10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

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

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2020

or

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

Commission File Number 001-39321

Avidity Biosciences, Inc.

(Exact name of registrant as specified in its charter)

Delaware	46-1336960
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)
10975 N. Torrey Pines Road, Suite 150 La Jolla, California	92037
(Address of principal executive offices)	(Zip Code)

(858) 401-7900

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.0001 par value	RNA	The Nasdaq Global Market

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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☒    No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a 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 October 20, 2020, the registrant had 37,526,631 shares of common stock outstanding.

Avidity Biosciences, Inc.

FORM 10-Q

TABLE OF CONTENTS

PART I – FINANCIAL INFORMATION
Item 1.	Condensed Financial Statements (unaudited)	3
	Condensed Balance Sheets (unaudited)	3
	Condensed Statements of Operations (unaudited)	4
	Condensed Statements of Convertible Preferred Stock/Units and Stockholders'/Members’ Equity (Deficit) (unaudited)	5
	Condensed Statements of Cash Flows (unaudited)	7
	Notes to Condensed Financial Statements (unaudited)	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	27
Item 4.	Controls and Procedures	27
PART II – OTHER INFORMATION
Item 1.	Legal Proceedings	28
Item 1A.	Risk Factors	28
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	28
Item 3.	Defaults Upon Senior Securities	28
Item 4.	Mine Safety Disclosures	28
Item 5.	Other Information	28
Item 6.	Exhibits	29
SIGNATURES		30

2

PART I - FINANCIAL INFORMATION

Item 1.  Condensed Financial Statements (unaudited)

Avidity Biosciences, Inc.

Condensed Balance Sheets

(in thousands, except par value)

	September 30, 2020			December 31, 2019
	(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	341,142		$	94,578
Prepaid and other assets		3,155			1,098
Total current assets		344,297			95,676
Property and equipment, net		1,295			631
Restricted cash		124			—
Other assets		417			600
Total assets	$	346,133		$	96,907
Liabilities, Convertible Preferred Stock and Stockholders’ Equity (Deficit)
Current liabilities:
Accounts payable and accrued liabilities	$	6,328		$	2,308
Accrued compensation		2,132			1,314
Deferred revenue, current portion		5,220			3,840
Long-term debt, current portion		—			2,774
Total current liabilities		13,680			10,236
Lease liabilities, net of current portion		689			393
Deferred revenue, net of current portion		11,600			15,100
Long-term debt, net of current portion		—			1,770
Other long-term liabilities		—			45
Total liabilities		25,969			27,544
Commitments and contingencies (Note 7)
Convertible preferred stock, $0.0001 par value; authorized shares - none and 38,055    at September 30, 2020 and December 31, 2019, respectively; issued and outstanding –    none and 37,267 at September 30, 2020 and December 31, 2019, respectively		—			134,720
Stockholders’ equity (deficit):
Preferred stock, $0.0001 par value, authorized shares – 40,000 and none at    September 30, 2020 and December 31, 2019, respectively; issued and outstanding    shares – none		—			—
Common stock, $0.0001 par value; authorized shares – 400,000 and 52,042    at September 30, 2020 and December 31, 2019, respectively; issued and outstanding    shares – 37,527 and 2,989 at September 30, 2020 and December 31, 2019, respectively		4			—
Additional paid-in capital		370,425			(43,172	)
Accumulated deficit		(50,265	)		(22,185	)
Total stockholders’ equity (deficit)		320,164			(65,357	)
Total liabilities, convertible preferred stock and stockholders’ equity (deficit)	$	346,133		$	96,907

See accompanying notes.

3

Avidity Biosciences, Inc.

Condensed Statements of Operations

(in thousands, except per share data)

(unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2020			2019			2020			2019
Collaboration revenue	$	1,746		$	650		$	4,645		$	874
Operating expenses:
Research and development		9,455			5,099			23,983			8,894
General and administrative		3,757			757			8,646			3,265
Total operating expenses		13,212			5,856			32,629			12,159
Loss from operations		(11,466	)		(5,206	)		(27,984	)		(11,285	)
Other income (expense):
Interest income		27			—			188			—
Interest and other expense		—			(1,462	)		(209	)		(3,049	)
Change in fair value of preferred warrant liability		—			—			(75	)		1
Total other income (expense)		27			(1,462	)		(96	)		(3,048	)
Net loss	$	(11,439	)	$	(6,668	)	$	(28,080	)	$	(14,333	)
Net loss per share, basic and diluted	$	(0.31	)	$	(2.43	)	$	(1.72	)	$	(5.32	)
Weighted-average shares outstanding, basic and diluted		37,420			2,739			16,361			2,692

See accompanying notes.

4

Avidity Biosciences, Inc.

Condensed Statements of Convertible Preferred Stock/Units and Stockholders'/Members’ Equity (Deficit)

(in thousands)

(unaudited)

	Convertible Preferred Stock						Common Stock				Additional Paid-in			Accumulated			Total Stockholders’ Equity
	Shares			Amount			Shares		Amount		Capital			Deficit			(Deficit)
Balance at December 31, 2019		37,267		$	134,720			2,989	$	—	$	(43,172	)	$	(22,185	)	$	(65,357	)
Issuance of common stock upon exercise of stock    options, net of repurchases		—			—			41		—		16			—			16
Vesting of early exercise options		—			—			—		—		14			—			14
Issuance of Series C convertible preferred stock,    net of issuance costs of $100		538			2,200			—		—		—			—			—
Stock-based compensation		—			—			—		—		449			—			449
Net loss		—			—			—		—		—			(6,085	)		(6,085	)
Balance at March 31, 2020		37,805		$	136,920			3,030	$	—	$	(42,693	)	$	(28,270	)	$	(70,963	)
Vesting of early exercise options		—			—			—		—		34			—			34
Issuance of common stock in initial public offering,    net of issuance costs of $24,026		—			—			16,560		2		274,052			—			274,054
Conversion of convertible preferred stock into    common stock upon completion of initial public    offering		(37,805	)		(136,920	)		17,921		2		136,918			—			136,920
Reclassification of warrant liability to equity due    to adjustment from preferred stock warrant to    common stock warrant upon completion of initial    public offering		—			—			—		—		120			—			120
Cashless exercise of common stock warrants		—			—			16		—		—			—			—
Stock-based compensation		—			—			—		—		687			—			687
Net loss		—			—			—		—		—			(10,556	)		(10,556	)
Balance at June 30, 2020		—		$	—			37,527	$	4	$	369,118		$	(38,826	)	$	330,296
Vesting of early exercise options		—			—			—		—		11			—			11
Stock-based compensation		—			—			—		—		1,296			—			1,296
Net loss		—			—			—		—		—			(11,439	)		(11,439	)
Balance at September 30, 2020		—		$	—			37,527	$	4	$	370,425		$	(50,265	)	$	320,164

5

Avidity Biosciences, Inc.

Condensed Statements of Convertible Preferred Stock/Units and Stockholders'/Members’ Equity (Deficit)

(in thousands)

(unaudited)

	Preferred Units						Convertible Preferred Stock				Common Units						Common Stock				Additional Paid-in			Accumulated			Predecessor's			Total Stockholders’/ Members'
	Units			Amount			Shares		Amount		Units			Amount			Shares		Amount		Capital			Deficit			Deficit			Deficit
Balance at December 31, 2018		12,459		$	32,693			—	$	—		2,842		$	426			—	$	—	$	—		$	—		$	(41,555	)	$	(41,129	)
Distribution to members		—			(106	)		—		—		—			—			—		—		—			—			—			—
Issuance of common units upon    exercise of unit options		—			—			—		—		78			39			—		—		—			—			—			39
Vesting of early exercise options		—			—			—		—		—			5			—		—		—			—			—			5
Stock-based compensation		—			—			—		—		—			17			—		—		—			—			—			17
Net loss to date of conversion		—			—			—		—		—			—			—		—		—			—			(2,549	)		(2,549	)
Balance at March 31, 2019		12,459		$	32,587			—	$	—		2,920		$	487			—	$	—	$	—		$	—		$	(44,104	)	$	(43,617	)
Conversion from LLC to C    corporation		(12,459	)		(32,587	)		12,459		32,587		(2,920	)		(487	)		2,920		—		(43,617	)		—			44,104			—
Issuance of common stock upon    exercise of stock options, net    of repurchases		—			—			—		—		—			—			7		—		3			—			—			3
Vesting of early exercise options		—			—			—		—		—			—			—		—		16			—			—			16
Stock-based compensation		—			—			—		—		—			—			—		—		16			—			—			16
Net loss		—			—			—		—		—			—			—		—		—			(5,116	)		—			(5,116	)
Balance at June 30, 2019		—		$	—			12,459	$	32,587		—		$	—			2,927	$	—	$	(43,582	)	$	(5,116	)	$	—		$	(48,698	)
Issuance of common stock upon    exercise of stock options		—			—			—		—		—			—			48		—		16			—			—			16
Vesting of early exercise options		—			—			—		—		—			—			—		—		2			—			—			2
Stock-based compensation		—			—			—		—		—			—			—		—		22			—			—			22
Net loss		—			—			—		—		—			—			—		—		—			(6,668	)		—			(6,668	)
Balance at September 30, 2019		—		$	—			12,459	$	32,587		—		$	—			2,975	$	—	$	(43,542	)	$	(11,784	)	$	—		$	(55,326	)

See accompanying notes.

6

Avidity Biosciences, Inc.

Condensed Statements of Cash Flows

(in thousands)

(unaudited)

	Nine Months Ended September 30,
	2020			2019
Cash flows from operating activities
Net loss	$	(28,080	)	$	(14,333	)
Adjustments to reconcile net loss to net cash (used in) provided    by operating activities:
Depreciation		258			265
Stock-based compensation expense		2,432			55
Amortization of discounts and loan issuance costs		29			57
Noncash interest expense		110			2,764
Change in fair value of preferred warrant liability		75			(1	)
Changes in operating assets and liabilities:
Prepaid and other assets		(2,060	)		(864	)
Accounts payable and accrued liabilities		4,373			92
Accrued compensation		818			(67	)
Operating lease right-of-use assets and liabilities, net		121			(59	)
Deferred revenue		(2,120	)		19,600
Net cash (used in) provided by operating activities		(24,044	)		7,509
Cash flows from investing activities
Purchases of property and equipment		(855	)		(144	)
Net cash used in investing activities		(855	)		(144	)
Cash flows from financing activities
Proceeds from issuance of common stock in initial public offering, gross		298,080			—
Payment of issuance costs related to initial public offering		(24,026	)		—
Proceeds from exercise of stock options/units, net of repurchases		16			58
Payments on long-term debt		(4,683	)		(2,100	)
Proceeds from issuance of Series C convertible preferred stock,    net of issuance costs		2,200			—
Proceeds from issuance of convertible notes, net of issuance costs		—			19,451
Net cash provided by financing activities		271,587			17,409
Net increase in cash, cash equivalents and restricted cash		246,688			24,774
Cash, cash equivalents and restricted cash at beginning of period		94,578			3,090
Cash, cash equivalents and restricted cash at end of period	$	341,266		$	27,864
Supplemental disclosure of cash flow information:
Cash paid for interest	$	571		$	261
Supplemental schedule of noncash investing and financing activities:
Right-of-use assets obtained in exchange for operating lease liabilities	$	676		$	807
Costs incurred, but not paid, in connection with purchases of property    and equipment included in accounts payable and accrued liabilities	$	67		$	21
Conversion of convertible preferred stock into common stock upon completion    of initial public offering	$	136,920		$	—
Reclassification of warrant liability to equity due to adjustment from preferred    stock warrant to common stock warrant upon completion of initial public    offering	$	120		$	—

See accompanying notes.

7

Avidity Biosciences, Inc.

Notes to Unaudited Condensed Financial Statements

1. DescriptionofBusiness and BasisofPresentation

Description of Business

Avidity Biosciences, Inc. (the Company or Avidity) is a biopharmaceutical company pioneering a new class of oligonucleotide-based therapies called Antibody Oligonucleotide Conjugates (AOCs) designed to overcome the current limitations of oligonucleotide-based therapies in order to treat a wide range of serious diseases. The Company utilizes its proprietary AOC platform to design, engineer and develop therapeutics that combine the tissue selectivity of monoclonal antibodies (mAbs) and the precision of oligonucleotide-based therapies.

Initial Public Offering

On June 16, 2020, the Company completed its initial public offering (IPO) in which it sold 16,560,000 shares of common stock at an offering price of $18.00 per share. Proceeds from the IPO, net of underwriting discounts, commissions and offering costs, were $274.1 million.

In addition, each of the following occurred in connection with the completion of the IPO:

• the conversion of all outstanding shares of convertible preferred stock into 17,921,069 shares of the Company’s common stock;

• the adjustment of an outstanding warrant to purchase convertible preferred stock into a warrant to purchase 7,809 shares of the Company’s common stock; and

• the amendment and restatement of the Company’s certificate of incorporation, authorizing 400,000,000 shares of common stock and 40,000,000 shares of undesignated preferred stock.

Reverse Stock Split

On June 4, 2020, the Company effected a one-for-2.1095 reverse stock split of its common stock (the Reverse Stock Split). The par value and the authorized shares of the common stock were not adjusted as a result of the Reverse Stock Split. All issued and outstanding common stock and the conversion ratio of the convertible preferred stock have been retroactively adjusted to reflect this Reverse Stock Split for all periods presented.

Liquidity

As of September 30, 2020, the Company has devoted substantially all of its resources to organizing and staffing the company, business planning, raising capital, developing its proprietary AOC platform, identifying potential product candidates, establishing its intellectual property portfolio and conducting research and preclinical studies, and providing other general and administrative support for these operations. In addition, the Company has a limited operating history, has incurred operating losses since inception and expects that it will continue to incur net losses into the foreseeable future as it continues the development of its product candidates and development programs. As of September 30, 2020, the Company had an accumulated deficit of $50.3 million and cash and cash equivalents of $341.1 million.

The Company believes that existing cash and cash equivalents, including the net proceeds from the IPO, will be sufficient to fund the Company’s operations for at least 12 months from the date of the filing of this Form 10-Q. The Company plans to finance its future cash needs through equity offerings, debt financings or other capital sources, including potential collaborations, licenses and other similar arrangements. If the Company is not able to secure adequate additional funding, it may be forced to make reductions in spending, extend payment terms with suppliers, liquidate assets where possible, and/or delay or reduce the scope of its planned development programs. Any of these actions could materially harm the Company’s business, results of operations and future prospects.

8

Basis of Presentation

The accompanying unaudited interim condensed financial statements have been prepared in accordance with U.S. generally accepted accounting principles (GAAP) and the rules and regulations of the Securities and Exchange Commission (SEC) related to a quarterly report on Form 10-Q. Certain information and note disclosures normally included in annual financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to those rules and regulations. The unaudited interim condensed financial statements reflect all adjustments which, in the opinion of management, are necessary for a fair statement of the results for the periods presented. All such adjustments are of a normal and recurring nature. The operating results presented in these unaudited interim condensed financial statements are not necessarily indicative of the results that may be expected for any future periods. These unaudited interim condensed financial statements should be read in conjunction with the audited financial statements and the notes thereto for the year ended December 31, 2019 included in the Company’s Prospectus filed with the SEC on June 12, 2020 for its IPO.

2. SummaryofSignificantAccountingPolicies

Use of Estimates

The Company’s condensed financial statementsarepreparedinaccordancewith GAAP, whichrequires the Company tomakeestimates and assumptions that impact the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities in the financial statements and accompanying notes. The most significant estimates in the Company’s condensed financial statements relate to revenue recognition, stock-based compensation, and accrued research and development costs. Although these estimates are based on the Company’sknowledgeofcurrenteventsandactionsitmayundertakeinthefuture,actualresultsmayultimatelymateriallydifferfromtheseestimates andassumptions.

Cash, Cash Equivalents and Restricted Cash

The Company considers all highly liquid investments with original maturities of three months or less from the date of purchase to be cash equivalents. Cash and cash equivalents include cash in readily available checking and money market accounts. Restricted cash represents cash held as collateral for the letter of credit required under the Company’s facility lease and is reported as a long-term asset in the accompanying condensed balance sheet.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash deposits. The Company maintains deposits in federally insured financial institutions in excess of federally insured limits. 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.

Fair Value of Financial Instruments

Certain assets and liabilities are carried at fair value under GAAP. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. Financial assets and liabilities carried at fair value are to be classified and disclosed in one of the following three levels of the fair value hierarchy, of which the first two are considered observable and the last is considered unobservable:

• Level 1—Quoted prices in active markets for identical assets or liabilities

• Level 2—Observable inputs, such as quoted prices in active markets for similar assets or liabilities, quoted prices in markets that are not active for identical or similar assets or liabilities, or other inputs that are observable or can be corroborated by observable market data.

• Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to determining the fair value of the assets or liabilities, including pricing models, discounted cash flow methodologies and similar techniques.

The asset’s or liability’s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.

9

None of the Company’s non-financial assets are recorded at fair value on a non-recurring basis. Prior to the completion of the IPO in June 2020, financial liabilities that were measured at fair value on a recurring basis included the preferred stock warrant liability. No transfers between levels have occurred during the periods presented. The carrying amounts reflected in the Company’s condensed balance sheets for prepaid and other assets and accounts payable and accrued liabilities approximate their fair values due to their short-term nature. As of December 31, 2019, the carrying value of the Company’s debt approximated fair value due to the interest being reflective of then-current market rates for debt with similar terms and conditions.

The following table provides a reconciliation of the preferred stock warrant liability measured at fair value using Level 3 unobservable inputs (in thousands):

Balance at December 31, 2019	$	45
Change in fair value		75
Reclassification of preferred stock warrant liability    to stockholders’ equity		(120	)
Balance at September 30, 2020	$	—

Property and Equipment

Property and equipment, including leasehold improvements, are stated at cost less accumulated depreciation and amortization. Depreciation and amortization are recorded using the straight-line method over the estimated useful lives of the related assets, which ranges from three to five years. Leasehold improvements are amortized on a straight-line basis over the shorter of the estimated useful lives of the assets or the remaining lease term. Repairs and maintenance charges that do not increase the useful life of the assets are charged to operating expenses as incurred.

Impairment of Long-Lived Assets

Long-lived assets consist of property and equipment. An impairment loss is recorded if and when events and circumstances indicate that assets might be impaired and the undiscounted cash flows estimated to be generated by those assets are less than the carrying amount of those assets. The Company has not recognized any impairment losses in any of the periods presented in these financial statements.

Segment Information

Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by management in making decisions regarding resource allocation and assessing performance. The Company manages its operations as a single operating segment in the United States for the purposes of assessing performance and making operating decisions.

Revenue Recognition

To date, all the Company’s revenue has been derived from collaboration and research agreements. The terms of these arrangements include the following types of payments to the Company: non-refundable, upfront license fees; development, regulatory and commercial milestone payments; payments for research and development services provided by the Company or for manufacturing supply services the Company provides through its contract manufacturers; and royalties on net sales of licensed products.  

The Company performs the following steps in determining the appropriate amount of revenue to be recognized as it fulfills its obligations under each of these agreements: (i) identification of the promised goods or services in the contract; (ii) determination of whether the promised goods or services are performance obligations including whether they are distinct in the context of the contract; (iii) measurement of the transaction price, including the constraint on variable consideration; (iv) allocation of the transaction price to the performance obligations; and (v) recognition of revenue when, or as, the Company satisfies each performance obligation.

The Company receives payments from its collaborators based on billing schedules established in each contract. Upfront and other payments may require deferral of revenue recognition to a future period until the Company performs its obligations under its research and collaboration arrangements. Amounts are recorded as accounts receivable when the Company’s right to consideration is unconditional.

See Note 3 (Collaboration and License Agreement) for further information.

10

Research and Development Costs

Research and development costs are expensed as incurred and include salaries, benefits and stock-based compensation associated with research and development personnel, third-party research and development expenses, license fees, laboratory supplies, facilities, overhead costs, and consultants. Nonrefundable advance payments for goods and services that will be used in future research and development activities are capitalized and recorded as expense in the period that the Company receives the goods or when services are performed.

Upfront and milestone payments to acquire contractual rights to licensed technology are recorded when incurred if there is uncertainty in the Company receiving future economic benefit from the acquired contractual rights.

Income Taxes

Deferred tax assets and liabilities are determined based on the differences between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Valuation allowances are provided, if based upon the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. The Company is subject to taxation in the United States and state jurisdictions. As of December 31, 2019, the Company’s tax years since inception are subject to examination by taxing authorities.

Stock-Based Compensation

Stock-based compensation expense for employee and non-employee stock option grants is recorded at the estimated fair value of the award as of the grant date and is recognized as expense on a straight-line basis over the requisite service period (usually the vesting period) of the stock-based award, net of actual forfeitures during the period. Stock-based compensation expense for employee stock purchases under the Company’s Employee Stock Purchase Plan (the ESPP) is recorded at the estimated fair value of the purchase as of the plan enrollment date and is recognized as expense on a straight-line basis over the applicable six-month ESPP offering period. The estimation of fair value for stock-based compensation requires management to make estimates and judgments about, among other things, the estimated life of options and volatility of the Company’s common stock. The judgments directly affect the amount of compensation expense that will be recognized.

Comprehensive Loss

Comprehensive loss is defined as the change in equity during a period from transactions and other events and circumstances from non-owner sources. Net loss and comprehensive loss were the same for all periods presented.

Net Loss Per Share

Basic net loss per share is computed by dividing the net loss by the weighted-average number of common shares outstanding for the period, adjusted for the weighted-average number of common shares outstanding that are subject to repurchase or forfeiture. The Company has excluded 106,202 and 137,767 weighted-average shares subject to repurchase or forfeiture from the weighted-average number of common shares outstanding for the three and nine months ended September 30, 2020, respectively, and 195,378 and 221,266 weighted-average shares subject to repurchase or forfeiture from the weighted-average number of common shares outstanding for the three and nine months ended September 30, 2019, respectively. Diluted net loss per share is computed by dividing the net loss by the weighted-average number of shares of common stock and dilutive common stock equivalents outstanding for the period determined using the treasury-stock and if-converted methods. For all periods presented, there is no difference in the number of shares used to calculate basic and diluted shares outstanding as inclusion of the potentially dilutive securities would be antidilutive due to the Company’s net loss position.

Potentially dilutive securities not included in the calculation of diluted net loss per share, because to do so would be anti-dilutive, are as follows (in common stock equivalent shares; in thousands):

	September 30,
	2020		2019
Convertible preferred stock		—		5,906
Warrant to purchase convertible preferred stock		—		8
Warrant to purchase common stock		—		9
Common stock options issued and outstanding		3,545		230
Common stock subject to repurchase or forfeiture		92		213
ESPP shares pending issuance		19		—
Total		3,656		6,366

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Recently Issued Accounting Pronouncements

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

3. Collaboration and License Agreement

Research Collaboration and License Agreement with Eli Lilly and Company

In April 2019, the Company entered into a Research Collaboration and License Agreement (the Lilly Agreement) with Eli Lilly and Company (Lilly) for the discovery, development and commercialization of AOC products directed against certain targets in immunology and other select indications on a worldwide basis. Under the Lilly Agreement, the Company granted Lilly an exclusive, worldwide, royalty-bearing license, with the right to sublicense (subject to certain conditions), under the Company’s technology to research, develop, manufacture, and sell products containing AOCs that are directed to up to six mRNA targets. The Company retains the right to use its technology to perform its obligations under the Lilly Agreement and for all purposes not granted to Lilly. The Company agreed that it will not, itself or with a third party, research, develop, manufacture or commercialize or otherwise exploit any compound or product directed against targets subject to the Lilly Agreement.

