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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Form 10-Q

 

(Mark One)

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

For the quarterly period ended June 30, 2020

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: 001-38663

 

Gritstone Oncology, Inc.

(Exact Name of Registrant as Specified in its Charter)

 

 

Delaware

 

47-4859534

(State or Other Jurisdiction of

Incorporation or Organization)

 

(I.R.S. Employer

Identification No.)

 

 

5959 Horton Street, Suite 300

Emeryville, California

 

94608

(Address of Principal Executive Offices)

 

(Zip Code)

(510) 871-6100

(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, $0.0001 par value per share

 

GRTS

 

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

 

Large accelerated filer

 

Accelerated filer

 

 

 

 

 

Non-accelerated filer

 

Smaller reporting company

 

 

 

 

 

 

 

 

Emerging growth company

 

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

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

As of July 31, 2020, there were 37,749,059 shares of the registrant’s common stock, par value $0.0001 per share, outstanding.


Gritstone Oncology, Inc.

Table of Contents

 

 

 

 

 

Page

PART I. FINANCIAL INFORMATION

 

1

Item 1.

 

Financial Statements (unaudited)

 

1

 

 

Condensed Consolidated Balance Sheets as of June 30, 2020 and December 31, 2019

 

1

 

 

Condensed Consolidated Statements of Operations and Comprehensive Loss for the Three and Six Months Ended June 30, 2020 and 2019

 

2

 

 

Condensed Consolidated Statements of Stockholders’ Equity for the Three and Six Months Ended June 30, 2020 and 2019

 

3

 

 

Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2020 and 2019

 

5

 

 

Notes to Condensed Consolidated Financial Statements (unaudited)

 

6

Item 2.

 

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

 

23

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risks

 

33

Item 4.

 

Controls and Procedures

 

33

 

 

 

 

 

PART II. OTHER INFORMATION

 

34

Item 1.

 

Legal Proceedings

 

34

Item 1A.

 

Risk Factors

 

34

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

 

85

Item 3.

 

Defaults Upon Senior Securities

 

85

Item 4.

 

Mine Safety Disclosures

 

85

Item 5.

 

Other Information

 

85

Item 6.

 

Exhibits

 

86

 

 

 

 

 

SIGNATURES

 

87

 

 


PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Gritstone Oncology, Inc.

Condensed Consolidated Balance Sheets

(Unaudited)

(In thousands, except share

amounts and par value)

 

 

 

June 30,

 

 

December 31,

 

 

 

2020

 

 

2019

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

62,631

 

 

$

57,408

 

Marketable securities

 

 

29,282

 

 

 

70,368

 

Prepaid expenses and other current assets

 

 

2,584

 

 

 

3,497

 

Total current assets

 

 

94,497

 

 

 

131,273

 

Property and equipment, net

 

 

24,581

 

 

 

26,911

 

Operating lease right-of-use assets

 

 

23,909

 

 

 

23,427

 

Deposits and other long-term assets

 

 

2,679

 

 

 

2,778

 

Total assets

 

$

145,666

 

 

$

184,389

 

Liabilities and stockholders’ equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

4,301

 

 

$

4,621

 

Accrued compensation

 

 

3,765

 

 

 

4,598

 

Accrued liabilities

 

 

138

 

 

 

1,041

 

Accrued research and development expenses

 

 

953

 

 

 

1,779

 

Lease liabilities, current portion

 

 

4,240

 

 

 

2,505

 

Deferred revenue, current portion

 

 

5,778

 

 

 

4,956

 

Total current liabilities

 

 

19,175

 

 

 

19,500

 

Other non-current liabilities

 

 

375

 

 

 

 

Lease liabilities, net of current portion

 

 

22,258

 

 

 

20,985

 

Deferred revenue, net of current portion

 

 

7,630

 

 

 

9,560

 

Total liabilities

 

 

49,438

 

 

 

50,045

 

Commitments and contingencies (Notes 6 and 8)

 

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

 

 

Preferred stock, $0.0001 par value; 10,000,000 shares authorized; no shares issued and outstanding

