0001367920-22-000061 | 10-Q | XBRL Viewer | Concert Pharmaceuticals INC

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Cover Page - shares	6 Months Ended
Cover Page - shares	Jun. 30, 2022	Aug. 01, 2022
Cover [Abstract]
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Jun. 30, 2022
Document Transition Report	false
Entity File Number	001-36310
Entity Registrant Name	CONCERT PHARMACEUTICALS, INC.
Entity Incorporation, State	DE
Entity Tax Identification Number	20-4839882
Entity Address, Street	65 Hayden Avenue
Entity Address, Suite	Suite 3000N
Entity Address, City	Lexington
Entity Address, State	MA
Entity Address, Postal Zip Code	02421
City Area Code	781
Local Phone Number	860-0045
Title of each class	Common Stock, par value $0.001 per share
Trading Symbol(s)	CNCE
Name of each exchange on which registered	NASDAQ
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Non-accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		47,934,649
Amendment Flag	false
Document Fiscal Year Focus	2022
Document Fiscal Period Focus	Q2
Entity Central Index Key	0001367920
Current Fiscal Year End Date	--12-31

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) - USD ($) $ in Thousands	Jun. 30, 2022	Dec. 31, 2021
Current assets:
Cash and cash equivalents	$ 139,245	$ 141,636
Investments, available for sale	14,488	0
Marketable equity securities	839	1,463
Interest receivable	129	0
Deferred offering costs	0	15
Accounts receivable	1,072	218
Prepaid expenses and other current assets	6,343	6,997
Total current assets	162,116	150,329
Property and equipment, net	4,776	5,242
Restricted cash	1,157	1,157
Other assets	0	3
Operating lease right-of-use asset, long-term	8,344	8,585
Total assets	176,393	165,316
Current liabilities:
Accounts payable	1,369	2,606
Accrued expenses and other liabilities, current portion	13,511	12,359
Lease liability, current portion	1,280	1,155
Total current liabilities	16,160	16,120
Accrued expenses, net of current portion	0	28
Deferred revenue, long-term	7,595	7,595
Lease liability, net of current portion	13,227	13,910
Warrant liabilities, long-term (Note 13)	11,619	15,438
Total liabilities	48,601	53,091
Commitments (Note 11)
Stockholders’ equity:
Preferred stock, $0.001 par value per share; 5,000,000 shares authorized; 32,500 shares designated as Series X1; 16,602 and 13,997 shares of Series X1 issued and outstanding as of June 30, 2022 and December 31, 2021, respectively	0	0
Common stock, $0.001 par value per share; 200,000,000 and 100,000,000 shares authorized, 48,125,000 and 34,939,628 shares issued and 47,924,399 and 34,739,027 shares outstanding as of June 30, 2022 and December 31, 2021, respectively	45	34
Additional paid-in capital	539,103	461,765
Accumulated other comprehensive loss	(85)	(76)
Accumulated deficit	(411,271)	(349,498)
Total stockholders’ equity	127,792	112,225
Total liabilities and stockholders’ equity	$ 176,393	$ 165,316

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (Parenthetical) - $ / shares	Jun. 30, 2022	Dec. 31, 2021
Preferred stock, par value (in dollars per share)	$ 0.001	$ 0.001
Preferred stock, shares authorized (in shares)	5,000,000	5,000,000
Common stock, par value (in dollars per share)	$ 0.001	$ 0.001
Common stock, shares authorized (in shares)	200,000,000	100,000,000
Common stock, shares issued (in shares)	48,125,000	34,939,628
Common stock, shares outstanding (in shares)	47,924,399	34,739,027
Series X1 Preferred Stock
Preferred stock, shares issued (in shares)	32,500	32,500
Preferred stock, shares outstanding (in shares)		13,997
Common stock, shares outstanding (in shares)	16,602

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS) INCOME (UNAUDITED) - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021
Revenue:
Total revenue	$ 21	$ 32,017	$ 22	$ 32,022
Operating expenses:
Research and development	20,855	20,184	51,344	38,684
General and administrative	4,849	5,614	10,389	11,099
Total operating expenses	25,704	25,798	61,733	49,783
(Loss) income from operations	(25,683)	6,219	(61,711)	(17,761)
Investment income	145	15	165	40
Unrealized (loss) gain on marketable equity securities	(60)	(809)	(624)	477
Unrealized gain on warrant liabilities (Note 13)	2,050	0	894	0
Net (loss) income	(23,548)	5,425	(61,276)	(17,244)
Other comprehensive (loss) income:
Unrealized gain (loss) on investments, available for sale	33	(2)	(9)	(18)
Comprehensive (loss) income	(23,515)	5,423	(61,285)	(17,262)
Dividend attributable to down round feature of warrants	(497)	0	(497)	0
(Loss) income attributable to common stockholders - basic	(24,045)	5,415	(61,773)	(17,244)
(Loss) income attributable to common stockholders - diluted	$ (24,045)	$ 5,415	$ (61,773)	$ (17,244)
Net (loss) income per share applicable to common stockholders - basic (in dollars per share)	$ (0.59)	$ 0.16	$ (1.59)	$ (0.51)
Net (loss) income per share applicable to common stockholders - diluted (in dollars per share)	$ (0.59)	$ 0.16	$ (1.59)	$ (0.51)
Weighted-average number of common shares used in net (loss) income per share applicable to common stockholders
Weighted-average number of common shares used in net (loss) income per share applicable to common stockholders, basic (in shares)	41,042	33,974	38,877	33,934
Weighted-average number of common shares used in net (loss) income per share applicable to common stockholders, diluted (in shares)	41,042	34,083	38,877	33,934
License and research and development revenue
Revenue:
Total revenue	$ 21	$ 17	$ 22	$ 22
Other revenue
Revenue:
Total revenue	$ 0	$ 32,000	$ 0	$ 32,000