In consideration of the rights granted to Lilly under the Lilly Agreement, the Company received a one-time upfront fee of $20.0 million and is eligible to receive up to $60.0 million in development milestone payments, up to $140.0 million in regulatory milestone payments and up to $205.0 million in commercialization milestone payments per target. In addition, Lilly is obligated to reimburse the Company for research expenses, as defined in and, incurred under the Lilly Agreement. Lilly is obligated to pay the Company a tiered royalty ranging from the mid-single to low-double digits on worldwide annual net sales of licensed products, subject to specified and capped reductions for the market entry of biosimilar products, loss of patent coverage of licensed products and for payments owed to third parties for additional rights necessary to commercialize licensed products in the territory. Lilly’s royalty obligations and the Lilly Agreement will expire on a licensed product-by-licensed product and country-by-country basis on the later of ten years from the date of the first commercial sale or when there is no longer a valid patent claim covering such licensed product in such country.

The Company has identified multiple promises to deliver goods and services, which include at inception of the agreement: (i) a license to technology and patents, information and know-how; and (ii) collaboration, including research services, technical and regulatory support provided by the Company. At inception and through September 30, 2020, the Company has identified one performance obligation for all the deliverables under the Lilly Agreement since the delivered elements are either not capable of being distinct or are not distinct within the context of the contract. Accordingly, the Company will recognize revenue for the fixed or determinable collaboration in an amount proportional to the collaboration expenses incurred and the total estimated collaboration expenses over the five-year period over which it expects to deliver its performance obligations. In connection with the Lilly Agreement, the Company recognized revenue of $1.7 million and $0.7 million for the three months ended September 30, 2020 and 2019, respectively, and $4.6 million and $0.9 million for the nine months ended September 30, 2020 and 2019, respectively, and had deferred revenue of $16.8 million and $18.9 million as of September 30, 2020 and December 31, 2019, respectively.

A reconciliation of the closing balance of deferred revenue related to the Lilly Agreement is as follows (in thousands):

Balance at December 31, 2019	$	18,940
Revenue recognized		(2,120	)
Balance at September 30, 2020	$	16,820

Concurrently with the execution of the Lilly Agreement, the Company issued a convertible promissory note to Lilly. In connection with the Series C financing in November 2019, all outstanding principal and interest accrued under the note converted into 4,576,342 shares of Series C convertible preferred stock. See Note 6 (Convertible Notes) for further discussion.

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4. Property and Equipment

Property and equipment consist of the following (in thousands):

	September 30, 2020			December 31, 2019
Laboratory equipment	$	2,645		$	1,755
Computers and software		91			65
Office furniture and equipment		43			37
Leasehold improvements		417			417
Property and equipment, gross		3,196			2,274
Less accumulated depreciation		(1,901	)		(1,643	)
Total property and equipment, net	$	1,295		$	631

Depreciation expense related to property and equipment was $0.1 million and $0.1 million for the three months ended September 30, 2020 and 2019, respectively, and $0.3 million and $0.3 million for the nine months ended September 30, 2020 and 2019, respectively.

5. Debt

The Company’s debt consisted of the following (in thousands):

	September 30, 2020		December 31, 2019
Current liabilities:
Term loans	$	—	$	2,800
Unamortized debt issuance costs		—		(25	)
Unamortized debt discount		—		(1	)
Loans payable, net of issuance costs and discount		—		2,774
Non-current liabilities:
Term loans		—		1,400
Accrued end of term fees		—		374
Unamortized debt issuance costs		—		(4	)
Loans payable, net of issuance costs and discount		—		1,770
Total loans payable, net of issuance costs and discount	$	—	$	4,544

Term Loan

In June 2017, the Company entered into an amendment (the LSA Amendment) to the Amended and Restated Loan and Security Agreement (as amended, the LSA) with Silicon Valley Bank (SVB). Pursuant to the LSA Amendment, SVB agreed to make loans of up to $7.0 million, comprising (i) a $5.0 million term loan, funded at the closing date (the Term C Loan), and (ii) subject to the achievement of a specified milestone relating to the Company’s research, an additional term loan totaling up to $2.0 million (the Term D Loan), of which $4.1 million was used to repay the Company’s existing loan with SVB, in addition to the final payments totaling $0.4 million.

The Term C Loan was scheduled to mature on June 1, 2021 and bore interest at an adjustable annual rate of the prime rate per the Wall Street Journal plus one-fifth of one percent (0.20%). The LSA Amendment provided an extension of the interest only period through June 1, 2019, upon the Term D Loan advance. Beginning July 1, 2019, the Company was required to repay the principal amount in 36 equal monthly installments, in addition to the monthly interest payment. In addition, a final payment of 6.5% of the funded amount, or $0.3 million, was due on the maturity date. The final payment fee was accrued as interest expense over the term of the loan and recorded in long-term debt, net of current portion.

In August 2018, the Company entered into a second amendment to the LSA (the LSA Second Amendment). Pursuant to the LSA Second Amendment, SVB provided the Term D Loan of $2.0 million, upon the Company’s receipt of $3.0 million in convertible note financing. In addition, a final payment of 6.5% of the funded amount, or $0.1 million, was due on the maturity date. The Company accounted for the financing prospectively as a debt modification.  

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On June 30, 2020, the Company voluntarily prepaid the aggregate outstanding principal balance of $2.8 million and final payments and accrued interest of $0.5 million related to the Term C and Term D Loans, and the LSA was terminated.

In conjunction with the Term A and Term B Loans, the Company issued a warrant to SVB to purchase up to 16,474 shares of Series A convertible preferred stock at an exercise price of $2.2615 per share, exercisable at any time following the issuance, with a term of ten years. In connection with the completion of the IPO in June 2020, the preferred stock warrant was adjusted to become a warrant exercisable for 7,809 shares of common stock at an exercise price of $4.77 per share. In conjunction with the Term C Loan entered into in June 2017, the Company issued a warrant to SVB to purchase up to 9,442 shares of common stock at an exercise price of $0.53 per share, exercisable at any time following the issuance, with a term of seven years. The Company estimated the fair value of the warrants granted using the Black-Scholes option-pricing model and recorded the fair value as debt discounts, which were being amortized to interest expense using the effective interest method over the term of the loans. On June 17, 2020, the warrants were cashless exercised for an aggregate of 15,833 shares of common stock.

6. Convertible Notes

In 2018 and 2019, the Company issued convertible promissory notes in the aggregate principal amount of $3.0 million and $4.5 million, respectively (the 2018 Notes and 2019 Notes, respectively). The 2018 Notes and the 2019 Notes accrued interest at 8% and 10% per annum, respectively, and automatically converted into preferred equity in the next qualified financing of at least $10 million at 85% and 80%, respectively, of the per share price paid by the investors in such financing.

Concurrently with the execution of the Lilly Agreement in April 2019, the Company issued a convertible promissory note to Lilly (the Lilly Note) and received cash proceeds of $15.0 million. The Lilly Note accrued simple interest of 8.0% per annum and, if not converted, would have matured in October 2020. All unpaid principal and interest were due at maturity.

The 2018 Notes, 2019 Notes and the Lilly Note (collectively, the Notes) represented share settled debt that were accounted for at amortized cost by accreting the Notes to their redemption value over the life of the debt using the effective interest method.  In connection with the Series C financing in November 2019, all outstanding principal and interest accrued under the Notes converted into 6,893,036 shares of Series C convertible preferred stock.

7. Commitments and Contingencies

Lease Agreements

The Company determines if an arrangement is a finance lease, operating lease or short-term lease at inception, or as applicable, and accounts for the arrangement under the relevant accounting literature. Currently, the Company is only party to non-cancellable office and laboratory space operating leases and a short-term office lease. Under the relevant guidance, the Company recognizes operating lease right-of-use (ROU) assets and liabilities based on the present value of the future minimum lease payments over the lease term at the commencement date, using the Company’s assumed incremental borrowing rate of 5.5%, and amortizes the ROU assets and liabilities over the lease term. Lease expense for operating leases is recognized on a straight-line basis over the lease term. The Company’s short-term lease is not subject to recognition of an ROU asset or liability or straight-line lease expense requirements.

In March 2014, the Company entered into a non-cancellable operating lease for office and laboratory space with a lease term through November 2017. In July 2017, the Company entered into an amendment to this lease to extend the lease term through December 2021.

On June 1, 2020, the Company entered into a second amendment to its existing operating lease (as amended, the 2014 Lease) and entered into a new non-cancellable temporary operating lease (the Temporary Lease) in connection with a newly executed non-cancellable operating lease for its headquarters location, commencing on July 1, 2021 (the New Lease). The lease term under both the 2014 Lease and the Temporary Lease ends 15 days after the commencement date of the New Lease in July 2021. The remaining monthly rental payments under the 2014 Lease and the rent under the Temporary Lease were abated beginning on June 1, 2020, given the execution of the New Lease. The total lease payments under the New Lease of $7.3 million were allocated amongst the 2014 Lease, Temporary Lease and New Lease based on the relative standalone price of the separate lease components. The New Lease will have a 5-year term upon commencement on July 1, 2021, with an initial monthly base rent of approximately $124,000, which will increase to approximately $139,000 during the last year of the New Lease's term. In addition, under the terms of the New Lease, the Company is required to maintain a letter of credit totaling $124,000 throughout the lease term.

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In June 2020, the Company adjusted the ROU asset and liability of the 2014 Lease to conform to the modification terms, and recorded an ROU asset and liability for the Temporary Leaseupon occupancy. The Company will recognize an ROU asset and liability related to the New Lease upon occupancy, which is expected to occur in July 2021.

As of September 30, 2020, the Company’s ROU assets and liabilities related to the 2014 Lease and the Temporary Lease are as follows (in thousands):

ROU assets (included in other assets)	$	373
Lease liabilities, current portion (included in accounts    payable and accrued liabilities)	$	—
Lease liabilities, net of current portion		689
Total lease liabilities	$	689

Maturities of the lease liabilities due under the 2014 Lease and the Temporary Lease are as follows (in thousands):

Remaining in 2020	$	—
2021		12
2022		149
2023		154
2024		158
2025		163
2026		83
Total lease payments		719
Less imputed interest		(30	)
Total operating lease liabilities		689
Less lease liabilities, current portion		—
Lease liabilities, net of current portion	$	689

Supplemental cash flow information related to operating leases was as follows (in thousands):

	Nine Months Ended September 30,
	2020		2019
Cash paid included in operating cash flows	$	163	$	286

Rent expense was as follows (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
Operating leases	$	119	$	75	$	285	$	226
Short-term lease		9		—		27		—
Total rent expense	$	128	$	75	$	312	$	226

Litigation

Liabilities for loss contingencies arising from claims, assessments, litigation, fines, penalties, and other sources are recorded when it is probable that a liability has been incurred and the amount can be reasonably estimated. There are no matters currently outstanding for which any liabilities have been accrued.

8. Stockholders’ Equity (Deficit)

Amended and Restated Certificate of Incorporation

On June 16, 2020, the Company’s certificate of incorporation was amended and restated to authorize 400,000,000 shares of common stock and 40,000,000 shares of undesignated preferred stock, each with a par value of $0.0001 per share.

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Convertible Preferred Stock

In connection with the completion of the IPO in June 2020, all of the outstanding shares of convertible preferred stock were converted into 17,921,069 shares of the Company’s common stock. As of December 31, 2019, the Company’s convertible preferred stock was classified as temporary equity on the accompanying balance sheet in accordance with authoritative guidance for the classification and measurement of potentially redeemable securities whose redemption is based upon certain change in control events outside of the Company’s control.

Conversion

On April 1, 2019, Avidity LLC, a Delaware limited liability company, was converted into Avidity Biosciences, Inc., a Delaware corporation. The entire membership interests of Avidity LLC were converted into securities of Avidity Biosciences, Inc. as follows: (i) each outstanding common unit of Avidity LLC was converted into one share of Avidity Biosciences, Inc.’s common stock; (ii) each outstanding Series A preferred unit of Avidity LLC converted into one share of Avidity Biosciences, Inc.’s Series A convertible preferred stock; and (iii) each outstanding Series B preferred unit of Avidity LLC converted into one share of Avidity Biosciences, Inc.’s Series B convertible preferred stock. All the property, rights, privileges, powers and franchises of Avidity LLC vested in Avidity Biosciences, Inc., and all debts, liabilities and duties of Avidity LLC became debts, liabilities and duties of Avidity Biosciences, Inc. All references to the former members’ equity accounts in Avidity LLC have been adjusted to reflect the equivalent number of Avidity Biosciences, Inc. shares of common stock. Upon completion of the conversion, the Company reclassified an accumulated deficit of $44.1 million from predecessor deficit to additional paid in capital.

As of December 31, 2019, preferred stock consisted of the following (in thousands, except per share data):

Series	Shares Authorized		Shares Issued and Outstanding		Per Share Original Issue Price and Conversion Price		Liquidation Preference		Carrying Value
Series A		4,367		4,350	$	2.2615	$	9,838	$	9,773
Series B		8,108		8,108		2.8269		22,922		22,814
Series C		25,580		24,809		4.2812		106,210		102,133
Total		38,055		37,267			$	138,970	$	134,720

Equity Incentive Plan

In January 2013, the Company adopted the 2013 Equity Incentive Plan (the 2013 Plan). The 2013 Plan provided for the issuance of incentive units to employees and nonemployees of the Company and non‑statutory unit options, restricted unit awards, unit appreciation rights, and unit bonuses to directors, employees and consultants of the Company. Under the 2013 Plan, 2,127,013 units were initially reserved for issuance. Upon the conversion of the Company to a C corporation, the 2013 Plan continued on the same terms and conditions. In 2019, the number of shares reserved under the 2013 Plan was increased to 4,771,615 shares.

In June 2020, the Board of Directors adopted, and the Company’s stockholders approved, the 2020 Incentive Award Plan (the 2020 Plan), which became effective in connection with the IPO. Pursuant to the 2020 Plan, the Company ceased granting awards under the 2013 Plan. Under the 2020 Plan, the Company may grant stock options, restricted stock, dividend equivalents, restricted stock units, stock appreciation rights, and other stock or cash-based awards to individuals who are then employees, officers, non-employee directors or consultants of the Company. A total of 3,900,000 shares of common stock were initially reserved for issuance under the 2020 Plan. In addition, the number of shares of common stock available for issuance under the 2020 Plan will be increased annually on the first day of each fiscal year during the term of the 2020 Plan, beginning with the 2021 fiscal year, by an amount equal to the lesser of (a) 5% of the shares of common stock outstanding on the final day of the immediately preceding calendar year or (b) such smaller number of shares as determined by the Board of Directors. At September 30, 2020, 3,107,424 shares remain available for issuance under the 2020 Plan.

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Stock Options

Options granted from the 2013 Plan and 2020 Plan are exercisable at various dates and will expire no more than ten years from their date of grant. Prior to the IPO, the exercise price of options was determined by the board of directors. Following the IPO, the Company grants options with an exercise price equal to the fair market value of the Company’s stock on the date of the option grant.

Stock option activity for employee and nonemployee awards and related information is as follows (options in thousands):

	Number			Weighted- Average Exercise Price
Outstanding at December 31, 2019		1,667		$	1.08
Granted		2,035			12.13
Exercised		(106	)		0.44
Forfeited		(51	)		1.24
Outstanding at September 30, 2020		3,545		$	7.44

Employee Stock Purchase Plan

In June 2020, the Company adopted the ESPP, which permits participants to contribute up to 15% of their eligible compensation during defined rolling six-month periods to purchase the Company’s common stock. The purchase price of the shares will be 85% of the lower of the fair market value of the Company’s common stock on the first day of trading of the offering period or on the applicable purchase date. A total of 325,000 shares of common stock was initially reserved for issuance under the ESPP. As of September 30, 2020, the Company has not issued any shares under the ESPP. The Company had an outstanding liability of $0.3 million at September 30, 2020, which is included in accounts payable and accrued liabilities on the balance sheet, for employee contributions to the ESPP for shares pending issuance at the end of the offering period.

Stock-Based Compensation Expense

The assumptions used in the Black-Scholes option pricing model to determine the fair value of the stock option/unit grants were as follows:

	Nine Months Ended September 30,
	2020	2019
Risk-free interest rate	0.3% - 1.5%	1.4% - 2.7%
Expected volatility	88% - 92%	84% - 88%
Expected term (in years)	5.4 - 6.1	2.0 - 5.5
Expected dividend yield	—%	—%

The allocation of stock-based compensation expense was as follows (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
Research and development expense	$	565	$	6	$	850	$	22
General and administrative expense		731		16		1,582		33
Total stock-based compensation expense	$	1,296	$	22	$	2,432	$	55

As of September 30, 2020, the unrecognized compensation cost related to outstanding time-based options was $23.1 million, which is expected to be recognized over a weighted-average period of 3.3 years.

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9. COVID-19

The COVID-19 outbreak in the United States has caused significant business disruption. The extent of the impact of COVID-19 on the Company’s operational and financial performance will depend on certain developments, including the duration and spread of the outbreak, and its impact on the Company’s preclinical studies and clinical trials, employees and vendors, all of which are uncertain and cannot be predicted. In response to the COVID-19 outbreak, the Company has closed its executive offices with its administrative employees continuing their work remotely and limited the number of staff in its research and development laboratories. To date, the Company has not experienced material disruptions in its business operations. However, a prolonged outbreak could have a material adverse impact on the financial results and business operations of the Company, including the timing and ability of the Company to complete certain clinical trials and other efforts required to advance the development of its product candidates and raise additional capital. In response to the pandemic, the Coronavirus Aid, Relief and Economic Security Act (the CARES Act) was signed into law on March 27, 2020. The CARES Act, among other things, includes tax provisions relating to refundable payroll tax credits, deferment of employer’s social security payments, net operating loss utilization and carryback periods, modifications to the net interest deduction limitations and technical corrections to tax depreciation methods for qualified improvement property. The CARES Act had no impact on the Company’s income tax provision for the three and nine months ended September 30, 2020. The Company continues to evaluate the impact of the CARES Act on its financial position, results of operations and cash flows. The Company currently does not expect to apply for loans or grants under the CARES Act.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with  our unaudited condensed financial statements and related notes thereto included elsewhere in this Quarterly Report on Form 10-Q and with our audited financial statements and notes thereto and management’s discussion and analysis of financial condition and results of operations for the year ended December 31, 2019, included in our Prospectus dated June 11, 2020 filed pursuant to Rule 424(b) under the Securities Act of 1933, as amended, or the Securities Act, with the Securities Exchange Commission, or SEC, on June 12, 2020, or the Prospectus.

Cautionary Note Regarding Forward-Looking Statements

This Quarterly Report contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. All statements other than statements of historical facts contained in this Quarterly Report, including statements regarding our future results of operations and financial position, business strategies and plans, research and development plans, the anticipated timing, costs, design and conduct of our ongoing and planned preclinical studies and planned clinical trials for our product candidates, the timing and likelihood of regulatory filings and approvals for our product candidates, the impact of COVID-19 on our business, the timing and likelihood of success, plans and objectives of management for future operations and future results of anticipated product development efforts, are forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “could,” “expect,” “intend,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “continue,” or the negative of these terms or other comparable terminology. These forward-looking statements are only predictions. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition and results of operations. These forward-looking statements speak only as of the date of this Quarterly Report and are subject to a number of risks, uncertainties and assumptions, including those described in Part II, Item 1A, “Risk Factors.” The events and circumstances reflected in our forward-looking statements may not be achieved or occur, and actual results could differ materially from those projected in the forward-looking statements. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained herein, whether as a result of any new information, future events, changed circumstances or otherwise.

Overview

We are pioneering a new class of oligonucleotide-based therapies called Antibody Oligonucleotide Conjugates, or AOCs, designed to overcome the current limitations of oligonucleotide therapies in order to treat a wide range of serious diseases. We utilize our proprietary AOC platform to design, engineer and develop therapeutics that combine the tissue selectivity of monoclonal antibodies, or mAbs, and the precision of oligonucleotide therapies in order to access previously undruggable tissue and cell types and more effectively target underlying genetic drivers of diseases. We are initially focused on muscle diseases to demonstrate the capabilities of our AOCs, and our muscle franchise consists of five programs. Our lead product candidate, AOC 1001, is designed to treat myotonic dystrophy type 1, a rare monogenic muscle disease. We expect to submit an investigational new drug application, or IND, for AOC 1001 in 2021 and plan to initiate a Phase 1/2 clinical trial by the end of the same year. We also intend to advance AOC product candidates in our four other muscle programs focused on the treatment of muscle atrophy, Duchenne muscular dystrophy, or DMD, facioscapulohumeral muscular dystrophy and Pompe disease. In addition to our muscle franchise, we have development efforts focused on immune and other cell types.

Since our inception in 2012, we have devoted substantially all of our resources to organizing and staffing our company, business planning, raising capital, developing our proprietary AOC platform, identifying potential product candidates, establishing our intellectual property portfolio and conducting research and preclinical studies, and providing other general and administrative support for these operations. We have not generated any revenue from product sales. In June 2020, we completed our initial public offering, or IPO, of 16,560,000 shares of our common stock at a price to the public of $18.00 per share, including the exercise in full by the underwriters of their option to purchase 2,160,000 additional shares of our common stock. Including the option exercise, our aggregate net proceeds from the offering were $274.1 million, net of underwriting discounts, commissions and offering costs. Since our inception through September 30, 2020, other sources of capital raised to fund our operations were comprised of aggregate gross proceeds of $131.6 million from the sale and issuance of convertible preferred units/stock and convertible notes, $29.1 million from funding under collaboration and research services agreements, and $7.0 million from loans from Silicon Valley Bank, or SVB, under a Loan and Security Agreement, as amended, or the LSA. As of September 30, 2020, we had cash and cash equivalents of $341.1 million.

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We have incurred operating losses in each year since inception. Our net losses were $24.7 million and $11.2 million for the years ended December 31, 2019 and 2018, respectively, and $28.1 million for the nine months ended September 30, 2020. As of September 30, 2020, we had an accumulated deficit of $50.3 million. We expect our expenses and operating losses will increase substantially as we conduct our ongoing and planned preclinical studies and clinical trials, continue our research and development activities, utilize third parties to manufacture our product candidates and related raw materials, hire additional personnel, protect our intellectual property and incur additional costs associated with being a public company, including audit, legal, regulatory, and tax-related services associated with maintaining compliance with exchange listing and SEC requirements, director and officer insurance premiums, and investor relations costs. Our net losses may fluctuate significantly from quarter-to-quarter and year-to-year, depending on the timing of our preclinical studies and clinical trials and our expenditures on other research and development activities, as well as the generation of any collaboration and services revenue.

