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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 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 September 30, 2019
 
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 Number 000-50797
 
Momenta Pharmaceuticals, Inc.
(Exact Name of Registrant as Specified in Its Charter)
 
 
Delaware
04-3561634
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
 
 
 
 
301 Binney Street
Cambridge
MA
02142
(Address of Principal Executive Offices)
 
 
(Zip Code)
 
(617) 491-9700
(Registrant’s Telephone Number, Including Area Code)

N/A
(Former name, former address and former fiscal year, if changed since last report)

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

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes   No 
 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes    No 
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
 
 
Large accelerated filer
Accelerated filer
Non-accelerated filer  
Smaller reporting company
 
 
Emerging growth company

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes   No 
 
As of October 22, 2019, there were 98,917,239 shares of the registrant’s common stock, par value $0.0001 per share, outstanding.
 


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MOMENTA PHARMACEUTICALS, INC.

 
 
 
Page
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Our logo, trademarks and service marks are the property of Momenta Pharmaceuticals, Inc. Other trademarks or service marks appearing in this Quarterly Report on Form 10-Q are the property of their respective holders.


2

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Statements contained in this Quarterly Report on Form 10-Q that are about future events or future results, or are otherwise not statements of historical fact, are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements are based on current expectations, estimates, forecasts, projections, intentions, goals, strategies, plans, prospects and the beliefs and assumptions of our management. In some cases, these statements can be identified by words such as “anticipate,” “approach,” “believe,” “can,” “contemplate,” “continue,” “could,” “ensure,” “estimate,” “expect,” "goal," “intend,” “likely,” “may,” “might,” “objective,” “opportunity,” “plan,” “potential”, “predict,” “project,” “pursue,” “seek,” “schedule,” “should,” “strategy,” “target,” “typically,” “will,” “would,” and other similar words or expressions, or the negative of these words or similar words or expressions. These statements include, but are not limited to, statements regarding our priorities, goals and strategies, including our change in strategic focus toward the discovery and development of our novel drug candidates for rare immune-mediated diseases, including M281, M254 and M230, the advancement of our late stage biosimilar candidate, M710, and our plans regarding our M923 program; the use, efficacy, safety, potency, tolerability, dosing, convenience, differentiation and commercial potential of our products and product candidates; the design, timing and goals of clinical trials and the availability, timing and announcement of data and results; estimates of incidence of disease and patient populations; market potential and acceptance of our products and product candidates; the timing of regulatory filings, reviews and approvals; our expectations regarding the development and utility of our products and product candidates; development timelines for our product candidates; development, manufacture and commercialization of our products and product candidates; efforts to seek and manage relationships with collaboration partners, including without limitation for our novel therapeutic and biosimilar programs; the timing of launch of products and product candidates; market share and product revenues of our products and product candidates, including GLATOPA and Enoxaparin Sodium Injection; the timing, merits, strategy, impact and outcome of, and decisions regarding, legal proceedings; the settlement of, and release of collateral for, certain legal proceedings; timing of biosimilar market formation; collaboration revenues and research and development revenues; the sufficiency of our current capital resources and projected milestone payments and product revenues for future operations; our future financial position, including but not limited to our future operating losses, our potential future profitability; our future expenses, including anticipated restructuring charges; the composition and mix of our cash, cash equivalents and marketable securities; our future revenues and our future liabilities; our funding transactions and our intended uses of proceeds thereof; the potential sale of our common stock pursuant to a sales agreement entered into with Stifel, Nicolaus & Company, Incorporated; product candidate development costs; receipt of contingent milestone payments; accounting policies, estimates and judgments; our estimates regarding the fair value of our investment portfolio; the market risk of our cash equivalents, marketable securities and derivative, foreign currency and other financial instruments; rights, obligations, terms, conditions and allocation of responsibilities and decision making under our collaboration agreements; the regulatory pathway for biosimilars; our strategy, including but not limited to our regulatory strategy, and scientific approach; the importance of key customer distribution arrangements; market potential and acceptance of our products and product candidates; future capital requirements; reliance on our collaboration partners and other third parties; the competitive landscape; changes in, impact of and compliance with laws, rules and regulations; product reimbursement policies and trends; pricing of pharmaceutical products, including our products and product candidates; our stock price; our intellectual property strategy and position; sufficiency of insurance; attracting and retaining qualified personnel; our internal controls and procedures; acquisitions or investments in companies, products and technologies; entering into collaboration and/or license arrangements; marketing plans; financing our planned operating and capital expenditure; materials used in our research and development; dilution; royalty rates; and vesting of equity awards.
Any forward-looking statements in this Quarterly Report on Form 10-Q involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements. Important factors that may cause actual results to differ materially from current expectations include, among other things, those listed under Part II, Item 1A. “Risk Factors” and discussed elsewhere in this Quarterly Report on Form 10-Q. Given these uncertainties, you should not place undue reliance on these forward-looking statements. Except as required by law, we assume no obligation to update or revise these forward-looking statements for any reason, even if new information becomes available in the future.
This Quarterly Report on Form 10-Q also contains estimates, projections and other information concerning our industry, our business, and the markets for certain diseases, including data regarding the estimated size of those markets, and the incidence and prevalence of certain medical conditions. Information that is based on estimates, forecasts, projections, market research or similar methodologies is inherently subject to uncertainties and actual events or circumstances may differ materially from events and circumstances reflected in this information. Unless otherwise expressly stated, we obtained this

