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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

(Mark One)

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

For the quarterly period ended March 31, 2021

OR

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

For the transition period from                      to                     

Commission File No. 001-38359

 

Adicet Bio, Inc.

(Exact name of registrant as specified in its charter)

 

 

Delaware

 

81-3305277

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

500 Boylston Street, 13th Floor

Boston, MA

 

02116

(Address of principal executive offices)

 

(Zip Code)

 

(857) 315-5528

(Registrant’s telephone number, including area code)  

 

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

 

Title of each class

Trading symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.0001 per share

ACET

The Nasdaq Global Market

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

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

Accelerated filer

Non-accelerated filer

 

Smaller reporting company

 

 

 

Emerging growth Company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  

As of May 12, 2021, the registrant had 31,813,542 shares of common stock, $0.0001 par value per share, outstanding.

 

 

 

 


 

Table of Contents

 

 

 

Page

EXPLANATORY NOTE

2

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

3

 

 

 

PART I.

FINANCIAL INFORMATION

5

Item 1.

Consolidated Financial Statements (Unaudited)

5

 

Consolidated Balance Sheets as of March 31, 2021 and December 31, 2020

5

 

Consolidated Statements of Operations and Comprehensive Loss for the Three Months Ended March 31, 2021 and 2020

6

 

Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit) for the Three Months Ended March 31, 2021 and 2020

7

 

Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2021 and 2020

8

 

Notes to Unaudited Consolidated Financial Statements

9

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

26

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

36

Item 4.

Controls and Procedures

36

PART II.

OTHER INFORMATION

39

Item 1.

Legal Proceedings

39

Item 1A.

Risk Factors

39

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

78

Item 3.

Defaults Upon Senior Securities

78

Item 4.

Mine Safety Disclosures

78

Item 5.

Other Information

78

Item 6.

Exhibits

79

Signatures

80

 

 

i


 

Summary of the Material Risks Associated with Our Business

 

Our product candidates are based on novel technologies, which makes it difficult to predict the likely success of such product candidates and the time and cost of product candidate development and obtaining regulatory approval. Specifically, our gamma delta T cell candidates represent a novel approach to cancer treatment that creates significant challenges for us.

 

Our business is highly dependent on the success of ADI-001 and ADI-002. If we are unable to obtain regulatory approval for ADI-001 or ADI-002 and effectively commercialize ADI-001 or ADI-002 for the treatment of patients in our targeted indications, our business would be significantly harmed.

 

All of our product candidates, including ADI-001 and ADI-002, will require additional clinical and non-clinical development and will require substantial investment. If we are unable to raise sufficient capital when needed, our business, financial condition and results of operations will be harmed, and we will need to significantly modify our operational plans to continue as a going concern.

 

Our clinical trials may fail to demonstrate the safety and efficacy of any of our product candidates, which would prevent or delay regulatory approval and commercialization.

 

We may encounter substantial delays in our clinical trials or may not be able to conduct our trials on the timelines we expect.

 

A variety of risks associated with conducting research and clinical trials abroad and marketing our product candidates internationally could materially adversely affect our business.

 

A pandemic, epidemic or outbreak of an infectious disease, such as COVID-19, may materially and adversely affect our business and operations.

 

We have identified material weaknesses in our internal control over financial reporting. Failure to achieve and maintain effective internal control over financial reporting could harm our business and negatively impact the value of our common stock.

 

We may form or seek strategic alliances or enter into additional licensing arrangements in the future, and we may not realize the benefits of such alliances or licensing arrangements.

 

If our collaboration agreement with Regeneron is terminated, or if Regeneron materially breaches its obligations thereunder, our business, prospects, operating results, and financial condition would be materially harmed.

 

We are subject to certain exclusivity obligations under our agreement with Regeneron.

 

The FDA regulatory approval process is lengthy and time-consuming, and we may experience significant delays in the clinical development and regulatory approval of our product candidates.

 

We depend on intellectual property licensed from third parties and termination of any of these licenses could result in the loss of significant rights, which would harm our business.

 

We currently have no marketing and sales organization and as a company have no experience in marketing products. If we are unable to establish marketing and sales capabilities or enter into agreements with third parties to market and sell our product candidates, we may not be able to generate product revenue.

 

We do not currently operate our own manufacturing facility, which would require significant resources and any failure to successfully manufacture our products could adversely affect our clinical trials and the commercial viability of our product candidates.

1


EXPLANATORY NOTE

 

Prior to September 15, 2020, we were a clinical-stage biopharmaceutical company known as resTORbio, Inc. (resTORbio) that had historically focused on developing innovative medicines that target the biology of aging, to prevent or treat age-related diseases with the potential to extend healthy lifespans. resTORbio was originally incorporated under the laws of the State of Delaware in July 2016 and commenced research and development operations in March 2017.

On September 15, 2020, we completed our business combination whereby a wholly-owned subsidiary of resTORbio merged with and into Adicet Bio, Inc. (Former Adicet), with Former Adicet surviving as a wholly-owned subsidiary of resTORbio and changing our name to Adicet Therapeutics, Inc. (such transactions, the Merger). In connection with the completion of the Merger, resTORbio was renamed Adicet Bio, Inc. (Adicet Bio).

Immediately prior to the Effective Time of the Merger, resTORbio effected a reverse stock split of our common stock at a ratio of 1-for-7 (the Reverse Stock Split). At the Effective Time of the Merger, each outstanding share of Former Adicet’s capital stock was converted into the right to receive 0.1240 (the Exchange Ratio) shares of Adicet Bio’s common stock.

