cdak-10q_20210331.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, 2021

OR

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

For the transition period from _______________ to _______________

Commission File Number: 001-39615

 

CODIAK BIOSCIENCES, INC.

(Exact Name of Registrant as Specified in its Charter)

 

 

Delaware

47-4926530

(State or other jurisdiction of

incorporation or organization)

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

 

35 CambridgePark Drive, Suite 500

Cambridge, MA

02140

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: (617949-4100

 

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

 

CDAK

 

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, 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 May 3, 2021, the registrant had 22,043,883 shares of common stock, $0.0001 par value per share, outstanding.

 

 

 

 


 

Table of Contents

 

 

 

Page

PART I.

 

 

Item 1.

Financial Statements (Unaudited)

3

 

Condensed Consolidated Balance Sheets as of March 31, 2021 and December 31, 2020

3

 

Condensed Consolidated Statements of Operations and Comprehensive Loss for the three months ended March 31, 2021 and 2020

4

 

Condensed Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders' Equity (Deficit) for the three months ended March 31, 2021 and 2020

5

 

Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2021 and 2020

6

 

Notes to Condensed Consolidated Financial Statements

7

Item 2.

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

29

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

43

Item 4.

Controls and Procedures

43

PART II.

OTHER INFORMATION

44

Item 1.

Legal Proceedings

44

Item 1A.

Risk Factors

44

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

44

Item 3.

Defaults Upon Senior Securities

44

Item 4.

Mine Safety Disclosures

44

Item 5.

Other Information

44

Item 6.

Exhibits

45

Signatures

46

 

 

i


 

 

  SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

This Quarterly Report on Form 10-Q contains express or implied forward-looking statements that are based on our management’s belief and assumptions and on information currently available to our management. Although we believe that the expectations reflected in these forward-looking statements are reasonable, these statements relate to future events or our future operational or financial performance, and involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements. Forward-looking statements contained in this Quarterly Report on Form 10-Q include, but are not limited to, statements about:

 

 

 

the success, cost and timing of our product development activities, preclinical studies and clinical trials, including statements regarding the timing of initiation and completion of studies or trials and related preparatory work, the period during which the results of the trials will become available and our research and development programs;

 

 

 

the design and conduct of our clinical trials of exoSTING and exoIL-12 and planned clinical trial of exoASO-STAT6;

 

 

 

our ability to successfully advance any our engEx product candidates into and through clinical trials, or obtain marketing approval;

 

 

 

the potential and capabilities of our engEx Platform, engEx product candidates and engEx discovery programs;

 

 

 

the potential and capability of our engEx Platform to generate additional engEx product candidates;

 

 

 

our ability to successfully manufacture, or procure from third parties sufficient supply of, our product candidates for preclinical studies, clinical trials or commercial use, if approved;

 

 

 

our ability to establish, operate and maintain our in-house Phase 1/2 clinical manufacturing facility;

 

 

 

our ability to utilize our engEx Platform to engineer exosomes to carry various biologically active drug molecules, target specific cell types or cellular pathways or enhance the value of existing drug modalities;

 

 

 

the potential indications that we may be able to target with engineered exosomes generated from our engEx Platform;

 

 

 

the size, composition and growth potential of the patient populations and markets we intend to target with our engEx product candidates and our ability to develop and commercialize engEx product candidates to address those patient populations and markets;

 

 

 

the ability and willingness of our current and future collaborators to continue research and development activities relating to our engEx exosomes;

 

 

 

our ability to maintain regulatory approval, if obtained, of any of our current or future engEx product candidates, and any related restrictions, limitations and/or warnings in the label of an approved product candidate;

 

 

 

our expectations regarding our ability to obtain and maintain intellectual property protection for our product candidates;

 

 

 

our ability to license intellectual property relating to our product candidates and to comply with our existing license and collaboration agreements;

 

 

 

our ability to commercialize our products, if approved, in light of the intellectual property rights of others;

 

 

 

developments relating to the use of exosomes to develop therapeutics;

 

 

 

the success of competing therapies that are or become available;

 

 

 

our ability to obtain funding for our operations, including funding necessary to complete further development and commercialization of our product candidates;

 

 

 

the commercialization of our product candidates, if approved;

 

 

 

our plans to research, develop and commercialize our engEx product candidates and enhance the capabilities of our engEx Platform;

 

 

 

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

1


 

 

 

 

 

future agreements with third parties in connection with the commercialization of our product candidates and any other approved product;

 

 

 

the rate and degree of market acceptance of our product candidates;

 

 

 

regulatory developments in the United States and foreign countries;

 

 

 

our ability to contract with third-party suppliers and manufacturers and their ability to perform adequately;

 

 

 

our ability to attract and retain key scientific or management personnel;

 

 

 

our expectations regarding the time during which we will be an emerging growth company under the JOBS Act;

 

 

 

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

 

 

 

the impact of laws and regulations; and

 

 

 

the direct or indirect impact of the COVID-19 pandemic on our business, operations, development timelines and the markets and communities in which we and our partners, collaborators, vendors and customers operate.

