rptx-10q_20200630.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 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: 001-39335

 

Repare Therapeutics Inc.

(Exact Name of Registrant as Specified in its Charter)

 

 

Québec

Not applicable

(State or other jurisdiction of

incorporation or organization)

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

7210 Frederick-Banting, Suite 100

St-Laurent, Québec, Canada

H4S 2A1

(Address of principal executive offices)

(Zip Code)

 

Registrant’s telephone number, including area code: (857) 412-7018

 

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 shares, no par value

 

RPTX

 

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.

 

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 August 13, 2020, there were 36,753,454 shares of the registrant’s common stock, no par value per share, outstanding.

 

 

 


Table of Contents

 

 

 

Page

SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS

1

PART I.

FINANCIAL INFORMATION

3

Item 1.

Financial Statements (Unaudited)

3

 

Condensed Consolidated Balance Sheets

3

 

Condensed Consolidated Statements of Operations

4

 

Condensed Consolidated Statements of Comprehensive Income (Loss)

5

 

Condensed Consolidated Statements of Cash Flows

6

 

Notes to Unaudited Condensed Consolidated Financial Statements

7

Item 2.

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

13

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

23

Item 4.

Controls and Procedures

24

PART II.

OTHER INFORMATION

25

Item 1.

Legal Proceedings

25

Item 1A.

Risk Factors

25

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

73

Item 3.

Defaults Upon Senior Securities

74

Item 4.

Mine Safety Disclosures

74

Item 5.

Other Information

74

Item 6.

Exhibits

75

Signatures

76

 

 

 


 

i


 

SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements about us and our industry that involve substantial risks and uncertainties. All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q, including statements regarding our strategy, future financial condition, future operations, research and development costs, plans and objectives of management, are forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “aim,” “anticipate,” “assume,” “believe,” “contemplate,” “continue,” “could,” “design,” “due,” “estimate,” “expect,” “goal,” “intend,” “may,” “objective,” “plan,” “predict,” “positioned,” “potential,” “seek,” “should,” “target,” “will,” “would” and other similar expressions that are predictions of or indicate future events and future trends, or the negative of these terms or other comparable terminology. Although we believe that we have a reasonable basis for each forward-looking statement contained in this Quarterly Report on Form 10-Q, we caution you that these statements are based on a combination of facts and factors currently known by us and our expectations of the future, about which we cannot be certain.

The forward-looking statements in this Quarterly Report on Form 10-Q include, among other things, statements about:

 

the initiation, timing, progress and results of our current and future preclinical studies and clinical trials and related preparatory work and the period during which the results of the trials will become available, as well as our research and development programs;

 

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

 

our ability to obtain regulatory approval of RP-3500 and any of our current and future product candidates that we develop;

 

our ability to identify and develop additional product candidates using our SNIPRx platform;

 

business disruptions affecting the initiation, patient enrollment, development and operation of our clinical trials, including a public health emergency or pandemic, such as the coronavirus disease, or COVID-19 pandemic

 

the unexpected impact of the COVID-19 pandemic on our operations, the continuity of our business, including our preclinical studies and clinical trials, general economic conditions and ability to raise additional capital;

 

our ability to enroll patients in clinical trials, to timely and successfully complete those trials and to receive necessary regulatory approvals;

 

the timing of completion of enrollment and availability of data from our current preclinical studies and clinical trials;

 

the expected timing of filings with regulatory authorities for any product candidates that we develop;

 

our expectations regarding the potential market size and the rate and degree of market acceptance for any product candidates that we develop;

 

the effects of competition with respect to RP-3500 or any of our other current or future product candidates, as well as innovations by current and future competitors in our industry;

 

our ability to fund our working capital requirements;

 

our intellectual property position, including the scope of protection we are able to establish, maintain and enforce for intellectual property rights covering our product candidates;

 

our financial performance and our ability to effectively manage our anticipated growth;

 

our ability to obtain additional funding for our operations; and

 

other risks and uncertainties, including those listed under the section titled “Risk Factors.”

