mtcr-10q_20220331.htm
false 2022 Q1 0001634379 --12-31 true true false P5Y P7Y9M25D P7Y7M6D P7Y7M6D P5Y9M10D 0.006 0.887 P5Y9M18D 0.019 0.010 0.875 0.895 P5Y7M6D P6Y1M6D 0001634379 2022-01-01 2022-03-31 xbrli:shares 0001634379 2022-05-05 iso4217:USD 0001634379 2022-03-31 0001634379 2021-12-31 iso4217:USD xbrli:shares 0001634379 2021-01-01 2021-03-31 0001634379 2020-12-31 0001634379 2021-03-31 0001634379 us-gaap:CommonStockMember 2021-12-31 0001634379 us-gaap:AdditionalPaidInCapitalMember 2021-12-31 0001634379 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2021-12-31 0001634379 us-gaap:RetainedEarningsMember 2021-12-31 0001634379 us-gaap:AdditionalPaidInCapitalMember 2022-01-01 2022-03-31 0001634379 us-gaap:CommonStockMember 2022-01-01 2022-03-31 0001634379 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2022-01-01 2022-03-31 0001634379 us-gaap:RetainedEarningsMember 2022-01-01 2022-03-31 0001634379 us-gaap:CommonStockMember 2022-03-31 0001634379 us-gaap:AdditionalPaidInCapitalMember 2022-03-31 0001634379 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2022-03-31 0001634379 us-gaap:RetainedEarningsMember 2022-03-31 0001634379 us-gaap:CommonStockMember 2020-12-31 0001634379 us-gaap:AdditionalPaidInCapitalMember 2020-12-31 0001634379 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2020-12-31 0001634379 us-gaap:RetainedEarningsMember 2020-12-31 0001634379 us-gaap:AdditionalPaidInCapitalMember 2021-01-01 2021-03-31 0001634379 us-gaap:CommonStockMember 2021-01-01 2021-03-31 0001634379 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2021-01-01 2021-03-31 0001634379 us-gaap:RetainedEarningsMember 2021-01-01 2021-03-31 0001634379 us-gaap:CommonStockMember 2021-03-31 0001634379 us-gaap:AdditionalPaidInCapitalMember 2021-03-31 0001634379 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2021-03-31 0001634379 us-gaap:RetainedEarningsMember 2021-03-31 0001634379 srt:MinimumMember 2022-01-01 2022-03-31 0001634379 srt:MaximumMember 2022-01-01 2022-03-31 0001634379 us-gaap:AccountingStandardsUpdate202006Member 2022-03-31 0001634379 mtcr:CommonStockOptionsMember 2022-01-01 2022-03-31 0001634379 mtcr:CommonStockOptionsMember 2021-01-01 2021-03-31 0001634379 us-gaap:RestrictedStockUnitsRSUMember 2022-01-01 2022-03-31 0001634379 mtcr:UnvestedCommonStockMember 2021-01-01 2021-03-31 0001634379 mtcr:CommonStockWarrantMember 2022-01-01 2022-03-31 0001634379 mtcr:CommonStockWarrantMember 2021-01-01 2021-03-31 0001634379 2018-03-31 0001634379 2018-03-01 2018-03-31 0001634379 mtcr:BelharraTherapeuticsMember 2022-03-11 2022-03-11 0001634379 2022-03-11 0001634379 2022-03-11 2022-03-11 0001634379 srt:MaximumMember mtcr:LicenseAgreementWithSalkInstituteMember 2022-03-31 0001634379 mtcr:LicenseAgreementWithSalkInstituteMember 2022-03-31 0001634379 mtcr:TermLoansMember 2019-08-27 2019-08-27 0001634379 mtcr:TermLoansMember 2019-08-27 0001634379 mtcr:FirstTrancheTermLoanMember mtcr:SecondAmendmentToLoanAgreementMember 2021-10-01 0001634379 mtcr:SecondTrancheTermLoanMember mtcr:SecondAmendmentToLoanAgreementMember 2022-03-31 0001634379 mtcr:TermLoansMember mtcr:SecondAmendmentToLoanAgreementMember 2021-10-01 0001634379 mtcr:TermLoansMember 2022-01-01 2022-03-31 xbrli:pure 0001634379 us-gaap:PrimeRateMember mtcr:TermLoansMember 2022-01-01 2022-03-31 0001634379 us-gaap:PrimeRateMember mtcr:TermLoansMember mtcr:SecondAmendmentToLoanAgreementMember 2023-09-01 2023-09-01 0001634379 mtcr:TermLoansMember srt:MinimumMember 2022-01-01 2022-03-31 0001634379 mtcr:TermLoansMember srt:MaximumMember mtcr:SecondAmendmentToLoanAgreementMember 2021-10-01 2021-10-01 0001634379 mtcr:FirstTrancheTermLoanMember 2022-01-01 2022-03-31 0001634379 mtcr:TermLoansMember 2022-03-31 0001634379 mtcr:TermLoansMember 2021-12-31 0001634379 mtcr:TermLoansMember mtcr:SecondAmendmentToLoanAgreementMember 2023-09-01 0001634379 mtcr:TermLoansMember 2020-12-31 0001634379 mtcr:TermLoansMember srt:MaximumMember mtcr:SecondAmendmentToLoanAgreementMember 2022-03-31 0001634379 mtcr:LenderWarrantMember mtcr:SeriesCConvertiblePreferredStockMember 2022-03-31 0001634379 mtcr:LenderWarrantMember us-gaap:CommonStockMember mtcr:SecondAmendmentToLoanAgreementMember 2022-03-31 0001634379 mtcr:LenderWarrantMember mtcr:SeriesCConvertiblePreferredStockMember 2022-01-01 2022-03-31 0001634379 mtcr:LenderWarrantMember us-gaap:CommonStockMember mtcr:SecondAmendmentToLoanAgreementMember 2022-01-01 2022-03-31 0001634379 mtcr:LenderWarrantMember mtcr:SecondAmendmentToLoanAgreementMember 