SEC Filing - Prelude Therapeutics

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prld-10q_20220331.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended March 31, 2022

☐	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: 001-39527

PRELUDE THERAPEUTICS INCORPORATED

(Exact Name of Registrant as Specified in its Charter)

Delaware	81-1384762
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
200 Powder Mill Road Wilmington, Delaware	19803
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (302) 467-1280

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

PRLD

The Nasdaq Stock Market LLC

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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§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.

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 ☒

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes ☒ No ☐

As of May 4, 2022, the registrant had 47,695,639 shares of voting and non-voting common stock, $0.0001 par value per share, outstanding.

Table of Contents

		Page
PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements	1
	Balance Sheets (Unaudited)	1
	Statements of Operations and Comprehensive Loss (Unaudited)	2
	Statements of Changes in Stockholders’ Equity (Deficit) (Unaudited)	3
	Statements of Cash Flows (Unaudited)	4
	Notes to Unaudited Interim Financial Statements	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	14
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	21
Item 4.	Controls and Procedures	21
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	21
Item 1A.	Risk Factors	22
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	69
Item 3.	Defaults Upon Senior Securities	69
Item 4.	Mine Safety Disclosures	69
Item 5.	Other Information	69
Item 6.	Exhibits	70
Signatures		71

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

PRELUDE THERAPEUTICS INCORPORATED

BALANCE SHEETS

(UNAUDITED)

(in thousands, except share data)	March 31, 2022			December 31, 2021
Assets
Current assets:
Cash and cash equivalents	$	51,634		$	31,828
Marketable securities		214,555			259,405
Prepaid expenses and other current assets		3,783			3,882
Total current assets		269,972			295,115
Restricted cash		4,044			4,044
Property and equipment, net		4,122			3,929
Right-of-use asset		2,224			1,707
Other assets		309			303
Total assets	$	280,671		$	305,098
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	7,390		$	7,840
Accrued expenses and other current liabilities		6,820			9,621
Operating lease liability		1,859			1,740
Total current liabilities		16,069			19,201
Other liabilities		2,400			—
Operating lease liability		390			—
Total liabilities		18,859			19,201
Commitments (Note 8)
Stockholders’ equity:
Voting common stock, $0.0001 par value: 487,149,741 shares authorized; 36,293,331 and 36,200,299 shares issued and outstanding at March 31, 2022 and December 31, 2021, respectively		4			4
Non-voting common stock, $0.0001 par value; 12,850,259 shares authorized; 11,402,037 and 11,402,037 shares issued and outstanding at March 31, 2022 and December 31, 2021, respectively		1			1
Additional paid-in capital		512,705			505,723
Accumulated other comprehensive income (loss)		(2,313	)		(711	)
Accumulated deficit		(248,585	)		(219,120	)
Total stockholders’ equity		261,812			285,897
Total liabilities and stockholders’ equity	$	280,671		$	305,098

See accompanying notes to unaudited interim financial statements.

PRELUDE THERAPEUTICS INCORPORATED

STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(UNAUDITED)

	Three Months Ended March 31,
(in thousands, except share and per share data)	2022			2021
Operating expenses:
Research and development	$	22,821		$	16,470
General and administrative		7,467			5,497
Total operating expenses		30,288			21,967
Loss from operations		(30,288	)		(21,967	)
Other income, net		823			667
Net loss	$	(29,465	)	$	(21,300	)
Per share information:
Net loss per share of common stock, basic and diluted	$	(0.63	)	$	(0.47	)
Weighted average common shares outstanding, basic and diluted		47,066,427			45,121,955
Comprehensive loss
Net loss	$	(29,465	)	$	(21,300	)
Unrealized loss on marketable securities, net of tax		(1,602	)		—
Comprehensive loss	$	(31,067	)	$	(21,300	)

See accompanying notes to unaudited interim financial statements.