 

Although we believe that the expectations reflected in these forward-looking statements are reasonable, these statements relate to our strategy, future operations, future financial position, future revenue, projected costs, prospects, plans, objectives of management and expected market growth, and involve known and unknown risks, uncertainties and other factors including, without limitation, risks, uncertainties and assumptions regarding the impact of the COVID-19 pandemic on our business, operations, strategy, goals and anticipated timelines, our ongoing and planned preclinical activities, our ability to initiate, enroll, conduct or complete ongoing and planned clinical trials, our timelines for regulatory submissions and our financial position that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. You are urged to carefully review the disclosures we make

1


 

concerning these risks and other factors that may affect our business and operating results in this Quarterly Report on Form 10-Q. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this document. We do not intend, and undertake no obligation, to update any forward-looking information to reflect events or circumstances

2


 

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

Repare Therapeutics Inc.

Condensed Consolidated Balance Sheets

(Unaudited)

(Amounts in thousands of U.S. dollars, except share data)

 

 

 

As of

June 30,

 

 

As of

December 31,

 

 

 

2020

 

 

2019

 

ASSETS

 

 

 

 

 

 

 

 

CURRENT ASSETS:

 

 

 

 

 

 

 

 

Cash

 

$

369,933

 

 

$

94,797

 

Research and development tax credits receivable

 

 

1,414

 

 

 

1,080

 

Other receivables

 

 

2,621

 

 

 

1,976

 

Prepaid expenses and other current assets

 

 

3,296

 

 

 

719

 

Total current assets

 

 

377,264

 

 

 

98,572

 

Property and equipment, net

 

 

2,453

 

 

 

2,390

 

Restricted cash

 

 

199

 

 

 

208

 

Operating lease right-of-use assets

 

 

729

 

 

 

1,034

 

Other assets

 

 

894

 

 

 

359

 

Deferred tax assets

 

 

192

 

 

 

132

 

TOTAL ASSETS

 

$

381,731

 

 

$

102,695

 

LIABILITIES, CONVERTIBLE PREFERRED SHARES AND SHAREHOLDERS’

   EQUITY (DEFICIT)

 

 

 

 

 

 

 

 

CURRENT LIABILITIES:

 

 

 

 

 

 

 

 

Accounts payable

 

$

3,576

 

 

$

2,127

 

Accrued expenses and other current liabilities

 

 

5,262

 

 

 

1,276

 

Operating lease liability, current portion

 

 

608

 

 

 

625

 

Income tax payable

 

 

351

 

 

 

218

 

Total current liabilities

 

 

9,797

 

 

 

4,246

 

Operating lease liability, net of current portion

 

 

136

 

 

 

439

 

Deferred revenue

 

 

58,142

 

 

 

8,142

 

TOTAL LIABILITIES

 

 

68,075

 

 

 

12,827

 

Series A convertible preferred shares, no par value per share; 0 shares and unlimited shares

   authorized as of June 30, 2020 and December 31, 2019, respectively; 0 shares and

   11,090,135 shares issued and outstanding as of June 30, 2020 and December 31, 2019,

   respectively; liquidation and redemption value of $0 and $52,750 as of June 30, 2020

   and December 31, 2019, respectively

 

 

 

 

 

53,749

 

Series B convertible preferred shares, no par value per share; 0 shares and unlimited shares

   authorized as of June 30, 2020 and December 31, 2019, respectively; 0 shares and

   10,468,258 shares issued and outstanding as of June 30, 2020 and December 31, 2019,

   respectively; liquidation and redemption value of $0 and $82,496 as of June 30, 2020

   and December 31, 2019, respectively

 

 

 

 

 

82,248

 

TOTAL CONVERTIBLE PREFERRED SHARES

 

 

 

 

 

135,997

 

SHAREHOLDERS’ EQUITY (DEFICIT)

 

 

 

 

 

 

 

 

Preferred shares, no par value per share; unlimited shares and 0 shares authorized as of

   June 30, 2020 and December 31, 2019, respectively; 0 shares issued and outstanding as of   

   June 30, 2020 and December 31, 2019

 

 

 

 

 

 

Common shares, no par value per share; unlimited shares authorized as of

   June 30, 2020 and December 31, 2019; 36,753,454 and 1,528,374  shares

   issued and outstanding as of June 30, 2020, and December 31, 2019, respectively

 

 

383,818

 

 

 

1

 

Additional paid-in capital

 

 

4,182

 

 

 

3,811

 

Accumulated deficit

 

 

(74,344

)

 

 

(49,941

)

Total shareholders’ equity (deficit)

 

 