Unless otherwise noted, all references to common stock share and per share amounts in this Quarterly Report on Form 10-Q have been retroactively adjusted to reflect the conversion of shares in the Merger based on the Exchange Ratio and Reverse Stock Split. As used herein, the words “the Company,” “we,” “us,” and “our” refer to, for periods following the Merger, Adicet Bio (formerly resTORbio, Inc.), together with its direct and indirect subsidiaries, and for periods prior to the Merger, Adicet Therapeutics, Inc. (formerly Adicet Bio, Inc.), and our direct and indirect subsidiaries, as applicable. In addition, the word “resTORbio” refers to the Company prior to the completion of the Merger, and we sometimes refer to Adicet Therapeutics, Inc. as “Adicet” or “Former Adicet.”

2


SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements that involve substantial risks and uncertainties. All statements, other than statements of historical facts, contained in this Quarterly Report on Form 10-Q, including statements regarding our strategy, future operations, future financial position, future revenue, projected costs, prospects, plans and objectives of management and expected market growth are forward-looking statements. The words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “should,” “target,” “would” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words.

These forward-looking statements include, among other things, statements about:

 

the anticipated timing of our initiation of future clinical trials for ADI-001 in Non-Hodgkin’s Lymphoma (NHL), including the anticipated results;

 

the anticipated timing of our submission of our Investigational New Drug (IND) application or equivalent regulatory filings and initiation of future clinical trials for ADI-002 in solid tumors, including the timing of the anticipated results;

 

the impacts of the current COVID-19 pandemic on our continuing operations, clinical development plans, including the timing of initiation and completion of studies or trials, financial forecasts and expectations, potential delays and increased costs in conducting clinical trials in nursing homes, and other matters related to our business and operations;

 

the timing of announcements of interim results of our clinical trials;

 

the timing of and our ability to obtain and maintain regulatory approvals for our product candidates;

 

the rate and degree of acceptance and clinical utility of any products for which we receive regulatory approval;

 

our commercialization, marketing and manufacturing capabilities and strategy;

 

our intellectual property position and strategy;

 

our ability to identify additional product candidates with significant commercial potential;

 

our plans to enter into collaborations for the development and commercialization of product candidates;

 

the potential benefits of any future collaboration;

 

our ability to contract with third party suppliers and manufacturers and their ability to perform adequately;

 

the success of competing therapies that are or may become available;

 

our ability to retain the continued service of our key professionals and to identify, hire, and retain additional qualified professionals;

 

our financial performance;

 

our expectations related to the use of cash, cash equivalents and marketable securities;

 

our estimates regarding expenses, future revenue, capital requirements and needs for additional financing;

 

our ability to remediate the material weaknesses in internal control over financial reporting and to maintain effective internal control over financial reporting;

 

our expectations regarding the time during which we will be an emerging growth company under the JOBS Act;

 

developments relating to our competitors and our industry;

3


 

 

the impact of government laws and regulations; and

 

other risks and uncertainties, including those listed under the caption “Risk Factors.”

We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements we make. We have included important factors in the cautionary statements included in this Quarterly Report on Form 10-Q, particularly in the “Risk Factors” section, that could cause actual results or events to differ materially from the forward-looking statements that we make. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, collaborations, joint ventures or investments that we may make or enter into.

You should read this Quarterly Report on Form 10-Q and the documents that we reference herein and have filed or incorporated by reference as exhibits hereto completely and with the understanding that our actual future results may be materially different from what we expect. We do not assume any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

This Quarterly Report on Form 10-Q includes statistical and other industry and market data that we obtained from industry publications and research, surveys and studies conducted by third parties. Industry publications and third-party research, surveys and studies generally indicate that their information has been obtained from sources believed to be reliable, although they do not guarantee the accuracy or completeness of such information. We are responsible for all of the disclosure contained in this Quarterly Report on Form 10-Q, and we believe these industry publications and third-party research, surveys and studies are reliable.

4


PART I—FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements.

ADICET BIO, INC.

Consolidated Balance Sheets

(in thousands, except share and per share amounts)

(unaudited)

 

 

 

March 31,

2021

 

 

December 31,

2020

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

221,667

 

 

$

84,330

 

Short-term marketable debt securities

 

 

1,753

 

 

 

10,284

 

Prepaid expenses and other current assets

 

 

5,686

 

 

 

5,722

 

     Total current assets

 

 

229,106

 

 

 

100,336

 

Property and equipment, net

 

 

3,122

 

 

 

2,790

 

Operating lease right-of-use asset

 

 

22,380

 

 

 

23,066

 

Goodwill

 

 

19,863

 

 

 

20,089

 

In-process research and development

 

 

730

 

 

 

1,190

 

Restricted cash

 

 

4,773

 

 

 

4,527

 

Other non-current assets

 

 

2,099

 

 

 

1,837

 

     Total assets

 

$

282,073

 

 

$

153,835

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

1,748

 

 

$

1,552

 

Contract liabilities — related party, current

 

 

17,961

 

 

 

13,980

 

Accrued and other current liabilities

 

 

4,227

 

 

 

5,732

 

Operating lease liability

 

 

1,247

 

 

 

1,215

 

Total current liabilities

 

 

25,183

 

 

 

22,479

 

Operating lease liability, net of current portion

 

 

19,954

 

 

 

20,424

 

Contingent consideration liability

 

 

600

 

 

 

980

 

Deferred tax liability

 

 

77

 

 

 

125

 

Total liabilities

 

 

45,814

 

 

 

44,008

 

Stockholders’ equity:

 

 

 

 

 

 

 

 

Preferred stock, $0.0001 par value, 10,000,000 shares authorized as of

March 31, 2021 and December 31, 2020, respectively; none issued and outstanding as of March 31, 2021 and December 31, 2020, respectively

 

 

 

 

 

 

Common stock, $0.0001 par value, 150,000,000 shares authorized as of March 31, 2021 and December 31, 2020, respectively; 31,802,399 and 19,677,249 shares issued and outstanding as of March 31, 2021 and December 31, 2020, respectively

 

 

3

 

 

 

2

 

Additional paid-in capital

 

 

363,898

 

 

 

216,126

 

Accumulated deficit

 

 

(127,644

)

 

 

(106,325

)

Accumulated other comprehensive income

 

 

2

 

 

 

24

 

Total stockholders’ equity

 

 

236,259

 

 

 

109,827

 

Total liabilities and stockholders’ equity

 

$

282,073

 

 

$

153,835

 

 

The accompanying notes are an integral part of these consolidated financial statements.

