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Table of Contents

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 March 31, 2021

or

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

For the transition period from ________ to ________

Commission file number: 001-36182

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(s)

    

Name of each exchange on which registered:

Common Stock, par value $0.01 per share

XNCR

Nasdaq Global Market

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

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

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

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

Class

Outstanding at April 26, 2021

Common stock, $0.01 par value

58,224,616

Table of Contents

Xencor, Inc.

Quarterly Report on Form 10-Q for the Quarter Ended March 31, 2021

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 March 31, 2021 (unaudited) and December 31, 2020

5

Statements of Comprehensive Income (Loss) for the Three Months Ended March 31, 2021 and 2020 (unaudited)

6

Statements of Stockholders’ Equity for the Three Months Ended March 31, 2021 and 2020 (unaudited)

7

Statements of Cash Flows for the Three Months Ended March 31, 2021 and 2020 (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

35

Item 4.

Controls and Procedures

36

PART II.

OTHER INFORMATION

37

Item 1.

Legal Proceedings

37

Item 1A.

Risk Factors

37

Item 6.

Exhibits

38

Signatures

39

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

Table of Contents

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. You should not place undue reliance on these statements. 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,” the negative of such terms or other words indicating future results.

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 ability to execute on our plans to research, develop and commercialize our product candidates;

the success of our ongoing and planned clinical trials;

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

our ability to accurately estimate 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;

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

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

our ability to protect our intellectual property position;

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

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

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;

the potential loss or retirement of key members of management;

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

our failure to maintain effective internal controls; and

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our ability to accurately estimate expenses, future revenues, capital requirements and needs for additional financing.

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, 2020 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 and per share data)

    

March 31, 

    

December 31, 

2021

2020

(unaudited)

Assets

Current assets

Cash and cash equivalents

$

176,965

$

163,544

Marketable securities

368,878

434,156

Equity securities

6,136

5,303

Accounts receivable

12,525

 

11,443

Contract asset

12,500

12,500

Prepaid expenses and other current assets

14,164

 

10,726

Total current assets

591,168

 

637,672

Property and equipment, net

 

22,301

 

21,682

Patents, licenses, and other intangible assets, net

15,550

 

15,977

Marketable securities - long term

25,082

1,030

Equity securities - long term

28,219

16,071

Other assets

 

10,417

 

10,812

Total assets

$

692,737

$

703,244

Liabilities and stockholders’ equity

Current liabilities

Accounts payable

$

7,663

$

8,954

Accrued expenses

12,513

 

17,603

Lease liabilities

1,934

1,889

Deferred revenue

77,821

 

92,615

Total current liabilities

99,931

 

121,061

Lease liabilities, net of current portion

9,194

9,739

Total liabilities

109,125

 

130,800

Commitments and contingencies

Stockholders’ equity

Preferred stock, $0.01 par value: 10,000,000 authorized shares; -0- issued and outstanding shares at March 31, 2021 and December 31, 2020

Common stock, $0.01 par value: 200,000,000 authorized shares at March 31, 2021 and December 31, 2020; 58,221,953 issued and outstanding at March 31, 2021 and 57,873,444 issued and outstanding at December 31, 2020

583

 

580

Additional paid-in capital

951,154

 

937,525

Accumulated other comprehensive income

97

 

74

Accumulated deficit

 

(368,222)

 

(365,735)

Total stockholders’ equity

 

583,612

 

572,444

Total liabilities and stockholders’ equity

$

692,737

$

703,244

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

 

March 31, 

 

    

2021

    

2020

 

Revenue

Collaborations, licenses, milestones, and royalties

$

33,965

$

32,385

Operating expenses

Research and development

 

41,411

 

33,943

General and administrative

 

8,226

 

7,219

Total operating expenses

 

49,637

 

41,162

Loss from operations

 

(15,672)

 

(8,777)

Other income (expenses)

Interest income, net

 

215

 

3,039

Other income (expense), net

12,970

(2,336)

Total other income, net

 

13,185

 

703

Net loss

(2,487)

(8,074)

Other comprehensive income (loss)

Net unrealized gain (loss) on marketable securities

23

(105)

Comprehensive loss

$

(2,464)

$

(8,179)

Basic and diluted net loss per common share

$

(0.04)

$

(0.14)

Basic and diluted weighted average common shares outstanding

57,997,313

56,946,714

See accompanying notes.