313,656

 

 

 

(46,129

)

TOTAL LIABILITIES, CONVERTIBLE PREFERRED SHARES AND

   SHAREHOLDERS’ EQUITY (DEFICIT)

 

$

381,731

 

 

$

102,695

 

 

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

3


 

Repare Therapeutics Inc.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(Unaudited)

(Amounts in thousands of U.S. dollars, except share and per share data)

 

 

 

Three Months Ended

June 30,

 

 

Six Months Ended

June 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development, net of tax credits

 

$

8,951

 

 

$

4,853

 

 

$

17,583

 

 

$

8,556

 

General and administrative

 

 

3,372

 

 

 

1,032

 

 

 

5,555

 

 

 

2,108

 

Total operating expenses

 

 

12,323

 

 

 

5,885

 

 

 

23,138

 

 

 

10,664

 

Loss from operations

 

 

(12,323

)

 

 

(5,885

)

 

 

(23,138

)

 

 

(10,664

)

Other income (expense), net

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Realized and unrealized gain (loss) on foreign exchange

 

 

595

 

 

 

227

 

 

 

(1,136

)

 

 

299

 

Change in fair value of Series A preferred share tranche

   obligation

 

 

 

 

 

(680

)

 

 

 

 

 

(700

)

Other expense

 

 

(4

)

 

 

(1

)

 

 

(6

)

 

 

(3

)

Total other income (expense), net

 

 

591

 

 

 

(454

)

 

 

(1,142

)

 

 

(404

)

Loss before income taxes

 

 

(11,732

)

 

 

(6,339

)

 

 

(24,280

)

 

 

(11,068

)

Income tax expense

 

 

(70

)

 

 

(20

)

 

 

(123

)

 

 

(129

)

Net loss and comprehensive loss

 

$

(11,802

)

 

$

(6,359

)

 

$

(24,403

)

 

$

(11,197

)

Net loss attributable to common shareholders—basic and

   diluted

 

$

(11,802

)

 

$

(6,359

)

 

$

(24,403

)

 

$

(11,197

)

Net loss per share attributable to common shareholders—basic and

   diluted

 

$

(2.45

)

 

$

(4.16

)

 

$

(7.56

)

 

$

(7.33

)

Weighted-average common shares outstanding—basic and diluted

 

 

4,825,214

 

 

 

1,528,374

 

 

 

3,229,635

 

 

 

1,528,374

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

4


 

Repare Therapeutics Inc.

Condensed Consolidated Statements of Convertible Preferred Shares and Shareholders’ Equity (Deficit)

(Unaudited)

(Amounts in thousands of U.S. dollars, except share data)

 

 

 

Convertible Preferred Shares

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Series A

 

 

Series B

 

 

Common Shares

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Additional

Paid-in

Capital

 

 

Accumulated

Deficit

 

 

Total

Shareholders’

Equity (Deficit)

 

Balance, December 31, 2018

 

 

6,813,340

 

 

$

31,873

 

 

 

 

 

$

 

 

 

1,528,374

 

 

$

1

 

 

$

340

 

 

$

(22,725

)

 

$

(22,384

)

Issuance of Series A convertible preferred shares,

   net of issuance costs of $5

 

 

4,276,795

 

 

 

21,876

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Share-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

65

 

 

 

 

 

 

65

 

Net loss and comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(4,838

)

 

 

(4,838

)

Balance, March 31, 2019

 

 

11,090,135

 

 

$

53,749

 

 

 

 

 

$

-

 

 

 

1,528,374

 

 

$

1

 

 

$

405

 

 

$

(27,563

)

 

$

(27,157

)

Share-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

121

 

 

 

 

 

 

121

 

Net loss and comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(6,359

)

 

 

(6,359

)

Balance, June 30, 2019

 

 

11,090,135

 

 

$

53,749

 

 

 

 

 

$

 

 

 

1,528,374

 

 

$

1

 

 

$

526

 

 

$

(33,922

)

 

$

(33,395

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, December 31, 2019

 

 

11,090,135

 

 

$

53,749

 

 

 

10,468,258

 

 

$

82,248

 

 

 

1,528,374

 

 

$

1

 

 

$

3,811

 

 

$

(49,941

)

 

$

(46,129

)

Exercise of stock options

 

 

 

 

$

 

 

 

