0001558370-21-001717 | 10-K | XBRL Viewer

Document and Entity Information - USD ($) $ in Millions	12 Months Ended
Document and Entity Information - USD ($) $ in Millions	Dec. 31, 2020	Jan. 31, 2021	Jun. 30, 2020
Document and Entity Information
Document Type	10-K
Document Annual Report	true
Document Transition Report	false
Document Period End Date	Dec. 31, 2020
Entity File Number	001-37581
Entity Incorporation, State or Country Code	DE
Entity Address, Address Line One	640 Lee Road, Suite 200
Entity Tax Identification Number	46-0571712
Entity Address, City or Town	Wayne
Entity Address, State or Province	PA
Entity Address, Postal Zip Code	19087
City Area Code	484
Local Phone Number	324-7933
Title of 12(b) Security	Common Stock, $0.00001 par value
Trading Symbol	ACRS
Security Exchange Name	NASDAQ
Entity Registrant Name	Aclaris Therapeutics, Inc.
Entity Well-known Seasoned Issuer	Yes
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Non-accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Public Float			$ 65.5
Entity Common Stock, Shares Outstanding		51,804,258
Entity Central Index Key	0001557746
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2020
Document Fiscal Period Focus	FY
Amendment Flag	false
ICFR Auditor Attestation Flag	false

CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Dec. 31, 2020	Dec. 31, 2019
Current assets:
Cash and cash equivalents	$ 22,063	$ 34,187
Restricted cash		1,750
Marketable securities	32,068	39,078
Accounts receivable, net	772	704
Prepaid expenses and other current assets	2,590	3,118
Discontinued operations - current assets		4,966
Total current assets	57,493	83,803
Property and equipment, net	1,654	2,470
Intangible assets	7,123	7,199
Other assets	4,514	4,825
Total assets	70,784	98,297
Current liabilities:
Accounts payable	5,254	9,917
Accrued expenses	5,906	7,721
Current portion of lease liabilities	603	637
Discontinued operations - current liabilities	3,111	4,157
Total current liabilities	14,874	22,432
Other liabilities	3,179	3,736
Long-term debt, net	10,653
Contingent consideration	4,061	1,668
Deferred tax liability	367	549
Total liabilities	33,134	28,385
Commitments and contingencies (Note 20)
Stockholders' Equity:
Preferred stock, $0.00001 par value; 10,000,000 shares authorized and no shares issued or outstanding at December 31, 2020 and December 31, 2019
Common stock, $0.00001 par value; 100,000,000 shares authorized at December 31, 2020 and December 31, 2019; 45,109,314 and 41,485,638 shares issued and outstanding at December 31, 2020 and December 31, 2019, respectively
Additional paid-in capital	542,286	523,505
Accumulated other comprehensive loss	(94)	(66)
Accumulated deficit	(504,542)	(453,527)
Total stockholders' equity	37,650	69,912
Total liabilities and stockholders' equity	$ 70,784	$ 98,297

CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares	Dec. 31, 2020	Dec. 31, 2019
CONDENSED CONSOLIDATED BALANCE SHEETS
Preferred stock, par value (in dollars per share)	$ 0.00001	$ 0.00001
Preferred stock, shares authorized	10,000,000	10,000,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Common stock, par value (in dollars per share)	$ 0.00001	$ 0.00001
Common stock, shares authorized	100,000,000	100,000,000
Common stock, shares issued	45,109,314	41,485,638
Common stock, shares outstanding	45,109,314	41,485,638

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2018
Total revenue	$ 6,482	$ 4,227	$ 6,151
Costs and expenses:
Cost of revenue	5,133	4,055	4,329
Research and development	31,731	64,899	60,841
General and administrative	20,530	27,827	25,761
Goodwill impairment		18,504
Total costs and expenses	57,394	115,285	90,931
Loss from operations	(50,912)	(111,058)	(84,780)
Other income (expense), net	(424)	(2,484)	2,676
Loss from continuing operations before income taxes	(51,336)	(113,542)	(82,104)
Income tax benefit	(182)
Loss from continuing operations	(51,154)	(113,542)	(82,104)
Income (loss) from discontinued operations, net of tax	139	(47,812)	(50,634)
Net loss	$ (51,015)	$ (161,354)	$ (132,738)
Net loss per share, basic and diluted	$ (1.20)	$ (3.90)	$ (4.03)
Weighted average common shares outstanding, basic and diluted	42,539,293	41,323,921	32,909,762
Other comprehensive income (loss):
Unrealized gain (loss) on marketable securities, net of tax of $0	$ (2)	$ 28	$ 145
Foreign currency translation adjustment	(26)	(25)	32
Total other comprehensive income (loss)	(28)	3	177
Comprehensive loss	(51,043)	(161,351)	(132,561)
Contract research
Total revenue	5,786	$ 4,227	4,651
Other revenue
Total revenue	$ 696		$ 1,500

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (Parenthetical) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2018
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
Unrealized gain (loss) on marketable securities, tax	$ 0	$ 0	$ 0

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY - USD ($) $ in Thousands	Common Stock Equity Purchase Agreement	Common Stock Public Offering	Common Stock	Additional Paid-in Capital Equity Purchase Agreement	Additional Paid-in Capital Public Offering	Additional Paid-in Capital	Accumulated Other Comprehensive Income (Loss)	Accumulated Deficit	Equity Purchase Agreement	Public Offering	Total
Balance at beginning of period at Dec. 31, 2017						$ 384,943	$ (246)	$ (159,435)			$ 225,262
Balance at beginning of period (in shares) at Dec. 31, 2017			30,856,505
Increase (Decrease) in Stockholders' Equity
Exercise of stock options and vesting of restricted stock units						(52)					(52)
Exercise of stock options and vesting of restricted stock units, shares			159,289
Issuance of common stock					$ 100,205					$ 100,205
Issuance of common stock, shares		9,941,750
Issuance of common stock in connection with the Confluence development milestone						2,215					2,215
Issuance of common stock in connection with the Confluence development milestone, shares			253,181
Unrealized gain (loss) on marketable securities							145				145
Foreign currency translation adjustment							32				32
Stock-based compensation expense						20,055					20,055
Net loss								(132,738)			(132,738)
Balance at end of period at Dec. 31, 2018						507,366	(69)	(292,173)			215,124
Balance at end of period (in shares) at Dec. 31, 2018			41,210,725
Increase (Decrease) in Stockholders' Equity
Exercise of stock options and vesting of restricted stock units						(38)					(38)
Exercise of stock options and vesting of restricted stock units, shares			274,913
Unrealized gain (loss) on marketable securities							28				28
Foreign currency translation adjustment							(25)				(25)
Stock-based compensation expense						16,177					16,177
Net loss								(161,354)			(161,354)
Balance at end of period at Dec. 31, 2019						523,505	(66)	(453,527)			$ 69,912
Balance at end of period (in shares) at Dec. 31, 2019			41,485,638								41,485,638
Increase (Decrease) in Stockholders' Equity
Exercise of stock options and vesting of restricted stock units						(669)					$ (669)
Exercise of stock options and vesting of restricted stock units, shares			1,390,922
Issuance of common stock				$ 7,865					$ 7,865
Issuance of common stock, shares	2,232,754
Fair value of warrants issued in connection with debt financing						378					378
Unrealized gain (loss) on marketable securities							(2)				(2)
Foreign currency translation adjustment							(26)				(26)
Stock-based compensation expense						11,207					11,207
Net loss								(51,015)			(51,015)
Balance at end of period at Dec. 31, 2020						$ 542,286	$ (94)	$ (504,542)			$ 37,650
Balance at end of period (in shares) at Dec. 31, 2020			45,109,314								45,109,314

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Parenthetical) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2018
Equity Purchase Agreement
Offering costs netted against proceeds	$ 168
Public Offering
Offering costs netted against proceeds		$ 6,669

CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2018
Cash flows from operating activities:
Net loss	$ (51,015)	$ (161,354)	$ (132,738)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	1,324	6,409	1,879
Stock-based compensation expense	11,207	16,177	20,055
Change in fair value of contingent consideration	2,393	734	1,272
Goodwill impairment charge		18,504
Intangible asset impairment charge		27,638
Payment of Confluence development milestone			(717)
Gain on sale of RHOFADE		(1,850)
Deferred taxes	(182)
Changes in operating assets and liabilities:
Accounts receivable	4,898	(809)	(4,380)
Prepaid expenses and other assets	1,689	3,233	62
Accounts payable	(5,219)	(3,160)	6,964
Accrued expenses	(3,728)	(1,967)	6,792
Net cash used in operating activities	(38,633)	(96,445)	(100,811)
Cash flows from investing activities:
Purchases of property and equipment	(453)	(1,613)	(1,356)
Acquisition of RHOFADE			(67,122)
Disposition of RHOFADE		34,186
Purchases of marketable securities	(47,714)	(137,385)	(161,598)
Proceeds from sales and maturities of marketable securities	54,554	210,491	239,443
Net cash provided by investing activities	6,387	105,679	9,367
Cash flows from financing activities:
Proceeds from debt financing (including warrants), net of issuance costs	10,913		29,910
Repayment of debt		(30,000)
Payment of Confluence development milestone			(1,783)
Finance lease payments	(137)	(523)	(648)
Deferred issuance costs	(211)
Proceeds from exercise of employee stock options and the issuance of stock	70	207	577
Net cash provided by (used in) financing activities	18,372	(30,316)	128,261
Net increase (decrease) in cash, cash equivalents and restricted cash	(13,874)	(21,082)	36,817
Cash, cash equivalents and restricted cash at beginning of period	35,937	57,019	20,202
Cash, cash equivalents and restricted cash at end of period	22,063	35,937	57,019
Supplemental disclosure of non-cash investing and financing activities:
Additions to property and equipment included in accounts payable		124	161
Fair value of warrants issued in connection with debt financing	378
Property and equipment obtained pursuant to finance lease financing arrangements			2,131
Fair value of stock issued in connection with Confluence development milestone			2,215
Offering costs included in accounts payable			210
Operating lease asset recorded as a result of new accounting standard		$ 2,132
Fair value of common stock issued in connection with an equity purchase agreement	263
Public Offering
Cash flows from financing activities:
Proceeds from issuance of common stock, net of issuance costs			$ 100,205
Equity Purchase Agreement
Cash flows from financing activities:
Proceeds from issuance of common stock, net of issuance costs	$ 7,737

Organization and Nature of Business

12 Months Ended

Dec. 31, 2020

Organization and Nature of Business

Organization and Nature of Business

1. Organization and Nature of Business

Overview

Aclaris Therapeutics, Inc. was incorporated under the laws of the State of Delaware in 2012. In July 2015, Aclaris Therapeutics International Limited (“ATIL”) was established under the laws of the United Kingdom as a wholly-owned subsidiary of Aclaris Therapeutics, Inc. In March 2016, Vixen Pharmaceuticals, Inc. (“Vixen”) became a wholly-owned subsidiary of Aclaris Therapeutics, Inc., and in September 2018, Vixen was dissolved. In August 2017, Confluence Life Sciences, Inc. (now known as Aclaris Life Sciences, Inc.) (“Confluence”) was acquired by Aclaris Therapeutics, Inc. and became a wholly-owned subsidiary thereof. Aclaris Therapeutics, Inc., ATIL, Vixen and Confluence are referred to collectively as the “Company.” The Company is a clinical-stage biopharmaceutical company focused on developing novel drug candidates for immuno-inflammatory diseases. In addition to developing its novel drug candidates, the Company is pursuing strategic alternatives, including identifying and consummating transactions with third-party partners, to further develop, obtain marketing approval for and/or commercialize its novel drug candidates.

Liquidity

The Company’s consolidated financial statements have been prepared on the basis of continuity of operations, realization of assets and the satisfaction of liabilities in the ordinary course of business. As of December 31, 2020, the Company had cash, cash equivalents and marketable securities of $54.1 million and an accumulated deficit of $504.5 million. Since inception, the Company has incurred net losses and negative cash flows from its operations. Prior to the acquisition of Confluence in August 2017, the Company had never generated revenue. There can be no assurance that profitable operations will ever be achieved, and, if achieved, will be sustained on a continuing basis. In addition, development activities, including clinical and preclinical testing of the Company’s drug candidates, will require significant additional financing. The future viability of the Company is dependent on its ability to successfully develop its drug candidates and to generate revenue from identifying and consummating transactions with third-party partners to further develop, obtain marketing approval for and/or commercialize its development assets or to raise additional capital to finance its operations. The Company will require additional capital to complete the clinical development of ATI-450 and ATI-1777, to develop its preclinical compounds, and to support its discovery efforts.

The Company has taken a number of actions to support its operations and meet its liquidity needs. In September 2019, the Company announced the completion of a strategic review and its decision to refocus its resources on its immuno-inflammatory development programs and to actively seek partners for its drug candidates and commercial products. As a result of this decision, the Company restructured its operations and reduced its workforce, which lowered operating costs. In October 2019, the Company sold the worldwide rights to RHOFADE (oxymetazoline hydrochloride) cream, 1% (“RHOFADE”) to further its focus on its development programs and improve cash flow. In March 2020, the Company borrowed $11.0 million under a term loan facility with Silicon Valley Bank. In August 2020, the Company entered into an equity purchase agreement (the “Purchase Agreement”) with Lincoln Park Capital Fund, LLC (“Lincoln Park”). As of December 31, 2020, the Company had sold 2,111,170 shares of common stock to Lincoln Park under the Purchase Agreement for net proceeds of $7.7 million. The Company did not sell any additional shares prior to terminating the Purchase Agreement in January 2021 in connection with a public offering of common stock in which it sold 6,306,271 shares of its common stock for net proceeds of $103.5 million.

The Company’s plans to further address its liquidity needs primarily include its ability to control the timing and spending on its research and development programs. The Company may also consider other plans to fund its operations including: (1) raising additional capital through debt or equity financings; (2) identifying third-party partners to further develop, obtain marketing approval for and/or commercialize its drug candidates, which may generate revenue and/or milestone payments; (3) reducing spending on one or more research and development programs by delaying or discontinuing development; and/or (4) further restructuring its operations to change its overhead structure.

Additional funds may not be available on a timely basis, on commercially acceptable terms, or at all, and such funds, if raised, may not be sufficient to enable the Company to continue to implement its long-term business strategy.

The Company’s ability to raise additional capital may be adversely impacted by potential worsening global economic conditions and the recent disruptions to, and volatility in, the credit and financial markets in the United States and worldwide resulting from the ongoing COVID-19 pandemic. If the Company is unable to raise sufficient additional capital or generate revenue from transactions with potential third-party partners for the development and/or commercialization of its drug candidates, it may need to substantially curtail planned operations. The Company’s failure to raise capital as and when needed could have a negative impact on its financial condition and ability to pursue its business strategies.

In accordance with Accounting Standards Update (“ASU”) 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern (Subtopic 205-40), the Company evaluated whether there are conditions and events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that its consolidated financial statements are issued. As of the report date, the Company does not believe that substantial doubt exists about its ability to continue as a going concern. The Company believes its existing cash, cash equivalents and marketable securities are sufficient to fund its operating and capital expenditure requirements for a period greater than 12 months from the date of issuance of these consolidated financial statements.

Summary of Significant Accounting Policies

12 Months Ended

Dec. 31, 2020

Summary of Significant Accounting Policies

Summary of Significant Accounting Policies

2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying consolidated financial statements have been prepared in conformity with generally accepted accounting principles in the United States (“GAAP”). The consolidated financial statements of the Company include the accounts of the operating parent company, Aclaris Therapeutics, Inc., and its wholly-owned subsidiaries, Confluence, ATIL, and Vixen (for periods prior to its dissolution in 2018). All significant intercompany transactions have been eliminated. Based upon the Company’s revenue, the Company believes that gross profit does not provide a meaningful measure of profitability and, therefore, has not included a line item for gross profit on the consolidated statement of operations.

Reclassifications

Certain prior year amounts have been reclassified to conform to the current year financial statement presentation.

Discontinued Operations

In September 2019, the Company announced the completion of a strategic review and its decision to refocus its resources on its immuno-inflammatory development programs and to actively seek partners for its commercial products. The Company also announced a plan to terminate 86 employees (see Note 17).

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting periods. Significant estimates and assumptions reflected in these financial statements include, but are not limited to, research and development expenses, contingent consideration and the valuation of stock-based awards. Estimates are periodically reviewed in light of changes in circumstances, facts and experience. The COVID-19 pandemic has resulted in a global slowdown in economic activity. As of the date of issuance of these financial statements, the Company is not aware of any specific event or circumstance that would require an update to its estimates, assumptions and judgments or revise the carrying value of its assets or liabilities. Actual results could differ from the Company’s estimates.

Revenue Recognition

The Company accounts for revenue in accordance with Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers. Under ASC Topic 606, revenue is recognized when a customer obtains control of promised goods or services in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services.

To determine revenue recognition in accordance with ASC Topic 606, the Company performs the following five steps: (i) identify the contract(s) with a customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations in the contract, and (v) recognize revenue when (or as) performance obligations are satisfied. At contract inception, the Company assesses the goods or services promised within a contract with a customer to identify the performance obligations, and to determine if they are distinct. The Company recognizes the revenue that is allocated to each distinct performance obligation when (or as) that performance obligation is satisfied. The Company only recognizes revenue when collection of the consideration it is entitled to under a contract with a customer is probable.