 

In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” “continue” or the negative of these terms or other comparable terminology. These statements are only predictions. You should not place undue reliance on forward-looking statements because they involve known and unknown risks, uncertainties, and other factors, which are, in some cases, beyond our control and which could materially affect results. Factors that may cause actual results to differ materially from current expectations include, among other things, those listed above under “Summary of the Material Risks Associated with Our Business” and under the section titled “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q. If one or more of these risks or uncertainties occur, or if our underlying assumptions prove to be incorrect, actual events or results may vary significantly from those implied or projected by the forward-looking statements. No forward-looking statement is a guarantee of future performance. You should read this Quarterly Report on Form 10-Q and the documents that we reference in this Quarterly Report on Form 10-Q and have filed with the Securities and Exchange Commission as exhibits hereto completely and with the understanding that our actual future results may be materially different from any future results expressed or implied by these forward-looking statements.

 

The forward-looking statements in this Quarterly Report on Form 10-Q represent our views as of the date of this Quarterly Report on Form 10-Q. We anticipate that subsequent events and developments will cause our views to change. However, while we may elect to update these forward-looking statements at some point in the future, we have no current intention of doing so except to the extent required by applicable law. You should therefore not rely on these forward-looking statements as representing our views as of any date subsequent to the date of this Quarterly Report on Form 10‑Q.

 

This Quarterly Report on Form 10-Q also contains estimates, projections and other information concerning our industry, our business and the markets for our product candidates. Information that is based on estimates, forecasts, projections, market research or similar methodologies is inherently subject to uncertainties and actual events or circumstances may differ materially from events and circumstances that are assumed in this information. Unless otherwise expressly stated, we obtained this industry, business, market, and other data from our own internal estimates and research as well as from reports, research surveys, studies, and similar data prepared by market research firms and other third parties, industry, medical and general publications, government data and similar sources. While we are not aware of any misstatements regarding any third-party information presented in this Quarterly Report on Form 10-Q, their estimates, in particular as they relate to projections, involve numerous assumptions, are subject to risks and uncertainties and are subject to change based on various factors, including those discussed under the section titled “Risk Factors” and elsewhere in our Annual Report on Form 10-K for the year ended December 31, 2020, or the Annual Report, and this Quarterly Report on Form 10-Q.

 

NOTE REGARDING COMPANY REFERENCES

 

Unless the context otherwise requires, the terms “Codiak,” “the Company,” “we,” “us,” and “our” in this Form 10-Q refer to Codiak BioSciences, Inc. and its consolidated subsidiaries.

2


 

 

Item 1. Financial Statements

 

CODIAK BIOSCIENCES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited, in thousands, except share and per share data)

 

 

 

MARCH 31,

2021

 

 

DECEMBER 31,

2020

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

130,272

 

 

$

88,915

 

Prepaid expenses and other current assets

 

 

4,405

 

 

 

4,843

 

Total current assets

 

 

134,677

 

 

 

93,758

 

Property and equipment, net

 

 

30,885

 

 

 

31,410

 

Restricted cash, net of current portion

 

 

4,170

 

 

 

4,170

 

Operating right-of-use assets

 

 

21,767

 

 

 

22,003

 

Total assets

 

$

191,499

 

 

$

151,341

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

2,162

 

 

$

2,018

 

Accrued expenses

 

 

6,805

 

 

 

8,870

 

Deferred revenue

 

 

4,345

 

 

 

5,281

 

Operating lease liabilities

 

 

2,230

 

 

 

1,482

 

Total current liabilities

 

 

15,542

 

 

 

17,651

 

Long-term liabilities:

 

 

 

 

 

 

 

 

Deferred revenue, net of current portion

 

 

46,008

 

 

 

57,416

 

Note payable, net of discount

 

 

25,095

 

 

 

24,960

 

Operating lease liabilities, net of current portion

 

 

35,931

 

 

 

36,540

 

Other long-term liabilities

 

 

207

 

 

207

 

Total liabilities

 

 

122,783

 

 

 

136,774

 

Commitments and contingencies (Note 8)

 

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

 

 

