XML 93 R21.htm IDEA: XBRL DOCUMENT

Summary of Significant Accounting Policies (Policies)

12 Months Ended

Dec. 31, 2019

The consolidated financial statements of the Company include the Company’s accounts and have been prepared in conformity with accounting principles generally accepted in the United States of America (US GAAP) and include the Company’s accounts and those of its wholly-owned subsidiaries MyoKardia Australia Pty Ltd and MyoKardia Netherlands B.V. The consolidated financial statements include the Company’s accounts and those of its wholly-owned subsidiaries. All intercompany accounts, transactions and balances have been eliminated during consolidation. The functional and reporting currency of the Company and its subsidiaries is the United States Dollar.

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 reported amounts of assets and liabilities, disclosure of contingent assets and liabilities and the reported amounts of revenues and expenses in the consolidated financial statements and the accompanying notes. On an ongoing basis, management evaluates its estimates, including those related to clinical trials accrued liabilities, income tax valuation allowance and stock-based compensation. Management bases its estimates on historical experience and on various other market-specific and relevant assumptions that management believes to be reasonable under the circumstances. Actual results could differ from those estimates.

Segments

The Company operates and manages its business as one reportable and operating segment, which is the business of developing and commercializing therapeutics. The Company’s chief executive officer, who is the chief operating decision maker, reviews financial information on an aggregate basis for purposes of allocating and evaluating financial performance. All revenues have been earned in the United States of America and all long-lived assets are maintained in the United States of America.

Cash and cash equivalents

Cash and Cash Equivalents

Cash and cash equivalents consist of cash and other highly liquid investments with original maturities of three months or less from the date of purchase. At December 31, 2019 and 2018, the Company’s cash and cash equivalents were comprised of funds held in checking accounts, interest-bearing money market accounts, money market funds and commercial paper.

Reconciliation of Cash, Cash Equivalents, and Restricted Cash as Reported in Consolidated Statements of Cash Flows

Cash as reported in the consolidated statements of cash flows includes the aggregate amounts of cash, cash equivalents and restricted cash as presented on the consolidated balance sheets. Restricted cash at December 31, 2019 and 2018 represents cash balances held as security in connection with the Company’s facility lease agreements. The following table provides a reconciliation of cash, cash equivalents, and restricted cash within the consolidated balance sheets to the total shown in the consolidated statements of cash flows (in thousands):

	As of December 31,
	2019		2018
Cash and cash equivalents	$	101,436	$	246,122
Restricted cash included in prepaid expenses and other current assets		337		—
Restricted cash included in restricted cash and other		1,857		2,143
Total cash, cash equivalents and restricted cash shown in the consolidated statements of cash flows	$	103,630	$	248,265

Concentration of Credit Risk

Financial instruments that potentially subject the Company to a concentration of credit risk consist of cash, cash equivalents and investments. All of the Company’s cash and cash equivalents are held at financial institutions that management believes are of high credit quality. Such deposits may, at times, exceed federally insured limits. The Company invests in a variety of financial instruments, such as, but not limited to, corporate debt and United States Treasury and Government agency securities, and by policy, limits the amount of credit exposure with any one financial institution or commercial issuer. The Company has not experienced any credit losses on its investments.

Revenue Recognition

The Company did not recognize revenues during the year ended December 31, 2019. As discussed in Note 3, in the years ended December 31, 2018 and 2017 the Company generated revenue from its collaboration and license agreement with its former collaboration partner, Sanofi. The collaboration and license agreement included non-refundable upfront license fees, reimbursement of research and development costs and contingent consideration payments based on the achievement of defined collaboration objectives. To date, the Company has not recognized revenue from sales of its product candidates.

Effective January 1, 2018, the Company adopted Accounting Standards Codification Topic 606, Revenue from Contracts with Customers (ASC 606) using the full retrospective transition method. This standard applies to all contracts with customers, except for contracts that are within the scope of other standards, such as leases, insurance, certain collaboration arrangements and financial instruments. Under ASC 606, the Company recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration which the Company expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements that the Company determines are within the scope of ASC 606, the Company performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the Company satisfies a performance obligation. The Company only applies the five-step model to contracts when it is probable that Company will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer. At contract inception, once the contract is determined to be within the scope of ASC 606, the Company assesses the goods or services promised within each contract and determines those that are performance obligations and assesses whether each promised good or service is distinct. The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied.