Product Sales, net

The Company sold RHOFADE and ESKATA (hydrogen peroxide) topical solution, 40% (w/w) (“ESKATA”), its non-marketed product approved by the U.S. Food and Drug Administration, during the years ended December 31, 2019 and 2018 to a limited number of wholesalers in the United States (collectively, its “Customers”). These Customers subsequently resold the Company’s products to pharmacies and health care providers. In addition to distribution agreements with Customers, the Company entered into, or was subject to, arrangements with third-party payors, including pharmacy benefit managers and government agencies, as well as group purchasing organizations (“GPOs”), which provided for government mandated or privately negotiated rebates, chargebacks, and discounts with respect to the purchase of the Company’s commercial products. The Company discontinued selling ESKATA in August 2019. The Company sold the worldwide rights to RHOFADE in October 2019 (see Note 3). Product sales, net is presented in discontinued operations for all periods presented.

The Company recognized revenue from product sales at the point the Customer obtained control of the product, which generally occurred upon delivery. The Company also included estimates of variable consideration in the same period revenue was recognized. Components of variable consideration include trade discounts and allowances, product returns, government rebates, discounts and rebates, other incentives such as patient co-pay assistance, and other fee for service amounts. Variable consideration was recorded on the consolidated balance sheet as either a reduction of accounts receivable, if payable to a Customer, or as a current liability, if payable to a third party other than a Customer. The Company considered all relevant information when estimating variable consideration such as contractual and statutory requirements, specific known market events and trends, industry data and forecasted customer buying and payment patterns. The amount of net revenue that can be recognized is constrained by estimates of variable consideration which are included in the transaction price. Payment terms with Customers did not exceed one year and, therefore, the Company did not account for a financing component in its arrangements. The Company expensed incremental costs of obtaining a contract with a Customer, including sales commissions, when incurred as the period of benefit was less than one year.

Trade Discounts and Allowances - The Company provided Customers with trade discounts, rebates, allowances and/or other incentives. The Company recorded estimates for these items as a reduction of revenue in the same period the revenue was recognized.

Government and Payor Rebates - The Company contracted with, or was subject to arrangements with, certain third-party payors, including pharmacy benefit managers and government agencies, for the payment of rebates with respect to utilization of its commercial products. The Company also entered into agreements with GPOs that provided for administrative fees and discounted pricing in the form of volume-based rebates. The Company was also subject to discount and rebate obligations under state Medicaid programs and Medicare. The Company recorded estimates for these discounts and rebates as a reduction of revenue in the same period the revenue was recognized.

Other Incentives - The Company maintained a co-pay assistance program which was intended to provide financial assistance to qualified commercially-insured patients with prescription drug co-payments required by third-party payors. The Company estimated and recorded accruals for these incentives as a reduction of revenue in the period the revenue was recognized. The Company estimated amounts for co-pay assistance based upon the number of claims and the cost per claim that the Company expected to receive associated with product that had been sold to Customers but remained in the distribution channel at the end of each reporting period.

Product Returns - Consistent with industry practice, the Company has a product returns policy for RHOFADE that provides Customers a right of return for product purchased within a specified period prior to and subsequent to the product’s expiration date. The right of return lapses upon shipment of the product to a patient. The Company recorded an estimate for the amount of its products which may be returned as a reduction of revenue in the period the related revenue

was recognized. The Company’s estimate for product returns was based upon available industry data and its own sales information, including its visibility into the inventory remaining in the distribution channel. There is no return liability associated with sales of ESKATA as the Company had a no returns policy for ESKATA when it was commercialized.

Contract Research

The Company earns contract research revenue from the provision of laboratory services to clients through Confluence, its wholly-owned subsidiary. Contract research revenue is generally evidenced by contracts with clients which are on an agreed upon fixed-price, fee-for-service basis and are generally billed on a monthly basis in arrears for services rendered. Revenue related to these contracts is generally recognized as the laboratory services are performed, based upon the rates specified in the contracts. Under ASC Topic 606, the Company elected to apply the “right to invoice” practical expedient when recognizing contract research revenue and as such, recognizes revenue in the amount which it has the right to invoice. ASC Topic 606 also provides an optional exemption, which the Company has elected to apply, from disclosing remaining performance obligations when revenue is recognized from the satisfaction of the performance obligation in accordance with the “right to invoice” practical expedient.

The Company also received revenue from grants under the Small Business Innovation Research program of the National Institutes of Health, or NIH. During the year ended December 31, 2018, the Company had two active grants from NIH related to early-stage research. There are no remaining funds available under the grants.

Other Revenue

Licenses of Intellectual Property – The Company recognizes revenue received from non-refundable, upfront fees related to the licensing of intellectual property when the intellectual property is determined to be distinct from the other performance obligations identified in the arrangement, the license has been transferred to the customer, and the customer is able to use and benefit from the license.

Milestone Payments – At the inception of each arrangement that includes milestone payments, the Company evaluates whether the milestones are considered probable of being reached and estimates the amount to be included in the transaction price using the most likely amount method. If it is probable that a significant revenue reversal would not occur, the associated milestone value is included in the amount allocated to the license of intellectual property. Milestone payments that are not within the control of the Company or the counterparty, such as regulatory approvals, are not considered probable of being achieved until those approvals are received.

Cash, Cash Equivalents and Restricted Cash

The Company considers all short-term, highly liquid investments with original maturities of three months or less at acquisition date to be cash equivalents. Cash equivalents, which have consisted of money market accounts and commercial paper, are stated at fair value. Total cash, cash equivalents and restricted cash as shown in the consolidated statements of cash flows as of December 31, 2020 and 2019 includes $0 and $1.8 million, respectively, of restricted cash, consisting of funds in escrow pursuant to the asset purchase agreement with EPI Health, LLC (“EPI Health”) (see Note 15).

Marketable Securities

Marketable securities with original maturities of greater than three months and remaining maturities of less than one year from the balance sheet date are classified as short-term. Marketable securities with remaining maturities of greater than one year from the balance sheet date are classified as long-term.

The Company classifies all of its marketable securities as available-for-sale securities. The Company’s marketable securities are measured and reported at fair value using either quoted prices in active markets for identical securities or quoted prices in markets that are not active for identical or similar securities. Unrealized gains and losses are reported as a separate component of stockholders’ equity. The cost of securities sold is determined on a specific identification basis, and realized gains and losses, if any, are included in other income (expense), net within the consolidated statement of operations and comprehensive loss. If any adjustment to fair value reflects a decline in the value of the investment, the Company considers available evidence to evaluate the extent to which the decline is “other than

temporary” and reduces the investment to fair value through a charge to the statement of operations and comprehensive loss.

Property and Equipment

Property and equipment are stated at cost less accumulated depreciation. Depreciation expense is recognized using the straight-line method over the useful life of the asset. Computer equipment is depreciated over three years. Manufacturing and laboratory equipment is depreciated over five years. Furniture and fixtures are depreciated over five years. Leasehold improvements are depreciated over the shorter of the lease term or their useful life. Expenditures for repairs and maintenance of assets are charged to expense as incurred. Upon retirement or sale, the cost and related accumulated depreciation of assets disposed of are removed from the accounts and any resulting gain or loss is included in loss from continuing operations.

Impairment of Long-Lived Assets

Long-lived assets consist of property and equipment. Long-lived assets to be held and used are tested for recoverability whenever events or changes in business circumstances indicate that the carrying amount of the assets may not be fully recoverable. Factors that the Company considers in deciding when to perform an impairment review include significant underperformance of the business in relation to expectations, significant negative industry or economic trends and significant changes or planned changes in the use of the assets. If an impairment review is performed to evaluate a long-lived asset for recoverability, the Company compares forecasts of undiscounted cash flows expected to result from the use and eventual disposition of the long-lived asset to its carrying value. An impairment loss would be recognized when estimated undiscounted future cash flows expected to result from the use of an asset are less than its carrying amount. The impairment loss would be based on the excess of the carrying value of the impaired asset over its fair value, determined based on discounted cash flows.

Intangible Assets

Intangible assets include both definite-lived and indefinite-lived assets. Definite-lived intangible assets consist of a drug discovery platform the Company acquired through the acquisition of Confluence, and prior to the disposition in 2019, also included the intellectual property rights related to RHOFADE. Definite-lived intangible assets are amortized over their estimated useful life based on the pattern over which the intangible assets are consumed or otherwise used up. If that pattern cannot be reliably determined, the straight-line method of amortization is used. Indefinite-lived intangible assets consist of an in-process research and development (“IPR&D”) drug candidate acquired through the acquisition of Confluence. IPR&D assets are considered indefinite-lived until the completion or abandonment of the associated research and development efforts. The cost of IPR&D is either amortized over its estimated useful life beginning when the underlying drug candidate is approved and launched commercially, or expensed immediately if development of the drug candidate is abandoned or otherwise impaired.

Definite-lived intangible assets are tested for impairment when events or changes in circumstances indicate that the carrying value of the asset may not be recoverable. Indefinite-lived intangible assets are tested for impairment at least annually, which the Company performs during the fourth quarter, or when indicators of an impairment are present. The Company recognizes impairment losses when and to the extent that the estimated fair value of an intangible asset is less than its carrying value.

During the year ended December 31, 2019, the Company performed an impairment analysis of the RHOFADE intangible asset due to its decision to discontinue commercial operations and actively seek a commercialization partner for RHOFADE. The Company’s impairment analysis, which primarily utilized a market-participant’s indication of fair value, resulted in a fair value for the RHOFADE intangible asset which was less than its carrying value. As a result, the Company recorded an impairment charge of $27.6 million, which is included in discontinued operations on the consolidated statement of operations, to adjust the carrying value of the RHOFADE intangible asset to its net realizable value (see Note 3).

During the years ended December 31, 2020 and 2019, the Company did not record an IPR&D impairment.

Goodwill

Goodwill is not amortized, but rather is subject to testing for impairment at least annually, which the Company performs either during the fourth quarter or when indicators of an impairment are present. The Company considers each of its operating segments, therapeutics and contract research, to be a reporting unit since this is the lowest level for which discrete financial information is available. The impairment test performed by the Company is a qualitative assessment based upon the then current facts and circumstances related to operations of the reporting unit. If the qualitative assessment indicates an impairment may be present, the Company would perform the required quantitative analysis and an impairment charge would be recognized to the extent that the estimated fair value of the reporting unit is less than its carrying amount. However, any loss recognized would not exceed the total amount of goodwill allocated to that reporting unit.

During the year ended December 31, 2019, the Company performed an impairment analysis due to a decline in its stock price, which was considered a triggering event to evaluate goodwill for impairment. The Company’s impairment analysis, using a market approach, noted that its stock price, including a reasonable control premium, resulted in a fair value for the therapeutics reporting unit which was less than its carrying value. As a result, the Company recorded an impairment charge of $18.5 million.

Leases

Leases represent a company’s right to use an underlying asset and a corresponding obligation to make payments to a lessor for the right to use those assets. The Company evaluates leases at their inception to determine if they are an operating lease or a finance lease. A lease is accounted for as a finance lease if it meets one of the following five criteria: the lease has a purchase option that is reasonably certain of being exercised, the present value of the future cash flows are substantially all of the fair market value of the underlying asset, the lease term is for a significant portion of the remaining economic life of the underlying asset, the title to the underlying asset transfers at the end of the lease term, or if the underlying asset is of such a specialized nature that it is expected to have no alternative uses to the lessor at the end of the term. Leases that do not meet the finance lease criteria are accounted for as an operating lease.

The Company recognizes assets and liabilities for leases at their inception based upon the present value of all payments due under the lease. The Company uses an implicit interest rate to determine the present value of finance leases, and its incremental borrowing rate to determine the present value of operating leases. The Company determines incremental borrowing rates by referencing collateralized borrowing rates for debt instruments with terms similar to the respective lease. The Company recognizes expense for operating and finance leases on a straight-line basis over the term of each lease, and interest expense related to finance leases is recognized over the lease term based on the effective interest method. The Company includes estimates for any residual value guarantee obligations under its leases in lease liabilities recorded on its consolidated balance sheet.

Right-of-use assets are included in other assets and property and equipment, net on the Company’s consolidated balance sheet for operating and finance leases, respectively. Obligations for lease payments are included in current portion of lease liabilities and other liabilities on the Company’s consolidated balance sheet for both operating and finance leases.

Contingent Consideration

The Company initially recorded a contingent consideration liability related to future potential payments resulting from the acquisition of Confluence based upon the achievement of certain development, regulatory and commercial milestones, as well as future projected sales performance, at its estimated fair value on the date of acquisition. The ultimate amount of future payments, if any, is based on criteria such as sales performance and the achievement of certain regulatory and sales milestones. The Company estimates the fair value of the contingent consideration liability related to the achievement of regulatory milestones by assigning an achievement probability to each potential milestone and discounting the associated cash payment to its present value using a credit-risk-adjusted interest rate. The Company estimates the fair value of the contingent consideration liability associated with sales milestones and royalties by estimating future sales levels, assigning an achievement probability and discounting the associated cash payments to their present values using a risk-adjusted rate of return. Significant assumptions used in the Company’s estimates include the probability of success of both achieving regulatory milestones and commencing commercialization, which are based upon an asset’s current stage of development and ranged between 4% and 15%. The Company evaluates fair value estimates of contingent consideration liabilities on a quarterly basis. Any change in fair value reflects new information about the likelihood of the payment of the contingent consideration and the passage of time. For example, if the timing of the development of an

acquired drug candidate, or the size of potential commercial opportunities related to an acquired drug candidate, differ from the Company’s assumptions, then the fair value of contingent consideration would be adjusted accordingly. Future changes in the fair value of the contingent consideration, if any, will be recorded as income or expense in the Company’s consolidated statement of operations and comprehensive loss.

Research and Development Costs

Research and development costs are expensed as incurred. Research and development expenses include salaries, stock-based compensation and benefits of employees, fees paid under licensing agreements, fees paid under a third party assignment agreement and other operational costs related to the Company’s research and development activities, including depreciation expenses and the cost of research and development contracts which the Company has entered into with outside vendors to conduct both preclinical studies and clinical trials. Significant judgment and estimates are made in determining the amount of research and development costs recognized in each reporting period. The Company analyzes the progress of its preclinical studies and clinical trials, completion of milestone events, invoices received and contracted costs when estimating research and development costs. Actual results could differ from the Company’s estimates. The Company’s historical estimates for research and development costs have not been materially different from the actual costs.

Stock-Based Compensation

The Company measures the compensation expense of stock-based awards granted to employees and directors using the grant date fair value of the award. The Company has issued stock options and restricted stock unit (“RSU”) awards with service-based vesting conditions, as well as with performance-based vesting conditions. The Company has not issued awards that include market-based conditions. For service-based awards the Company recognizes stock-based compensation expense on a straight-line basis over the requisite service period. For performance-based awards the Company recognizes stock-based compensation expense on a straight-line basis over the requisite service period beginning in the period that it becomes probable the performance conditions will occur. At each balance sheet date, the Company evaluates whether any performance conditions related to a performance-based award have changed. The effect of any change in performance conditions would be recognized as a cumulative catch-up adjustment in the period such change occurs, and any remaining unrecognized compensation expense would be recognized on a straight-line basis over the remaining requisite service period. The impact of forfeitures is recognized in the period in which they occur.

The Company measures the compensation expense of stock-based awards granted to consultants using the grant date fair value of the award. The Company recognizes compensation expense over the period during which services are rendered by the consultant.

The Company classifies stock-based compensation expense in its statement of operations and comprehensive loss in the same manner in which the award recipient’s payroll costs are classified or in which the award recipients’ service payments are classified.

The fair value of each stock option grant is estimated on the date of grant using the Black-Scholes option-pricing model. The Company estimates its expected stock volatility based on the historical volatility of a set of peer companies, which are publicly traded, and expects to continue to do so until it has adequate historical data regarding the volatility of its own publicly-traded stock price. The expected term of the Company’s stock options has been determined using the “simplified” method for awards that qualify as “plain vanilla” options. The expected term of stock options granted to non-employees is equal to the contractual term of the option award. The risk-free interest rate is determined by reference to the U.S. Treasury yield curve in effect at the time of grant of the award for time periods approximately equal to the expected term of the award. The Company uses an expected dividend yield of zero based on the fact that the Company has never paid cash dividends and does not expect to pay cash dividends in the future.

The fair value of each RSU is measured using the closing price of the Company’s common stock on the date of grant.

Patent Costs

All patent related costs incurred in connection with filing and prosecuting patent applications are expensed as incurred due to the uncertainty about the recovery of the expenditure. Amounts incurred are classified as general and administrative expenses.

Foreign Currency Translation

The reporting currency of the Company is the U.S. Dollar. The functional currency of ATIL, the Company’s wholly-owned subsidiary, is the British Pound. Assets and liabilities of ATIL are translated into U.S. Dollars based on exchange rates at the end of each reporting period. Revenues and expenses are translated at average exchange rates during the reporting period. Gains and losses arising from the translation of assets and liabilities are included as a component of accumulated other comprehensive loss within the Company’s consolidated balance sheet. Gains and losses resulting from foreign currency transactions are reflected within the Company’s consolidated statement of operations. The Company has not utilized foreign currency hedging strategies to mitigate the effect of its foreign currency exposure.

