Full Press Release Details
Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of Metacrine, Inc.
Opinion on the Financial Statements
accompanying consolidated balance sheets of Metacrine, Inc. (the Company) as of December 31, 2021 and 2020, the related consolidated statements of operations and comprehensive loss, convertible preferred stock and stockholders equity
(deficit) and cash flows for the years then ended, and the related notes (collectively referred to as the consolidated financial statements ). In our opinion, the consolidated financial statements present fairly, in all material respects,
the financial position of the Company at December 31, 2021 and 2020, and the results of its operations and its cash flows for the years then ended, in conformity with U.S. generally accepted accounting principles.
These financial statements are the
responsibility of the Company s management. Our responsibility is to express an opinion on the Company s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight
Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As
part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company s internal control over financial reporting.
Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial
statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also
included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ Ernst & Young LLP
We have served as the
Company s auditor since 2016.
San Diego, California
Consolidated Balance Sheets
(In thousands, except par value and share amounts)
| December 31, | ||||||||
| 2021 | 2020 | |||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 48,910 | $ | 24,393 | ||||
| Short-term investments | 27,517 | 71,783 | ||||||
| Prepaid expenses and other current assets | 2,313 | 5,847 | ||||||
| Total current assets | 78,740 | 102,023 | ||||||
| Property and equipment, net | 347 | 634 | ||||||
| Operating lease right-of-use asset | 902 | 1,579 | ||||||
| Total assets | $ | 79,989 | $ | 104,236 | ||||
| Liabilities and Stockholders Equity | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | 368 | $ | 334 | ||||
| Accrued liabilities | 6,567 | 2,951 | ||||||
| Current portion of operating lease liability | 825 | 741 | ||||||
| Total current liabilities | 7,760 | 4,026 | ||||||
| Operating lease liability, net of current portion | 181 | 1,007 | ||||||
| Long-term debt, net of debt discount | 13,303 | 9,372 | ||||||
| Other long-term liabilities | 1,390 | 552 | ||||||
| Commitments and contingencies (Note 3) | ||||||||
| Stockholders equity: | ||||||||
| Preferred stock, $0.0001 par value; authorized shares - 10,000,000 at December 31, 2021 and 2020, respectively; issued and outstanding shares - none at December 31, 2021 and 2020, respectively. | ||||||||
| Common stock, $0.0001 par value; authorized shares 200,000,000 at December 31, 2021 and 2020, respectively; issued shares 42,110,560 and 26,005,934 at December 31, 2021 and 2020, respectively; outstanding shares 42,108,428 and 25,969,442 at December 31, 2021 and 2020, respectively. | 4 | 3 | ||||||
| Additional paid-in-capital | 240,309 | 210,021 | ||||||
| Accumulated other comprehensive income (loss) | (5 | ) | 1 | |||||
| Accumulated deficit | (182,953 | ) | (120,746 | ) | ||||
| Total stockholders equity | 57,355 | 89,279 | ||||||
| Total liabilities and stockholders equity | $ | 79,989 | $ | 104,236 |
The accompanying notes are an integral part of these financial statements.
Consolidated Statements of Operations and Comprehensive Loss
(In thousands, except share and per share amounts)
| Years Ended December 31, | ||||||||
| 2021 | 2020 | |||||||
| Operating expenses: | ||||||||
| Research and development | $ | 45,474 | $ | 26,790 | ||||
| General and administrative | 15,605 | 9,900 | ||||||
| Total operating expenses | 61,079 | 36,690 | ||||||
| Loss from operations | (61,079 | ) | (36,690 | ) | ||||
| Other income (expense): | ||||||||
| Interest income | 102 | 494 | ||||||
| Interest expense | (1,202 | ) | (1,012 | ) | ||||
| Other expense | (28 | ) | (96 | ) | ||||
| Total other income (expense) | (1,128 | ) | (614 | ) | ||||
| Net loss | $ | (62,207 | ) | $ | (37,304 | ) | ||
| Other comprehensive loss: | ||||||||
| Unrealized loss on available-for-sale securities, net | (6 | ) | (40 | ) | ||||
| Comprehensive loss | $ | (62,213 | ) | $ | (37,344 | ) | ||
| Net loss per share, basic and diluted | $ | (2.29 | ) | $ | (3.97 | ) | ||
| Weighted average shares of common stock outstanding, basic and diluted | 27,188,864 | 9,404,188 |
The accompanying notes are an integral part of these financial statements.