Revenue Recognition in 2018 and 2017

The Company implemented ASC 606 using the full retrospective transition method effective January 1, 2018 and revised its revenue for the years ended December 31, 2016 and 2017 accordingly. The Company evaluated the Collaboration Agreement under ASC 606 and determined that it had the following performance obligations to Sanofi:

1. the licenses of intellectual property for each of the HCM-1, HCM-2 and DCM-1 compound development programs, and

2. the performance of research and development services, including regulatory support, for each of the three programs.

The Company considered whether the licenses had standalone functionality and were capable of being distinct; however, given the fact that the research and development services were of such a specialized nature that could only be performed by the Company and Sanofi could not benefit from the intellectual property licenses without the Company’s performance, the Company determined that the intellectual property licenses were not distinct from the research and development services and thus the license and research and development services for each program were combined into three separate performance obligations.

Research and Development Expenses

Research and development costs are expensed as incurred and consist of salaries and benefits, lab supplies and facility costs, and fees paid to others that conduct certain research and development activities on the Company’s behalf. Under the terms of the Company’s collaboration agreement with Sanofi, which terminated effective December 31, 2018, and as discussed in Note 3, the Company and Sanofi shared qualified research and development expenses that were jointly incurred to develop certain of the Company’s product candidates. Qualified costs consisted of internal and external research and development expenses including employee costs and direct out-of-pocket costs that were specifically identifiable or reasonably and directly related to the development of these candidates. Examples of qualified costs included those incurred for clinical trials, preparation for regulatory approval, manufacture or purchase of product for use in trials.

Clinical Trials Accrued Liabilities

The Company’s clinical trials accrued liabilities are a component of research and development expenses and based on patient enrollment and related costs at clinical investigator sites as well as estimates for the services received and efforts expended pursuant to contracts with clinical research organizations (CROs) that conduct and manage clinical trials on the Company’s behalf. Management estimates clinical trials accrued liabilities for services the Company has not yet been invoiced or otherwise notified of the actual cost based on the services performed, pursuant to contracts with research institutions and CROs that conduct and manage preclinical studies and clinical trials on its behalf. Management estimates these expenses based on discussions with the Company’s internal clinical management personnel and CROs as to the progress or stage of completion of trials or services and the contracted fees to be paid for such services. Assumptions used by management in developing the estimate include the progress or stage of completion and patient enrollment of the clinical trials.

Recently Adopted Accounting Pronouncements

Recently Adopted Accounting Pronouncements – Leases

Effective January 1, 2019, the Company adopted Accounting Standards Codification Topic 842, Leases (ASC 842), which requires lessees to recognize a right-of-use asset (ROU) and a lease liability on the balance sheet for all leases except for short-term leases with a lease term of twelve months or less. For lessees, leases continue to be classified as either operating or finance leases in the income statement. Lessor accounting is similar to the prior model but updated to align with certain changes to the lessee model. Lessors continue to classify leases as operating, direct financing or sales-type leases. The Company elected to adopt ASC 842 under the transition method that allows for the application of the new guidance at the beginning of the adoption period without recasting comparative periods. The Company also elected transition practical expedients to the implementation of the lease standard, as follows: (1) the Company did not reassess whether any expired or existing contracts, which had commenced before January 1, 2019, the date of adoption, are or contain leases (2) the Company did not reassess the lease classification for any expired or existing leases and (3) the Company did not reassess the initial direct costs for any existing leases.

All of the Company’s leases are operating leases for property, which historically have been accounted for as operating leases, and under ASC 842 were also determined to be operating leases. The Company also reviewed its open contracts as of the date of adoption and determined that none had terms and conditions that would represent ROU assets or liabilities that would be considered embedded leases.

Upon adoption, the Company recognized ROU assets and related lease liabilities totaling $2.1 million, representing the present value of future lease payments of each lease utilizing the Company’s incremental borrowing rate (IBR), which is the estimated borrowing rate of a collateralized loan over the remaining term of the lease. A deferred rent amount of $0.2 million as of December 31, 2018 was also reclassified to the ROU assets, reducing the carrying value to $1.9 million.

Recently Adopted Accounting Pronouncements – Other

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which removes certain exceptions for recognizing deferred taxes for investments, performing intraperiod allocation and calculating income taxes in interim periods. The ASU also adds guidance to reduce complexity in certain areas, including recognizing deferred taxes for tax goodwill and allocating taxes to members of a consolidated group. This amendment is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. Early adoption is permitted. The Company adopted this amendment in December 2019 and the adoption did not have a material impact to the Company’s financial statements.