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Xencor, Inc.

Statements of Stockholders’ Equity

(unaudited)

(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, 2020

57,873,444

580

937,525

74

(365,735)

572,444

Issuance of common stock upon exercise of stock awards

230,701

2

5,337

5,339

Issuance of restricted stock units

117,808

1

(1)

Comprehensive income (loss)

23

(2,487)

(2,464)

Stock-based compensation

8,293

8,293

Balance, March 31, 2021

58,221,953

$

583

$

951,154

$

97

$

(368,222)

$

583,612

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

See accompanying notes.

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Xencor, Inc.

Statements of Cash Flows

(unaudited)

(in thousands)

Three Months Ended

March 31, 

    

2021

    

2020

Cash flows from operating activities

Net loss

$

(2,487)

$

(8,074)

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

Depreciation and amortization

 

1,638

 

1,373

Amortization of premium (accretion of discount) on marketable securities

 

865

 

(573)

Stock-based compensation

 

8,293

 

6,512

Abandonment of capitalized intangible assets

 

193

 

28

Equity received in connection with license agreement

(4,589)

Change in fair value of equity security

(12,980)

2,336

Changes in operating assets and liabilities:

Accounts receivable

 

(1,082)

 

14,749

Interest receivable

311

215

Contract asset and deposits

(62)

Prepaid expenses and other assets

 

(3,438)

 

71

Accounts payable

 

(1,291)

 

124

Accrued expenses

 

(5,090)

 

(1,703)

Lease liabilities and right of use (ROU) assets

(42)

(54)

Deferred revenue

 

(14,794)

 

(955)

Net cash (used in) provided by operating activities

 

(29,966)

 

9,460

Cash flows from investing activities

Purchase of marketable securities

 

(84,139)

 

(142,477)

Purchase of intangible assets

 

(72)

 

(538)

Purchase of property and equipment

 

(1,951)

 

(2,073)

Proceeds from maturities and sale of marketable securities

124,210

157,653

Net cash provided by investing activities

 

38,048

 

12,565

Cash flows from financing activities

Proceeds from issuance of common stock upon exercise of stock awards

 

5,339

 

1,471

Net cash provided by financing activities

 

5,339

 

1,471

Net increase in cash and cash equivalents

 

13,421

 

23,496

Cash and cash equivalents, beginning of period

 

163,544

 

50,312

Cash and cash equivalents, end of period

$

176,965

$

73,808

Supplemental disclosure of cash flow information

Cash paid during the period for:

Interest

$

4

$

6

Supplemental disclosures of non-cash investing activities

Unrealized gain (loss) on marketable securities

$

23

$

(105)

See accompanying notes.

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Xencor, Inc.

Notes to Financial Statements

(unaudited)

March 31, 2021

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 2020 Annual Report on Form 10-K filed with the Securities and Exchange Commission (SEC) on February 24, 2021.

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 royalty revenue, accrued research and development expenses, stock-based compensation expenses, intangible assets and related amortization, estimated standalone selling price of performance obligations, estimated time for completing delivery of performance obligations under certain arrangements, 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 months ended March 31, 2021 and 2020.

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 months ended March 31, 2021 and 2020.

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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.

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 months ended March 31, 2021 and 2020, respectively. 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 receives equity securities in connection with certain licensing transactions with its partners. These investments in an equity security are carried at fair value with changes in fair value recognized each period and reported 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 or losses on the sale of the securities will be recognized within other income (expense) in the Statements of Comprehensive Income (Loss) in the period of sale.

The Company also has investments in equity securities without readily determinable fair values, where the Company elects the measurement alternative to record at its initial cost minus impairment, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer.

Recent Accounting Pronouncements

Pronouncements Adopted in 2021

Effective January 1, 2021, the Company adopted ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which removes specific exceptions to the general principles in Topic 740 and simplifies the accounting for income taxes. The adoption of this standard did not have a significant impact on the Company’s financial statements.