Consolidated Statements of Cash Flows
| Years Ended December 31, | ||||||||
| 2021 | 2020 | |||||||
| Operating activities: | ||||||||
| Net loss | $ | (62,207 | ) | $ | (37,304 | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation | 295 | 307 | ||||||
| Stock-based compensation | 6,949 | 5,021 | ||||||
| Non-cash interest expense | 342 | 273 | ||||||
| Accretion of discounts on investments, net | 342 | 51 | ||||||
| Amortization of right-of-use asset | 677 | 624 | ||||||
| Change in fair value of warrant liability | 75 | |||||||
| Changes in operating assets and liabilities | ||||||||
| Prepaid expenses and other current assets | 3,534 | (4,155 | ) | |||||
| Accounts payable and accrued liabilities | 3,650 | (503 | ) | |||||
| Lease liability | (742 | ) | (600 | ) | ||||
| Net cash used in operating activities | (47,160 | ) | (36,211 | ) | ||||
| Investing activities: | ||||||||
| Purchases of property and equipment | (8 | ) | (206 | ) | ||||
| Purchases of short-term investments | (42,673 | ) | (79,874 | ) | ||||
| Sales and maturities of short-term investments | 86,591 | 47,983 | ||||||
| Net cash provided by (used in) investing activities | 43,910 | (32,097 | ) | |||||
| Financing activities: | ||||||||
| Proceeds from issuance of common stock from initial public offering, net of issuance costs | 76,874 | |||||||
| Proceeds from issuance of common stock from at-the-market offering program, net of issuance costs | 21,661 | |||||||
| Proceeds from issuance of long-term debt, net of issuance costs | 4,825 | |||||||
| Proceeds from exercise of common stock options | 1,098 | 161 | ||||||
| Proceeds from issuance of common stock from employee stock purchase plan | 184 | |||||||
| Repurchase of unvested common stock | (1 | ) | (2 | ) | ||||
| Net cash provided by financing activities | 27,767 | 77,033 | ||||||
| Net increase in cash and cash equivalents | 24,517 | 8,725 | ||||||
| Cash and cash equivalents at beginning of year | 24,393 | 15,668 | ||||||
| Cash and cash equivalents at end of year | $ | 48,910 | $ | 24,393 | ||||
| Supplemental disclosure of cash flow information: | ||||||||
| Cash paid for interest | $ | 809 | $ | 737 | ||||
| Supplemental non-cash investing and financing activities: | ||||||||
| Conversion of convertible preferred stock to common stock | $ | $ | 122,465 | |||||
| Conversion of convertible preferred stock warrant to common stock warrant | $ | $ | 259 | |||||
| Issuance of common stock warrant | $ | 374 | $ | |||||
| Vesting of common stock | $ | 23 | $ | 80 |
The accompanying notes are an integral part of these financial statements.
Consolidated Statements of Convertible Preferred Stock and Stockholders Equity (Deficit)
For the Years Ended December 31, 2021 and 2020
(In thousands, except share amounts)
| Convertible Preferred Stock | Common Stock | Additional paid-in capital | Accumulated other comprehensive income (loss) | Accumulated deficit | Total stockholders equity | |||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | |||||||||||||||||||||||||||||||
| Balance at December 31, 2020 | $ | 25,969,442 | $ | 3 | $ | 210,021 | $ | 1 | $ | (120,746 | ) | $ | 89,279 | |||||||||||||||||||||
| Issuance of common stock from at-the-market offering program, net of issuance costs | 15,534,172 | 1 | 21,660 | 21,661 | ||||||||||||||||||||||||||||||
| Stock-based compensation | 6,949 | 6,949 | ||||||||||||||||||||||||||||||||
| Exercise of stock options | 491,695 | 1,098 | 1,098 | |||||||||||||||||||||||||||||||
| Issuance of common stock warrant | 374 | 374 | ||||||||||||||||||||||||||||||||
| Vesting of early exercised stock options | 31,665 | 23 | 23 | |||||||||||||||||||||||||||||||
| Issuance of common stock from employee stock purchase plan | 81,454 | 184 | 184 | |||||||||||||||||||||||||||||||
| Unrealized loss on investment securities | (6 | ) | (6 | ) | ||||||||||||||||||||||||||||||
| Net loss | (62,207 | ) | (62,207 | ) | ||||||||||||||||||||||||||||||
| Balance at December 31, 2021 | $ | 42,108,428 | $ | 4 | $ | 240,309 | $ | (5 | ) | $ | (182,953 | ) | $ | 57,355 |
| Convertible Preferred Stock | Common Stock | Additional paid-in capital | Accumulated other comprehensive income | Accumulated deficit | Total stockholders equity (deficit) | |||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | |||||||||||||||||||||||||||||||
| Balance at December 31, 2019 | 85,093,688 | $ | 122,465 | 2,484,848 | $ | $ | 5,164 | $ | 41 | $ | (83,442 | ) | $ | (78,237 | ) | |||||||||||||||||||
