Commitments and Contingencies

9 Months Ended

Sep. 30, 2022

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Commitments and Contingencies

Commitments

As of September 30, 2022, the Company had non-cancellable commitments for purchase of clinical materials, contract manufacturing, maintenance, and committed funding of up to $32.0 million, of which the Company expects to pay $28.8 million within one year and $3.2 million over one to four years. The amount and timing of these payments vary depending on the rate of progress of development. Future clinical trial expenses have not been included within the purchase commitments because they are contingent on enrollment in clinical trials and the activities required to be performed by the clinical sites.

On February 7, 2022, the Company entered into a 10-year office lease for its new corporate headquarters in Boston, Massachusetts, which required the issuance of a letter of credit of $0.7 million. The fixed annual rent will be approximately $1.6 million in 2023 and will escalate each subsequent year to approximately $1.9 million in Year 10. The Company expects to have a right of use of the office space in early 2023.

Licensing and Collaborative Arrangements

As of September 30, 2022, the Company had no milestone obligations recorded on its balance sheet under its license and collaborative arrangements. Included in research and development expenses in the Company’s consolidated statement of operations and comprehensive loss for the three months ended September 30, 2022 was aggregate incurred expenses of $0.8 million, reflecting the amortization of upfront costs. For the nine months ended September 30, 2022, aggregate incurred expenses were $2.2 million. The Company does not expect payments related to its licensing arrangements in the next twelve months to be material to the Company’s consolidated financial statements.

Contingencies

From time to time, the Company may have certain contingent liabilities that arise in the ordinary course of its business activities. The Company accrues a liability for such matters when it is probable that future expenditures will be made, and such expenditures can be reasonably estimated.

Litigation

On September 28, 2022, the Company and certain of its current and former officers were named as defendants in a proposed class-action lawsuit. The complaint generally alleges that the Company violated Sections 10(b) and 20(a) and Sections 11 and 15 of the Securities Act of 1933, as amended (the “Securities Act”) by allegedly making materially false and/or misleading statements, as well as allegedly failing to disclose material adverse facts relating to the safety profile and future clinical and commercial prospects of each of its lixivaptan and ZF874 programs, which caused the Company’s securities to trade at artificially inflated prices. The Company believes this lawsuit is without merit and intends to defend the case vigorously. Litigation is subject to inherent uncertainty and a court could ultimately rule against the Company. In addition, the defense of litigation and related matters are costly and may divert the attention of the Company’s management and other resources that would otherwise be engaged in other activities. The Company has not recorded an estimate of the possible loss associated with this legal proceeding due to the uncertainties related to both the likelihood and the amount of any possible loss or range of loss.