Income Taxes

The Company accounts for income taxes using the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in the financial statements or in the Company’s tax returns. Deferred taxes are determined based on the difference between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect in the years in which the differences are expected to reverse. Changes in deferred tax assets and liabilities are recorded in the provision for income taxes. The Company assesses the likelihood that its deferred tax assets will be recovered from future taxable income and, to the extent it believes, based upon the weight of available evidence, that it is more likely than not that all or a portion of the deferred tax assets will not be realized, a valuation allowance is established through a charge to income tax expense. Potential for recovery of deferred tax assets is evaluated by estimating the future taxable profits expected and considering prudent and feasible tax planning strategies.

The Company accounts for uncertainty in income taxes recognized in the consolidated financial statements by applying a two-step process to determine the amount of tax benefit to be recognized. First, the tax position must be evaluated to determine the likelihood that it will be sustained upon external examination by the taxing authorities. If the tax position is deemed more likely than not to be sustained, the tax position is then assessed to determine the amount of benefit to recognize in the consolidated financial statements. The amount of the benefit that may be recognized is the largest amount that has a greater than 50% likelihood of being realized upon ultimate settlement. The provision for income taxes includes the effects of any resulting tax reserves, or unrecognized tax benefits, that are considered appropriate as well as the related net interest and penalties.

Comprehensive Loss

Comprehensive loss includes net loss as well as other changes in stockholders’ equity that result from transactions and economic events other than those with stockholders. Comprehensive loss is comprised of net loss, foreign currency translation adjustments and unrealized gains (losses) on marketable securities.

Net Loss per Share

Basic net loss per share is computed using the weighted average number of common shares outstanding during the period. Diluted net loss per share is computed using the sum of the weighted average number of common shares outstanding during the period, plus the weighted average number of potential shares of common stock from the assumed exercise of stock options and warrants and the assumed vesting of RSUs, if dilutive. Since the Company was in a net loss position, basic and diluted net loss per share was the same for each of the periods presented.

Fair Value Measurements

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 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 (other than Level 1 quoted prices), 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 Company’s cash equivalents, marketable securities and contingent consideration are carried at fair value, determined according to the fair value hierarchy described above. The carrying value of the Company’s accounts payable and accrued expenses approximate fair value due to the short-term nature of these liabilities. The carrying value of the Company’s debt approximates fair value due to the debt bearing a variable interest rate which is reflective of current market rates.

Concentration of Credit Risk and of Significant Suppliers

Financial instruments that potentially expose the Company to concentrations of credit risk consist primarily of cash, cash equivalents and marketable securities. The Company holds all cash, cash equivalents and marketable securities balances at one accredited financial institution, in amounts that exceed federally insured limits. The Company does not believe that it is subject to unusual credit risk beyond the normal credit risk associated with commercial banking relationships.

The Company is dependent on third-party manufacturers to supply drug product, including all underlying components, for its research and development activities, including preclinical and clinical testing. These activities could be adversely affected by a significant interruption in the supply of active pharmaceutical ingredients or other components.

Segment Reporting

Operating segments are components of a company for which separate financial information is available and evaluated regularly by the chief operating decision maker in assessing performance and deciding how to allocate resources. The Company has two reportable segments, therapeutics and contract research. The therapeutics segment is focused on identifying and developing innovative therapies to address significant unmet needs for immuno-inflammatory diseases. The contract research segment earns revenue from the provision of laboratory services to clients through Confluence, the Company’s wholly-owned subsidiary. Contract research revenue is generally evidenced by contracts with clients which are on an agreed upon fixed-price, fee-for-service basis. The Company does not report balance sheet information by segment since it is not reviewed by the chief operating decision maker, and all of the Company’s tangible assets are held in the United States.

Recently Issued Accounting Pronouncements

In November 2018, the Financial Accounting Standards Board (“FASB”) issued ASU 2018-18, Collaborative Arrangements (Topic 808): Clarifying the Interaction Between Topic 808 and Topic 606, which, among other things, provides guidance on how to assess whether certain collaborative arrangement transactions should be accounted for under Topic 606. The Company adopted this standard as of January 1, 2020, the impact of which on its consolidated financial statements was not significant.

In August 2018, the FASB issued ASU 2018-15, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40). ASU 2018-15 requires a customer in a cloud computing arrangement that is a service contract to follow the internal-use software guidance in ASC 350-40 to determine which implementation costs to capitalize as assets or expense as incurred. The Company adopted this standard as of January 1, 2020, the impact of which on its consolidated financial statements was not significant.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820). The FASB developed the amendments to ASC 820 as part of its broader disclosure framework project, which aims to improve the effectiveness of disclosures in the notes to financial statements by focusing on requirements that clearly communicate the most important information to users of the financial statements. This update eliminates certain disclosure requirements for fair value

measurements for all entities, requires public entities to disclose certain new information and modifies some of the existing disclosure requirements. The Company adopted this standard as of January 1, 2020, the impact of which on its consolidated financial statements was not significant.

In June 2018, the FASB issued ASU 2018-07, Compensation—Stock Compensation (Topic 718). The amendments in this ASU expand the scope of Topic 718 to include stock-based compensation arrangements with nonemployees except for specific guidance on option pricing model inputs and cost attribution. The Company adopted this standard as of January 1, 2019, the impact of which on its consolidated financial statements was not significant.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). In July 2018, the FASB issued ASU 2018-10, Codification Improvements to Topic 842, Leases, and 2018-11, Targeted Improvements, which included a number of technical corrections and improvements, including additional options for transition. The new standard establishes a right-of-use model that requires a lessee to record a right-of-use asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases are classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. The amendments in ASU 2016-02 must be applied to all leases existing at the date a company initially applies the standard. The Company adopted the new standard as of January 1, 2019, using the effective date as the date of its initial application, and used the modified retrospective approach. The adoption of ASU 2016-02 resulted in the Company recording additional assets and liabilities of $2.1 million and $2.3 million, respectively, upon adoption on January 1, 2019. The adoption of ASU 2016-02 did not have a material impact on the Company’s consolidated statement of operations and comprehensive loss or cash flows.

RHOFADE

12 Months Ended

Dec. 31, 2020

RHOFADE

RHOFADE

3. RHOFADE

Disposition - Asset Purchase Agreement with EPI Health, LLC

In October 2019, the Company entered into an asset purchase agreement with EPI Health pursuant to which the Company sold the worldwide rights to RHOFADE, which included the assignment of certain licenses for related intellectual property assets (the “Disposition”).

Pursuant to the asset purchase agreement, EPI Health paid the Company an upfront payment of $35.2 million. In addition, EPI Health agreed to pay the Company (i) potential sales milestone payments of up to $20.0 million in the aggregate upon the achievement of specified levels of net sales of products as defined in the asset purchase agreement, (ii) a specified high single-digit royalty calculated as a percentage of net sales, on a product-by-product and country-by-country basis, until the date that the patent rights related to a particular product, such as RHOFADE, have expired, provided, that with respect to sales of RHOFADE in any territory outside of the United States, such royalty shall be paid until the date that the RHOFADE patent rights in the particular country have expired or, if later, 10 years from the date of the first commercial sale of RHOFADE in such country and (iii) 25% of any upfront, license, milestone, maintenance or fixed payment received by EPI Health in connection with any license or sublicense of the assets transferred in the Disposition in any territory outside of the United States, subject to specified exceptions. Finally, EPI Health agreed to assume the Company’s obligation to pay specified royalties and milestone payments under certain agreements with third parties.

Acquisition – Asset Purchase Agreement with Allergan Sales, LLC

In November 2018, the Company acquired the worldwide rights to RHOFADE, which included an exclusive license to certain intellectual property, from Allergan Sales, LLC (“Allergan”) pursuant to an asset purchase agreement. The acquisition of RHOFADE was accounted for as an asset acquisition in accordance with FASB ASC 805-50.

The following table summarizes the fair value of assets acquired in the acquisition of RHOFADE:


(In thousands)
Inventory	$	893
Intangible assets, net		66,229
Total assets acquired	$	67,122

Fair Value of Financial Assets and Liabilities

12 Months Ended

Dec. 31, 2020

Fair Value of Financial Assets and Liabilities

Fair Value of Financial Assets and Liabilities

4. Fair Value of Financial Assets and Liabilities

The following tables present information about the fair value measurements of the Company’s financial assets and liabilities which are measured at fair value on a recurring and non-recurring basis, and indicate the level of the fair value hierarchy utilized to determine such fair values:


	December 31, 2020
(In thousands)	Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents	$	14,955	$	1,500	$	—	$	16,455
Marketable securities		—		32,068		—		32,068
Total assets	$	14,955	$	33,568	$	—	$	48,523


Liabilities:
Acquisition-related contingent consideration	$	—	$	—	$	4,061	$	4,061
Total liabilities	$	—	$	—	$	4,061	$	4,061


	December 31, 2019
(In thousands)	Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents	$	21,277	$	—	$	—	$	21,277
Marketable securities		—		39,078		—		39,078
Total assets	$	21,277	$	39,078	$	—	$	60,355


Liabilities:
Acquisition-related contingent consideration	$	—	$	—	$	1,668	$	1,668
Total liabilities	$	—	$	—	$	1,668	$	1,668

As of December 31, 2020 and 2019, the Company’s cash equivalents included a money market fund, which was valued based upon Level 1 inputs. Cash equivalents as of December 31, 2020 also included commercial paper, which was valued based upon Level 2 inputs. The Company’s marketable securities as of December 31, 2020 and 2019 included U.S. government agency debt securities, commercial paper and asset-backed debt securities, which were valued based upon Level 2 inputs. Marketable securities as of December 31, 2019 also included corporate debt securities, which were valued based upon Level 2 inputs.

In determining the fair value of its Level 2 investments, the Company relied on quoted prices for identical securities in markets that are not active. These quoted prices were obtained by the Company with the assistance of a third-party pricing service based on available trade, bid and other observable market data for identical securities. Quarterly, the Company compares the quoted prices obtained from the third-party pricing service to other available independent pricing information to validate the reasonableness of the quoted prices provided. The Company evaluates whether adjustments to third-party pricing are necessary and, historically, the Company has not made adjustments to quoted prices obtained from the third-party pricing service. During the years ended December 31, 2020 and 2019, there were no transfers between Level 1, Level 2 and Level 3.

The increase in contingent consideration of $2.4 million during the year ended December 31, 2020 was primarily due to updates to the Company’s assumptions resulting from the successful completion of a Phase 1 clinical trial for ATI-450 and the submission and allowance of an Investigational New Drug Application (“IND”) for ATI-1777. The change in acquisition-related contingent consideration of $0.7 million during the year ended December 31, 2019 was the result of updates to the Company’s assumptions as a result of the submission and allowance of an IND for ATI-450.

As of December 31, 2020 and 2019, the fair value of the Company’s available-for-sale marketable securities by type of security was as follows:


	December 31, 2020
			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
(In thousands)	Cost		Gain		Loss		Value
Marketable securities:
Commercial paper	$	20,483	$	—	$	—	$	20,483
Asset-backed debt securities		4,036		1		—		4,037
U.S. government agency debt securities		7,547		1		—		7,548
Total marketable securities	$	32,066	$	2	$	—	$	32,068


	December 31, 2019
			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
(In thousands)	Cost		Gain		Loss		Value
Marketable securities:
Corporate debt securities	$	7,815	$	2	$	—	$	7,817
Commercial paper		15,129		—		—		15,129
Asset-backed debt securities		8,004		4		—		8,008
U.S. government agency debt securities		8,126		1		(3)		8,124
Total marketable securities	$	39,074	$	7	$	(3)	$	39,078

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

+ References + Details

Property and Equipment, Net

12 Months Ended

Dec. 31, 2020

Property and Equipment, Net

Property and Equipment, Net

5. Property and Equipment, Net

Property and equipment, net consisted of the following:


		December 31,		December 31,
(In thousands)	2020		2019
Computer equipment	$	1,197	$	1,315
Finance lease right-of-use assets		—		435
Lab equipment		1,340		1,250
Furniture and fixtures		617		647
Leasehold improvements		1,123		889
Property and equipment, gross		4,277		4,536
Accumulated depreciation		(2,623)		(2,066)
Property and equipment, net	$	1,654	$	2,470

Depreciation expense was $1.1 million, $1.5 million and $1.2 million for the years ended December 31, 2020, 2019 and 2018, respectively.

Intangible Assets

12 Months Ended

Dec. 31, 2020

Intangible Assets

Intangible Assets

6. Intangible Assets

Intangible assets consisted of the following:


		Gross Cost				Accumulated Amortization
	Remaining		December 31,		December 31,		December 31,		December 31,
(In thousands, except years)	Life (years)	2020		2019		2020		2019
Other intangible assets	6.6		751		751		257		181
IPR&D	na		6,629		6,629		—		—
Total intangible assets		$	7,380	$	7,380	$	257	$	181

Amortization expense was $75 thousand for each of the years ended December 31, 2020, 2019 and 2018.

As of December 31, 2020, estimated future amortization expense is as follows:


		Year Ending
(In thousands)		December 31,
2021	$	75
2022		75
2023		75
2024		75
2025		75
Thereafter		119
Total	$	494

Accrued Expenses

12 Months Ended

Dec. 31, 2020

Accrued Expenses

Accrued Expenses

7. Accrued Expenses

Accrued expenses consisted of the following:


		December 31,		December 31,
(In thousands)	2020		2019
Employee compensation expenses	$	3,971	$	3,321
Research and development expenses		761		2,857
Other		1,174		1,543
Total accrued expenses	$	5,906	$	7,721

Debt

12 Months Ended

Dec. 31, 2020

Debt

Debt

8. Debt

Loan and Security Agreement – Silicon Valley Bank

In March 2020, the Company entered into a Loan and Security Agreement with Silicon Valley Bank (“SVB”). The Loan and Security Agreement provides for $11.0 million in term loans, of which the Company borrowed the entire amount on March 30, 2020. The Loan and Security Agreement is secured by substantially all of the assets of the Company other than intellectual property. In connection with the Loan and Security Agreement, the Company issued to SVB a warrant to purchase up to 460,251 shares of common stock (the “Warrant”) (see Note 9). The proceeds of the Loan and Security Agreement were allocated to the term loan and Warrant using a relative fair value approach.

The term loan repayment schedule provides for interest only payments beginning April 1, 2020 and continuing through March 1, 2022, followed by 24 consecutive equal monthly installments of principal, plus monthly payments of accrued interest, starting on April 1, 2022 and continuing through the maturity date of March 1, 2024. All outstanding principal and accrued and unpaid interest will be due and payable on the maturity date. The Loan and Security Agreement provides for an annual interest rate equal to the greater of (i) the prime rate then in effect as reported in The Wall Street Journal plus 2% and (ii) 6.75%.

The Loan and Security Agreement includes a final payment fee equal to 5% of the original principal amount borrowed. The Company has the option to prepay the outstanding balance of the term loans in full, subject to a prepayment premium of (i) 3% of the original principal amount borrowed for any prepayment on or prior to the first anniversary of March 30, 2020, (ii) 2% of the original principal amount borrowed for any prepayment after the first anniversary and on or before the second anniversary of March 30, 2020 or (iii) 1% of the original principal amount borrowed for any prepayment after the second anniversary of March 30, 2020 but before March 1, 2024.

Loan and Security Agreement – Oxford Finance LLC

In October 2018, the Company entered into a Loan and Security Agreement with Oxford Finance LLC. The Loan and Security Agreement provided for up to $65.0 million in term loans, of which the Company borrowed $30.0 million in October 2018. In October 2019, the Company repaid in full the $30.0 million that was outstanding under the Loan and Security Agreement, together with all accrued and unpaid interest and fees.

Stockholders' Equity

12 Months Ended

Dec. 31, 2020

Stockholders' Equity

Stockholders' Equity

9. Stockholders’ Equity

Preferred Stock

As of December 31, 2020 and 2019, the Company’s amended and restated certificate of incorporation authorized the Company to issue 10,000,000 shares of undesignated preferred stock. There were no shares of preferred stock outstanding as of December 31, 2020 and 2019.

Common Stock

As of December 31, 2020 and 2019, the Company’s amended and restated certificate of incorporation authorized the Company to issue 100,000,000 shares of $0.00001 par value common stock.

Each share of common stock entitles the holder to one vote on all matters submitted to a vote of the Company’s stockholders. Common stockholders are entitled to receive dividends, as may be declared by the board of directors, if any, subject to any preferential dividend rights of any series of preferred stock that may be outstanding. No dividends have been declared through December 31, 2020.

October 2018 Public Offering

In October 2018, the Company entered into an underwriting agreement pursuant to which the Company issued and sold 9,941,750 shares of common stock under registration statements on Form S-3, including the underwriters’ full exercise of their option to purchase additional shares. The shares of common stock were sold to the public at a price of $10.75 per share, for gross proceeds of $106.9 million. The Company paid underwriting discounts and commissions of $6.4 million to the underwriters in connection with the offering. In addition, the Company incurred expenses of $0.3 million in connection with the offering. The net offering proceeds received by the Company, after deducting underwriting discounts and commissions and offering expenses, were $100.2 million.

