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Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended June 30, 2020

or

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

Commission file number: 001-36182

Xencor, Inc.

(Exact Name of Registrant as Specified in its Charter)

Delaware

20-1622502

(State or Other Jurisdiction of Incorporation

or Organization)

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

111 West Lemon Avenue, Monrovia, CA

91016

(Address of Principal Executive Offices)

(Zip Code)

(626) 305-5900

(Registrant’s Telephone Number, Including Area Code)

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

Title of each class:

    

Trading Symbol

    

Name of each exchange on which registered:

Common Stock, par value $0.01 per share

XNCR

NASDAQ

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes   No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes   No 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See 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 checkmark 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 Securities Exchange Act of 1934).  Yes   No 

Indicate the number of shares of each of the issuer’s classes of common stock, as of the latest practicable date:

Class

Outstanding at July 30, 2020

Common stock, $0.01 par value

57,242,886

Table of Contents

Xencor, Inc.

Quarterly Report on FORM 10-Q for the Quarter Ended June 30, 2020

Table of Contents

Page

SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS

3

PART I.

FINANCIAL INFORMATION

5

Item 1.

Financial Statements

5

Balance Sheets as of June 30, 2020 (unaudited) and December 31, 2019

5

Statements of Comprehensive Income (Loss) for the Three and Six Months Ended June 30, 2020 and 2019 (unaudited)

6

Statement of Stockholders’ Equity for the Three and Six Months Ended June 30, 2020 and 2019 (unaudited)

7

Statements of Cash Flows for the Six Months Ended June 30, 2020 and 2019 (unaudited)

8

Notes to Financial Statements (unaudited)

9

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

26

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

37

Item 4.

Controls and Procedures

38

PART II.

OTHER INFORMATION

39

Item 1.

Legal Proceedings

39

Item 1A.

Risk Factors

39

Item 6.

Exhibits

41

Signatures

42

In this report, unless otherwise stated or the context otherwise indicates, references to “Xencor,” “the Company,” “we,” “us,” “our” and similar references refer to Xencor, Inc. The Xencor logo is a registered trademark of Xencor, Inc. This report also contains registered marks, trademarks and trade names of other companies. All other trademarks, registered marks and trade names appearing in this report are the property of their respective holders.

2

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of federal securities laws. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends affecting the financial condition of our business. Forward-looking statements should not be read as a guarantee of future performance or results and will not necessarily be accurate indications of the times at, or by, which such performance or results will be achieved. Forward-looking statements are based on information available at the time those statements are made and/or management’s good faith belief as of that time with respect to future events, and are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in or suggested by the forward-looking statements. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth below under Part II, Item 1A, “Risk Factors” in this Quarterly Report. These statements, which represent our current expectations or beliefs concerning various future events, may contain words such as “may,” “will,” “expect,” “anticipate,” “intend,” “plan,” “believe,” “estimate” or other words indicating future results. Such statements may include, but are not limited to, statements concerning the following:

These forward-looking statements should, therefore, be considered in light of various important factors, including but not limited to, the following:

the effects of the ongoing COVID-19 pandemic on our financial condition, results of operations, cash flows and performance;

our plans to research, develop and commercialize our product candidates;

our ongoing and planned clinical trials;

the timing of and our ability to obtain and maintain regulatory approvals for our product candidates;

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

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

the rate and degree of market acceptance and clinical utility of our products;

the capabilities and strategy of our suppliers and vendors including key manufacturers of our clinical drug supplies;

significant competition in our industry;

costs of litigation and the failure to successfully defend lawsuits and other claims against us;

our partners’ ability to advance drug candidates into, and successfully complete, clinical trials;

our ability to receive research funding and achieve anticipated milestones under our collaborations;

our intellectual property position;

loss or retirement of key members of management;

costs of compliance and our failure to comply with new and existing governmental regulations;

failure to successfully execute our growth strategy, including any delays in our planned future growth; and

our failure to maintain effective internal controls.

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The factors, risks and uncertainties referred to above and others are more fully described under the heading “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2019 and this Quarterly Report on Form 10-Q. Forward-looking statements should be regarded solely as our current plans, estimates and beliefs. We cannot guarantee future results, events, levels of activity, performance or achievements. We do not undertake and specifically decline any obligation to update, republish or revise forward-looking statements to reflect future events or circumstances or to reflect the occurrences of unanticipated events.