 

 

$

 

 

 

181,318

 

 

$

520

 

 

$

(196

)

 

$

 

 

$

324

 

Share-based compensation expense

 

 

 

 

$

 

 

 

 

 

$

 

 

 

 

 

$

 

 

$

271

 

 

$

 

 

$

271

 

Net loss and comprehensive loss

 

 

 

 

$

 

 

 

 

 

$

 

 

 

 

 

$

 

 

$

 

 

$

(12,601

)

 

$

(12,601

)

Balance, March 31, 2020

 

 

11,090,135

 

 

$

53,749

 

 

 

10,468,258

 

 

$

82,248

 

 

 

1,709,692

 

 

$

521

 

 

$

3,886

 

 

$

(62,542

)

 

$

(58,135

)

Exercise of stock options

 

 

 

 

 

 

 

 

 

 

 

 

 

 

85,369

 

 

 

257

 

 

 

(93

)

 

 

 

 

 

164

 

Share-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

389

 

 

 

 

 

 

389

 

Issuance of common shares upon initial public

   offering, net of issuance costs of $20,957

 

 

 

 

 

 

 

 

 

 

 

 

 

 

12,650,000

 

 

 

232,043

 

 

 

 

 

 

 

 

 

232,043

 

Conversion of convertible preferred shares into an

   equivalent number of common shares

 

 

(11,090,135

)

 

 

(53,749

)

 

 

(10,468,258

)

 

 

(82,248

)

 

 

21,558,393

 

 

 

135,997

 

 

 

 

 

 

 

 

 

135,997

 

Issuance of warrant and conversion into common

   shares

 

 

 

 

 

 

 

 

 

 

 

 

 

 

750,000

 

 

 

15,000

 

 

 

 

 

 

 

 

 

15,000

 

Net loss and comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(11,802

)

 

 

(11,802

)

Balance, June 30, 2020

 

 

 

 

$

 

 

 

 

 

$

 

 

 

36,753,454

 

 

$

383,818

 

 

$

4,182

 

 

$

(74,344

)

 

$

313,656

 

 

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

 

5


 

Repare Therapeutics Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(Amounts in thousands of U.S. dollars)

 

 

 

Six Months Ended

June 30,

 

 

 

2020

 

 

2019

 

Cash Flows From Operating Activities:

 

 

 

 

 

 

 

 

Net loss and comprehensive loss for the period

 

$

(24,403

)

 

$

(11,197

)

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

 

 

 

 

 

 

 

 

Share-based compensation expense

 

 

660

 

 

 

186

 

Depreciation expense

 

 

403

 

 

 

262

 

Change in fair value of the Series A preferred shares tranche obligation

 

 

 

 

 

700

 

Non-cash lease expense

 

 

305

 

 

 

86

 

Foreign exchange loss (gain)

 

 

1,162

 

 

 

(522

)

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Prepaid expenses and other current assets

 

 

(2,577

)

 

 

(155

)

Research and development tax credits receivable

 

 

(381

)

 

 

(246

)

Other receivables

 

 

(725

)

 

 

(566

)

Deferred tax asset

 

 

(60

)

 

 

(42

)

Other non-current assets

 

 

(535

)

 

 

(15

)

Accounts payable

 

 

915

 

 

 

260

 

Accrued expenses and other current liabilities

 

 

2,371

 

 

 

(119

)

Operating lease liability, current portion

 

 

(9

)

 

 

15

 

Income tax payable

 

 

133

 

 

 

72

 

Operating lease liability, net of current portion

 

 

(292

)

 

 

(93

)

Deferred revenue

 

 

50,000

 

 

 

8,142

 

Net cash provided by (used in) operating activities

 

 

26,967

 

 

 

(3,232

)

Cash Flows From Investing Activities:

 

 

 

 

 

 

 

 

Purchase of property and equipment

 

 

(43

)

 

 

(380

)

Net cash used in investing activities

 

 

(43

)

 

 

(380

)

Cash Flows From Financing Activities:

 

 

 

 

 

 

 

 

Proceeds from issuance of Series A preferred shares, net

 

 

 

 

 

20,995

 

Proceeds from exercise of stock options

 

 

488

 

 

 

 

Proceeds from issuance of warrant

 

 

15,000

 

 

 

 

Net proceeds from issuance of common shares in initial public offering

 