In June 2018, the FASB issued ASU No. 2018-07 (Topic 718), Compensation – Stock Compensation (ASU 2018-07). The update represents an expansion of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees. An entity should apply the requirements of Topic 718 to nonemployee awards except for specific guidance on inputs to an option pricing model and the attribution of cost (that is, the period of time over which share-based payment awards vest and the pattern of cost recognition over that period). The amendments specify that Topic 718 applies to all share-based payment transactions in which a grantor acquires goods or services to be used or consumed in a grantor’s own operations by issuing share-based payment awards. The amendments also clarify that Topic 718 does not apply to share-based payments used to effectively provide (1) financing to the issuer or (2) awards granted in conjunction with selling goods or services to customers as part of a contract accounted for under Topic 606, Revenue from Contracts with Customers. The Company adopted ASU 2018-17 in the first quarter of 2019 and the adoption of this standard did not have a material impact to the Company’s financial statements.

In February 2018, the FASB issued ASU No. 2018-05 (Topic 740) Income Taxes, Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118. The update provides guidance that gives entities the option to reclassify to retained earnings tax effects related to items in accumulated other comprehensive income (OCI) that the FASB refers to as having been stranded in accumulated OCI as a result of tax reform. Entities can early adopt the guidance in any interim or annual period for which financial statements have not yet been issued and apply it either (1) in the period of adoption or (2) retrospectively to each period in which the income tax effects of the Tax Cuts and Jobs Act related to items in accumulated OCI are recognized. The Company adopted ASU 2018-05 in the first quarter of 2019 utilizing the modified retrospective transition method. The adoption of this standard did not have a material impact to the Company’s financial statements.

Recently Issued Accounting Pronouncements Not Yet Adopted

In November 2018, the FASB issued ASU 2018-18 (Topic 808), Clarifying the Interaction Between Topic 808 and Topic 606, which provides guidance on how to assess whether certain transactions between collaborative arrangement participants should be accounted for within the revenue recognition standard. The ASU also provides more comparability in the presentation of revenue for certain transactions between collaborative arrangement participants. It accomplishes this by allowing organizations to only present units of account in collaborative arrangements that are within the scope of the revenue recognition standard together with revenue accounted for under the revenue recognition standard. The parts of the collaborative arrangement that are not in the scope of the revenue recognition standard should be presented separately from revenue accounted for under the revenue recognition standard. For public companies, the amendments in ASU 2018-18 are effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Early adoption is permitted. The Company has evaluated this amendment and it is not expected to have a material impact to the Company’s financial statements.

In August 2018, the FASB issued ASU 2018-13 (Topic 820), Fair Value Measurement, which modifies the disclosure requirements in Topic 820 by removing requirements for disclosing (i) amounts of and reasons for transfers between the Level 1 and Level 2 hierarchies, (ii) the policy for timing of transfers between levels and (iii) the valuation processes for Level 3 fair value measurements. The ASU 2018-13 amendment also adds requirements for disclosure of changes in unrealized gains and losses for the period relating to Level 3 fair value measurements and other factors considered in the valuation of Level 3 investments. This amendment is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The Company has evaluated this amendment and it is not expected to have a material impact to the Company’s financial statements.

In June 2016, the FASB issued ASU No. 2016-13 (Topic 326), Financial Instruments –Measurement of Credit Losses on Financial Instruments, which requires measurement and recognition of expected credit losses for financial assets by requiring an allowance to be recorded as an offset to the amortized cost of such assets. For available-for-sale debt securities, expected credit losses should be estimated when the fair value of the debt securities is below their associated amortized costs. This amendment is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Early adoption is permitted. The modified retrospective approach should be applied upon adoption of this new guidance. The Company has evaluated this amendment and it is not expected to have a material impact to the Company’s financial statements.

Fair Value Measurements

Fair value accounting is applied for all financial assets and liabilities, including short-term and long-term investments, and non-financial assets and liabilities that are recognized or disclosed at fair value in the consolidated financial statements on a recurring basis (at least annually). The carrying amount of the Company’s financial instruments, including accounts payable and accrued liabilities and other current liabilities approximate fair value due to their short-term maturities.