Warrants

The Warrant issued to SVB in March 2020 had an initial exercise price of $0.956 per share, subject to adjustment as provided in the Warrant. The Warrant became immediately exercisable in full upon the funding of the term loan facility. The Company assigned a fair value of $0.4 million to the Warrant using a Black-Scholes valuation methodology, and also concluded that the Warrant was indexed to its own stock and therefore classified the Warrant as an equity instrument. In January 2021, SVB net exercised the Warrant in full, and the Company issued to SVB 388,119 shares of common stock.

Equity Purchase Agreement with Lincoln Park Capital Fund, LLC

In August 2020, the Company entered into the Purchase Agreement with Lincoln Park which provided that, upon the terms and subject to the conditions and limitations set forth therein, the Company may sell to Lincoln Park, at its discretion, up to $15.0 million of shares of its common stock over the 36-month term of the Purchase Agreement. Upon execution of the Purchase Agreement, the Company issued 121,584 shares of its common stock to Lincoln Park as commitment shares in accordance with the closing conditions contained within the Purchase Agreement. The commitment shares were valued using the closing price of the Company’s common stock on the effective date of the Purchase Agreement resulting in an aggregate fair value of $0.3 million. Through December 31, 2020, the Company sold 2,111,170 shares of its common stock to Lincoln Park under the Purchase Agreement for net proceeds of $7.7 million. The Company terminated the Purchase Agreement in January 2021. The Company did not sell any additional shares prior to terminating the Purchase Agreement in January 2021 in connection with the public offering of common stock described below (see Note 21).

Stock-Based Awards

12 Months Ended

Dec. 31, 2020

Stock-Based Awards

Stock-Based Awards

10. Stock-Based Awards

2015 Equity Incentive Plan

In September 2015, the Company’s board of directors adopted the 2015 Equity Incentive Plan (the “2015 Plan”), and the Company’s stockholders approved the 2015 Plan. The 2015 Plan became effective in connection with the Company’s initial public offering. Beginning at the time the 2015 Plan became effective, no further grants may be made

under the Company’s 2012 Equity Compensation Plan, as amended and restated (the “2012 Plan”). The 2015 Plan provides for the grant of incentive stock options, nonqualified stock options, stock appreciation rights, restricted stock awards, RSU awards, performance stock awards, cash-based awards and other stock-based awards. The number of shares initially reserved for issuance under the 2015 Plan was 1,643,872 shares of common stock. The number of shares of common stock that may be issued under the 2015 Plan will automatically increase on January 1 of each year ending on January 1, 2025, in an amount equal to the lesser of (i) 4.0% of the shares of the Company’s common stock outstanding on December 31 of the preceding calendar year or (ii) an amount determined by the Company’s board of directors. The shares of common stock underlying any awards that expire, are otherwise terminated, settled in cash or repurchased by the Company under the 2015 Plan and the 2012 Plan will be added back to the shares of common stock available for issuance under the 2015 Plan. As of December 31, 2020, 2,423,020 shares remained available for grant under the 2015 Plan. As of January 1, 2021, the number of shares of common stock that may be issued under the 2015 Plan was automatically increased by 1,804,372 shares.

2017 Inducement Plan

In July 2017, the Company’s board of directors adopted the 2017 Inducement Plan (the “2017 Inducement Plan”). The 2017 Inducement Plan is a non-stockholder approved stock plan adopted pursuant to the “inducement exception” provided under Nasdaq listing rules. The Company had 443,000 stock options and 28,895 RSUs outstanding as of December 31, 2020 under the 2017 Inducement Plan. All shares of common stock that were eligible for issuance under the 2017 Inducement Plan after October 1, 2018, including any shares underlying any awards that expire or are otherwise terminated, reacquired to satisfy tax withholding obligations, settled in cash or repurchased by the Company in the future that would have been eligible for re-issuance under the 2017 Inducement Plan, were retired.

2012 Equity Compensation Plan

Upon the 2015 Plan becoming effective, no further grants can be made under the 2012 Plan. The Company granted a total of 1,140,524 stock options under the 2012 Plan, of which 549,561 and 745,735 were outstanding as of December 31, 2020 and 2019, respectively. Stock options granted under the 2012 Plan vested over four years and expire after ten years.

Stock Option Valuation

The weighted average assumptions the Company used to estimate the fair value of stock options granted during the years ended December 31, 2020, 2019 and 2018 were as follows:


	Year Ended
	December 31,
	2020		2019		2018
Risk-free interest rate	0.87	%	2.27	%	2.66	%
Expected term (in years)	6.1		6.2		6.3
Expected volatility	85.19	%	99.36	%	96.78	%
Expected dividend yield	0	%	0	%	0	%

The Company recognizes compensation expense for awards over their vesting period. Compensation expense for awards includes the impact of forfeiture in the period when they occur.

Stock Options

The following table summarizes stock option activity for the years ended December 31, 2020, 2019 and 2018:


				Weighted
		Weighted		Average
		Average		Remaining	Aggregate
	Number	Exercise		Contractual	Intrinsic
(In thousands, except share and per share data and years)	of Shares	Price		Term	Value
				(in years)
Outstanding as of December 31, 2017	3,328,757	$	20.69	8.3	$	19,812
Granted	1,459,800		20.97
Exercised	(59,450)		9.70			724
Forfeited and cancelled	(447,026)		24.62
Outstanding as of December 31, 2018	4,282,081	$	20.53	7.9	$	2,404
Granted	44,500		5.75
Exercised	(142,779)		1.33			112
Forfeited and cancelled	(1,081,581)		23.01
Outstanding as of December 31, 2019	3,102,221	$	20.33	6.6	$	148
Granted	734,800		1.30
Exercised	(53,737)		1.30			145
Forfeited and cancelled	(911,786)		22.41
Outstanding as of December 31, 2020	2,871,498	$	15.16	6.8	$	4,890
Options vested and expected to vest as of December 31, 2020	2,871,498	$	15.16	6.8	$	4,890
Options exercisable as of December 31, 2020	1,844,197	$	18.92	5.8	$	1,424

The weighted average grant date fair value of stock options granted during the years ended December 31, 2020, 2019 and 2018 was $0.93, $4.63 and $16.55 per share, respectively.

Restricted Stock Units

The following table summarizes RSU activity for the years ended December 31, 2020, 2019 and 2018.


		Weighted
		Average
		Grant Date		Aggregate
	Number	Fair Value		Intrinsic
(In thousands, except share and per share data)	of Shares	Per Share		Value
Outstanding as of December 31, 2017	283,553	$	27.02
Granted	552,060		19.03
Vested	(140,497)		27.22	$	2,158
Forfeited and cancelled	(68,709)		23.65
Outstanding as of December 31, 2018	626,407	$	20.30
Granted	3,650,942		3.56
Vested	(173,444)		21.31	$	799
Forfeited and cancelled	(510,990)		10.63
Outstanding as of December 31, 2019	3,592,915	$	4.62
Granted	1,168,805		1.36
Vested	(1,804,429)		3.33	$	2,607
Forfeited and cancelled	(713,134)		4.77
Outstanding as of December 31, 2020	2,244,157	$	3.83

Stock-Based Compensation

Stock-based compensation expense included in total costs and expenses on the consolidated statement of operations included the following:


	Year Ended
	December 31,
(In thousands)	2020		2019		2018
Cost of revenue	$	946	$	703	$	766
Research and development		2,919		5,091		6,480
General and administrative		7,342		10,288		9,317
Total stock-based compensation expense	$	11,207	$	16,082	$	16,563

As of December 31, 2020, the Company had unrecognized stock-based compensation expense for stock options and RSUs of $4.2 million and $5.5 million, respectively, which is expected to be recognized over weighted average periods of 1.3 years and 1.8 years, respectively.

Net Loss per Share

12 Months Ended

Dec. 31, 2020

Net Loss per Share

Net Loss per Share

11. Net Loss per Share

Basic and diluted net loss per share is summarized in the following table:


	Year Ended
	December 31,
(In thousands, except for share and per share data)	2020		2019		2018
Numerator:
Net loss	$	(51,015)	$	(161,354)	$	(132,738)
Denominator:
Weighted average shares of common stock outstanding, basic and diluted		42,539,293		41,323,921		32,909,762
Net loss per share, basic and diluted	$	(1.20)	$	(3.90)	$	(4.03)

The Company’s potentially dilutive securities, which included stock options, RSUs and warrants, have been excluded from the computation of diluted net loss per share since the effect would be to reduce the net loss per share. Therefore, the weighted average number of shares of common stock outstanding used to calculate both basic and diluted net loss per share attributable to common stockholders is the same. The following table presents potential shares of common stock excluded from the calculation of diluted net loss per share attributable to common stockholders for the years ended December 31, 2020, 2019 and 2018. All share amounts presented in the table below represent the total number outstanding as of December 31 of each year.



	December 31,
	2020	2019	2018
Options to purchase common stock	2,871,498	3,102,221	4,282,081
Restricted stock unit awards	2,244,157	3,592,915	626,407
Warrants	460,251	—	—
Total potential shares of common stock	5,575,906	6,695,136	4,908,488

Leases

12 Months Ended

Dec. 31, 2020

Leases

Leases

12. Leases

The Company has operating leases for office space and laboratory facilities, and had finance leases for its laboratory equipment. As a result of the Company’s decision to actively seek partners for its commercial products, the

Company terminated the finance leases for its fleet vehicles and recognized a loss on lease termination of $0.2 million during the year ended December 31, 2019. The components of lease expense were as follows:


	Year Ended
	December 31,
(In thousands)	2020		2019
Operating lease expense	$	1,013	$	808

Finance Leases:
Amortization of right-to-use assets	$	113	$	443
Interest expense		5		87
Total finance lease expenses	$	118	$	530

Rent expense was $1.0 million, $1.0 million and $0.9 million for the years ended December 31, 2020, 2019 and 2018, respectively, which was recognized on a straight-line basis over the term of the lease.

Operating Leases

Agreements for Office Space

The Company has a sublease agreement with Auxilium Pharmaceuticals, LLC (the “Sublandlord”) pursuant to which it subleases 33,019 square feet of office space for its headquarters in Wayne, Pennsylvania. The sublease has a term that runs through October 2023. If for any reason the lease between Chesterbrook Partners, LP (“Landlord”) and Sublandlord is terminated or expires prior to October 2023, the Company’s sublease will automatically terminate. In December 2020, the Company entered into a sub-sublease agreement under which it sub-subleased 8,115 square feet. The sub-sublease term runs concurrent with the original sublease agreement.

In February 2019, the Company entered into a sublease agreement with a third party for 20,433 square feet of office and laboratory space in St. Louis, Missouri. The lease commenced in June 2019 and has a term that runs through June 2029.

Supplemental balance sheet information related to operating leases is as follows:


		December 31,		December 31,
(In thousands)	2020		2019
Operating Leases:
Gross cost	$	5,240	$	5,213
Accumulated amortization		(1,111)		(480)
Other assets	$	4,129	$	4,733

Current portion of lease liabilities	$	603	$	526
Other liabilities		2,894		3,548
Total operating lease liabilities	$	3,497	$	4,074

Finance Leases

Laboratory Equipment

The Company leased laboratory equipment which it used in its laboratory space in St. Louis, Missouri under two finance lease financing arrangements which the Company entered into in August 2017 and October 2017, and which terms ended in October 2020 and December 2020, respectively.

Fleet Vehicles

The Company leased automobiles for its sales force and other field-based employees under the terms of a master lease agreement with a third party. The lease term for each automobile began on the date the Company took delivery and continued for a period of four years. The Company returned all leased vehicles during the year ended December 31, 2019.

Supplemental balance sheet information related to finance leases is as follows:


(In thousands)		December 31,		December 31,
Finance Leases:	2020		2019
Property and equipment, gross	$	—	$	435
Accumulated depreciation		—		(322)
Property and equipment, net	$	—	$	113

Current portion of lease liabilities	$	—	$	111
Other liabilities		—		21
Total finance lease liabilities	$	—	$	132

Supplemental information related to operating and finance leases is as follows:


	Year Ended
(In thousands, except for years and percentages)	December 31,
Supplemental Cash Flow Lease Information:	2020			2019
Operating cash flows from operating leases	$	907		$	755
Operating cash flows from finance leases	$	5		$	87
Financing cash flows from finance leases	$	137		$	523

Leased assets obtained in exchange for new operating lease liabilities	$	—		$	3,060

Weighted-Average Remaining Lease Term (in years):
Operating leases		6.0			6.8
Finance leases		—			0.9

Weighted-Average Discount Rate:
Operating leases		10.1	%		10.1%
Finance leases		10.0	%		10.0%

Future minimum lease payments under operating and finance lease agreements are as follows:


(In thousands)		Operating
Year Ending December 31,		Leases
2021	$	924
2022		949
2023		866
2024		343
2025		352
Thereafter		1,301
Total undiscounted lease payments		4,735
Less: unrecognized interest		(1,238)
Total lease liability	$	3,497

Income Taxes

12 Months Ended

Dec. 31, 2020

Income Taxes

Income Taxes

13. Income Taxes

During the years ended December 31, 2020, 2019 and 2018, the Company did not record an income tax benefit for net operating losses incurred in each year due to the uncertainty of realizing a benefit from those items.

Loss before income taxes is allocated as follows:


	Year Ended December 31,
(In thousands)	2020		2019		2018
U.S. operations	$	(51,215)	$	(161,192)	$	(132,473)
Foreign operations		18		(162)		(265)
Loss before income taxes	$	(51,197)	$	(161,354)	$	(132,738)

A reconciliation of the U.S. federal statutory income tax rate to the Company’s effective income tax rate is as follows:


	Year Ended December 31,
	2020		2019		2018
Federal statutory income tax rate	(21.0)	%	(21.0)	%	(21.0)	%
State taxes, net of federal benefit	(7.5)		(6.6)		(3.5)
Research and development tax credits	(2.6)		(1.5)		(2.1)
Permanent differences	2.6		3.0		0.8
Change in deferred tax asset valuation allowance	28.1		26.2		25.7
Effective income tax rate	(0.4)	%	0.1	%	(0.1)	%

Deferred tax liabilities, net consisted of the following:


		December 31,
(In thousands)	2020		2019
Deferred tax assets:
Net operating loss carryforwards	$	101,277	$	90,298
Capitalized start-up costs		6,509		6,904
Research and development tax credit carryforwards		8,732		7,417
Capitalized research and development expense		4,611		4,456
Stock‑based compensation expense		14,526		12,973
Accrued compensation		745		588
Lease liabilities		888		945
Other		602		618
Total deferred tax assets		137,890		124,199
Deferred tax liabilities:
Property and equipment		(209)		(206)
Intangible asset		(2,033)		(1,741)
Right-to-use assets		(1,026)		(1,235)
Other		(430)		(600)
Total deferred tax liabilities		(3,698)		(3,782)
Valuation allowance		(134,559)		(120,966)
Deferred tax liabilities, net	$	(367)	$	(549)

As of December 31, 2020, the Company had federal and state net operating loss (“NOL”) carryforwards of $367.6 million and $369.6 million, respectively, which will begin to expire in 2032. As of December 31, 2020, the Company also had federal research and development tax credit carryforwards of $8.6 million which will begin to expire in 2032, and state research and development tax credit carryforwards of $0.1 million which will begin to expire in 2022. The Company also has $0.2 million of loss carryforwards in the United Kingdom which can be carried forward indefinitely. Utilization of the NOLs and research and development tax credit carryforwards in the United States may be subject to a substantial annual limitation under Section 382 of the Internal Revenue Code of 1986 due to ownership changes that may have occurred previously or that could occur in the future. These ownership changes may limit the amount of carryforwards that can be utilized annually to offset future taxable income. In general, an ownership change, as defined by Section 382, results from transactions increasing the ownership of certain stockholders or public groups in the stock of a corporation by more than 50% over a three-year period. The Company has completed an analysis under Section 382 for NOLs generated from July 13, 2012 through July 20, 2020. Although the Company has experienced Section 382 ownership changes since 2012, the Company has concluded that it should have sufficient ability to utilize NOLs accumulated during the periods

tested. The Company has not yet determined if a Section 382 ownership change has occurred after July 20, 2020. In addition, the Company may experience ownership changes in the future as a result of subsequent shifts in its stock ownership, some of which may be outside of the Company’s control.

The Company has evaluated the positive and negative evidence bearing upon its ability to realize the deferred tax assets. The Company considered its history of cumulative net losses incurred since inception, its lack of substantial revenue generated to date, and its forecasted future operating losses and concluded that it is more likely than not that the Company will not realize the benefits of its deferred tax assets. Accordingly, a full valuation allowance has been established against the deferred tax assets as of December 31, 2020 and 2019. The Company evaluates positive and negative evidence of its ability to realize deferred tax assets at each reporting period.