3

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industry, business, market and other data from reports, research surveys, studies and similar data prepared by market research firms and other third parties, industry, medical and general publications, government data and similar sources.

4

Table of Contents

PART I. FINANCIAL INFORMATION
 
Item 1.    FINANCIAL STATEMENTS

MOMENTA PHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except per share amounts)
(unaudited)
 
September 30, 2019
 
December 31, 2018
Assets
 

 
 

Current assets:
 

 
 

Cash and cash equivalents
$
122,131

 
$
248,334

Marketable securities
149,599

 
174,076

Collaboration receivable
5,670

 
11,371

Prepaid expenses and other current assets
8,619

 
6,318

Assets held-for-sale
125

 
1,324

Total current assets
286,144

 
441,423

Marketable securities, long-term
54,132

 
27,001

Property and equipment, net
11,555

 
20,944

Restricted cash, long-term
1,849

 
37,898

Intangible assets, net
2,018

 
2,883

Other long-term assets
42,070

 
1,414

Total assets
$
397,768

 
$
531,563

Liabilities and Stockholders’ Equity
 

 
 

Current liabilities:
 

 
 

Accounts payable
$
3,459

 
$
9,352

Accrued expenses
26,212

 
14,060

Accrued restructuring
257

 
3,235

Collaboration liabilities
4,283

 
4,721

Deferred revenue
939

 
3,916

Other current liabilities
5,431

 
16,227

Total current liabilities
40,581

 
51,511

Deferred revenue, net of current portion
1,183

 
1,774

Other long-term liabilities
80,080

 
17,270

Total liabilities
121,844

 
70,555

Commitments and contingencies (Notes 8 and 13)


 


Stockholders’ Equity:
 

 
 

Common stock, $0.0001 par value per share; 200,000 shares authorized, 99,374 shares issued and 98,806 shares outstanding at September 30, 2019 and 100,000 shares authorized, 98,695 shares issued and 98,466 shares outstanding at December 31, 2018
10

 
10

Additional paid-in capital
1,225,748

 
1,208,025

Accumulated other comprehensive income (loss)
461

 
(87
)
Accumulated deficit
(947,181
)
 
(743,826
)
Treasury stock, at cost, 568 shares at September 30, 2019 and 229 shares at December 31, 2018
(3,114
)
 
(3,114
)
Total stockholders’ equity
275,924

 
461,008

Total liabilities and stockholders’ equity
$
397,768

 
$
531,563

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

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MOMENTA PHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(in thousands, except per share amounts)
(unaudited)
 
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2019
 
2018
 
2019
 
2018
Collaboration revenue:
 

 
 

 
 
 
 
Product revenue
$
5,551

 
$
13,621

 
$
11,236

 
$
28,921

Research and development revenue
840

 
1,263

 
4,450

 
3,846

Total collaboration revenue
6,391

 
14,884

 
15,686

 
32,767

Operating expenses:
 

 
 

 
 
 
 
Research and development
46,105

 
30,727

 
106,208

 
95,309

General and administrative
20,081

 
20,437

 
90,896

 
63,580

Restructuring
19

 
15,535

 
177

 
15,535

Other operating expense

 