Marketable securities are stated at their estimated fair values. The counterparties to the agreements relating to the Company’s investment securities consist of the U.S. Treasury, governmental agencies, various major corporations and financial institutions with high credit standing. The carrying amounts for financial instruments consisting of cash and cash equivalents, receivable from collaboration partner, accounts payable and accrued liabilities approximate fair value due to their short maturities.

The accounting guidance for fair value provides a framework for measuring fair value, clarifies the definition of fair value and expands disclosures regarding fair value measurements. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the reporting date. The accounting guidance establishes a three-tiered hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value as follows:

Level 1—Inputs are unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date.

Level 2—Inputs other than quoted market prices included in Level 1 are either directly or indirectly observable for the asset or liability through correlation with market data at the measurement date and for the duration of the instrument’s anticipated life.

Level 3—Inputs reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date. Consideration is given to the risk inherent in the valuation technique and the risk inherent in the inputs to the model.

Property and Equipment

Property and equipment are stated at cost and depreciated using the straight-line method over the estimated useful lives of the assets, ranging from two to five years. Leasehold improvements are amortized over the shorter of their estimated useful lives or the related lease term. Upon retirement or sale, the cost and related accumulated depreciation are removed from the consolidated balance sheet and the resulting gain or loss is reflected in the consolidated statement of operations and comprehensive loss.

Leases

The Company determines if an arrangement is or contains a lease at inception. Operating lease right-of-use (ROU) assets and liabilities are presented separately on our consolidated balance sheets. The Company does not have any finance leases.

Operating lease ROU assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term beginning at the commencement date. As the Company’s leases do not provide enough information to determine an implicit interest rate, the Company determines its incremental borrowing rate based on the rate of interest that the Company would have to pay to borrow on a collateralized basis over a similar term in a similar economic environment. The operating lease ROU assets also include any lease payments made and excludes lease incentives and initial direct costs incurred. Lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term.

Stock-Based Compensation

The Company accounts for stock-based compensation arrangements with employees in accordance with ASC 718, Stock Compensation. Stock-based awards granted include stock options with time-based vesting, performance-based stock options, and restricted stock units (RSUs). ASC 718 requires the recognition of compensation expense, using a fair value-based method, for costs related to all stock-based payments. The Company’s determination of the fair value of stock options with time-based vesting on the date of grant utilizes the Black-Scholes option-pricing model, and is impacted by its common stock price as well as other variables including, but not limited to, expected term that options will remain outstanding, expected common stock price volatility over the term of the option awards, risk-free interest rates and expected dividends.

Stock-based compensation expense for performance stock options and RSUs is based on the probability of achieving certain performance criteria, as defined in the individual grant agreement. The Company estimates the number of performance options and RSUs ultimately expected to vest and recognizes stock-based compensation expense for those options and RSUs expected to vest when it becomes probable that the performance criteria will be met.

The fair value of a stock-based award is recognized over the period during which a grantee is required to provide services in exchange for the option or RSU award, known as the requisite service period (usually the vesting period), on a straight-line basis. The Company accounts for forfeitures as they occur.

Equity instruments issued to non-employees are recorded at their fair value on the grant date. The fair value of options granted to consultants is expensed over the non-employees’ vesting period. Non-employee stock-based compensation expense was not material for all periods presented.

Income Taxes

The Company accounts for income taxes under the asset and liability method. Current income tax expense or benefit represents the amount of income taxes expected to be payable or refundable for the current year. Deferred income tax assets and liabilities are determined based on differences between the financial statement reporting and tax bases of assets and liabilities and net operating loss and credit carryforwards and are measured using the enacted tax rates and laws that will be in effect when such items are expected to reverse. Deferred income tax assets are reduced, as necessary, by a valuation allowance when management determines it is more likely than not that some or all of the tax benefits will not be realized.

Transaction Price

The Company’s assessment of the transaction price included an analysis of amounts to which it was expected to be entitled for providing goods or services to the customer. The extended term (from January 1, 2017 to December 31, 2018) had a fixed fee of $45.0 million, paid by Sanofi contemporaneously with the notice of continuation of the contract. The Company therefore determined that the transaction price for this extended term was $45.0 million and this amount was recognized over the periods ending December 31, 2018 and 2017, respectively.

As noted above, the Collaboration Agreement included up to $45.0 million in funding from Sanofi of approved in-kind research and clinical activities. Sanofi was the decision maker on how to provide these services and such services were used in the development of joint program technology which is co-owned by both parties. As such the Company concluded that these in-kind contributions did not constitute consideration paid by Sanofi to the Company.