Effective January 1, 2021, the Company adopted 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, Investments – Equity Securities immediately before applying or upon discontinuing the equity method. The adoption of this standard did not have a significant impact on the Company’s financial statements.

Effective January 1, 2021, the Company adopted ASU No. 2020-10, Codification Improvements, which amends a variety of topics in the Accounting Standards Codification to improve consistency and clarify guidance. The adoption of this standard did not have a significant impact on the Company’s financial statements.

There have been no other material changes to the significant accounting policies previously disclosed in the Company’s 2020 Annual Report on Form 10-K.

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2. Fair Value of Financial Instruments

Financial instruments included in the financial statements include cash and cash equivalents, marketable debt securities, accounts receivable, accounts payable and accrued expenses. Marketable debt 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):

March 31, 2021

(unaudited)

December 31, 2020

    

Total

    

    

    

Total

    

    

Fair Value

Level 1

Level 2

Level 3

Fair Value

Level 1

Level 2

Level 3

Money Market Funds

$

165,350

$

165,350

$

$

$

158,937

$

158,937

$

$

Corporate Securities

73,929

73,929

119,833

119,833

Government Securities

320,031

320,031

315,353

315,353

Equity Securities with Readily Determinable Fair Value

6,136

6,136

5,303

5,303

Equity Securities without Readily Determinable Fair Value

28,219

28,219

16,071

16,071

$

593,665

$

171,486

$

393,960

$

28,219

$

615,497

$

164,240

$

435,186

$

16,071

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 months ended March 31, 2021 and 2020, there were no transfers between Level 1 and Level 2. During the three months ended March 31, 2021, an equity investment without a readily determinable fair value was transferred to Level 1 from Level 3.

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The Company held equity securities without readily determinable fair value at March 31, 2021 and December 31, 2020, respectively. The Company elects the measurement alternative to record at its initial cost minus impairment, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer.

3. Net Loss Per Share

Basic net loss per common share is computed by dividing the net 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 loss per share is computed by dividing the net loss attributable to common stockholders by the weighted-average number of common stock equivalents outstanding for the period. Potentially dilutive securities consisting of stock issuable under options, ESPP and RSUs and are not included in the per common share calculation in periods when the inclusion of such shares would have an anti-dilutive effect.

Basic and diluted net loss per common share is computed as follows:

Three Months Ended

 

March 31, 

    

2021

    

2020

    

(in thousands, except share and per share data)

Numerator:

Net loss attributable to common stockholders

$

(2,487)

$

(8,074)

Denominator:

Weighted-average common shares outstanding used in computing basic and diluted net loss

57,997,313

56,946,714

Basic and diluted net loss per common share

$

(0.04)

$

(0.14)

For the three months ended March 31, 2021 and 2020, 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 anti-dilutive.

4. Comprehensive Loss

Comprehensive loss is comprised of net loss and other comprehensive income (loss). For the three months ended March 31, 2021 and 2020, the only component of other comprehensive income (loss) is net unrealized gain (loss) on marketable securities. There were no material reclassifications out of accumulated other comprehensive income (loss) during the three months ended March 31, 2021 and 2020.

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5. Marketable and Equity Securities

The Company’s marketable debt securities held as of March 31, 2021 and December 31, 2020 are summarized below:

Gross

Gross

    

Amortized

    

Unrealized

Unrealized

    

March 31, 2021

Cost

Gains

Losses

Fair Value

(in thousands)

Money Market Funds

$

165,350

$

$

$

165,350

Corporate Securities

73,922

12

(5)

73,929

Government Securities

319,931

107

(7)

320,031

$

559,203

$

119

$

(12)

$

559,310

Reported as

Cash and cash equivalents

$

165,350

Marketable securities

393,960

Total investments

$

559,310

Gross

Gross

    

Amortized

    

Unrealized

Unrealized

    

December 31, 2020

Cost

Gains

Losses

Fair Value

(in thousands)

Money Market Funds

$

158,937

$

$

$

158,937

Corporate Securities

119,782

57

(6)