Common stock, $0.0001 par value; 150,000,000 shares authorized as of March 31, 2021

   and December 31, 2020; 21,996,886 and 18,787,579 shares issued and outstanding

   as of March 31, 2021 and December 31, 2020, respectively

 

 

2

 

 

 

2

 

Additional paid-in capital

 

 

367,112

 

 

 

302,655

 

Accumulated deficit

 

 

(298,398

)

 

 

(288,090

)

Total stockholders’ equity

 

 

68,716

 

 

 

14,567

 

Total liabilities and stockholders’ equity

 

$

191,499

 

 

$

151,341

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

3


 

CODIAK BIOSCIENCES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(Unaudited, in thousands, except share and per share data)

 

 

 

THREE MONTHS ENDED

MARCH 31,

 

 

 

2021

 

 

2020

 

Revenue:

 

 

 

 

 

 

 

 

Collaboration revenue

 

$

13,191

 

 

$

134

 

Total revenue

 

 

13,191

 

 

 

134

 

Operating expenses:

 

 

 

 

 

 

 

 

Research and development

 

 

16,550

 

 

 

18,391

 

General and administrative

 

 

6,588

 

 

 

4,233

 

Total operating expenses

 

 

23,138

 

 

 

22,624

 

Loss from operations

 

 

(9,947

)

 

 

(22,490

)

Other income (expense):

 

 

 

 

 

 

 

 

Interest expense

 

 

(698

)

 

 

(295

)

Interest income

 

 

5

 

 

 

223

 

Other income

 

 

332

 

 

 

60

 

Total other expense, net

 

 

(361

)

 

 

(12

)

Net loss

 

$

(10,308

)

 

$

(22,502

)

Cumulative dividends on redeemable convertible

   preferred stock

 

 

 

 

 

(3,419

)

Net loss attributable to common stockholders

 

$

(10,308

)

 

$

(25,921

)

Net loss per share attributable to common stockholders,

   basic and diluted

 

$

(0.51

)

 

$

(8.64

)

Weighted average common shares outstanding, basic and

   diluted

 

 

20,333,398

 

 

 

3,001,660

 

Comprehensive loss:

 

 

 

 

 

 

 

 

Net loss

 

$

(10,308

)

 

$

(22,502

)

Other comprehensive loss:

 

 

 

 

 

 

 

 

Unrealized loss on investments, net of tax of $0

 

 

 

 

 

(41

)

Total other comprehensive loss

 

 

 

 

 

(41

)

Comprehensive loss

 

$

(10,308

)

 

$

(22,543

)

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

4


 

 

CODIAK BIOSCIENCES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT)

FOR THE THREE MONTHS ENDED MARCH 31, 2021 AND 2020

(Unaudited, in thousands, except share data)

 

 

 

SERIES A

REDEEMABLE

CONVERTIBLE

PREFERRED

STOCK

 

 

SERIES B

REDEEMABLE

CONVERTIBLE

PREFERRED

STOCK

 

 

SERIES C

REDEEMABLE

CONVERTIBLE

PREFERRED

STOCK

 

 

 

COMMON

STOCK

 

 

ADDITIONAL

PAID-IN

 

 

ACCUM-

ULATED

OTHER

COMPRE-

HENSIVE

(LOSS)

 

 

ACCUM-

ULATED

 

 

TOTAL

STOCK-

HOLDERS

 

 

 

SHARES

 

 

AMOUNT

 

 

SHARES

 

 

AMOUNT

 

 

SHARES

 

 

AMOUNT

 

 

 

SHARES

 

 

AMOUNT

 

 

CAPITAL

 

 

INCOME

 

 

DEFICIT

 

 

EQUITY (DEFICIT)

 

 

 

 

 

Balance at December 31, 2020

 

 

 

 

$

 

 

 

 

 

$

 

 

 

 

 

$

 

 

 

 

18,787,579

 

 

$

2

 

 

$

302,655

 

 

$

 

 

$

(288,090

)

 

$

14,567

 

Exercise of options to purchase common stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

46,807

 

 

 

 

 

 

316

 

 

 

 

 

 

 

 

 

316

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,273

 

 

 

 

 

 

 

 

 

2,273

 

Issuance of common stock upon public

   offering, net of issuance costs of $560

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3,162,500

 

 

 

 

 

 

61,868

 

 

 

 

 

 

 

 

 

61,868

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(10,308

)

 

 

(10,308

)

Balance at March 31, 2021

 

 

 

 

$

 

 

 

 

 

$

 

 

 

 

 

$

 

 

 

 

21,996,886

 

 

$

2

 

 

$

367,112

 