2022-01-01 2022-03-31 0001634379 mtcr:TermLoansMember mtcr:SecondAmendmentMember 2022-01-01 2022-03-31 0001634379 mtcr:TermLoansMember mtcr:SecondAmendmentMember 2022-03-31 0001634379 mtcr:TermLoansMember mtcr:SecondAmendmentToLoanAgreementMember 2022-03-31 0001634379 mtcr:TermLoansMember 2021-01-01 2021-03-31 0001634379 us-gaap:CommercialPaperMember us-gaap:FairValueMeasurementsRecurringMember 2022-03-31 0001634379 us-gaap:CommercialPaperMember us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueInputsLevel2Member 2022-03-31 0001634379 us-gaap:USGovernmentCorporationsAndAgenciesSecuritiesMember us-gaap:FairValueMeasurementsRecurringMember 2022-03-31 0001634379 us-gaap:USGovernmentCorporationsAndAgenciesSecuritiesMember us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueInputsLevel2Member 2022-03-31 0001634379 us-gaap:FairValueMeasurementsRecurringMember 2022-03-31 0001634379 us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueInputsLevel2Member 2022-03-31 0001634379 us-gaap:CommercialPaperMember us-gaap:FairValueMeasurementsRecurringMember 2021-12-31 0001634379 us-gaap:CommercialPaperMember us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueInputsLevel2Member 2021-12-31 0001634379 us-gaap:USGovernmentCorporationsAndAgenciesSecuritiesMember us-gaap:FairValueMeasurementsRecurringMember 2021-12-31 0001634379 us-gaap:USGovernmentCorporationsAndAgenciesSecuritiesMember us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueInputsLevel2Member 2021-12-31 0001634379 us-gaap:FairValueMeasurementsRecurringMember 2021-12-31 0001634379 us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueInputsLevel2Member 2021-12-31 0001634379 us-gaap:CommercialPaperMember 2022-03-31 0001634379 us-gaap:USGovernmentCorporationsAndAgenciesSecuritiesMember 2022-03-31 0001634379 us-gaap:CommercialPaperMember 2021-12-31 0001634379 us-gaap:USGovernmentCorporationsAndAgenciesSecuritiesMember 2021-12-31 0001634379 mtcr:DueInOneYearOrLessMember 2022-03-31 0001634379 mtcr:SalesAgreementMember mtcr:AtTheMarketOfferingMember mtcr:SVBLeerinkLLCMember 2022-01-01 2022-03-31 0001634379 mtcr:SalesAgreementMember mtcr:AtTheMarketOfferingMember mtcr:SVBLeerinkLLCMember 2021-10-04 2021-10-04 0001634379 mtcr:SalesAgreementMember mtcr:AtTheMarketOfferingMember mtcr:SVBLeerinkLLCMember 2021-10-04 0001634379 mtcr:SalesAgreementMember mtcr:AtTheMarketOfferingMember mtcr:SVBLeerinkLLCMember 2022-03-31 0001634379 mtcr:TwoThousandAndTwentyEquityIncentivePlanMember 2022-03-31 0001634379 mtcr:TwoThousandAndFifteenAndTwoThousandAndTwentyEquityIncentivePlansMember srt:MaximumMember 2022-01-01 2022-03-31 0001634379 mtcr:TwoThousandAndFifteenAndTwoThousandAndTwentyEquityIncentivePlansMember 2022-01-01 2022-03-31 0001634379 2021-01-01 2021-12-31 0001634379 srt:MinimumMember 2021-01-01 2021-03-31 0001634379 srt:MaximumMember 2021-01-01 2021-03-31 0001634379 us-gaap:RestrictedStockUnitsRSUMember 2021-12-31 0001634379 us-gaap:RestrictedStockUnitsRSUMember 2022-01-01 2022-03-31 0001634379 us-gaap:RestrictedStockUnitsRSUMember 2022-03-31 0001634379 us-gaap:RestrictedStockUnitsRSUMember 2021-06-01 2021-06-30 0001634379 us-gaap:RestrictedStockUnitsRSUMember us-gaap:SubsequentEventMember 2022-04-01 2022-04-30 0001634379 mtcr:TwoThousandAndTwentyEmployeeStockPurchasePlanMember 2020-09-30 0001634379 mtcr:TwoThousandAndTwentyEmployeeStockPurchasePlanMember 2020-09-01 2020-09-30 0001634379 mtcr:TwoThousandAndTwentyEmployeeStockPurchasePlanMember 2022-01-01 2022-03-31 0001634379 mtcr:TwoThousandAndTwentyEmployeeStockPurchasePlanMember 2022-03-31 0001634379 us-gaap:GeneralAndAdministrativeExpenseMember 2022-01-01 2022-03-31 0001634379 us-gaap:GeneralAndAdministrativeExpenseMember 2021-01-01 2021-03-31 0001634379 us-gaap:ResearchAndDevelopmentExpenseMember 2022-01-01 2022-03-31 0001634379 us-gaap:ResearchAndDevelopmentExpenseMember 2021-01-01 2021-03-31 0001634379 mtcr:CommonStockOptionsMember 2022-03-31 0001634379 mtcr:CommonStockOptionsMember 2021-12-31 0001634379 mtcr:EquityIncentivePlansMember 2022-03-31 0001634379 mtcr:EquityIncentivePlansMember 2021-12-31 0001634379 mtcr:RestrictedStockUnitsOutstandingMember 2022-03-31 0001634379 mtcr:RestrictedStockUnitsOutstandingMember 2021-12-31 0001634379 mtcr:EmployeeStockPurchasePlanMember 2022-03-31 0001634379 mtcr:EmployeeStockPurchasePlanMember 2021-12-31 0001634379 mtcr:CommonStockWarrantMember 2022-03-31 0001634379 mtcr:CommonStockWarrantMember 2021-12-31 0001634379 2022-02-10