 

233,760

 

 

 

 

Net cash provided by financing activities

 

 

249,248

 

 

 

20,995

 

Effect of exchange rate fluctuations on cash held

 

 

(1,045

)

 

 

482

 

Net Increase In Cash And Restricted Cash

 

 

275,127

 

 

 

17,865

 

Cash and restricted cash at beginning of period

 

 

95,005

 

 

 

10,929

 

Cash and restricted cash at end of period

 

$

370,132

 

 

$

28,794

 

 

 

 

 

 

 

 

 

 

Reconciliation Of Cash And Restricted Cash

 

 

 

 

 

 

 

 

Cash

 

$

369,933

 

 

$

28,588

 

Restricted cash

 

 

199

 

 

 

206

 

Total cash and restricted cash

 

$

370,132

 

 

$

28,794

 

 

 

 

 

 

 

 

 

 

Supplemental Disclosure Of Cash Flow Information:

 

 

 

 

 

 

 

 

Property and equipment purchases in accounts payable

 

$

423

 

 

$

14

 

Initial public offering costs in accounts payable

 

$

102

 

 

 

 

 

Initial public offering costs in accruals and other current liabilities

 

$

1,615

 

 

$

 

Conversion of Series A and B convertible preferred shares into common shares

 

$

135,997

 

 

$

 

Conversion of warrant into common shares

 

$

15,000

 

 

$

 

 

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

6


 

REPARE THERAPEUTICS INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands of U.S. dollars, except share and per share amounts, unless otherwise specified)

1. Organization and Nature of Business

Repare Therapeutics Inc. (“Repare” or the “Company”) is a precision medicine oncology company focused on the development of synthetic lethality-based therapies to patients with cancer. The Company was incorporated under the Canada Business Corporations Act on September 6, 2016. On June 23, 2020, immediately following the completion of its initial public offering (the “IPO”), the Company was continued as a corporation under the Business Corporations Act (Québec).

On June 12, 2020, the Company effected a 1-for-6.062 reverse stock split of the Company’s share capital. Accordingly, all common shares, Series A and B preferred shares, stock options and per share amounts in these unaudited condensed consolidated financial statements have been retroactively adjusted to reflect the reverse stock split on a retroactive basis for all periods presented.

On June 23, 2020, the Company completed its IPO of 12,650,000 of its common shares, including the exercise in full by the underwriters of their option to purchase up to 1,650,000 additional common shares, for aggregate gross proceeds of $253,000. The Company’s shares began trading on the Nasdaq Global Select Market under the ticker symbol “RPTX” on June 19, 2020. The Company received $232,043 in net proceeds after deducting underwriting discounts and commissions and other offering expenses payable by the Company. Upon closing of the IPO, all outstanding convertible preferred shares converted into 21,558,393 common shares and the outstanding warrant was automatically exercised into 750,000 common shares.

2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in conformity with generally accepted accounting principles in the United States of America (“U.S. GAAP”). Any reference in these notes to applicable guidance is meant to refer to the authoritative U.S. GAAP as found in the Accounting Standards Codification (“ASC”) and as amended by Accounting Standards Updates (“ASU”) of the Financial Accounting Standards Board (“FASB”).

The unaudited condensed consolidated financial statements have been prepared on the same basis as the audited annual consolidated financial statements as of and for the year ended December 31, 2019, and, in the opinion of management, reflect all adjustments, consisting of normal recurring adjustments, necessary for the fair presentation of the Company’s consolidated financial position as of June 30, 2020, the consolidated results of its operations for the three and six months ended June 30, 2020 and 2019, its statements of shareholders’ equity for the three and six months ended June 30, 2020 and 2019 and its consolidated cash flows for the six months ended June 30, 2020 and 2019.

The accompanying condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and the accompanying notes for the year ended December 31, 2019 included in the Company’s final prospectus that forms part of the Company’s Registration Statement on Form S-1 (File No. 333-238822), filed with the Securities and Exchange Commission (the “SEC”) pursuant to Rule 424(b)(4) on June 19, 2020 (the “Prospectus”). The condensed consolidated balance sheet data as of December 31, 2019 presented for comparative purposes was derived from the Company’s audited consolidated financial statements but does not include all disclosures required by U.S. GAAP. The results for the three and six months ended June 30, 2020 are not necessarily indicative of the operating results to be expected for the full year or for any other subsequent interim period.