PRELUDE THERAPEUTICS INCORPORATED

STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)

(UNAUDITED)

	Stockholders’ equity (deficit)
	Voting common stock				Non-voting common stock						Accumulated Other
(in thousands, except shares)	Shares		Amount		Shares		Amount		Additional paid-in capital		Comprehensive Income (Loss)			Accumulated deficit			Total
Balance at January 1, 2022		36,200,299	$	4		11,402,037	$	1	$	505,723	$	(711	)	$	(219,120	)	$	285,897
Exercise of stock options		93,032		—		—		—		153		—			—			153
Unrealized loss on marketable securities		—		—		—		—		—		(1,602	)		—			(1,602	)
Stock-based compensation expense		—		—		—		—		6,829		—			—			6,829
Net loss		—		—		—		—		—		—			(29,465	)		(29,465	)
Balance at March 31, 2022		36,293,331	$	4		11,402,037	$	1	$	512,705	$	(2,313	)	$	(248,585	)	$	261,812

	Stockholders’ equity (deficit)
	Voting common stock				Non-voting common stock				Additional paid-in		Accumulated
(in thousands, except shares)	Shares		Amount		Shares		Amount		capital		deficit			Total
Balance at January 1, 2021		32,595,301	$	3		11,110,371	$	1	$	319,605	$	(107,426	)	$	212,183
Exercise of stock options		210,274		—		—		—		386		—			386
Sale of common stock, net of offering costs of $739		2,583,334		1		291,666		—		161,411		—			161,412
Stock-based compensation expense		—		—		—		—		3,886		—			3,886
Net loss		—		—		—		—		—		(21,300	)		(21,300	)
Balance at March 31, 2021		35,388,909	$	4		11,402,037	$	1	$	485,288	$	(128,726	)	$	356,567

See accompanying notes to unaudited interim financial statements.

PRELUDE THERAPEUTICS INCORPORATED

STATEMENTS OF CASH FLOWS

(UNAUDITED)

	Three months ended March 31,
(in thousands)	2022			2021
Cash flows used in operating activities:
Net loss	$	(29,465	)	$	(21,300	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		307			160
Noncash lease expense		411			282
Stock-based compensation		6,829			3,886
Amortization of premium and discount on marketable securities, net		748			—
Changes in operating assets and liabilities:
Prepaid expenses and other current assets		93			761
Accounts payable		2			1,601
Accrued expenses and other liabilities		(401	)		(1,372	)
Operating lease liabilities		(419	)		(161	)
Net cash used in operating activities		(21,895	)		(16,143	)
Cash flows provided by (used in) investing activities:
Proceeds from maturities of marketable securities		42,500			—
Purchases of property and equipment		(952	)		(986	)
Net cash provided by (used in) investing activities		41,548			(986	)
Cash flows provided by financing activities:
Proceeds from the sale of common stock, net of offering costs		—			161,424
Proceeds from the exercise of stock options		153			386
Net cash provided by financing activities		153			161,810
Net increase in cash and cash equivalents		19,806			144,681
Cash, cash equivalents, and restricted cash at beginning of period		35,872			218,309
Cash, cash equivalents, and restricted cash at end of period	$	55,678		$	362,990
Supplemental disclosures:
Operating lease right-of-use assets obtained in exchange for operating lease liabilities	$	928		$	—
Property and equipment in accounts payable	$	354		$	86
Unrealized loss on marketable securities	$	(1,602	)	$	—

See accompanying notes to unaudited interim financial statements.

PRELUDE THERAPEUTICS INCORPORATED

NOTES TO UNAUDITED INTERIM FINANCIAL STATEMENTS

1. Background

Prelude Therapeutics Incorporated (the “Company”) was incorporated in Delaware on February 5, 2016 and is a clinical-stage fully integrated oncology company built on a foundation of drug discovery excellence to deliver novel precision cancer medicines to underserved patients. Since beginning operations, the Company has devoted substantially all its efforts to research and development, conducting preclinical and clinical studies, recruiting management and technical staff, administration, and raising capital.