 

 

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, 2022

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: 001-39512

 

 

Metacrine, Inc.

(Exact name of registrant as specified in its charter)

 

 

Delaware

47-2297384

(State or other jurisdiction of

incorporation or organization)

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

4225 Executive Square, Suite 600

San Diego, California

92037

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: (858) 369-7800

 

 

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

 

MTCR

 

The 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 the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

  

Accelerated filer

 

 

 

 

 

Non-accelerated filer

 

  

Smaller reporting company

 

 

 

 

 

 

 

 

 

 

 

 

Emerging growth company

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).     Yes      No  

The number of outstanding shares of the registrant’s common stock on May 5, 2022 was 42,468,810.

 

 

 


 

Metacrine, Inc.

Table of Contents

 

 

 

Page

PART I. FINANCIAL INFORMATION

 

Item 1.

Financial Statements

1

Item 2.

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

15

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

21

Item 4.

Controls and Procedures

21

PART II. OTHER INFORMATION

 

Item 1.

Legal Proceedings

23

Item 1A.

Risk Factors

23

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

63

Item 3.

Defaults Upon Senior Securities

63

Item 4.

Mine Safety Disclosures

63

Item 5.

Other Information

63

Item 6.

Exhibits

63

 

 

 

 


 

PART I—FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Metacrine, Inc.

Unaudited Condensed Consolidated Balance Sheets

(In thousands, except par value and share amounts)

 

 

 

March 31,

 

 

December 31,

 

 

 

2022

 

 

2021

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

33,035

 

 

$

48,910

 

Short-term investments

 

 

29,654

 

 

 

27,517

 

Prepaid expenses and other current assets

 

 

4,047

 

 

 

2,313

 

Total current assets

 

 

66,736

 

 

 

78,740

 

Property and equipment, net

 

 

 

 

 

347

 

Operating lease right-of-use asset

 

 

 

 

 

902

 

Total assets

 

$

66,736

 

 

$

79,989

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

264

 

 

$

368

 

Accrued liabilities

 

 

5,209

 

 

 

6,567

 

Current portion of operating lease liability

 

 

 

 

 

825

 

Total current liabilities

 

 

5,473

 

 

 

7,760

 

Operating lease liability, net of current portion

 

 

 

 

 

181

 

Long-term debt, net of debt discount

 

 

13,425

 

 

 

13,303

 

Other long-term liabilities

 

 

1,388

 

 

 

1,390

 

Commitments and contingencies (Note 3)

 

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

 

 

Preferred stock, $0.0001 par value; authorized shares – 10,000,000 at March 31, 2022 and December 31, 2021, respectively; issued and outstanding shares – none at March 31, 2022 and December 31, 2021

 

 

 

 

 

 

Common stock, $0.0001 par value; authorized shares – 200,000,000 at March 31, 2022 and December 31, 2021, respectively; issued shares – 42,163,510 and 42,110,560 at March 31, 2022 and December 31, 2021, respectively; outstanding shares – 42,163,510 and 42,108,428 at March 31, 2022 and December 31, 2021, respectively

 

 

4

 

 

 

4

 

Additional paid-in-capital

 

 

242,322

 

 

 

240,309

 

Accumulated other comprehensive loss

 

 

(43

)

 

 

(5

)

Accumulated deficit

 

 

(195,833

)

 

 

(182,953

)

Total stockholders’ equity

 

 

46,450

 

 

 

57,355

 

Total liabilities and stockholders’ equity

 

$

66,736

 

 

$

79,989

 

 

See accompanying notes to the unaudited condensed consolidated financial statements.

 

1


 

Metacrine, Inc.

Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss

(In thousands, except share and per share amounts)

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2022

 

 

2021

 

Operating expenses:

 

 

 

 

 

 

 

 

Research and development

 

$

6,680

 

 

$

10,857

 

General and administrative

 

 

5,482

 

 

 

3,696

 

Restructuring charges

 

 

858

 

 

 

 

Gain from lease termination and asset sale

 

 

(508

)

 

 

 

Total operating expenses

 

 

12,512

 

 

 

14,553

 

Loss from operations

 

 

(12,512

)

 

 

(14,553

)

Other income (expense):

 

 

 

 

 

 

 

 

Interest income

 

 

23

 

 

 

36

 

Interest expense

 

 

(414

)

 

 

(244

)

Other income (expense)

 

 

23

 

 

 

(7

)

Total other income (expense)

 

 

(368

)

 

 

(215

)

Net loss

 

$

(12,880

)

 

$

(14,768

)

Other comprehensive loss:

 

 

 

 

 

 

 

 

Unrealized loss on available-for-sale securities, net

 

 

(38

)

 

 

(2

)

Comprehensive loss

 

$

(12,918

)

 

$

(14,770

)

Net loss per share, basic and diluted

 

$

(0.31

)

 

$

(0.57

)

Weighted average shares of common stock outstanding, basic and diluted

 

 

42,125,693

 

 

 

26,007,692

 

 

See accompanying notes to the unaudited condensed consolidated financial statements.

2


Metacrine, Inc.

Unaudited Condensed Consolidated Statements of Cash Flows

(In thousands)

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2022

 

 

2021

 

Operating activities:

 

 

 

 

 

 

 

 

Net loss

 

$

(12,880

)

 

$

(14,768

)

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

 

 

 

 

 

 

 

 

Depreciation

 

 

68

 

 

 

79

 

Stock-based compensation

 

 

2,010

 

 

 

1,520

 

Non-cash interest expense

 

 

122

 

 

 

62

 

Amortization of premiums/discounts on investments, net

 

 

1

 

 

 

170

 

Amortization of right-of-use asset

 

 

179

 

 

 

164

 

Gain on lease termination and asset sale

 

 

(508

)

 

 

 

Changes in operating assets and liabilities

 

 

 

 

 

 

 

 

Prepaid expenses and other current assets

 

 

(1,034

)

 

 

(410

)

Accounts payable and accrued liabilities

 

 

(1,461

)

 

 

1,189

 

Lease liability

 

 

(196

)

 

 

(176

)