 

 

 

 

 

 

Common stock, $0.0001 par value; 300,000,000 shares authorized at

June 30, 2020 and December 31, 2019; 37,713,218 and 36,332,956

shares issued and outstanding at June 30, 2020 and December 31, 2019

 

 

17

 

 

 

17

 

Additional paid-in capital

 

 

369,223

 

 

 

355,291

 

Accumulated other comprehensive gain

 

 

50

 

 

 

24

 

Accumulated deficit

 

 

(273,062

)

 

 

(220,988

)

Total stockholders’ equity

 

 

96,228

 

 

 

134,344

 

Total liabilities and stockholders’ equity

 

$

145,666

 

 

$

184,389

 

 

See accompanying notes to the unaudited condensed consolidated financial statements.

1


Gritstone Oncology, Inc.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(Unaudited)

(In thousands, except share and per share amounts)

 

 

 

Three Months Ended June 30,

Six Months Ended June 30,

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

 

Collaboration revenue

 

$

488

 

 

$

1,150

 

 

$

1,750

 

 

$

2,497

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

21,290

 

 

 

18,529

 

 

 

43,758

 

 

 

34,428

 

 

General and administrative

 

 

5,255

 

 

 

4,835

 

 

 

10,720

 

 

 

9,212

 

 

Total operating expenses

 

 

26,545

 

 

 

23,364

 

 

 

54,478

 

 

 

43,640

 

 

Loss from operations

 

 

(26,057

)

 

 

(22,214

)

 

 

(52,728

)

 

 

(41,143

)

 

Interest income, net

 

 

189

 

 

 

1,042

 

 

 

654

 

 

 

1,962

 

 

Net loss

 

 

(25,868

)

 

 

(21,172

)

 

 

(52,074

)

 

 

(39,181

)

 

Other comprehensive gain:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized gain on marketable securities,

net of tax

 

 

70

 

 

 

9

 

 

 

26

 

 

 

161

 

 

Net and comprehensive loss

 

$

(25,798

)

 

$

(21,163

)

 

$

(52,048

)

 

$

(39,020

)

 

Net loss per share, basic and diluted

 

$

(0.69

)

 

$

(0.63

)

 

$

(1.41

)

 

$

(1.25

)

 

Weighted-average number of shares used in computing

   net loss per share, basic and diluted

 

 

37,256,247

 

 

 

33,582,844

 

 

 

37,027,405

 

 

 

31,273,696

 

 

 

See accompanying notes to the unaudited condensed consolidated financial statements.

2


Gritstone Oncology, Inc.

Condensed Consolidated Statements of Stockholders’ Equity

(Unaudited)

(In thousands, except share amounts)

Three Months Ended June 30, 2020:

 

 

Common Stock

 

 

Additional

Paid-In

 

 

Accumulated

Other

Comprehensive

 

 

Accumulated

 

 

Total

Stockholders'

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Gain (Loss)

 

 

Deficit

 

 

Equity

 

Balance at March 31, 2020

 

 

36,985,739

 

 

$

17

 

 

$

362,586

 

 

$

(20

)

 

$

(247,194

)

 

$

115,389

 

Issuance of common stock under at the

   market ("ATM") equity offering

   program, net of issuance costs of $97

 

 

592,594

 

 

 

 

 

 

4,093

 

 

 

 

 

 

 

 

 

4,093

 

Issuance of common stock under employee

   stock purchase plan (“ESPP”)

 

 

96,234

 

 

 

 

 

 

527

 

 

 

 

 

 

 

 

 

527

 

Unrealized gain on marketable securities

 

 

 

 

 

 

 

 

 

 

 

70

 

 

 

 

 

 

70

 

Lapse of repurchase rights related to

   common stock issued pursuant to early

   exercises

 

 

7,142

 

 

 

 

 

 

3

 

 

 

 

 

 

 

 

 

3

 

Issuance of common stock upon exercise of

   stock options

 

 

31,509

 

 

 

 

 

 

57

 

 

 

 

 

 

 

 

 