5


ADICET BIO, INC.

Consolidated Statements of Operations and Comprehensive Loss

(in thousands, except share and per share amounts)

(unaudited)

 

 

 

Three Months Ended March 31,

 

 

 

2021

 

 

2020

 

Revenuerelated party

 

$

(3,981

)

 

$

2,000

 

Operating expenses:

 

 

 

 

 

 

 

 

Research and development

 

 

11,743

 

 

 

7,033

 

General and administrative

 

 

5,630

 

 

 

2,524

 

Total operating expenses

 

 

17,373

 

 

 

9,557

 

Loss from operations

 

 

(21,354

)

 

 

(7,557

)

Interest income

 

 

41

 

 

 

322

 

Interest expense

 

 

(50

)

 

 

 

Other income (expense), net

 

 

(4

)

 

 

70

 

Loss before income tax expense (benefit)

 

 

(21,367

)

 

 

(7,165

)

Income tax expense (benefit)

 

 

(48

)

 

 

(2,679

)

Net loss

 

$

(21,319

)

 

$

(4,486

)

Net loss per share attributable to common stockholders, basic and diluted

 

$

(0.82

)

 

$

(2.07

)

Weighted-average common shares used in computing net loss per share attributable to common stockholders, basic and diluted

 

 

26,099,954

 

 

 

2,163,440

 

Other comprehensive income:

 

 

 

 

 

 

 

 

Unrealized (loss) gain on marketable debt securities, net of tax

 

 

(22

)

 

 

(15

)

Total other comprehensive (loss) income

 

 

(22

)

 

 

(15

)

Comprehensive loss

 

$

(21,341

)

 

$

(4,501

)

 

The accompanying notes are an integral part of these consolidated financial statements.

 

6


 

ADICET BIO, INC.

Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit)

(in thousands, except share amounts)

(Unaudited)

 

 

 

Common Stock

 

 

Additional

Paid In

 

 

Accumulated

 

 

Accumulated

Other

Comprehensive

 

 

Total

Shareholders'

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Income (Loss)

 

 

Equity

 

Balance at December 31, 2020

 

 

19,677,249

 

 

$

2

 

 

$

216,126

 

 

$

(106,325

)

 

$

24

 

 

$

109,827

 

Issuance of common stock upon exercise of stock options

 

 

393,991

 

 

 

 

 

 

976

 

 

 

 

 

 

 

 

 

976

 

Issuance of common stock related to financing

 

 

11,729,353

 

 

 

1

 

 

 

143,753

 

 

 

 

 

 

 

 

 

143,754

 

Exercise of warrant

 

 

1,806

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

3,043

 

 

 

 

 

 

 

 

 

3,043

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(21,319

)

 

 

 

 

 

(21,319

)

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(22

)

 

 

(22

)

Balance at March 31, 2021

 

 

31,802,399

 

 

$

3

 

 

$

363,898

 

 

$

(127,644

)

 

$

2

 

 

$

236,259

 

 

 

 

Redeemable Convertible

Preferred Stock

 

 

 

Common Stock

 

 

Additional

Paid In

 

 

Accumulated

 

 

Accumulated

Other

Comprehensive

 

 

Total

Shareholders'

 

 

 

Shares

 

 

Amount

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Income (Loss)

 

 

(Deficit)

 

Balance at December 31, 2019

 

 

12,048,698

 

 

$

114,083

 

 

 

 

2,155,578

 

 

$

 

 

$

9,258

 

 

$

(69,647

)

 

$

23

 

 

$

(60,366

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(4,486

)

 

 

 

 

 

(4,486

)

Issuance of common stock upon exercise of stock options

 

 

 

 

 

 

 

 

 

19,953

 

 

 

 

 

 

42

 

 

 

 

 

 

 

 

 

42

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

299

 

 

 

 

 

 

 

 

 

299

 

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(15

)

 

 

(15

)

Balance at March 31, 2020

 

 

12,048,698

 

 

$

114,083

 

 

 

 

2,175,531

 

 

$

 

 

$

9,599

 

 

$

(74,133

)

 

$

8

 

 

$

(64,526

)

 

The accompanying notes are an integral part of these consolidated financial statements.

 

7


 

ADICET BIO, INC.

Consolidated Statements of Cash Flows

(in thousands)

(unaudited) 

 

 

 

Three Months Ended March 31,

 

 

 

2021

 

 

2020

 

Cash flows from operating activities

 

 

 

 

 

 

 

 

Net loss

 

$

(21,319

)

 

$

(4,486

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization expense

 

 

326

 

 

 

313

 

Noncash lease expense

 

 

686

 

 

 

 

Stock-based compensation expense

 

 

3,043

 

 

 

299

 

Net amortization of premiums and accretion discounts on investments

 

 

9

 

 

 

(31

)

Change in fair value of redeemable convertible preferred stock warrant liability

 

 

 

 

 

(70

)

Amortization of deferred debt issuance costs

 

 

184

 

 

 

 

Impairment of in-process research and development

 

 

460

 

 

 

 

Reduction to revenue

 

 

3,981

 

 

 

 

Remeasurement of contingent consideration liability

 