Net cash used in operating activities

 

 

(13,699

)

 

 

(12,170

)

Investing activities:

 

 

 

 

 

 

 

 

Purchases of short-term investments

 

 

(12,676

)

 

 

(12,784

)

Sales and maturities of short-term investments

 

 

10,500

 

 

 

19,395

 

Net cash (used in) provided by investing activities

 

 

(2,176

)

 

 

6,611

 

Financing activities:

 

 

 

 

 

 

 

 

Proceeds from exercise of common stock options

 

 

 

 

 

623

 

Net cash provided by financing activities

 

 

 

 

 

623

 

Net decrease in cash and cash equivalents

 

 

(15,875

)

 

 

(4,936

)

Cash and cash equivalents at beginning of period

 

 

48,910

 

 

 

24,393

 

Cash and cash equivalents at end of period

 

$

33,035

 

 

$

19,457

 

Supplemental disclosure of cash flow information:

 

 

 

 

 

 

 

 

Cash paid for interest

 

$

291

 

 

$

181

 

Receivable from asset sale

 

 

700

 

 

 

 

Supplemental non-cash investing and financing activities:

 

 

 

 

 

 

 

 

Vesting of common stock

 

$

3

 

 

$

8

 

 

See accompanying notes to the unaudited condensed consolidated financial statements.

 

 

3


 

 

Metacrine, Inc.

Unaudited Condensed Consolidated Statements of Convertible Preferred Stock and Stockholders’ Equity

For the Three Months Ended March 31, 2022 and 2021

(In thousands, except share amounts)

 

 

 

 

Preferred Stock

 

 

Common Stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Additional

paid-in

capital

 

 

Accumulated

other

comprehensive loss

 

 

Accumulated

deficit

 

 

Total

stockholders'

equity

 

Balance at December 31, 2021

 

 

 

 

$

 

 

 

42,108,428

 

 

$

4

 

 

$

240,309

 

 

$

(5

)

 

$

(182,953

)

 

$

57,355

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,010

 

 

 

 

 

 

 

 

 

2,010

 

Vesting of early exercised stock options

 

 

 

 

 

 

 

 

2,132

 

 

 

 

 

 

3

 

 

 

 

 

 

 

 

 

3

 

Vesting of restricted stock units

 

 

 

 

 

 

 

 

52,950

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized loss on investment securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(38

)

 

 

 

 

 

(38

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(12,880

)

 

 

(12,880

)

Balance at March 31, 2022

 

 

 

 

$

 

 

 

42,163,510

 

 

$

4

 

 

$

242,322

 

 

$

(43

)

 

$

(195,833

)

 

$

46,450

 

 

 

 

 

Preferred Stock

 

 

Common Stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Additional

paid-in

capital

 

 

Accumulated

other

comprehensive

income (loss)

 

 

Accumulated

deficit

 

 

Total

stockholders'

equity

 

Balance at December 31, 2020

 

 

 

 

$

 

 

 

25,969,442

 

 

$

3

 

 

$

210,021

 

 

$

1

 

 

$

(120,746

)

 

$

89,279

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,520

 

 

 

 

 

 

 

 

 

1,520

 

Exercise of stock options

 

 

 

 

 

 

 

 

228,678

 

 

 

 

 

 

623

 

 

 

 

 

 

 

 

 

623

 

Vesting of early exercised stock options

 

 

 

 

 

 

 

 

11,207

 

 

 

 

 

 

8

 

 

 

 

 

 

 

 

 

8

 

Unrealized loss on investment securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2

)

 

 

 

 

 

(2

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(14,768

)

 

 

(14,768

)

Balance at March 31, 2021

 

 

 

 

$

 

 

 

26,209,327

 

 

$

3

 

 

$

212,172

 

 

$

(1

)

 

$

(135,514

)

 

$

76,660

 

 

See accompanying notes to the unaudited condensed consolidated financial statements.

 

 

 

4


 

 

Metacrine, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

Note 1. Organization and Summary of Significant Accounting Policies

Organization

Metacrine, Inc. (the “Company”) was incorporated in the state of Delaware on September 17, 2014 and is based in San Diego, California. The Company is a clinical-stage biopharmaceutical company currently focused on developing differentiated therapies for patients with gastrointestinal (“GI”) diseases.

Principles of Consolidation and Basis of Presentation

In May 2019, the Company established a wholly-owned Australian subsidiary, Metacrine, Pty Ltd, in order to conduct various clinical activities for its product candidates. The unaudited condensed consolidated financial statements include the accounts of the Company and Metacrine, Pty Ltd. The functional currency of both the Company and Metacrine, Pty Ltd is the U.S. dollar. Assets and liabilities that are not denominated in the functional currency are remeasured into U.S. dollars at foreign currency exchange rates in effect at the balance sheet date except for nonmonetary assets, which are remeasured at historical foreign currency exchange rates in effect at the date of transaction. Net realized and unrealized gains and losses from foreign currency transactions and remeasurement are reported in other income (expense) in the unaudited condensed consolidated statements of operations and comprehensive loss. All intercompany accounts and transactions have been eliminated in consolidation.

The Company’s unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) and applicable regulations of the U.S. Securities and Exchange Commission (“SEC”). The Company’s unaudited condensed consolidated financial statements should be read in conjunction with the audited financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021 filed on March 30, 2022.

Liquidity and Capital Resources

From its inception through March 31, 2022, the Company has devoted substantially all its efforts to organizing and staffing, business planning, raising capital, researching, discovering and developing its pipeline in farnesoid X receptor (“FXR”), and other drug targets, and general and administrative support for these operations and has funded its operations primarily with the net proceeds from the issuance of convertible preferred stock, common stock, and long-term debt. The Company has incurred net losses and negative cash flows from operations since inception and had an accumulated deficit of $195.8 million as of March 31, 2022. Management expects the Company will incur substantial operating losses for the foreseeable future in order to complete clinical trials and launch and commercialize any product candidates for which it receives regulatory approval. The Company will need to finance its operations through a combination of equity offerings, debt financings, strategic transactions, collaborations, and other similar arrangements. As of March 31, 2022, the Company had available cash, cash equivalents, and short-term investments of $62.7 million and working capital of $61.3 million to fund future operations. Management has prepared cash flow forecasts which indicate that, based on the Company’s current cash resources available and working capital, the Company will have sufficient resources to fund its operations for at least one year after the date the financial statements are issued.