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED) - USD ($) $ in Thousands	Total	Preferred Stock	Common Stock	In Treasury	Additional paid-in capital	Accumulated other comprehensive loss	Accumulated deficit
Beginning balance at Dec. 31, 2020	$ 131,162	$ 0	$ 31		$ 400,636	$ (58)	$ (269,447)
Beginning balance (in shares) at Dec. 31, 2020		0
Beginning balance (in shares) at Dec. 31, 2020			32,063,000
Beginning balance (in shares) at Dec. 31, 2020				200,000
Increase (Decrease) in Stockholders' Equity
Release of restricted stock units (in shares)			136,000
Unrealized gain (loss) on short-term investments	(16)					(16)
Exercise of stock options	89				89
Exercise of stock options (in shares)			10,000
Stock-based compensation expense	3,431				3,431
Shares issued during the period, value	2,042				2,042
Shares issued during the period, (in shares)			165,000
Net income (loss)	(22,669)						(22,669)
Ending balance at Mar. 31, 2021	114,039	$ 0	$ 31		406,198	(74)	(292,116)
Ending balance (in shares) at Mar. 31, 2021		0
Ending balance (in shares) at Mar. 31, 2021			32,374,000
Ending balance (in shares) at Mar. 31, 2021				200,000
Beginning balance at Dec. 31, 2020	131,162	$ 0	$ 31		400,636	(58)	(269,447)
Beginning balance (in shares) at Dec. 31, 2020		0
Beginning balance (in shares) at Dec. 31, 2020			32,063,000
Beginning balance (in shares) at Dec. 31, 2020				200,000
Increase (Decrease) in Stockholders' Equity
Unrealized gain (loss) on short-term investments	(18)
Net income (loss)	(17,244)
Ending balance at Jun. 30, 2021	122,716	$ 0	$ 31		409,452	(76)	(286,691)
Ending balance (in shares) at Jun. 30, 2021		0
Ending balance (in shares) at Jun. 30, 2021			32,374,000
Ending balance (in shares) at Jun. 30, 2021				200,000
Beginning balance at Mar. 31, 2021	114,039	$ 0	$ 31		406,198	(74)	(292,116)
Beginning balance (in shares) at Mar. 31, 2021		0
Beginning balance (in shares) at Mar. 31, 2021			32,374,000
Beginning balance (in shares) at Mar. 31, 2021				200,000
Increase (Decrease) in Stockholders' Equity
Unrealized gain (loss) on short-term investments	(2)					(2)
Stock-based compensation expense	3,254				3,254
Net income (loss)	5,425						5,425
Ending balance at Jun. 30, 2021	122,716	$ 0	$ 31		409,452	(76)	(286,691)
Ending balance (in shares) at Jun. 30, 2021		0
Ending balance (in shares) at Jun. 30, 2021			32,374,000
Ending balance (in shares) at Jun. 30, 2021				200,000
Beginning balance at Dec. 31, 2021	$ 112,225	$ 0	$ 34		461,765	(76)	(349,498)
Beginning balance (in shares) at Dec. 31, 2021		14,000
Beginning balance (in shares) at Dec. 31, 2021	34,739,027		34,938,000
Beginning balance (in shares) at Dec. 31, 2021				200,000
Increase (Decrease) in Stockholders' Equity
Release of restricted stock units (in shares)			216,000
Unrealized gain (loss) on short-term investments	$ (42)					(42)
Stock-based compensation expense	2,111				2,111
Net income (loss)	(37,728)						(37,728)
Ending balance at Mar. 31, 2022	76,566	$ 0	$ 34		463,876	(118)	(387,226)
Ending balance (in shares) at Mar. 31, 2022		14,000
Ending balance (in shares) at Mar. 31, 2022			35,154,000
Ending balance (in shares) at Mar. 31, 2022				200,000
Beginning balance at Dec. 31, 2021	$ 112,225	$ 0	$ 34		461,765	(76)	(349,498)
Beginning balance (in shares) at Dec. 31, 2021		14,000
Beginning balance (in shares) at Dec. 31, 2021	34,739,027		34,938,000
Beginning balance (in shares) at Dec. 31, 2021				200,000
Increase (Decrease) in Stockholders' Equity
Unrealized gain (loss) on short-term investments	$ (9)
Exercise of stock options (in shares)	0
Net income (loss)	$ (61,276)
Ending balance at Jun. 30, 2022	$ 127,792	$ 0	$ 45		539,103	(85)	(411,271)
Ending balance (in shares) at Jun. 30, 2022		17,000
Ending balance (in shares) at Jun. 30, 2022	47,924,399		48,125,000
Ending balance (in shares) at Jun. 30, 2022				200,000
Beginning balance at Mar. 31, 2022	$ 76,566	$ 0	$ 34		463,876	(118)	(387,226)
Beginning balance (in shares) at Mar. 31, 2022		14,000
Beginning balance (in shares) at Mar. 31, 2022			35,154,000
Beginning balance (in shares) at Mar. 31, 2022				200,000
Increase (Decrease) in Stockholders' Equity
Release of restricted stock units (in shares)			95,000
Unrealized gain (loss) on short-term investments	33					33
Stock-based compensation expense	1,963				1,963
Conversion of preferred stock (in shares)		(1,000)	1,376,000
Exercise of warrants (in shares)		4,000
Exercise of warrants	11,679				11,679
Reclassification of warrants to equity	10,156				10,156
Dividend attributable to down round feature of warrants	0				497		(497)
Shares issued during the period, value	50,943		$ 11		50,932
Shares issued during the period, (in shares)			11,500,000
Net income (loss)	(23,548)						(23,548)
Ending balance at Jun. 30, 2022	$ 127,792	$ 0	$ 45		$ 539,103	$ (85)	$ (411,271)
Ending balance (in shares) at Jun. 30, 2022		17,000
Ending balance (in shares) at Jun. 30, 2022	47,924,399		48,125,000
Ending balance (in shares) at Jun. 30, 2022				200,000

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021
Operating activities
Net income (loss)	$ (61,276)	$ (17,244)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	638	785
Stock-based compensation expense	4,074	6,685
Amortization of premiums on investments	351	35
Unrealized loss (gain) on marketable equity securities	624	(477)
Unrealized gain on warrant liabilities	(894)	0
Non-cash lease expense	241	176
Changes in operating assets and liabilities:
Accounts receivable	(854)	(87)
Deferred offering costs	15	0
Interest receivable	(129)	144
Prepaid expenses and other current assets	654	(272)
Other assets	3	30
Accounts payable	(1,240)	(230)
Accrued expenses and other liabilities	1,124	(1,481)
Income taxes receivable	0	2,346
Operating lease liability	(558)	(450)
Net cash used in operating activities	(57,227)	(10,040)
Investing activities
Purchases of property and equipment	(169)	(140)
Purchases of investments	(55,348)	0
Maturities of investments	40,500	52,713
Net cash (used in) provided by investing activities	(15,017)	52,573
Financing activities
Proceeds from exercise of stock options	0	89
Proceeds from exercise of warrants	18,910	0
Proceeds from common stock sold, net of underwriters’ discount and costs	50,943	0
Proceeds from at-the-market offering, net of issuance costs	0	2,575
Net cash provided by financing activities	69,853	2,664
Net (decrease) increase in cash, cash equivalents and restricted cash	(2,391)	45,197
Cash, cash equivalents and restricted cash at beginning of period	142,793	78,359
Cash, cash equivalents and restricted cash at end of period	140,402	123,556
Supplemental cash flow information:
Purchases of property and equipment unpaid at period end	3	36
Public offering costs unpaid at period end	405	15
Cash paid included in measurement of lease liabilities	$ 1,529	$ 1,484

Nature of Business	6 Months Ended
Nature of Business	Jun. 30, 2022
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Nature of Business	Nature of Business Concert Pharmaceuticals, Inc., or the Company, was incorporated on April 12, 2006 as a Delaware corporation and has its operations based in Lexington, Massachusetts. The Company is a late-stage clinical biopharmaceutical company that is developing CTP-543, a Janus Kinase 1 and Janus Kinase 2 (JAK 1/2) inhibitor that it discovered through the application of its deuterated chemical entity platform, or DCE Platform®. As discussed in detail in the “Overview” section in Part I, Item 2. of this Quarterly Report on Form 10-Q, the Company has successfully completed two Phase 3 clinical trials of CTP-543 for the treatment of adults with moderate to severe alopecia areata, a serious autoimmune dermatological condition, and intends to file a New Drug Application, or NDA, with the U.S. Food and Drug Administration, or FDA, in the first half of 2023. Liquidity and Going Concern As of June 30, 2022, the Company had cash, cash equivalents and investments of $153.7 million and net working capital of $146.0 million. The Company has incurred cumulative net losses of $411.3 million since inception and requires capital to continue future development activities. The Company does not have any products approved for sale and has not generated any revenue from product sales. The Company has financed its operations primarily through the public offering and private placement of its equity, debt financing, funding from collaborations and patent assignments, asset sales and other arrangements. The Company expects its expenses to increase in connection with its ongoing activities, particularly as it seeks marketing approval for CTP-543 and conducts its open label, long-term extension studies and other clinical trials to support the submission of its NDA. For information regarding the Company’s recent equity financings, see Notes 12, 13 and 14. The Company is subject to risks common to companies in the biotechnology industry, including, but not limited to, risks of failure or unsatisfactory results of nonclinical studies and clinical trials, the need to obtain additional financing to fund the future development of its pipeline, the need to obtain marketing approval for its product candidates, the need to successfully commercialize and gain market acceptance of its product candidates, dependence on key personnel, protection of proprietary technology, compliance with government regulations, development by competitors of similar products or technological innovations and the ability to transition from pilot-scale manufacturing to large-scale production of products. Under Accounting Standards Codification, or ASC, Topic 205-40, Presentation of Financial Statements - Going Concern, management is required at each reporting period to evaluate whether there are conditions and events, considered in the aggregate, that raise substantial doubt about an entity's ability to continue as a going concern within one year after the date that the financial statements are issued. This evaluation initially does not take into consideration the potential mitigating effect of management’s plans that have not been fully implemented as of the date the financial statements are issued. When substantial doubt exists, management evaluates whether the mitigating effect of its plans sufficiently alleviates the substantial doubt about the entity’s ability to continue as a going concern. The mitigating effect of management's plans, however, is only considered if both (i) it is probable that the plans will be effectively implemented within one year after the date that the financial statements are issued and (ii) it is probable that the plans, when implemented, will mitigate the relevant conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date that the financial statements are issued. Generally, to be considered probable of being effectively implemented, the plans must have been approved by the entity’s board of directors before the date that the financial statements are issued. Successful completion of the Company’s development program and, ultimately, the attainment of profitable operations are dependent upon future events, including obtaining adequate financing to support the Company’s cost structure and operating plan. Management’s plans to alleviate its financing requirements include, among other things, pursuing one or more of the following steps to raise additional capital, none of which can be guaranteed or are entirely within the Company’s control: •raise funding through the sale of the Company’s common or preferred stock; •raise funding through debt financing; and •establish collaborations with potential partners to advance the Company’s product pipeline. Based on the Company’s current operating plan, management believes that its current cash, cash equivalents and investments will allow the Company to meet its liquidity requirements into the second quarter of 2023. The Company’s history of significant losses, its negative cash flows from operations, its limited liquidity resources currently on hand and its dependence on its ability to obtain additional financing to fund its operations after the current resources are exhausted, about which there can be no certainty, have resulted in management’s assessment that there is substantial doubt about the Company’s ability to continue as a going concern for a period of at least twelve months from the issuance date of this Quarterly Report on Form 10-Q. The accompanying condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business, and do not include any adjustments that may result from the outcome of this uncertainty. If the Company is unable to raise capital when needed or on acceptable terms, or if it is unable to procure collaboration arrangements to advance its programs, the Company would be forced to discontinue some of its operations or develop and implement a plan to further extend payables, reduce overhead or scale back its current operating plan until sufficient additional capital is raised to support further operations. There can be no assurance that such a plan would be successful.