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PART I — FINANCIAL INFORMATION

Item1.          Financial Statements

Xencor, Inc.

Balance Sheets

(In thousands, except share amounts)

    

June 30, 

    

December 31, 

2020

2019

(unaudited)

Assets

Current assets

Cash and cash equivalents

$

109,534

$

50,312

Marketable securities

474,114

479,470

Equity securities

2,611

Accounts receivable

8,925

 

21,574

Income tax receivable

804

502

Prepaid expenses and other current assets

7,398

 

6,547

Total current assets

603,386

 

558,405

Property and equipment, net

 

16,239

 

15,805

Patents, licenses, and other intangible assets, net

15,162

 

14,421

Marketable securities - long term

1,145

71,526

Income tax receivable

402

Other assets

 

8,788

 

9,691

Total assets

$

644,720

$

670,250

Liabilities and stockholders’ equity

Current liabilities

Accounts payable

$

10,513

$

10,189

Accrued expenses

9,157

 

8,995

Lease liabilities

2,094

2,169

Deferred revenue

44,685

 

45,205

Total current liabilities

66,449

 

66,558

Lease liabilities, net of current portion

7,626

8,565

Deferred revenue, net of current portion

1,926

Total liabilities

74,075

 

77,049

Commitments and contingencies

Stockholders’ equity

Preferred stock, $0.01 par value: 10,000,000 authorized shares; -0- issued and outstanding shares at June 30, 2020 and December 31, 2019

Common stock, $0.01 par value: 200,000,000 authorized shares at June 30, 2020 and December 31, 2019; 57,214,253 issued and outstanding at June 30, 2020 and 56,902,301 issued and outstanding at December 31, 2019

572

 

569

Additional paid-in capital

908,084

 

887,873

Accumulated other comprehensive income

1,483

 

1,161

Accumulated deficit

 

(339,494)

 

(296,402)

Total stockholders’ equity

 

570,645

 

593,201

Total liabilities and stockholders’ equity

$

644,720

$

670,250

See accompanying notes.

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Xencor, Inc.

Statements of Comprehensive Income (Loss)

(unaudited)

(In thousands, except share and per share data)

Three Months Ended

 

Six Months Ended

June 30, 

 

June 30, 

    

2020

    

2019

 

2020

    

2019

Revenue

Collaborations, licenses, milestones, and royalties

$

13,089

$

19,485

$

45,474

$

131,424

Operating expenses

Research and development

 

43,458

 

33,299

 

77,401

 

61,481

General and administrative

 

7,231

 

5,758

 

14,449

 

11,270

Total operating expenses

 

50,689

 

39,057

 

91,850

 

72,751

Income (loss) from operations

 

(37,600)

 

(19,572)

 

(46,376)

 

58,673

Other income (expenses)

Interest income, net

 

2,090

 

3,615

 

5,129

 

6,501

Other income (expense), net

492

(27)

(1,845)

(212)

Total other income, net

 

2,582

 

3,588

 

3,284

 

6,289

Net income (loss) before income tax expense

(35,018)

(15,984)

(43,092)

64,962

Income tax expense

50

950

Net income (loss)

(35,018)

(16,034)

(43,092)

64,012

Other comprehensive income

Net unrealized gain on marketable securities

427

1,284

322

2,600

Comprehensive income (loss)

$

(34,591)

$

(14,750)

$

(42,770)

$

66,612

Basic net income (loss) per common share

$

(0.61)

$

(0.28)

$

(0.76)

$

1.14

Diluted net income (loss) per common share

$

(0.61)

$

(0.28)

$

(0.76)

$

1.10

Basic weighted average common shares outstanding

57,059,610

56,399,255

57,003,162

56,351,377

Diluted weighted average common shares outstanding

57,059,610

56,399,255

57,003,162

58,042,819

See accompanying notes.

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Xencor, Inc.