Use of Estimates

The preparation of the Company’s unaudited condensed consolidated financial statements requires it to make estimates and assumptions that impact the reported amounts of assets, liabilities, and expenses and the disclosure of contingent assets and liabilities. The most significant estimates in the Company’s unaudited condensed consolidated financial statements relate to accruals for research and development expenses and stock-based compensation. 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. To the extent there are material differences between the estimates and actual results, the Company’s future results of operations will be affected.

Cash and Cash Equivalents

The Company considers all highly liquid investments with original maturities of three months or less when purchased to be cash equivalents. Cash and cash equivalents include cash in readily available checking accounts, money market funds, and commercial paper. The carrying amounts reported in the unaudited condensed consolidated balance sheets for cash and cash equivalents are valued at cost, which approximates fair value.

Short-Term Investments

Short-term investments primarily consist of commercial paper and U.S. government and agency bonds. The Company has classified these investments as available-for-sale securities, as the sale of such investments may be required prior to maturity to implement management strategies, and therefore has classified all short-term investments with maturity dates beyond three months at the date of purchase as current assets in the accompanying unaudited condensed consolidated balance sheets. Any premium or discount arising at purchase is amortized and/or accreted to interest income as an adjustment to yield using the straight-line method over the life of the instrument. Short-term investments are reported at their estimated fair value. The Company reviews its short-term investments in unrealized loss positions at each reporting date to assess whether the decline in their fair value is due to credit-related

5


Metacrine, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements (continued)

 

factors. The credit portion of unrealized losses and any subsequent improvements are recorded in other income (expense) through an allowance account. Unrealized gains and losses that are not credit-related are included in other comprehensive (income) loss as a component of stockholders’ equity until realized. Realized gains and losses are determined using the specific identification method and are included in other income (expense).

Fair Value Measurement

The Company accounts for certain assets and liabilities at their fair value. The Company uses the following fair value hierarchy to indicate the extent to which the inputs used to determine fair value are observable in the market:

 

Level 1: Inputs are based on quoted prices for identical assets in active markets.

 

Level 2: Inputs, other than Level 1, that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; 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 and that are significant to the fair value of the assets or liabilities.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash, cash equivalents, and short-term investments. The Company maintains deposits in federally insured financial institutions in excess of federally insured limits. 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.

Property and Equipment, Net

Property and equipment are stated at cost and depreciated on a straight-line basis over the estimated useful life of the related assets (generally three to five years). Leasehold improvements are stated at cost and amortized on a straight-line basis over the lesser of the remaining lease term or the estimated useful life of the leasehold improvements. Repairs and maintenance costs are charged to expense as incurred. The Company sold its property and equipment on March 31, 2022 in connection with the termination of the facility lease for its former corporate headquarters. Refer to Note 3 in the unaudited condensed consolidated financial statements for further discussion.

Leases

At the inception of a contractual arrangement, the Company determines whether the contract contains a lease by assessing whether there is an identified asset and whether the contract conveys the right to control the use of the identified asset in exchange for consideration over a period of time. Lease terms are determined at the commencement date by considering whether renewal options and termination options are reasonably assured of exercise. For its long-term operating leases, the Company recognizes a lease liability and a right-of-use (“ROU”) asset on its unaudited condensed consolidated balance sheets and recognizes lease expense on a straight-line basis over the lease term. The lease liability is determined as the present value of future lease payments using the discount rate implicit in the lease or, if the implicit rate is not readily determinable, an estimate of the Company’s incremental borrowing rate. The ROU asset is based on the lease liability, adjusted for any prepaid or deferred rent. The Company aggregates all lease and non-lease components for each class of underlying assets into a single lease component and variable charges for common area maintenance and other variable costs are recognized as expense as incurred. The Company has elected to not recognize a lease liability or ROU asset in connection with short-term operating leases and recognizes lease expense for short-term operating leases on a straight-line basis over the lease term. The Company does not have any financing leases.

Impairment of Long-Lived Assets

The Company reviews long-lived assets, such as property and equipment, for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the future undiscounted net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured as the amount by which the carrying amount of the assets exceeds the fair value of the assets. Fair value would be assessed using discounted cash flows or other appropriate measures of fair value. The Company did not recognize any impairment losses during the three months ended March 31, 2022 and 2021.

Research and Development Costs

All costs of research and development are expensed in the period incurred. Research and development costs primarily consist of salaries and related expenses for personnel, stock-based compensation, external research and development costs incurred under agreements with contract research organizations, investigative sites and consultants to conduct our preclinical, toxicology and clinical studies, milestone payments resulting from license agreements, laboratory supplies, costs related to compliance with regulatory requirements, costs related to manufacturing the Company’s product candidates for clinical trials and preclinical studies, facilities, depreciation, and other allocated expenses. Payments made prior to the receipt of goods or services to be used in research and development are capitalized until the related goods are delivered or services performed.

6


Metacrine, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements (continued)

 

The Company has entered into various research and development contracts with clinical research organizations, clinical manufacturing organizations and other companies. Payments for these activities are based on the terms of the individual agreements, which may differ from the pattern of costs incurred, and payments made in advance of performance are reflected in the accompanying unaudited condensed consolidated balance sheets as prepaid expenses and other current assets. The Company records accruals for estimated costs incurred for ongoing research and development activities. When evaluating the adequacy of the accrued liabilities, the Company analyzes progress of the services, including the phase or completion of events, invoices received and contracted costs. Significant judgments and estimates may be made in determining the prepaid or accrued balances at the end of any reporting period. Actual results could differ from the Company’s estimates.