Basis of Presentation and Significant Accounting Policies	6 Months Ended
	Jun. 30, 2022
Accounting Policies [Abstract]
Basis of Presentation and Significant Accounting Policies	Basis of Presentation and Significant Accounting Policies Basis of Presentation The condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments, consisting of normal recurring accruals and revisions of estimates, considered necessary for a fair presentation of the condensed consolidated financial statements have been included. Interim results for the six months ended June 30, 2022 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2022 or any other future period. The accompanying condensed consolidated financial statements reflect the accounts of the Company and its subsidiaries. All intercompany transactions between the Company and its subsidiaries have been eliminated. Management has determined that the Company operates in one segment: the development of pharmaceutical products on its own behalf or in collaboration with others. The information included in this Quarterly Report on Form 10-Q should be read in conjunction with the Company’s consolidated financial statements and the accompanying notes included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021 filed with the Securities and Exchange Commission, or SEC, on March 3, 2022. Unless otherwise indicated, all amounts in the following tables are in thousands except share and per share amounts. Use of Estimates and Summary of Significant Accounting Policies The preparation of the consolidated financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, equity, revenue and expenses, the disclosure of contingent assets and liabilities and the Company’s ability to continue as a going concern. In preparing the consolidated financial statements, management used estimates in the following areas, among others: revenue recognition; prepaid and accrued research and development expenses; stock-based compensation expense; fair value of warrant equity and liabilities; and the evaluation of the existence of conditions and events that raise substantial doubt regarding the Company’s ability to continue as a going concern. Actual results could differ from those estimates. During the six months ended June 30, 2022, there have been no material changes to the significant accounting policies previously disclosed in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021. Recently Adopted Accounting Pronouncements In August 2020, the Financial Accounting Standards Board, or FASB, issued Accounting Standards Update, or ASU, 2020-06, Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. ASU 2020-06 simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts in an entity’s own stock, by eliminating the cash conversion and beneficial conversion feature accounting models for convertible debt and convertible preferred stock. Additionally, ASU 2020-06 eliminates the treasury stock method to calculate diluted earnings per share for convertible instruments. ASU 2020-06 is effective for public business entities for fiscal years beginning after December 15, 2021 and interim periods within those fiscal years, or December 31, 2023 and interim periods within those fiscal years for companies who meet the SEC definition of smaller reporting company. Early adoption is permitted, and entities are allowed to adopt the guidance through either a modified retrospective method of transition or a fully retrospective method of transition. The Company early adopted this standard effective January 1, 2022 on a modified retrospective basis, and it did not have a material effect on the condensed consolidated financial statements and related disclosures. In May 2021, the FASB issued ASU 2021-04, Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options (a consensus of the FASB Emerging Issues Task Force), which provides guidance on modifications or exchanges of a freestanding equity-classified written call option that is not within the scope of another topic. An entity should treat a modification of the terms or conditions or an exchange of a freestanding equity-classified written call option that remains equity classified after modification or exchange as an exchange of the original instrument for a new instrument, and provides further guidance on measuring the effect of a modification or an exchange of a freestanding equity-classified written call option that remains equity classified after modification or exchange. ASU 2021-04 also provides guidance on the recognition of the effect of a modification or an exchange of a freestanding equity-classified written call option that remains equity classified after modification or exchange on the basis of the substance of the transaction, in the same manner as if cash had been paid as consideration. ASU 2021-04 is effective for all entities for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. An entity should apply ASU 2021-04 prospectively to modifications or exchanges occurring on or after the effective date of ASU 2021-04. The Company adopted ASU 2021-04 effective January 1, 2022, on a prospective basis. In conjunction with the warrant amendments discussed in Note 13, the Company recorded issuance costs of $7.2 million as a reduction of proceeds in additional paid-in capital for the warrant exercise and a corresponding increase to the remeasured fair value of the equity-classified warrants as of the modification date, resulting in no impact. Pending Accounting Pronouncements In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses. This standard requires entities to measure all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions and reasonable and supportable forecasts. As a smaller reporting company, ASU 2016-13 will become effective for the Company for fiscal years beginning after December 15, 2022, and early adoption is permitted. The Company is currently evaluating the impact that ASU 2016-13 will have on its financial statements and related disclosures.

Fair Value Measurements

6 Months Ended

Jun. 30, 2022

Fair Value Disclosures [Abstract]

Fair Value Measurements

The Company has certain financial assets and liabilities that are recorded at fair value which have been classified as Level 1, 2 or 3 within the fair value hierarchy as described in the accounting standards for fair value measurements:

•Level 1—quoted prices for identical instruments in active markets;

•Level 2—quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets; and

•Level 3—valuations derived from valuation techniques in which one or more significant value drivers are unobservable.

The tables below present information about the Company’s financial assets and liabilities that are measured and carried at fair value as of June 30, 2022 and December 31, 2021 and indicate the level within the fair value hierarchy where each measurement is classified. The carrying amounts reflected in the condensed consolidated balance sheets for cash, prepaid expenses and other current assets, restricted cash, accounts payable and accrued expenses approximate their fair value due to their short-term nature.


	Level 1		Level 2		Level 3		Total
June 30, 2022
Cash equivalents:
Money market funds	$	123,380	$	—	$	—	$	123,380


Investments, available for sale:
U.S. Treasury obligations	—		14,488		—		14,488
Marketable equity securities:
Corporate equity securities	839		—		—		839
Total	$	124,219	$	14,488	$	—	$	138,707

Warrant liabilities (Note 13)	$	—	$	11,619	$	—	$	11,619


	Level 1		Level 2		Level 3		Total
December 31, 2021
Cash equivalents:
Money market funds	$	132,850	$	—	$	—	$	132,850

Marketable equity securities:
Corporate equity securities	1,463		—		—		1,463
Total	$	134,313	$	—	$	—	$	134,313

Warrant liabilities (Note 13)	$	—	$	15,438	$	—	$	15,438

- Definition

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

+ References + Details

Cash, Cash Equivalents, Investments and Marketable Equity Securities

6 Months Ended

Jun. 30, 2022

Cash and Cash Equivalents [Abstract]

Cash, Cash Equivalents, Investments and Marketable Equity Securities

Cash equivalents include all highly liquid investments maturing within 90 days from the date of purchase. Investments consist of securities with original maturities greater than 90 days when purchased. The Company classifies these investments as available for sale and records them at fair value in the accompanying condensed consolidated balance sheets. Unrealized gains or losses from equity securities are included in net (loss) income. Unrealized gains or losses from other investments, including debt securities, are included in accumulated other comprehensive (loss) income. Premiums or discounts from par value are amortized to investment income over the life of the underlying investment.