The Company’s significant accounting policies are disclosed in the audited consolidated financial statements for the year ended December 31, 2019 included in the Prospectus. Since the date of the audited consolidated financial statements for the year ended December 31, 2019 included in the Prospectus, there have been no changes to its significant accounting policies.

Use of Estimates

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in consolidated financial statements and accompanying notes. Significant estimates and assumptions reflected in these consolidated financial statements include, but are not limited to, accrued research and development expenses and share-based compensation. Estimates are periodically reviewed in light of changes in circumstances, facts and experience. Changes in estimates are recorded in the period in which they become known. Actual results could differ from those estimates.

7


 

COVID-19 Pandemic

With the global spread of the ongoing COVID-19 pandemic in the first half of 2020, the Company established a cross-functional task force and has implemented business continuity plans designed to address and mitigate the impact of the COVID-19 pandemic on its employees and its business, including its preclinical studies and its ongoing and planned clinical trials. The Company’s operations are considered as an “essential business” and therefore, the Company is continuing to operate during this period. The Company has taken measures to secure its research and development activities, while work in its laboratories and facilities has been re-organized to reduce risk of COVID-19 transmission. While the Company is experiencing limited financial impacts at this time, given the global economic slowdown, the overall disruption of global healthcare systems and the other risks and uncertainties associated with the pandemic, the Company’s business, financial condition and results of operations could be materially adversely affected. The Company continues to closely monitor the COVID-19 pandemic as it evolves its business continuity plans, clinical development plans and response strategy. As of the date of these financial statements, the Company is not aware of any specific event or circumstance that would require the Company to update these estimates, assumptions and judgments or revise the carrying value of its assets or liabilities. Actual results could differ from those estimates, and any such differences may be material to the Company’s financial statements.

3. Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities as of June 30, 2020 and December 31, 2019 consisted of the following:

 

 

 

June 30,

2020

 

 

December 31,

2019

 

Accrued compensation and benefits

 

$

1,118

 

 

$

1,043

 

Accrued research and development expense

 

 

1,814

 

 

 

208

 

Accrued initial public offering costs

 

 

1,615

 

 

 

 

Accrued professional services

 

 

668

 

 

 

21

 

Other

 

 

47

 

 

 

4

 

Total accrued expenses and other current liabilities

 

$

5,262

 

 

$

1,276

 

 

 

 

 

 

 

 

 

 

 

4. Collaboration and License Agreement

In May 2020, the Company entered into a collaboration and license agreement with Bristol-Myers Squibb Company (“Bristol Myers Squibb”), pursuant to which the Company and Bristol Myers Squibb have agreed to collaborate in the research and development of potential new product candidates for the treatment of cancer. The Company is providing Bristol Myers Squibb access to a selected number of its existing screening campaigns and novel campaigns. The Company is responsible for carrying out early stage research activities directed to identifying potential targets for potential licensing by Bristol Myers Squibb, in accordance with a mutually agreed upon research plan. The collaboration consists of programs directed to both druggable targets and to targets commonly considered undruggable to traditional small molecule approaches. In the event that Bristol Myers Squibb elects to obtain an exclusive license for the subsequent development, manufacturing and commercialization of a program, Bristol Myers Squibb will then be solely responsible for all such worldwide activities.

Under the terms of the agreement, Bristol Myers Squibb paid the Company an initial nonrefundable upfront fee payment of $50,000 in June 2020. The Company is entitled to receive up to $301,000 in total milestones on a program-by-program basis, consisting of $176,000 in the aggregate for certain specified research, development and regulatory milestones and $125,000 in the aggregate for certain specified commercial milestones. The Company is also entitled to a tiered percentage royalty on annual net sales ranging from high-single digits to low-double digits, subject to certain specified reductions.

The Company assessed the collaboration and license agreement in accordance with ASC 606, Revenue from Contracts with Customers, and concluded that Bristol Myers Squibb is a customer based on the agreement structure. At inception, the Company identified several performance obligations under the agreement, including research services for each campaign, as well as a selected number of material rights associated with options to obtain exclusive development, manufacturing and commercial licenses to targets identified. The Company determined that the options to obtain the exclusive development, manufacturing and commercialization licenses were material rights under ASC 606 because there are minimal amounts to be paid to the Company upon exercise of such options.