 

$

 

 

$

(298,398

)

 

$

68,716

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at December 31, 2019

 

 

33,200,000

 

 

$

44,169

 

 

 

20,520,828

 

 

$

81,108

 

 

 

20,204,079

 

 

$

89,507

 

 

 

 

2,997,040

 

 

$

 

 

$

2

 

 

$

43

 

 

$

(192,878

)

 

$

(192,833

)

Issuance of Series B redeemable convertible

   preferred stock in conjunction with sponsored

   research agreement

 

 

 

 

 

 

 

 

62,500

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exercise of options to purchase common stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

5,340

 

 

 

 

 

 

18

 

 

 

 

 

 

 

 

 

18

 

Accretion of preferred stock to redemption value

 

 

 

 

 

662

 

 

 

 

 

 

1,184

 

 

 

 

 

 

1,526

 

 

 

 

 

 

 

 

 

 

(1,768

)

 

 

 

 

 

(1,604

)

 

 

(3,372

)

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,750

 

 

 

 

 

 

 

 

 

1,750

 

Unrealized loss on investments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(41

)

 

 

 

 

 

(41

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(22,502

)

 

 

(22,502

)

Balance at March 31, 2020

 

 

33,200,000

 

 

$

44,831

 

 

 

20,583,328

 

 

$

82,292

 

 

 

20,204,079

 

 

$

91,033

 

 

 

 

3,002,380

 

 

$

 

 

$

2

 

 

$

2

 

 

$

(216,984

)

 

$

(216,980

)

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

.

 

5


 

 

CODIAK BIOSCIENCES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited, in thousands)

 

 

 

THREE MONTHS ENDED

MARCH 31,

 

 

 

2021

 

 

2020

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net loss

 

$

(10,308

)

 

$

(22,502

)

   Adjustments to reconcile net loss to net cash from operating activities:

 

 

 

 

 

 

 

 

   Stock-based compensation expense

 

 

2,273

 

 

 

1,750

 

   Non-cash interest expense

 

 

135

 

 

 

67

 

   Depreciation and amortization expense

 

 

1,386

 

 

 

1,028

 

   Accretion of investments

 

 

 

 

 

(40

)

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Prepaid expenses and other current assets

 

 

273

 

 

 

3,154

 

Operating right-of-use assets

 

 

236

 

 

 

502

 

Accounts payable

 

 

270

 

 

 

(920

)

Accrued expenses

 

 

(1,696

)

 

 

(4,315

)

Deferred revenue

 

 

(12,345

)

 

 

(134

)

Operating lease liabilities

 

 

139

 

 

 

2,421

 

Net cash used in operating activities

 

 

(19,637

)

 

 

(18,989

)

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Purchases of property and equipment

 

 

(1,526

)

 

 

(14,065

)

Maturities of investments

 

 

 

 

 

70,562

 

Net cash (used in) provided by investing activities

 

 

(1,526

)

 

 

56,497

 

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Proceeds from exercise of common stock options

 

 

316

 

 

 

18

 

Proceeds from public offering of common stock, net of issuance costs

 

 

62,204

 

 

 

 

Net cash provided by financing activities

 

 

62,520

 

 

 

18

 

Net Increase in cash, cash equivalents and restricted cash

 

 

41,357

 

 

 

37,526

 

Cash, cash equivalents and restricted cash, beginning of period

 

 

93,085

 

 

 

14,852

 

Cash, cash equivalents and restricted cash, end of period

 

$

134,442

 

 

$

52,378

 

Supplemental disclosures:

 

 

 

 

 

 

 

 

Cash paid for interest

 

$

563

 

 

$

228

 

Non-cash investing and financing activities:

 

 

 

 

 

 

 

 

Purchases of property and equipment included in accounts payable and

   accrued expenses

 

$

457

 

 

$

3,136

 

Deferred offering costs included in accrued expenses

 

$

336

 

 

$

 

Accretion of redeemable convertible preferred stock to redemption value

 

$

 

 

$

3,372

 

Operating right-of-use assets obtained in exchange for operating lease

   liabilities

 

$

 

 

$

23,186

 

 

 

 

 

 

 

 

 

 

 

 

AS OF MARCH 31,

 

Reconciliation to amounts within the condensed consolidated balance sheets

 

2021

 

 

2020

 

Cash and cash equivalents

 

$

130,272

 

 

$

47,842

 

Restricted cash

 

$

 

 

$

366

 

Restricted cash, net of current portion

 

$

4,170

 

 

$

4,170

 

Cash, cash equivalents and restricted cash at end of period

 

$

134,442

 

 

$

52,378

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

6


 

 

CODIAK BIOSCIENCES, INC.