57

 

Stock-based compensation

 

 

 

 

 

 

 

 

1,957

 

 

 

 

 

 

 

 

 

1,957

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(25,868

)

 

 

(25,868

)

Balance at June 30, 2020

 

 

37,713,218

 

 

$

17

 

 

$

369,223

 

 

$

50

 

 

$

(273,062

)

 

$

96,228

 

Three Months Ended June 30, 2019:

 

 

Common Stock

 

 

Additional

Paid-In

 

 

Accumulated

Other

Comprehensive

 

 

Accumulated

 

 

Total

Stockholders'

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Gain (Loss)

 

 

Deficit

 

 

Equity

 

Balance at March 31, 2019

 

 

29,024,382

 

 

$

16

 

 

$

276,703

 

 

$

67

 

 

$

(144,564

)

 

$

132,222

 

Issuance of common stock upon public

  offering at $11.50 per share for cash, net

  of issuance costs of $556

 

 

6,500,000

 

 

 

1

 

 

 

69,708

 

 

 

 

 

 

 

 

 

69,709

 

Unrealized gain on marketable securities,

   net of tax

 

 

 

 

 

 

 

 

 

 

 

9

 

 

 

 

 

 

9

 

Lapse of repurchase rights related to

   common stock issued pursuant to early

   exercises

 

 

49,563

 

 

 

 

 

 

17

 

 

 

 

 

 

 

 

 

17

 

Issuance of common stock upon exercise of

   stock options

 

 

80,686

 

 

 

 

 

 

276

 

 

 

 

 

 

 

 

 

276

 

Stock-based compensation

 

 

 

 

 

 

 

 

1,317

 

 

 

 

 

 

 

 

 

1,317

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(21,172

)

 

 

(21,172

)

Balance at June 30, 2019

 

 

35,654,631

 

 

$

17

 

 

$

348,021

 

 

$

76

 

 

$

(165,736

)

 

$

182,378

 

 

Continued on next page.

 

See accompanying notes to the unaudited condensed consolidated financial statements.


3


Gritstone Oncology, Inc.

Condensed Consolidated Statements of Stockholders’ Equity - Continued

(Unaudited)

(In thousands, except share amounts)

Six Months Ended June 30, 2020:

 

 

Common Stock

 

 

Additional

Paid-In

 

 

Accumulated

Other

Comprehensive

 

 

Accumulated

 

 

Total

Stockholders'

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Gain (Loss)

 

 

Deficit

 

 

Equity

 

Balance at December 31, 2019

 

 

36,332,956

 

 

$

17

 

 

$

355,291

 

 

$

24

 

 

$

(220,988

)

 

$

134,344

 

Issuance of common stock under at the

   market ("ATM") equity offering

   program, net of issuance costs of $101

 

 

1,160,963

 

 

 

 

 

 

9,670

 

 

 

 

 

 

 

 

 

9,670

 

Issuance of common stock under employee

   stock purchase plan (“ESPP”)

 

 

96,234

 

 

 

 

 

 

527

 

 

 

 

 

 

 

 

 

527

 

Unrealized gain on marketable securities

 

 

 

 

 

 

 

 

 

 

 

26

 

 

 

 

 

 

26

 

Lapse of repurchase rights related to

   common stock issued pursuant to early

   exercises

 

 

30,874

 

 

 

 

 

 

11

 

 

 

 

 

 

 

 

 

11

 

Issuance of common stock upon exercise of

   stock options

 

 

92,191

 

 

 

 

 

 

148

 

 

 

 

 

 

 

 

 

148

 

Stock-based compensation

 

 

 

 

 

 

 

 

3,576

 

 

 

 

 

 

 

 

 

3,576

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(52,074

)

 

 

(52,074

)

Balance at June 30, 2020

 

 

37,713,218

 

 

$

17

 

 

$

369,223

 

 

$

50

 

 

$

(273,062

)

 

$

96,228

 

 

Six Months Ended June 30, 2019:

 

 

Common Stock

 

 

Additional

Paid-In

 

 