Based upon our current operating plans, we believe that our existing cash and cash equivalents will be sufficient to fund our operations for at least the next 36 months. While we may generate revenue under our current and/or future collaboration agreements, we do not expect to generate any revenues from product sales until we successfully complete development and obtain regulatory approval for one or more of our product candidates, which we expect will take a number of years and may never occur. If we obtain regulatory approval for any of our product candidates, we expect to incur significant commercialization expenses related to product sales, marketing, manufacturing and distribution. Accordingly, until such time as we can generate significant revenue from sales of our product candidates, if ever, we expect to finance our cash needs through equity offerings, debt financings or other capital sources, including potential collaborations, licenses and other similar arrangements. However, we may be unable to raise additional funds or enter into such other arrangements when needed, on favorable terms or at all. Our failure to raise capital or enter into such other arrangements when needed would have a negative impact on our financial condition and could force us to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.

Research Collaboration and License Agreement with Lilly

In April 2019, we entered into a Research Collaboration and License Agreement, or the Lilly Agreement, with Eli Lilly and Company, or Lilly, for the discovery, development and commercialization of AOC products in immunology and other select indications on a worldwide basis. Under the Lilly Agreement, we and Lilly will collaborate on preclinical research and discovery activities for such products, with Lilly being responsible for funding the cost of such activities by both parties. Lilly will also lead the clinical development, regulatory approval and commercialization of all such products, at its sole cost. We granted Lilly an exclusive, worldwide, royalty-bearing license, with the right to sublicense, under our technology to research, develop, manufacture, and sell products containing AOCs that are directed to up to six mRNA targets. We retain the right to use our technology to perform our obligations under the agreement and for all purposes not granted to Lilly. Lilly paid us an upfront license fee of $20.0 million in 2019, and we are eligible to receive up to $60.0 million in development milestone payments, up to $140.0 million in regulatory milestone payments and up to $205.0 million in commercialization milestone payments per target. We are eligible to receive a tiered royalty ranging from the mid-single to low-double digits from Lilly on worldwide annual net sales of licensed products, subject to specified and capped reductions for the market entry of biosimilar products, loss of patent coverage of licensed products and for payments owed to third parties for additional rights necessary to commercialize licensed products in the territory.

Concurrently with the Lilly Agreement, we issued a convertible promissory note to Lilly, or the Lilly Note, and received cash proceeds of $15.0 million in 2019. The Lilly Note accrued simple interest of 8.0% per annum and, if not converted, would have matured in October 2020. In connection with the sale of our Series C convertible preferred stock in November 2019, all outstanding principal and interest accrued under the Lilly Note converted into 4,576,342 shares of our Series C convertible preferred stock, at a conversion price equal to 80% of the per share cash price paid by the investors in the Series C convertible preferred stock financing.

Components of Results of Operations

Revenue

Our revenue to date has been derived from payments received under the Lilly Agreement and payments for research services under other research services agreements. Our services under these other research services agreements were substantially completed in early 2018, and therefore no related revenue was recognized in 2019 or is expected in future periods. For the foreseeable future, we may generate revenue from reimbursements of services under the Lilly Agreement, as well as a combination of upfront payments and milestone payments under our current and/or future collaboration agreements. We do not expect to generate any revenue from the sale of products unless and until such time that our product candidates have advanced through clinical development and regulatory approval, if ever. We expect that any revenue we generate, if at all, will fluctuate from quarter-to-quarter as a result of the timing and amount of payments relating to such services and milestones and the extent to which any of our products are approved and successfully commercialized. If we fail to complete preclinical and clinical development of product candidates or obtain regulatory approval for them, our ability to generate future revenues and our results of operations and financial position would be adversely affected.

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Operating Expenses

Research and Development

Research and development expenses consist of external and internal costs associated with our research and development activities, including our discovery and research efforts, and the preclinical and clinical development of our product candidates. Our research and development expenses include:

• external costs, including expenses incurred under arrangements with third parties, such as contract research organizations, contract manufacturers, consultants and our scientific advisors; and

• internal costs, including;

• employee-related expenses, including salaries, benefits and stock-based compensation;

• the costs of laboratory supplies and acquiring, developing and manufacturing preclinical study materials; and

• facilities, information technology and depreciation, which include direct and allocated expenses for rent and maintenance of facilities and depreciation of leasehold improvements and equipment.

Research and development costs, including costs reimbursed under our collaboration with Lilly, are expensed as incurred, with reimbursements of such amounts being recognized as revenue. We account for nonrefundable advance payments for goods and services that will be used in future research and development activities as expenses when the service has been performed or when the goods have been received.

At any one time, we are working on multiple programs. Our internal resources, employees and infrastructure are not directly tied to any one research or drug discovery program and are typically deployed across multiple programs. As such, we do not track internal costs on a specific program basis. The following table summarizes our external costs and internal costs for the periods presented (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
External costs	$	5,442	$	3,245	$	14,991	$	3,758
Internal costs:
Employee-related expenses		2,641		946		5,946		3,326
Facilities and other costs		1,372		908		3,046		1,810
Total internal costs		4,013		1,854		8,992		5,136
Total research and development expenses	$	9,455	$	5,099	$	23,983	$	8,894

We expect our research and development expenses to increase for the foreseeable future as we continue to conduct our ongoing research and development activities, advance our preclinical research programs toward clinical development, including conducting IND-enabling studies, and conduct clinical trials. The process of conducting preclinical studies and clinical trials necessary to obtain regulatory approval is costly and time consuming. We may never succeed in achieving marketing approval for any of our product candidates.

The timelines and costs associated with research and development activities are uncertain, can vary significantly for each product candidate and development program, and are difficult to predict. We anticipate we will make determinations as to which programs to pursue and how much funding to direct to each program on an ongoing basis in response to preclinical and clinical results, regulatory developments, ongoing assessments as to each program’s commercial potential, and our ability to maintain or enter into new collaborations, to the extent we determine the resources or expertise of a collaborator would be beneficial for a given program. We will need to raise substantial additional capital in the future. In addition, we cannot forecast which development programs may be subject to future collaborations, when such arrangements will be secured, if at all, and to what degree such arrangements would affect our development plans and capital requirements.

Our development costs may vary significantly based on factors such as:

• the number and scope of preclinical and IND-enabling studies;

• per patient trial costs;

• the number of trials required for approval;

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• the number of sites included in the trials;

• the countries in which the trials are conducted;

• the length of time required to enroll eligible patients;

• the number of patients that participate in the trials;

• the number of doses that patients receive;

• the drop-out or discontinuation rates of patients;

• potential additional safety monitoring requested by regulatory agencies;

• the duration of patient participation in the trials and follow-up;

• the cost and timing of manufacturing our product candidates;

• the phase of development of our product candidates; and

• the efficacy and safety profile of our product candidates.

General and Administrative

General and administrative expenses consist primarily of employee-related expenses, including salaries, benefits and stock-based compensation, for employees in our finance, accounting, legal, business development and support functions. Other general and administrative expenses include allocated facility, information technology and depreciation related costs not otherwise included in research and development expenses and professional fees for auditing, tax, intellectual property and legal services. Costs related to filing and pursuing patent applications are recognized as general and administrative expenses as incurred since recoverability of such expenditures is uncertain.

We expect our general and administrative expenses will increase for the foreseeable future to support our increased research and development activities and increased costs of operating as a public company. These increased costs will likely include increased expenses related to audit, legal, regulatory and tax services associated with maintaining compliance with exchange listing and SEC requirements, director and officer insurance premiums and investor relations costs associated with operating as a public company.

Other Income (Expense)

Interest Income

Interest income consists primarily of interest earned on our cash and cash equivalents.

Interest Expense

Interest expense consists of cash and non-cash interest expense associated with our previously outstanding financing arrangements, which included borrowings under the LSA and convertible notes with certain of our investors.

Change in Fair Value of Preferred Warrant Liability

Prior to our IPO, we classified our outstanding warrant to purchase shares of our Series A convertible preferred stock as a liability on our balance sheets at its estimated fair value since the underlying convertible preferred stock was classified as temporary equity. At the end of each reporting period, changes in the estimated fair value during the period were recorded as a component of other income (expense). In connection with our IPO, this warrant was adjusted to become a warrant to purchase shares of our common stock and, therefore, no longer subject to liability accounting. Accordingly, the fair value of the warrant liability was reclassified to stockholders’ equity.

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Results of Operations

Comparison of the Three Months Ended September 30, 2020 and 2019

The following table summarizes our results of operations for the periods presented (in thousands):

	Three Months Ended September 30,					Increase
	2020		2019			(decrease)
Revenue	$	1,746	$	650		$	1,096
Research and development expenses		9,455		5,099			4,356
General and administrative expenses		3,757		757			3,000
Other income (expense)		27		(1,462	)		1,489

Revenue

Revenue was $1.7 million for the three months ended September 30, 2020 compared to $0.7 million for the three months ended September 30, 2019. Revenue during both periods was derived from the Lilly Agreement, which was entered into in April 2019. The increase was due to higher reimbursable collaboration-related research and development expenses resulting in the recognition of higher corresponding revenue under the Lilly Agreement.

Research and Development Expenses

Research and development expenses were $9.5 million for the three months ended September 30, 2020 compared to $5.1 million for the three months ended September 30, 2019. The increase was primarily driven by the advancement of AOC 1001 and our other programs, as well as costs related to the expansion of our overall research capabilities.

General and Administrative Expenses

General and administrative expenses were $3.8 million for the three months ended September 30, 2020 compared to $0.8 million for the three months ended September 30, 2019. The increase was primarily due to higher personnel costs (including noncash stock-based compensation), professional fees and insurance costs related to being a public company, as well as higher patent filing fees.

Other Income (Expense)

Other income was $27,000 for the three months ended September 30, 2020 compared to other expense of $1.5 million for the three months ended September 30, 2019. The change was primarily related to reduced interest expense as a result of the November 2019 conversion of all outstanding convertible notes into convertible preferred stock, which was subsequently converted into common stock in connection with our IPO.

Comparison of the Nine Months Ended September 30, 2020 and 2019

The following table summarizes our results of operations for the periods presented (in thousands):

	Nine Months Ended September 30,						Increase
	2020			2019			(decrease)
Revenue	$	4,645		$	874		$	3,771
Research and development expenses		23,983			8,894			15,089
General and administrative expenses		8,646			3,265			5,381
Other income (expense)		(96	)		(3,048	)		2,952

Revenue

Revenue was $4.6 million for the nine months ended September 30, 2020 compared to $0.9 million for the nine months ended September 30, 2019. Revenue during both periods was derived from the Lilly Agreement, which was entered into in April 2019. The increase was due to higher reimbursable collaboration-related research and development expenses resulting in the recognition of higher corresponding revenue under the Lilly Agreement.

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Research and Development Expenses

Research and development expenses were $24.0 million for the nine months ended September 30, 2020 compared to $8.9 million for the nine months ended September 30, 2019. The increase was primarily driven by the advancement of AOC 1001 and our other programs, as well as costs related to the expansion of our overall research capabilities.

General and Administrative Expenses

General and administrative expenses were $8.6 million for the nine months ended September 30, 2020 compared to $3.3 million for the nine months ended September 30, 2019. The increase was primarily due to higher personnel costs (including noncash stock-based compensation), professional fees and insurance costs related to being a public company, as well as higher patent filing fees.

Other Income (Expense)

Other expense was $0.1 million for the nine months ended September 30, 2020 compared to $3.0 million for the nine months ended September 30, 2019. The change was primarily related to reduced interest expense as a result of the November 2019 conversion of all outstanding convertible notes into convertible preferred stock, which was subsequently converted into common stock in connection with our IPO.

Liquidity and Capital Resources

Sources of Liquidity

In June 2020, we completed our IPO of 16,560,000 shares of our common stock at a price to the public of $18.00 per share, including the exercise in full by the underwriters of their option to purchase 2,160,000 additional shares of our common stock. Including the option exercise, our aggregate net proceeds from the offering were $274.1 million, net of underwriting discounts, commissions and offering costs. Since our inception through September 30, 2020, other sources of capital raised to fund our operations were comprised of aggregate gross proceeds of $131.6 million from the sale and issuance of convertible preferred units/stock and convertible notes, $29.1 million from funding under collaboration and research services agreements, and $7.0 million from loans from SVB under the LSA. As of September 30, 2020, we had cash and cash equivalents of $341.1 million.

Convertible Promissory Notes

In July 2018 and February 2019, we issued convertible promissory notes to certain of our existing investors, or the 2018 Notes and 2019 Notes, respectively, and received proceeds of $3.0 million and $4.5 million, respectively. The 2018 Notes and 2019 Notes accrued simple interest at a rate of 8% and 10% per annum, respectively, and had a maturity date in December 2020, subject to earlier conversion.

In addition, in April 2019, as described above, in connection with the Lilly Agreement, we issued the Lilly Note and received cash proceeds of $15.0 million.

In November 2019, in connection with our Series C financing transaction, all outstanding amounts of principal and accrued interest from the 2018 Notes, 2019 Notes and Lilly Note, which totaled $23.8 million, were converted into an aggregate of 6,893,036 shares of our Series C convertible preferred stock, which subsequently converted into shares of our common stock in connection with our IPO.

SVB Loan and Security Agreement

In June 2017, we entered into an amendment to the LSA with SVB, or the First LSA Amendment, which provided up to $7.0 million in available borrowings in two tranches. In 2017, we drew the first tranche of $5.0 million, of which $4.6 million was used to repay our existing debt obligations to SVB. In August 2018, we drew the second tranche of $2.0 million. Interest accrued on the unpaid principal balance at an adjustable annual rate of the prime rate per the Wall Street Journal plus 0.20%. In addition to our monthly payments of principal and interest, our repayment obligations included a final payment of 6.5% of the original principal advanced, which was due upon final maturity of the loan in June 2021. On June 30, 2020, we voluntarily prepaid the outstanding principal balance of $2.8 million and final payments and accrued interest of $0.5 million under the LSA, and the LSA was terminated.

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In connection with execution of the LSA, we issued SVB a warrant to purchase 16,474 shares of our Series A convertible preferred stock at an exercise price of $2.2615 per share, exercisable at any time following issuance with a term of ten years. In connection with the completion of our IPO in June 2020, the preferred stock warrant wasadjusted to becomea warrant exercisable for 7,809 shares of common stock at an exercise price of $4.77 per share. In connection with the First LSA Amendment in June 2017, we issued SVB an additional warrant to purchase 9,442 shares of common stock at an exercise price of $0.53 per share, exercisable at any time following issuance with a term of seven years.On June 17, 2020, the warrants were cashless exercised for an aggregate of 15,833 shares of common stock.

Future Capital Requirements

As of September 30, 2020, we had cash and cash equivalents of $341.1 million. Based upon our current operating plans, we believe that our existing cash and cash equivalents will be sufficient to fund our operations for at least the next 36 months. However, our forecast of the period of time through which our financial resources will be adequate to support our operations is a forward-looking statement that involves risks and uncertainties, and actual results could vary materially. We have based this estimate on assumptions that may prove to be wrong, and we could deplete our capital resources sooner than we expect. Additionally, the process of conducting preclinical studies and testing product candidates in clinical trials is costly, and the timing of progress and expenses in these studies and trials is uncertain.

Our future capital requirements are difficult to forecast and will depend on many factors, including but not limited to:

• the type, number, scope, progress, expansions, results, costs and timing of discovery, preclinical studies and clinical trials of our product candidates that we are pursuing or may choose to pursue in the future;

• the costs and timing of manufacturing for our product candidates and commercial manufacturing if any product candidate is approved;

• the costs, timing and outcome of regulatory review of our product candidates;

• the terms and timing of establishing and maintaining collaborations, licenses and other similar arrangements;

• the costs of obtaining, maintaining and enforcing our patents and other intellectual property rights;

• our efforts to enhance operational systems and hire additional personnel to satisfy our obligations as a public company, including enhanced internal controls over financial reporting;

• the costs associated with hiring additional personnel and consultants as our preclinical and clinical activities increase;

• the timing and amount of the milestone or other payments made to us under the Lilly Agreement or any future collaboration agreements;

• the costs and timing of establishing or securing sales and marketing capabilities if any product candidate is approved;

• our ability to achieve sufficient market acceptance, coverage and adequate reimbursement from third-party payors and adequate market share and revenue for any approved products; and

• costs associated with any products or technologies that we may in-license or acquire.

While we may generate revenue under our current and/or future collaboration agreements, we do not expect to generate any revenues from product sales until we successfully complete development and obtain regulatory approval for one or more of our product candidates, which we expect will take a number of years and may never occur. If we obtain regulatory approval for any of our product candidates, we expect to incur significant commercialization expenses related to product sales, marketing, manufacturing and distribution. Accordingly, until such time as we can generate significant revenue from sales of our product candidates, if ever, we expect to finance our cash needs through equity offerings, debt financings or other capital sources, including potential collaborations, licenses and other similar arrangements. However, we may be unable to raise additional funds or enter into such other arrangements when needed, on favorable terms or at all. Our failure to raise capital or enter into such other arrangements when needed would have a negative impact on our financial condition and could force us to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.

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Cash Flows

The following table summarizes our cash flows for the periods presented (in thousands):

	Nine Months Ended September 30,
	2020			2019
Net cash provided by (used in):
Operating activities	$	(24,044	)	$	7,509
Investing activities		(855	)		(144	)
Financing activities		271,587			17,409
Net increase in cash, cash equivalents    and restricted cash	$	246,688		$	24,774

Operating Activities

Cash used in operating activities was $24.0 million for the nine months ended September 30, 2020, which consisted primarily of cash used to fund our operations related to the development of AOC 1001 and our other programs. Cash provided by operating activities was $7.5 million for the nine months ended September 30, 2019, which consisted primarily of the $20.0 million upfront fee related to the Lilly Agreement, partially offset by cash used to fund our operations related to the development of AOC 1001 and our other programs.

Investing Activities

Net cash used in investing activities was $0.9 million and $0.1 million for the nine months ended September 30, 2020 and 2019, respectively, which consisted primarily of purchases of property and equipment.

Financing Activities

Net cash provided by financing activities was $271.6 million for the nine months ended September 30, 2020, which consisted primarily of net proceeds from our IPO and net proceeds from the sale of shares of our Series C convertible preferred stock, partially offset by payments related to the LSA. Net cash provided by financing activities was $17.4 million for the nine months ended September 30, 2019, which consisted primarily of net proceeds from the issuance of convertible notes, partially offset by payments related to the LSA.

Critical Accounting Policies

Our management’s discussion and analysis of our financial condition and results of operations is based on our condensed financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States. The preparation of the financial statements requires us to make estimates and judgments that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported revenues and expenses during the reporting periods. Our estimates are based on our historical experience, trends and various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Changes in estimates are reflected in reported results for the period in which they become known. Actual results may differ from these estimates under different assumptions or conditions. As of September 30, 2020, there have been no material changes to our critical accounting policies and estimates from those disclosed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies,” included in the Prospectus.

Contractual Obligations and Commitments

As of September 30, 2020, there have been no material changes outside the ordinary course of our business to the contractual obligations we reported in “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Contractual Obligations and Commitments,” included in the Prospectus.

Off-Balance Sheet Arrangements

During the periods presented, we did not have, nor do we currently have, any off-balance sheet arrangements, as defined in the rules and regulations of the SEC.

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JOBS Act

As an emerging growth company under the JOBS Act, we can take advantage of an extended transition period for complying with new or revised accounting standards. This allows an emerging growth company to delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to avail ourselves of this exemption from new or revised accounting standards, and, therefore, our financial statements may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates. We also intend to rely on other exemptions provided by the JOBS Act, including without limitation, not being required to comply with the auditor attestation requirements of Section 404(b) of Sarbanes-Oxley.

We will remain an emerging growth company until the earliest of (i) the last day of the fiscal year following the fifth anniversary of the consummation of our IPO; (ii) the last day of the fiscal year in which we have total annual gross revenue of at least $1.07 billion; (iii) the last day of the fiscal year in which we are deemed to be a “large accelerated filer” as defined in Rule 12b-2 under the Exchange Act, which would occur if the market value of our common stock held by non-affiliates exceeded $700.0 million as of the last business day of the second fiscal quarter of such year; or (iv) the date on which we have issued more than $1.0 billion in nonconvertible debt securities during the prior three-year period.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS

Not required.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our periodic and current reports that we file with the SEC is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable and not absolute assurance of achieving the desired control objectives. In reaching a reasonable level of assurance, management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. In addition, the design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

Our management, with the participation of our principal executive officer and our principal financial officer, evaluated, as of the end of the period covered by this Quarterly Report on Form 10-Q, the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Based on that evaluation, our principal executive officer and principal financial officer have concluded that, as of September 30, 2020, our disclosure controls and procedures were effective at the reasonable assurance level.

Changes in Internal Control Over Financial Reporting

There have been no changes in our internal control over financial reporting during the quarter ended September 30, 2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II — OTHER INFORMATION

Item 1. Legal Proceedings

We are not currently subject to any material legal proceedings. From time to time, we may be involved in legal proceedings or subject to claims incident to the ordinary course of business. Regardless of the outcome, such proceedings or claims can have an adverse impact on us because of defense and settlement costs, diversion of resources and other factors, and there can be no assurances that favorable outcomes will be obtained.

Item 1A. Risk Factors

There have been no material changes to the risk factors set forth in Part II, Item 1A of our Quarterly Report on Form 10-Q for the quarter ended June 30, 2020.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Unregistered Sales of Equity Securities

None.

Use of Proceeds

On June 11, 2020, the SEC declared effective our registration statement on Form S-1 (File No. 333-238612), as amended, filed in connection with our IPO. Our IPO closed on June 16, 2020, and we issued and sold 16,560,000 shares of our common stock at a price to the public of $18.00 per share, which included the exercise in full of the underwriters’ option to purchase additional shares. We received gross proceeds from our IPO of $298.1 million, before deducting underwriting discounts, commissions and offering costs of $24.0 million. The managing underwriters of the offering were Cowen and Company, LLC, SVB Leerink LLC, Credit Suisse Securities (USA) LLC and Wells Fargo Securities, LLC. No offering costs were paid or are payable, directly or indirectly, to our directors or officers, to persons owning 10% or more of any class of our equity securities or to any of our affiliates.

As of September 30, 2020, we have not used any of the proceeds from our IPO. There has been no material change in the planned use of such proceeds from that described in the Prospectus.

Issuer Repurchases of Equity Securities

None.

Item 3. Defaults Upon Senior Securities

Not applicable.

Item 4. Mine Safety Disclosures

Not applicable.

ITEM 5. OTHER INFORMATION

None.

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Item 6. Exhibits

Exhibit Number	Exhibit Description	Incorporated by Reference			Filed Herewith
		Form	Date	Number
3.1	Amended and Restated Certificate of Incorporation	S-1	5/22/2020	3.3
3.2	Amended and Restated Bylaws	S-1	5/22/2020	3.4
4.1	Form of Common Stock Certificate	S-1	5/22/2020	4.1
4.2	Amended and Restated Registration Rights Agreement, dated November 8, 2019, by and among Avidity Biosciences, Inc. and certain of its stockholders	S-1	5/22/2020	4.2
10.1#	Employment Agreement, dated July 6, 2020, by and between Jae B. Kim, M.D., and Avidity Biosciences, Inc.				X
31.1	Certification of Chief Executive Officer of Avidity Biosciences, Inc., as required by Rule 13a-14(a) or Rule 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.				X
31.2	Certification of Chief Financial Officer of Avidity Biosciences, Inc., as required by Rule 13a-14(a) or Rule 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.				X
32.1*	Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.				X
32.2*	Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.				X
101.INS	XBRL Report Instance Document				X
101.SCH	XBRL Taxonomy Extension Schema Document				X
101.CAL	XBRL Taxonomy Calculation Linkbase Document				X
101.LAB	XBRL Taxonomy Label Linkbase Document				X
101.PRE	XBRL Presentation Linkbase Document				X
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document				X

# Indicates management contract or compensatory plan.

* This certification is deemed not filed for purpose of section 18 of the Exchange Act or otherwise subject to the liability of that section, nor shall it be deemed incorporated by reference into any filing under the Securities Act or the Exchange Act.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	Avidity Biosciences, Inc.
Date: November 10, 2020	By:	/s/ Sarah Boyce
		Sarah Boyce
		President, Chief Executive Officer and Director (Principal Executive Officer)
Date: November 10, 2020	By:	/s/ Michael F. MacLean
		Michael F. MacLean
		Chief Financial Officer (Principal Financial Officer)

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EX-10.1

Exhibit 10.1

July 6, 2020

Jae B. Kim, M.D.

c/o Avidity Biosciences, Inc.