Cash, cash equivalents, available-for-sale investments and marketable equity securities included the following as of June 30, 2022 and December 31, 2021:


	Average Maturity	Amortized Cost		Unrealized Gains		Unrealized Losses		Fair Value
June 30, 2022
Cash		$	15,864	$	—	$	—	$	15,864
Money market funds		123,381		—		—		123,381
Total cash and cash equivalents		$	139,245	$	—	$	—	$	139,245

U.S. Treasury obligations	82 days	$	14,497	$	—	$	(9)	$	14,488

Total investments, available for sale		$	14,497	$	—	$	(9)	$	14,488

June 30, 2022		Acquisition Value		Unrealized Gains		Unrealized Losses		Fair Value
Marketable equity securities		$	10,451	$	—	$	(9,612)	$	839


	Amortized Cost		Unrealized Gains		Unrealized Losses		Fair Value
December 31, 2021
Cash	$	8,786	$	—	$	—	$	8,786
Money market funds	132,850		—		—		132,850

Total cash and cash equivalents	$	141,636	$	—	$	—	$	141,636

December 31, 2021	Acquisition Value		Unrealized Gains		Unrealized Losses		Fair Value
Marketable equity securities	$	10,451	$	—	$	(8,988)	$	1,463

Although available to be sold to meet operating needs or otherwise, securities are generally held through maturity. The Company classifies all investments as current assets, as these assets are readily available for use in current operations. The cost of securities sold is determined based on the specific identification method for purposes of recording realized gains and losses. During 2022 and 2021, there were no realized gains or losses on sales of investments, and no investments were adjusted other than for temporary declines in fair value

Restricted Cash

6 Months Ended

Jun. 30, 2022

Cash and Cash Equivalents [Abstract]

Restricted Cash

Restricted cash as of June 30, 2022 and 2021 was held as collateral for stand-by letters of credit issued by the Company to its landlord in connection with the current lease for its principal facilities located at 65 Hayden Avenue, Lexington, Massachusetts, or the Premises. For additional information regarding the Company’s lease, refer to Note 11. Cash, cash equivalents and restricted cash consisted of the following as of June 30, 2022 and 2021:


	June 30, 2022		June 30, 2021
Cash and cash equivalents	$	139,245	$	122,399
Restricted cash	1,157		1,157
Total cash, cash equivalents and restricted cash shown in the statements of cash flows	$	140,402	$	123,556

Accrued Expenses and Other Liabilities

6 Months Ended

Jun. 30, 2022

Payables and Accruals [Abstract]

Accrued Expenses and Other Liabilities

Accrued expenses and other liabilities consisted of the following as of June 30, 2022 and December 31, 2021:


	June 30, 2022		December 31, 2021
Accrued professional fees and other	$	1,389	$	1,094
Employee compensation and benefits	1,687		3,617
Research and development expenses	10,435		7,648

Accrued expenses and other liabilities, current portion	$	13,511	$	12,359

Employee compensation and benefits, net of current portion	$	—	$	28
Accrued expenses and other liabilities, net of current portion	$	—	$	28

Income Taxes	6 Months Ended
Income Taxes	Jun. 30, 2022
Income Tax Disclosure [Abstract]
Income Taxes	Income Taxes Deferred tax assets and deferred tax liabilities are recognized based on temporary differences between the financial reporting and tax basis of assets and liabilities using statutory rates. A valuation allowance is recorded against deferred tax assets if it is more likely than not that some or all of the deferred tax assets will not be realized. The Company’s ability to use its operating loss carryforwards and tax credits to offset future taxable income is subject to restrictions under Sections 382 and 383 of the U.S. Internal Revenue Code, or the Code. Net operating loss and tax credit carryforwards may become subject to an annual limitation in the event of certain cumulative changes in the ownership interest of significant stockholders over a three-year period in excess of 50%, as defined under Sections 382 and 383 of the Code. Such changes would limit the Company’s use of its operating loss carryforwards and tax credits. In such a situation, the Company may be required to pay income taxes, even though significant operating loss carryforwards and tax credits exist. The Company records a provision or benefit for income taxes on ordinary pre-tax income or loss based on its estimated effective tax rate for the year. As of June 30, 2022, the Company forecasts an ordinary pre-tax loss for the year ended December 31, 2022 and, since it maintains a full valuation allowance on its deferred tax assets, the Company did not record an income tax benefit relating to this period. The Company adopted ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, effective January 1, 2020. Under ASU 2019-12, the Company, having a full valuation and a loss in continuing operations, will no longer include the impacts of items in other comprehensive income in determining intra-period allocation of tax expense for continuing operations. Under ASU 2019-12, the Company can apply this change to intra-period tax allocation on a prospective basis. For the six months ended June 30, 2022, the Company applied the tax allocation rules of ASU 2019-12 to the $9 thousand of unrealized losses on available-for-sale investments recognized in other comprehensive loss, which did not have a material impact on the consolidated financial statements or related disclosures. Effective for tax years beginning on or after January 1, 2022, research and experimental expenditures under Section 174 of the Code must be capitalized over five years when performed in the United States and over 15 years when performed outside of the United States. The modification is an accounting method change that will require the filing of Form 3115 with the Company's 2022 tax return. As of June 30, 2022, the Company has performed a high-level analysis of the impact of this legislation and determined that the Company’s projected loss position for 2022 does not result in income tax. The Company maintains its full valuation allowance.

- Definition

The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 740
-SubTopic 10
-Section 50
-Paragraph 21
-URI https://asc.fasb.org/extlink&oid=121826272&loc=d3e32857-109319

Reference 2: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 740
-SubTopic 10
-Section S99
-Paragraph 2
-Subparagraph (SAB Topic 11.C)
-URI https://asc.fasb.org/extlink&oid=122134291&loc=d3e330215-122817

Reference 3: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 740
-SubTopic 10
-Section 50
-Paragraph 17
-Subparagraph (b)
-URI https://asc.fasb.org/extlink&oid=121826272&loc=d3e32809-109319

Reference 4: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 740
-SubTopic 10
-Section S99
-Paragraph 1
-Subparagraph (SAB TOPIC 6.I.5.Q1)
-URI https://asc.fasb.org/extlink&oid=122134291&loc=d3e330036-122817

Reference 5: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 740
-SubTopic 10
-Section 50
-Paragraph 14
-URI https://asc.fasb.org/extlink&oid=121826272&loc=d3e32705-109319

Reference 6: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 740
-SubTopic 270
-Section 50
-Paragraph 1
-URI https://asc.fasb.org/extlink&oid=6424409&loc=d3e44925-109338

Reference 7: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 740
-URI https://asc.fasb.org/topic&trid=2144680

Reference 8: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 740
-SubTopic 30
-Section 50
-Paragraph 2
-Subparagraph (a)
-URI https://asc.fasb.org/extlink&oid=6424122&loc=d3e41874-109331

Reference 9: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 235
-SubTopic 10
-Section S99
-Paragraph 1
-Subparagraph (SX 210.4-08(h)(2))
-URI https://asc.fasb.org/extlink&oid=120395691&loc=d3e23780-122690

+ Details

Revenue	6 Months Ended
Revenue	Jun. 30, 2022
Revenue from Contract with Customer [Abstract]
Revenue	Revenue The Company’s revenue is generated through collaborative licensing agreements, patent assignments, intellectual property sales and asset sales. The Company generates its revenue through one segment. The revenue recognized under each of the Company’s arrangements during the current and prior periods is described below. Contract Assets The Company did not have a contract asset as of June 30, 2022 or December 31, 2021. Contract Liabilities As of June 30, 2022 and December 31, 2021, the Company had $2.8 million in contract liabilities related to unsatisfied performance obligations as well as variable consideration paid in advance, but currently constrained from recognition. Contract liabilities are presented as deferred revenue and classified as current or non-current based on the timing of when the Company expects to recognize revenue. The $2.8 million in contract liabilities consisted of deferred revenue related to a payment received from GlaxoSmithKline that the Company will not recognize as revenue until all repayment obligations lapse. Revenue Arrangements Vertex In July 2017, the Company completed the sale of worldwide development and commercialization rights to CTP-656, now known as VX-561, and other assets related to the treatment of cystic fibrosis to Vertex Pharmaceuticals, Inc., or Vertex. Pursuant to the Asset Purchase Agreement with Vertex, or the Vertex Agreement, the Company received $160.0 million in cash upon closing. Additionally, upon the achievement of certain milestone events, Vertex agreed to pay the Company an aggregate of up to $90.0 million, or the Milestone Obligation. In May 2021, the Company entered into an amendment to the Vertex Agreement, or the Vertex Amendment. Pursuant to the Vertex Amendment, Vertex paid the Company $32.0 million in cash in exchange for the removal of the Milestone Obligation. As a result of the Vertex Amendment, the Company is not entitled to receive any further payments pursuant to the Vertex Agreement. The Vertex Amendment changed the future obligations due from Vertex under the Vertex Agreement and was therefore treated as a contract modification. Since the Vertex Amendment does not provide for any new distinct goods and services and the single performance obligation related to the arrangement was previously satisfied, the Company recognized the $32.0 million payment from Vertex as Other Revenue during the year ended December 31, 2021. Previously, the variable consideration related to the Milestone Obligation was considered fully constrained due to the uncertainty associated with the achievement of the milestones. Pursuant to the Vertex Amendment, Vertex is no longer obligated to make these future milestone payments, and as a result, they are no longer considered variable consideration. There are no performance obligations or variable consideration remaining associated with the Vertex Agreement.