119,833

Government Securities

315,319

37

(3)

315,353

$

594,038

$

94

$

(9)

$

594,123

Reported as

Cash and cash equivalents

$

158,937

Marketable securities

435,186

Total investments

$

594,123

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

Amortized

    

Estimated

March 31, 2021

Cost

Fair Value

(in thousands)

Mature in one year or less

$

368,762

$

368,878

Mature within two years

25,091

25,082

$

393,853

$

393,960

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The unrealized losses on available-for-sale investments and their related fair values as of March 31, 2021 and December 31, 2020 are as follows:

Less than 12 months

12 months or greater

Unrealized

Unrealized

March 31, 2021

Fair value

losses

Fair value

losses

(in thousands)

Corporate Securities

$

4,102

$

(2)

$

3,066

$

(3)

Government Securities

14,990

(7)

$

4,102

$

(2)

$

18,056

$

(10)

Less than 12 months

12 months or greater

Unrealized

Unrealized

December 31, 2020

Fair value

losses

Fair value

losses

(in thousands)

Corporate Securities

$

15,843

$

(6)

$

$

Government Securities

40,802

(3)

$

56,645

$

(9)

$

$

The unrealized losses from the listed securities are primarily due to a change in the interest rate environment and not a change in the credit quality of the securities.

In 2020, the Company received shares of common stock of Aimmune Therapeutics, Inc. (Aimmune) and shares of common stock of Viridian Therapeutics, Inc. (Viridian, formerly MiRagen Therapeutics, Inc.) in connection with the Aimmune and Viridian licensing arrangements (both as defined below). The Aimmune common stock was redeemed for cash within the same year; the Viridian common stock is classified as equity securities with a readily determinable fair value at March 31, 2021. In 2020, the Company also received equity of Zenas BioPharma Limited (Zenas), a private company, in connection with a licensing agreement. The Company elected the measurement alternative to carry the Zenas equity at cost minus impairment, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. There has not been any impairment or observable price changes related to this investment. In 2018, the Company received equity shares in Quellis Biosciences, Inc. (Quellis), a private company, in connection with a licensing transaction. The Company recorded the Quellis equity as securities not having a readily determinable fair value, and the investment was recorded at its original cost. In 2021, Quellis merged into Catabasis Pharmaceuticals, Inc. (Catabasis), and the Company received equity shares in Catabasis, which common shares have a readily determinable fair value. The adjustment in the fair value of the Catabasis equity has been recorded in other income (loss) for the three months ended March 31, 2021.

Net gains and losses during the year ended March 31, 2021 and 2020 consist of the following:

Three Months Ended

March 31, 

    

2021

    

2020

Net gains (losses) recognized on equity securities

$

12,981

$

(2,336)

Less: net gains recognized on equity securities redeemed

 

(1)

 

Unrealized gains (losses) recognized on equity securities

$

12,980

$

(2,336)

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Table of Contents

6. Stock Based Compensation

Our Board of Directors (the Board) and the requisite stockholders previously approved the 2010 Equity Incentive Plan (the 2010 Plan). In October 2013, the Board approved the 2013 Equity Incentive Plan (the 2013 Plan), and in November 2013, our stockholders approved the 2013 Plan, which became effective as of December 3, 2013. As of December 2, 2013, we suspended the 2010 Plan, and no additional awards may be granted under the 2010 Plan. Any shares of common stock covered by awards granted under the 2010 Plan that terminate after December 2, 2013 by expiration, forfeiture, cancellation or other means without the issuance of such shares will be added to the 2013 Plan reserve.

As of March 31, 2021, the total number of shares of common stock available for issuance under the 2013 Plan is 13,445,524, which includes 2,684,456 shares of common stock that were available for issuance under the 2010 Plan as of the effective date of the 2013 Plan. Unless otherwise determined by the Board, beginning January 1, 2014, and continuing until the expiration of the 2013 Plan, the total number of shares of common stock available for issuance under the 2013 Plan will automatically increase annually on January 1 of each year by 4% of the total number of issued and outstanding shares of common stock as of December 31 of the immediately preceding year. Pursuant to approval by the Board, the total number of shares of common stock available for issuance under the 2013 Plan was increased by 2,314,937 shares on January 1, 2021. As of March 31, 2021, a total of 11,894,756 options have been granted under the 2013 Plan.