Statement of Stockholders’ Equity

(in thousands, except share data)

Accumulated

Additional

Other

Total

Common Stock

Paid-in

Comprehensive

Accumulated

Stockholders’

Stockholders’ Equity

Shares

Amount

Capital

Income (Loss)

Deficit

Equity

Balance, December 31, 2019

56,902,301

569

887,873

1,161

(296,402)

593,201

Issuance of common stock upon exercise of stock awards

79,930

1

1,470

1,471

Issuance of restricted stock units

19,022

Comprehensive loss

(105)

(8,074)

(8,179)

Stock-based compensation

6,512

6,512

Balance, March 31, 2020

57,001,253

$

570

$

895,855

$

1,056

$

(304,476)

$

593,005

Issuance of common stock upon exercise of stock awards

181,856

2

3,273

3,275

Issuance of restricted stock units

2,800

Issuance of common stock under the Employee Stock Purchase Plan

28,344

725

725

Comprehensive income (loss)

427

(35,018)

(34,591)

Stock-based compensation

8,231

8,231

Balance, June 30, 2020

57,214,253

$

572

$

908,084

$

1,483

$

(339,494)

$

570,645

Accumulated

Additional

Other

Total

Common Stock

Paid-in

Comprehensive

Accumulated

Stockholders’

Stockholders’ Equity

Shares

Amount

Capital

Income (Loss)

Deficit

Equity

Balance, December 31, 2018

56,279,542

563

845,366

(971)

(323,277)

521,681

Issuance of common stock upon exercise of stock awards

58,536

1

666

667

Issuance of restricted stock units

11,311

Comprehensive income

1,316

80,045

81,361

Stock-based compensation

5,856

5,856

Balance, March 31, 2019

56,349,389

$

564

$

851,888

$

345

$

(243,232)

$

609,565

Issuance of common stock upon exercise of stock awards

143,504

1

3,238

3,239

Issuance of common stock under the Employee Stock Purchase Plan

36,505

734

734

Comprehensive income (loss)

1,284

(16,034)

(14,750)

Stock-based compensation

9,303

9,303

Balance, June 30, 2019

56,529,398

$

565

$

865,163

$

1,629

$

(259,266)

$

608,091

See accompanying notes.

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Xencor, Inc.

Statements of Cash Flows

(unaudited)

(in thousands)

Six Months Ended

June 30, 

    

2020

    

2019

Cash flows from operating activities

Net income (loss)

$

(43,092)

$

64,012

Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:

Depreciation and amortization

 

2,816

 

2,003

Accretion of discount on marketable securities

 

(838)

 

(1,876)

Stock-based compensation

 

14,743

 

15,159

Abandonment of capitalized intangible assets

 

167

 

90

Equity received in connection with license agreement

(4,589)

Change in fair value of equity security

1,978

Loss on disposal of assets

5

5

Gain on sale of marketable securities available for sale

(153)

Changes in operating assets and liabilities:

Accounts receivable

 

12,649

 

122

Interest receivable

914

(154)

Prepaid expenses and other assets

 

(843)

 

(932)

Accounts payable

 

324

 

5,197

Accrued expenses

 

162

 

(3,436)

Income taxes

91

1,604

Lease liabilities and right of use (ROU) assets

(110)

(65)

Deferred revenue

 

(2,446)

 

8,699

Net cash provided by (used in) operating activities

 

(18,222)

 

90,428

Cash flows from investing activities

Purchase of marketable securities

 

(302,319)

 

(244,499)

Purchase of intangible assets

 

(1,467)

 

(2,164)

Purchase of property and equipment

 

(2,695)

 

(1,867)

Proceeds from maturities of marketable securities

378,454

159,773

Net cash provided by (used in) investing activities

 

71,973

 

(88,757)

Cash flows from financing activities

Proceeds from issuance of common stock upon exercise of stock awards

 

4,746

 

3,906

Proceeds from issuance of common stock under the Employee Stock Purchase Plan

725

734

Net cash provided by financing activities

 

5,471

 

4,640

Net increase in cash and cash equivalents

 

59,222

 

6,311

Cash and cash equivalents, beginning of period

 

50,312

 

26,246

Cash and cash equivalents, end of period

$

109,534

$

32,557

Supplemental disclosure of cash flow information

Cash paid during the period for:

Interest

$

11

$

7

Income taxes

$

$

150

Supplemental disclosures of non-cash investing activities

Unrealized gain on marketable securities

$

322

$

2,600

See accompanying notes.