10975 N. Torrey Pines Rd., Suite 150

La Jolla, CA 92037

Re:Offer of Employment

Dear Jae:

Avidity Biosciences, Inc. (the “Company”) is pleased to offer you employment as the Company’s Chief Medical Officer on the terms and conditions set forth in this letter agreement (the “Agreement”).

1.Commencement of Employment.  Your employment with the Company as Chief Medical Officer will start on or about July 27, 2020 (the “Start Date”).

2.Duties.  You will be responsible for performing such duties as are customary for your position and any other duties or areas of responsibility that may be reasonably requested from time to time by the Company’s Chief Executive Officer (the “CEO”), to whom you will report.  You shall devote your best efforts and full business time, skill and attention to the performance of your duties.  You will also be expected to adhere to the general employment policies and practices of the Company that may be in effect from time to time, except that when the terms of this Agreement conflict with the Company’s general employment policies or practices, this Agreement will control.  You will work remotely from your home in the Boston, Massachusetts area until your relocation to the San Diego, California area as described in Section 6 below.  Prior to any such relocation, you will be expected to travel as reasonably required in connection with your duties to the Company’s La Jolla, California office or any other location whenever deemed necessary or requested by the Company from time to time, and the Company will reimburse you for such travel expenses.  

3.Salary.  You will be paid an annual base salary of $440,000, less applicable deductions and withholdings, to be paid each month in accordance with the Company’s payroll practices, as may be in effect from time to time.

4.Benefits.  You will be eligible to participate in the Company’s standard benefit programs, subject to the terms and conditions of such plans.  The Company may, from time to time, change these benefits in its discretion.  Additional information regarding these benefits is available for your review upon request.

5.Sign-On Bonus.  If you join the Company, you will be eligible to earn a one-time bonus of $50,000, less applicable deductions and withholdings (the “Sign-On Bonus”).  The Company will advance you the Sign-On Bonus prior to its being earned, within thirty (30) days after your Start Date.  You will earn the Sign-On Bonus if you remain continuously employed with the Company through the one-year anniversary of your Start Date.  If your employment with the

Page 2

Company is terminated for Cause (as defined below) or by you without Good Reason (as defined below) prior to the one-year anniversary of your Start Date, you agree to repay, within thirty (30) days of your last day of employment with the Company, the portion of the Sign-On Bonus calculated by multiplying $50,000 by a fraction, (i) the numerator of which is twelve (12) less the number of full months elapsed between the Start Date and the last day of employment and (ii) the denominator of which is twelve (12).

6.Relocation.  It is currently anticipated you shall relocate your primary residence from the Boston, Massachusetts area to the San Diego, California area, with the timing for such relocation to be mutually agreed upon by you and the Chief Executive Officer of the Company.  In connection with such relocation, you will also be eligible to earn a one-time relocation assistance payment of $100,000, less applicable deductions and withholdings (the “Relocation Bonus”) for relocation and moving expenses incurred in connection with your relocation.  The Company will advance you the Relocation Bonus prior to its being earned, within thirty (30) days after your Start Date.  You will earn the Relocation Bonus if you remain continuously employed with the Company through the one-year anniversary of your Start Date.  If your employment with the Company is terminated for Cause or by you without Good Reason prior to the one-year anniversary of your Start Date, you agree to repay, within thirty (30) days of your last day of employment with the Company, the portion of the Relocation Bonus calculated by multiplying $100,000 by a fraction, (i) the numerator of which is twelve (12) less the number of full months elapsed between the Start Date and the last day of employment and (ii) the denominator of which is twelve (12).  If you are terminated by the Company without Cause or you resign for Good Reason within twelve (12) months of your relocation to California, the Company will pay for the reasonable and necessary documented relocation and moving expenses incurred in connection with your relocation back to Massachusetts should you choose to do so, less applicable deductions and withholdings, provided such relocation back to Massachusetts occurs within six (6) months following your termination date; provided that the amount to be paid by the Company pursuant to this sentence shall not exceed the Relocation Bonus.

7.Equity Awards.  Subject to approval by the Company’s Board of Directors (the “Board”) which will not be unreasonably withheld and voted upon within thirty (30) days of your Start Date, the Company will grant you an option to purchase 375,266 shares of the Company’s common stock (the “Option”). The Option will be governed by the terms and conditions of the Company’s 2020 Incentive Award Plan (the “Plan”) and your grant agreement, and will include the following vesting schedule: 25% of the total shares subject to the Option will vest on the first anniversary of your Start Date, and 1/48th of the total shares subject to the Option will vest each month thereafter on the same day of the month as the Start Date (or if there is no corresponding day, on the last day of the month), subject to your continuous employment or service through each such date. The Option will have an exercise price equal to the fair market value per share of the Company’s common stock on the date of grant, as determined under the Plan. If there are any inconsistencies between the terms of this Agreement and the Plan or your grant agreements, the terms of this Agreement shall govern.

8.Performance Bonuses.  Each year, you will be eligible to earn an annual incentive bonus equal to forty percent (40%) of your annual base salary (your “Target Bonus”); provided that the annual incentive bonus for the 2020 fiscal year shall be pro-rated based on the portion of such year that has elapsed from the Start Date through December 31, 2020.  Whether you receive

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such a bonus, and the amount of any such bonus, shall be determined by the Board (or duly authorized committee thereof) in its sole discretion, and shall be based upon achievement of performance objectives to be mutually agreed upon between you and the Board (or duly authorized committee thereof) and other criteria to be determined by the Board (or duly authorized committee thereof).  Any bonus shall be paid within thirty (30) days after the Board’s (or such committee’s) determination that a bonus shall be awarded.  Except as otherwise provided under “Severance” below, you must be employed on the day that your bonus (if any) is paid in order to earn the bonus.  Therefore, if your employment is terminated either by you or the Company for any reason prior to the bonus being paid, you will not have earned the bonus and no partial or prorated bonus will be paid, except as otherwise provided under “Severance” below.

9.Severance.

(a)Termination For Cause; Resignation Without Good Reason.  If, at any time, the Company terminates your employment for Cause, you resign without Good Reason, or if either party terminates your employment as a result of your death or disability, you will receive your base salary accrued through your last day of employment, as well as any unused vacation (if applicable) accrued through your last day of employment.  Under these circumstances, you will not be entitled to any other form of compensation from the Company, including any severance benefits.   

(b)Termination Without Cause; Resignation With Good Reason Not in Connection With a Change of Control. If at any time other than during the Change of Control Period (as defined herein), the Company terminates your employment without Cause or you resign for Good Reason, and other than any termination of your employment as a result of your death or disability, and provided such termination constitutes a “separation from service” (as defined under Treasury Regulation Section 1.409A-1(h), without regard to any alternative definition thereunder, a “Separation from Service”), then subject to your obligations below, you shall be entitled to receive the following severance benefits (collectively, the “Severance Benefits”):

(i)an amount equal to twelve (12) months of your then current base salary (at the rate in effect immediately prior to the date of your termination of employment, or in the case of a material diminution in your base salary which would give rise to Good Reason for your resignation, the base salary in effect prior to such material diminution), less all applicable withholdings and deductions, paid over such twelve (12) month period, on the schedule described in clause (d) below (the “Salary Continuation”); and

(ii)if you timely elect continued coverage under COBRA for yourself and your covered dependents under the Company’s group health plans following such termination or resignation of employment, then the Company shall pay the COBRA premiums necessary to continue your health insurance coverage in effect for yourself and your eligible dependents on the termination date until the earliest of (A) the close of the twelve (12) month period following the termination of your employment, (B) the expiration of your eligibility for the continuation coverage under COBRA, or (C) the date when you become eligible for substantially equivalent health insurance coverage in connection with new employment or self-employment (such period from the termination date through the earliest of (A) through (C), the “COBRA Payment Period”).  Notwithstanding the foregoing, if the Company determines, in its sole discretion, that

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the payment of the COBRA premiums could result in a violation of the nondiscrimination rules of Section 105(h)(2) of the Internal Revenue Code of 1986, as amended (the “Code”), or any statute or regulation of similar effect (including but not limited to the 2010 Patient Protection and Affordable Care Act, as amended by the 2010 Health Care and Education Reconciliation Act), then in lieu of providing the COBRA premiums, the Company, in its sole discretion, may elect to instead pay you on the first day of each month of the COBRA Payment Period, a fully taxable cash payment equal to the COBRA premiums for that month, subject to applicable tax withholdings (such amount, the “Special Severance Payment”), for the remainder of the COBRA Payment Period.  You may, but are not obligated to, use such Special Severance Payment toward the cost of COBRA premiums.  On the sixtieth (60th) day following your Separation from Service, the Company will make the first payment under this clause (and, in the case of the Special Severance Payment, such payment will be paid to you in a lump sum) equal to the aggregate amount of payments that the Company would have paid through such date had such payments commenced on the Separation from Service through such sixtieth (60th) day, with the balance of the payments paid thereafter on the schedule described above.  If you become eligible for coverage under another employer’s group health plan or otherwise cease to be eligible for COBRA during the period provided in this clause, you must immediately notify the Company of such event, and all payments and obligations under this clause shall cease.

(c)Termination Without Cause; Resignation With Good Reason in Connection With a Change of Control.  If the Company terminates your employment without Cause or you resign for Good Reason, and other than any termination of your employment as a result of your death or disability, in each case within fifty-nine (59) days prior to or twelve (12) months following the effective date of a Change of Control (as defined herein) (the “Change of Control Period”), and provided such termination constitutes a Separation from Service, then subject to your obligations below, you shall be entitled to receive the following severance benefits (collectively, the “Change of Control Severance Benefits”) in lieu of the Severance Benefits (and for the avoidance of doubt, in no event will you be entitled to both the Severance Benefits and the Change of Control Severance Benefits):

(i)an amount equal to twelve (12) months of your then current base salary (at the rate in effect immediately prior to the date of your termination of employment, or in the case of a material diminution in your base salary which would give rise to Good Reason for your resignation, the base salary in effect prior to such material diminution), less all applicable withholdings and deductions, paid in substantially equal installments over twelve (12) months, on the schedule described in clause (d) below (the “Change of Control Salary Continuation”);

(ii)an amount equal to your Target Bonus for the calendar year in which your termination occurs, less all applicable withholdings and deductions, paid on the sixtieth (60th) day following your Separation from Service;

(iii)if you timely elect continued coverage under COBRA for yourself and your covered dependents under the Company’s group health plans following such termination or resignation of employment, then the Company shall pay the COBRA premiums necessary to continue your health insurance coverage in effect for yourself and your eligible dependents on the termination date until the earliest of (A) the close of the twelve (12) month period following the termination of your employment, (B) the expiration of your eligibility for the continuation

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coverage under COBRA, or (C) the date when you become eligible for substantially equivalent health insurance coverage in connection with new employment or self-employment (such period from the termination date through the earliest of (A) through (C), the “Change of Control COBRA Payment Period”).  Notwithstanding the foregoing, if the Company determines, in its sole discretion, that the payment of the COBRA premiums could result in a violation of the nondiscrimination rules of Section 105(h)(2) of the Code or any statute or regulation of similar effect (including but not limited to the 2010 Patient Protection and Affordable Care Act, as amended by the 2010 Health Care and Education Reconciliation Act), then in lieu of providing the COBRA premiums, the Company, in its sole discretion, may elect to instead pay you on the first day of each month of the Change of Control COBRA Payment Period, the Special Severance Payment, for the remainder of the Change of Control COBRA Payment Period.  You may, but are not obligated to, use such Special Severance Payment toward the cost of COBRA premiums.  On the sixtieth (60th) day following your Separation from Service, the Company will make the first payment under this clause (and, in the case of the Special Severance Payment, such payment will be paid to you in a lump sum) equal to the aggregate amount of payments that the Company would have paid through such date had such payments commenced on the Separation from Service through such sixtieth (60th) day, with the balance of the payments paid thereafter on the schedule described above.  If you become eligible for coverage under another employer’s group health plan or otherwise cease to be eligible for COBRA during the period provided in this clause, you must immediately notify the Company of such event, and all payments and obligations under this clause shall cease; and

(iv)acceleration of 100% of any unvested time based Stock Awards.  Such acceleration shall be effective as of the later of (1) the effective date of your Separation from Service, or (2) the date of such Change of Control.

(d)Conditions For Receipt of Severance Benefits or Change of Control Severance Benefits. The Severance Benefits or Change of Control Severance Benefits are conditional upon (x) your continuing to comply with your obligations under your Employee Invention Assignment and Confidentiality Agreement; (y) your delivering to the Company an effective, general release of claims in favor of the Company in a form acceptable to the Company (the “Release”), and any revocation period thereunder having expired, within 60 days following your termination date; and (z) if you are a member of the Board, your resignation from the Board, to be effective no later than the date of your termination date (or such other date as requested by the Board).  The Salary Continuation or Change of Control Salary Continuation will be paid in equal installments on the Company’s regular payroll schedule and will be subject to applicable tax withholdings over the period outlined above following the date of your Separation from Service; provided, however, that no payments will be made prior to the sixtieth (60^th) day following your Separation from Service.  On the sixtieth (60^th) day following your Separation from Service, the Company will pay you in a lump sum the Salary Continuation or Change of Control Salary Continuation, as applicable, that you would have received on or prior to such date under the original schedule but for the delay while waiting for the sixtieth (60^th) day in compliance with Code Section 409A and the effectiveness of the Release, with the balance of the Salary Continuation or Change of Control Salary Continuation, as applicable, being paid as originally scheduled.

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(i)Definition of Cause.  For purposes of this Agreement, “Cause” shall mean one or more of the following: (A) your willful failure substantially to perform your duties and responsibilities to the Company or deliberate violation of aCompany policy; (B) your commission of any act of fraud, embezzlement, dishonesty or any other willful misconduct that has caused or is reasonably expected to result in material injury to the Company; (C) your unauthorized use or disclosure of any proprietary information or trade secrets of the Company or any other party to whom you owe an obligation of nondisclosure as a result of your relationship with the Company; or (D) your willful breach of any of your obligations under any written agreement or covenant with the Company.  The determination as to whether you are being terminated for Cause shall be made in good faith by the Company.  The foregoing definition does not in any way limit the Company’s ability to terminate your employment at any time.

(ii)Definition of Good Reason.  For purposes of this Agreement, “Good Reason” shall mean your resignation from employment with the Company if any of the following actions are taken by the Company without your prior written consent:

(A)a material reduction in your base salary, unless pursuant to a salary reduction program applicable generally to the Company’s similarly situated employees;

(B)a material reduction in your duties (including responsibilities and/or authorities); provided that it shall not constitute Good Reason if such reduction is a mere change of title alone or change in reporting relationship;

(C)relocation of your principal place of employment to a place that increases your one-way commute by more than fifty (50) miles as compared to your then-current principal place of employment immediately prior to such relocation; provided that your obligation to work from the Company’s La Jolla, California offices as provided in Section 2 above, or the requirement that you relocate to San Diego, California pursuant to Section 6 above, shall not constitute Good Reason; or

(D)any other action or inaction that constitutes a material breach by the Company of this Agreement or any agreement under which you provide services.

Provided, however that, such termination by you shall only be deemed for Good Reason pursuant to the foregoing definition if (i) the Company is given written notice from you within sixty (60) days following the first occurrence of the condition that you consider to constitute Good Reason describing the condition and the Company fails to satisfactorily remedy such condition within thirty (30) days following such written notice, and (ii) you terminate employment within ninety (90) days following the end of the period within which the Company was entitled to remedy the condition constituting Good Reason but failed to do so.

(iii)Definition of Change of Control.  For purposes of this Agreement, “Change of Control” shall have the meaning given to such term in the Plan. Notwithstanding the foregoing, if a Change of Control would give rise to a payment or settlement event with respect to any payment or benefit that constitutes “nonqualified deferred compensation,” the transaction or event constituting the Change of Control must also constitute a “change in control event” (as

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defined in Treasury Regulation Section 1.409A-3(i)(5)) in order to give rise to the payment or settlement event for such payment or benefit, to the extent required by Section 409A.

(iv)Definition of Stock Awards.  For purposes of this Agreement, “Stock Awards” shall mean all stock options, restricted stock and such other awards granted pursuant to the Company’s stock option and equity incentive award plans or agreements and any shares of stock issued upon exercise thereof.

10.Section 409A. It is intended that all of the severance benefits and other payments payable under this Agreement satisfy, to the greatest extent possible, the exemptions from the application of Code Section 409A provided under Treasury Regulations 1.409A-1(b)(4), 1.409A-1(b)(5) and 1.409A-1(b)(9), and this Agreement will be construed to the greatest extent possible as consistent with those provisions, and to the extent not so exempt, this Agreement (and any definitions hereunder) will be construed in a manner that complies with Code Section 409A.  For purposes of Code Section 409A (including, without limitation, for purposes of Treasury Regulation Section 1.409A-2(b)(2)(iii)), your right to receive any installment payments under this Agreement (whether severance payments, reimbursements or otherwise) shall be treated as a right to receive a series of separate payments and, accordingly, each installment payment hereunder shall at all times be considered a separate and distinct payment.  Notwithstanding any provision to the contrary in this Agreement, if you are deemed by the Company at the time of your Separation from Service to be a “specified employee” for purposes of Code Section 409A(a)(2)(B)(i), and if any of the payments upon Separation from Service set forth herein and/or under any other agreement with the Company are deemed to be “deferred compensation”, then to the extent delayed commencement of any portion of such payments is required in order to avoid a prohibited distribution under Code Section 409A(a)(2)(B)(i) and the related adverse taxation under Section 409A, such payments shall not be provided to you prior to the earliest of (i) the expiration of the six-month period measured from the date of your Separation from Service with the Company, (ii) the date of your death or (iii) such earlier date as permitted under Section 409A without the imposition of adverse taxation.  Upon the first business day following the expiration of such applicable Code Section 409A(a)(2)(B)(i) period, all payments deferred pursuant to this paragraph shall be paid in a lump sum to you, and any remaining payments due shall be paid as otherwise provided herein or in the applicable agreement.  No interest shall be due on any amounts so deferred. All reimbursements and in-kind benefits provided under the Agreement shall be made or provided in accordance with the requirements of Section 409A to the extent that such reimbursements or in-kind benefits are subject to Section 409A, including, where applicable, the requirements that (A) any reimbursement is for expenses incurred during your lifetime (or during a shorter period of time specified in this Agreement), (B) the amount of expenses eligible for reimbursement during a calendar year may not affect the expenses eligible for reimbursement in any other calendar year, (C) the reimbursement of any eligible expense will be made on or before the last day of the calendar year following the year in which the expense is incurred, and (D) the right to reimbursement is not subject to set off or liquidation or exchange for any other benefit.  Notwithstanding any provision to the contrary in this Agreement, to the extent any payments to you pursuant to this Agreement constitute “nonqualified deferred compensation” subject to Section 409A of the Code or are intended to be exempt from Section 409A of the Code pursuant to Treasury Regulation Section 1.409A-1(b)(9)(iii), then, to the extent required by Section 409A of the Code or to satisfy such exception, no amount shall be payable pursuant to such sections unless your termination of employment constitutes a Separation from Service.  

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11.Parachute Payments.

(a)In the event that any payments and benefits provided for under this Agreement or any other agreement or arrangement between the Company and you (collectively, the “Payments”) (i) constitute “parachute payments” within the meaning of Section 280G of the Code and (ii) but for this section, would be subject to the excise tax imposed by Section 4999 of the Code, then your benefits under this Agreement or otherwise shall be payable either (a) in full, or (b) as to such lesser amount which would result in no portion of such benefits being subject to an excise tax under Section 4999 of the Code, whichever of the foregoing amounts, taking into account the applicable federal, state and local income taxes and the excise tax imposed by Section 4999, results in your receipt on an after-tax basis, of the greatest amount of benefits under this Agreement or otherwise, notwithstanding that all or some portion of such benefits may be taxable under Section 4999 of the Code; provided, however, that this sentence shall not apply if, immediately before the change in ownership or control on which such Payment is contingent or otherwise relates, no stock in the Company is readily tradeable on an established securities market or otherwise (as determined  in accordance with Treasury Reg. Section 1.280G-1 Q&A 6).  In applying this principle, the reduction shall be made in a manner consistent with the requirements of Code Section 409A, and if more than one method of reduction will result in the same economic benefit, the items so reduced will be reduced pro rata.  Unless you and the Company otherwise agree in writing, any determination required under this section shall be made in writing by the Company’s independent public accountants immediately preceding the change in ownership or control on which such Payments are contingent or otherwise relate (the “Accountants”), whose determination shall be conclusive and binding upon you and the Company for all purposes.  For purposes of making the calculations required by this section, the Accountants may make reasonable assumptions and approximations concerning applicable taxes and may rely on reasonable, good faith interpretations concerning the application of Sections 280G and 4999 of the Code.  You and the Company shall furnish to the Accountants such information and documents as the Accountants may reasonably request in order to make a determination under this section.  The Company shall bear all costs the Accountants may reasonably incur in connection with any calculations contemplated by this section as well as any costs incurred by you with the Accountants for tax planning under Sections 280G and 4999 of the Code.

(b)Stockholder Approval.  Notwithstanding the foregoing, if any Payments would not be subject to such excise tax if the stockholder approval requirements of Section 280G(b)(5) of the Code are satisfied, subject to your waiver of the rights to such Payments in accordance with Section 280G of the Code with respect to any portion of the Payments that would otherwise be subject to excise tax imposed by Section 4999 of the Code (before giving effect to any reduction in Payments contemplated in this Section), the Company shall use its reasonable best efforts to cause such payments to be submitted for such approval prior to the event giving rise to such payments.  To the extent the Company submits any payment or benefit payable to you under this Agreement or otherwise to the Company’s stockholders for approval in accordance with Treasury Reg. Section 1.280G-1 Q&A 7, the foregoing provisions shall not apply following such submission and such payments and benefits will be treated in accordance with the results of such vote, except that any reduction in, or waiver of, such payments or benefits required by such vote will be applied without any application of discretion by you and in the order prescribed in the preceding paragraph.  In no event shall you have any discretion with respect to the ordering of payment reductions.

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12.Confidentiality Obligations.