 

(380

)

 

 

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Prepaid expenses and other current assets

 

 

36

 

 

 

(3,022

)

Other non-current assets

 

 

(377

)

 

 

(205

)

Accounts payable

 

 

196

 

 

 

316

 

Contract liabilities — related party

 

 

 

 

 

(2,000

)

Operating lease liabilities

 

 

(438

)

 

 

(37

)

Accrued and other current liabilities

 

 

(1,553

)

 

 

571

 

Net cash used in operating activities

 

 

(15,146

)

 

 

(8,352

)

Cash flows from investing activities

 

 

 

 

 

 

 

 

Proceeds from sales of marketable debt securities

 

 

7,500

 

 

 

 

Purchases of marketable debt securities

 

 

 

 

 

(5,700

)

Proceeds from maturities of marketable debt securities

 

 

1,000

 

 

 

10,440

 

Purchases of property and equipment

 

 

(658

)

 

 

(295

)

Net cash provided by investing activities

 

 

7,842

 

 

 

4,445

 

Cash flows from financing activities

 

 

 

 

 

 

 

 

Proceeds from issuance of common stock, net of issuance costs

 

 

143,754

 

 

 

 

Proceeds from exercise of stock options

 

 

976

 

 

 

42

 

Deferred debt issuance costs

 

 

157

 

 

 

 

Net cash provided by financing activities

 

 

144,887

 

 

 

42

 

Net change in cash, cash equivalents and restricted cash

 

 

137,583

 

 

 

(3,865

)

Cash, cash equivalents and restricted cash, at the beginning of period

 

 

88,857

 

 

 

14,889

 

Cash, cash equivalents and restricted cash, at the end of period

 

$

226,440

 

 

$

11,024

 

Reconciliation of cash, cash equivalents and restricted cash:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

221,667

 

 

$

6,742

 

Restricted cash

 

 

4,773

 

 

 

4,282

 

Cash, cash equivalents and restricted cash

 

$

226,440

 

 

$

11,024

 

Supplemental cash flow information

 

 

 

 

 

 

 

 

Cash received from tax refund

 

$

158

 

 

$

 

Supplemental disclosures of noncash investing and financing activities

 

 

 

 

 

 

 

 

Purchases of property and equipment included in accounts payable

 

$

67

 

 

$

71

 

Adjustment to goodwill

 

$

56

 

 

$

 

 

The accompanying notes are an integral part of these consolidated financial statements.

8


ADICET BIO, INC.

Notes to Interim Consolidated Financial Statements (Unaudited)

1. Organization and Nature of the Business

Adicet Bio, Inc. (formerly resTORbio, Inc. (resTORbio)), together with its subsidiaries, (the Company) is a biotechnology company discovering and developing allogeneic gamma delta T cell therapies for cancer and other diseases. The Company is advancing a pipeline of “off-the-shelf” gamma delta T cells, engineered with chimeric antigen receptors (CARs) and T cell receptor-like antibodies to enhance selective tumor targeting, facilitate innate and adaptive anti-tumor immune response, and improve persistence for durable activity in patients. The Company believes its approach has potentially significant advantages over alpha beta T cells, which are the basis of standard CAR-T cell therapies. The Company was incorporated in November 2014 in Delaware. The principal executive offices are located in Boston, Massachusetts. The Company also has another office in Menlo Park, California.

Adicet Bio, Inc. (when referred to prior to the Merger (as defined below), (Former Adicet)) was incorporated in November 2014 in Delaware and was headquartered in Menlo Park, CA. Adicet Bio Israel Ltd. (formerly Applied Immune Technologies Ltd.) (Adicet Israel) is a wholly owned subsidiary of Former Adicet and is located in Haifa, Israel. Adicet Israel was founded in 2006. During 2019, Former Adicet consolidated its operations, including research and development activities, in the U.S. and as a result substantially reduced its operations in Israel.

Merger with resTORbio

Prior to September 15, 2020, the Company was a clinical-stage biopharmaceutical company known as resTORbio that had historically focused on developing innovative medicines that target the biology of aging, to prevent or treat age-related diseases with the potential to extend healthy lifespans. On April 28, 2020, resTORbio entered into a definitive Merger Agreement with Former Adicet (the Merger Agreement). Under the terms of the Merger Agreement, Former Adicet agreed to merge with a wholly owned subsidiary of resTORbio in an all-stock transaction with Former Adicet surviving as a wholly owned subsidiary of resTORbio and changing its name to “Adicet Therapeutics, Inc.” (such transactions, the Merger). Under the exchange ratio formula in the Merger Agreement, immediately following the Effective Time of the Merger, the securityholders of Former Adicet as of immediately prior to the Effective Time of the Merger owned approximately 75% of the outstanding shares of the Company’s common stock on a fully-diluted basis and securityholders of resTORbio as of immediately prior to the Effective Time (as defined below) of the Merger owned approximately 25% of the outstanding shares of the Company’s common stock on a fully-diluted basis (in each case excluding equity incentives available for grant).

The Company concluded that the transaction represented a business combination pursuant to Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 805, Business Combinations. Further, Former Adicet was determined to be the accounting acquirer based upon the terms of the Merger and other factors including: (i) Former Adicet’s securityholders own approximately 75% of the voting rights of the combined company (on a fully-diluted basis excluding equity incentives available for grant); (ii) Former Adicet designated a majority (five of seven) of the initial members of the Board of Directors of the combined company; and (iii) the terms of the exchange of equity interests based on the exchange ratio at the announcement of the Merger factored in an implied premium to resTORbio’s stockholders. The composition of senior management of the combined company was determined to be a neutral factor in the accounting acquirer determination, as the combined company will leverage the expertise of the senior management of both companies. Accordingly, the reported operating results prior to the business combination are those of Former Adicet.