 
42,936

 
30,000

Gain on lease modification
(13,720
)
 

 
(13,720
)
 

Total operating expenses
52,485

 
66,699

 
226,497

 
204,424

Operating loss
(46,094
)
 
(51,815
)
 
(210,811
)
 
(171,657
)
Other income, net
1,551

 
1,515

 
7,456

 
3,841

Net loss
$
(44,543
)
 
$
(50,300
)
 
$
(203,355
)
 
$
(167,816
)
 
 
 
 
 
 
 
 
Basic and diluted net loss per share
$
(0.45
)
 
$
(0.65
)
 
$
(2.06
)
 
$
(2.20
)
Weighted average shares used in computing basic and diluted net loss per share
98,709

 
77,229

 
98,501

 
76,415

 
 
 
 
 
 
 
 
Comprehensive loss:
 

 
 

 
 
 
 
Net loss
$
(44,543
)
 
$
(50,300
)
 
$
(203,355
)
 
$
(167,816
)
Net unrealized holding gain (loss) on available-for-sale debt securities
(58
)
 
137

 
548

 
(24
)
Comprehensive loss
$
(44,601
)
 
$
(50,163
)
 
$
(202,807
)
 
$
(167,840
)

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


6

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MOMENTA PHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
 
Nine Months Ended September 30,
 
2019
 
2018
Cash Flows from Operating Activities:
 

 
 

Net loss
$
(203,355
)
 
$
(167,816
)
Adjustments to reconcile net loss to net cash used in operating activities:
 

 
 

Depreciation and amortization of property and equipment
10,857

 
5,575

Impairment of equipment

 
1,605

Share-based compensation expense
13,825

 
20,172

Amortization of premium on investments
(1,534
)
 
(175
)
Amortization of intangibles
865

 
865

Loss (gain) on disposal of assets
(789
)
 
623

Gain on lease modification
(13,720
)
 

Changes in operating assets and liabilities:
 

 
 

Collaboration receivable
5,701

 
1,213

Prepaid expenses and other current assets
(3,307
)
 
1,573

Other long-term assets
2,849

 
62

Accounts payable
(5,850
)
 
(5,893
)
Accrued expenses
11,760

 
(2,175
)
Accrued restructuring
(2,978
)
 
8,674

Collaboration liabilities
(438
)
 
(6,072
)
Deferred revenue
(3,568
)
 
(1,896
)
Other liabilities
22,849

 
22,273

Net cash used in operating activities
(166,833
)
 
(121,392
)
 
 
 
 
Cash Flows from Investing Activities:
 

 
 

Purchases of property and equipment
(1,737
)
 
(8,594
)
Proceeds from disposal of equipment
2,992

 
84

Purchases of marketable securities
(242,018
)
 
(117,440
)
Proceeds from maturities of marketable securities
241,446

 
207,459

Net cash provided by investing activities
683

 
81,509

 
 
 
 
Cash Flows from Financing Activities:
 

 
 

Proceeds from issuance of common stock under stock plans
3,898

 
27,751

Net cash provided by financing activities
3,898

 
27,751

 
 
 
 
Net decrease in cash, cash equivalents and restricted cash
(162,252
)
 
(12,132
)
Cash, cash equivalents and restricted cash, beginning of period
286,232

 
96,683

Cash, cash equivalents and restricted cash, end of period
$
123,980

 
$
84,551

 
 
 
 
Non-Cash Activities:
 
 
 
Purchases of property and equipment included in accounts payable and accrued expenses
$
392

 
$
1,228

Receivable due from stock option exercises

$

 
$
124

Impact of adopting ASC 606
$

 
$
5,511

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

7

Table of Contents

MOMENTA PHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(in thousands)
(unaudited)
 
Common Stock
 
 
 
 
 
 
 
Treasury Stock
 
 
 
Shares
 
Par Value
 
Additional Paid-In Capital
 
Accumulated Other Comprehensive Income (Loss)
 
Accumulated Deficit
 
Shares
 
Amount
 
Total Stockholders' Equity
Balances at December 31, 2017
76,584

 
$
8

 
$
939,654

 
$
(140
)
 
$
(562,254
)
 
(229
)
 
(3,114
)
 
$
374,154

Impact of adopting ASU 2016-09

 

 

 