(a)Confidentiality Obligations. In connection with your employment, you will be expected to sign and abide by the Company’s standard form of Employee Invention Assignment and Confidentiality Agreement, a copy of which is attached hereto as Exhibit A (the “Confidentiality Agreement”).  In your work for the Company, you are expected not to use or disclose any confidential information, including trade secrets, of any former employer or other person to whom you have an obligation of confidentiality.  Rather, you are expected to use only that information which is generally known and used by persons with training and experience comparable to your own, which is common knowledge in the industry or otherwise legally in the public domain, or which is otherwise provided or developed by the Company.  You agree that you will not bring onto Company premises any unpublished documents or property belonging to any former employer or other person to whom you have an obligation of confidentiality.  You hereby represent that your employment does not create a conflict with any agreement between you and a third-party.  Notwithstanding anything to the contrary contained in the Confidentiality Agreement, nothing therein prohibits you from reporting possible violations of federal law or regulation to any United States governmental agency or entity in accordance with the provisions of and rules promulgated under Section 21F of the Securities Exchange Act of 1934 or Section 806 of the Sarbanes-Oxley Act of 2002, or any other whistleblower protection provisions of state or federal law or regulation (including the right to receive an award for information provided to any such government agencies).

(b)Defend Trade Secrets Act Notice of Immunity Rights. You acknowledge that the Company has provided you with the following notice of immunity rights in compliance with the requirements of the Defend Trade Secrets Act: (i) you shall not be held criminally or civilly liable under any Federal or State trade secret law for the disclosure of confidential information  that is made in confidence to a Federal, State, or local government official or to an attorney solely for the purpose of reporting or investigating a suspected violation of law; (ii) you shall not be held criminally or civilly liable under any Federal or State trade secret law for the disclosure of confidential information that is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal; and (iii) if you file a lawsuit for retaliation by the Company for reporting a suspected violation of law, you may disclose the confidential information to your attorney and use the confidential information in the court proceeding, if you file any document containing the confidential information under seal, and do not disclose the confidential information, except pursuant to court order.

13.At-Will Employment.  Your employment with Company will be “at-will.”  This means that either you or Company may terminate your employment at any time, with or without Cause or Good Reason, and with or without advance notice.

14.Arbitration.  To ensure the timely and economical resolution of disputes that may arise in connection with your employment with the Company, you and the Company agree that any and all disputes, claims, or causes of action arising from or relating to the enforcement, breach, performance, negotiation, execution, or interpretation of this Agreement, your employment, or the termination of your employment, including but not limited to statutory claims, shall be resolved pursuant to the Federal Arbitration Act, 9 U.S.C. §1-16, or if inapplicable, the California Arbitration Act, and to the fullest extent permitted by law by final, binding and confidential

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arbitration, by a single neutral arbitrator in San Diego, California, chosen jointly by the parties, and will be conducted by JAMS, Inc. (“JAMS”) under the then applicable JAMS rules (which can be found at the following web address: https://www.jamsadr.com/rules-employment-arbitration/ or will be provided to you upon request without charge).  If the parties cannot agree on an arbitrator, then JAMS shall appoint an arbitrator in accordance with JAMS rules.  By agreeing to this arbitration procedure, both you and the Company waive the right to resolve any such dispute through a trial by jury or judge or administrative proceeding.  The Company acknowledges that you will have the right to be represented by legal counsel at any arbitration proceeding.  In addition, all claims, disputes, or causes of action under this paragraph, whether by you or the Company, must be brought in an individual capacity, and shall not be brought as a plaintiff (or claimant) or class member in any purported class or representative proceeding, nor joined or consolidated with the claims of any other person or entity.  The arbitrator may not consolidate the claims of more than one person or entity, and may not preside over any form of representative or class proceeding.  To the extent that the preceding sentences regarding class claims or proceedings are found to violate applicable law or are otherwise found unenforceable, any claim(s) alleged or brought on behalf of a class shall proceed in a court of law rather than by arbitration.  This paragraph shall not apply to an action or claim brought in court pursuant to the California Private Attorneys General Act of 2004, as amended.  The arbitrator shall: (a) have the authority to compel adequate discovery for the resolution of the dispute and to award such relief as would otherwise be permitted by law; and (b) issue a written arbitration decision, to include the arbitrator’s essential findings and conclusions and a statement of the award.  The arbitrator shall be authorized to award any or all remedies that you or the Company would be entitled to seek in a court of law.  The Company shall pay all JAMS’ arbitration fees in excess of the amount of court fees that would be required of you if the dispute were filed in Superior Court.  Nothing in this Agreement is intended to prevent either you or the Company from obtaining injunctive relief in court to prevent irreparable harm pending the conclusion of any such arbitration.  Any awards or orders in such arbitrations may be entered and enforced as judgments in the federal and state courts of any competent jurisdiction.

15.Miscellaneous.  This Agreement, including Exhibit A, is the complete and exclusive statement of all of the terms and conditions of your employment with the Company, and supersedes and replaces any and all prior agreements or representations with regard to the subject matter hereof, whether written or oral.  It is entered into without reliance on any promise or representation other than those expressly contained herein, and it cannot be modified, amended or extended except in a writing signed by you and a duly authorized officer of the Company.  This Agreement is intended to bind and inure to the benefit of and be enforceable by you and the Company, and our respective successors, assigns, heirs, executors and administrators, except that you may not assign any of your duties or rights hereunder without the express written consent of the Company.  Whenever possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability will not affect any other provision or any other jurisdiction, but this Agreement will be reformed, construed and enforced as if such invalid, illegal or unenforceable provisions had never been contained herein.  This Agreement and the terms of your employment with the Company shall be governed in all aspects by the laws of the State of California.

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16.Indemnification.  You will receive defense and be indemnified by the Company to the full extent of the provisions of the Company's charter and bylaws and applicable Californiaand Delaware law.

17.Withholding and other Deductions. All compensation payable to you hereunder shall be subject to such deductions as the Company is from time to time required to make pursuant to law, governmental regulation or order.

18.Notices.  All notices or other communications required or permitted to be given under this Agreement shall be in writing and shall be deemed to have been duly given when delivered personally or one (1) business day after being sent by a nationally recognized overnight delivery service, charges prepaid.  Notices also may be given electronically via PDF and shall be effective on the date transmitted if confirmed within forty-eight (48) hours thereafter by a signed original sent in the manner provided in the preceding sentence.  Notice to you shall be sent to your most recent residence and personal email address on file with the Company.  Notice to the Company shall be sent to its physical address set forth on the first page hereto and addressed to the Chief Executive Officer at the email address provided by the Company for such person.

This offer is subject to satisfactory proof of your right to work in the United States and satisfactory completion of a Company-required background check.  If you agree to the terms and conditions set forth herein, please sign below.

We look forward to having you join us.  If you have any questions about this Agreement, please do not hesitate to call me.

[SIGNATURE PAGE FOLLOWS]

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Best regards,
AVIDITY BIOSCIENCES, INC.
/s/ Sarah Boyce
Sarah Boyce
Chief Executive Officer
Date:	July 10, 2020
Accepted and agreed:
/s/ Jae B. Kim
Jae B. Kim, M.D.
Date:	July 8, 2020

EX-31.1

Exhibit 31.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Sarah Boyce, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Avidity Biosciences, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

a. designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. [paragraph omitted in accordance with Exchange Act Rule 13a-14(a)];

c. evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 10, 2020	/s/ Sarah Boyce
	Sarah Boyce
	President, Chief Executive Officer and Director
	(Principal Executive Officer)

EX-31.2

Exhibit 31.2

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Michael F. MacLean, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Avidity Biosciences, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

a. designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. [paragraph omitted in accordance with Exchange Act Rule 13a-14(a)];

c. evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 10, 2020	/s/ Michael F. MacLean
	Michael F. MacLean
	Chief Financial Officer
	(Principal Financial Officer)

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the quarterly report of Avidity Biosciences, Inc. (the “Company”) on Form 10-Q for the quarter ended September 30, 2020, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Sarah Boyce, President, Chief Executive Officer and Director of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: November 10, 2020	/s/ Sarah Boyce
	Sarah Boyce
	President, Chief Executive Officer and Director (Principal Executive Officer)

The foregoing certification is being furnished solely pursuant to 18 U.S.C. Section 1350 and is not being filed as part of the Report or as a separate disclosure document.

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the quarterly report of Avidity Biosciences, Inc. (the “Company”) on Form 10-Q for the quarter ended September 30, 2020, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Michael F. MacLean, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: November 10, 2020	/s/ Michael F. MacLean
	Michael F. MacLean
	Chief Financial Officer (Principal Financial Officer)

The foregoing certification is being furnished solely pursuant to 18 U.S.C. Section 1350 and is not being filed as part of the Report or as a separate disclosure document.

XML

Document and Entity Information - shares	9 Months Ended
	Sep. 30, 2020	Oct. 20, 2020
Cover [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Sep. 30, 2020
Document Fiscal Year Focus	2020
Document Fiscal Period Focus	Q3
Current Fiscal Year End Date	--12-31
Entity Registrant Name	Avidity Biosciences, Inc.
Entity Central Index Key	0001599901
Entity Current Reporting Status	No
Entity Interactive Data Current	Yes
Entity Small Business	true
Entity Emerging Growth Company	true
Entity Ex Transition Period	false
Entity Shell Company	false
Entity Filer Category	Non-accelerated Filer
Entity Common Stock, Shares Outstanding		37,526,631
Entity File Number	001-39321
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	46-1336960
Entity Address, Address Line One	10975 N. Torrey Pines Road
Entity Address, Address Line Two	Suite 150
Entity Address, City or Town	La Jolla
Entity Address, State or Province	CA
Entity Address, Postal Zip Code	92037
City Area Code	858
Local Phone Number	401-7900
Title of 12(b) Security	Common Stock, $0.0001 par value
Trading Symbol	RNA
Security Exchange Name	NASDAQ
Document Quarterly Report	true
Document Transition Report	false

XML

Condensed Balance Sheets - USD ($) $ in Thousands	Sep. 30, 2020	Dec. 31, 2019
Current assets:
Cash and cash equivalents	$ 341,142	$ 94,578
Prepaid and other assets	3,155	1,098
Total current assets	344,297	95,676
Property and equipment, net	1,295	631
Restricted cash	124	0
Other assets	417	600
Total assets	346,133	96,907
Current liabilities:
Accounts payable and accrued liabilities	6,328	2,308
Accrued compensation	2,132	1,314
Deferred revenue, current portion	5,220	3,840
Long-term debt, current portion	0	2,774
Total current liabilities	13,680	10,236
Lease liabilities, net of current portion	689	393
Deferred revenue, net of current portion	11,600	15,100
Long-term debt, net of current portion	0	1,770
Other long-term liabilities	0	45
Total liabilities	25,969	27,544
Commitments and contingencies (Note 7)	0	0
Convertible preferred stock, $0.0001 par value; authorized shares - none and 38,055 at September 30, 2020 and December 31, 2019, respectively; issued and outstanding – none and 37,267 at September 30, 2020 and December 31, 2019, respectively	0	134,720
Stockholders’ equity (deficit):
Preferred stock, $0.0001 par value, authorized shares – 40,000 and none at September 30, 2020 and December 31, 2019, respectively; issued and outstanding shares – none	0	0
Common stock, $0.0001 par value; authorized shares – 400,000 and 52,042 at September 30, 2020 and December 31, 2019, respectively; issued and outstanding shares – 37,527 and 2,989 at September 30, 2020 and December 31, 2019, respectively	4	0
Additional paid-in capital	370,425	(43,172)
Accumulated deficit	(50,265)	(22,185)
Total stockholders’ equity (deficit)	320,164	(65,357)
Total liabilities, convertible preferred stock and stockholders’ equity (deficit)	$ 346,133	$ 96,907

XML

Condensed Balance Sheets (Parenthetical) - $ / shares	Sep. 30, 2020	Dec. 31, 2019
Statement Of Financial Position [Abstract]
Convertible preferred stock, par value	$ 0.0001	$ 0.0001
Convertible preferred stock, authorized	0	38,055,000
Convertible preferred stock, issued	0	37,267,000
Convertible preferred stock, outstanding	0	37,267,000
Preferred stock, par value	$ 0.0001	$ 0.0001
Preferred stock, shares authorized	40,000,000	0
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Common stock, par value	$ 0.0001	$ 0.0001
Common stock, shares authorized	400,000,000	52,042,000
Common stock, shares issued	37,527,000	2,989,000
Common stock, shares outstanding	37,527,000	2,989,000

XML

Condensed Statements of Operations (Unaudited) - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Income Statement [Abstract]
Collaboration revenue	$ 1,746	$ 650	$ 4,645	$ 874
Revenue from Contract with Customer, Product and Service [Extensible List]	rna:CollaborationRevenueMember	rna:CollaborationRevenueMember	rna:CollaborationRevenueMember	rna:CollaborationRevenueMember
Operating expenses:
Research and development	$ 9,455	$ 5,099	$ 23,983	$ 8,894
General and administrative	3,757	757	8,646	3,265
Total operating expenses	13,212	5,856	32,629	12,159
Loss from operations	(11,466)	(5,206)	(27,984)	(11,285)
Other income (expense):
Interest income	27	0	188	0
Interest and other expense	0	(1,462)	(209)	(3,049)
Change in fair value of preferred warrant liability	0	0	(75)	1
Total other income (expense)	27	(1,462)	(96)	(3,048)
Net loss	$ (11,439)	$ (6,668)	$ (28,080)	$ (14,333)
Net loss per share, basic and diluted	$ (0.31)	$ (2.43)	$ (1.72)	$ (5.32)
Weighted-average shares outstanding, basic and diluted	37,420	2,739	16,361	2,692

XML

Condensed Statements of Convertible Preferred Stock/Units and Stockholders'/Members' Equity (Deficit) - USD ($) $ in Thousands	Total	IPO	Preferred Units	Common Units	Predecessor's Deficit	Convertible Preferred Stock	Common Stock	Common Stock IPO	Additional Paid-in Capital	Additional Paid-in Capital IPO	Accumulated Deficit	Accumulated Deficit IPO
Balance at Dec. 31, 2018	$ (41,129)				$ (41,555)		$ 0		$ 0		$ 0
Preferred Units, balance, Units at Dec. 31, 2018			12,459,000
Preferred Units, balance at Dec. 31, 2018			$ 32,693
Temporary equity, balance, Shares at Dec. 31, 2018						0
Temporary equity, balance at Dec. 31, 2018						$ 0
Members' equity, balance, Units at Dec. 31, 2018				2,842,000
Members' equity, balance at Dec. 31, 2018				$ 426
Balance, Shares at Dec. 31, 2018							0
Distribution to members			(106)
Issuance of common units upon exercise of unit options	39		0	$ 39	0	0	$ 0		0		0
Issuance of common units upon exercise of unit options, Units				78,000
Vesting of early exercise options	5		0	$ 5	0	0	0		0		0
Stock-based compensation	17			17	0		0		0		0
Net loss	(2,549)		$ 0	$ 0	(2,549)	$ 0	0		0		0
Balance at Mar. 31, 2019	(43,617)				(44,104)		$ 0		0		0
Preferred Units, balance, Units at Mar. 31, 2019			12,459,000
Preferred Units, balance at Mar. 31, 2019			$ 32,587
Temporary equity, balance, Shares at Mar. 31, 2019						0
Temporary equity, balance at Mar. 31, 2019						$ 0
Members' equity, balance, Units at Mar. 31, 2019				2,920,000
Members' equity, balance at Mar. 31, 2019				$ 487
Balance, Shares at Mar. 31, 2019							0
Balance at Dec. 31, 2018	(41,129)				(41,555)		$ 0		0		0
Preferred Units, balance, Units at Dec. 31, 2018			12,459,000
Preferred Units, balance at Dec. 31, 2018			$ 32,693
Temporary equity, balance, Shares at Dec. 31, 2018						0
Temporary equity, balance at Dec. 31, 2018						$ 0
Members' equity, balance, Units at Dec. 31, 2018				2,842,000
Members' equity, balance at Dec. 31, 2018				$ 426
Balance, Shares at Dec. 31, 2018							0
Reclassification of warrant liability to equity due to adjustment from preferred stock warrant to common stock warrant upon completion of initial public offering	0
Net loss	(14,333)
Balance at Sep. 30, 2019	(55,326)				0		$ 0		(43,542)		(11,784)
Preferred Units, balance, Units at Sep. 30, 2019			0
Preferred Units, balance at Sep. 30, 2019			$ 0
Temporary equity, balance, Shares at Sep. 30, 2019						12,459,000
Temporary equity, balance at Sep. 30, 2019						$ 32,587
Members' equity, balance, Units at Sep. 30, 2019				0
Members' equity, balance at Sep. 30, 2019				$ 0
Balance, Shares at Sep. 30, 2019							2,975,000
Balance at Mar. 31, 2019	(43,617)				(44,104)		$ 0		0		0
Preferred Units, balance, Units at Mar. 31, 2019			12,459,000
Preferred Units, balance at Mar. 31, 2019			$ 32,587
Temporary equity, balance, Shares at Mar. 31, 2019						0
Temporary equity, balance at Mar. 31, 2019						$ 0
Members' equity, balance, Units at Mar. 31, 2019				2,920,000
Members' equity, balance at Mar. 31, 2019				$ 487
Balance, Shares at Mar. 31, 2019							0
Conversion from LLC to C corporation	0			$ (487)	44,104		$ 0		(43,617)		0
Conversion from LLC to C corporation, Temporary equity, Shares			(12,459,000)			12,459,000
Conversion from LLC to C corporation, Temporary equity			$ (32,587)			$ 32,587
Conversion from LLC to C corporation, Shares				(2,920,000)			2,920,000
Issuance of common stock upon exercise of stock options, net of repurchases	3		0	$ 0	0	0	$ 0		3		0
Issuance of common stock upon exercise of stock options, net of repurchases, Shares							7,000
Vesting of early exercise options	16		0	0	0	0	$ 0		16		0
Stock-based compensation	16			0	0		0		16		0
Net loss	(5,116)		$ 0	$ 0	0	$ 0	0		0		(5,116)
Balance at Jun. 30, 2019	(48,698)				0		$ 0		(43,582)		(5,116)
Preferred Units, balance, Units at Jun. 30, 2019			0
Preferred Units, balance at Jun. 30, 2019			$ 0
Temporary equity, balance, Shares at Jun. 30, 2019						12,459,000
Temporary equity, balance at Jun. 30, 2019						$ 32,587
Members' equity, balance, Units at Jun. 30, 2019				0
Members' equity, balance at Jun. 30, 2019				$ 0
Balance, Shares at Jun. 30, 2019							2,927,000
Issuance of common stock upon exercise of stock options	16		0	0	0	0	$ 0		16		0
Issuance of common stock upon exercise of stock options, Shares							48,000
Vesting of early exercise options	2		0	0	0	0	$ 0		2		0
Stock-based compensation	22			0	0		0		22		0
Net loss	(6,668)		$ 0	$ 0	0	$ 0	0		0		(6,668)
Balance at Sep. 30, 2019	(55,326)				$ 0		$ 0		(43,542)		(11,784)
Preferred Units, balance, Units at Sep. 30, 2019			0
Preferred Units, balance at Sep. 30, 2019			$ 0
Temporary equity, balance, Shares at Sep. 30, 2019						12,459,000
Temporary equity, balance at Sep. 30, 2019						$ 32,587
Members' equity, balance, Units at Sep. 30, 2019				0
Members' equity, balance at Sep. 30, 2019				$ 0
Balance, Shares at Sep. 30, 2019							2,975,000
Balance at Dec. 31, 2019	$ (65,357)						$ 0		(43,172)		(22,185)
Temporary equity, balance, Shares at Dec. 31, 2019	37,267,000					37,267,000
Temporary equity, balance at Dec. 31, 2019	$ 134,720					$ 134,720
Balance, Shares at Dec. 31, 2019							2,989,000
Issuance of common stock upon exercise of stock options, net of repurchases	16					0	$ 0		16		0
Issuance of common stock upon exercise of stock options, net of repurchases, Shares							41,000
Vesting of early exercise options	14					0	$ 0		14		0
Issuance of convertible preferred stock, net of issuance costs						$ 2,200
Issuance of convertible preferred stock, net of issuance costs, Shares						538,000
Stock-based compensation	449						0		449		0
Net loss	(6,085)					$ 0	0		0		(6,085)
Balance at Mar. 31, 2020	(70,963)						$ 0		(42,693)		(28,270)
Temporary equity, balance, Shares at Mar. 31, 2020						37,805,000
Temporary equity, balance at Mar. 31, 2020						$ 136,920
Balance, Shares at Mar. 31, 2020							3,030,000
Balance at Dec. 31, 2019	$ (65,357)						$ 0		(43,172)		(22,185)
Temporary equity, balance, Shares at Dec. 31, 2019	37,267,000					37,267,000
Temporary equity, balance at Dec. 31, 2019	$ 134,720					$ 134,720
Balance, Shares at Dec. 31, 2019							2,989,000
Issuance of common stock upon exercise of stock options, Shares	106,000
Reclassification of warrant liability to equity due to adjustment from preferred stock warrant to common stock warrant upon completion of initial public offering	$ 120
Net loss	(28,080)
Balance at Sep. 30, 2020	$ 320,164						$ 4		370,425		(50,265)
Temporary equity, balance, Shares at Sep. 30, 2020	0					0
Temporary equity, balance at Sep. 30, 2020	$ 0					$ 0
Balance, Shares at Sep. 30, 2020							37,527,000
Balance at Mar. 31, 2020	(70,963)						$ 0		(42,693)		(28,270)
Temporary equity, balance, Shares at Mar. 31, 2020						37,805,000
Temporary equity, balance at Mar. 31, 2020						$ 136,920
Balance, Shares at Mar. 31, 2020							3,030,000
Vesting of early exercise options	34					0	$ 0		34		0
Issuance of stock, net of issuance costs, Value		$ 274,054						$ 2		$ 274,052		$ 0
Issuance of stock, net of issuance costs, Shares								16,560,000
Conversion of convertible preferred stock into common stock upon completion of initial public offering	136,920					$ (136,920)	$ 2		136,918		0
Conversion of convertible preferred stock into common stock upon completion of initial public offering, Shares						(37,805,000)	17,921,000
Reclassification of warrant liability to equity due to adjustment from preferred stock warrant to common stock warrant upon completion of initial public offering	120					$ 0	$ 0		120		0
Cashless exercise of common stock warrants	0						$ 0		0		0
Cashless exercise of common stock warrants, Shares							16,000
Stock-based compensation	687						$ 0		687		0
Net loss	(10,556)					$ 0	0		0		(10,556)
Balance at Jun. 30, 2020	330,296						$ 4		369,118		(38,826)
Temporary equity, balance, Shares at Jun. 30, 2020						0
Temporary equity, balance at Jun. 30, 2020						$ 0
Balance, Shares at Jun. 30, 2020							37,527,000
Vesting of early exercise options	11					0	$ 0		11		0
Stock-based compensation	1,296					0	0		1,296		0
Net loss	(11,439)					$ 0	0		0		(11,439)
Balance at Sep. 30, 2020	$ 320,164						$ 4		$ 370,425		$ (50,265)
Temporary equity, balance, Shares at Sep. 30, 2020	0					0
Temporary equity, balance at Sep. 30, 2020	$ 0					$ 0
Balance, Shares at Sep. 30, 2020							37,527,000

XML

Condensed Statements of Convertible Preferred Stock/Units and Stockholders'/Members' Equity (Deficit) (Parenthetical) - USD ($) $ in Thousands	3 Months Ended
	Jun. 30, 2020	Mar. 31, 2020
Convertible Preferred Stock
Stock issuance costs		$ 100
IPO | Common Stock
Stock issuance costs	$ 24,026

XML

Condensed Statements of Cash Flows (unaudited) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019
Cash flows from operating activities
Net loss	$ (28,080)	$ (14,333)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Depreciation	258	265
Stock-based compensation expense	2,432	55
Amortization of discounts and loan issuance costs	29	57
Noncash interest expense	110	2,764
Change in fair value of preferred warrant liability	75	(1)
Changes in operating assets and liabilities:
Prepaid and other assets	(2,060)	(864)
Accounts payable and accrued liabilities	4,373	92
Accrued compensation	818	(67)
Operating lease right-of-use assets and liabilities, net	121	(59)
Deferred revenue	(2,120)	19,600
Net cash (used in) provided by operating activities	(24,044)	7,509
Cash flows from investing activities
Purchases of property and equipment	(855)	(144)
Net cash used in investing activities	(855)	(144)
Cash flows from financing activities
Proceeds from issuance of common stock in initial public offering, gross	298,080	0
Payment of issuance costs related to initial public offering	(24,026)	0
Proceeds from exercise of stock options/units, net of repurchases	16	58
Payments on long-term debt	(4,683)	(2,100)
Proceeds from issuance of Series C convertible preferred stock, net of issuance costs	2,200	0
Proceeds from issuance of convertible notes, net of issuance costs	0	19,451
Net cash provided by financing activities	271,587	17,409
Net increase in cash, cash equivalents and restricted cash	246,688	24,774
Cash, cash equivalents and restricted cash at beginning of period	94,578	3,090
Cash, cash equivalents and restricted cash at end of period	341,266	27,864
Supplemental disclosure of cash flow information:
Cash paid for interest	571	261
Supplemental schedule of noncash investing and financing activities:
Right-of-use assets obtained in exchange for operating lease liabilities	676	807
Costs incurred, but not paid, in connection with purchases of property and equipment included in accounts payable and accrued liabilities	67	21
Conversion of convertible preferred stock into common stock upon completion of initial public offering	136,920	0
Reclassification of warrant liability to equity due to adjustment from preferred stock warrant to common stock warrant upon completion of initial public offering	$ 120	$ 0

XML

Description of Business and Basis of Presentation

9 Months Ended

Sep. 30, 2020

Accounting Policies [Abstract]

Description of Business and Basis of Presentation

1. DescriptionofBusiness and BasisofPresentation

Description of Business

Avidity Biosciences, Inc. (the Company or Avidity) is a biopharmaceutical company pioneering a new class of oligonucleotide-based therapies called Antibody Oligonucleotide Conjugates (AOCs) designed to overcome the current limitations of oligonucleotide-based therapies in order to treat a wide range of serious diseases. The Company utilizes its proprietary AOC platform to design, engineer and develop therapeutics that combine the tissue selectivity of monoclonal antibodies (mAbs) and the precision of oligonucleotide-based therapies.