On September 15, 2020, the Company completed the Merger pursuant to the Merger Agreement (the Effective Time). In connection with the Merger, and immediately prior to the Effective Time, the Company effected a reverse stock split of the Company’s common stock at a ratio of 1-for-7 (the Reverse Stock Split). Also, in connection with the Merger, the Company changed its name from “resTORbio, Inc.” to “Adicet Bio, Inc.” (the Name Change), Former Adicet changed its name from “Adicet Bio, Inc.” to “Adicet Therapeutics, Inc.” and the business conducted by the Company became primarily the business which was previously conducted by Former Adicet, which is a biotechnology company discovering and developing allogeneic gamma delta T cell therapies for cancer and other diseases.

At the Effective Time, each outstanding share of Former Adicet capital stock was converted into the right to receive 0.1240 (the Exchange Ratio) shares of Company’s common stock, as set forth in the Merger Agreement. The Exchange Ratio was determined based on the total number of outstanding shares of Company’s common stock and Former Adicet capital stock, each on a fully diluted basis, and the respective valuations of Former Adicet and resTORbio at the time of execution of the Merger Agreement. In connection with the Merger, the Company also assumed certain outstanding Former Adicet warrants and stock options under Former Adicet’s 2015 Stock Incentive Plan (the 2015 Adicet Stock Incentive Plan) and Former Adicet’s 2014 Share Option Plan (the 2014 Share Option Plan and, together with the 2015 Adicet Stock Incentive Plan, the Former Adicet Plans), with such stock options and warrants henceforth representing the right to purchase a number of shares of Company’s common stock equal to the Exchange Ratio multiplied by the number of shares of Former Adicet’s capital stock previously represented by such stock options and warrants, as applicable, with a proportionate adjustment in exercise price.

9


Immediately following the Effective Time, there were approximately 19,589,828 shares of the Company’s common stock outstanding (post Reverse Stock Split) and the former equity holders of Former Adicet held approximately 75% of the outstanding shares of Company’s common stock on a fully-diluted basis and the former equity holders of resTORbio held approximately 25% of the outstanding shares of Company’s common stock on a fully-diluted basis (in each case excluding equity incentives available for grant).

Please refer to Note 3 “Business Combinations” for further details of the Merger.

Liquidity

The Company has incurred significant net operating losses and negative cash flows from operations and has an accumulated deficit of $127.6 million as of March 31, 2021. The Company has historically financed its operations primarily through a collaboration and licensing arrangement, through the private placement of equity securities and debt, and cash received in the Merger. To date, none of the Company’s product candidates have been approved for sale and therefore the Company has not generated any revenue from product sales. Management expects operating losses and negative cash flows to continue for the foreseeable future, until such time, if ever, that it can generate significant sales of its product candidates currently in development.

In February 2021, the Company completed an underwritten public offering of 10,575,513 shares of its common stock at a public offering price of $13.00 per share. The Company received aggregate gross proceeds from the offering, before deducting underwriting discounts and commissions and offering expenses of approximately $137.5 million. In connection with the offering, the Company also entered into a stock purchase agreement with certain existing investors for $15.0 million of shares of the Company’s common stock at a price per share equal to the public offering price, with an initial closing for certain investors held simultaneously with the closing of the offering and a subsequent closing for certain additional investors. These two recent events have resolved the substantial doubt about the Company’s ability to continue as a going concern. The Company expects that its cash, cash equivalents and marketable debt securities, including the gross proceeds it received in February 2021 from its underwritten public offering and the proceeds received from a stock purchase agreement with certain existing investors, will be sufficient to fund its forecasted operating expenses, capital expenditure requirements and debt service payments for at least the next twelve months from the issuance of these interim consolidated financial statements.

All of the Company’s revenue to date is generated from the Regeneron Agreement, which is a collaboration and license agreement with Regeneron Pharmaceuticals, Inc. (Regeneron). The Company does not expect to generate any significant product revenue until it obtains regulatory approval of and commercialize any of the Company’s product candidates or enter into additional collaborative agreements with third parties, and it does not know when, or if, either will occur. The Company expects to continue to incur significant losses for the foreseeable future, and it expects the losses to increase as the Company continues the development of, and seek regulatory approvals for, its product candidates and begin to commercialize any approved products. The Company is subject to all of the risks typically related to the development of new product candidates, including, but not limited to, raising additional capital, development by its competitors of new technological innovations, risk of failure in preclinical and clinical studies, safety and efficacy of its product candidates in clinical trials, the risk of relying on external parties such as contract research organizations (CROs) and contract manufacturing organizations (CMOs), the regulatory approval process, market acceptance of the Company’s products once approved, lack of marketing and sales history, dependence on key personnel and protection of proprietary technology and it may encounter unforeseen expenses, difficulties, complications, delays, and other unknown factors that may adversely affect its business.

Until such time as the Company can generate significant revenue from product sales, if ever, the Company expects to finance its operations through the sale of equity, debt financings, collaborative or other arrangements with corporate or other sources of financing. Adequate funding may not be available to the Company on acceptable terms or at all. The Company’s failure to raise capital as and when needed could have a negative impact on its financial condition and the Company’s ability to pursue its business strategies. Although the Company continues to pursue these plans, there is no assurance that the Company will be successful in obtaining sufficient funding on terms acceptable to the Company to fund continuing operations, if at all.

 

2. Summary of Significant Accounting Policies

Basis of Presentation

The unaudited interim consolidated financial statements and related disclosures have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”).

10


Significant Accounting Policies

The Company’s significant accounting policies are described in Note 2, Summary of Significant Accounting Policies, to the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020. There have been no material changes to the significant accounting policies during the three-month period ended March 31, 2021.