Stock-Based Compensation

6 Months Ended

Jun. 30, 2022

Share-Based Payment Arrangement [Abstract]

Stock-Based Compensation

Stock-Based CompensationThe Company’s equity incentive plans provide for the issuance of a variety of stock-based awards, including incentive stock options, nonstatutory stock options and awards of stock, to directors, officers and employees of the Company, as well as

consultants and advisors to the Company. As of June 30, 2022, the Company has granted awards in the form of stock options and restricted stock units, or RSUs. The stock options generally have been granted with an exercise price equal to the closing market price of the Company’s common stock on the date of grant, a vesting period of one, three or four years, and an expiration date no later than ten years from the date of grant. The Company has granted performance-based RSUs and service-based RSUs with a vesting period of one, two or three years.

Effective January 1, 2022, an additional 1,389,561 shares of common stock were added to the Company’s 2014 Stock Incentive Plan, or the 2014 Plan, for future issuance pursuant to the terms of the 2014 Plan. As of June 30, 2022, there were 2,049,070 shares of common stock available for future awards under the 2014 Plan.

Total stock-based compensation expense related to all stock-based options and awards recognized in the condensed consolidated statements of operations and comprehensive loss consisted of:


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Research and development	$	922	$	1,745	$	1,872	$	3,596
General and administrative	1,042		1,509		2,202		3,089
Total stock-based compensation expense	$	1,964	$	3,254	$	4,074	$	6,685

Stock Options

Stock options are valued using the Black-Scholes-Merton option valuation model, and compensation cost is recognized based on such fair value over the period of vesting. The weighted-average fair value of options granted in the three and six months ended June 30, 2022 and 2021 reflect the following weighted-average assumptions:


	Three Months Ended June 30,		Six Months Ended June 30,
	2022	2021	2022	2021
Expected volatility	72.71%	70.57%	71.66%	69.83	%
Expected term	6.0 years	6.0 years	6.0 years	6.0 years
Risk-free interest rate	3.08%	0.94%	2.75%	0.59	%
Expected dividend yield	—%	—%	—%	—	%

The following table provides certain information related to the Company’s outstanding stock options:


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
	(Amounts in thousands, except per share data)
Weighted-average fair value of options granted, per option	$	3.30	$	2.66	$	2.94	$	7.17
Aggregate grant date fair value of options vested during the period	$	1,030	$	2,110	$	2,939	$	4,176
Total cash received from exercises of stock options	$	—	$	—	$	—	$	89
Total intrinsic value of stock options exercised	$	—	$	—	$	—	$	42

The following is a summary of stock option activity for the six months ended June 30, 2022:


	Number of Option Shares	Weighted Average Exercise Price per Share		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value
				(in years)	(in thousands)
Outstanding at December 31, 2021	5,197,320	$	14.21
Granted	66,113	$	4.50
Exercised	—	$	—
Forfeited or expired	(328,296)	$	15.53
Outstanding at June 30, 2022	4,935,137	$	13.99	5.65	$	26
Exercisable at June 30, 2022	3,998,008	$	14.55	5.08	$	7
Vested and expected to vest at June 30, 2022 (1)	4,870,189	$	14.02	5.61	$	24

(1)Represents the number of vested stock option shares as of June 30, 2022, plus the number of unvested stock option shares that the Company estimated as of June 30, 2022 would vest, based on the unvested stock option shares as of June 30, 2022 and an estimated forfeiture rate of 7%.

As of June 30, 2022, there was $6.0 million of unrecognized compensation cost related to stock options that are expected to vest. The stock option costs are expected to be recognized over a weighted-average remaining vesting period of 1.9 years.

Restricted Stock Units

On February 14, 2020, or the 2020 RSU grant date, the Company granted 0.4 million RSUs, or the 2020 RSUs, to certain officers and employees. All of the 2020 RSUs are service-based and vest ratably over three years, with one third of the 2020 RSUs vesting on each anniversary of the 2020 RSU grant date through February 14, 2023.

On January 5, 2021, or the January 2021 RSU grant date, the Company granted 0.3 million RSUs, or the January 2021 RSUs, to certain officers and employees. All of the January 2021 RSUs are service-based and vest ratably over three years, with one third of the January 2021 RSUs vesting on each anniversary of the January 2021 RSU grant date through January 5, 2024.

On June 10, 2021, or the June 2021 RSU grant date, the Company granted 0.2 million RSUs, or the June 2021 RSUs, to directors and certain employees. All of the June 2021 RSUs were service-based. Half of the grants to employees vested six months after the June 2021 RSU grant date and the remainder vested on the first anniversary of the June 2021 RSU grant date, and the grants to directors vested one day prior to the Company’s 2022 annual meeting of stockholders, or June 8, 2022.

On January 28, 2022, or the 2022 RSU grant date, the Company granted 0.7 million RSUs, or the 2022 RSUs, to certain officers and employees. All of the 2022 RSUs are service-based and vest ratably over three years, with one third of the 2022 RSUs vesting on each anniversary of the 2022 RSU grant date through January 28, 2025.

Also on the 2022 RSU grant date, the Company granted 0.3 million performance-based RSUs, or the 2022 PSUs, to certain officers and employees. The 2022 PSUs vest as to the total number of shares granted one business day after the date on which the FDA notifies the Company that it has accepted for filing an NDA for CTP-543, provided that the date of acceptance is on or before October 31, 2023. The Company is using the straight-line method to recognize expense over the requisite service period based on its estimate of the number of 2022 PSUs that will vest. If there is a change in the estimate of the number of 2022 PSUs that are probable of vesting, the Company will cumulatively adjust compensation expense in the period that the change in estimate is made.

RSUs are not included in issued and outstanding common stock until the shares have vested and settled. As of June 30, 2022, 0.3 million of the 2020 RSUs, 0.1 million of the January 2021 RSUs and all of the June 2021 RSUs had vested. The fair value of an RSU is measured based on the market price of the underlying common stock on the date of grant.

The following is a summary of RSU activity for the six months ended June 30, 2022:


	Number of RSUs	Weighted- Average Grant Date Fair Value

Outstanding at December 31, 2021	628,192	$	10.78
Granted	1,103,975	$	3.08
Released	(309,372)	$	9.49
Forfeited	(37,860)	$	8.54
Outstanding at June 30, 2022	1,384,935	$	4.99

As of June 30, 2022, there was $4.8 million of unrecognized compensation cost related to RSUs that are expected to vest. The RSU costs are expected to be recognized over a weighted-average remaining vesting period of 1.9 years.

(Loss) Income Per Share

6 Months Ended

Jun. 30, 2022

Earnings Per Share [Abstract]

(Loss) Income Per Share

As of June 30, 2021, the Company had outstanding warrants to purchase 61,273 shares of common stock that were issued in connection with a 2017 Loan and Security Agreement with Hercules Capital, Inc., which were deemed to be participating securities. Accordingly, the Company applied the two-class method to calculate basic and diluted net earnings per share of common stock for the three months ended June 30, 2021. The two-class method is an earnings allocation formula that treats a participating security as having rights to earnings that otherwise would have been available to common stockholders. The two-class method was not applied for the three and six months ended June 30, 2022 or the six months ended June 30, 2021, as the Company’s participating securities do not have any obligation to absorb net losses.

Basic net (loss) income per common share is calculated by dividing net (loss) income allocable to common stockholders, adjusted to recognize the effect of a down round feature when it is triggered, by the weighted-average common shares outstanding during the period, without consideration of stock options, RSUs or preferred stock as common stock equivalents. Net loss allocable to common stockholders for the three and six months ended June 30, 2022 is adjusted for the effect of a triggered down round feature of warrants deemed to be a dividend. Refer to Note 13 for details regarding the triggered down round feature of the warrants. The weighted-average common shares outstanding as of June 30, 2022 and 2021 includes pre-funded warrants to purchase up to an aggregate of 1.8 million shares of common stock that were issued in connection with a financing in 2020. For purposes of the diluted net (loss) income per share calculation, common stock equivalents are excluded from the calculation if their effect would be anti-dilutive. As such, basic and diluted net loss per share applicable to common stockholders are the same for periods with a net loss.