Patent Costs

Costs related to filing and pursuing patent applications are recorded as general and administrative expenses and expensed as incurred since recoverability of such expenditures is uncertain.

Stock-Based Compensation

The Company recognizes stock-based compensation expense related to stock options, restricted stock units, and shares granted under the Company’s 2020 Employee Stock Purchase Plan (the “ESPP”). Stock-based compensation expense represents the cost of the grant date fair value of the applicable awards recognized over the requisite service period of the awards (usually the vesting period) on a straight-line basis. The Company estimates the fair value of stock option grants and shares purchased under the ESPP using the Black-Scholes option pricing model. Stock-based compensation expense related to restricted stock units is determined based upon the fair market value of the Company’s stock on the grant date. Stock-based compensation expense is adjusted to reflect forfeitures as they occur.

Income Taxes

The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the unaudited condensed consolidated financial statements. Under this method, deferred tax assets and liabilities are determined on the basis of the differences between the unaudited condensed consolidated financial statements and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date.

The Company recognizes net deferred tax assets to the extent that the Company believes these assets are more likely than not to be realized. In making such a determination, management considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies and results of recent operations. If management determines that the Company would be able to realize its deferred tax assets in the future in excess of their net recorded amount, management would make an adjustment to the deferred tax asset valuation allowance, which would reduce the provision for income taxes.

The Company records uncertain tax positions on the basis of a two-step process whereby (1) management determines whether it is more likely than not that the tax positions will be sustained on the basis of the technical merits of the position and (2) for those tax positions that meet the more-likely-than-not recognition threshold, management recognizes the largest amount of tax benefit that is more than 50 percent likely to be realized upon ultimate settlement with the related tax authority. The Company recognizes interest and penalties related to unrecognized tax benefits within income tax expense. Any accrued interest and penalties are included within the related tax liability.

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 only component of other comprehensive loss is unrealized gains (losses) on available-for-sale securities. Comprehensive gains (losses) have been reflected in the unaudited condensed consolidated statements of operations and comprehensive loss and as a separate component in the unaudited condensed consolidated statements of convertible preferred stock and stockholders’ equity for all periods presented.

Segment Reporting

Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision-maker in making decisions regarding resource allocation and assessing performance. The Company and its chief operating decision-maker view the Company’s operations and manages its business in one operating segment.

Recent Accounting Pronouncements

In August 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2020-06, Debt with Conversion and Other Options (Topic 470) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Topic 815). ASU No. 2020-06 simplifies the accounting for convertible instruments by reducing the number of accounting models for convertible debt instruments and convertible preferred stock and amending the derivatives scope exception for contracts in an entity’s own equity

7


Metacrine, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements (continued)

 

to reduce form-over-substance-based accounting conclusions. The Company adopted ASU No. 2020-06 during the first quarter of 2022 using the modified retrospective method. The standard did not have a material impact on the Company’s unaudited condensed consolidated financial statements.

Net Loss Per Share

Basic net loss per share is computed by dividing the net loss by the weighted average number of common shares outstanding for the period, without consideration for potentially dilutive securities. Diluted net loss per share is computed by dividing the net loss by the weighted average number of common shares and dilutive common stock equivalents outstanding for the period determined using the treasury-stock and if-converted methods. Dilutive common stock equivalents are comprised of common stock warrants, unvested common stock subject to repurchase, and stock options and unvested restricted stock units outstanding under the Company’s equity incentive plans.

Potentially dilutive securities not included in the calculation of diluted net loss per share because to do so would be anti-dilutive are as follows (in common stock equivalent shares):

 

 

 

March 31,

 

 

 

2022

 

 

2021

 

Common stock options

 

 

4,319,278

 

 

 

3,688,965

 

Unvested restricted stock units

 

 

1,676,417

 

 

 

 

Unvested common stock

 

 

 

 

 

25,285

 

Common stock warrant

 

 

154,240

 

 

 

23,122

 

Total

 

 

6,149,935

 

 

 

3,737,372

 

 

Note 2. Balance Sheet Details

Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consist of the following (in thousands):

 

 

 

March 31,

 

 

December 31,

 

 

 

2022

 

 

2021

 

Prepaid research and development

 

$

2,404

 

 

$

1,241

 

Prepaid expenses

 

 

738

 

 

 

578

 

Receivable from asset sale

 

 

700

 

 

 

 

Other current assets

 

 

196

 

 

 

468

 

Interest receivable

 

 

9

 

 

 

26

 

Total prepaid expenses and other current assets

 

$

4,047

 

 

$

2,313

 

Accrued Liabilities

Accrued liabilities consist of the following (in thousands):

 

 

 

March 31,

 

 

December 31,

 

 

 

2022

 

 

2021

 

Accrued research and development

 

$

2,918

 

 

$

4,250

 

Accrued compensation

 

 

1,418

 

 

 

1,653

 

Other accrued liabilities

 

 

873

 

 

 

664

 

Total accrued liabilities

 

$

5,209

 

 

$

6,567

 

 

Note 3. Commitments and Contingencies

Operating Leases

The Company entered into a five-year noncancelable operating lease in June 2017 for its corporate headquarters in San Diego, California under an agreement that commenced in March 2018. Under the terms of the agreement, there was no option to extend the lease and the Company was subject to additional charges for common area maintenance and other costs. Monthly rental payments due under the lease commenced in March 2018 and escalated throughout the lease term.

On March 11, 2022, the Company entered into an Agreement for Termination of Lease and Voluntary Surrender of Premises (“Lease Termination Agreement”) with ARE-SD Region No. 30, LLC (“Landlord”) to accelerate the termination of the facility lease for its former corporate headquarters. Under the terms of the Lease Termination Agreement, the Company’s lease would terminate on the later of March 31, 2022 and the date that Landlord notifies the Company that it has executed a lease agreement with a third party for

8


Metacrine, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements (continued)

 

the premises. On March 31, 2022 (“Lease Termination Date”), Landlord notified the Company that its lease had been terminated pursuant to the terms of the Lease Termination Agreement.