Changes in the valuation allowance for deferred tax assets during the years ended December 31, 2020, 2019 and 2018 related primarily to the increases in NOLs, capitalized start-up costs, and research and development tax credit carryforwards and were as follows:


		Year Ended December 31,
(In thousands)		2020		2019		2018
Valuation allowance at beginning of year	$	(120,966)	$	(80,985)	$	(46,878)
Decreases recorded as benefit to income tax provision		—		—		—
Decreases recorded to opening balance sheet		58		—		—
Increases recorded to income tax provision		(13,651)		(39,981)		(34,107)
Valuation allowance as of end of year	$	(134,559)	$	(120,966)	$	(80,985)

The Company files tax returns as prescribed by the tax laws of the jurisdictions in which it operates. In the normal course of business, the Company is subject to examination by federal and state jurisdictions, where applicable. There are currently no pending income tax examinations. The Company’s tax years are still open under statute from 2017 to the present. All open years may be examined to the extent that tax credit or NOLs are used in future periods. The Company’s policy is to record interest and penalties related to income taxes as part of its income tax provision.

Related Party Transactions

12 Months Ended

Dec. 31, 2020

Related Party Transactions

Related Party Transactions

14. Related Party Transactions

Mallinckrodt plc

In April 2018, Bryan Reasons was appointed to the Company’s board of directors. Subsequently, in March 2019, Mr. Reasons became the Chief Financial Officer of Mallinckrodt plc. Prior to Mr. Reasons joining Mallinckrodt plc, in November 2018 the Company entered into a master services agreement with a subsidiary of Mallinckrodt plc pursuant to which Confluence provides laboratory services to the subsidiary (“Mallinckrodt”) in the ordinary course of business. Mr. Reasons was not involved in the negotiation or execution of the agreement, but may be deemed to have an interest in the ongoing transactions based on his employment as an executive officer of Mallinckrodt plc. During the years ended December 31, 2020 and 2019, the Company invoiced Mallinckrodt for $0.3 million and $0.1 million, respectively, under the master services agreement. As of December 31, 2020 and 2019, the Company had $0 of outstanding accounts receivable balances from Mallinckrodt. Mr. Reasons had no financial interest in these transactions.

Agreements Related to Intellectual Property

12 Months Ended

Dec. 31, 2020

15. Agreements Related to Intellectual Property

Asset Purchase Agreement – EPI Health, LLC

In October 2019, the Company sold RHOFADE to EPI Health pursuant to an asset purchase agreement. EPI Health agreed to pay the Company a high single-digit royalty calculated as a percentage of net sales on a country-by-country basis until the date that the patent rights related to RHOFADE have expired or, if later, ten years from the date of the first commercial sale of RHOFADE in such country. The Company recorded royalty income under the asset purchase agreement of $0.7 million and $0 during the years ended December 31, 2020 and 2019, respectively. Royalty income is included in other revenue on the consolidated statements of operations and comprehensive loss. EPI Health has also agreed to pay the Company potential sales milestone payments of up to $20.0 million in the aggregate upon the achievement of specified levels of net sales of products covered by the asset purchase agreement, and 25% of any upfront, license, milestone, maintenance or fixed payment received by EPI Health in connection with any license or sublicense of the assets transferred in the disposition in any territory outside of the United States, subject to specified exceptions.

Asset Purchase Agreement – Allergan Sales, LLC

In November 2018, the Company acquired RHOFADE from Allergan pursuant to an asset purchase agreement. The Company agreed to pay Allergan specified royalties, ranging from a mid-single digit percentage to a mid-teen percentage of net sales, subject to specified reductions, limitations and other adjustments. The Company incurred royalties earned by Allergan under the asset purchase agreement of $0, $1.4 million and $0.1 million during the years ended December 31, 2020, 2019 and 2018, respectively.

Agreement and Plan of Merger - Confluence

In August 2017, the Company entered into an Agreement and Plan of Merger, pursuant to which it acquired Confluence (the “Confluence Agreement”). In November 2018, a development milestone specified in the Confluence Agreement was achieved, as a result of which the Company paid the former Confluence equity holders $2.5 million in cash and issued 253,208 shares of its common stock with a fair value of $2.2 million. Under the Confluence Agreement, the Company also agreed to pay the former Confluence equity holders aggregate remaining contingent consideration of up to $75.0 million, based upon the achievement of specified regulatory and commercial milestones set forth in the Confluence Agreement. In addition, the Company agreed to pay the former Confluence equity holders future royalty payments calculated as a low single-digit percentage of annual net sales, subject to specified reductions, limitations and other adjustments, until the date that all of the patent rights for that product have expired, as determined on a country-by-country and product-by-product basis or, in specified circumstances, ten years from the first commercial sale of such product. In addition to the payments described above, if the Company sells, licenses or transfers any of the intellectual property acquired from Confluence pursuant to the Confluence Agreement to a third party, the Company will be obligated to pay the former Confluence equity holders a portion of any consideration received from such sale, license or transfer in specified circumstances.

License and Collaboration Agreement – Rigel Pharmaceuticals, Inc.

In August 2015, the Company entered into an exclusive, worldwide license and collaboration agreement with Rigel Pharmaceuticals, Inc. (“Rigel”) for the development and commercialization of products containing two specified JAK inhibitors, which the Company refers to as ATI-501 and ATI-502. During the year ended December 31, 2019, the Company made a milestone payment of $4.0 million to Rigel upon the achievement of a specified development milestone which is included in research and development expenses on the Company’s consolidated statement of operations. In connection with an amendment of the agreement with Rigel in October 2019, the Company paid Rigel an amendment fee of $1.5 million during the year ended December 31, 2020.

Retirement Savings Plan

12 Months Ended

Dec. 31, 2020

Retirement Savings Plan

Retirement Savings Plan

16. Retirement Savings Plan

The Company has a defined contribution savings plan under Section 401(k) of the Internal Revenue Code. This plan covers substantially all employees who meet minimum age and service requirements and allows participants to defer a portion of their annual compensation on a pre-tax basis. Company contributions to the plan may be made at the discretion of the Company’s board of directors. The Company has elected to match 100% of employee contributions to the 401(k) Plan up to 4% of the employee’s earnings, subject to certain limitations. Company contributions under the 401(k) Plan were $0.4 million, $0.7 million and $0.7 million for the years ended December 31, 2020, 2019 and 2018, respectively.

Restructuring Charges

12 Months Ended

Dec. 31, 2020

Restructuring Charges

Restructuring Charges

17. Restructuring Charges

In September 2019, the Company announced the completion of a strategic review and its decision to refocus on its immuno-inflammatory development programs and to actively seek partners for its commercial products. As a result, the Company terminated 63 employees (“terminated employees”) and gave notice to an additional 23 employees (“noticed employees”) who were asked to provide transition services through termination dates ranging between 4 to 10 months from the date notice was given. The terminated employees were entitled to receive cash severance payments as well as cash payments in lieu of sixty days’ notice required by the Worker Adjustment and Retraining Notification Act (the “WARN Act”). The noticed employees were entitled to receive one-time cash severance payments which were not contingent upon providing additional services to the Company. In addition, certain noticed employees earned retention bonuses if they continued to be employed by the Company through certain termination dates. The Company recorded a restructuring charge for the one-time severance and WARN Act payments, which was triggered immediately upon either

terminating or giving notice to the impacted employees. The Company expensed the cost of retention bonuses for noticed employees over their respective service terms. During the year ended December 31, 2020, the Company recognized aggregate expenses of $0.1 million and made payments of $0.3 million related to termination benefits for employees. During the year ended December 31, 2019, the Company recognized aggregate expenses of $2.7 million and made payments of $2.3 million related to termination benefits for employees.

Discontinued Operations

12 Months Ended

Dec. 31, 2020

Discontinued Operations

Discontinued Operations

18. Discontinued Operations

The components of loss from discontinued operations as reported in the Company’s consolidated statement of operations were as follows:


	Year Ended
	December 31,
(In thousands, except share and per share data)	2020		2019		2018
Revenues:
Product sales, net	$	424	$	13,896	$	3,940
Total revenue, net		424		13,896		3,940

Costs and expenses:
Cost of revenue (excludes amortization)		—		4,522		1,969
Research and development		1		503		2,168
Sales and marketing		283		23,112		47,827
General and administrative		1		2,929		2,058
Intangible asset impairment		—		27,638		—
Amortization of definite-lived intangible		—		4,426		552
Total costs and expenses		285		63,130		54,574
Income (loss) from operations		139		(49,234)		(50,634)

Other income, net		—		1,422		—
Income (loss) from discontinued operations before income taxes		139		(47,812)		(50,634)
Income tax benefit		—		—		—
Net income (loss) from discontinued operations	$	139	$	(47,812)	$	(50,634)

Net income (loss) from discontinued operations per share, basic and diluted	$	0.00	$	(1.16)	$	(1.54)
Weighted average common shares outstanding, basic and diluted		42,539,293		41,323,921		32,909,762

The following table presents the details of product sales, net included in discontinued operations:


	Year Ended
	December 31,
(In thousands)	2020		2019		2018
ESKATA	$	—	$	312	$	2,804
RHOFADE		424		13,584		1,136
Total product sales, net	$	424	$	13,896	$	3,940

The Company recorded $0.4 million of RHOFADE product sales, net during the year ended December 31, 2020 due to a reversal of previously accrued product sales-related reserves.

The following table presents information related to assets and liabilities reported as discontinued operations in the Company’s consolidated balance sheet:


	December 31,		December 31,
(In thousands)	2020		2019
Accounts receivable, net	$	—	$	4,966
Discontinued operations - current assets	$	—	$	4,966


Accounts payable	$	1,175	$	1,705
Accrued expenses		1,936		2,452
Discontinued operations - current liabilities	$	3,111	$	4,157

The Company relied on Allergan to distribute RHOFADE on its behalf pursuant to the terms of a transition services agreement. Accounts receivable, net as of December 31, 2019 included $5.0 million related to amounts invoiced by Allergan for sales of RHOFADE.

The following table presents certain non-cash items related to discontinued operations, which are included in the Company’s consolidated statement of cash flows:


	Year Ended
	December 31,
(In thousands)	2020		2019
Depreciation and amortization	$	—	$	313
Stock-based compensation expense		—		95
Intangible asset impairment charge		—		27,638
Loss on disposal of property and equipment		—		248
		—		28,294
Gain on sale of RHOFADE		—		1,670
Total non-cash items	$	—	$	26,624

As a result of the Company’s decision to actively seek partners for its commercial products, the Company terminated the finance leases for its fleet vehicles and recognized a loss on lease termination of $0.2 million in the year ended December 31, 2019, which is included in other income, net in the Company’s consolidated statement of operations.

During the year ended December 31, 2019, the Company performed an impairment analysis of the RHOFADE intangible asset due to its decision to discontinue commercial operations and actively seek a commercialization partner for RHOFADE. The Company’s impairment analysis, which primarily utilized a third-party indication of fair value, resulted in a fair value for the RHOFADE intangible asset which was less than its carrying value. As a result, the Company recorded an impairment charge of $27.6 million to adjust the carrying value of the RHOFADE intangible asset to its net realizable value.

Segment Information

12 Months Ended

Dec. 31, 2020

Segment Information

Segment Information

19. Segment Information

The Company has two reportable segments, therapeutics and contract research. The therapeutics segment is focused on identifying and developing innovative therapies to address significant unmet needs for immuno-inflammatory diseases. The contract research segment earns revenue from the provision of laboratory services to clients through Confluence, the Company’s wholly-owned subsidiary. Contract research revenue is generally evidenced by contracts with clients which are on an agreed upon fixed-price, fee-for-service basis. Corporate and other includes general and administrative expenses as well as eliminations of intercompany transactions. The Company does not report balance sheet information by segment since it is not reviewed by the chief operating decision maker, and all of the Company’s tangible assets are held in the United States.

The Company’s results of operations by segment for the years ended December 31, 2020, 2019 and 2018 are summarized in the tables below:


(In thousands)			Contract		Corporate		Total
Year Ended December 31, 2020	Therapeutics		Research		and Other		Company
Total revenue	$	696	$	13,319	$	(7,533)	$	6,482
Cost of revenue		—		12,228		(7,095)		5,133
Research and development		32,170		—		(439)		31,731
General and administrative		—		2,794		17,736		20,530
Loss from operations	$	(31,474)	$	(1,703)	$	(17,735)	$	(50,912)
Income (loss) from discontinued operations	$	140	$	—	$	(1)	$	139


			Contract		Corporate		Total
Year Ended December 31, 2019	Therapeutics		Research		and Other		Company
Total revenue	$	—	$	16,824	$	(12,597)	$	4,227
Cost of revenue		—		16,253		(12,198)		4,055
Research and development		65,298		—		(399)		64,899
General and administrative		620		2,738		24,469		27,827
Goodwill impairment		18,504		—		—		18,504
Loss from operations	$	(84,422)	$	(2,167)	$	(24,469)	$	(111,058)
Loss from discontinued operations	$	(46,305)	$	—	$	(1,507)	$	(47,812)


			Contract		Corporate		Total
Year Ended December 31, 2018	Therapeutics		Research		and Other		Company
Revenue, net	$	1,500	$	13,135	$	(8,484)	$	6,151
Cost of revenue		—		11,399		(7,070)		4,329
Research and development		62,255		—		(1,414)		60,841
General and administrative		160		2,181		23,420		25,761
Loss from operations	$	(60,915)	$	(445)	$	(23,420)	$	(84,780)
Loss from discontinued operations	$	(48,576)	$	—	$	(2,058)	$	(50,634)

Intersegment Revenue

Revenue for the contract research segment included $7.5 million, $12.6 million and $8.5 million for services performed on behalf of the therapeutics segment for the years ended December 31, 2020, 2019 and 2018, respectively. All intersegment revenue has been eliminated in the Company’s consolidated statement of operations.

Legal Proceedings

12 Months Ended

Dec. 31, 2020

Legal Proceedings

Legal Proceedings

20. Legal Proceedings

Securities Class Action

On July 30, 2019, plaintiff Linda Rosi (“Rosi”) filed a putative class action complaint captioned Rosi v. Aclaris Therapeutics, Inc., et al. in the U.S. District Court for the Southern District of New York against the Company and certain of its executive officers. The complaint alleges that the defendants violated federal securities laws by, among other things, failing to disclose an alleged likelihood that regulators would scrutinize advertising materials related to ESKATA and find that the materials minimized the risks or overstated the efficacy of the product. The complaint seeks unspecified compensatory damages on behalf of Rosi and all other persons and entities that purchased or otherwise acquired the Company’s securities between May 8, 2018 and June 20, 2019.

On September 5, 2019, an additional plaintiff, Robert Fulcher (“Fulcher”), filed a substantially identical putative class action complaint captioned Fulcher v. Aclaris Therapeutics, Inc., et al. in the same court against the same defendants.

On November 6, 2019, the court consolidated the Rosi and Fulcher actions (together, the “Consolidated Securities Action”) and appointed Fulcher “lead plaintiff” for the putative class.

On January 24, 2020, Fulcher filed a consolidated amended complaint in the Consolidated Securities Action, naming two additional executive officers as defendants, extending the putative class period to August 12, 2019, and adding allegations concerning, among other things, alleged statements and omissions throughout the putative class period concerning ESKATA’s risks, tolerability and effectiveness. The defendants filed a motion to dismiss the consolidated

amended complaint on April 17, 2020. Fulcher filed an opposition to the defendants’ motion on June 15, 2020, and the defendants filed a reply to such opposition on August 4, 2020. Oral argument on the pending motion to dismiss is scheduled for February 25, 2021. The motion remains under judicial consideration.

The Company and the other defendants dispute plaintiffs’ claims in the Consolidated Securities Action and intend to defend the matter vigorously. At this time, the Company cannot reasonably predict the outcome or potential loss, if any, that could result from this matter.

Stockholder Derivative Action

On November 15, 2019, plaintiff Keith Allred (“Allred”) filed a derivative stockholder complaint captioned Allred v. Walker et al. in the U.S. District Court for the Southern District of New York against certain of the Company’s directors and executive officers. The complaint alleges that the defendants, among other things, breached their fiduciary duties as directors and/or officers in connection with the claims alleged in the Consolidated Securities Action. The complaint seeks, among other things, unspecified compensatory damages on behalf of the Company.

On November 25, 2019, an additional plaintiff, Bruce Brown (“Brown”), filed a substantially identical complaint captioned Brown v. Walker et al. in the same court against the same defendants.

On December 12, 2019, the court consolidated the Allred and Brown actions under the caption In re Aclaris Therapeutics, Inc. Derivative Litigation (the “Consolidated Derivative Action”) and directed that future derivative cases filed in or transferred to the court arising out of substantially the same transactions or events be similarly consolidated. Thereafter, on January 11, 2020, the court stayed – subject to certain conditions – all deadlines in the Consolidated Derivative Action pending resolution of the defendants’ anticipated motion to dismiss the Consolidated Securities Action.

The defendants dispute plaintiffs’ claims in the Consolidated Derivative Action and intend to defend the matter vigorously. At this time, the Company cannot reasonably predict the outcome or potential loss, if any, that could result from this matter.

Product Liability Lawsuit

On December 18, 2020, plaintiff Daurie Mancini filed an amended complaint under the caption Daurie Mancini v. Aclaris Therapeutics, Inc. et al in the Superior Court of New Jersey Ocean County against the Company and certain third parties alleging injuries as a result of the plaintiff’s alleged treatment with ESKATA in 2019. The amended complaint seeks unspecified compensatory and punitive damages. On January 19, 2021, the Company’s deadline to answer, move against or otherwise respond to the amended complaint was extended until March 15, 2021.