In November 2013, the Board and our stockholders approved the 2013 Employee Stock Purchase Plan (ESPP), which became effective as of December 5, 2013. We have reserved a total of 581,286 shares of common stock for issuance under the ESPP. Unless otherwise determined by the Board, beginning on January 1, 2014, and continuing until the expiration of the ESPP, the total number of shares of common stock available for issuance under the ESPP will automatically increase annually on January 1 by the lesser of (i) 1% of the total number of issued and outstanding shares of common stock as of December 31 of the immediately preceding year, or (ii) 621,814 shares of common stock. Pursuant to approval by our Board of Directors, there was no increase in the number of authorized shares in the ESPP from 2015 to 2020. As of March 31, 2021, we have issued a total of 467,595 shares of common stock under the ESPP.

During the three months ended March 31, 2021, the Company awarded 247,050 restricted stock units (RSUs) to certain employees. The standard vesting of these awards is generally in three equal annual installments and is contingent on continued service to the Company. The fair value of these awards is determined based on the intrinsic value of the stock on the date of grant and will be recognized as stock-based compensation expense over the requisite service period. As of March 31, 2021, we have granted a total of 700,837 shares of common stock issuable upon the vesting of RSUs.

Total employee, director and non-employee stock-based compensation expense recognized for the three months ended March 31, 2021 and 2020 are as follows (in thousands):

Three Months Ended

 

March 31, 

 

    

2021

    

2020

 

General and administrative

$

2,737

$

2,291

Research and development

 

5,556

 

4,221

$

8,293

$

6,512

Three Months Ended

March 31, 

2021

    

2020

Stock options

$

6,530

$

5,882

ESPP

248

194

RSUs

1,515

436

$

8,293

$

6,512

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The following table summarizes option activity under our stock plans and related information:

    

    

    

Weighted

 

Weighted

Average

 

Average

Number of

Exercise

 

Remaining

Aggregate

Shares Subject

Price

 

Contractual

Intrinsic

to Outstanding

(Per

 

Term

Value

Options

Share)

 

(in years)

(in thousands)

Balance at December 31, 2020

 

7,751,789

$

26.23

7.00

$

134,941

Options granted

 

1,321,917

$

43.24

Options forfeited

 

(64,824)

$

33.00

Options exercised

 

(230,701)

$

23.14

Balance at March 31, 2021

 

8,778,181

$

28.82

7.25

$

125,395

Exercisable

4,963,607

$

22.73

5.95

$

100,938

We calculate the intrinsic value as the difference between the exercise price of the options and the closing price of common stock of $43.06 per share as of March 31, 2021.

Weighted-average fair value of options granted during the three-month periods ended March 31, 2021 and 2020 were $22.83 and $16.64 per share, respectively. There were 1,137,420 options granted during the three-month period ended March 31, 2020. We estimated the fair value of each stock option using the Black-Scholes option-pricing model based on the date of grant of such stock option with the following weighted average assumptions for the three months ended March 31, 2021 and 2020:

Options

Three Months Ended

March 31, 

    

2021

    

2020

    

Expected term (years)

6.2

 

6.3

Expected volatility

55.6

%

53.9

%

Risk-free interest rate

1.02

%

1.71

%

Expected dividend yield

%  

%  

ESPP

Three Months Ended

March 31, 

    

2021

    

2020

    

Expected term (years)

 

0.5 - 2.0

 

0.5 - 2.0

Expected volatility

50.8 - 66.4

%

50.8

%

Risk-free interest rate

 

0.09 - 1.65

%

1.56 - 1.65

%

Expected dividend yield

%

%

As of March 31, 2021, the unamortized compensation expense related to unvested stock options was $71.4 million. The remaining unamortized compensation expense will be recognized over the next 3.0 years. As of March 31, 2021, the unamortized compensation expense under our ESPP was $0.7 million. The remaining unamortized