As consideration for Landlord’s agreement to enter into the Lease Termination Agreement and accelerate the expiration date of the term of the lease, the Company surrendered certain items of personal property to Landlord and agreed to sell certain items of personal property to Belharra Therapeutics, Inc. (“Belharra”) for $0.7 million. The personal property was sold to Belharra on an “as is, where is” condition via a bill of sale that contained no representations or warranties. Jeffrey Jonker, a member of the Company’s Board of Directors, is the Chief Executive Officer of Belharra. The personal property was sold to Belharra on the Lease Termination Date, and after the Lease Termination Date, the Company did not report any property and equipment.

On the Lease Termination Date, the Company derecognized the right-of-use asset of $0.7 million and current and noncurrent operating lease liabilities of $0.8 million in the unaudited condensed consolidated balance sheets in connection with the termination of its facility lease pursuant to the Lease Termination Agreement. The Company also derecognized net property and equipment of $0.3 million and recorded a receivable from asset sale of $0.7 million in connection with the asset sale to Belharra discussed above. The Company recognized a gain from lease termination and asset sale of $0.5 million in the unaudited condensed consolidated statements of operations. Prior to the Lease Termination Date, the Company recognized depreciation expense of $0.1 million during each of the three months ended March 31, 2022 and 2021.

 

Information related to the Company’s operating lease prior to the Lease Termination Date is as follows (in thousands):

 

 

 

Three Months Ended March 31,

 

 

 

2022

 

 

2021

 

Operating lease expense (including variable costs of $96 and $88 during the three months ended March 31, 2022 and 2021, respectively.

 

$

294

 

 

$

285

 

Cash paid for amounts included in the measurement of lease liabilities

 

$

215

 

 

$

209

 

License Agreement with the Salk Institute

In November 2016, the Company and The Salk Institute for Biological Studies (“The Salk”) entered into the Amended and Restated Exclusive FXR License Agreement, which was amended in February 2017 and July 2018, pursuant to which The Salk granted the Company an exclusive, worldwide license to certain FXR related intellectual property to make, use, offer for sale, import, export, and distribute products covered by such intellectual property (“FXR Licensed Products”) and a non-exclusive, worldwide license to use certain technical information to research, develop, test, make, use, offer for sale, import, export and distribute FXR Licensed Products. The Company is required to use commercially reasonable efforts to achieve certain diligence milestones with respect to the FXR Licensed Products, including with respect to developing, producing and selling FXR Licensed Products. The Company is also required to pay The Salk up to $6.5 million in milestone payments upon the completion of certain clinical and regulatory milestones, certain of which payments the Company may defer under certain circumstances. The Company is also obligated to pay The Salk a low single-digit percentage royalty on net sales, with a minimum annual royalty payment due beginning with the first commercial sale of each FXR Licensed Product. The applicable minimum annual royalty payment amount depends on the number of years that have elapsed since the first commercial sale of an FXR Licensed Product and is in the hundreds-of-thousands-of-dollars range. In addition, if the Company chooses to sublicense the FXR Licensed Product to any third parties, the Company must pay to The Salk a low single-digit percentage of all sublicensing revenue. In addition, in the event of a change of control, the Company is required to pay The Salk a low single-digit percentage of any payments and consideration that it receives in consideration of the change of control. The Company has accrued $0.4 million in milestone payments based upon the achievement of certain regulatory milestones as of March 31, 2022.

Contingencies

In the event the Company becomes subject to claims or suits arising in the ordinary course of business, the Company would accrue a liability for such matters when it is probable that future expenditures will be made and such expenditures can be reasonably estimated.

Note 4. Long-Term Debt

Long-term debt consists of the following (in thousands):

 

 

 

March 31,

2022

 

 

December 31,

2021

 

Long-term debt

 

$

15,000

 

 

$

15,000

 

Unamortized debt discount

 

 

(1,575

)

 

 

(1,697

)

Long-term debt, net of debt discount

 

$

13,425

 

 

$

13,303

 

On August 27, 2019, the Company entered into a Loan and Security Agreement with a lender (the “Lender”). The Company borrowed $10.0 million at the inception of the Loan and Security Agreement. On October 4, 2021, the Company entered into the second amendment to the Loan Agreement (“Second Amendment” or “Loan Agreement”) pursuant to which the existing term loan tranches were replaced and superseded by new term loan tranches (“Term Loans”) under which the Company could borrow up to an aggregate

9


Metacrine, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements (continued)

 

principal amount of $45.0 million subject to the achievement of certain milestones. The Company borrowed $15.0 million under the Term Loans on October 1, 2021. As of March 31, 2022, $20.0 million in term loan tranches were available to the Company to borrow under the terms of the Loan Agreement, subject to the achievement of certain milestones.

Prior to the Second Amendment, the Term Loans accrued interest at a floating annual rate equal to the greater of (i) the prime rate used by the Lender plus 2% and (ii) 7.25%. Subsequent to the Second Amendment, the Term Loans accrue interest at a floating annual rate equal to the greater of (i) the prime rate used by the Lender plus 4.5% and (ii) and 7.75%. The Company is only required to make monthly interest payments on amounts borrowed under the Term Loans from the applicable funding date through July 1, 2023 (“Interest Only Period”). Subsequent to the Interest Only Period, the Term Loans are payable in equal monthly installments of principal plus accrued and unpaid interest through the maturity date of April 1, 2025 (“Maturity Date”).

In addition, the Company is required to make final fee payments equal to $0.5 million on September 1, 2023 and 5.75% of the aggregate original principal amount of the Term Loans made pursuant to the Second Amendment on the Maturity Date. As of both March 31, 2022 and December 31, 2021, the Company recorded final payment fees of $1.4 million in other long-term liabilities in the unaudited condensed consolidated balance sheets. The Company may elect to prepay all, but not less than all, of the Term Loans prior to the Maturity Date, subject to a prepayment fee of up to 3% of the then outstanding principal balance. After repayment, no Term Loan amounts may be borrowed again.