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Xencor, Inc.

Notes to Financial Statements

(unaudited)

June 30, 2020

1. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited interim financial statements for Xencor, Inc. (the Company, Xencor, we or us) have been prepared in accordance with U.S. generally accepted accounting principles (GAAP) for interim financial information. The financial statements include all adjustments (consisting only of normal recurring adjustments) that the management of the Company believes are necessary for a fair presentation of the periods presented. The preparation of interim financial statements requires the use of management’s estimates and assumptions that affect reported amounts of assets and liabilities at the date of the interim financial statements and the reported revenues and expenditures during the reported periods. These interim financial results are not necessarily indicative of the results expected for the full fiscal year or for any subsequent interim period.

The accompanying unaudited interim financial statements and related notes should be read in conjunction with the audited financial statements and notes thereto included in the Company’s 2019 Annual Report on Form 10-K filed with the Securities and Exchange Commission (SEC) on February 25, 2020.

Use of Estimates

The preparation of interim financial statements in conformity with GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, other comprehensive gain (loss) and the related disclosures. On an ongoing basis, management evaluates its estimates, including estimates related to its accrued clinical trial and manufacturing development expenses, stock-based compensation expense, intangible assets and related amortization. Significant estimates in these interim financial statements include estimates made for royalties and accrued research and development expenses, stock-based compensation expenses, intangible assets and related amortization, estimated standalone selling price of performance obligations, the likelihood of recognizing variable consideration, and recoverability of deferred tax assets.

Intangible Assets

The Company maintains definite-lived intangible assets related to certain capitalized costs of acquired licenses and third-party costs incurred in establishing and maintaining its intellectual property rights to its platform technologies and development candidates. These assets are amortized over their useful lives, which are estimated to be the remaining patent life or the contractual term of the license. The straight-line method is used to record amortization expense. The Company assesses its intangible assets for impairment if indicators are present or changes in circumstances suggest that impairment may exist. There were no impairment charges recorded for the three and six months ended June 30, 2020 and 2019.

The Company capitalizes certain in-process intangible assets that are then abandoned when they are no longer pursued or used in current research activities. There was no material abandonment of in-process intangible assets during the three and six months ended June 30, 2020 and 2019.

Marketable and Equity Securities

The Company has an investment policy that includes guidelines on acceptable investment securities, minimum credit quality, maturity parameters, and concentration and diversification. The Company invests its excess cash primarily in marketable debt securities issued by investment grade institutions.

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The Company considers its marketable debt securities to be available-for-sale and does not intend to sell these securities, and it is not more likely than not that the Company will be required to sell the securities before recovery of the amortized cost basis. These assets are carried at fair value and any impairment losses and recoveries related to the underlying issuer’s credit standing are recognized within other income (expense), while non-credit related impairment losses and recoveries are recognized within accumulated other comprehensive income (loss). There were no impairment losses or recoveries recorded for the three and six months ended June 30, 2020 and 2019. Accrued interest on marketable debt securities is included in marketable securities’ carrying value. Each reporting period, the Company reviews its portfolio of marketable debt securities, using both quantitative and qualitative factors, to determine if each security’s fair value has declined below its amortized cost basis.

The Company also has an investment in an equity security that is carried at fair value with changes in fair value recognized within other income (expense). For equity securities with a readily determinable fair value, the Company remeasures these equity investments at each reporting period until such time that the investment is sold or disposed. If the Company sells an investment, any realized gains and losses on the sale of the securities will be recognized within other income (expense) in the Statement of Comprehensive Income (Loss) in the period of sale.

Recent Accounting Pronouncements

Pronouncements Adopted in 2020

Effective January 1, 2020, the Company adopted ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, as well as ASU No, 2018-19, Codification Improvements to Topic 326, Financial Instruments – Credit Losses. The standard amends guidance on reporting credit losses for assets held at amortized cost basis and also provides an available-for-sale (AFS) debt security impairment model that is a modified version of the other-than-temporary-impairment (OTTI) model. The AFS debt security impairment model no longer allows consideration of the length of time during which the fair value has been less than its amortized cost when determining whether a credit loss exists. The adoption of this standard did not have any impact on the Company’s financial statements.