Any consideration related to sales-based royalties were to be recognized when the related sales occurred and therefore have also been excluded from the transaction price.

Methodology of Revenue Recognition

Methodology for Recognition

Since the Company determined that the three performance obligations were satisfied over time, the Company selected a single revenue recognition method that it believed most faithfully depicts the Company’s performance in transferring control of the services. ASC 606 allows entities to choose between two methods to measure progress toward complete satisfaction of a performance obligation:

1. Output methods - recognize revenue on the basis of direct measurements of the value to the customer of the goods or services transferred to date relative to the remaining goods or services promised under the contract (e.g. surveys of performance completed to date, appraisals of results achieved, milestones reached, time elapsed, and units produced, or units delivered); or

2. Input methods - recognize revenue on the basis of the entity’s efforts or inputs to the satisfaction of a performance obligation (e.g., resources consumed, labor hours expended, costs incurred, or time elapsed) relative to the total expected inputs to the satisfaction of that performance obligation.

The Company utilized a cost-based input method to measure proportional performance and calculated the corresponding amount of revenue to recognize. The Company believed this was the best measure of progress because other measures did not reflect how the Company executed its performance obligations under the contract with Sanofi. In applying the cost-based input methods of revenue recognition, the Company used actual costs incurred relative to budgeted costs to fulfill the combined performance obligations. Revenue was recognized based on actual costs incurred as a percentage of total actual and budgeted costs as the Company completed its performance obligations, which were fulfilled on December 31, 2018. A cost-based input method of revenue recognition requires management to make estimates of costs to complete the Company’s performance obligations. In making such estimates, significant judgment is required to evaluate assumptions related to cost estimates. The cumulative effect of revisions to estimated costs to complete the Company’s performance obligations were recorded in the period in which changes were identified and amounts could be reasonably estimated.

Registration Program Plan and Pre-POC Cost Sharing

Cost Sharing

During the years ended December 31, 2019, 2018 and 2017, the Company received research and development cost reimbursements from Sanofi under the terms of the Collaboration Agreement.

Since the inception of the Collaboration Agreement and up until December 31, 2018, Sanofi had been conditionally responsible for reimbursing the Company for:

(i)

one half or more of the registration program plan (RPP) costs after clinical proof-of-concept had been established for the lead compound under each of the HCM-1 and HCM-2 programs; and

(ii)

if the Company had initiated a clinical trial of a compound under a proof-of-concept development plan and not terminated its development thereof and if an additional compound had been identified as a development candidate for the same program, the Company was entitled to full reimbursement of pre-proof-of-concept (pre-POC)

(iii)

research and development costs on development candidates mutually identified as such additional compounds, with the objective of conducting IND-enabling studies and clinical trials on such candidate.

Effective October 2017, and through June 30, 2019, Sanofi shared RPP costs for the mavacamten program pursuant to the Collaboration Agreement termination terms. Registration program costs approved by the Company and Sanofi included amounts incurred relating to clinical trials, development and manufacturing of, and obtaining regulatory approvals for mavacamten, and included direct employee costs and direct out-of-pocket costs incurred, by or on behalf of a party, specifically identifiable or reasonably and directly allocable to those activities.

Pursuant to the additional compounds provisions of the Collaboration Agreement, in August 2018 Sanofi agreed to reimburse the Company for eligible costs it incurred in the development of the MYK-224 compound, which had been identified as an additional compound under the HCM-1 program. Eligible costs were subject to review and approval under the same procedures as under the RPP program; reimbursable costs consisted of research and development activities agreed to by the Company and Sanofi that were negotiated and budgeted prior to the application for reimbursement. Reimbursements for this compound continued through March 31, 2019, in accordance to the Collaboration Agreement termination terms.

Estimated reimbursements were invoiced to Sanofi before each interim period based on budgeted amounts. For the RPP program, these estimates consisted of one half of the Company’s mavacamten development budget in excess of Sanofi’s mavacamten development budget each interim period and the entire MYK-224 budget which was reimbursable in full. Actual amounts received from Sanofi were applied to the applicable interim period to reduce the Company’s research and development expenses.

Due to the termination of the license agreement effective December 31, 2018, the Company has not received reimbursements for the MYK-224 compound for any periods subsequent to April 1, 2019 and for the mavacamten compound subsequent to July 1, 2019.