2. Risks and liquidity

The Company is subject to a number of risks common to early-stage companies in the biotechnology industry. Principal among these risks are the uncertainties in the development process, development of the same or similar technological innovations by competitors, protection of proprietary technology, dependence on key personnel, compliance with government regulations and approval requirements, and the need to obtain additional financing to fund operations. Product candidates currently under development will require significant additional research and development efforts, including extensive pre-clinical and clinical testing and regulatory approval, prior to commercialization. These efforts require significant amounts of additional capital, adequate personnel infrastructure, and extensive compliance-reporting capabilities. There can be no assurance that the Company’s research and development will be successfully completed, that adequate protection for the Company’s technology will be obtained, that any products developed will obtain necessary government regulatory approval, or that any approved products will be commercially viable. The Company operates in an environment of rapid change in technology and substantial competition from pharmaceutical and biotechnology companies. In addition, the Company is dependent upon the services of its employees, consultants and contractors.

Since its inception, the Company has incurred operating losses and has an accumulated deficit of $248.6 million at March 31, 2022. The Company has no revenue to date and devotes its efforts to research and development. The Company anticipates incurring additional losses until such time, if ever, that it can generate significant sales of its product candidates currently in development.

The Company believes that its cash, cash equivalents, and marketable securities as of March 31, 2022 will be sufficient to fund its operating expenses and capital expenditure requirements into the second half of 2024.

To fund its operating expenses and capital expenditure requirements after that date, the Company plans to seek additional funding through public or private equity offerings, debt financings, collaborations, strategic alliances and licensing arrangements. The Company may not be able to obtain financing on acceptable terms, or at all, and the Company may not be able to enter into strategic alliances or other arrangements on favorable terms, or at all. The terms of any financing may adversely affect the holdings or the rights of the Company’s stockholders. If the Company is unable to obtain funding, the Company could be required to delay, reduce or eliminate research and development programs, product portfolio expansion or future commercialization efforts, which could adversely affect its business prospects.

On March 10, 2020, the World Health Organization characterized the novel COVID-19 virus as a global pandemic. There is significant uncertainty as to the likely effects of this disease and emerging variants which may, among other things, materially impact the Company’s planned clinical trials. This pandemic or outbreak could result in difficulty securing clinical trial site locations, CROs, and/or trial monitors and other critical vendors and consultants supporting the trial. In addition, outbreaks or the perception of an outbreak near a clinical trial site location could impact the Company’s ability to enroll patients. These situations, or others associated with COVID-19, could cause delays in the Company’s clinical trial plans and could increase expected costs, all of which could have a material adverse effect on the Company’s business and its financial condition. At the current time, the Company is unable to quantify the potential effects of this pandemic on its future financial statements.

3. Summary of significant accounting policies

The summary of significant accounting policies included in the Company’s financial statements for the year ended December 31, 2021 can be found in “Note 3. Summary of significant accounting policies” of the Company’s Form 10-K filed with the Securities and Exchange Commission (the “SEC”) on March 17, 2022. Those policies have not materially changed, except as set forth below.

Basis of presentation

The accompanying unaudited interim financial statements have been prepared in accordance with generally accepted accounting principles (“GAAP”) for interim financial information, the instructions to Form 10-Q and Article 10 of Regulation S-X. They do not include all of the information and notes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three months ended March 31, 2022 are not necessarily indicative of the results that may be expected for the year ending December 31, 2022. The accompanying unaudited interim financial statements should be read in conjunction with the annual audited financial statements and related notes as of and for the year ended December 31, 2021 found in the Form 10-K filed with the SEC on March 17, 2022. Any reference in these notes to applicable guidance is meant to refer to GAAP as found in the Accounting Standards Codification (“ASC”) and Accounting Standards Updates (“ASU”) of the Financial Accounting Standards Board (“FASB”).

Use of estimates

The preparation of the unaudited interim financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and contingent liabilities at the date of the unaudited interim financial statements and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates.

Estimates and assumptions are periodically reviewed and the effects of the revisions are reflected in the accompanying unaudited interim financial statements in the period they are determined to be necessary. The most significant estimate relates to accrued clinical trial expenses.

