lease expense	106	94	212	180
Total lease expense	453	441	906	874
Operating cash outflows from operating leases	413	389	834	786

The remaining term on the Company’s lease was 1.4 years as of June 30, 2021. To compute the present value of the lease liability, the Company used a discount rate of 8.5%.

Future minimum commitments due under the operating lease agreement as of June 30, 2021 are as follows (in thousands):


Years Ending December 31,	Amount
2021 (remaining 6 months)	$	517
2022		2,454
Thereafter		—
Total undiscounted lease payments		2,971
Present value adjustment		(235	)
Total present value of lease payments	$	2,736

On July 1, 2021, the Company entered into a sublease agreement for additional office space. The commencement date of the

sublease was August 1, 2021. The contractual term of the sublease is two years with an option to extend for one additional year and an option to terminate after one year subject to a termination fee. The annual minimum rent payable by the Company under the sublease will be approximately $0.3 million annually.

6. Term Loan Payable

In November 2016, the Company entered into a loan and security agreement with Silicon Valley Bank (“SVB”) and borrowed

$3.5 million as a term loan. The outstanding principal amount of the term loan accrued interest at an annual rate of 1.75% per annum. At closing, the Company incurred de minimis debt issuance costs and owed a final payment fee of $0.3 million, both of which are amortized to interest expense over the remaining term of the debt under the effective interest method. The effective interest rate of the Company’s term loan was 5.14%.

The term loan’s original maturity date was November 1, 2020. However, in April 2020, the Company amended the loan and

security agreement to defer principal payments for six months and extend the maturity date to May 1, 2021. There were no costs or additional warrant issuances in connection with this amendment. The Company accounted for the amendment as a debt modification and amortized the remaining debt discount over the remaining term.

On May 1, 2021, the Company made its final scheduled payment to SVB under the loan and security agreement including the

final payment fee.

7. Stockholders’ Equity (Deficit)

Redeemable Convertible Preferred Stock

Prior to its conversion to common stock in December 2020, the Company’s redeemable convertible preferred stock was classified as mezzanine equity on the Company’s balance sheets as the shares are contingently redeemable upon a deemed liquidation such as a change in control and in that event, there is no guarantee that all stockholders would be entitled to receive the same form of consideration. No accretion to redemption value was recorded during the six months ended June 30, 2020 as a deemed liquidation event was not considered probable.

In March 2020, the Company issued 14,701,054 shares of its Series B redeemable convertible preferred stock, including 4,673,388 shares issued upon conversion of then outstanding convertible notes and accrued interest, and 10,027,666 shares issued for cash at a purchase price of $2.16 per share, resulting in gross proceeds of $21.5 million. The Series B purchase agreement provided that the Company would issue, and the Series B holders would purchase, an additional 21,732,862 shares of the Company’s Series B redeemable convertible preferred stock across two tranches for aggregate proceeds of $46.9 million in the event that certain agreed upon milestones were achieved or the preferred majority approved their closing. The Series B tranches did not meet the definition of freestanding instruments or the definition of derivatives, therefore, they were not accounted for separately or bifurcated.

On July 1, 2020, the Company issued 10,669,834 shares of its Series B redeemable convertible preferred stock for cash at a

purchase price of $2.16 per share, resulting in gross proceeds of $23.0 million. Proceeds received in advance of the July 1, 2020 issuance of Series B redeemable convertible preferred stock totaled $12.0 million. Given the noncancelable nature of the Series B issuance on July 1, 2020 and in light of the call exercise notice mailed by the Company 20 days prior, the proceeds received in June 2020 were recorded as mezzanine equity at June 30, 2020 despite the related shares not becoming legally issued and outstanding until July 1, 2020.

Common Stock

The Company has reserved shares of common stock for the following potential future issuances:


	June 30,		December 31,
	2021		2020
Shares underlying outstanding equity awards		6,467,507		6,316,569
Shares available for future equity award grants		2,930,614		1,506,806
Shares underlying early exercised equity awards		35,287		100,263
Shares underlying ESPP withholdings		—		4,393
Total		9,433,408		7,928,031

8. Stock-Based Compensation

Stock-based compensation expense recognized for all equity awards has been reported in the statements of operations and comprehensive loss as follows (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Research and development expense	$	2,079	$	73	$	4,004		104
General and administrative expense		2,651		55	$	5,011		71
Total stock-based compensation expense	$	4,730	$	128	$	9,015		175

As of June 30, 2021, the total unrecognized stock-based compensation expense was $60.4 million, which is expected to be recognized over a remaining weighted-average period of approximately 2.86 years.

Stock Option Awards

As of June 30, 2021, the Company’s equity incentive plans authorized a total of 9,564,798 shares, of which 2,930,614 shares are available for future grant, and 6,467,507 shares are outstanding. Not included in the outstanding option balance are 35,287 shares pursuant to stock options that were early exercised and subject to repurchase under the 2016 Plan that remain unvested as of June 30, 2021.

A summary of the Company’s stock option activity for the six months ended June 30, 2021 is as follows (in thousands, except share and per share data and years):


	Stock Options Outstanding
	Shares Subject to Options Outstanding			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Life (Years)		Aggregate Intrinsic Value
Balance at December 31, 2020		6,316,569		$	10.93		9.5	$	223,647
Granted		328,873			39.02
Exercised		(165,331	)		2.86				4,634
Cancelled		(12,604	)		13.81
Balance at June 30, 2021		6,467,507			12.56		9.04		121,425