 
(5,511
)
 

 

 
(5,511
)
Issuance of common stock pursuant to the exercise of stock options and employee stock purchase plan
691

 

 
8,966

 

 

 

 

 
8,966

Issuance of restricted stock
101

 

 

 

 

 

 

 

Cancellation/forfeiture of restricted stock
(47
)
 

 

 

 

 

 

 

Share-based compensation expense

 

 
4,874

 

 

 

 

 
4,874

Unrealized loss on marketable securities

 

 

 
(435
)
 

 

 

 
(435
)
Net loss

 

 

 

 
(47,631
)
 

 

 
(47,631
)
Balances at March 31, 2018
77,329


$
8


$
953,494


$
(575
)

$
(615,396
)

(229
)

(3,114
)
 
$
334,417

Issuance of common stock pursuant to the exercise of stock options and employee stock purchase plan
808

 

 
11,713

 

 

 

 

 
11,713

Issuance of restricted stock
70

 

 

 

 

 

 

 

Cancellation/forfeiture of restricted stock
(38
)
 

 

 

 

 

 

 

Share-based compensation expense

 

 
5,172

 

 

 

 

 
5,172

Unrealized gain on marketable securities

 

 

 
274

 

 

 

 
274

Net loss

 

 

 

 
(69,885
)
 

 

 
(69,885
)
Balances at June 30, 2018
78,169

 
$
8

 
$
970,379

 
$
(301
)
 
$
(685,281
)
 
(229
)
 
(3,114
)
 
$
281,691

Issuance of common stock pursuant to the exercise of stock options and employee stock purchase plan
467

 

 
7,103

 

 

 

 

 
7,103

Issuance of restricted stock
23

 

 

 

 

 

 

 

Cancellation/forfeiture of restricted stock
(51
)
 

 

 

 

 

 

 

Share-based compensation expense

 

 
10,126

 

 

 

 

 
10,126

Unrealized gain on marketable securities

 

 

 
137

 

 

 

 
137

Net loss

 

 

 

 
(50,300
)
 

 

 
(50,300
)
Balances at September 30, 2018
78,608

 
$
8

 
$
987,608

 
$
(164
)
 
$
(735,581
)
 
(229
)
 
$
(3,114
)
 
$
248,757


8

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Common Stock
 
 
 
 
 
 
 
Treasury Stock
 
 
 
Shares
 
Par Value
 
Additional Paid-In Capital
 
Accumulated Other Comprehensive Income (Loss)
 
Accumulated Deficit
 
Shares
 
Amount
 
Total Stockholders' Equity
Balances at December 31, 2018
98,695

 
$
10

 
$
1,208,025

 
$
(87
)
 
$
(743,826
)
 
(229
)
 
$
(3,114
)
 
$
461,008

Issuance of common stock pursuant to the exercise of stock options and employee stock purchase plan
237

 

 
2,577

 

 

 

 

 
2,577

Issuance of restricted stock
280

 

 

 

 

 

 

 

Cancellation/forfeiture of restricted stock
(36
)
 

 

 

 

 

 

 

Share-based compensation expense for employees

 

 
3,474

 

 

 

 

 
3,474

Unrealized gain on marketable securities

 

 

 
342

 

 

 

 
342

Net loss

 

 

 

 
(44,843
)
 

 

 
(44,843
)
Balances at March 31, 2019
99,176

 
$
10

 
$
1,214,076

 
$
255

 
$
(788,669
)
 
(229
)
 
$
(3,114
)
 
$
422,558

Issuance of common stock pursuant to the exercise of stock options and employee stock purchase plan
20

 

 
204

 

 

 

 

 
204

Issuance of restricted stock
55

 

 

 

 

 

 

 

Cancellation/forfeiture of restricted stock

 

 

 

 

 
(339
)
 

 

Share-based compensation expense for employees

 

 
3,662

 

 

 

 

 
3,662

Unrealized gain on marketable securities

 

 

 
264

 

 

 

 
264

Net loss

 

 

 

 
(113,969
)
 

 

 
(113,969
)
Balances at June 30, 2019
99,251

 
$
10

 
$
1,217,942

 
$
519

 
$
(902,638
)
 
(568
)
 
$
(3,114
)
 
$
312,719

Issuance of common stock pursuant to the exercise of stock options and employee stock purchase plan
103