Income taxes

Based upon the historical and anticipated future losses, management has determined that the deferred tax assets generated by net operating losses and research and development credits do not meet the more likely than not threshold for realizability. Accordingly, a full valuation allowance has been recorded against the Company’s net deferred tax assets as of March 31, 2022 and December 31, 2021.

Cash, Cash Equivalents and Restricted cash

The Company’s cash equivalents include short-term highly liquid investments with an original maturity of 90 days or less when purchased and are carried at fair value in the accompanying balance sheets.

Restricted cash comprises a letter of credit for the benefit of the landlord in connection with the Company’s Chestnut Run Lease. See Note 8 for further details.

The following table provides a reconciliation of cash and cash equivalents and restricted cash reported within the balance sheet that total to the amounts shown in the statement of cash flows:

(in thousands)	March 31, 2022		December 31, 2021
Cash and cash equivalents	$	51,634	$	31,828
Restricted cash		4,044		4,044
Total cash, cash equivalents, and restricted cash shown in statement of cash flows	$	55,678	$	35,872

Marketable Securities

The Company’s marketable securities consist of investments in corporate debt securities and commercial paper that are classified as available-for-sale. The securities are carried at fair value with the unrealized gains and losses, net of tax, included in accumulated other comprehensive income (loss), a component of stockholders’ equity (deficit). Realized gains and losses as well as credit losses, if

any, on marketable securities are included in the Company's statements of operations. The Company classifies marketable securities that are available for use in current operations as current assets on the balance sheets.

Net Loss Per Share

Basic net loss per share of common stock is computed by dividing net loss by the weighted-average number of shares of common stock outstanding during each period. The weighted-average number of shares of common stock outstanding used in the basic net loss per share calculation does not include unvested restricted stock awards as these instruments are considered contingently issuable shares until they vest. Diluted net loss per share of common stock includes the effect, if any, from the potential exercise of securities, such as stock options, and the effect from unvested restricted stock awards and restricted stock units which would result in the issuance of incremental shares of common stock. For diluted net loss per share, the weighted-average number of shares of common stock is the same for basic net loss per share due to the fact that when a net loss exists, dilutive securities are not included in the calculation as the impact is anti-dilutive. The Company’s unvested restricted stock awards entitle the holder to participate in dividends and earnings of the Company, and, if the Company were to recognize net income, it would have to use the two-class method to calculate earnings per share. The two-class method is not applicable during periods with a net loss, as the holders of the unvested restricted stock awards have no obligation to fund losses.

The following potentially dilutive securities have been excluded from the computation of diluted weighted-average shares of common stock outstanding, as they would be anti-dilutive:

	March 31,
	2022		2021
Unvested restricted stock awards		514,641		1,009,462
Unvested restricted stock units		20,000		—
Stock options		8,541,017		6,732,969
Employee stock purchase plan		40,127		—
		9,115,785		7,742,431

Amounts in the above table reflect the common stock equivalents.

Recently Issued Accounting Pronouncements

Emerging Growth Company Status

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

Recently Adopted Accounting Pronouncements

In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments-Credit Losses: Measurement of Credit Losses on Financial Instruments” which has subsequently been amended by ASU No. 2019-04, ASU No. 2019-05, ASU No. 2019-10, ASU No. 2019-11, and ASU No. 2020-03 (“ASU 2016-03”). This guidance replaces the incurred loss impairment methodology under current U.S. GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The Company early adopted this standard as of January 1, 2022 using a modified retrospective approach. It did not have a material impact on the Company’s financial statements and related disclosures.

In November 2021, the FASB issued ASU No. 2021-10, “Government Assistance: Disclosures by Business Entities about Government Assistance”. The amendments in this Update improve financial reporting by requiring disclosures that increase the transparency of transactions with a government. The amendments require the following annual disclosures about transactions with a government that are accounted for by applying a grant or contribution accounting model by analogy (i) the type of transaction (ii) the accounting for the transaction, and (iii) the effect of the transaction on the entity’s financial statements. The Company adopted this

standard as of January 1, 2022 using a prospective approach and it did not have a material impact on the Company’s financial statements and related disclosures.