Unaudited Interim Financial Information

The consolidated balance sheet as of December 31, 2020 was derived from the Company’s audited financial statements, but does not include all disclosures required by GAAP. The accompanying unaudited consolidated financial statements as of March 31, 2021 and for the three months ended March 31, 2021 and 2020, have been prepared by the Company, pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”), for interim financial statements. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been or omitted pursuant to such rules and regulations. However, the Company believes that the disclosures are adequate to make the information presented not misleading. These consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and the notes thereto for the year ended December 31, 2020. In the opinion of management, all adjustments, consisting only of normal recurring adjustments necessary for a fair statement of the Company’s consolidated financial position as of March 31, 2021 and consolidated results of operations for the three months ended March 31, 2021 and 2020 and consolidated cash flows for the three months ended March 31, 2021 and 2020 have been made. The results of operations for the three months ended March 31, 2021 are not necessarily indicative of the results of operations that may be expected for the year ending December 31, 2021.

Concentration of Credit Risk

Financial instruments, which potentially subject the Company to concentrations of credit risk, consist principally of cash and cash equivalents, and marketable debt securities. The Company’s cash and cash equivalents are held at two financial institutions in the U.S. and one financial institution in Israel and such amounts may, at times, exceed insured limits. The Company invests its cash equivalents and marketable debt securities in money market funds, U.S. government securities, commercial paper, corporate bonds, and asset-backed securities. The Company limits its credit risk associated with cash equivalents and marketable debt securities by placing them with banks and institutions it believes are highly creditworthy and in highly rated investments. The Company has not experienced any losses on its deposits of cash and cash equivalents and marketable debt securities to date.

The Company has one customer, Regeneron Pharmaceuticals, Inc. (Regeneron), which represents 100% of the Company’s total revenue for the quarters ended March 31, 2021, and 2020 (see Note 10).

Risks and Uncertainties

The Company is subject to risks and uncertainties common to early-stage companies in the biotechnology industry, including, but not limited to, development by competitors of new technological innovations, protection of proprietary technology, dependence on key personnel, compliance with government regulations and the need to obtain additional financing to fund operations. Product candidates currently under development will require significant additional research and development efforts, including extensive preclinical studies, clinical trials, and regulatory approval, prior to commercialization. These efforts require significant amounts of additional capital, adequate personnel infrastructure and extensive compliance and reporting.

The Company’s product candidates are still in development and, to date, none of the Company’s product candidates have been approved for sale and, therefore, the Company has not generated any revenue from product sales.

There can be no assurance that the Company’s research and development will be successfully completed, that adequate protection for the Company’s intellectual property will be obtained or maintained, that any products developed will obtain necessary government regulatory approval or that any approved products will be commercially viable. Even if the Company’s product development efforts are successful, it is uncertain when, if ever, the Company will generate revenue from product sales. The Company operates in an environment of rapid change in technology and substantial competition from other pharmaceutical and biotechnology companies.

11


The current COVID-19 (coronavirus) pandemic, which is impacting worldwide economic activity, poses risk that the Company or its employees, contractors, suppliers, and other partners may be prevented from conducting business activities for an indefinite period of time, including due to shutdowns that may be requested or mandated by governmental authorities. The extent to which the coronavirus impacts the Company’s operations will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the duration of the outbreak, new information that will emerge concerning the severity of the coronavirus and the actions to contain the coronavirus or treat its impact, among others. COVID-19 may impact the timing of regulatory approval of the investigational new drug (INDs) for clinical trials, the enrollment of any clinical trials that are approved, the availability of clinical trial materials and regulatory approval and commercialization of our products. COVID-19 may also impact the Company’s ability to access capital, which could negatively impact short-term and long-term liquidity.

Recent Accounting Pronouncements

From time to time, new accounting pronouncements are issued by the FASB ASC or other standard setting bodies and adopted by the Company as of the specified effective date, unless otherwise discussed below.

Recently Adopted Accounting Pronouncements

In November 2018, FASB issued ASU 2018-18, Collaborative Arrangements (Topic 808): Clarifying the Interaction Between Topic 808 and Topic 606, which is intended to clarify the circumstances under which certain transactions in collaborative arrangements should be accounted for under the revenue recognition standard. Certain transactions between collaboration arrangement participants should be accounted for as revenue under ASC Topic 606 when the collaborative arrangement participant is a customer in the context of a unit of account. For public business entities, this ASU is effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. For all other entities, this ASU is effective for fiscal years and interim periods within those years beginning after December 15, 2020. Early adoption is permitted. The Company is adopted ASU 2018-18 in the first quarter of 2021. The impact on its consolidated financial statements and related disclosures was not material.

Accounting Pronouncements Not Yet Adopted

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which requires the measurement and recognition of expected credit losses for financial assets held at amortized cost. This ASU replaces the existing incurred loss impairment model with an expected loss model. It also eliminates the concept of other-than-temporary impairment and requires credit losses related to available-for-sale debt securities to be recorded through an allowance for credit losses rather than as a reduction in the amortized cost basis of the securities. These changes will result in earlier recognition of credit losses. For public business entities that meet the definition of a Securities and Exchange Commission (SEC) filer, excluding entities eligible to be smaller reporting companies as defined by the SEC, adoption is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. For SEC filers that are eligible to be smaller reporting companies and for all other entities, this ASU is effective for fiscal years beginning after December 15, 2022, and interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the impact the adoption of this ASU will have on its consolidated financial statements and related disclosures.

In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740)—Simplifying the Accounting for Income Taxes, which simplify various aspects related to the accounting for income taxes. This ASU removes exceptions to the general principles in Topic 740 related to the approach for intra-period tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. For public companies, this ASU is effective for interim and annual reporting periods beginning after December 15, 2020. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022. Early adoption is permitted. The Company is currently evaluating the impact the adoption of this ASU will have on its consolidated financial statements and related disclosures.