 

 
1,117

 

 

 

 

 
1,117

Issuance of restricted stock
20

 

 

 

 

 

 

 

Share-based compensation expense for employees

 

 
6,689

 

 

 

 

 
6,689

Unrealized loss on marketable securities

 

 

 
(58
)
 

 

 

 
(58
)
Net loss
 
 
 
 
 
 
 
 
(44,543
)
 
 
 
 
 
(44,543
)
Balances at September 30, 2019
99,374

 
$
10

 
$
1,225,748

 
$
461

 
$
(947,181
)
 
(568
)
 
$
(3,114
)
 
$
275,924

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

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MOMENTA PHARMACEUTICALS, INC.
NOTES TO UNAUDITED, CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 
1. Nature of Business and Basis of Presentation
 
Business Overview

Momenta Pharmaceuticals, Inc., referred to as Momenta or the Company, was incorporated in the state of Delaware in May 2001 and began operations in early 2002. Its facilities are located in Cambridge, Massachusetts. Momenta is a biotechnology company focused on developing novel therapeutics for rare immune-mediated diseases and other legacy products, including complex generics and biosimilars. The Company presently derives all of its revenue from its collaborations.

Basis of Presentation
 
In the opinion of management, the accompanying unaudited, condensed consolidated financial statements include all adjustments, consisting of normal recurring accruals, necessary for a fair presentation of the Company's financial statements for interim periods in accordance with accounting principles generally accepted in the United States, or U.S. GAAP. The information included in this quarterly report on Form 10-Q should be read in conjunction with the Company's audited consolidated financial statements and the accompanying notes included in its Annual Report on Form 10-K for the year ended December 31, 2018 filed with the Securities and Exchange Commission, or the SEC, on February 22, 2019. The year-end condensed consolidated balance sheet data presented for comparative purposes was derived from the Company's audited financial statements, but does not include all disclosures required by U.S. GAAP. The results of operations for the three and nine months ended September 30, 2019 are not necessarily indicative of the operating results for the full year or for any other subsequent interim period.

Consolidation
 
The accompanying unaudited, condensed consolidated financial statements reflect the operations of the Company and the Company’s wholly-owned subsidiaries, Momenta Pharmaceuticals Securities Corporation and Momenta Ireland Limited. Intercompany balances and transactions are eliminated in consolidation.
 
Use of Estimates
 
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates, judgments and assumptions that may affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. On an ongoing basis, the Company evaluates its estimates and judgments, including those related to revenue recognition, accrued expenses, and share-based payments. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results may differ from these estimates.

Summary of Significant Accounting Policies

The Company's significant accounting policies are described in Note 2, "Summary of Significant Accounting Policies" to the consolidated financial statements in its Annual Report on Form 10-K for the year ended December 31, 2018, except as described below.

Leases

The Company determines if an arrangement is or contains a lease at inception. For leases with a term of 12 months or less, the Company does not recognize a right-of-use asset or lease liability. The Company's operating leases are recognized on its consolidated balance sheet as other long-term assets, other current liabilities, and other long-term liabilities. The Company does not have any finance leases.

Right-of-use assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Operating lease right-of-use assets and liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. As the Company’s leases typically do not provide an implicit rate, the Company uses an estimate of its incremental borrowing rate based on the information available at the lease commencement date in determining the present value of lease payments.

10

Table of Contents

Operating lease right-of-use assets also include the effect of any lease payments made and excludes lease incentives. The lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Lease expense is recognized on a straight-line basis over the lease term.

The Company has lease agreements with lease and non-lease components, which are generally accounted for separately. Non-lease components as it pertains to the Company's leased premises generally refer to common area maintenance charges related to the premises.