The following table illustrates the determination of (loss) income per share for each period presented.


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
	(Amounts in thousands, except per share amounts)
Basic Earnings Per Share:
Numerator:
Net (loss) income	$	(23,548)	$	5,425	$	(61,276)	$	(17,244)
Income attributable to participating securities - basic	—		(10)		—		—
Dividend attributable to down round feature of warrants	(497)		—		(497)		—
(Loss) income attributable to common stockholders - basic	$	(24,045)	$	5,415	$	(61,773)	$	(17,244)

Denominator:
Weighted-average shares outstanding	41,042		33,974		38,877		33,934
Net (loss) income per share applicable to common stockholders - basic	$	(0.59)	$	0.16	$	(1.59)	$	(0.51)

Diluted Earnings Per Share:
Numerator:
Net (loss) income	$	(23,548)	$	5,425	$	(61,276)	$	(17,244)
Income attributable to participating securities - diluted	—		(10)		—		—
Dividend attributable to down round feature of warrants	(497)		—		(497)		—
(Loss) income attributable to common stockholders - diluted	$	(24,045)	$	5,415	$	(61,773)	$	(17,244)

Denominator:
Weighted-average shares outstanding	41,042		33,974		38,877		33,934

Dilutive impact from:
Stock options	—		15		—		—
Restricted stock units	—		94		—		—
Weighted-average shares outstanding - diluted	41,042		34,083		38,877		33,934
Net income (loss) per share applicable to common stockholders - diluted	$	(0.59)	$	0.16	$	(1.59)	$	(0.51)

Anti-dilutive potential common stock equivalents excluded from the calculation of net (loss) income per share:
Stock options	4,935		5,435		4,935		5,450
Restricted stock units	1,385		886		1,385		980
Warrants	12,269		—		12,269		61
Series X1 Preferred Stock	16,602		—		16,602		—

Commitments	6 Months Ended
Commitments	Jun. 30, 2022
Commitments and Contingencies Disclosure [Abstract]
Commitments	Commitments Lease The Company currently has a lease, or the Lease, for approximately 56,000 square feet of office and laboratory space located at the Premises. The Lease is classified as an operating lease. The lease term extends ten years following January 1, 2019. The Company is entitled to two five-year options to extend the Lease. The Lease provides for annual base rent of approximately $2.8 million in the first year following January 1, 2019, which increases on a yearly basis by 3.0% (subject to an abatement of base rent of approximately $0.5 million at the beginning of the second year of the lease term). There are no variable payments, exercise purchase options, penalties, fees or residual value guarantees under the Lease. The Company is also obligated to pay the landlord for certain costs, taxes and operating expenses related to the Premises, subject to certain exclusions. The Company recorded a liability for the Lease of $16.9 million on January 1, 2019. This lease liability is amortized over the remaining lease term in an amount equal to the difference between the cash rent paid and the monthly interest calculated on the remaining lease liability. As of June 30, 2022, the Company had a current lease liability of $1.3 million and a non-current lease liability of $13.2 million recorded in its condensed consolidated balance sheets. On January 1, 2019, the Company recorded a right-of-use asset in the amount of $9.5 million, which represents the lease liability of $16.9 million, adjusted for previously accrued rent of $2.9 million and previously recorded unamortized lease incentives in the amount of $4.5 million. The right-of-use asset is amortized over the remaining lease term in an amount equal to the difference between the calculated straight-line expense of the total lease payments less the monthly interest calculated on the remaining lease liability. As of June 30, 2022, the Company had a long-term lease asset of $8.3 million recorded in its condensed consolidated balance sheets. The Company recognizes lease expense, calculated as the remaining cost of the Lease allocated over the remaining lease term, on a straight-line basis. Lease expense is presented as part of continuing operations in the condensed consolidated statements of operations and comprehensive loss. For the six months ended June 30, 2022, the Company recognized $1.2 million in lease expense. For the six months ended June 30, 2022, the Company paid $1.5 million in rent. As a payment arising from an operating lease, the $1.5 million is classified within operating activities in the condensed consolidated statements of cash flows. For the six months ended June 30, 2022 and 2021, the weighted-average remaining lease term was 6.5 years and 7.5 years, respectively, and the weighted-average discount rate was 13.08%.

Open Market Sale Agreement

6 Months Ended

Jun. 30, 2022

Equity [Abstract]

Open Market Sale Agreement

On March 1, 2019, the Company entered into an Open Market Sale Agreement, or the ATM Agreement, with Jefferies LLC, or Jefferies, with respect to an at-the-market offering program under which the Company may sell, from time to time at its sole discretion, shares of common stock having an aggregate offering price of up to $50.0 million, referred to as Placement Shares, through Jefferies as its sales agent. The Company will pay Jefferies a commission equal to 3.0% of the gross sales proceeds of any Placement Shares sold through Jefferies under the ATM Agreement.

On November 5, 2020, the Company entered into an amendment to the ATM Agreement with Jefferies to increase the aggregate offering price of Placement Shares that may be sold pursuant to the ATM Agreement from up to $50.0 million to up to $100.0 million. However, on March 7, 2021, the Company’s ability to further use the first $50.0 million expired. As a result, after March 7, 2021, the Company may only sell up to an additional $50.0 million pursuant to the ATM Agreement.

During the year ended December 31, 2021, the Company sold 165,323 shares of common stock pursuant to the ATM Agreement for net proceeds of $2.0 million, after payment of cash commissions of 3.0% of the gross proceeds to Jefferies. Cash provided by financing activities for the six months ended June 30, 2021 included $0.5 million in net proceeds from sales pursuant to the ATM Agreement that had been classified as a receivable as of December 31, 2020.

During the six months ended June 30, 2022, the Company did not sell any shares of common stock pursuant to the ATM Agreement.

2021 Sale of Common and Preferred Stock, Warrants and Royalty Interest

In November 2021, the Company entered into a structured financing, or the 2021 Financing, consisting of a securities purchase agreement, warrant agreements, or the Warrants, and a royalty purchase agreement, or the RPA. Pursuant to the 2021 Financing, the Company received aggregate gross proceeds of $65.0 million in exchange for the sale to a select group of institutional investors, or the Investors, of (i) 2,253,000 shares of common stock, (ii) 13,997 shares of Series X1 Preferred Stock, (iii) Warrants to purchase up to 16,250 shares of Series X1 Preferred Stock and (iv) a portion of the Company’s right to receive potential future AVP-786 royalties, or the Royalty Interest, under an existing development and licensing agreement, or the Avanir Agreement, with Avanir Pharmaceuticals, Inc., or Avanir, a subsidiary of Otsuka Pharmaceuticals, Co., Ltd.

Preferred Stock

In November 2021, the Company filed a certificate of designation with the Delaware Secretary of State setting forth the preferences, rights and limitations of a newly designated series of preferred stock known as “Series X1 Preferred Stock.” 32,500 shares have been designated as Series X1 Preferred Stock.

The Series X1 Preferred Stock is convertible into shares of common stock at a conversion rate of 1,000 shares of common stock per share of Series X1 Preferred Stock, at the option of the holder, subject to certain limitations. Except in limited circumstances, the Series X1 Preferred Stock does not have voting rights. Holders of the Series X1 Preferred Stock are entitled to receive dividends on an as converted to common stock basis when and if declared on the common stock. In any liquidation or dissolution of the Company, the Series X1 Preferred Stock will rank on parity with the common stock in the distribution of assets, to the extent legally available for distribution, and will receive any dividends declared but unpaid on such shares.

Warrants

The Warrants consisted of (i) warrants to purchase an aggregate of 8,125 shares of Series X1 Preferred Stock at an initial exercise price (on a common stock equivalent basis) of $5.34 per share, or the First Tranche Warrants, and (ii) warrants to purchase an aggregate of an additional 8,125 shares of Series X1 Preferred Stock at an initial exercise price (on a common stock equivalent basis) of $7.35 per share, or the Second Tranche Warrants. The Warrants are exercisable at any time prior to the expiration date.