Initial Public Offering

On June 16, 2020, the Company completed its initial public offering (IPO) in which it sold 16,560,000 shares of common stock at an offering price of $18.00 per share. Proceeds from the IPO, net of underwriting discounts, commissions and offering costs, were $274.1 million.

In addition, each of the following occurred in connection with the completion of the IPO:

• the conversion of all outstanding shares of convertible preferred stock into 17,921,069 shares of the Company’s common stock;

• the adjustment of an outstanding warrant to purchase convertible preferred stock into a warrant to purchase 7,809 shares of the Company’s common stock; and

• the amendment and restatement of the Company’s certificate of incorporation, authorizing 400,000,000 shares of common stock and 40,000,000 shares of undesignated preferred stock.

Reverse Stock Split

On June 4, 2020, the Company effected a one-for-2.1095 reverse stock split of its common stock (the Reverse Stock Split). The par value and the authorized shares of the common stock were not adjusted as a result of the Reverse Stock Split. All issued and outstanding common stock and the conversion ratio of the convertible preferred stock have been retroactively adjusted to reflect this Reverse Stock Split for all periods presented.

Liquidity

As of September 30, 2020, the Company has devoted substantially all of its resources to organizing and staffing the company, business planning, raising capital, developing its proprietary AOC platform, identifying potential product candidates, establishing its intellectual property portfolio and conducting research and preclinical studies, and providing other general and administrative support for these operations. In addition, the Company has a limited operating history, has incurred operating losses since inception and expects that it will continue to incur net losses into the foreseeable future as it continues the development of its product candidates and development programs. As of September 30, 2020, the Company had an accumulated deficit of $50.3 million and cash and cash equivalents of $341.1 million.

The Company believes that existing cash and cash equivalents, including the net proceeds from the IPO, will be sufficient to fund the Company’s operations for at least 12 months from the date of the filing of this Form 10-Q. The Company plans to finance its future cash needs through equity offerings, debt financings or other capital sources, including potential collaborations, licenses and other similar arrangements. If the Company is not able to secure adequate additional funding, it may be forced to make reductions in spending, extend payment terms with suppliers, liquidate assets where possible, and/or delay or reduce the scope of its planned development programs. Any of these actions could materially harm the Company’s business, results of operations and future prospects.

Basis of Presentation

The accompanying unaudited interim condensed financial statements have been prepared in accordance with U.S. generally accepted accounting principles (GAAP) and the rules and regulations of the Securities and Exchange Commission (SEC) related to a quarterly report on Form 10-Q. Certain information and note disclosures normally included in annual financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to those rules and regulations. The unaudited interim condensed financial statements reflect all adjustments which, in the opinion of management, are necessary for a fair statement of the results for the periods presented. All such adjustments are of a normal and recurring nature. The operating results presented in these unaudited interim condensed financial statements are not necessarily indicative of the results that may be expected for any future periods. These unaudited interim condensed financial statements should be read in conjunction with the audited financial statements and the notes thereto for the year ended December 31, 2019 included in the Company’s Prospectus filed with the SEC on June 12, 2020 for its IPO.

XML

Summary of Significant Accounting Policies

9 Months Ended

Sep. 30, 2020

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

2. SummaryofSignificantAccountingPolicies

Use of Estimates

The Company’s condensed financial statementsarepreparedinaccordancewith GAAP, whichrequires the Company tomakeestimates and assumptions that impact the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities in the financial statements and accompanying notes. The most significant estimates in the Company’s condensed financial statements relate to revenue recognition, stock-based compensation, and accrued research and development costs. Although these estimates are based on the Company’sknowledgeofcurrenteventsandactionsitmayundertakeinthefuture,actualresultsmayultimatelymateriallydifferfromtheseestimates andassumptions.

Cash, Cash Equivalents and Restricted Cash

The Company considers all highly liquid investments with original maturities of three months or less from the date of purchase to be cash equivalents. Cash and cash equivalents include cash in readily available checking and money market accounts. Restricted cash represents cash held as collateral for the letter of credit required under the Company’s facility lease and is reported as a long-term asset in the accompanying condensed balance sheet.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash deposits. The Company maintains deposits in federally insured financial institutions in excess of federally insured limits. 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.

Fair Value of Financial Instruments

Certain assets and liabilities are carried at fair value under GAAP. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. Financial assets and liabilities carried at fair value are to be classified and disclosed in one of the following three levels of the fair value hierarchy, of which the first two are considered observable and the last is considered unobservable:

• Level 1—Quoted prices in active markets for identical assets or liabilities

• Level 2—Observable inputs, such as quoted prices in active markets for similar assets or liabilities, quoted prices in markets that are not active for identical or similar assets or liabilities, or other inputs that are observable or can be corroborated by observable market data.

• Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to determining the fair value of the assets or liabilities, including pricing models, discounted cash flow methodologies and similar techniques.

The asset’s or liability’s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.

None of the Company’s non-financial assets are recorded at fair value on a non-recurring basis. Prior to the completion of the IPO in June 2020, financial liabilities that were measured at fair value on a recurring basis included the preferred stock warrant liability. No transfers between levels have occurred during the periods presented. The carrying amounts reflected in the Company’s condensed balance sheets for prepaid and other assets and accounts payable and accrued liabilities approximate their fair values due to their short-term nature. As of December 31, 2019, the carrying value of the Company’s debt approximated fair value due to the interest being reflective of then-current market rates for debt with similar terms and conditions.

The following table provides a reconciliation of the preferred stock warrant liability measured at fair value using Level 3 unobservable inputs (in thousands):

Balance at December 31, 2019	$	45
Change in fair value		75
Reclassification of preferred stock warrant liability    to stockholders’ equity		(120	)
Balance at September 30, 2020	$	—

Property and Equipment

Property and equipment, including leasehold improvements, are stated at cost less accumulated depreciation and amortization. Depreciation and amortization are recorded using the straight-line method over the estimated useful lives of the related assets, which ranges from three to five years. Leasehold improvements are amortized on a straight-line basis over the shorter of the estimated useful lives of the assets or the remaining lease term. Repairs and maintenance charges that do not increase the useful life of the assets are charged to operating expenses as incurred.

Impairment of Long-Lived Assets

Long-lived assets consist of property and equipment. An impairment loss is recorded if and when events and circumstances indicate that assets might be impaired and the undiscounted cash flows estimated to be generated by those assets are less than the carrying amount of those assets. The Company has not recognized any impairment losses in any of the periods presented in these financial statements.

Segment Information

Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by management in making decisions regarding resource allocation and assessing performance. The Company manages its operations as a single operating segment in the United States for the purposes of assessing performance and making operating decisions.

Revenue Recognition

To date, all the Company’s revenue has been derived from collaboration and research agreements. The terms of these arrangements include the following types of payments to the Company: non-refundable, upfront license fees; development, regulatory and commercial milestone payments; payments for research and development services provided by the Company or for manufacturing supply services the Company provides through its contract manufacturers; and royalties on net sales of licensed products.  

The Company performs the following steps in determining the appropriate amount of revenue to be recognized as it fulfills its obligations under each of these agreements: (i) identification of the promised goods or services in the contract; (ii) determination of whether the promised goods or services are performance obligations including whether they are distinct in the context of the contract; (iii) measurement of the transaction price, including the constraint on variable consideration; (iv) allocation of the transaction price to the performance obligations; and (v) recognition of revenue when, or as, the Company satisfies each performance obligation.

The Company receives payments from its collaborators based on billing schedules established in each contract. Upfront and other payments may require deferral of revenue recognition to a future period until the Company performs its obligations under its research and collaboration arrangements. Amounts are recorded as accounts receivable when the Company’s right to consideration is unconditional.

See Note 3 (Collaboration and License Agreement) for further information.

Research and Development Costs

Research and development costs are expensed as incurred and include salaries, benefits and stock-based compensation associated with research and development personnel, third-party research and development expenses, license fees, laboratory supplies, facilities, overhead costs, and consultants. Nonrefundable advance payments for goods and services that will be used in future research and development activities are capitalized and recorded as expense in the period that the Company receives the goods or when services are performed.

Upfront and milestone payments to acquire contractual rights to licensed technology are recorded when incurred if there is uncertainty in the Company receiving future economic benefit from the acquired contractual rights.

Income Taxes

Deferred tax assets and liabilities are determined based on the differences between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Valuation allowances are provided, if based upon the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. The Company is subject to taxation in the United States and state jurisdictions. As of December 31, 2019, the Company’s tax years since inception are subject to examination by taxing authorities.

Stock-Based Compensation

Stock-based compensation expense for employee and non-employee stock option grants is recorded at the estimated fair value of the award as of the grant date and is recognized as expense on a straight-line basis over the requisite service period (usually the vesting period) of the stock-based award, net of actual forfeitures during the period. Stock-based compensation expense for employee stock purchases under the Company’s Employee Stock Purchase Plan (the ESPP) is recorded at the estimated fair value of the purchase as of the plan enrollment date and is recognized as expense on a straight-line basis over the applicable six-month ESPP offering period. The estimation of fair value for stock-based compensation requires management to make estimates and judgments about, among other things, the estimated life of options and volatility of the Company’s common stock. The judgments directly affect the amount of compensation expense that will be recognized.

Comprehensive Loss

Comprehensive loss is defined as the change in equity during a period from transactions and other events and circumstances from non-owner sources. Net loss and comprehensive loss were the same for all periods presented.

Net Loss Per Share

Basic net loss per share is computed by dividing the net loss by the weighted-average number of common shares outstanding for the period, adjusted for the weighted-average number of common shares outstanding that are subject to repurchase or forfeiture. The Company has excluded 106,202 and 137,767 weighted-average shares subject to repurchase or forfeiture from the weighted-average number of common shares outstanding for the three and nine months ended September 30, 2020, respectively, and 195,378 and 221,266 weighted-average shares subject to repurchase or forfeiture from the weighted-average number of common shares outstanding for the three and nine months ended September 30, 2019, respectively. Diluted net loss per share is computed by dividing the net loss by the weighted-average number of shares of common stock and dilutive common stock equivalents outstanding for the period determined using the treasury-stock and if-converted methods. For all periods presented, there is no difference in the number of shares used to calculate basic and diluted shares outstanding as inclusion of the potentially dilutive securities would be antidilutive due to the Company’s net loss position.

Potentially dilutive securities not included in the calculation of diluted net loss per share, because to do so would be anti-dilutive, are as follows (in common stock equivalent shares; in thousands):

	September 30,
	2020		2019
Convertible preferred stock		—		5,906
Warrant to purchase convertible preferred stock		—		8
Warrant to purchase common stock		—		9
Common stock options issued and outstanding		3,545		230
Common stock subject to repurchase or forfeiture		92		213
ESPP shares pending issuance		19		—
Total		3,656		6,366

Recently Issued Accounting Pronouncements

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

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Collaboration and License Agreement

9 Months Ended

Sep. 30, 2020

Collaboration And License Agreements [Abstract]

Collaboration and License Agreement

3. Collaboration and License Agreement

Research Collaboration and License Agreement with Eli Lilly and Company

In April 2019, the Company entered into a Research Collaboration and License Agreement (the Lilly Agreement) with Eli Lilly and Company (Lilly) for the discovery, development and commercialization of AOC products directed against certain targets in immunology and other select indications on a worldwide basis. Under the Lilly Agreement, the Company granted Lilly an exclusive, worldwide, royalty-bearing license, with the right to sublicense (subject to certain conditions), under the Company’s technology to research, develop, manufacture, and sell products containing AOCs that are directed to up to six mRNA targets. The Company retains the right to use its technology to perform its obligations under the Lilly Agreement and for all purposes not granted to Lilly. The Company agreed that it will not, itself or with a third party, research, develop, manufacture or commercialize or otherwise exploit any compound or product directed against targets subject to the Lilly Agreement.

In consideration of the rights granted to Lilly under the Lilly Agreement, the Company received a one-time upfront fee of $20.0 million and is eligible to receive up to $60.0 million in development milestone payments, up to $140.0 million in regulatory milestone payments and up to $205.0 million in commercialization milestone payments per target. In addition, Lilly is obligated to reimburse the Company for research expenses, as defined in and, incurred under the Lilly Agreement. Lilly is obligated to pay the Company a tiered royalty ranging from the mid-single to low-double digits on worldwide annual net sales of licensed products, subject to specified and capped reductions for the market entry of biosimilar products, loss of patent coverage of licensed products and for payments owed to third parties for additional rights necessary to commercialize licensed products in the territory. Lilly’s royalty obligations and the Lilly Agreement will expire on a licensed product-by-licensed product and country-by-country basis on the later of ten years from the date of the first commercial sale or when there is no longer a valid patent claim covering such licensed product in such country.

The Company has identified multiple promises to deliver goods and services, which include at inception of the agreement: (i) a license to technology and patents, information and know-how; and (ii) collaboration, including research services, technical and regulatory support provided by the Company. At inception and through September 30, 2020, the Company has identified one performance obligation for all the deliverables under the Lilly Agreement since the delivered elements are either not capable of being distinct or are not distinct within the context of the contract. Accordingly, the Company will recognize revenue for the fixed or determinable collaboration in an amount proportional to the collaboration expenses incurred and the total estimated collaboration expenses over the five-year period over which it expects to deliver its performance obligations. In connection with the Lilly Agreement, the Company recognized revenue of $1.7 million and $0.7 million for the three months ended September 30, 2020 and 2019, respectively, and $4.6 million and $0.9 million for the nine months ended September 30, 2020 and 2019, respectively, and had deferred revenue of $16.8 million and $18.9 million as of September 30, 2020 and December 31, 2019, respectively.

A reconciliation of the closing balance of deferred revenue related to the Lilly Agreement is as follows (in thousands):

Balance at December 31, 2019	$	18,940
Revenue recognized		(2,120	)
Balance at September 30, 2020	$	16,820

Concurrently with the execution of the Lilly Agreement, the Company issued a convertible promissory note to Lilly. In connection with the Series C financing in November 2019, all outstanding principal and interest accrued under the note converted into 4,576,342 shares of Series C convertible preferred stock. See Note 6 (Convertible Notes) for further discussion.

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Property and Equipment

9 Months Ended

Sep. 30, 2020

Property Plant And Equipment [Abstract]

Property and Equipment

4. Property and Equipment

Property and equipment consist of the following (in thousands):

	September 30, 2020			December 31, 2019
Laboratory equipment	$	2,645		$	1,755
Computers and software		91			65
Office furniture and equipment		43			37
Leasehold improvements		417			417
Property and equipment, gross		3,196			2,274
Less accumulated depreciation		(1,901	)		(1,643	)
Total property and equipment, net	$	1,295		$	631

Depreciation expense related to property and equipment was $0.1 million and $0.1 million for the three months ended September 30, 2020 and 2019, respectively, and $0.3 million and $0.3 million for the nine months ended September 30, 2020 and 2019, respectively.

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Debt

9 Months Ended

Sep. 30, 2020

Debt Disclosure [Abstract]

Debt

5. Debt

The Company’s debt consisted of the following (in thousands):

	September 30, 2020		December 31, 2019
Current liabilities:
Term loans	$	—	$	2,800
Unamortized debt issuance costs		—		(25	)
Unamortized debt discount		—		(1	)
Loans payable, net of issuance costs and discount		—		2,774
Non-current liabilities:
Term loans		—		1,400
Accrued end of term fees		—		374
Unamortized debt issuance costs		—		(4	)
Loans payable, net of issuance costs and discount		—		1,770
Total loans payable, net of issuance costs and discount	$	—	$	4,544

Term Loan

In June 2017, the Company entered into an amendment (the LSA Amendment) to the Amended and Restated Loan and Security Agreement (as amended, the LSA) with Silicon Valley Bank (SVB). Pursuant to the LSA Amendment, SVB agreed to make loans of up to $7.0 million, comprising (i) a $5.0 million term loan, funded at the closing date (the Term C Loan), and (ii) subject to the achievement of a specified milestone relating to the Company’s research, an additional term loan totaling up to $2.0 million (the Term D Loan), of which $4.1 million was used to repay the Company’s existing loan with SVB, in addition to the final payments totaling $0.4 million.

The Term C Loan was scheduled to mature on June 1, 2021 and bore interest at an adjustable annual rate of the prime rate per the Wall Street Journal plus one-fifth of one percent (0.20%). The LSA Amendment provided an extension of the interest only period through June 1, 2019, upon the Term D Loan advance. Beginning July 1, 2019, the Company was required to repay the principal amount in 36 equal monthly installments, in addition to the monthly interest payment. In addition, a final payment of 6.5% of the funded amount, or $0.3 million, was due on the maturity date. The final payment fee was accrued as interest expense over the term of the loan and recorded in long-term debt, net of current portion.

In August 2018, the Company entered into a second amendment to the LSA (the LSA Second Amendment). Pursuant to the LSA Second Amendment, SVB provided the Term D Loan of $2.0 million, upon the Company’s receipt of $3.0 million in convertible note financing. In addition, a final payment of 6.5% of the funded amount, or $0.1 million, was due on the maturity date. The Company accounted for the financing prospectively as a debt modification.  

On June 30, 2020, the Company voluntarily prepaid the aggregate outstanding principal balance of $2.8 million and final payments and accrued interest of $0.5 million related to the Term C and Term D Loans, and the LSA was terminated.

In conjunction with the Term A and Term B Loans, the Company issued a warrant to SVB to purchase up to 16,474 shares of Series A convertible preferred stock at an exercise price of $2.2615 per share, exercisable at any time following the issuance, with a term of ten years. In connection with the completion of the IPO in June 2020, the preferred stock warrant was adjusted to become a warrant exercisable for 7,809 shares of common stock at an exercise price of $4.77 per share. In conjunction with the Term C Loan entered into in June 2017, the Company issued a warrant to SVB to purchase up to 9,442 shares of common stock at an exercise price of $0.53 per share, exercisable at any time following the issuance, with a term of seven years. The Company estimated the fair value of the warrants granted using the Black-Scholes option-pricing model and recorded the fair value as debt discounts, which were being amortized to interest expense using the effective interest method over the term of the loans. On June 17, 2020, the warrants were cashless exercised for an aggregate of 15,833 shares of common stock.

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Convertible Notes

9 Months Ended

Sep. 30, 2020

Debt Disclosure [Abstract]

Convertible Notes

6. Convertible Notes

In 2018 and 2019, the Company issued convertible promissory notes in the aggregate principal amount of $3.0 million and $4.5 million, respectively (the 2018 Notes and 2019 Notes, respectively). The 2018 Notes and the 2019 Notes accrued interest at 8% and 10% per annum, respectively, and automatically converted into preferred equity in the next qualified financing of at least $10 million at 85% and 80%, respectively, of the per share price paid by the investors in such financing.

Concurrently with the execution of the Lilly Agreement in April 2019, the Company issued a convertible promissory note to Lilly (the Lilly Note) and received cash proceeds of $15.0 million. The Lilly Note accrued simple interest of 8.0% per annum and, if not converted, would have matured in October 2020. All unpaid principal and interest were due at maturity.

The 2018 Notes, 2019 Notes and the Lilly Note (collectively, the Notes) represented share settled debt that were accounted for at amortized cost by accreting the Notes to their redemption value over the life of the debt using the effective interest method.  In connection with the Series C financing in November 2019, all outstanding principal and interest accrued under the Notes converted into 6,893,036 shares of Series C convertible preferred stock.

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Commitments and Contingencies

9 Months Ended

Sep. 30, 2020

Commitments And Contingencies Disclosure [Abstract]

Commitments and Contingencies

7. Commitments and Contingencies

Lease Agreements

The Company determines if an arrangement is a finance lease, operating lease or short-term lease at inception, or as applicable, and accounts for the arrangement under the relevant accounting literature. Currently, the Company is only party to non-cancellable office and laboratory space operating leases and a short-term office lease. Under the relevant guidance, the Company recognizes operating lease right-of-use (ROU) assets and liabilities based on the present value of the future minimum lease payments over the lease term at the commencement date, using the Company’s assumed incremental borrowing rate of 5.5%, and amortizes the ROU assets and liabilities over the lease term. Lease expense for operating leases is recognized on a straight-line basis over the lease term. The Company’s short-term lease is not subject to recognition of an ROU asset or liability or straight-line lease expense requirements.

In March 2014, the Company entered into a non-cancellable operating lease for office and laboratory space with a lease term through November 2017. In July 2017, the Company entered into an amendment to this lease to extend the lease term through December 2021.