In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848) (“ASU 2020-04”). The amendments in ASU 2020-04 provide optional expedients and exceptions for applying generally accepted accounting principles to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments in ASU 2020-04 are effective for all entities as of March 12, 2020 through December 31, 2022. An entity may elect to apply the amendments for contract modifications by Topic or Industry Subtopic as of any date from the beginning an interim period that includes or is subsequent to March 12, 2020, or prospectively from the date that the financial statements are available to be issued. Once elected for a Topic or an Industry Subtopic, the amendments must be applied prospectively for all eligible contract modifications for that Topic or Industry Subtopic. The Company may elect to apply ASU 2020-04 as its contracts referenced in London Interbank Offered Rate (“LIBOR”) are impacted by reference rate reform. The Company is currently evaluating the impact of the adoption of this ASU on the Company’s consolidated financial statements.

12


3. Business Combination

 

On September 15, 2020, Former Adicet completed its Merger with resTORbio. Based on the Exchange Ratio of 0.1240, immediately following the Merger, resTORbio stockholders and holders of resTORbio restricted stock units and options to acquire resTORbio common stock owned approximately 25.0% of the outstanding capital stock of the combined company on a fully diluted basis, and Former Adicet stockholders, holders of options or warrants to acquire Former Adicet capital stock owned approximately 75.0% of the outstanding capital stock of the combined company on a fully diluted basis. At the closing of the Merger, all shares of Former Adicet common stock and Former Adicet redeemable convertible preferred stock then outstanding were converted to Former Adicet’s common stock under their original terms and were then exchanged for the Company’s common stock.

resTORbio’s stockholders will continue to own and hold their existing shares of the Company’s common stock (after giving effect to the 1-for-7 reverse stock split). Pursuant to the terms of the Merger, the vesting of all outstanding resTORbio stock options was accelerated in full as of immediately prior to the Effective Time. All out-of-the-money resTORbio stock options were cancelled for no consideration. All in-the-money resTORbio stock options remained outstanding after the completion of the Merger in accordance with their terms. For accounting purposes, the Company assumed 81,370 in-the-money resTORbio stock options after giving effect to reverse stock split. In addition, 91,309 unvested resTORbio restricted stock units outstanding and unsettled, after giving effect to reverse stock split, as of immediately prior to the effective time of the Merger, were accelerated in full and the holders of such restricted stock units received 54,553 shares of the Company’s common stock (after reduction by the number of shares of resTORbio common stock necessary to satisfy applicable tax withholding obligations at the maximum statutory rate). The fair value of these modified stock options and restricted stock units attributable to pre-combination services was recorded as a component of consideration transferred and the fair value of these modified stock options and restricted stock units attributable to post-combination services was recognized as stock compensation expense in the Company’s consolidated statements of operations and comprehensive loss at the close of the Merger

At the closing of the Merger, all shares of Former Adicet common stock and Former Adicet redeemable convertible preferred stock then outstanding were converted to Former Adicet’s common stock under their original terms and were then exchanged for the Company’s common stock.

In connection with the Merger, the Company entered into a Contingent Value Rights Agreement (the CVR Agreement) with Computershare Inc. and Computershare Trust Company, N.A. as joint rights agent. Per the terms of the Merger, each holder of resTORbio common stock as of immediately prior to the completion of the Merger is entitled to one contractual contingent value right, subject to and in accordance with the terms and conditions of the CVR Agreement, for each share of resTORbio common stock held by such holder as of immediately prior to the Effective Time. The CVR holders are entitled to receive net proceeds from the commercialization, if any, from a third-party commercial partner of RTB101, resTORbio’s small molecule product candidate that is a potent inhibitor of target of rapamycin complex 1 (TORC1), for a COVID-19 related indication.

The total purchase price was allocated to the tangible and intangible assets acquired and liabilities assumed of resTORbio based on their fair values as of the completion of the Merger, with the excess allocated to goodwill. The purchase price is calculated based on the fair value of resTORbio common stock that the resTORbio stockholders owned as of the closing date of the Merger because, with no active trading market for shares of Former Adicet, the fair value of the resTORbio’s common stock represented a more reliable measure of the fair value of consideration transferred in the Merger. The following summarizes the purchase price in the Merger (in thousands, except share and per share amounts):

 

 

Fair value of common stock shares of the combined company owned by resTORbio stockholders (1)

 

$

84,142

 

Fair value of contingent consideration liability with respect to CVR (2)

 

 

2,880

 

Purchase price

 

$

87,022

 

 

 

(1)

Represents the share consideration of the combined company that the resTORbio stockholders own as of the closing of the Merger calculated as follows:

 

Number of shares of the combined company owned by

resTORbio stockholders (a)

 

 

5,207,695

 

Multiplied by the fair value per share of resTORbio common stock (b)

 

$

16.59

 

Acquisition date fair value of resTORbio

 

 

86,396

 

Estimated fair value of modified stock options and restricted stock units attributable to pre-combination services (3)

 

 

626

 

Less: portion of the fair value to be distributed as CVR (c)

 

 

(2,880

)

Fair value of shares of the combined company owned by resTORbio stockholders

 

$

84,142

 

13


 

 

 

a.

Represents the number of shares of common stock of the combined company that the resTORbio stockholders owned as of the closing of the Merger. This amount is calculated as 5,207,695 shares of resTORbio common stock outstanding as of September 15, 2020.

 

b.

The purchase price is based on the closing price of resTORbio common stock on September 14, 2020.

 

c.

The fair value of resTORbio common stock was further adjusted to remove the estimated fair value of the CVR embedded within the closing price, as each holder of resTORbio stock will receive one contractual CVR immediately prior to the Merger.