Newly Adopted Accounting Pronouncements
 
In February 2016, the Financial Accounting Standards Board, or the FASB, issued Accounting Standards Update, or ASU, No. 2016-02, Leases (Topic 842). The new standard requires that all lessees recognize the assets and liabilities that arise from leases on the balance sheet and disclose qualitative and quantitative information about their leasing arrangements. In July 2018, the FASB issued ASU No. 2018-11, which provides entities with an additional transition method to adopt Topic 842. Under the new transition method, an entity initially applies the new lease requirements at the adoption date, not the earliest period presented, and recognizes a cumulative effect adjustment to the opening balance of retained earnings in the period of adoption. The Company elected to apply this transition method at the adoption date of January 1, 2019. The Company also elected to apply the package of practical expedients, under which an entity need not reassess whether any expired or existing contracts are or contain leases, the lease classification for any expired or existing leases, or initial direct costs for any existing leases. The standard had a material impact on the Company's consolidated balance sheet, but did not have an impact on the Company's consolidated statement of operations and comprehensive loss in the period of adoption. The most significant impact was the recognition of right-of-use assets of $76.7 million and lease liabilities of $93.6 million for operating leases on January 1, 2019. Refer to Note 8, "Leases," for additional disclosures.

In June 2018, the FASB issued ASU No. 2018-07, Compensation-Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting. The new standard largely aligns the accounting for share-based payment awards issued to employees and nonemployees by expanding the scope of ASC 718 to apply to nonemployee share-based transactions, as long as the transaction is not effectively a form of financing. The new guidance was effective for the Company on January 1, 2019. The adoption of the standard had no material impact on the Company's consolidated financial statements.

Newly Issued Accounting Pronouncements

In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Requirements for Fair Value Measurement. The new standard added, modified or removed disclosure requirements under Topic 820 for clarity and consistency. ASU 2018-13 is effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The Company does not expect the guidance will have a material impact on its consolidated financial statements.

In August 2018, the FASB issued ASU No. 2018-15, Intangibles — Goodwill and Other — Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract. The amendment updates the accounting for implementation, setup, and other upfront costs for a customer in a hosting arrangement that is a service contract. The amendment is effective for public business entities for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Early adoption of the amendment is permitted, including adoption in any interim period, for all entities. The amendment may be applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption. The Company expects to adopt this amendment prospectively when effective, and does not expect the amendment will have a material impact on its consolidated financial statements.

In November 2018, the FASB issued ASU No. 2018-18, Collaborative Arrangements (Topic 808): Clarifying the Interaction between Topic 808 and Topic 606. The amendment clarifies that certain transactions between collaborative arrangement participants should be accounted for as revenue under Topic 606 when the collaborative arrangement participant is a customer in the context of a unit of account. In those situations, all guidance in Topic 606 should be applied, including recognition, measurement, presentation, and disclosure requirements. The amendment also adds unit-of-account guidance in Topic 808 to align with the guidance in Topic 606 (that is, a distinct good or service) when an entity is assessing whether the collaborative arrangement or a part of the arrangement is within the scope of Topic 606. Lastly, the amendment requires that in a transaction with a collaborative arrangement participant that is not directly related to sales to third parties, presenting the transaction together with revenue recognized under Topic 606 is precluded if the collaborative arrangement participant is not a customer. For public business entities, the amendments are effective for fiscal years beginning after December 15, 2019, and

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interim periods within those fiscal years. The Company is currently evaluating these clarifications in the accounting and presentation for its collaborative arrangements within the scope of Topic 808.

2. Supplemental Cash Flow Statement Information

The following table summarizes the Company’s cash, cash equivalents and restricted cash as of September 30, 2019 and December 31, 2018 (in thousands):

 
September 30, 2019
 
December 31, 2018
Cash and cash equivalents
$
122,131

 
$
248,334

Restricted cash, long-term
1,849

 
37,898

Total
$
123,980

 
$
286,232



3. Fair Value Measurements
 
The tables below present information about the Company’s assets that are regularly measured and carried at fair value and indicate the level within the fair value hierarchy of the valuation techniques utilized to determine such fair value (in thousands):
Description
 
Balance as of
September 30, 2019
 
Quoted
Prices in
Active
Markets
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
 
Significant
Other
Unobservable
Inputs
(Level 3)
Assets:
 
 

 
 

 
 

 
 

Cash equivalents:
 
 

 
 

 
 

 
 

Money market funds
 
$
101,576

 
$
101,576

 
$

 
$

Certificates of deposit
 
1,600

 

 
1,600

 

Commercial paper obligations
 
3,199

 

 
3,199

 

Overnight repurchase agreements
 
7,500

 

 
7,500

 

Marketable securities:
 
 

 
 

 
 

 
 

U.S. government-sponsored enterprise securities
 
24,674

 

 
24,674

 

Corporate debt securities
 
111,909

 