8


 

The Company determined that the transaction price at the onset of the agreement is the total upfront payment received of $50,000. Additional consideration to be paid to the Company upon the exercise of the license options and future milestone payments were excluded from the transaction price as they represent option fees and milestone payments that can only be achieved subsequent to option exercises and the achievement of the milestone events.

The Company will allocate the transaction price to each performance obligation based on the relative stand-alone selling price of each performance obligation at inception. Revenue is expected to be recognized at the point in time when option licenses are exercised by Bristol Myers Squibb, with the remainder to be recognized on a proportional performance basis over the period of service for research services. The upfront payment of $50,000 has been recorded as deferred revenue as of June 30, 2020 as, up to that point in time, no research and development services had been performed under the agreement and no options were exercised.

In conjunction with the collaboration and license agreement, the Company entered into a warrant agreement with an affiliate of Bristol Myers Squibb pursuant to which the Company issued a warrant for total proceeds of $15,000. Upon closing of the IPO, this warrant was automatically exercised into 750,000 common shares of the Company. The Company evaluated whether the warrant should be treated as a separate agreement or a single arrangement with the collaboration and license agreement. Although both agreements were negotiated concurrently, the warrant was issued at fair value. Accordingly, the Company accounted for the warrant agreement separately from the collaboration and license agreement.

5. Leases

The Company has historically entered into lease arrangements for its facilities. As of June 30, 2020, the Company had three operating leases with required future minimum payments. The Company’s leases generally do not include termination or purchase options.

Operating Leases

The following table contains a summary of the lease costs recognized under ASC 842 and other information pertaining to the Company’s operating leases for the three and six months ended June 30, 2020:

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

June 30, 2020

 

 

June 30, 2020

 

Operating Leases

 

 

 

 

 

 

 

 

Lease Cost

 

 

 

 

 

 

 

 

Operating lease cost

 

$

165

 

 

$

330

 

Short-term lease cost

 

 

1

 

 

 

4

 

Variable lease cost

 

 

39

 

 

 

92

 

Total lease cost

 

$

205

 

 

$

426

 

 

 

 

June 30, 2020

 

Other Operating Lease Information

 

 

 

 

Operating cash flows used for operating leases

 

$

335

 

Weighted-average remaining lease term

 

1.37 years

 

Weighted-average discount rate

 

 

7.6

%

 

6. Shareholders’ Deficit

Convertible Preferred Shares

The Company’s Series A and Series B convertible preferred shares were convertible on a one-to-one basis into common shares. Upon completion of the IPO, all issued and outstanding Series A and Series B convertible preferred shares were converted into 21,558,393 common shares and the existing classes of Series A and Series B convertible preferred shares were removed (unlimited preferred shares authorized, 11,090,135 Series A convertible preferred shares and 10,468,258 Series B convertible preferred shares issued and outstanding as of December 31, 2019).

Effective upon the closing of the IPO, the Company authorized for issue an unlimited number of preferred shares, issuable in series. No preferred shares were issued and outstanding as of June 30, 2020.

9


 

Warrant

In conjunction with the collaboration and license agreement with Bristol Myers Squibb, the Company entered into a warrant agreement with an affiliate of Bristol Myers Squibb pursuant to which the Company issued a warrant for total proceeds of $15,000 on May 26, 2020. Upon closing of the IPO, the warrant was automatically exercised at the public offering price of $20.00 per share into 750,000 common shares of the Company.     

Common Shares

Authorized share capital

An unlimited number of common shares, voting and participating, without par value.

On June 23, 2020, the Company completed its IPO of 12,650,000 of its common shares, including the exercise in full by the underwriters of their option to purchase up to 1,650,000 additional common shares, at the public offering price of $20.00 per share, for aggregate gross proceeds of $253,000. The Company received $232,043 in net proceeds after deducting underwriting discounts and commissions and other offering expenses payable by the Company. Upon closing of the IPO, all outstanding convertible preferred shares converted into 21,558,393 common shares and the outstanding warrant automatically converted into 750,000 common shares.