4. Marketable Securities

The following is a summary of the Company’s marketable securities.

(in thousands)	Amortized Cost		Gross unrealized gain		Gross unrealized loss			Fair Value
March 31, 2022
Corporate debt securities	$	180,532	$	—	$	(2,237	)	$	178,295
Commercial paper		36,336		—		(76	)		36,260
Total	$	216,868	$	—	$	(2,313	)	$	214,555

December 31, 2021
Corporate debt securities	$	193,798	$	1	$	(696	)	$	193,103
Commercial paper		66,318		1		(17	)		66,302
Total	$	260,116	$	2	$	(713	)	$	259,405

The Company’s marketable securities generally have contractual maturity dates of 15 months or less. The Company believes that any unrealized losses associated with the decline in value of its securities is temporary, is primarily related to market factors and believes that it is more likely than not that it will be able to hold its debt securities to maturity. Therefore, the Company anticipates a full recovery of the amortized cost basis of its debt securities at maturity and an allowance for credit losses was not recognized.

5. Fair Value of Financial Instruments

Fair value is the price that could be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. Fair value determination in accordance with applicable accounting guidance requires that a number of significant judgments be made. Additionally, fair value is used on a nonrecurring basis to evaluate assets for impairment or as required for disclosure purposes by applicable accounting guidance on disclosures about fair value of financial instruments. Depending on the nature of the assets and liabilities, various valuation techniques and assumptions are used when estimating fair value. The Company follows the provisions of ASC 820, for financial assets and liabilities measured on a recurring basis. The guidance requires fair value measurements be classified and disclosed in one of the following three categories:

•

Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.

•

Level 2: Quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liabilities.

•

Level 3: Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported by little or no market activity).

The following fair value hierarchy table presents information about the Company’s assets and liabilities measured at fair value on a recurring basis:

	Fair value measurement at reporting date using
(in thousands)	Quoted prices in active markets for identical assets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
March 31, 2022:
Assets:
Cash equivalents (Money Market Funds)	$	47,920	$	—	$	—
Marketable securities
Corporate debt securities		—		178,295		—
Commercial paper		—		36,260		—
Total	$	47,920	$	214,555	$	—

December 31, 2021:
Assets:
Cash equivalents (Money Market Funds)	$	30,520	$	—	$	—
Marketable securities
Corporate debt securities		—		193,103		—
Commercial paper		—		66,302		—
Total	$	30,520	$	259,405	$	—

6. Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consisted of the following:

(in thousands)	March 31, 2022		December 31, 2021
Compensation and related benefits	$	3,025	$	4,919
Research and development		3,441		4,615
Other		354		87
	$	6,820	$	9,621

7. Common Stock

Common Stock Offering

In January 2021, the Company sold 2,875,000 shares of its common stock at a public offering price of $60.00 per share. The Company received net proceeds of $161.4 million after deducting underwriting discounts, commissions, and other offering expenses paid by the Company.

The Company has two classes of common stock; “voting common stock” and “non-voting common stock.” The holders of the voting common stock are entitled to one vote for each share of voting common stock held at all meetings of stockholders. Except as otherwise required by law, the holders of non-voting common stock shall not be entitled to vote at any meetings of stockholders (or written actions in lieu of meetings) and the shares of non-voting common stock shall not be included in determining the number of shares voting or entitled to vote on any matter. Unless required by law, there shall be no cumulative voting. Any holder of non-voting common stock may elect to convert each share of non-voting common stock into one fully paid and non-assessable share of voting common stock at any time by providing written notice to the Company; provided that as a result of such conversion, such holder, together with its affiliates and any members of a Schedule 13(d) group with such holder, would not beneficially own in excess of 9.99% of the Company’s common stock immediately prior to and following such conversion, unless otherwise as expressly provided for in the Company’s restated certificate of incorporation. However, this ownership limitation may be increased (not to exceed 19.99%) or decreased to any other percentage designated by such holder of non-voting common stock upon 61 days’ notice to the Company.