| Conversion of preferred stock to common stock from completion of initial public offering | (85,093,688 | ) | (122,465 | ) | 16,685,014 | 2 | 122,463 | 122,465 | ||||||||||||||||||||||||||
| Issuance of common stock from initial public offering, net of issuance costs | 6,540,000 | 1 | 76,873 | 76,874 | ||||||||||||||||||||||||||||||
| Stock-based compensation | 5,021 | 5,021 | ||||||||||||||||||||||||||||||||
| Conversion of convertible preferred stock warrant to common stock warrant | 259 | 259 | ||||||||||||||||||||||||||||||||
| Exercise of stock options | 102,792 | 161 | 161 | |||||||||||||||||||||||||||||||
| Vesting of early exercised stock options | 156,788 | 80 | 80 | |||||||||||||||||||||||||||||||
| Unrealized loss on investment securities | (40 | ) | (40 | ) | ||||||||||||||||||||||||||||||
| Net loss | (37,304 | ) | (37,304 | ) | ||||||||||||||||||||||||||||||
| Balance at December 31, 2020 | $ | 25,969,442 | $ | 3 | $ | 210,021 | $ | 1 | $ | (120,746 | ) | $ | 89,279 |
The accompanying notes are an integral part of these financial statements.
Notes to the Consolidated Financial Statements
Note 1. Organization and Summary of Significant Accounting Policies
Metacrine, Inc. (the
Company ) was incorporated in the state of Delaware on September 17, 2014 and is based in San Diego, California. The Company is a clinical-stage biopharmaceutical company currently focused on discovering and developing differentiated
therapies for patients with gastrointestinal, or GI, diseases.
Principles of Consolidation
In May 2019, the Company established a wholly-owned Australian subsidiary, Metacrine, Pty Ltd, in order to conduct various clinical activities
for its product candidates. The consolidated financial statements include the accounts of the Company and Metacrine, Pty Ltd. The functional currency of both the Company and Metacrine, Pty Ltd is the U.S. dollar. Assets and liabilities that are not
denominated in the functional currency are remeasured into U.S. dollars at foreign currency exchange rates in effect at the balance sheet date except for nonmonetary assets, which are remeasured at historical foreign currency exchange rates in
effect at the date of transaction. Net realized and unrealized gains and losses from foreign currency transactions and remeasurement are reported in other income (expense) in the consolidated statements of operations and comprehensive loss. All
intercompany accounts and transactions have been eliminated in consolidation.
Initial Public Offering
On September 18, 2020, the Company closed its initial public offering ( IPO ) of 6,540,000 shares of common stock at a public
offering price of $13.00 per share. The Company raised $76.9 million in net proceeds from the IPO after deducting underwriters discounts and commissions of $6.0 million and issuance costs of $2.2 million.
Upon closing of the Company s IPO, all of the Company s outstanding preferred stock were automatically converted into 16,685,014
shares of common stock.
Liquidity and Capital Resources
From its inception through December 31, 2021, the Company has devoted substantially all its efforts to organizing and staffing, business
planning, raising capital, researching, discovering and developing its pipeline in FXR and other drug targets, and general and administrative support for these operations and has funded its operations primarily with the net proceeds from the
issuance of convertible preferred stock, common stock, and long-term debt. The Company has incurred net losses and negative cash flows from operations since inception and had an accumulated deficit of $183.0 million as of December 31,
2021. Management expects the Company will incur operating losses for the foreseeable future in order to complete clinical trials and launch and commercialize any product candidates for which it receives regulatory approval. The Company will need to
raise additional capital through a combination of equity offerings, debt financings, collaborations, and other similar arrangements. As of December 31, 2021, the Company had available cash, cash equivalents, and short-term investments of
$76.4 million and working capital of $71.0 million to fund future operations. Management has prepared cash flow forecasts which indicate that, based on the Company s current cash resources available and working capital, the Company
will have sufficient resources to fund its operations for at least one year after the date the financial statements are issued.