Accumulated

Other

Comprehensive

 

 

Accumulated

 

 

Total

Stockholders'

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Gain (Loss)

 

 

Deficit

 

 

Equity

 

Balance at December 31, 2018

 

 

28,823,130

 

 

$

16

 

 

$

275,593

 

 

$

(85

)

 

$

(126,402

)

 

$

149,122

 

Cumulative effect of adoption of Topic 842

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(153

)

 

 

(153

)

Issuance of common stock upon public

  offering at $11.50 per share for cash, net

  of issuance costs of $556

 

 

6,500,000

 

 

 

1

 

 

 

69,708

 

 

 

 

 

 

 

 

 

69,709

 

Unrealized gain on marketable securities,

   net of tax

 

 

 

 

 

 

 

 

 

 

 

161

 

 

 

 

 

 

161

 

Lapse of repurchase rights related to

   common stock issued pursuant to early

   exercises

 

 

100,877

 

 

 

 

 

 

34

 

 

 

 

 

 

 

 

 

34

 

Issuance of common stock upon exercise of

   stock options

 

 

230,624

 

 

 

 

 

 

362

 

 

 

 

 

 

 

 

 

362

 

Stock-based compensation

 

 

 

 

 

 

 

 

2,324

 

 

 

 

 

 

 

 

 

2,324

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(39,181

)

 

 

(39,181

)

Balance at June 30, 2019

 

 

35,654,631

 

 

$

17

 

 

$

348,021

 

 

$

76

 

 

$

(165,736

)

 

$

182,378

 

 

See accompanying notes to the unaudited condensed consolidated financial statements.

 

4


Gritstone Oncology, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(In thousands)

 

 

 

Six Months Ended June 30,

 

 

2020

 

 

2019

 

 

Operating activities

 

 

 

 

 

 

 

 

 

Net loss

 

$

(52,074

)

 

$

(39,181

)

 

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

 

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

3,277

 

 

 

2,130

 

 

Net amortization of premiums and discounts on marketable securities

 

 

(113

)

 

 

(970

)

 

Stock-based compensation

 

 

3,576

 

 

 

2,324

 

 

Non-cash operating lease expense

 

 

3,712

 

 

 

2,837

 

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

 

Prepaid expenses and other current assets

 

 

897

 

 

 

268

 

 

Deposits and other long-term assets

 

 

99

 

 

 

(272

)

 

Accounts payable

 

 

599

 

 

 

(867

)

 

Accrued compensation

 

 

(835

)

 

 

(1,329

)

 

Accrued and other non-current liabilities

 

 

256

 

 

 

1,312

 

 

Accrued research and development expenses

 

 

(825

)

 

 

 

 

Lease liability

 

 

(1,169

)

 

 

(1,293

)

 

Deferred revenue

 

 

(1,108

)

 

 

(2,497

)

 

Net cash used in operating activities

 

 

(43,708

)

 

 

(37,538

)

 

Investing activities

 

 

 

 

 

 

 

 

 

Purchase of marketable securities

 

 

(8,809

)

 

 

(16,012

)

 

Maturities of marketable securities

 

 

44,632

 

 

 

44,050

 

 

Sales of marketable securities

 

 

5,401

 

 

 

 

 

Purchase of property and equipment

 

 

(2,625

)

 

 

(4,831

)

 

Net cash provided by investing activities

 

 

38,599

 

 

 

23,207

 

 

Financing activities

 

 

 

 

 

 

 

 

 

Proceeds from issuance of common stock, net of issuance costs

 

 

10,435

 

 

 

70,432

 

 

Payments of deferred financing costs

 

 

(103

)

 

 

(556

)

 

Net cash provided by financing activities

 

 

10,332

 

 

 

69,876

 

 

Net increase in cash, cash equivalents and restricted cash

 

 

5,223

 

 

 

55,545

 

 

Cash, cash equivalents and restricted cash at beginning of period

 

 

58,400

 

 

 

53,175

 

 

Cash, cash equivalents and restricted cash at end of period

 

$

63,623

 

 

$