On June 1, 2020, the Company entered into a second amendment to its existing operating lease (as amended, the 2014 Lease) and entered into a new non-cancellable temporary operating lease (the Temporary Lease) in connection with a newly executed non-cancellable operating lease for its headquarters location, commencing on July 1, 2021 (the New Lease). The lease term under both the 2014 Lease and the Temporary Lease ends 15 days after the commencement date of the New Lease in July 2021. The remaining monthly rental payments under the 2014 Lease and the rent under the Temporary Lease were abated beginning on June 1, 2020, given the execution of the New Lease. The total lease payments under the New Lease of $7.3 million were allocated amongst the 2014 Lease, Temporary Lease and New Lease based on the relative standalone price of the separate lease components. The New Lease will have a 5-year term upon commencement on July 1, 2021, with an initial monthly base rent of approximately $124,000, which will increase to approximately $139,000 during the last year of the New Lease's term. In addition, under the terms of the New Lease, the Company is required to maintain a letter of credit totaling $124,000 throughout the lease term.

In June 2020, the Company adjusted the ROU asset and liability of the 2014 Lease to conform to the modification terms, and recorded an ROU asset and liability for the Temporary Lease upon occupancy. The Company will recognize an ROU asset and liability related to the New Lease upon occupancy, which is expected to occur in July 2021.

As of September 30, 2020, the Company’s ROU assets and liabilities related to the 2014 Lease and the Temporary Lease are as follows (in thousands):

ROU assets (included in other assets)	$	373
Lease liabilities, current portion (included in accounts    payable and accrued liabilities)	$	—
Lease liabilities, net of current portion		689
Total lease liabilities	$	689

Maturities of the lease liabilities due under the 2014 Lease and the Temporary Lease are as follows (in thousands):

Remaining in 2020	$	—
2021		12
2022		149
2023		154
2024		158
2025		163
2026		83
Total lease payments		719
Less imputed interest		(30	)
Total operating lease liabilities		689
Less lease liabilities, current portion		—
Lease liabilities, net of current portion	$	689

Supplemental cash flow information related to operating leases was as follows (in thousands):

	Nine Months Ended September 30,
	2020		2019
Cash paid included in operating cash flows	$	163	$	286

Rent expense was as follows (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
Operating leases	$	119	$	75	$	285	$	226
Short-term lease		9		—		27		—
Total rent expense	$	128	$	75	$	312	$	226

Litigation

Liabilities for loss contingencies arising from claims, assessments, litigation, fines, penalties, and other sources are recorded when it is probable that a liability has been incurred and the amount can be reasonably estimated. There are no matters currently outstanding for which any liabilities have been accrued.

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Stockholders' Equity (Deficit)

9 Months Ended

Sep. 30, 2020

Equity [Abstract]

Stockholders’ Equity (Deficit)

8. Stockholders’ Equity (Deficit)

Amended and Restated Certificate of Incorporation

On June 16, 2020, the Company’s certificate of incorporation was amended and restated to authorize 400,000,000 shares of common stock and 40,000,000 shares of undesignated preferred stock, each with a par value of $0.0001 per share.

Convertible Preferred Stock

In connection with the completion of the IPO in June 2020, all of the outstanding shares of convertible preferred stock were converted into 17,921,069 shares of the Company’s common stock. As of December 31, 2019, the Company’s convertible preferred stock was classified as temporary equity on the accompanying balance sheet in accordance with authoritative guidance for the classification and measurement of potentially redeemable securities whose redemption is based upon certain change in control events outside of the Company’s control.

Conversion

On April 1, 2019, Avidity LLC, a Delaware limited liability company, was converted into Avidity Biosciences, Inc., a Delaware corporation. The entire membership interests of Avidity LLC were converted into securities of Avidity Biosciences, Inc. as follows: (i) each outstanding common unit of Avidity LLC was converted into one share of Avidity Biosciences, Inc.’s common stock; (ii) each outstanding Series A preferred unit of Avidity LLC converted into one share of Avidity Biosciences, Inc.’s Series A convertible preferred stock; and (iii) each outstanding Series B preferred unit of Avidity LLC converted into one share of Avidity Biosciences, Inc.’s Series B convertible preferred stock. All the property, rights, privileges, powers and franchises of Avidity LLC vested in Avidity Biosciences, Inc., and all debts, liabilities and duties of Avidity LLC became debts, liabilities and duties of Avidity Biosciences, Inc. All references to the former members’ equity accounts in Avidity LLC have been adjusted to reflect the equivalent number of Avidity Biosciences, Inc. shares of common stock. Upon completion of the conversion, the Company reclassified an accumulated deficit of $44.1 million from predecessor deficit to additional paid in capital.

As of December 31, 2019, preferred stock consisted of the following (in thousands, except per share data):

Series	Shares Authorized		Shares Issued and Outstanding		Per Share Original Issue Price and Conversion Price		Liquidation Preference		Carrying Value
Series A		4,367		4,350	$	2.2615	$	9,838	$	9,773
Series B		8,108		8,108		2.8269		22,922		22,814
Series C		25,580		24,809		4.2812		106,210		102,133
Total		38,055		37,267			$	138,970	$	134,720

Equity Incentive Plan

In January 2013, the Company adopted the 2013 Equity Incentive Plan (the 2013 Plan). The 2013 Plan provided for the issuance of incentive units to employees and nonemployees of the Company and non‑statutory unit options, restricted unit awards, unit appreciation rights, and unit bonuses to directors, employees and consultants of the Company. Under the 2013 Plan, 2,127,013 units were initially reserved for issuance. Upon the conversion of the Company to a C corporation, the 2013 Plan continued on the same terms and conditions. In 2019, the number of shares reserved under the 2013 Plan was increased to 4,771,615 shares.

In June 2020, the Board of Directors adopted, and the Company’s stockholders approved, the 2020 Incentive Award Plan (the 2020 Plan), which became effective in connection with the IPO. Pursuant to the 2020 Plan, the Company ceased granting awards under the 2013 Plan. Under the 2020 Plan, the Company may grant stock options, restricted stock, dividend equivalents, restricted stock units, stock appreciation rights, and other stock or cash-based awards to individuals who are then employees, officers, non-employee directors or consultants of the Company. A total of 3,900,000 shares of common stock were initially reserved for issuance under the 2020 Plan. In addition, the number of shares of common stock available for issuance under the 2020 Plan will be increased annually on the first day of each fiscal year during the term of the 2020 Plan, beginning with the 2021 fiscal year, by an amount equal to the lesser of (a) 5% of the shares of common stock outstanding on the final day of the immediately preceding calendar year or (b) such smaller number of shares as determined by the Board of Directors. At September 30, 2020, 3,107,424 shares remain available for issuance under the 2020 Plan.

Stock Options

Options granted from the 2013 Plan and 2020 Plan are exercisable at various dates and will expire no more than ten years from their date of grant. Prior to the IPO, the exercise price of options was determined by the board of directors. Following the IPO, the Company grants options with an exercise price equal to the fair market value of the Company’s stock on the date of the option grant.

Stock option activity for employee and nonemployee awards and related information is as follows (options in thousands):

	Number			Weighted- Average Exercise Price
Outstanding at December 31, 2019		1,667		$	1.08
Granted		2,035			12.13
Exercised		(106	)		0.44
Forfeited		(51	)		1.24
Outstanding at September 30, 2020		3,545		$	7.44

Employee Stock Purchase Plan

In June 2020, the Company adopted the ESPP, which permits participants to contribute up to 15% of their eligible compensation during defined rolling six-month periods to purchase the Company’s common stock. The purchase price of the shares will be 85% of the lower of the fair market value of the Company’s common stock on the first day of trading of the offering period or on the applicable purchase date. A total of 325,000 shares of common stock was initially reserved for issuance under the ESPP. As of September 30, 2020, the Company has not issued any shares under the ESPP. The Company had an outstanding liability of $0.3 million at September 30, 2020, which is included in accounts payable and accrued liabilities on the balance sheet, for employee contributions to the ESPP for shares pending issuance at the end of the offering period.

Stock-Based Compensation Expense

The assumptions used in the Black-Scholes option pricing model to determine the fair value of the stock option/unit grants were as follows:

	Nine Months Ended September 30,
	2020	2019
Risk-free interest rate	0.3% - 1.5%	1.4% - 2.7%
Expected volatility	88% - 92%	84% - 88%
Expected term (in years)	5.4 - 6.1	2.0 - 5.5
Expected dividend yield	—%	—%

The allocation of stock-based compensation expense was as follows (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
Research and development expense	$	565	$	6	$	850	$	22
General and administrative expense		731		16		1,582		33
Total stock-based compensation expense	$	1,296	$	22	$	2,432	$	55

As of September 30, 2020, the unrecognized compensation cost related to outstanding time-based options was $23.1 million, which is expected to be recognized over a weighted-average period of 3.3 years.

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COVID-19

9 Months Ended

Sep. 30, 2020

Extraordinary And Unusual Items [Abstract]

COVID-19

9. COVID-19

The COVID-19 outbreak in the United States has caused significant business disruption. The extent of the impact of COVID-19 on the Company’s operational and financial performance will depend on certain developments, including the duration and spread of the outbreak, and its impact on the Company’s preclinical studies and clinical trials, employees and vendors, all of which are uncertain and cannot be predicted. In response to the COVID-19 outbreak, the Company has closed its executive offices with its administrative employees continuing their work remotely and limited the number of staff in its research and development laboratories. To date, the Company has not experienced material disruptions in its business operations. However, a prolonged outbreak could have a material adverse impact on the financial results and business operations of the Company, including the timing and ability of the Company to complete certain clinical trials and other efforts required to advance the development of its product candidates and raise additional capital. In response to the pandemic, the Coronavirus Aid, Relief and Economic Security Act (the CARES Act) was signed into law on March 27, 2020. The CARES Act, among other things, includes tax provisions relating to refundable payroll tax credits, deferment of employer’s social security payments, net operating loss utilization and carryback periods, modifications to the net interest deduction limitations and technical corrections to tax depreciation methods for qualified improvement property. The CARES Act had no impact on the Company’s income tax provision for the three and nine months ended September 30, 2020. The Company continues to evaluate the impact of the CARES Act on its financial position, results of operations and cash flows. The Company currently does not expect to apply for loans or grants under the CARES Act.

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Summary of Significant Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2020

Accounting Policies [Abstract]

Basis of Presentation

Basis of Presentation

The accompanying unaudited interim condensed financial statements have been prepared in accordance with U.S. generally accepted accounting principles (GAAP) and the rules and regulations of the Securities and Exchange Commission (SEC) related to a quarterly report on Form 10-Q. Certain information and note disclosures normally included in annual financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to those rules and regulations. The unaudited interim condensed financial statements reflect all adjustments which, in the opinion of management, are necessary for a fair statement of the results for the periods presented. All such adjustments are of a normal and recurring nature. The operating results presented in these unaudited interim condensed financial statements are not necessarily indicative of the results that may be expected for any future periods. These unaudited interim condensed financial statements should be read in conjunction with the audited financial statements and the notes thereto for the year ended December 31, 2019 included in the Company’s Prospectus filed with the SEC on June 12, 2020 for its IPO.

Use of Estimates

Use of Estimates

The Company’s condensed financial statementsarepreparedinaccordancewith GAAP, whichrequires the Company tomakeestimates and assumptions that impact the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities in the financial statements and accompanying notes. The most significant estimates in the Company’s condensed financial statements relate to revenue recognition, stock-based compensation, and accrued research and development costs. Although these estimates are based on the Company’sknowledgeofcurrenteventsandactionsitmayundertakeinthefuture,actualresultsmayultimatelymateriallydifferfromtheseestimates andassumptions.

Cash, Cash Equivalents and Restricted Cash

Cash, Cash Equivalents and Restricted Cash

The Company considers all highly liquid investments with original maturities of three months or less from the date of purchase to be cash equivalents. Cash and cash equivalents include cash in readily available checking and money market accounts. Restricted cash represents cash held as collateral for the letter of credit required under the Company’s facility lease and is reported as a long-term asset in the accompanying condensed balance sheet.

Concentration of Credit Risk

Concentration of Credit Risk

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash deposits. The Company maintains deposits in federally insured financial institutions in excess of federally insured limits. 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.

Fair Value of Financial Instruments

Fair Value of Financial Instruments

Certain assets and liabilities are carried at fair value under GAAP. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. Financial assets and liabilities carried at fair value are to be classified and disclosed in one of the following three levels of the fair value hierarchy, of which the first two are considered observable and the last is considered unobservable:

• Level 1—Quoted prices in active markets for identical assets or liabilities

• Level 2—Observable inputs, such as quoted prices in active markets for similar assets or liabilities, quoted prices in markets that are not active for identical or similar assets or liabilities, or other inputs that are observable or can be corroborated by observable market data.

• Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to determining the fair value of the assets or liabilities, including pricing models, discounted cash flow methodologies and similar techniques.

The asset’s or liability’s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.

None of the Company’s non-financial assets are recorded at fair value on a non-recurring basis. Prior to the completion of the IPO in June 2020, financial liabilities that were measured at fair value on a recurring basis included the preferred stock warrant liability. No transfers between levels have occurred during the periods presented. The carrying amounts reflected in the Company’s condensed balance sheets for prepaid and other assets and accounts payable and accrued liabilities approximate their fair values due to their short-term nature. As of December 31, 2019, the carrying value of the Company’s debt approximated fair value due to the interest being reflective of then-current market rates for debt with similar terms and conditions.

The following table provides a reconciliation of the preferred stock warrant liability measured at fair value using Level 3 unobservable inputs (in thousands):

Balance at December 31, 2019	$	45
Change in fair value		75
Reclassification of preferred stock warrant liability    to stockholders’ equity		(120	)
Balance at September 30, 2020	$	—

Property and Equipment

Property and Equipment

Property and equipment, including leasehold improvements, are stated at cost less accumulated depreciation and amortization. Depreciation and amortization are recorded using the straight-line method over the estimated useful lives of the related assets, which ranges from three to five years. Leasehold improvements are amortized on a straight-line basis over the shorter of the estimated useful lives of the assets or the remaining lease term. Repairs and maintenance charges that do not increase the useful life of the assets are charged to operating expenses as incurred.

Impairment of Long-Lived Assets

Impairment of Long-Lived Assets

Long-lived assets consist of property and equipment. An impairment loss is recorded if and when events and circumstances indicate that assets might be impaired and the undiscounted cash flows estimated to be generated by those assets are less than the carrying amount of those assets. The Company has not recognized any impairment losses in any of the periods presented in these financial statements.

Segment Information

Segment Information

Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by management in making decisions regarding resource allocation and assessing performance. The Company manages its operations as a single operating segment in the United States for the purposes of assessing performance and making operating decisions.

Revenue Recognition

Revenue Recognition

To date, all the Company’s revenue has been derived from collaboration and research agreements. The terms of these arrangements include the following types of payments to the Company: non-refundable, upfront license fees; development, regulatory and commercial milestone payments; payments for research and development services provided by the Company or for manufacturing supply services the Company provides through its contract manufacturers; and royalties on net sales of licensed products.  

The Company performs the following steps in determining the appropriate amount of revenue to be recognized as it fulfills its obligations under each of these agreements: (i) identification of the promised goods or services in the contract; (ii) determination of whether the promised goods or services are performance obligations including whether they are distinct in the context of the contract; (iii) measurement of the transaction price, including the constraint on variable consideration; (iv) allocation of the transaction price to the performance obligations; and (v) recognition of revenue when, or as, the Company satisfies each performance obligation.

The Company receives payments from its collaborators based on billing schedules established in each contract. Upfront and other payments may require deferral of revenue recognition to a future period until the Company performs its obligations under its research and collaboration arrangements. Amounts are recorded as accounts receivable when the Company’s right to consideration is unconditional.

See Note 3 (Collaboration and License Agreement) for further information.

Research and Development Costs

Research and Development Costs

Research and development costs are expensed as incurred and include salaries, benefits and stock-based compensation associated with research and development personnel, third-party research and development expenses, license fees, laboratory supplies, facilities, overhead costs, and consultants. Nonrefundable advance payments for goods and services that will be used in future research and development activities are capitalized and recorded as expense in the period that the Company receives the goods or when services are performed.

Upfront and milestone payments to acquire contractual rights to licensed technology are recorded when incurred if there is uncertainty in the Company receiving future economic benefit from the acquired contractual rights.

Income Taxes

Income Taxes

Deferred tax assets and liabilities are determined based on the differences between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Valuation allowances are provided, if based upon the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. The Company is subject to taxation in the United States and state jurisdictions. As of December 31, 2019, the Company’s tax years since inception are subject to examination by taxing authorities.

Stock-Based Compensation

Stock-Based Compensation

Stock-based compensation expense for employee and non-employee stock option grants is recorded at the estimated fair value of the award as of the grant date and is recognized as expense on a straight-line basis over the requisite service period (usually the vesting period) of the stock-based award, net of actual forfeitures during the period. Stock-based compensation expense for employee stock purchases under the Company’s Employee Stock Purchase Plan (the ESPP) is recorded at the estimated fair value of the purchase as of the plan enrollment date and is recognized as expense on a straight-line basis over the applicable six-month ESPP offering period. The estimation of fair value for stock-based compensation requires management to make estimates and judgments about, among other things, the estimated life of options and volatility of the Company’s common stock. The judgments directly affect the amount of compensation expense that will be recognized.

Comprehensive Loss

Comprehensive Loss

Comprehensive loss is defined as the change in equity during a period from transactions and other events and circumstances from non-owner sources. Net loss and comprehensive loss were the same for all periods presented.

Net Loss Per Share

Net Loss Per Share

Basic net loss per share is computed by dividing the net loss by the weighted-average number of common shares outstanding for the period, adjusted for the weighted-average number of common shares outstanding that are subject to repurchase or forfeiture. The Company has excluded 106,202 and 137,767 weighted-average shares subject to repurchase or forfeiture from the weighted-average number of common shares outstanding for the three and nine months ended September 30, 2020, respectively, and 195,378 and 221,266 weighted-average shares subject to repurchase or forfeiture from the weighted-average number of common shares outstanding for the three and nine months ended September 30, 2019, respectively. Diluted net loss per share is computed by dividing the net loss by the weighted-average number of shares of common stock and dilutive common stock equivalents outstanding for the period determined using the treasury-stock and if-converted methods. For all periods presented, there is no difference in the number of shares used to calculate basic and diluted shares outstanding as inclusion of the potentially dilutive securities would be antidilutive due to the Company’s net loss position.

Potentially dilutive securities not included in the calculation of diluted net loss per share, because to do so would be anti-dilutive, are as follows (in common stock equivalent shares; in thousands):

	September 30,
	2020		2019
Convertible preferred stock		—		5,906
Warrant to purchase convertible preferred stock		—		8
Warrant to purchase common stock		—		9
Common stock options issued and outstanding		3,545		230
Common stock subject to repurchase or forfeiture		92		213
ESPP shares pending issuance		19		—
Total		3,656		6,366

Recently Issued Accounting Pronouncements

Recently Issued Accounting Pronouncements

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

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Summary of Significant Accounting Policies (Tables)

9 Months Ended

Sep. 30, 2020

Accounting Policies [Abstract]

Schedule of Reconciliation of Preferred Stock Warrant Liability Measured at Fair Value Using Level 3 Unobservable Inputs

The following table provides a reconciliation of the preferred stock warrant liability measured at fair value using Level 3 unobservable inputs (in thousands):

Balance at December 31, 2019	$	45
Change in fair value		75
Reclassification of preferred stock warrant liability    to stockholders’ equity		(120	)
Balance at September 30, 2020	$	—

Schedule of Potentially Dilutive Securities not Included in Calculation of Diluted Net Loss Per Share

Potentially dilutive securities not included in the calculation of diluted net loss per share, because to do so would be anti-dilutive, are as follows (in common stock equivalent shares; in thousands):

	September 30,
	2020		2019
Convertible preferred stock		—		5,906
Warrant to purchase convertible preferred stock		—		8
Warrant to purchase common stock		—		9
Common stock options issued and outstanding		3,545		230
Common stock subject to repurchase or forfeiture		92		213
ESPP shares pending issuance		19		—
Total		3,656		6,366

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Collaboration and License Agreement (Tables)

9 Months Ended

Sep. 30, 2020

Collaboration And License Agreements [Abstract]

Summary of Reconciliation of Deferred Revenue Related to Lilly Agreement

A reconciliation of the closing balance of deferred revenue related to the Lilly Agreement is as follows (in thousands):

Balance at December 31, 2019	$	18,940
Revenue recognized		(2,120	)
Balance at September 30, 2020	$	16,820

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Property and Equipment (Tables)

9 Months Ended

Sep. 30, 2020

Property Plant And Equipment [Abstract]

Schedule of Property and Equipment

Property and equipment consist of the following (in thousands):

	September 30, 2020			December 31, 2019
Laboratory equipment	$	2,645		$	1,755
Computers and software		91			65
Office furniture and equipment		43			37
Leasehold improvements		417			417
Property and equipment, gross		3,196			2,274
Less accumulated depreciation		(1,901	)		(1,643	)
Total property and equipment, net	$	1,295		$	631

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Debt (Tables)

9 Months Ended

Sep. 30, 2020

Debt Disclosure [Abstract]

Schedule of Debt

The Company’s debt consisted of the following (in thousands):

	September 30, 2020		December 31, 2019
Current liabilities:
Term loans	$	—	$	2,800
Unamortized debt issuance costs		—		(25	)
Unamortized debt discount		—		(1	)
Loans payable, net of issuance costs and discount		—		2,774
Non-current liabilities:
Term loans		—		1,400
Accrued end of term fees		—		374
Unamortized debt issuance costs		—		(4	)
Loans payable, net of issuance costs and discount		—		1,770
Total loans payable, net of issuance costs and discount	$	—	$	4,544

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Commitments and Contingencies (Tables)

9 Months Ended

Sep. 30, 2020

Commitments And Contingencies Disclosure [Abstract]

Schedule of ROU Assets and Liabilities Related to 2014 Lease and Temporary Lease

As of September 30, 2020, the Company’s ROU assets and liabilities related to the 2014 Lease and the Temporary Lease are as follows (in thousands):

ROU assets (included in other assets)	$	373
Lease liabilities, current portion (included in accounts    payable and accrued liabilities)	$	—
Lease liabilities, net of current portion		689
Total lease liabilities	$	689

Schedule of Maturities of Lease Liabilities due under 2014 Lease and Temporary Lease

Maturities of the lease liabilities due under the 2014 Lease and the Temporary Lease are as follows (in thousands):

Remaining in 2020	$	—
2021		12
2022		149
2023		154
2024		158
2025		163
2026		83
Total lease payments		719
Less imputed interest		(30	)
Total operating lease liabilities		689
Less lease liabilities, current portion		—
Lease liabilities, net of current portion	$	689

Supplemental Cash Flow Information Related to Operating Leases

Supplemental cash flow information related to operating leases was as follows (in thousands):

	Nine Months Ended September 30,
	2020		2019
Cash paid included in operating cash flows	$	163	$	286

Schedule of Rent Expense

Rent expense was as follows (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
Operating leases	$	119	$	75	$	285	$	226
Short-term lease		9		—		27		—
Total rent expense	$	128	$	75	$	312	$	226