 
111,909

 

Certificates of deposit
 
5,064

 

 
5,064

 

Commercial paper obligations
 
30,040

 

 
30,040

 

Asset-backed securities
 
32,044

 

 
32,044

 

Total
 
$
317,606

 
$
101,576

 
$
216,030

 
$

 
Description
 
Balance as of
December 31, 2018
 
Quoted
Prices in
Active
Markets
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
 
Significant
Other
Unobservable
Inputs
(Level 3)
Assets:
 
 

 
 

 
 

 
 

Cash equivalents:
 
 

 
 

 
 

 
 

Money market funds
 
$
119,955

 
$
119,955

 
$

 
$

Marketable securities:
 
 

 
 

 
 

 
 

U.S. government-sponsored enterprise securities
 
12,424

 

 
12,424

 

Corporate debt securities
 
129,308

 

 
129,308

 

Certificates of deposit
 
3,003

 

 
3,003

 

Commercial paper obligations
 
30,935

 

 
30,935

 

Asset-backed securities
 
25,407

 

 
25,407

 

Total
 
$
321,032

 
$
119,955

 
$
201,077

 
$



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Overnight repurchase agreements are classified as Level 2 due to the collateral including both U.S. government-sponsored enterprise securities and treasury instruments.
There have been no impairments of the Company’s assets measured and carried at fair value during the three and nine months ended September 30, 2019 and the year ended December 31, 2018. In addition, there were no changes in valuation techniques or transfers between the fair value measurement levels during the three and nine months ended September 30, 2019. The fair value of Level 2 instruments classified as marketable securities were determined through third party pricing services. For a description of the Company’s validation procedures related to prices provided by third party pricing services, refer to Note 2, “Summary of Significant Accounting Policies” to the Company’s consolidated financial statements in its Annual Report on Form 10-K for the year ended December 31, 2018. The carrying amounts reflected in the Company’s condensed consolidated balance sheets for cash, collaboration receivable, other current assets, accounts payable, accrued restructuring, and accrued expenses approximate fair value due to their short-term maturities.

4. Cash, Cash Equivalents and Marketable Securities

The Company’s cash equivalents are composed of money market funds, certificates of deposit, commercial paper obligations, and overnight repurchase agreements. Money market funds are carried at fair value, which approximates cost at September 30, 2019 and December 31, 2018. Overnight repurchase agreement yields are comparable to money market funds where principal and interest on the instruments is due the next day.

The Company classifies U.S. government-sponsored enterprise securities, corporate debt securities, certificates of deposit, commercial paper and asset-backed securities as short-term and long-term marketable securities in its consolidated financial statements. See Note 2, “Summary of Significant Accounting Policies” to the Company's condensed consolidated financial statements in its Annual Report on Form 10-K for the year ended December 31, 2018 for a discussion of the Company’s accounting policies.
 
The following tables summarize the Company’s cash, cash equivalents and marketable securities as of September 30, 2019 and December 31, 2018 (in thousands):
 
As of September 30, 2019
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair
Value
Cash, money market funds, certificates of deposit, commercial paper obligations, and overnight repurchase agreements
 
$
122,131

 
$

 
$

 
$
122,131

U.S. government-sponsored enterprise securities due in one year or less
 
22,756

 
26

 

 
22,782

U.S. government-sponsored enterprise securities due in more than one year
 
1,881

 
11

 

 
1,892

Corporate debt securities due in one year or less
 
91,372

 
243

 
(3
)
 
91,612

Corporate debt securities due in more than one year
 
20,183

 
114

 

 
20,297

Certificates of deposit due in one year or less
 
5,062

 
2

 

 
5,064

Commercial paper obligations due in one year or less
 
30,029

 
11

 

 
30,040

Asset-backed securities due in one year or less
 
101

 

 

 
101

Asset-backed securities due in more than one year
 
31,886

 
59

 
(2
)
 
31,943

Total
 
$
325,401

 
$
466

 
$
(5
)
 
$
325,862

 
 
 
 
 
 
 
 
 
Reported as:
 
 

 
 

 
 

 
 

Cash and cash equivalents
 
$
122,131

 
$

 
$

 
$
122,131

Marketable securities
 
203,270

 
466

 
(5
)
 
203,731

Total
 
$
325,401

 
$
466

 
$
(