Notes to CONDENSED Consolidated Financial Statements

(Unaudited)

1. Nature of the Business

Codiak BioSciences, Inc. (collectively, with its consolidated subsidiaries, any of Codiak, we, us, or the Company) was incorporated in Delaware on June 12, 2015 and is headquartered in Cambridge, Massachusetts. Codiak is a clinical-stage biopharmaceutical company focused on pioneering the development of exosome-based therapeutics, a new class of medicines with the potential to transform the treatment of a wide spectrum of diseases with high unmet medical need. Exosomes have evolved as intercellular transfer mechanisms for complex, biologically active macromolecules and have emerged in recent years as a compelling potential drug delivery vehicle. By leveraging Codiak’s deep understanding of exosome biology, the Company has developed its engineering and manufacturing platform (the engEx Platform), to expand upon the innate properties of exosomes to design, engineer and manufacture novel exosome therapeutics. Codiak has utilized its engEx Platform to generate a deep pipeline of engineered exosomes (engEx exosomes) aimed at treating a broad range of diseases, including oncology, neuro-oncology, neurology, neuromuscular disease and infectious disease. In September 2020, Codiak initiated clinical trials for its two lead product candidates, exoSTING and exoIL-12, which are being developed to address solid tumors. Codiak has multiple preclinical and discovery programs that it is advancing either independently or through its strategic collaborations with Jazz Pharmaceuticals Ireland Limited (Jazz) and Sarepta Therapeutics, Inc. (Sarepta).

Since its inception, the Company has devoted substantially all of its resources to its research and development efforts, including activities to develop its engEx Platform, advance engEx product candidates into clinical trials, perform preclinical research to identify potential engEx product candidates, to perform process development to refine Codiak’s exosome engineering and manufacturing processes, and to provide general and administrative support for these operations.

The Company has primarily funded its operations with proceeds from the sales of common stock, redeemable convertible preferred stock, collaborative and research arrangements with Jazz and Sarepta and its Loan and Security agreement with Hercules Capital, Inc. (Hercules). As of March 31, 2021, the Company has raised an aggregate of $168.2 million through the issuance of its redeemable convertible preferred stock and convertible debt, net of issuance costs, $24.6 million from its term loan facility with Hercules, net of issuance costs, and received $66.0 million in payments from its collaborations with Jazz and Sarepta. On October 16, 2020, the Company completed its initial public offering (IPO), pursuant to which it issued and sold 5,500,000 shares of its common stock at a public offering price of $15.00 per share, resulting in net proceeds of $74.4 million, after deducting underwriting discounts and commissions and other offering expenses. In addition, on February 17, 2021, the Company completed a follow-on public offering, pursuant to which it issued and sold 3,162,500 shares of its common stock (inclusive of the exercise of the underwriter’s option to purchase 412,500 additional shares of common stock) at a public offering price of $21.00 per share, resulting in aggregate net proceeds of $61.9 million, after deducting underwriting discounts and commissions and other offering expenses.

The Company has incurred significant operating losses and negative cash flows from operations since inception. The Company expects to continue to incur significant expenses and operating losses for the foreseeable future. In addition, the Company anticipates that its expenses will increase significantly in connection with ongoing activities to support its engEx Platform development, drug discovery and preclinical and clinical development, in addition to creating a portfolio of intellectual property and providing administrative support.

The Company does not expect to generate significant revenue from sales of its engEx product candidates unless and until clinical development has been successfully completed and regulatory approval is obtained. If the Company obtains regulatory approval for any of its investigational products, it expects to incur significant commercialization expenses.

As a result, the Company will need substantial additional funding to support its continued operations and growth strategy. Until such a time as the Company can generate significant revenue from product sales, if ever, the Company expects to finance its operations through the sale of equity, debt financings or other capital sources, including collaborations with other companies or other strategic transactions. The Company may be unable to raise additional funds or enter into such other agreements on favorable terms, or at all. If the Company fails to raise capital or enter into such agreements as, and when, needed, the Company may have to significantly delay, scale back or discontinue the development and commercialization of one or more of its product candidates or delay its pursuit of potential in-licenses or acquisitions.

7


 

As of March 31, 2021, the Company had cash and cash equivalents of $130.3 million. Management believes that its cash and cash equivalent resources at March 31, 2021, will be sufficient to allow the Company to fund its current operating plan through at least the next twelve months from the issuance of these financial statements.             