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Stockholders' Equity (Deficit) (Tables)

9 Months Ended

Sep. 30, 2020

Equity [Abstract]

Summary of Preferred Stock

As of December 31, 2019, preferred stock consisted of the following (in thousands, except per share data):

Series	Shares Authorized		Shares Issued and Outstanding		Per Share Original Issue Price and Conversion Price		Liquidation Preference		Carrying Value
Series A		4,367		4,350	$	2.2615	$	9,838	$	9,773
Series B		8,108		8,108		2.8269		22,922		22,814
Series C		25,580		24,809		4.2812		106,210		102,133
Total		38,055		37,267			$	138,970	$	134,720

Summary of Stock Option Activity

Stock option activity for employee and nonemployee awards and related information is as follows (options in thousands):

	Number			Weighted- Average Exercise Price
Outstanding at December 31, 2019		1,667		$	1.08
Granted		2,035			12.13
Exercised		(106	)		0.44
Forfeited		(51	)		1.24
Outstanding at September 30, 2020		3,545		$	7.44

Schedule of Assumptions Used in Black-Scholes Option Pricing Model to Determine Fair Value of Stock Option/Unit Grants

The assumptions used in the Black-Scholes option pricing model to determine the fair value of the stock option/unit grants were as follows:

	Nine Months Ended September 30,
	2020	2019
Risk-free interest rate	0.3% - 1.5%	1.4% - 2.7%
Expected volatility	88% - 92%	84% - 88%
Expected term (in years)	5.4 - 6.1	2.0 - 5.5
Expected dividend yield	—%	—%

Schedule of Allocated Stock-based Compensation Expense

The allocation of stock-based compensation expense was as follows (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
Research and development expense	$	565	$	6	$	850	$	22
General and administrative expense		731		16		1,582		33
Total stock-based compensation expense	$	1,296	$	22	$	2,432	$	55

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Description of Business and Basis of Presentation - Additional Information (Details) $ / shares in Units, $ in Thousands			1 Months Ended	3 Months Ended	9 Months Ended
	Jun. 16, 2020 USD ($) $ / shares shares	Jun. 04, 2020	Jun. 30, 2020 shares	Jun. 30, 2020 shares	Sep. 30, 2020 USD ($) shares	Dec. 31, 2019 USD ($) shares
Description Of Business And Basis Of Presentation [Line Items]
Common stock, shares authorized	400,000,000				400,000,000	52,042,000
Preferred stock, shares authorized	40,000,000				40,000,000	0
Reverse stock split, description					On June 4, 2020, the Company effected a one-for-2.1095 reverse stock split of its common stock (the Reverse Stock Split).
Stockholders' equity note, stock split, conversion ratio		2.1095
Accumulated deficit | $					$ 50,265	$ 22,185
Cash and cash equivalents | $					$ 341,142	$ 94,578
Common Stock
Description Of Business And Basis Of Presentation [Line Items]
Outstanding shares of convertible preferred stock converted into common stock				17,921,000
Initial Public Offering
Description Of Business And Basis Of Presentation [Line Items]
Sale of stock number of shares issued in transaction	16,560,000
Sale of stock, price per share | $ / shares	$ 18.00
Proceeds from the IPO, net of underwriting discounts, commissions and offering costs | $	$ 274,100
Outstanding shares of convertible preferred stock converted into common stock	17,921,069
Initial Public Offering | Undesignated Preferred Stock
Description Of Business And Basis Of Presentation [Line Items]
Preferred stock, shares authorized	40,000,000
Initial Public Offering | Common Stock
Description Of Business And Basis Of Presentation [Line Items]
Outstanding shares of convertible preferred stock converted into common stock			17,921,069
Warrant to purchase of common stock	7,809
Common stock, shares authorized	400,000,000

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Summary of Significant Accounting Policies - Additional Information (Details)	3 Months Ended		9 Months Ended
	Sep. 30, 2020 USD ($) shares	Sep. 30, 2019 shares	Sep. 30, 2020 USD ($) Segment shares	Sep. 30, 2019 shares
Summary Of Significant Accounting Policies [Line Items]
Transfers of assets measured on recurring basis out of Level 1 into Level 2	$ 0		$ 0
Transfers of assets measured on recurring basis out of Level 2 into Level 1	0		0
Transfers of liabilities measured on recurring basis out of Level 1 into Level 2	0		0
Transfers of liabilities measured on recurring basis out of Level 2 into Level 1	$ 0		0
Transfers of financial instrument classified as liability into level 3			0
Transfers of financial instrument classified as liability out of level 3			0
Transfers of financial instrument classified as asset into level 3			0
Transfers of financial instrument classified as asset out of level 3			$ 0
Number of operating segment | Segment			1
Weighted-average shares subject to repurchase or forfeiture | shares	106,202	195,378	137,767	221,266
Minimum
Summary Of Significant Accounting Policies [Line Items]
Estimated useful lives of assets			3 years
Maximum
Summary Of Significant Accounting Policies [Line Items]
Estimated useful lives of assets			5 years

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Summary of Significant Accounting Policies - Schedule of Reconciliation of Preferred Stock Warrant Liability Measured at Fair Value Using Level 3 Unobservable Inputs (Details) - Level 3 - Recurring $ in Thousands	9 Months Ended
	Sep. 30, 2020 USD ($)
Fair Value Assets Measured On Recurring Basis Unobservable Input Reconciliation [Line Items]
Balance at December 31, 2019	$ 45
Change in fair value	75
Reclassification of preferred stock warrant liability to stockholders’ equity	(120)
Balance at September 30, 2020	$ 0

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Summary of Significant Accounting Policies - Schedule of Potentially Dilutive Securities not Included in Calculation of Diluted Net Loss Per Share (Details) - shares shares in Thousands	9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019
Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items]
Total	3,656	6,366
Convertible Preferred Stock
Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items]
Total	0	5,906
Warrant | Common Stock
Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items]
Total	0	9
Warrant | Convertible Preferred Stock
Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items]
Total	0	8
Common Stock Options Issued and Outstanding
Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items]
Total	3,545	230
Common Stock Subject to Repurchase or Forfeiture
Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items]
Total	92	213
ESPP Shares Pending Issuance
Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items]
Total	19	0

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Collaboration and License Agreements - Additional Information (Details)		1 Months Ended	3 Months Ended		9 Months Ended
	Nov. 30, 2019 shares	Apr. 30, 2019 USD ($) Product	Sep. 30, 2020 USD ($)	Sep. 30, 2019 USD ($)	Sep. 30, 2020 USD ($) Obligation	Sep. 30, 2019 USD ($)	Dec. 31, 2019 USD ($)
Collaborative Arrangements And Noncollaborative Arrangement Transactions [Line Items]
Revenue recognized			$ 1,746,000	$ 650,000	$ 4,645,000	$ 874,000
Lilly Note | Series C Convertible Preferred Stock
Collaborative Arrangements And Noncollaborative Arrangement Transactions [Line Items]
Conversion of convertible note payable to preferred stock | shares	4,576,342
Research Collaboration and License Agreement with Eli Lilly
Collaborative Arrangements And Noncollaborative Arrangement Transactions [Line Items]
Upfront fees received		$ 20,000,000
License agreement expiry period		10 years
Number of performance obligation | Obligation					1
Period for expects performance obligation					5 years
Revenue recognized			1,700,000	$ 700,000	$ 4,600,000	$ 900,000
Deferred revenue			$ 16,820,000		$ 16,820,000		$ 18,940,000
Research Collaboration and License Agreement with Eli Lilly | Maximum
Collaborative Arrangements And Noncollaborative Arrangement Transactions [Line Items]
Rights to antibody oligonucleotide conjugates for messengers RNA targets. | Product		6
Development milestone payment eligible to receive per target		$ 60,000,000
Regulatory milestone payment eligible to receive per target		140,000,000
Commercialization milestone payment eligible to receive		$ 205,000,000

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Collaboration and License Agreements - Reconciliation of Deferred Revenue Related to Lilly Agreement (Details) - Research Collaboration and License Agreement with Eli Lilly $ in Thousands	9 Months Ended
	Sep. 30, 2020 USD ($)
Collaborative Arrangements And Noncollaborative Arrangement Transactions [Line Items]
Balance	$ 18,940
Revenue recognized	(2,120)
Balance	$ 16,820

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Property,and Equipment - Schedule of Property and Equipment (Details) - USD ($) $ in Thousands	Sep. 30, 2020	Dec. 31, 2019
Property Plant And Equipment [Line Items]
Property and equipment, gross	$ 3,196	$ 2,274
Less accumulated depreciation	(1,901)	(1,643)
Total property and equipment, net	1,295	631
Laboratory Equipment
Property Plant And Equipment [Line Items]
Property and equipment, gross	2,645	1,755
Computers and Software
Property Plant And Equipment [Line Items]
Property and equipment, gross	91	65
Office Furniture and Equipment
Property Plant And Equipment [Line Items]
Property and equipment, gross	43	37
Leasehold Improvements
Property Plant And Equipment [Line Items]
Property and equipment, gross	$ 417	$ 417

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Property and Equipment - Additional Information (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Property Plant And Equipment [Line Items]
Depreciation expenses related to property and equipment			$ 258	$ 265
Property and Equipment
Property Plant And Equipment [Line Items]
Depreciation expenses related to property and equipment	$ 100	$ 100	$ 300	$ 300

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Debt - Schedule of Debt (Details) - USD ($) $ in Thousands	Sep. 30, 2020	Dec. 31, 2019
Current liabilities:
Term loans	$ 0	$ 2,800
Unamortized debt issuance costs	0	(25)
Unamortized debt discount	0	(1)
Loans payable, net of issuance costs and discount	0	2,774
Non-current liabilities:
Term loans	0	1,400
Accrued end of term fees	0	374
Unamortized debt issuance costs	0	(4)
Loans payable, net of issuance costs and discount	0	1,770
Total loans payable, net of issuance costs and discount	$ 0	$ 4,544

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Debt - Additional Information (Details)		1 Months Ended			9 Months Ended
	Jun. 17, 2020 shares	Jun. 30, 2020 USD ($) $ / shares shares	Aug. 31, 2018 USD ($)	Jun. 30, 2017 USD ($) Installment $ / shares shares	Sep. 30, 2020 USD ($) $ / shares shares	Sep. 30, 2019 USD ($)
Debt Instrument [Line Items]
Repayment of existing loan					$ 4,683,000	$ 2,100,000
Proceeds from notes					$ 0	$ 19,451,000
Common Stock
Debt Instrument [Line Items]
Warrant exercisable | shares		7,809
Exercise price of warrant | $ / shares		$ 4.77
Cashless exercise of warrants | shares	15,833
SVB
Debt Instrument [Line Items]
Repayment of existing loan				$ 4,100,000
Debt instrument final payments				$ 400,000
SVB | Convertible Notes
Debt Instrument [Line Items]
Proceeds from notes			$ 3,000,000
SVB | Term C Loan | Common Stock
Debt Instrument [Line Items]
Warrant term					7 years
Exercise price of warrant | $ / shares				$ 0.53
SVB | Term C Loan | Common Stock | Maximum
Debt Instrument [Line Items]
Warrant to purchase common stock | shares				9,442
SVB | Term A And Term B Loans | Series A Convertible Preferred Stock
Debt Instrument [Line Items]
Exercise price of warrant | $ / shares					$ 2.2615
Warrant term					10 years
SVB | Term A And Term B Loans | Series A Convertible Preferred Stock | Maximum
Debt Instrument [Line Items]
Warrant to purchase convertible preferred stock | shares					16,474
SVB | LSA Amendment
Debt Instrument [Line Items]
Loan facility maximum borrowing capacity				$ 7,000,000
SVB | LSA Amendment | Term C Loan
Debt Instrument [Line Items]
Face amount of loans				5,000,000
Debt instrument final payments				$ 300,000
Maturity date				Jun. 01, 2021
Basis spread on variable rate				0.20%
Frequency of periodic payment principal					36 equal monthly
Number of equal monthly installments of principal | Installment				36
Frequency of periodic payment interest					monthly
Debt instrument final payment percentage				6.50%
SVB | LSA Amendment | Term D Loan
Debt Instrument [Line Items]
Face amount of loans			2,000,000
SVB | LSA Second Amendment | Term D Loan
Debt Instrument [Line Items]
Debt instrument final payments			$ 100,000
Debt instrument final payment percentage			6.50%
Proceeds from issuance of long-term debt			$ 2,000,000
SVB | LSA | Term C And D Loans
Debt Instrument [Line Items]
Loans prepaid amount		$ 2,800,000
Payment of final payment and accrued interest		$ 500,000

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Convertible Notes - Additional Information (Details) - USD ($)		1 Months Ended	9 Months Ended		12 Months Ended
	Nov. 30, 2019	Apr. 30, 2019	Sep. 30, 2020	Sep. 30, 2019	Dec. 31, 2019	Dec. 31, 2018
Debt Instrument [Line Items]
Proceeds from issuance of convertible notes			$ 0	$ 19,451,000
Convertible Notes | Series C Convertible Preferred Stock
Debt Instrument [Line Items]
Conversion of convertible notes payable to preferred stock	6,893,036
2018 Notes
Debt Instrument [Line Items]
Face amount of loans						$ 3,000,000
Convertible promissory notes accrued interest rate						8.00%
Convertible promissory notes conversion percentage on per share price paid by investors						85.00%
Qualified financing of convertible promissory notes converted into preferred equity						$ 10,000,000
2019 Notes
Debt Instrument [Line Items]
Face amount of loans					$ 4,500,000
Convertible promissory notes accrued interest rate					10.00%
Convertible promissory notes conversion percentage on per share price paid by investors					80.00%
Qualified financing of convertible promissory notes converted into preferred equity					$ 10,000,000
Lilly Note
Debt Instrument [Line Items]
Convertible promissory notes accrued interest rate		8.00%
Proceeds from issuance of convertible notes		$ 15,000,000
Maturity date		2020-10
Lilly Note | Series C Convertible Preferred Stock
Debt Instrument [Line Items]
Conversion of convertible notes payable to preferred stock	4,576,342

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Commitments and Contingencies - Additional Information (Details) - USD ($)	1 Months Ended	9 Months Ended
	Jun. 30, 2020	Sep. 30, 2020
Commitments and Contingencies [Line Items]
Operating lease, description		Currently, the Company is only party to non-cancellable office and laboratory space operating leases and a short-term office lease. Under the relevant guidance, the Company recognizes operating lease right-of-use (ROU) assets and liabilities based on the present value of the future minimum lease payments over the lease term at the commencement date, using the Company’s assumed incremental borrowing rate of 5.5%, and amortizes the ROU assets and liabilities over the lease term. Lease expense for operating leases is recognized on a straight-line basis over the lease term. The Company’s short-term lease is not subject to recognition of an ROU asset or liability or straight-line lease expense requirements.
Incremental borrowing rate		5.50%
Loss contingencies accrued		$ 0
Lease Term through November 2017 | Office and Laboratory Space
Commitments and Contingencies [Line Items]
Operating lease, term of contract, description		In March 2014, the Company entered into a non-cancellable operating lease for office and laboratory space with a lease term through November 2017
Lease Term through December 2021 | Office and Laboratory Space
Commitments and Contingencies [Line Items]
Operating lease, term of contract, description		In July 2017, the Company entered into an amendment to this lease to extend the lease term through December 2021.
New Lease | Office and Laboratory Space
Commitments and Contingencies [Line Items]
Operating lease, lease not yet commenced, description		On June 1, 2020, the Company entered into a second amendment to its existing operating lease (as amended, the 2014 Lease) and entered into a new non-cancellable temporary operating lease (the Temporary Lease) in connection with a newly executed non-cancellable operating lease for its headquarters location, commencing on July 1, 2021 (the New Lease).
Operating lease, lease not yet commenced, lease payment under new lease		$ 7,300,000
Operating lease, lease not yet commenced, term of contract	5 years
Operating lease, lease not yet commenced, initial monthly base rent	$ 124,000
Operating lease, lease not yet commenced, monthly base rent for last year lease	139,000
Letter of credit	$ 124,000
Temporary Lease | Office and Laboratory Space
Commitments and Contingencies [Line Items]
Operating lease expiration period, description		The lease term under both the 2014 Lease and the Temporary Lease ends 15 days after the commencement date of the New Lease in July 2021.
Operating lease lease expiration period	15 days

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Commitments and Contingencies - Schedule of ROU Assets and Liabilities Related to 2014 Lease and Temporary Lease (Details) - USD ($) $ in Thousands	Sep. 30, 2020	Dec. 31, 2019
Commitments And Contingencies Disclosure [Abstract]
ROU assets (included in other assets)	$ 373
Operating lease, right-of-use asset, statement of financial position [Extensible List]	us-gaap:OtherAssetsNoncurrent
Lease liabilities, current portion (included in accounts payable and accrued liabilities)	$ 0
Operating lease, liability, current, statement of financial position [Extensible List]	us-gaap:AccountsPayableAndAccruedLiabilitiesCurrent
Lease liabilities, net of current portion	$ 689	$ 393
Total lease liabilities	$ 689

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Commitments and Contingencies - Schedule of Maturities of Lease Liabilities due under 2014 Lease and Temporary Lease (Details) - USD ($) $ in Thousands	Sep. 30, 2020	Dec. 31, 2019
Commitments And Contingencies Disclosure [Abstract]
Remaining in 2020	$ 0
2021	12
2022	149
2023	154
2024	158
2025	163
2026	83
Total lease payments	719
Less imputed interest	(30)
Total lease liabilities	689
Less lease liabilities, current portion	0
Lease liabilities, net of current portion	$ 689	$ 393

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Commitments and Contingencies - Supplemental Cash Flow Information Related to Operating Leases (Details) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019
Commitments And Contingencies Disclosure [Abstract]
Cash paid included in operating cash flows	$ 163	$ 286

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Commitments and Contingencies - Schedule of Rent Expense (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Commitments And Contingencies Disclosure [Abstract]
Operating leases	$ 119	$ 75	$ 285	$ 226
Short-term lease	9	0	27	0
Total rent expense	$ 128	$ 75	$ 312	$ 226

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Stockholders' Equity (Deficit) - Additional Information (Details) - USD ($) $ / shares in Units, $ in Millions			1 Months Ended	3 Months Ended	9 Months Ended
	Jun. 16, 2020	Apr. 01, 2019	Jun. 30, 2020	Jun. 30, 2020	Sep. 30, 2020	Dec. 31, 2019	Jan. 31, 2013
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Common stock shares authorized	400,000,000				400,000,000	52,042,000
Preferred stock undesignated shares authorized	40,000,000				40,000,000	0
Common stock par value per share	$ 0.0001				$ 0.0001	$ 0.0001
Preferred stock par value per share	$ 0.0001				$ 0.0001	$ 0.0001
Reclassified accumulated deficit from predecessor deficit to additional paid in capital		$ 44.1
Time-based Options
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Unrecognized compensation cost					$ 23.1
Weighted-average period of unrecognized compensation cost					3 years 3 months 18 days
2013 Equity Incentive Plan
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Units initially reserved for issuance							2,127,013
Increased to number of shares reserved under plan						4,771,615
2013 Equity Incentive Plan | Maximum
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Expiration period					10 years
2020 Incentive Award Plan
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Shares of common stock initially reserved for issuance			3,900,000	3,900,000
Percentage of shares of common stock outstanding on final day of immediately preceding calendar year			5.00%	5.00%
Number of remaining shares available for issuance					3,107,424
2020 Incentive Award Plan | Maximum
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Expiration period					10 years
Employee Stock Purchase Plan
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Shares of common stock initially reserved for issuance			325,000	325,000
Participant maximum contribution as percentage of eligible compensation			15.00%	15.00%
Percentage of purchase price of shares of lower of fair market value			85.00%
Shares issued under ESPP					0
Employee Stock Purchase Plan | Accounts Payable and Accrued Liabilities
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Outstanding liability					$ 0.3
Series A Convertible Preferred Stock
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Preferred unit converted into convertible preferred stock		1
Series B Convertible Preferred Stock
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Preferred unit converted into convertible preferred stock		1
Common Stock
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Convertible preferred stock converted into shares of common stock				17,921,000
Common unit converted into common stock		1
IPO
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Convertible preferred stock converted into shares of common stock	17,921,069
IPO | Common Stock
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Common stock shares authorized	400,000,000
Convertible preferred stock converted into shares of common stock			17,921,069

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Stockholders' Equity (Deficit) - Summary of Preferred Stock (Details) - USD ($) $ / shares in Units, $ in Thousands	Sep. 30, 2020	Dec. 31, 2019
Temporary Equity [Line Items]
Shares Authorized	0	38,055,000
Shares Issued and Outstanding		37,267,000
Liquidation Preference		$ 138,970
Carrying Value	$ 0	$ 134,720
Series A
Temporary Equity [Line Items]
Shares Authorized		4,367,000
Shares Issued and Outstanding		4,350,000
Per Share Original Issue Price and Conversion Price		$ 2.2615
Liquidation Preference		$ 9,838
Carrying Value		$ 9,773
Series B
Temporary Equity [Line Items]
Shares Authorized		8,108,000
Shares Issued and Outstanding		8,108,000
Per Share Original Issue Price and Conversion Price		$ 2.8269
Liquidation Preference		$ 22,922
Carrying Value		$ 22,814
Series C
Temporary Equity [Line Items]
Shares Authorized		25,580,000
Shares Issued and Outstanding		24,809,000
Per Share Original Issue Price and Conversion Price		$ 4.2812
Liquidation Preference		$ 106,210
Carrying Value		$ 102,133

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Stockholders' Equity (Deficit) - Summary of Stock Option Activity (Details) shares in Thousands	9 Months Ended
	Sep. 30, 2020 $ / shares shares
Number
Outstanding at December 31, 2019 | shares	1,667
Granted | shares	2,035
Exercised | shares	(106)
Forfeited | shares	(51)
Outstanding at September 30, 2020 | shares	3,545
Weighted-Average Exercise Price
Outstanding at December 31, 2019 | $ / shares	$ 1.08
Granted | $ / shares	12.13
Exercised | $ / shares	0.44
Forfeited | $ / shares	1.24
Outstanding at September 30, 2020 | $ / shares	$ 7.44

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Stockholders' Equity (Deficit) - Schedule of Assumptions Used in Black-Scholes Option Pricing Model to Determine Fair Value of Stock Option/Unit Grants (Details)	9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Expected dividend yield	0.00%	0.00%
Minimum
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Risk-free interest rate	0.30%	1.40%
Expected volatility	88.00%	84.00%
Expected term (in years)	5 years 4 months 24 days	2 years
Maximum
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Risk-free interest rate	1.50%	2.70%
Expected volatility	92.00%	88.00%
Expected term (in years)	6 years 1 month 6 days	5 years 6 months

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Stockholders' Equity (Deficit) - Schedule of Allocated Stock-based Compensation Expense (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Employee Service Share Based Compensation Allocation Of Recognized Period Costs [Line Items]
Total stock-based compensation expense	$ 1,296	$ 22	$ 2,432	$ 55
Research and Development Expense
Employee Service Share Based Compensation Allocation Of Recognized Period Costs [Line Items]
Total stock-based compensation expense	565	6	850	22
General and Administrative Expense
Employee Service Share Based Compensation Allocation Of Recognized Period Costs [Line Items]
Total stock-based compensation expense	$ 731	$ 16	$ 1,582	$ 33