Upon issuance, the term of the First Tranche Warrants and Second Tranche Warrants was contingent on the outcome of the Company’s CTP-543 THRIVE-AA1 Phase 3 clinical trial and THRIVE-AA2 Phase 3 clinical trial, respectively. The Warrants would expire 90 days after the occurrence of both (i) the public disclosure by the Company of the achievement of statistical significance on each of the primary endpoints of the respective clinical trial and (ii) a determination by the Company that there are no safety or other issues that would impede the Company’s filing of an NDA without first requiring an additional clinical trial that is not already contemplated by the Company’s development plans for CTP-543. In the event that either event (i) or (ii) does not occur, the Warrants would expire 90 days after the earlier of (a) the public release of topline data from two ongoing Phase 3 clinical trials being conducted by Avanir in the indication of agitation in Alzheimer’s disease patients and (b) written notification to the Investors that the Company has received written notice from Avanir of a decision to cease both such clinical trials early. In the event that neither event (a) nor (b) occurs, the Warrants would expire upon the tenth anniversary from issuance.

The exercise price of the Warrants is subject to a one-time adjustment in the event that the Company sells capital stock or derivative securities convertible into or exercisable for capital stock (subject to certain exemptions) at a weighted-average price per share below the initial exercise price, in which case the initial exercise price is automatically reset upon exercise of the Warrant to an exercise price that is the midpoint between the initial exercise price and the weighted-average price per share, provided that the adjusted exercise price cannot be less than $2.88 per share.

On May 23, 2022, the Company announced the achievement of statistical significance on the primary endpoint of the CTP-543 THRIVE-AA1 Phase 3 clinical trial and determined that there were no safety or other issues that would impede the Company’s filing of an NDA without first requiring an additional clinical trial that was not already contemplated by the Company’s development plans for CTP-543. As a result, the expiration date of the First Tranche Warrants became 90 days after May 23, 2022, or August 21, 2022, or the First Tranche Warrants Expiration Date.

On June 1, 2022, concurrent with the June 2022 public offering detailed in Note 14, the Company entered into warrant amendment agreements to the First Tranche Warrants with the Investors. Pursuant to such amendments, in consideration for such Investors’ collective exercise of First Tranche Warrants to purchase an aggregate of 3,981 shares of Series X1 Preferred Stock for approximately $18.9 million concurrently with and contingent upon the offering, or the Exercise Commitments, the

Company agreed to (i) reduce the exercise price of the First Tranche Warrants that were subject to the Exercise Commitments from $5.34 per share on a common stock equivalent basis to $4.75 per share on a common stock equivalent basis and (ii) extend the expiration date of the First Tranche Warrants that remain outstanding to the later of August 21, 2022 and the 21st day after the Company’s public disclosure of the topline results of its CTP-543 THRIVE-AA2 Phase 3 clinical trial, or the Modified First Tranche Warrants Expiration Date. Upon closing on June 6, 2022, the Investors satisfied the Exercise Commitments, resulting in net cash proceeds to the Company of $18.9 million.

Pursuant to the original terms of the Warrants, following the June 2022 public offering detailed in Note 14 and assuming no other events that cause further adjustments, the exercise price of the remaining First Tranche Warrants and the Second Tranche Warrants will be adjusted to $5.05 per share and $6.05 per share (each on a common stock equivalent basis), respectively, upon exercise of such Warrants, which are the respective midpoints of the initial exercise prices and the public offering price per share.

Royalty Interest

As part of the 2021 Financing, under the RPA, the Investors purchased the Royalty Interest. Investors are initially entitled to an aggregate base amount of the future royalty payments of 35.0% in respect of worldwide net sales of licensed products under the Avanir Agreement, and may increase their percentage ownership (i) by up to an additional 7.5% based on the amount of First Tranche Warrants that are exercised and (ii) by up to an additional 7.5% based on the amount of Second Tranche Warrants that are exercised. Upon exercise of any portion of the First Tranche Warrants and/or Second Tranche Warrants by any Investor, such Investor is entitled to receive its pro rata share of the percentages set forth in the RPA.

Upon the exercise of the 3,981 First Tranche Warrants referenced above, the Investors’ collective ownership of the Royalty Interest increased to 38.7%.

Accounting Treatment

The Company received aggregate net proceeds of $64.4 million at the closing of the 2021 Financing after deducting offering expenses of $0.6 million payable by the Company.

The common stock, Series X1 Preferred Stock, Warrants and Royalty Interest were determined to be freestanding instruments, as they are legally detachable and separately exercisable from each other.

The Series X1 Preferred Stock is not redeemable outside the control of the Company, and the Company has the ability to settle any conversion in shares. As such, the Series X1 Preferred Stock is classified as a component of permanent stockholders’ equity within additional paid-in capital. The ability of the Series X1 Preferred Stock to be converted to common stock, or the Conversion Option, represents an embedded call option, and therefore, the Company performed an evaluation in accordance with ASC 815, Derivatives and Hedging, to determine whether the Conversion Option requires bifurcation as a derivative. As a result of the evaluation, the Company concluded that the Conversion Option feature is clearly and closely related to the equity host instrument and is not an embedded derivative requiring bifurcation. Additionally, the Company evaluated the Series X1 Preferred Stock for a beneficial conversion feature in accordance with ASC 470, Debt. The evaluation identified a beneficial conversion feature; however, because the Series X1 Preferred Stock was recorded at par value with the incremental amount recorded to additional paid-in capital, the beneficial conversion feature had no impact. As of January 1, 2022, the Company adopted ASU 2020-06. ASU 2020-06 eliminates the cash conversion and beneficial conversion feature accounting models for convertible debt and convertible preferred stock. As a result, the Company's adoption of ASU 2020-06 eliminated the beneficial conversion feature of the Series X1 Preferred Stock.

Upon issuance, the Warrants included an exercise contingency that was based on an observable index other than the Company’s own operations, and therefore, were precluded from equity classification. As a result, the Warrants were classified as a liability and measured at fair value at inception with subsequent changes in fair value recognized in earnings.

The Royalty Interest does not meet the debt classification criteria, and as such, is accounted for under the deferred income model to be amortized under the units of revenue method. The two options to acquire an additional 7.5% of ownership in future AVP-786 royalties, or the Royalty Step Ups, are features embedded in the Royalty Interest. The Royalty Step Ups do not require bifurcation, as they are subject to scope exception because they pertain to the sale of future revenues.

The aggregate proceeds of the 2021 Financing were first allocated to the Warrants based on fair value, with the remaining proceeds allocated to the common stock, Series X1 Preferred Stock and Royalty Interest on a relative fair value basis. The First Tranche Warrants and Second Tranche Warrants were valued using a Black-Scholes-Merton option pricing model, resulting in

a fair value of $7.5 million and $5.9 million, respectively, as of the date the Company entered into the 2021 Financing. The relative fair value allocated to common stock and Series X1 Preferred Stock totaled $6.5 million and $40.3 million, respectively. The relative fair value allocated to the Royalty Interest was $4.8 million.

First Tranche Warrant Reclassification to Equity

On May 23, 2022, the Company announced the achievement of statistical significance on the primary endpoint of the CTP-543 THRIVE-AA1 Phase 3 clinical trial and determined that there were no safety or other issues that would impede the Company’s filing of an NDA without first requiring an additional clinical trial that was not already contemplated by the Company’s development plans for CTP-543, which established the expiration date of the First Tranche Warrants as August 21, 2022. As a result, the First Tranche Warrants were no longer based on an observable index other than the Company’s own operations, and therefore, were no longer precluded from equity classification.

Upon the Company’s reassessment, the First Tranche Warrants were classified as a component of permanent stockholders’ equity within additional paid-in capital. The First Tranche Warrants were equity classified because they are freestanding financial instruments that are legally detachable and separately exercisable from other equity instruments, are immediately exercisable, do not embody an obligation for the Company to repurchase its shares, permit the holders to receive a fixed number of shares of Series X1 Preferred Stock upon exercise, are indexed to the Company’s common stock and meet the equity classification criteria.

The First Tranche Warrants were recorded at their fair value of $2.9 million as of May 23, 2022 using a Black-Scholes-Merton option pricing model, with the change in fair value of $5.9 million applied to unrealized gain on warrant liabilities. The fair value assumptions related to the equity-classified First Tranche Warrants as of May 23, 2022 were as follows:

As of May 23, 2022

First Tranche Warrants

Expected volatility

91.20%

Expected term

0.25 years

Risk-free interest rate

1.07%

Expected dividend yield

—%

The expected term was based on the First Tranche Warrants Expiration Date. The expected volatility is calculated based on the historical volatility of the Company commensurate with the expected term. The risk-free interest rate is based on the average treasury bill interest rate over a period commensurate with the expected term. The expected dividend is zero, as the Company has not paid any dividends to date and has no current intention of paying cash dividends.