 

 

(2)

Each holder of resTORbio common stock as of immediately prior to the completion of the Merger was entitled to one CVR issued by resTORbio, subject to and in accordance with the terms and conditions of the CVR Agreement, for each share of resTORbio common stock held by such holder as of immediately prior to the effective time of the Merger

 

 

(3)

Based on the capitalization of resTORbio as of September 15, 2020, 91,309 outstanding unvested resTORbio restricted stock units were accelerated in connection with the Merger and holders of the restricted stock units were issued approximately 54,553 shares of resTORbio common stock on a net settlement basis. Similarly, in connection with the Merger, vesting of outstanding resTORbio stock options was accelerated in full and the stock options that were not in the in-the-money on the close of the Merger were canceled, resulting in approximately 81,370 surviving stock options. The acquisition date fair value of these modified resTORbio restricted stock units and resTORbio stock options attributable to the pre-combination services is included in the estimated purchase price.

The Merger was accounted for as a business combination which requires that assets acquired, and liabilities assumed be recognized at their fair value as of the acquisition date. While the Company uses its best estimates and assumptions as part of the purchase price allocation process to value the assets acquired and liabilities assumed on the acquisition date, its estimates and assumptions are subject to refinement. Fair value estimates are based on a complex series of judgments about future events and uncertainties and rely heavily on estimates and assumptions. The judgments used to determine the estimated fair value assigned to each class of assets acquired and liabilities assumed, as well as asset lives, can materially impact the Company’s results of operations.

For the quarter ended March 31, 2021, the Company identified and recorded measurement period adjustments of $0.2 million to its preliminary purchase price allocation that was disclosed in prior periods based on the facts and circumstances existing as of the acquisition date.

 

The following summarizes the allocation of the purchase price to the net tangible and intangible assets acquired (in thousands):

 

 

 

As of

December 31,

2020

 

 

Measurement

Period

Adjustments

 

 

As of

March 31,

2021

 

Net assets acquired:

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

63,869

 

 

$

 

 

$

63,869

 

Prepaid expenses and other current assets

 

 

3,059

 

 

 

226

 

 

 

3,285

 

Property and equipment

 

 

318

 

 

 

 

 

 

318

 

IPR&D

 

 

3,490

 

 

 

 

 

 

3,490

 

Restricted cash

 

 

245

 

 

 

 

 

 

245

 

Accounts payable

 

 

(1,316

)

 

 

 

 

 

(1,316

)

Accrued and other current liabilities

 

 

(2,365

)

 

 

 

 

 

(2,365

)

Other liabilities

 

 

 

 

 

 

 

 

 

Deferred tax liability

 

 

(367

)

 

 

 

 

 

(367

)

Goodwill

 

 

20,089

 

 

 

(226

)

 

 

19,863

 

Purchase price

 

$

87,022

 

 

$

 

 

$

87,022

 

 

The goodwill of $19.9 million is not tax deductible and represents the excess of the consideration paid over the fair value of assets acquired and liabilities assumed. Goodwill is mainly attributable to the enhanced value of the combined company, as reflected in the increase in market value of the resTORbio common shares following the announcement of the Merger with Former Adicet.

 

14


 

The fair value of acquired in-process research and development (IPR&D) is related to the research and development of RTB101 for a COVID-19 related indication. The RTB101 compound IPR&D project was valued using an income approach, specifically a projected discounted cash flow method, adjusted for the probability of technical success (PTS). The projected discounted cash flow models used to estimate the Company’s IPR&D reflect significant assumptions regarding the estimates a market participant would make in order to evaluate a drug development asset, including the following:

 

 

Estimates of potential cash flows to be generated by the project and resulting asset, which was developed utilizing estimates of total patient population, market penetration rates, demand risk adjustment factors, and product pricing;

 

Estimates regarding the timing of and the expected costs of goods sold, research and development expenses, selling, general and administrative expenses to advance the clinical programs to commercialization, cash flow adjustments and partner profit split;

 

The projected cash flows were then adjusted using PTS factors that were selected considering both the current state of clinical development and the nature of the proposed indication, (i.e., respiratory therapeutics); and

 

Finally, the resulting probability adjusted cash flows were discounted to a present value using a risk-adjusted discount rate, developed considering the market risk present in the forecast and the size of the asset.

 

This IPR&D intangible asset is not amortized, but rather are reviewed for impairment on an annual basis or more frequently if indicators of impairment are present, until the project is completed, abandoned, or transferred to a third party. The Company performed a review for impairment of IPR&D for the quarter ended March 31, 2021, and recognized an impairment charge of $0.5 million as of March 31, 2021, which was recorded as research and development expenses in the consolidated statement of operations and comprehensive loss.

The contingent consideration for the CVR was valued using an income approach, leveraging the probability adjusted discounted cash flow used in the valuation of the IPR&D and then deducting the administrative fee to be retained by the combined company and other permitted deductions in order to arrive at the net cash expected to be paid out to the CVR holders. The probability adjusted cash flow includes significant estimates and assumptions pertaining to commercialization events and cash consideration received by the Company for the grant of rights to commercialize RTB101 during the term of the CVR Agreement (as discussed above). These cash flows were then discounted to present value using the same discount rate applied in the valuation of the IPR&D.

The following tables present changes in the Company’s IPR&D and CVR since the Merger (in thousands):

 

 

Acquisition Date

Fair value as of September 15, 2020

 

 

Change in

Fair value

 

 

As of

December 31, 2020

 

 

Change in

Fair value

 

 

As of

March 31, 2021

 

In-process research and development

$

3,490

 

 

$

(2,300

)

 

$

1,190

 

 

$

(460

)