8. Commitments

Leases

The Company leases office and laboratory space in Wilmington, Delaware under a noncancelable lease (the “Lease”). During the first quarter of 2022, the Lease was amended to allow the Company the option to renew the Lease for two 6-month periods and the Company exercised its option to renew the lease for an additional 6 months until June 30, 2023. The second option to extend the Lease for an additional 6 months was not recognized as part of the Company’s measurement of the right-of-use asset and operating lease liability as of March 31, 2022. The discount rate used to account for the Company’s operating lease under ASC 842 is the Company’s estimated incremental borrowing rate of 6.0%.

Rent expense for the three months ended March 31, 2022 and 2021 was $0.5 million and $0.3 million, respectively.

Future minimum annual lease payments under the Lease at March 31, 2022 is as follows:

(in thousands)
2022 (remaining)	$	1,377
2023		964
Total undiscounted lease payments		2,341
Less imputed interest		(92	)
Current and noncurrent lease liability	$	2,249

During the fourth quarter of 2021, the Company entered into a lease agreement (the “Chestnut Run Lease”) with a commencement date of the earlier of (i) the Landlord Work Substantial Completion Date (as such term is defined in the Chestnut Run Lease), or (ii) the date the Company takes possession of the premises for the conduct of the Company’s business (the “Commencement Date”). The Chestnut Run Lease premises includes approximately 81,000 square feet, located at Chestnut Run Plaza in Wilmington, Delaware (the Premises). The Premises contains both office and lab space the Company intends to use for administrative, research and development and other activities. Upon the Commencement Date, the Company will recognize a right-of-use asset and operating lease liability in accordance with ASC 842. The Chestnut Run Lease has an initial term of 162 months with 3 five-year extension options and certain expansion rights. The aggregate estimated rent payments due over the initial term of the Chestnut Run Lease is approximately $33.8 million. The estimated rent payments due for the remainder of 2022 along with each of the next five years and thereafter is as follows:

(in thousands)
2022 (remaining 9 months)	$	-
2023		140
2024		1,873
2025		2,326
2026		2,384
2027		2,444
Thereafter		24,670

The Company paid a security deposit for the Chestnut Run Lease in the form of a letter of credit of $4.0 million, which is included in the balance sheet as restricted cash as of March 31, 2022. The security deposit may be reduced to $0.5 million over time in accordance with the terms of the Chestnut Run Lease.

In connection with the Company’s expansion of operations in the State of Delaware, the Company was approved for a grant from the State of Delaware in 2021 that will provide up to $5.5 million in reimbursements over three years for the development of lab space in addition to increasing jobs in Delaware to meet specific targeted levels through 2023. During the first quarter of 2022, the Company received cash of $2.4 million from the grant for the development of lab space. The Company has deferred the recognition of these grant funds as they relate to capitalized costs and has classified them as long-term liabilities on the balance sheet. The Company will recognize the grant funds in other income as grant income over the useful life of the related assets. If, after two years from the disbursement date, the incurred costs for lab space are less than the $2.4 million received, the Company is required to pay back the difference between total funds received and allowable costs incurred. Additionally, if the Company leaves the State of Delaware within five years of the disbursement, the Company is required to return an amount equal to the amount of grant funds disbursed on a pro-rated basis. During the first quarter of 2022, the Company also received cash of $0.3 million for satisfying the first performance benchmark measurement. The Company recognized this in other income, net on the statement of operations and comprehensive loss.

To the extent the Company’s employee headcount is fewer than the performance benchmark, the Company is required to repay the amount of grant funds received for the number of employees below the benchmark.

Employment Agreements

The Company entered into employment agreements with key personnel providing for compensation and severance in certain circumstances, as defined in the respective employment agreements.