Effective January 1, 2020, the Company adopted ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement, which modifies the disclosures for transfers between Level 1 and Level 2 of the fair value hierarchy, modifies the Level 3 disclosure requirements for non-public entities and requires additional disclosure for Level 3 fair value hierarchy. The adoption of this standard did not have any impact on the Company’s financial statements.

Effective January 1, 2020, the Company adopted ASU No. 2018-18, Collaborative Arrangements (Topic 808): Clarifying the Interaction Between Topic 808 and Topic 606, which provides guidance on how to assess whether certain transactions between collaborative arrangement participants should be accounted for within the revenue recognition standard. The adoption of this standard did not have any impact on the Company’s financial statements.

Pronouncements Not Yet Effective

In December 2019, the Financial Accounting Standards Board (FASB) issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which is effective for fiscal years beginning on and after December 15, 2020, and interim periods within those fiscal years. The standard removes specific exceptions to the general principles in Topic 740 and simplifies the accounting for income taxes. The Company does not anticipate that the standard will have a significant impact on its financial statements.

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In January 2020, the FASB issued ASU No. 2020-01, which clarifies that a company should consider observable transactions that require a company to either apply or discontinue the equity method of accounting under Topic 323, Investment – Equity Method and Joint Ventures, for the purposes of applying the measurement alternative in accordance with Topic 321 immediately before applying or upon discontinuing the equity method. The amendment is effective for fiscal years beginning after December 15, 2020. The Company does not anticipate that the standard will have a significant impact on its financial statements.

There have been no other material changes to the significant accounting policies previously disclosed in the Company’s 2019 Annual Report on Form 10-K.

2. Fair Value of Financial Instruments

Financial instruments included in the financial statements include cash equivalents, marketable securities, accounts receivable, accounts payable and accrued expenses. Marketable securities and cash equivalents are carried at fair value. The fair value of the other financial instruments closely approximates their fair value due to their short-term maturities.

The Company accounts for recurring and non-recurring fair value measurements in accordance with FASB Accounting Standards Codification ASC 820, Fair Value Measurements and Disclosures (ASC 820). ASC 820 defines fair value, establishes a fair value hierarchy for assets and liabilities measured at fair value, and requires expanded disclosure about fair value measurements. The ASC 820 hierarchy ranks the quality of reliable inputs, or assumptions, used in the determination of fair value and requires assets and liabilities carried at fair value to be classified and disclosed in one of the following three categories:

Level 1—Fair value is determined by using unadjusted quoted prices that are available in active markets for identical assets or liabilities.

Level 2—Fair value is determined by using inputs other than Level 1 quoted prices that are directly or indirectly observable. Inputs can include quoted prices for similar assets or liabilities in active markets or quoted prices for identical assets or liabilities in markets that are not active. Related inputs can also include those used in valuation or other pricing models, such as interest rates and yield curves that can be corroborated by observable market data.

Level 3—Fair value is determined by inputs that are unobservable and not corroborated by market data. Use of these inputs involves significant and subjective judgments to be made by the reporting entity – e.g. determining an appropriate discount factor for illiquidity associated with a given security.

The Company measures the fair value of financial assets using the highest level of inputs that are reasonably available as of the measurement date. The assets recorded at fair value are classified within the hierarchy as follows for the periods reported (in thousands):

June 30, 2020

December 31, 2019

    

Total

    

    

    

Total

    

    

Fair Value

Level 1

Level 2

Fair Value

Level 1

Level 2

Money Market Funds

$

103,231

$

103,231

$

$

32,009

$

32,009

$

Corporate Securities

267,542

267,542

281,751

281,751

Government Securities

207,717

207,717

269,245

269,245

Equity Securities with Readily Determinable Fair Value

2,611

2,611

$

581,101

$

105,842

$

475,259

$

583,005

$

32,009

$

550,996

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Our policy is to record transfers of assets between Level 1 and Level 2 at their fair values as of the end of each reporting period, consistent with the date of the determination of fair value. During the three and six months ended June 30, 2020 and 2019, there were no transfers between Level 1 and Level 2. The Company does not have any Level 3 assets or liabilities.