2020 Employee Share Purchase Plan

In June 2020, the Company’s board of directors adopted, and the Company’s shareholders approved the 2020 Employee Share Purchase Plan (the “ESPP”). The maximum number of common shares that may be issued under the ESPP is 327,000. Additionally, the number of shares reserved and available for issuance under the ESPP will automatically increase each January 1, beginning on January 1, 2021 and each January 1 thereafter through January 31, 2030, by the lesser of (1) 1.0% of the total number of common shares outstanding on December 31 of the preceding calendar year, (2) 3,300,000 common shares, or (3) such smaller number of common shares as the Company’s board of directors may designate. The ESPP enables eligible employees to purchase common shares of the Company at the end of each offering period at a price equal to 85% of the fair market value of the shares on the first business day or the last business day of the offering period, whichever is lower. The ESPP will become active upon approval of the plan administrator, which is the Company’s board of directors. As of June 30, 2020, no common shares have been issued under the ESPP.

Share-Based Compensation

In December 2016, as further amended in December 2017 and September 2019, the Company adopted the Repare Therapeutics Inc. Option Plan (the “Option Plan”) for the issuance of share options and other share-based awards to directors, officers, employees or consultants. The Option Plan authorized up to 4,074,135 shares of the Company’s common shares to be issued.

In June 2020, the Company’s board of directors adopted, and the Company’s shareholders approved the 2020 Equity Incentive Plan (the “2020 Plan”). The 2020 Plan became effective on the effective date of the IPO, at which time the Company ceased making awards under the Option Plan. The 2020 Plan allows the Company’s compensation committee to make equity-based and cash-based incentive awards to the Company’s officers, employees, directors and consultants. A total of 3,600,000 common shares were initially reserved for issuance under the 2020 Plan, plus the number of shares (not to exceed 3,807,448 shares) (i) 298,605 common shares that were available for the issuance of awards under the Option Plan at the time the 2020 Plan became effective, which ceased to be available for future issuance under the Option Plan at such time and (ii) any shares subject to outstanding options or other share awards that were granted under the Option Plan that terminate or expire prior to exercise or settlement; are forfeited because of the failure to vest; or are reacquired or withheld (or not issued) to satisfy a tax withholding obligation or the purchase or exercise price. In addition, the number of shares reserved and available for issuance under the 2020 Plan will automatically increase each January 1, beginning on January 1, 2021 and each January 1 thereafter through January 31, 2030, by 5% of the outstanding number of common shares on the immediately preceding December 31, or such lesser number of shares as determined by the Company’s board of directors.

The 2020 Plan is administered by the Company’s board of directors. The exercise prices, vesting and other restrictions are determined by the board of directors, except that the exercise price per share may not be less than 100% of the fair value of the common share on the date of grant, determined based on the average of the daily volume-weighted average trading price of shares on each of the five trading days immediately preceding the date of grant. Stock option awards under the 2020 Plan expire 10 years after the grant date and generally have vesting conditions of 25% on the first anniversary date of the grant and 75% on a monthly basis at a rate of 1/36th unless otherwise decided by the board of directors.  

10


 

Total outstanding stock options as of June 30, 2020 and 2019 were as follows:

 

 

 

2020

 

 

2019

 

 

 

Number of

shares

 

 

Weighted

average

exercise price

 

 

Number of

shares

 

 

Weighted

average

exercise price

 

Outstanding at beginning of period

 

 

3,505,119

 

 

$

2.07

 

 

 

907,315

 

 

$

1.66

 

Granted

 

 

869,075

 

 

$

16.35

 

 

 

1,013,635

 

 

$

2.06

 

Exercised

 

 

(266,687

)

 

$

1.83

 

 

 

 

 

 

 

Cancelled or forfeited

 

 

(7,962

)

 

$

2.13

 

 

 

 

 

 

 

Outstanding at end of period

 

 

4,099,545

 

 

$

5.11

 

 

 

1,920,950

 

 

$

1.87

 

 

During the six months ended June 30, 2020, an aggregate of 266,687 options were exercised at a weighted-average exercise price of $1.83 per share, for aggregate proceeds of $488. As a result, an amount of $289 previously included in additional paid-in capital related to the exercised options has been credited to common shares and deducted from additional paid-in capital.

Share-based compensation expense was allocated as follows:

 

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Research and development

 

$

163

 

 

$

63

 

 

$

296

 

 

$

103

 

General and administrative

 

 

226

 

 

 

58

 

 

 

364

 

 

 

83