The Company’s obligations under the Loan Agreement are secured by a security interest in substantially all of its assets, other than its intellectual property. The Loan Agreement includes customary affirmative and negative covenants and also includes standard events of default, including an event of default based on the occurrence of a material adverse event, and a default under any agreement with a third party resulting in a right of such third party to accelerate the maturity of any debt in excess of $0.3 million. The negative covenants include, among others, restrictions on the Company transferring collateral, incurring additional indebtedness, engaging in mergers or acquisitions, paying cash dividends or making other distributions, making investments, creating liens, selling assets and making any payment on subordinated debt, in each case subject to certain exceptions. Upon the occurrence and continuance of an event of default, the Lender may declare all outstanding obligations immediately due and payable and take such other actions as set forth in the Loan Agreement. As of March 31, 2022 and December 31, 2021, the Company was in compliance with all applicable covenants under the Loan Agreement.

In connection with the Loan Agreement, the Company issued the Lender a warrant (the “Lender Warrant”) to purchase shares of the Company’s Series C convertible preferred stock at an exercise price of $10.812 per share and expiring on August 27, 2029. The Lender Warrant was subsequently converted into a warrant to purchase 23,122 shares of common stock upon completion of the Company’s initial public offering (“IPO”) in September 2020. In connection with the Second Amendment, the Company issued to the Lender a warrant (“New Lender Warrant”) to purchase an amount of shares of the Company’s common stock equal to (i) the greater of (a) $0.4 million and (b) 2.5% multiplied by the aggregate original principal amount of the Term Loans made pursuant to the Loan Agreement divided by (ii) $2.86 per share (the “Warrant Price”), with an exercise price equal to the Warrant Price. The New Lender Warrant is exercisable immediately and expires on October 1, 2031, provided that, under certain circumstances, the Lender Warrant may terminate and expire earlier in connection with the closing of certain acquisition transactions involving the Company. The Lender Warrant provides that the holder thereof may elect to exercise the Lender Warrant on a net “cashless” basis at any time prior to its expiration.

The Lender, at its option, may elect to convert up to an aggregate principal amount of $3.0 million into shares of the Company’s common stock at any time after the effective date of the Second Amendment and prior to the full payment of the Term Loans at a conversion price of $3.86 per share. The embedded conversion option met the derivative accounting scope exception since the embedded conversion option is indexed to the Company’s own common stock and qualifies for classification within stockholders’ equity.

The Company concluded that the Second Amendment was considered a debt modification for accounting purposes. The Company recognized additional debt issuance costs of $0.2 million, final payment fees of $0.9 million, and the fair value of the common stock warrant of $0.4 million resulting from the Second Amendment as debt discount. These amounts are being combined with the unamortized debt discount before the Second Amendment and are being amortized over the remaining term of the Loan Agreement under the effective interest method.

For the three months ended March 31, 2022 and 2021, the Company recognized $0.4 million and $0.2 million of interest expense, including $0.1 million of debt discount amortization in connection with the Loan Agreement. As of March 31, 2022 and December 31, 2021, the Company had an outstanding Term Loan of $15.0 million and accrued interest of $0.1 million, respectively.

Future minimum principal and interest payments under the Term Loan, including the final payment fee, as of March 31, 2022 are as follows (in thousands):

10


Metacrine, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements (continued)

 

 

 

 

March 31,

2022

 

Remaining in 2022

 

$

860

 

2023

 

 

5,543

 

2024

 

 

8,824

 

2025

 

 

3,825

 

Total principal and interest payments

 

 

19,052

 

Less interest and final payment fee

 

 

(4,052

)

Long-term debt

 

$

15,000

 

 

Note 5. Fair Value of Financial Instruments

The following tables summarize the Company’s financial instruments measured at fair value on a recurring basis (in thousands):

 

 

 

 

 

 

Fair Value Measurements At

Reporting Date Using

 

 

 

Total

 

 

Quoted

Prices in

Active

Markets

For

Identical

Assets

(Level 1)

 

 

Significant

Other

Observable

Inputs

(Level 2)

 

 

Significant

Unobservable

Inputs

(Level 3)

 

As of March 31, 2022

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial paper

 

$

18,400

 

 

$

 

 

$

18,400

 

 

$

 

U.S. government and agency securities

 

 

11,254

 

 

 

 

 

 

11,254

 

 

 

 

Total assets measured at fair value

 

$

29,654

 

 

$

 

 

$

29,654

 

 

$

 

As of December 31, 2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial paper

 

$

16,987

 

 

$

 

 

$

16,987

 

 

$

 

U.S. government and agency securities

 

 

10,530

 

 

 

 

 

 

10,530

 

 

 

 

Total assets measured at fair value

 

$

27,517

 

 

$

 

 

$

27,517

 

 

$

 

 

Note 6. Short-Term Investments

The following tables summarize short-term investments (in thousands):

 

 

 

As of March 31, 2022

 

 

 

 

 

 

 

Unrealized

 

 

 

 

 

 

 

Amortized Cost

 

 

Gains

 

 

Losses

 

 

Estimated Fair Value

 

Commercial paper

 

$

18,433

 

 

$

 

 

$

(33

)

 

$

18,400

 

U.S. government and agency securities

 

 

11,265

 

 

 

 

 

 

(11

)

 

 

11,254

 

Total short-term investments

 

$

29,698

 

 

$

 

 

$

(44

)

 

$

29,654

 

 

 

 

As of December 31, 2021

 

 

 

 

 

 

 

Unrealized

 

 

 

 

 

 

 

Amortized Cost

 

 

Gains

 

 

Losses

 

 

Estimated Fair Value

 

Commercial paper

 

$

16,991

 

 

$

1

 

 

$

(5

)

 

$

16,987

 

U.S. government and agency securities

 

 

10,531

 

 

 

 

 

 

(1

)

 

 

10,530

 

Total short-term investments

 

$

27,522

 

 

$

1