3. Net Income (Loss) Per Share

We compute basic net income (loss) per common share by dividing the net income (loss) attributable to common stockholders by the weighted-average number of common shares outstanding during the period without consideration of common stock equivalents. Diluted net income (loss) per share is computed by dividing the net income (loss) attributable to common stockholders by the weighted-average number of common stock equivalents outstanding for the period. The treasury stock method is used to determine the dilutive effect of the Company’s stock option grants, employee stock purchase plan (ESPP) and restricted stock units (RSUs). Potentially dilutive securities consisting of stock issuable under options, ESPP and RSUs are not included in the per common share calculation in periods when the inclusion of such shares would have an antidilutive effect.

Basic and diluted net income (loss) per common share is computed as follows (in thousands except share and per share data):

Three Months Ended

 

Six Months Ended

June 30, 

June 30, 

    

2020

    

2019

    

2020

    

2019

(in thousands, except share and per share data)

Numerator:

Net income (loss) attributable to common stockholders

$

(35,018)

$

(16,034)

$

(43,092)

$

64,012

Denominator:

Weighted-average common shares outstanding used in computing basic net income (loss)

 

57,059,610

 

56,399,255

57,003,162

56,351,377

Effect of dilutive securities

1,691,442

Weighted-average common shares outstanding used in computing diluted net income (loss)

57,059,610

56,399,255

57,003,162

58,042,819

Basic net income (loss) per common share

$

(0.61)

$

(0.28)

$

(0.76)

$

1.14

Diluted net income (loss) per common share

$

(0.61)

$

(0.28)

$

(0.76)

$

1.10

For the three and six months ended June 30, 2020, and the three months ended June 30, 2019, all outstanding potentially dilutive securities have been excluded from the calculation of diluted net loss per common share as the effect of including such securities would have been antidilutive. For the six months ended June 30, 2019, potentially dilutive securities consisting of 1,173,829 shares of stock awards are excluded from the calculation for the same period because the inclusion of such shares would have had an antidilutive effect.

4. Comprehensive Income

Comprehensive income is comprised of net income (loss) and other comprehensive income (loss). For the three and six months ended June 30, 2020 and 2019, the only component of other comprehensive income is net unrealized gain on marketable securities. There were no material reclassifications out of accumulated other comprehensive income (loss) during the three and six months ended June 30, 2020 and 2019.

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5. Marketable and Equity Securities

The Company’s marketable debt securities held as of June 30, 2020 and December 31, 2019 are summarized below:

Gross

Gross

    

Amortized

    

Unrealized

Unrealized

    

June 30, 2020

Cost

Gains

Losses

Fair Value

(in thousands)

Money Market Funds

$

103,231

$

$

$

103,231

Corporate Securities

266,756

786

267,542

Government Securities

207,010

710

(3)

207,717

$

576,997

$

1,496

$

(3)

$

578,490

Reported as

Cash and cash equivalents

$

103,231

Marketable securities

475,259

Total investments

$

578,490

Gross

Gross

    

Amortized

    

Unrealized

Unrealized

    

December 31, 2019

Cost

Gains

Losses

Fair Value

(in thousands)

Money Market Funds

$

32,009

$

$

$

32,009

Corporate Securities

281,586

195

(30)

281,751

Government Securities

268,239

1,006

269,245

$

581,834

$

1,201

$

(30)

$

583,005

Reported as

Cash and cash equivalents

$

32,009

Marketable securities

550,996

Total investments

$

583,005

The maturities of the Company’s marketable debt securities are as follows:

Amortized

    

Estimated

June 30, 2020

Cost

Fair Value

(in thousands)

Mature in one year or less

$

472,639

$

474,114

Mature within two years

1,127

1,145

$

473,766

$

475,259

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The unrealized losses on available-for-sale investments and their related fair values as of June 30, 2020 and December 31, 2019 are as follows:

Less than 12 months

12 months or greater

Unrealized

Unrealized

June 30, 2020

Fair value

losses

Fair value

losses

(in thousands)

Government Securities

49,973

(3)

Less than 12 months

12 months or greater

Unrealized

Unrealized

December 31, 2019

Fair value

losses

Fair value

losses

(in thousands)