The Company is subject to those risks associated with any biopharmaceutical company that has substantial expenditures for research and development. There can be no assurance that the Company’s research and development projects will be successful, that products developed will obtain necessary regulatory approval, or that any approved product will be commercially viable. In addition, the Company operates in an environment of rapid technological change and is largely dependent on the services of its employees and consultants. If the Company fails to become profitable or is unable to sustain profitability on a continuing basis, then it may be unable to continue its operations at planned levels and be forced to reduce its operations.

2. Summary of Basis of Presentation and Significant Accounting Policies

Basis of Presentation and Principles of Consolidation

The accompanying unaudited condensed consolidated financial statements that accompany these notes have been prepared in accordance with U.S. generally accepted accounting principles (GAAP) and applicable rules and regulations of the Securities and Exchange Commission (SEC) for interim financial reporting, consistent in all material respects with those applied in our Annual Report on Form 10-K for the year ended December 31, 2020 (2020 Annual Report). Any reference in these notes to applicable guidance is meant to refer to the authoritative accounting principles generally accepted in the United States as found in the Accounting Standard Codification (ASC) and Accounting Standards Update (ASU) of the Financial Accounting Standards Board (FASB). Certain reclassifications were made to the 2020 financial statements to conform to the current period’s presentation. The reclassifications did not result in any changes to net loss or net stockholders’ deficit in either period presented. This report should be read in conjunction with the consolidated financial statements in our 2020 Annual Report.

The consolidated financial statements include the Company and its subsidiaries. All intercompany transactions and balances have been eliminated in consolidation.

Use of estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts in the financial statements and accompanying notes. Actual results could materially differ from those estimates. Management considers many factors in selecting appropriate financial accounting policies and controls, and in developing the estimates and assumptions that are used in the preparation of these financial statements. Management must apply significant judgment in this process. In addition, other factors may affect estimates, including: expected business and operational changes, sensitivity and volatility associated with the assumptions used in developing estimates, and whether historical trends are expected to be representative of future trends. The estimation process often may yield a range of potentially reasonable estimates of the ultimate future outcomes and management must select an amount that falls within that range of reasonable estimates. Significant estimates relied upon in preparing the consolidated financial statements include, among others: estimates related to revenue recognition, the valuation of common stock and stock-based compensation awards, leases, accrued expenses and income taxes.

Significant Accounting Policies

The significant accounting policies used in preparation of these condensed consolidated financial statements for the three months ended March 31, 2021 are consistent with those described in our 2020 Annual Report.

Recent accounting pronouncements

From time to time, new accounting pronouncements are issued by the FASB or other standard setting bodies and adopted by the Company as of the specified effective date. Unless otherwise discussed, the Company believes that the impact of recently issued standards that are not yet effective will not have a material impact on its financial position or results of operations upon adoption.

8


 

In December 2019, the FASB issued ASU No. 2019-12 Income Taxes (Topic 740)-Simplifying the Accounting for Income Taxes (ASU 2019-12), as part of its initiative to reduce complexity in the accounting standards. The amendments in ASU 2019-12, eliminates certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. ASU 2019-12, also clarifies and simplifies other aspects of the accounting for income taxes. ASU 2019-12, is effective for the Company on January 1, 2022, with early adoption permitted. The Company is currently evaluating the potential impact that this standard may have on its financial position and results of operations.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326) (ASU 2016-13). The new standard adjusts the accounting for assets held at amortized cost basis, including marketable securities accounted for as available-for-sale. The standard eliminates the probable initial recognition threshold and requires an entity to reflect its current estimate of all expected credit losses. The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of the financial assets to present the net amount expected to be collected. ASU 2016-13 is effective for the Company on January 1, 2023, with early adoption permitted.  The Company is currently evaluating the potential impact that this standard may have on its financial position and results of operations.

3. Fair Value Measurements

The following tables present information about the Company’s assets measured at fair value on a recurring basis, and indicate the level of the fair value hierarchy utilized to determine such fair values (in thousands):

 

 

 

MARCH 31, 2021

 

 

 

TOTAL

 

 

LEVEL 1

 

 

LEVEL 2

 

 

LEVEL 3

 

 

NOT

SUBJECT

TO

LEVELING(1)

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

$

26,501

 

 

$

 

 

$

 

 

$

 

 

$

26,501

 

 

 

$

26,501

 

 

$

 

 

$

 

 

$

 

 

$

26,501

 

 

 

 

DECEMBER 31, 2020

 

 

 

TOTAL

 

 

LEVEL 1

 

 

LEVEL 2

 

 

LEVEL 3

 

 

NOT

SUBJECT

TO

LEVELING(1)

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

$

81,601

 

 

$

 

 

$

 

 

$

 

 

$

81,601

 

 

 

$

81,601

 

 

$

 

 

$

 

 

$

 

 

$

81,601

 

 

 

(1)

Certain cash equivalents that are valued using the net asset value per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy.