The Company disputes plaintiff’s claims and intends to defend the matter vigorously. At this time, the Company cannot reasonably predict the outcome or potential loss, if any, that could result from this matter.

Subsequent Events

12 Months Ended

Dec. 31, 2020

Subsequent Events

Subsequent Events

21. Subsequent Events

January 2021 Public Offering

In January 2021, the Company closed a public offering in which it sold 6,306,271 shares of common stock at a price to the public of $17.50 per share, for aggregate gross proceeds of $110.4 million. The Company paid underwriting discounts and commissions of $6.6 million, and also incurred expenses of $0.3 million in connection with the offering. As a result, the net offering proceeds received by the Company, after deducting underwriting discounts, commissions and offering expenses, were $103.5 million.

Summary of Significant Accounting Policies (Policies)

12 Months Ended

Dec. 31, 2020

Summary of Significant Accounting Policies

Basis of Presentation

Basis of Presentation

Reclassifications

Reclassifications

Certain prior year amounts have been reclassified to conform to the current year financial statement presentation.

Discontinued Operations

Discontinued Operations

Use of Estimates

Use of Estimates

Revenue Recognition

Revenue Recognition

Product Sales, net

Contract Research

Other Revenue

Cash, Cash Equivalents and Restricted Cash

Cash, Cash Equivalents and Restricted Cash

Marketable Securities

Marketable Securities

temporary” and reduces the investment to fair value through a charge to the statement of operations and comprehensive loss.

Property and Equipment

Property and Equipment

Impairment of Long-Lived Assets

Impairment of Long-Lived Assets

Intangible Assets

Intangible Assets

During the years ended December 31, 2020 and 2019, the Company did not record an IPR&D impairment.

Goodwill

Goodwill

Leases

Leases

Contingent Consideration

Contingent Consideration

Research and Development Costs

Research and Development Costs

Stock-Based Compensation

Stock-Based Compensation

The fair value of each RSU is measured using the closing price of the Company’s common stock on the date of grant.

Patent Costs

Patent Costs

Foreign Currency Translation

Foreign Currency Translation

Income Taxes

Income Taxes

Comprehensive Loss

Comprehensive Loss

Net Loss per Share

Net Loss per Share

Fair Value Measurements

Fair Value Measurements

●

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

●

Concentration of Credit Risk and of Significant Suppliers

Concentration of Credit Risk and of Significant Suppliers

Segment Reporting

Segment Reporting

Recently Issued Accounting Pronouncements

Recently Issued Accounting Pronouncements

RHOFADE (Tables)

12 Months Ended

Dec. 31, 2020

RHOFADE

RHOFADE

Schedule of fair value of assets acquired

The following table summarizes the fair value of assets acquired in the acquisition of RHOFADE:


(In thousands)
Inventory	$	893
Intangible assets, net		66,229
Total assets acquired	$	67,122

Fair Value of Financial Assets and Liabilities (Tables)

12 Months Ended

Dec. 31, 2020

Fair Value of Financial Assets and Liabilities

Schedule of assets and liabilities measured at fair value on a recurring basis


	December 31, 2020
(In thousands)	Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents	$	14,955	$	1,500	$	—	$	16,455
Marketable securities		—		32,068		—		32,068
Total assets	$	14,955	$	33,568	$	—	$	48,523


Liabilities:
Acquisition-related contingent consideration	$	—	$	—	$	4,061	$	4,061
Total liabilities	$	—	$	—	$	4,061	$	4,061


	December 31, 2019
(In thousands)	Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents	$	21,277	$	—	$	—	$	21,277
Marketable securities		—		39,078		—		39,078
Total assets	$	21,277	$	39,078	$	—	$	60,355


Liabilities:
Acquisition-related contingent consideration	$	—	$	—	$	1,668	$	1,668
Total liabilities	$	—	$	—	$	1,668	$	1,668

Schedule of the fair value of available for sale marketable securities


	December 31, 2020
			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
(In thousands)	Cost		Gain		Loss		Value
Marketable securities:
Commercial paper	$	20,483	$	—	$	—	$	20,483
Asset-backed debt securities		4,036		1		—		4,037
U.S. government agency debt securities		7,547		1		—		7,548
Total marketable securities	$	32,066	$	2	$	—	$	32,068


	December 31, 2019
			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
(In thousands)	Cost		Gain		Loss		Value
Marketable securities:
Corporate debt securities	$	7,815	$	2	$	—	$	7,817
Commercial paper		15,129		—		—		15,129
Asset-backed debt securities		8,004		4		—		8,008
U.S. government agency debt securities		8,126		1		(3)		8,124
Total marketable securities	$	39,074	$	7	$	(3)	$	39,078

Property and Equipment, Net (Tables)

12 Months Ended

Dec. 31, 2020

Property and Equipment, Net

Schedule of property and equipment, net


		December 31,		December 31,
(In thousands)	2020		2019
Computer equipment	$	1,197	$	1,315
Finance lease right-of-use assets		—		435
Lab equipment		1,340		1,250
Furniture and fixtures		617		647
Leasehold improvements		1,123		889
Property and equipment, gross		4,277		4,536
Accumulated depreciation		(2,623)		(2,066)
Property and equipment, net	$	1,654	$	2,470

Intangible Assets (Tables)

12 Months Ended

Dec. 31, 2020

Intangible Assets

Schedule of intangible assets


		Gross Cost				Accumulated Amortization
	Remaining		December 31,		December 31,		December 31,		December 31,
(In thousands, except years)	Life (years)	2020		2019		2020		2019
Other intangible assets	6.6		751		751		257		181
IPR&D	na		6,629		6,629		—		—
Total intangible assets		$	7,380	$	7,380	$	257	$	181

Schedule of estimated future amortization expenses


		Year Ending
(In thousands)		December 31,
2021	$	75
2022		75
2023		75
2024		75
2025		75
Thereafter		119
Total	$	494

Accrued Expenses (Tables)

12 Months Ended

Dec. 31, 2020

Accrued Expenses

Schedule of accrued expenses


		December 31,		December 31,
(In thousands)	2020		2019
Employee compensation expenses	$	3,971	$	3,321
Research and development expenses		761		2,857
Other		1,174		1,543
Total accrued expenses	$	5,906	$	7,721

Stock-Based Awards (Tables)

12 Months Ended

Dec. 31, 2020

Stock-Based Awards

Assumptions used to determine fair value of stock options granted


	Year Ended
	December 31,
	2020		2019		2018
Risk-free interest rate	0.87	%	2.27	%	2.66	%
Expected term (in years)	6.1		6.2		6.3
Expected volatility	85.19	%	99.36	%	96.78	%
Expected dividend yield	0	%	0	%	0	%

Summary of stock option activity


				Weighted
		Weighted		Average
		Average		Remaining	Aggregate
	Number	Exercise		Contractual	Intrinsic
(In thousands, except share and per share data and years)	of Shares	Price		Term	Value
				(in years)
Outstanding as of December 31, 2017	3,328,757	$	20.69	8.3	$	19,812
Granted	1,459,800		20.97
Exercised	(59,450)		9.70			724
Forfeited and cancelled	(447,026)		24.62
Outstanding as of December 31, 2018	4,282,081	$	20.53	7.9	$	2,404
Granted	44,500		5.75
Exercised	(142,779)		1.33			112
Forfeited and cancelled	(1,081,581)		23.01
Outstanding as of December 31, 2019	3,102,221	$	20.33	6.6	$	148
Granted	734,800		1.30
Exercised	(53,737)		1.30			145
Forfeited and cancelled	(911,786)		22.41
Outstanding as of December 31, 2020	2,871,498	$	15.16	6.8	$	4,890
Options vested and expected to vest as of December 31, 2020	2,871,498	$	15.16	6.8	$	4,890
Options exercisable as of December 31, 2020	1,844,197	$	18.92	5.8	$	1,424

Summary of restricted stock units activity


		Weighted
		Average
		Grant Date		Aggregate
	Number	Fair Value		Intrinsic
(In thousands, except share and per share data)	of Shares	Per Share		Value
Outstanding as of December 31, 2017	283,553	$	27.02
Granted	552,060		19.03
Vested	(140,497)		27.22	$	2,158
Forfeited and cancelled	(68,709)		23.65
Outstanding as of December 31, 2018	626,407	$	20.30
Granted	3,650,942		3.56
Vested	(173,444)		21.31	$	799
Forfeited and cancelled	(510,990)		10.63
Outstanding as of December 31, 2019	3,592,915	$	4.62
Granted	1,168,805		1.36
Vested	(1,804,429)		3.33	$	2,607
Forfeited and cancelled	(713,134)		4.77
Outstanding as of December 31, 2020	2,244,157	$	3.83

Stock-based compensation expense


	Year Ended
	December 31,
(In thousands)	2020		2019		2018
Cost of revenue	$	946	$	703	$	766
Research and development		2,919		5,091		6,480
General and administrative		7,342		10,288		9,317
Total stock-based compensation expense	$	11,207	$	16,082	$	16,563

Net Loss per Share (Tables)

12 Months Ended

Dec. 31, 2020

Net Loss per Share

Basic and diluted net loss per share


	Year Ended
	December 31,
(In thousands, except for share and per share data)	2020		2019		2018
Numerator:
Net loss	$	(51,015)	$	(161,354)	$	(132,738)
Denominator:
Weighted average shares of common stock outstanding, basic and diluted		42,539,293		41,323,921		32,909,762
Net loss per share, basic and diluted	$	(1.20)	$	(3.90)	$	(4.03)

Potential common shares excluded from the calculation of diluted net loss per share attributable to common stockholders



	December 31,
	2020	2019	2018
Options to purchase common stock	2,871,498	3,102,221	4,282,081
Restricted stock unit awards	2,244,157	3,592,915	626,407
Warrants	460,251	—	—
Total potential shares of common stock	5,575,906	6,695,136	4,908,488

Leases (Tables)

12 Months Ended

Dec. 31, 2020

Leases

Schedule of lease expense


	Year Ended
	December 31,
(In thousands)	2020		2019
Operating lease expense	$	1,013	$	808

Finance Leases:
Amortization of right-to-use assets	$	113	$	443
Interest expense		5		87
Total finance lease expenses	$	118	$	530

Schedule of supplemental balance sheet information related to operating leases


		December 31,		December 31,
(In thousands)	2020		2019
Operating Leases:
Gross cost	$	5,240	$	5,213
Accumulated amortization		(1,111)		(480)
Other assets	$	4,129	$	4,733

Current portion of lease liabilities	$	603	$	526
Other liabilities		2,894		3,548
Total operating lease liabilities	$	3,497	$	4,074

Schedule of supplemental balance sheet information related to finance leases


(In thousands)		December 31,		December 31,
Finance Leases:	2020		2019
Property and equipment, gross	$	—	$	435
Accumulated depreciation		—		(322)
Property and equipment, net	$	—	$	113

Current portion of lease liabilities	$	—	$	111
Other liabilities		—		21
Total finance lease liabilities	$	—	$	132

Schedule of future maturities lease liabilities under operating leases


	Year Ended
(In thousands, except for years and percentages)	December 31,
Supplemental Cash Flow Lease Information:	2020			2019
Operating cash flows from operating leases	$	907		$	755
Operating cash flows from finance leases	$	5		$	87
Financing cash flows from finance leases	$	137		$	523

Leased assets obtained in exchange for new operating lease liabilities	$	—		$	3,060

Weighted-Average Remaining Lease Term (in years):
Operating leases		6.0			6.8
Finance leases		—			0.9

Weighted-Average Discount Rate:
Operating leases		10.1	%		10.1%
Finance leases		10.0	%		10.0%

Schedule of future maturities lease liabilities under finance leases


(In thousands)		Operating
Year Ending December 31,		Leases
2021	$	924
2022		949
2023		866
2024		343
2025		352
Thereafter		1,301
Total undiscounted lease payments		4,735
Less: unrecognized interest		(1,238)
Total lease liability	$	3,497

Income Taxes (Tables)

12 Months Ended

Dec. 31, 2020

Income Taxes

Schedule of loss before income taxes by jurisdiction


	Year Ended December 31,
(In thousands)	2020		2019		2018
U.S. operations	$	(51,215)	$	(161,192)	$	(132,473)
Foreign operations		18		(162)		(265)
Loss before income taxes	$	(51,197)	$	(161,354)	$	(132,738)

Reconciliation of statutory to effective rate


	Year Ended December 31,
	2020		2019		2018
Federal statutory income tax rate	(21.0)	%	(21.0)	%	(21.0)	%
State taxes, net of federal benefit	(7.5)		(6.6)		(3.5)
Research and development tax credits	(2.6)		(1.5)		(2.1)
Permanent differences	2.6		3.0		0.8
Change in deferred tax asset valuation allowance	28.1		26.2		25.7
Effective income tax rate	(0.4)	%	0.1	%	(0.1)	%

Schedule of deferred tax assets and liabilities


		December 31,
(In thousands)	2020		2019
Deferred tax assets:
Net operating loss carryforwards	$	101,277	$	90,298
Capitalized start-up costs		6,509		6,904
Research and development tax credit carryforwards		8,732		7,417
Capitalized research and development expense		4,611		4,456
Stock‑based compensation expense		14,526		12,973
Accrued compensation		745		588
Lease liabilities		888		945
Other		602		618
Total deferred tax assets		137,890		124,199
Deferred tax liabilities:
Property and equipment		(209)		(206)
Intangible asset		(2,033)		(1,741)
Right-to-use assets		(1,026)		(1,235)
Other		(430)		(600)
Total deferred tax liabilities		(3,698)		(3,782)
Valuation allowance		(134,559)		(120,966)
Deferred tax liabilities, net	$	(367)	$	(549)

Changes in deferred tax asset valuation allowance


		Year Ended December 31,
(In thousands)		2020		2019		2018
Valuation allowance at beginning of year	$	(120,966)	$	(80,985)	$	(46,878)
Decreases recorded as benefit to income tax provision		—		—		—
Decreases recorded to opening balance sheet		58		—		—
Increases recorded to income tax provision		(13,651)		(39,981)		(34,107)
Valuation allowance as of end of year	$	(134,559)	$	(120,966)	$	(80,985)

Discontinued Operations (Tables)

12 Months Ended

Dec. 31, 2020

Discontinued Operations

Schedule of discontinued operations


	Year Ended
	December 31,
(In thousands, except share and per share data)	2020		2019		2018
Revenues:
Product sales, net	$	424	$	13,896	$	3,940
Total revenue, net		424		13,896		3,940

Costs and expenses:
Cost of revenue (excludes amortization)		—		4,522		1,969
Research and development		1		503		2,168
Sales and marketing		283		23,112		47,827
General and administrative		1		2,929		2,058
Intangible asset impairment		—		27,638		—
Amortization of definite-lived intangible		—		4,426		552
Total costs and expenses		285		63,130		54,574
Income (loss) from operations		139		(49,234)		(50,634)

Other income, net		—		1,422		—
Income (loss) from discontinued operations before income taxes		139		(47,812)		(50,634)
Income tax benefit		—		—		—
Net income (loss) from discontinued operations	$	139	$	(47,812)	$	(50,634)

Net income (loss) from discontinued operations per share, basic and diluted	$	0.00	$	(1.16)	$	(1.54)
Weighted average common shares outstanding, basic and diluted		42,539,293		41,323,921		32,909,762

The following table presents the details of product sales, net included in discontinued operations:


	Year Ended
	December 31,
(In thousands)	2020		2019		2018
ESKATA	$	—	$	312	$	2,804
RHOFADE		424		13,584		1,136
Total product sales, net	$	424	$	13,896	$	3,940

The Company recorded $0.4 million of RHOFADE product sales, net during the year ended December 31, 2020 due to a reversal of previously accrued product sales-related reserves.

The following table presents information related to assets and liabilities reported as discontinued operations in the Company’s consolidated balance sheet:


	December 31,		December 31,
(In thousands)	2020		2019
Accounts receivable, net	$	—	$	4,966
Discontinued operations - current assets	$	—	$	4,966


Accounts payable	$	1,175	$	1,705
Accrued expenses		1,936		2,452
Discontinued operations - current liabilities	$	3,111	$	4,157

The following table presents certain non-cash items related to discontinued operations, which are included in the Company’s consolidated statement of cash flows:


	Year Ended
	December 31,
(In thousands)	2020		2019
Depreciation and amortization	$	—	$	313
Stock-based compensation expense		—		95
Intangible asset impairment charge		—		27,638
Loss on disposal of property and equipment		—		248
		—		28,294
Gain on sale of RHOFADE		—		1,670
Total non-cash items	$	—	$	26,624

- Definition

Tabular disclosure of information related to a disposal group. Includes, but is not limited to, a discontinued operation, disposal classified as held-for-sale or disposed of by means other than sale or disposal of an individually significant component.