The Company s consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles
( GAAP ). The preparation of the Company s consolidated financial statements requires it to make estimates and assumptions that impact the reported amounts of assets, liabilities, and expenses and the disclosure of contingent assets
and liabilities. The most significant estimates in the Company s consolidated financial statements relate to accruals for research and development expenses and stock-based compensation. These estimates and assumptions are based on current
facts, historical experience, and various other factors believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the recording of expenses
that are not readily apparent from other sources. Actual results may differ materially and adversely from these estimates. To the extent there are material differences between the estimates and actual results, the Company s future results of
operations will be affected.
Cash and Cash Equivalents
The Company considers all highly liquid investments with original maturities of three months or less when purchased to be cash equivalents.
Cash and cash equivalents include cash in readily available checking accounts, money market funds, and commercial paper. The carrying amounts reported in the consolidated balance sheets for cash and cash equivalents are valued at cost, which
approximates fair value.
Short-Term Investments
Short-term investments primarily consist of commercial paper, corporate debt securities, and U.S. government and agency bonds. The Company has
classified these investments as available-for-sale securities, as the sale of such investments may be required prior to maturity to implement management strategies, and
therefore has classified all short-term investments with maturity dates beyond three months at the date of purchase as current assets in the accompanying unaudited condensed consolidated balance sheets. Any premium or discount arising at purchase is
amortized and/or accreted to interest income as an adjustment to yield using the straight-line method over the life of the instrument. Short-term investments are reported at their estimated fair value. The Company reviews its short-term investments
in unrealized loss positions at each reporting date to assess whether the decline in their fair value is due to credit-related factors. The credit portion of unrealized losses and any subsequent improvements are recorded in other income (expense)
through an allowance account. Unrealized gains and losses that are not credit-related are included in other comprehensive (income) loss as a component of stockholders equity until realized. Realized gains and losses are determined using the
specific identification method and are included in other income (expense).
Fair Value Measurement
The Company accounts for certain assets and liabilities at their fair value. The Company uses the following fair value hierarchy to indicate
the extent to which the inputs used to determine fair value are observable in the market:
Concentration of Credit Risk
Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash, cash
equivalents, and short-term investments. The Company maintains deposits in federally insured financial institutions in excess of federally insured limits. The Company has not experienced any losses in such accounts and management believes that the
Company is not exposed to significant credit risk due to the financial position of the depository institutions in which those deposits are held.
Property and Equipment, Net
Property and equipment are stated at cost and depreciated on a straight-line basis over the estimated useful life of the related assets
(generally three to five years). Leasehold improvements are stated at cost and amortized on a straight-line basis over the lesser of the remaining lease term or the estimated useful life of the leasehold improvements. Repairs and maintenance costs
are charged to expense as incurred.
At the inception of a contractual arrangement, the Company determines whether the contract contains a lease by assessing whether there is an
identified asset and whether the contract conveys the right to control the use of the identified asset in exchange for consideration over a period of time. Lease terms are determined at the commencement date by considering whether renewal options
and termination options are reasonably assured of exercise. For its long-term operating leases, the Company recognizes a lease liability and a right-of-use
( ROU ) asset on its consolidated balance sheets and recognizes lease expense on a straight-line basis over the lease term. The lease liability is determined as the present value of future lease payments using the discount rate implicit in
the lease or, if the implicit rate is not readily determinable, an estimate of the Company s incremental borrowing rate. The ROU asset is based on the lease liability, adjusted for any prepaid or deferred rent. The Company aggregates all lease
and non-lease components for each class of underlying assets into a single lease component and variable charges for common area maintenance and other variable costs are recognized as expense as incurred. The
Company has elected to not recognize a lease liability or ROU asset in connection with short-term operating leases and recognizes lease expense for short-term operating leases on a straight-line
basis over the lease term. The Company does not have any financing leases.
Impairment of Long-Lived Assets
The Company reviews long-lived assets, such as property and equipment, for impairment whenever events or changes in circumstances indicate the