 

As of March 31, 2021 and December 31, 2020, the Company’s cash equivalents consisted of money market funds invested in US Treasury securities with original maturities of less than 90 days from the date of purchase.

During the three months ended March 31, 2021 and 2020, there were no transfers between Level 1, Level 2 and Level 3.

The fair value of the Company’s debt is classified as Level 2 for the periods presented and approximates its carrying value due to the variable interest rate.

4. Investments

All of the Company’s investments matured during the year ended December 31, 2020. The Company did not hold any investments as of March 31, 2021.

9


 

Investments with original maturities of less than 90 days are included in cash and cash equivalents on the condensed consolidated balance sheets. Investments with maturities of less than 12 months would be considered current and those investments with maturities greater than 12 months would be considered non-current.

The Company did not recognize any realized gains or losses in the three months ended March 31, 2021. The Company recognized less than $0.1 million of realized losses in the three months ended March 31, 2020.

5. Property and Equipment, net

Property and equipment, net, consisted of the following (in thousands):

 

 

 

MARCH 31,

2021

 

 

DECEMBER 31,

2020

 

Leasehold improvements

 

$

23,961

 

 

$

23,949

 

Laboratory equipment

 

 

15,812

 

 

 

14,837

 

Furniture and fixtures

 

 

1,288

 

 

 

1,288

 

Computer equipment and software

 

 

159

 

 

 

159

 

Construction-in-process

 

 

1,541

 

 

 

1,667

 

 

 

$

42,761

 

 

$

41,900

 

Less: Accumulated depreciation and amortization

 

 

(11,876

)

 

 

(10,490

)

         Property and equipment, net

 

$

30,885

 

 

$

31,410

 

 

Depreciation and amortization expense for the three months ended March 31, 2021 and 2020 was $1.4 million and $1.0, respectively.

6. Accrued Expenses

Accrued expenses consists of the following (in thousands):

 

 

MARCH 31,

2021

 

 

DECEMBER 31,

2020

 

Accrued employee compensation

 

$

3,422

 

 

$

5,040

 

Accrued external research and development costs

 

 

1,351

 

 

 

1,475

 

Accrued professional services and consulting

 

 

1,156

 

 

 

902

 

Accrued facilities costs

 

 

296

 

 

 

846

 

Other expenditures

 

 

580

 

 

 

607

 

 

 

$

6,805

 

 

$

8,870

 

 

 

 

 

 

 

 

 

 

 

7. Leases

We have entered into various long-term non-cancelable lease arrangements for our facilities, expiring at various times through 2029. Certain arrangements have free rent periods or escalating rent payment provisions; costs under such arrangements are recognized on a straight-line basis over the life of the leases. We have two locations in Massachusetts, our office and laboratory, located in Cambridge and manufacturing space, located in Lexington.

Operating Leases

500 Technology Square

The Company leased building space at 500 Technology Square in Cambridge, Massachusetts. Under the terms of the lease, the Company leased approximately 19,823 square feet for $1.5 million per year in base rent, which was subject to a 2.5% annual rent increase plus certain operating expenses and taxes. The Company accounted for this lease as an operating lease. The lease commenced on December 28, 2016 and originally expired on December 31, 2021. On August 26, 2019, the Company signed a lease termination to accelerate the expiration date of the lease to February 28, 2020.

10


 

4 Hartwell Place

On March 5, 2019, the Company entered into a lease for manufacturing space at 4 Hartwell Place in Lexington, Massachusetts. Under the terms of the lease, the Company leases approximately 18,707 square feet for $0.9 million per year in base rent, which is subject to a 3.0% annual rent increase during the initial lease term, plus certain operating expenses and taxes. The lease term commenced in July 2019 and will end in December 2029. The Company has the option to extend the lease twice, each for a 5-year period, on the same terms and conditions as the current lease, subject to a change in base rent based on market rates. The Company has fully occupied the space as of December 31, 2020. Upon execution of the lease agreement, the Company provided a security deposit of $0.4 million which is held in the form of a letter of credit and was classified as non-current restricted cash on the condensed consolidated balance sheets as of March 31, 2021 and December 31, 2020. The lease provides the Company with a tenant improvement allowance of up to $1.3 million, which is being amortized as a reduction to rent expense over the remaining lease term. As of March 31, 2021, the Company had received all $1.3 million of the tenant improvement allowance. Costs incurred related to the allowance are capitalized as leasehold improvements.