+ References

Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 360
-SubTopic 10
-Section 50
-Paragraph 3A
-URI http://asc.fasb.org/extlink&oid=109226691&loc=SL51724579-110230

Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 205
-SubTopic 20
-Section 50
-Paragraph 3
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+ Details

Segment Information (Tables)

12 Months Ended

Dec. 31, 2020

Segment Information

Summary of results of operations by segment


(In thousands)			Contract		Corporate		Total
Year Ended December 31, 2020	Therapeutics		Research		and Other		Company
Total revenue	$	696	$	13,319	$	(7,533)	$	6,482
Cost of revenue		—		12,228		(7,095)		5,133
Research and development		32,170		—		(439)		31,731
General and administrative		—		2,794		17,736		20,530
Loss from operations	$	(31,474)	$	(1,703)	$	(17,735)	$	(50,912)
Income (loss) from discontinued operations	$	140	$	—	$	(1)	$	139


			Contract		Corporate		Total
Year Ended December 31, 2019	Therapeutics		Research		and Other		Company
Total revenue	$	—	$	16,824	$	(12,597)	$	4,227
Cost of revenue		—		16,253		(12,198)		4,055
Research and development		65,298		—		(399)		64,899
General and administrative		620		2,738		24,469		27,827
Goodwill impairment		18,504		—		—		18,504
Loss from operations	$	(84,422)	$	(2,167)	$	(24,469)	$	(111,058)
Loss from discontinued operations	$	(46,305)	$	—	$	(1,507)	$	(47,812)


			Contract		Corporate		Total
Year Ended December 31, 2018	Therapeutics		Research		and Other		Company
Revenue, net	$	1,500	$	13,135	$	(8,484)	$	6,151
Cost of revenue		—		11,399		(7,070)		4,329
Research and development		62,255		—		(1,414)		60,841
General and administrative		160		2,181		23,420		25,761
Loss from operations	$	(60,915)	$	(445)	$	(23,420)	$	(84,780)
Loss from discontinued operations	$	(48,576)	$	—	$	(2,058)	$	(50,634)

Organization and Nature of Business (Details) - USD ($) $ in Thousands	1 Months Ended		12 Months Ended
	Jan. 31, 2021	Aug. 31, 2020	Dec. 31, 2020	Mar. 31, 2020	Dec. 31, 2019
Production information
Cash, cash equivalents and marketable securities			$ 54,100
Accumulated deficit			$ 504,542		$ 453,527
Purchase Agreement \| Subsequent event \| Public Offering
Production information
Common stock, sold	6,306,271
Proceeds from common stock	$ 103,500
Lincoln Park Capital Fund, LLC \| Purchase Agreement
Production information
Common stock sell		$ 15,000
Purchase agreement term		36 months
Common stock, sold			2,111,170
Proceeds from common stock			$ 7,700
Term Loan Facility
Production information
Loan borrowed				$ 11,000

Summary of Significant Accounting Policies (Details) $ in Millions	1 Months Ended	12 Months Ended
	Sep. 30, 2019 employee	Dec. 31, 2020 USD ($)	Dec. 31, 2019 USD ($)
Summary Of Accounting Policies [Line Items]
Number of employees to be terminated \| employee	86
Revenue Recognition
Revenue, Practical Expedient, Financing Component [true false]		false
Revenue, Practical Expedient, Incremental Cost of Obtaining Contract [true false]		true
Maximum
Cash, Cash Equivalents and Restricted Cash
Probability of success of achieving regulatory and sales milestones		15.00%
Minimum
Cash, Cash Equivalents and Restricted Cash
Probability of success of achieving regulatory and sales milestones		4.00%
EPI Health, LLC
Cash, Cash Equivalents and Restricted Cash
Cash deposited in escrow \| $		$ 0.0	$ 1.8

Summary of Significant Accounting Policies - Property and Equipment (Details)	12 Months Ended
	Dec. 31, 2020
Computer equipment
Summary Of Accounting Policies [Line Items]
Depreciation period (in years)	3 years
Manufacturing equipment
Summary Of Accounting Policies [Line Items]
Depreciation period (in years)	5 years
Lab equipment
Summary Of Accounting Policies [Line Items]
Depreciation period (in years)	5 years
Furniture and fixtures
Summary Of Accounting Policies [Line Items]
Depreciation period (in years)	5 years

Summary of Significant Accounting Policies - Intangible Assets (Details) $ in Millions	12 Months Ended
	Dec. 31, 2019 USD ($)
RHOFADE
Disaggregation of Revenue [Line Items]
Write-down of equipment held for sale	$ 27.6

Summary of Significant Accounting Policies - Goodwill (Details) $ in Thousands	12 Months Ended
	Dec. 31, 2019 USD ($)
Summary of Significant Accounting Policies
Goodwill impairment charge	$ 18,504

Summary of Significant Accounting Policies - Stock-Based Compensation and Concentration of Credit Risk and of Significant Suppliers (Details) - item	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2018
Summary of Significant Accounting Policies
Expected dividend yield (as a percent)	0.00%	0.00%	0.00%
Number of financial institutions holding entity funds	1

Summary of Significant Accounting Policies - Segments (Details)	12 Months Ended
	Dec. 31, 2020 segment
Summary of Significant Accounting Policies
Number of operating segments	2

Summary of Significant Accounting Policies - Recent Pronouncements (Details) - USD ($) $ in Thousands	Dec. 31, 2020	Dec. 31, 2019	Jan. 01, 2019
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Lease liability	$ 3,497	$ 4,074
Adjustment \| ASU 2016-02
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
ROU assets			$ 2,100
Lease liability			$ 2,300

RHOFADE - Amount Paid for Assets Acquired (Details) $ in Millions	1 Months Ended
	Oct. 31, 2019 USD ($)
Business Acquisition [Line Items]
Percentage of payments received in connection with license or sublicense of assets transferred	25.00%
EPI Health, LLC
Business Acquisition [Line Items]
Upfront payment made	$ 35.2
Potential milestones payable	$ 20.0
Period of royalty payment from first commercial sale	10 years

RHOFADE - Summary of Fair Value Assets Acquired (Details) - APA - Nonrecurring - Allergan $ in Thousands	Nov. 30, 2018 USD ($)
Business Acquisition [Line Items]
Inventory	$ 893
Intangible assets, net	66,229
Total assets acquired	$ 67,122

Fair Value of Financial Assets and Liabilities (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2018
Assets:
Marketable securities	$ 32,068	$ 39,078
Liabilities:
Transfers from Level 1 to Level 2	0	0
Transfers from Level 2 to Level 1	0	0
Transfers into or out of Level 3	0	0
Change in fair value of contingent consideration	2,393	734	$ 1,272
Confluence
Liabilities:
Change in fair value of contingent consideration	2,400	700
Recurring
Assets:
Cash equivalents	16,455	21,277
Marketable securities	32,068	39,078
Total assets measured at fair value	48,523	60,355
Liabilities:
Acquisition-related contingent consideration	4,061	1,668
Total liabilities measured at fair value	4,061	1,668
Recurring \| Level 1
Assets:
Cash equivalents	14,955	21,277
Total assets measured at fair value	14,955	21,277
Recurring \| Level 2
Assets:
Cash equivalents	1,500
Marketable securities	32,068	39,078
Total assets measured at fair value	33,568	39,078
Recurring \| Level 3
Liabilities:
Acquisition-related contingent consideration	4,061	1,668
Total liabilities measured at fair value	$ 4,061	$ 1,668

Fair Value of Financial Assets and Liabilities - By Type (Details) - USD ($) $ in Thousands	Dec. 31, 2020	Dec. 31, 2019
Marketable securities:
Amortized Cost	$ 32,066	$ 39,074
Gross Unrealized Gain	2	7
Gross Unrealized Loss		(3)
Fair Value	32,068	39,078
Corporate debt securities
Marketable securities:
Amortized Cost		7,815
Gross Unrealized Gain		2
Fair Value		7,817
Commercial paper
Marketable securities:
Amortized Cost	20,483	15,129
Fair Value	20,483	15,129
Asset-backed securities
Marketable securities:
Amortized Cost	4,036	8,004
Gross Unrealized Gain	1	4
Fair Value	4,037	8,008
U.S. government agency debt securities
Marketable securities:
Amortized Cost	7,547	8,126
Gross Unrealized Gain	1	1
Gross Unrealized Loss		(3)
Fair Value	$ 7,548	$ 8,124

Property and Equipment, Net (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2018
Property and Equipment, Net
Finance lease right-of-use assets		$ 435
Property and equipment, gross	$ 4,277	4,536
Accumulated depreciation	(2,623)	(2,066)
Property and equipment, net	1,654	2,470
Depreciation expense	1,100	1,500	$ 1,200
Computer equipment
Property and Equipment, Net
Property and equipment, gross	1,197	1,315
Lab equipment
Property and Equipment, Net
Property and equipment, gross	1,340	1,250
Furniture and fixtures
Property and Equipment, Net
Property and equipment, gross	617	647
Leasehold improvements
Property and Equipment, Net
Property and equipment, gross	$ 1,123	$ 889

Intangible Assets (Details) - USD ($) $ in Thousands	12 Months Ended
Intangible Assets (Details) - USD ($) $ in Thousands	Dec. 31, 2020	Dec. 31, 2019
Definite-lived intangible assets
Accumulated Amortization	$ 257	$ 181
Intangible assets, net
Gross cost	7,380	7,380
IPR&D
Indefinite-lived intangible assets
Gross cost	$ 6,629	6,629
Other intangible assets
Finite Lived And Indefinite Lived Intangible Assets By Major Class [Line Items]
Remaining life	6 years 7 months 6 days
Definite-lived intangible assets
Gross Cost	$ 751	751
Accumulated Amortization	$ 257	$ 181

Intangible Assets - Future Amortization Expenses (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2018
Goodwill and Intangible Assets Disclosure [Abstract]
Amortization expense	$ 75	$ 75	$ 75
Future amortization expenses
2021	75
2022	75
2023	75
2024	75
2025	75
Thereafter	119
Total	$ 494

Accrued Expenses (Details) - USD ($) $ in Thousands	Dec. 31, 2020	Dec. 31, 2019
Accrued Expenses
Employee compensation expenses	$ 3,971	$ 3,321
Research and development expenses	761	2,857
Other	1,174	1,543
Total accrued expenses	$ 5,906	$ 7,721

Debt (Details) $ in Millions		1 Months Ended
Debt (Details) $ in Millions	Mar. 30, 2020	Mar. 31, 2020 USD ($) installment shares	Oct. 31, 2019 USD ($)	Oct. 31, 2018 USD ($)
SVB
Debt Instrument [Line Items]
Common stock warrants \| shares		460,251
Term Loan Facility
Debt Instrument [Line Items]
Loan borrowed		$ 11.0
Number of consecutive monthly installments \| installment		24
Annual interest rate		6.75%
Final payment fee percentage		5.00%
Term Loan Facility \| Oxford Finance LLC
Debt Instrument [Line Items]
Loan borrowed				$ 30.0
Loan, maximum borrowing capacity				$ 65.0
Loan repaid			$ 30.0
Term Loan Facility \| Prepayment prior to the first anniversary of the Funding Date
Debt Instrument [Line Items]
Prepayment fee percentage	3.00%
Term Loan Facility \| Prepayment between the first and second anniversaries of the Funding Date
Debt Instrument [Line Items]
Prepayment fee percentage	2.00%
Term Loan Facility \| Prepayment after the second anniversary of the Funding Date but before October 1, 2023
Debt Instrument [Line Items]
Prepayment fee percentage	1.00%
Term Loan Facility \| Prime Rate
Debt Instrument [Line Items]
Basis spread over LIBOR		2.00%

Stockholders' Equity (Details) $ / shares in Units, $ in Thousands	1 Months Ended	12 Months Ended
	Aug. 31, 2020 USD ($) shares	Dec. 31, 2020 USD ($) Vote $ / shares shares	Jan. 31, 2021 shares	Mar. 31, 2020 USD ($) $ / shares shares	Dec. 31, 2019 $ / shares shares
Class of Stock [Line Items]
Preferred stock, shares authorized		10,000,000			10,000,000
Preferred stock, shares outstanding		0			0
Common stock, shares authorized		100,000,000			100,000,000
Common stock, par value (in dollars per share) \| $ / shares		$ 0.00001			$ 0.00001
Number of votes per share \| Vote		1
Dividends declared \| $		$ 0
Lincoln Park Capital Fund, LLC \| Purchase Agreement
Class of Stock [Line Items]
Common stock sell \| $	$ 15,000
Purchase agreement term	36 months
Common stock shares issued	121,584
Aggregate fair value \| $	$ 300
Common stock, sold		2,111,170
Proceeds from common stock \| $		$ 7,700
SVB
Class of Stock [Line Items]
Common stock warrants				460,251
Initial exercise price \| $ / shares				$ 0.956
Fair value of warrants \| $				$ 400
SVB \| Subsequent event
Class of Stock [Line Items]
Common stock warrants			388,119

Stockholders' Equity - Other Offerings (Details) - USD ($) $ / shares in Units, $ in Thousands	1 Months Ended	12 Months Ended
	Oct. 31, 2018	Dec. 31, 2020
Subsidiary, Sale of Stock [Line Items]
Underwriters' discounts and commissions		$ 211
Public Offering October 2018
Subsidiary, Sale of Stock [Line Items]
Issuance of common stock in connection with equity purchase agreement, shares	9,941,750
Issuance price (in dollars per share)	$ 10.75
Aggregate gross proceeds	$ 106,900
Underwriters' discounts and commissions	6,400
Expenses related to stock issuance	300
Net offering proceeds	$ 100,200

Stock-Based Awards (Details) - shares		12 Months Ended			44 Months Ended
Stock-Based Awards (Details) - shares	Jan. 01, 2021	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2018	Sep. 14, 2015	Dec. 31, 2017	Sep. 30, 2015
Stock-based awards
Options granted (in shares)		734,800	44,500	1,459,800
Options outstanding		2,871,498	3,102,221	4,282,081		3,328,757
Stock Option Valuation
Risk-free interest rate (as a percent)		0.87%	2.27%	2.66%
Expected term (in years)		6 years 1 month 6 days	6 years 2 months 12 days	6 years 3 months 18 days
Expected volatility (as a percent)		85.19%	99.36%	96.78%
Expected dividend yield (as a percent)		0.00%	0.00%	0.00%
2017 Inducement Plan
Stock-based awards
Options outstanding		443,000
2017 Inducement Plan \| Restricted stock unit awards
Stock-based awards
Number of shares outstanding		28,895
2015 Equity Incentive Plan
Stock-based awards
Number of shares authorized							1,643,872
Number of shares available for grant		2,423,020
Percentage increase to shares available for grant from common outstanding as of preceding December 31 (as a percent)		4.00%
Additional shares available	1,804,372
2012 Equity Compensation Plan
Stock-based awards
Number of shares available for grant		0
Options granted (in shares)					1,140,524
Options outstanding		549,561	745,735
Vesting period (in years)		4 years
Term of award (in years)		10 years

Stock-Based Awards - Option Activity (Details) - USD ($) $ / shares in Units, $ in Thousands	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Options, Number of Shares
Number of Shares, beginning balance	3,102,221	4,282,081	3,328,757
Number of Shares, Granted	734,800	44,500	1,459,800
Number of Shares, Exercised	(53,737)	(142,779)	(59,450)
Number of Shares, Forfeited and cancelled	(911,786)	(1,081,581)	(447,026)
Number of Shares, ending balance	2,871,498	3,102,221	4,282,081	3,328,757
Number of Shares, Options vested and expected to vest	2,871,498
Number of Shares, Options exercisable	1,844,197
Options, Weighted Average Exercise Price
Weighted Average Exercise Price, beginning balance (in dollars per share)	$ 20.33	$ 20.53	$ 20.69
Weighted Average Exercise Price, Granted (in dollars per share)	1.30	5.75	20.97
Weighted Average Exercise Price, Exercised (in dollars per share)	1.30	1.33	9.70
Weighted Average Exercise Price, Forfeited and cancelled (in dollars per share)	22.41	23.01	24.62
Weighted Average Exercise Price, ending balance (in dollars per share)	15.16	$ 20.33	$ 20.53	$ 20.69
Weighted Average Exercise Price, Options vested and expected to vest (in dollars per share)	15.16
Weighted Average Exercise Price, Options exercisable (in dollars per share)	$ 18.92
Options, Weighted Average Remaining Contractual Term
Weighted Average Remaining Contractual Term (in years)	6 years 9 months 18 days	6 years 7 months 6 days	7 years 10 months 24 days	8 years 3 months 18 days
Weighted Average Remaining Contractual Term, Options vested and expected to vest (in years)	6 years 9 months 18 days
Weighted Average Remaining Contractual Term, Options exercisable (in years)	5 years 9 months 18 days
Aggregate Intrinsic Value
Aggregate Intrinsic Value	$ 4,890	$ 148	$ 2,404	$ 19,812
Aggregate Intrinsic Value, Exercised	145	$ 112	$ 724
Aggregate Intrinsic Value, Options vested and expected to vest	4,890
Aggregate Intrinsic Value, Options exercisable	$ 1,424
Weighted average grant-date fair value of stock options granted (in dollars per share)	$ 0.93	$ 4.63	$ 16.55

Stock-Based Awards - RSUs (Details) - Restricted stock unit awards - USD ($) $ / shares in Units, $ in Thousands	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2018
RSU, Number of Units
Units outstanding, beginning of period	3,592,915	626,407	283,553
Granted	1,168,805	3,650,942	552,060
Vested	(1,804,429)	(173,444)	(140,497)
Forfeited and cancelled	(713,134)	(510,990)	(68,709)
Units outstanding, end of period	2,244,157	3,592,915	626,407
RSU, Weighted Average Grant Date Fair Value Per Unit
Weighted average grant date fair value, beginning balance (in dollars per share)	$ 4.62	$ 20.30	$ 27.02
Weighted average grant date fair value, granted (in dollars per share)	1.36	3.56	19.03
Weighted average grant date fair value, vested (in dollars per share)	3.33	21.31	27.22
Forfeited and cancelled, estimated grant date fair value (in dollars per share)	4.77	10.63	23.65
Weighted average grant date fair value, ending balance (in dollars per share)	$ 3.83	$ 4.62	$ 20.30
Aggregate intrinsic value of awards that vested during the period	$ 2,607	$ 799	$ 2,158

Stock-Based Awards - Compensation (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2018
Stock-based compensation expense
Stock-based compensation expense	$ 11,207	$ 16,082	$ 16,563
Unrecognized stock-based compensation cost, options	4,200
Unrecognized compensation, RSUs	5,500
Cost of revenue.
Stock-based compensation expense
Stock-based compensation expense	946	703	766
Research and development
Stock-based compensation expense
Stock-based compensation expense	2,919	5,091	6,480
General and administrative
Stock-based compensation expense
Stock-based compensation expense	$ 7,342	$ 10,288	$ 9,317
Options to purchase common stock
Stock-based compensation expense
Weighted average recognition period unrecognized stock-based compensation cost (in years)	1 year 3 months 18 days
Restricted stock unit awards
Stock-based compensation expense
Weighted average recognition period unrecognized stock-based compensation cost (in years)	1 year 9 months 18 days

Net Loss per Share (Details) - USD ($) $ / shares in Units, $ in Thousands	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2018
Numerator:
Net loss	$ (51,015)	$ (161,354)	$ (132,738)
Denominator:
Weighted average shares of common stock outstanding, basic and diluted (in shares)	42,539,293	41,323,921	32,909,762
Net loss per share, basic and diluted	$ (1.20)	$ (3.90)	$ (4.03)

- Definition

The portion of profit or loss for the period, net of income taxes, which is attributable to the parent.