401(k) Defined Contribution Plan

The Company sponsors a 401(k) defined‑contribution plan covering all employees. Participants are permitted to contribute up to 100% of their eligible annual pretax compensation up to an established federal limit on aggregate participant contributions. The Company provides a safe harbor match with a maximum amount of 3% of the participant’s compensation. For both the three months ended March 31, 2022 and 2021, the Company made matching contributions of $0.2 million.

Research Collaboration Agreement

In September 2021, the Company entered into a research collaboration agreement estimated to last for approximately one year (the “Darwin Health Agreement”) with Darwin Health, Inc. (“DarwinHealth”). Under the terms of the Darwin Health Agreement, DarwinHealth will utilize their drug discovery technologies and certified methodologies in precision oncology to advance and accelerate clinical development for certain of the Company’s programs across a broad range of tumor subtypes. The Company will pay DarwinHealth a total of $3.0 million in three equal installments over the one-year term (the “Research Term”) to fund the research and, if the Company adopts any of DarwinHealth’s development ideas, the Company will be responsible for the development, manufacturing, and commercialization of any such products. In addition to research funding, DarwinHealth is eligible to receive future research, development and regulatory milestones of up to $3.0 million for each product candidate and is also eligible to receive tiered royalties in the low single digits on net sales of each product developed using DarwinHealth’s development technologies or methods. However, within eighteen-months following the Research Term, the Company, in its sole discretion, may notify DarwinHealth that it will not utilize its development ideas and will be entitled to receive a refund of $0.5 million.

Other Research and Development Arrangements

The Company enters into agreements with contract research organizations (“CROs”) to assist in the performance of research and development activities. Expenditures to CROs will represent a significant cost in clinical development for the Company.

9. Stock-Based Compensation

The Company has two equity incentive plans: the 2016 Equity Incentive Plan, as amended, and the 2020 Equity Incentive Plan. New awards can only be granted under the 2020 Equity Incentive Plan (the “Plan”) and as of March 31, 2022, 6,240,398 shares were available for future grants. The number of shares of the Company’s common stock that may be issued pursuant to rights granted under the Plan shall automatically increase on January 1st of each year, commencing on January 1, 2021, and continuing for ten years, in an amount equal to five percent of the total number of shares of the Company’s common stock outstanding on December 31st of the preceding calendar year, subject to the discretion of the board of directors or compensation committee to determine a lesser number of shares shall be added for such year. The Plan provides for the granting of common stock, incentive stock options, nonqualified stock options, restricted stock awards, restricted stock units and/or stock appreciation rights to employees, directors, and other persons, as determined by the Company’s board of directors. The Company’s stock options vest based on the terms in each award agreement, generally over four-year periods with 25% of options vesting after 1 year and then monthly thereafter, and have a term of ten years.

The Company measures stock-based awards at their grant-date fair value and records compensation expense on a straight-line basis over the vesting period of the awards. The Company recorded stock-based compensation expense in the following expense categories in its accompanying statements of operations:

	Three Months Ended March 31,
(in thousands)	2022		2021
Research and development	$	3,200	$	1,840
General and administrative		3,629		2,046
	$	6,829	$	3,886

Stock Options

The following table summarizes stock option activity for the periods indicated:

	Number of shares			Weighted average exercise price per share		Weighted average remaining contractual term (years)
Outstanding at January 1, 2022		7,179,482		$	15.36		8.66
Granted		1,646,416		$	10.60
Exercised		(93,032	)	$	1.64
Forfeited		(191,849	)	$	17.86
Outstanding at March 31, 2022		8,541,017		$	14.54		8.70
Exercisable at March 31, 2022		2,285,520		$	8.08		7.85

At March 31, 2022, the aggregate intrinsic value of outstanding options and exercisable options was $11.3 million and $6.7 million, respectively.

The following table summarizes information about stock options outstanding at March 31, 2022 under the Plan:

Options Outstanding

Options Exercisable

Range of Exercise Prices

Number

Outstanding

Weighted Average

Remaining