35 CambridgePark Drive

On March 22, 2019, the Company entered into a lease for office and laboratory space at 35 CambridgePark Drive in Cambridge, Massachusetts. Under the terms of the lease, the Company leases approximately 68,258 square feet for $4.9 million per year in base rent, which is subject to a 3.0% annual rent increase during the initial lease term, plus certain operating expenses and taxes. The lease term commenced upon execution of the lease on March 26, 2019 and is expected to end in November 2029. The Company has the option to extend the lease for a 10-year period on the same terms and conditions as the current lease, subject to a change in base rent based on market rates. The Company occupied the space in February 2020 as its new corporate headquarters. Upon execution of the lease agreement, the Company provided a security deposit of $3.7 million which is held in the form of a letter of credit and was classified as non-current restricted cash on the condensed consolidated balance sheets as of March 31, 2021 and December 31, 2020. The lease provides the Company with a tenant improvement allowance of $12.3 million, subject to reduction for a 2% construction oversight fee due to the landlord, which is being amortized as a reduction to rent expense over the remaining lease term. As of December 31, 2020, the Company had received all $12.3 million of the tenant improvement allowance. Costs incurred related to the allowance are capitalized as leasehold improvements.

Sublease

On April 27, 2020, the Company entered into a sublease for 23,280 square feet of its leased space at 35 CambridgePark Drive. Under the terms of the sublease, the sublessee is to pay the Company approximately $1.3 million per year, which is subject to a 3.0% annual rent increase, plus certain operating expenses. The Company remains jointly and severally liable under the head lease and accounts for the sublease as an operating lease. The lease term commenced on May 18, 2020 and is expected to end in May 2022. The sublessee has the option to extend the sublease for a one-year period on the same terms and conditions as the current sublease, subject to a change in base rent based on the greater of (i) an increase of 3% of the annual rent owed by the sublessee in year two, and (ii) market rent for the subleased premises. Upon execution of the sublease agreement, the sublessee provided the Company a security deposit of $0.3 million which is held in the form of a letter of credit. During the three months ended March 31, 2021, the Company recognized sublease income of $0.4 million, which was presented in other income on the condensed consolidated statements of operations and comprehensive loss. There was no sublease income recognized during the three months ended March 31, 2020.

The components of operating lease costs were as follows (in thousands):

 

 

THREE MONTHS ENDED

MARCH 31,

 

 

THREE MONTHS ENDED

MARCH 31,

 

 

 

2021

 

 

2020

 

Operating lease costs

 

$

1,209

 

 

$

1,212

 

Short-term lease costs

 

 

6

 

 

 

3

 

Variable lease costs

 

 

669

 

 

 

616

 

Sublease income

 

 

(357

)

 

 

 

 

 

$

1,527

 

 

$

1,831

 

 

Variable lease costs were primarily related to operating expenses, taxes and utilities associated with the operating leases, which were assessed based on the Company’s proportionate share of such costs for the leased premises.

11


 

Additional lease information is summarized in the following table (in thousands, except lease term and discount rate):

 

 

 

THREE MONTHS ENDED

MARCH 31,

 

 

THREE MONTHS ENDED

MARCH 31,

 

 

 

2021

 

 

2020

 

Cash paid for amounts included in the measurement of operating

   lease liabilities

 

$

1,483

 

 

$

1,698

 

Weighted-average remaining lease term - operating leases (years)

 

 

8.7

 

 

 

9.7

 

Weighted-average discount rate - operating leases

 

 

10

%

 

 

10

%

Undiscounted cash flows used in calculating the Company’s operating lease liabilities and amounts to be received under the sublease at 35 CambridgePark Drive as of March 31, 2021 are as follows (in thousands):

Fiscal Year

 

OPERATING

LEASE

PAYMENTS

 

 

SUBLEASE

RECEIPTS

 

 

NET

OPERATING

LEASE

PAYMENTS

 

2021 (remainder of the year)

 

 

4,463

 

 

 

961

 

 

 

3,502

 

2022

 

 

6,123

 

 

 

483

 

 

 

5,640

 

2023

 

 

6,307

 

 

 

 

 

 

6,307

 

2024

 

 

6,496

 

 

 

 

 

 

6,496

 

2025

 

 

34,978

 

 

 

 

 

 

34,978

 

Total undiscounted cash flows

 

$

58,367

 

 

$

1,444

 

 

$

56,923

 

Less: Amounts representing interest

 

 

(20,206

)

 

 

 

 

 

 

 

 

Present value of lease liabilities

 

$

38,161