+ References + Details

Net Loss per Share - Anti-dilution (Details) - shares	12 Months Ended
Net Loss per Share - Anti-dilution (Details) - shares	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2018
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Potential common shares excluded from the calculation of diluted net loss per share attributable to common stockholders	5,575,906	6,695,136	4,908,488
Options to purchase common stock
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Potential common shares excluded from the calculation of diluted net loss per share attributable to common stockholders	2,871,498	3,102,221	4,282,081
Restricted stock unit awards
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Potential common shares excluded from the calculation of diluted net loss per share attributable to common stockholders	2,244,157	3,592,915	626,407
Warrants
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Potential common shares excluded from the calculation of diluted net loss per share attributable to common stockholders	460,251

Leases (Details) $ in Thousands	12 Months Ended
Leases (Details) $ in Thousands	Dec. 31, 2020 USD ($) ft² item	Dec. 31, 2019 USD ($)	Dec. 31, 2018 USD ($)	Feb. 28, 2019 ft²
Lessee, Lease, Description [Line Items]
Loss on lease termination		$ 200
Rent expense			$ 900
Area leased, sublease agreement \| ft²	33,019			20,433
Rent expense	$ 1,000	$ 1,000
Number of lease financing arrangements \| item	2
Finance lease term		4 years
Sub-subleased \| ft²	8,115
Operating Leases:
Gross cost	$ 4,277	$ 4,536
Accumulated amortization	(2,623)	(2,066)
Property and equipment, net	1,654	2,470
Current portion of lease liabilities	$ 603	$ 526
Financial position	us-gaap:OtherLiabilitiesCurrent	us-gaap:OtherLiabilitiesCurrent
Other liabilities	$ 2,894	$ 3,548
Financial position	us-gaap:OtherLiabilitiesNoncurrent	us-gaap:OtherLiabilitiesNoncurrent
Total operating lease liabilities	$ 3,497	$ 4,074
Operating Lease, Liability, Statement of Financial Position [Extensible List]	Total operating lease liabilities
Operating Leases
Operating Leases:
Gross cost	$ 5,240	5,213
Accumulated amortization	(1,111)	(480)
Property and equipment, net	$ 4,129	$ 4,733

Leases - Lease Costs (Details) - USD ($) $ in Thousands	12 Months Ended
Leases - Lease Costs (Details) - USD ($) $ in Thousands	Dec. 31, 2020	Dec. 31, 2019
Lease Costs
Operating lease expense	$ 1,013	$ 808
Amortization of right-to-use assets	113	443
Interest expense	5	87
Total finance lease expenses	$ 118	$ 530

Leases - Finance Leases (Details) - USD ($) $ in Thousands	Dec. 31, 2020	Dec. 31, 2019
Finance Leases:
Property and equipment, gross	$ 4,277	$ 4,536
Accumulated depreciation	(2,623)	(2,066)
Property and equipment, net	$ 1,654	2,470
Finance Leases
Finance Leases:
Property and equipment, gross		435
Accumulated depreciation		(322)
Property and equipment, net		113
Current portion of lease liabilities		$ 111
Financial position	us-gaap:OtherLiabilitiesCurrent	us-gaap:OtherLiabilitiesCurrent
Other liabilities		$ 21
Financial position	us-gaap:OtherLiabilitiesNoncurrent	us-gaap:OtherLiabilitiesNoncurrent
Total finance lease liabilities		$ 132

Leases - Supplemental Information Related to Operating and Finance Leases (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019
Leases
Operating cash flows from operating leases	$ 907	$ 755
Operating cash flows from finance leases	5	87
Financing cash flows from finance leases	$ 137	523
Leased assets obtained in exchange for new operating lease liabilities		$ 3,060
Weighted-Average Remaining Lease Term (in years):
Operating leases	6 years	6 years 9 months 18 days
Finance leases		10 months 24 days
Weighted-Average Discount Rate:
Operating leases	10.10%	10.10%
Finance leases	10.00%	10.00%

Leases - Future Maturities of Lease Liabilities (Details) - USD ($) $ in Thousands	Dec. 31, 2020	Dec. 31, 2019
Operating Leases
2021	$ 924
2022	949
2023	866
2024	343
2025	352
Thereafter	1,301
Total undiscounted lease payments	4,735
Less: unrecognized interest	(1,238)
Total lease liability	$ 3,497	$ 4,074

Income Taxes - Rate Reconciliation (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2018
Income Taxes
Federal income tax benefit	$ 0	$ 0	$ 0
State income tax benefit	0	0	0
Loss before income taxes
U.S. operations	(51,215)	(161,192)	(132,473)
Foreign operations	18	(162)	(265)
Loss before income taxes	$ (51,197)	$ (161,354)	$ (132,738)
Effective Income Tax Rate Reconciliation, Percent [Abstract]
Federal statutory income tax rate	(21.00%)	(21.00%)	(21.00%)
State taxes, net of federal benefit	(7.50%)	(6.60%)	(3.50%)
Research and development tax credits	(2.60%)	(1.50%)	(2.10%)
Permanent differences	2.60%	3.00%	0.80%
Change in deferred tax asset valuation allowance	28.10%	26.20%	25.70%
Effective income tax rate	(0.40%)	0.10%	(0.10%)

Income Taxes - Deferred Assets and Liabilities, CFDs (Details) - USD ($) $ in Thousands	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Components of net deferred tax assets
Net operating loss carryforwards	$ 101,277	$ 90,298
Capitalized start-up costs	6,509	6,904
Research and development tax credit carryforwards	8,732	7,417
Capitalized research and development expenses	4,611	4,456
Stock-based compensation expenses	14,526	12,973
Accrued compensation	745	588
Lease liabilities	888	945
Other	602	618
Total deferred tax assets	137,890	124,199
Property and equipment	(209)	(206)
Intangible asset	(2,033)	(1,741)
Right-to-use assets	(1,026)	(1,235)
Other	(430)	(600)
Total deferred tax liabilities	(3,698)	(3,782)
Valuation allowance	(134,559)	(120,966)	$ (80,985)	$ (46,878)
Deferred tax liabilities, net	(367)	$ (549)
United Kingdom Tax Authority
Components of net deferred tax assets
Operating loss carryforwards	200
Federal
Components of net deferred tax assets
Operating loss carryforwards	367,600
Federal \| Research Tax Credit Carryforward [Member]
Components of net deferred tax assets
Tax credit carryforward	8,600
State
Components of net deferred tax assets
Operating loss carryforwards	369,600
State \| Research Tax Credit Carryforward [Member]
Components of net deferred tax assets
Tax credit carryforward	$ 100

Income Taxes - Valuation Allowance and Unrecognized Tax Benefits (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2018
Changes in valuation allowance for deferred tax assets
Valuation allowance at beginning of year	$ (120,966)	$ (80,985)	$ (46,878)
Decreases recorded to opening balance sheet	58
Increases recorded to income tax provision	(13,651)	(39,981)	(34,107)
Valuation allowance as of end of year	$ (134,559)	$ (120,966)	$ (80,985)

Related Party Transactions (Details) - Mallinckrodt PlC - USD ($) $ in Millions	Dec. 31, 2020	Dec. 31, 2019
Related Party Transactions
Invoice amount	$ 0.3	$ 0.1
Outstanding accounts receivable	$ 0.0	$ 0.0

Agreements Related to Intellectual Property (Details) - USD ($) $ in Thousands	1 Months Ended			12 Months Ended
	Oct. 31, 2019	Nov. 30, 2018	Aug. 31, 2017	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2018
Agreements Related to Intellectual Property
Revenue, Net				$ 6,482	$ 4,227	$ 6,151
EPI Health LLC
Agreements Related to Intellectual Property
Potential milestone payments					20,000
Percentage of upfront and license fees	25.00%
Term of agreement	10 years
EPI Health LLC \| Royalty
Agreements Related to Intellectual Property
Revenue, Net				700	0
Rigel
Agreements Related to Intellectual Property
Milestone payment					4,000
Amendment fees payable				1,500
Agreement and Plan of Merger \| Confluence
Agreements Related to Intellectual Property
Payment in cash		$ 2,500
Number of shares		253,208
Fair value of common stock		$ 2,200
Additional contingent consideration based on milestones, maximum, per Agreement			$ 75,000
Royalty term			10 years
APA \| Allergan
Agreements Related to Intellectual Property
Aggregate royalty payments				$ 0	$ 1,400	$ 100

Retirement Savings Plan (Details) - USD ($) $ in Millions	12 Months Ended
Retirement Savings Plan (Details) - USD ($) $ in Millions	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2018
Retirement Savings Plan
Employer match of employee contributions (as a percent)	100.00%
Employee earnings subject to employer match (as a percent)	4.00%
Company contributions	$ 0.4	$ 0.7	$ 0.7

Restructuring Charges (Details) $ in Millions	1 Months Ended	12 Months Ended
Restructuring Charges (Details) $ in Millions	Sep. 30, 2019 employee	Dec. 31, 2020 USD ($)	Dec. 31, 2019 USD ($)
Accrued Expenses
Number of employees	86
Expenses recognized \| $		$ 0.1	$ 2.7
Payments made \| $		$ 0.3	$ 2.3
Minimum
Accrued Expenses
Period for which transition services is provided by noticed employees	4 months
Maximum
Accrued Expenses
Period for which transition services is provided by noticed employees	10 months
Terminated employees
Accrued Expenses
Number of employees	63
Noticed employees
Accrued Expenses
Number of employees	23

Discontinued Operations (Details) - USD ($) $ in Thousands	12 Months Ended
Discontinued Operations (Details) - USD ($) $ in Thousands	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2018
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Total revenue, net	$ 424	$ 13,896	$ 3,940
Accounts receivable, net		4,966
Loss on lease termination		200
Impairment charge		27,638
Product sales, net
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Total revenue, net	424	13,896	3,940
RHOFADE
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Total revenue, net	$ 424	13,584	$ 1,136
Impairment charge		$ 27,600

Discontinued Operations - Loss (Details) - USD ($) $ / shares in Units, $ in Thousands	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2018
Disposal Group, Including Discontinued Operation, Income Statement Disclosures [Abstract]
Total revenue, net	$ 424	$ 13,896	$ 3,940
Cost of revenue (excludes amortization)		4,522	1,969
Research and development	1	503	2,168
Sales and marketing	283	23,112	47,827
General and administrative	1	2,929	2,058
Intangible asset impairment		27,638
Amortization of definite-lived intangible		4,426	552
Total costs and expenses	285	63,130	54,574
Loss from discontinued operations	139	(49,234)	(50,634)
Other income, net		1,422
Income (loss) from discontinued operations before income taxes	139	(47,812)	(50,634)
Income tax benefit	(182)
Loss from discontinued operations	$ 139	$ (47,812)	$ (50,634)
Net loss from discontinued operations per share, basic and diluted	$ 0.00	$ (1.16)	$ (1.54)
Weighted average common shares outstanding, basic and diluted	42,539,293	41,323,921	32,909,762
Product sales, net
Disposal Group, Including Discontinued Operation, Income Statement Disclosures [Abstract]
Total revenue, net	$ 424	$ 13,896	$ 3,940
ESKATA
Disposal Group, Including Discontinued Operation, Income Statement Disclosures [Abstract]
Total revenue, net		312	2,804
RHOFADE
Disposal Group, Including Discontinued Operation, Income Statement Disclosures [Abstract]
Total revenue, net	$ 424	$ 13,584	$ 1,136

Discontinued Operations - Assets and Liabilities (Details) - USD ($) $ in Thousands	Dec. 31, 2020	Dec. 31, 2019
Disposal Group, Including Discontinued Operation, Balance Sheet Disclosures [Abstract]
Accounts receivable, net		$ 4,966
Discontinued operations - current assets		4,966
Accounts payable	$ 1,175	1,705
Accrued expenses	1,936	2,452
Discontinued operations - current liabilities	$ 3,111	$ 4,157

Discontinued Operations - Cash Flow (Details) $ in Thousands	12 Months Ended
	Dec. 31, 2019 USD ($)
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Depreciation and amortization	$ 313
Stock-based compensation expense	95
Intangible asset impairment charge	27,638
Loss on disposal of property and equipment	248
Non-cash items	28,294
Total non-cash items	26,624
RHOFADE
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Gain on sale of RHOFADE	$ 1,670

Segment Information (Details) $ in Thousands	12 Months Ended
Segment Information (Details) $ in Thousands	Dec. 31, 2020 USD ($) item	Dec. 31, 2019 USD ($)	Dec. 31, 2018 USD ($)
Segment Reporting Information [Line Items]
Number of reportable segments \| item	2
Total revenue	$ 6,482	$ 4,227	$ 6,151
Cost of revenue	5,133	4,055	4,329
Research and development	31,731	64,899	60,841
General and administrative	20,530	27,827	25,761
Goodwill impairment		18,504
Amortization expense	75	75	75
Loss from operations	(50,912)	(111,058)	(84,780)
Loss from discontinued operations	139	(49,234)	(50,634)
Income (loss) from discontinued operations	139	(47,812)	(50,634)
Dermatology Therapeutics Segment
Segment Reporting Information [Line Items]
Total revenue	696		1,500
Research and development	32,170	65,298	62,255
General and administrative		620	160
Goodwill impairment		18,504
Loss from operations	(31,474)	(84,422)	(60,915)
Income (loss) from discontinued operations	140	(46,305)	(48,576)
Contract Research Segment
Segment Reporting Information [Line Items]
Total revenue	13,319	16,824	13,135
Cost of revenue	12,228	16,253	11,399
General and administrative	2,794	2,738	2,181
Loss from operations	(1,703)	(2,167)	(445)
Corporate and Other
Segment Reporting Information [Line Items]
Total revenue	(7,533)	(12,597)	(8,484)
Cost of revenue	(7,095)	(12,198)	(7,070)
Research and development	(439)	(399)	(1,414)
General and administrative	17,736	24,469	23,420
Loss from operations	(17,735)	(24,469)	(23,420)
Income (loss) from discontinued operations	(1)	(1,507)	(2,058)
Intersegment Eliminations \| Contract Research Segment
Segment Reporting Information [Line Items]
Total revenue	$ 7,500	$ 12,600	$ (8,500)

Legal Proceedings (Details)	Jan. 24, 2020 item
Executive officer
Other Commitments [Line Items]
Number of defendants	2

Subsequent Events (Details) - USD ($) $ / shares in Units, $ in Thousands	1 Months Ended	12 Months Ended
	Jan. 31, 2021	Dec. 31, 2020
Subsequent events
Expenses incurred in offering		$ 211
Subsequent event \| January 2021 Public Offering
Subsequent events
Common stock, sold	6,306,271
Common stock, price per share	$ 17.50
Aggregate gross proceeds	$ 110,400
Underwriting discounts and commissions	6,600
Expenses incurred in offering	300
Proceeds from common stock	$ 103,500