First Tranche Warrants Modification and Partial Exercise

On June 1, 2022, the First Tranche Warrants were modified, or the First Tranche Warrants Modification, to reduce the exercise price for the warrants subject to the Exercise Commitments from $5.34 per share to $4.75 per share on a common stock equivalent basis and to extend the expiration date of the remaining First Tranche Warrants to the Modified First Tranche Warrants Expiration Date. The modification of the First Tranche Warrants lowered the exercise price of the Exercise Commitments to the price per share contemplated in an ongoing public offering. The First Tranche Warrants remained a freestanding equity-classified instrument following the modification. The Company concluded the modification of the First Tranche Warrants provided more favorable terms to the Investors with the purpose of inducing the Investors to exercise the Exercise Commitments. Pursuant to ASU 2021-04, the Company remeasured the fair value of the First Tranche Warrants as of the modification date based on the modified terms and recorded the increase in fair value of $7.2 million as equity issuance

costs to additional paid-in capital, reducing proceeds from the exercise of the First Tranche Warrants. The fair value assumptions related to the modification of the First Tranche Warrants as of June 1, 2022 were as follows:

As of June 1, 2022

First Tranche Warrants (Post-Modification)

Expected volatility

104.20%

Expected term

0.25 years

Risk-free interest rate

1.15%

Expected dividend yield

—%

The expected term was based on 21 days following the approximate anticipated timing of the topline results of the THRIVE-AA2 Phase 3 clinical trial. The expected volatility is calculated based on the historical volatility of the Company commensurate with the expected term. The risk-free interest rate is based on the average treasury bill interest rate over a period commensurate with the expected term. The expected dividend is zero, as the Company has not paid any dividends to date and has no current intention of paying cash dividends.

In conjunction with the First Tranche Warrants Modification, Investors exercised 3,981 First Tranche Warrants in accordance with the Exercise Commitments, resulting in net cash proceeds of $18.9 million. The Company recorded the settlement of net cash proceeds to the par value of the preferred stock and additional paid-in capital.

Warrant Liability Fair Value Assumptions

As of December 31, 2021, the fair value of the First Tranche Warrants was $8.5 million. As of June 30, 2022 and December 31, 2021, the fair value of the Second Tranche Warrants was $11.6 million and $6.9 million, respectively. The Company estimated the fair value of the Warrants using the Black-Scholes-Merton option pricing model. The fair value assumptions related to the Warrants as of June 30, 2022 and December 31, 2021 were as follows:

As of June 30, 2022

Second Tranche Warrants

Expected volatility

74.23%

Expected term

2.27 years

Risk-free interest rate

2.86%

Expected dividend yield

—%


	As of December 31, 2021
	First Tranche Warrants	Second Tranche Warrants
Expected volatility	75.90%	76.40%
Expected term	2.68 years	2.80 years
Risk-free interest rate	0.97%	0.97%
Expected dividend yield	—%	—%

The expected term is probability-weighted based on the anticipated terms dictated by the possible outcomes of the Warrants. The expected volatility is calculated based on the historical volatility of the Company commensurate with the expected term. The risk-free interest rate is based on the average treasury bill interest rate over a period commensurate with the expected term. The expected dividend yield is zero, as the Company has not paid any dividends to date and has no current intention of paying cash dividends.

Down Round Feature of Warrants

The Company concluded that the exercise price adjustment of the Warrants following the June 2022 public offering meets the definition of a triggered down round feature. The exercise price adjustment lowered the exercise price of the Warrants, but did not change the proportion of instruments convertible into common stock. Further, the exercise price adjustments serve as anti-dilution protection and do not provide excess value to the Investors.

The First Tranche Warrants represent an equity-classified freestanding equity contract, and as such, require the value of the effect of the down round feature to be recognized when triggered. The value of the effect represents the difference between the fair value of the First Tranche Warrants without the down round feature (prior to the reduced exercise price) and the fair value of the First Tranche Warrants with the down round feature (subsequent to the reduced exercise price). The value of the effect of the down round feature on the First Tranche Warrants was determined to be $0.5 million and was recorded as a dividend with a reduction to income available to common stockholders when calculating basic earnings per share. The fair value assumptions used in determining the value of the effect of the down round feature were consistent with the modified First Tranche Warrants discussed above, with the exception of the reduced exercise price of $5.05 per share for the down-rounded Warrants.

The Second Tranche Warrants represent a liability-classified freestanding equity contract, which does not require specific treatment upon the triggering of a down round feature. The reduced exercise price of the Second Tranche Warrants was considered in the remeasurement as of June 30, 2022.

Related Party Participation in the 2021 Financing

The Investors included RA Capital Healthcare Fund, L.P., or RA Capital. At the time of entering into the 2021 Financing, RA Capital held greater than 5% of the Company’s outstanding common stock, and two members of the Company’s board of directors maintained minority, non-controlling interests in RA Capital. RA Capital purchased 7,500 shares of Series X1 Preferred Stock, 7,500 Warrants and a base amount of 16.2%, which could potentially increase up to 23.1%, of the Royalty Interest for $30.0 million in cash.

As a participant in the First Tranche Warrant exercise in June 2022, RA Capital purchased 1,875 shares of Series X1 Preferred Stock and increased their Royalty Interest to 17.9%.

As of June 30, 2022 and December 31, 2021, the Company’s condensed consolidated balance sheet includes RA Capital’s portion of warrant liabilities of $5.4 million and $7.1 million, respectively, and deferred revenue of $2.2 million for both periods. For the six months ended June 30, 2022, the Company’s condensed consolidated statement of operations and condensed consolidated statement of cash flows includes RA Capital’s portion of the unrealized gain on warrant liabilities of $0.6 million.

2022 Sale of Common Stock

In June 2022, the Company closed an underwritten public offering of 11,500,000 shares of its common stock to the public at $4.75 per share, or the 2022 Financing, which included the full exercise of the underwriters' option to purchase 1,500,000 additional shares of common stock. The Company received net proceeds of $50.9 million from the 2022 Financing, after deducting underwriting discounts and commissions and other offering expenses payable by the Company.

Related Party Participation in the 2022 Financing

An entity affiliated with Richard Aldrich, one of our directors, and Thomas Auchincloss and Christine van Heek, two of our other directors, purchased approximately $1.0 million, $29 thousand and $50 thousand, respectively, in shares of our common stock in the 2022 Financing at the public offering price.

- Definition

The entire disclosure for shareholders' equity comprised of portions attributable to the parent entity and noncontrolling interest, including other comprehensive income. Includes, but is not limited to, balances of common stock, preferred stock, additional paid-in capital, other capital and retained earnings, accumulated balance for each classification of other comprehensive income and amount of comprehensive income.

+ References

Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
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Reference 2: http://www.xbrl.org/2003/role/disclosureRef
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-Name Accounting Standards Codification
-Topic 505
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-Section 50
-Paragraph 13
-Subparagraph (b)
-URI https://asc.fasb.org/extlink&oid=126973232&loc=SL123496158-112644

Reference 3: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
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-URI https://asc.fasb.org/extlink&oid=126973232&loc=SL123496158-112644

Reference 4: http://www.xbrl.org/2003/role/disclosureRef
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Reference 5: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
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Reference 6: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
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-Section S99
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-Subparagraph (SX 210.3-04)
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Reference 7: http://www.xbrl.org/2003/role/disclosureRef
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-Name Accounting Standards Codification
-Topic 505
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Reference 8: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
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Reference 9: http://www.xbrl.org/2003/role/disclosureRef
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Reference 10: http://www.xbrl.org/2003/role/disclosureRef
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Reference 11: http://www.xbrl.org/2003/role/disclosureRef
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Reference 12: http://www.xbrl.org/2003/role/disclosureRef
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Reference 13: http://www.xbrl.org/2003/role/disclosureRef
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Reference 14: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
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Reference 15: http://www.xbrl.org/2003/role/disclosureRef
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+ Details

2021 Sale of Common and Preferred Stock, Warrants and Royalty Interest

6 Months Ended

Jun. 30, 2022

Equity [Abstract]

2021 Sale of Common and Preferred Stock, Warrants and Royalty Interest

Open Market Sale Agreement

During the six months ended June 30, 2022, the Company did not sell any shares of common stock pursuant to the ATM Agreement.

2021 Sale of Common and Preferred Stock, Warrants and Royalty Interest

Preferred Stock

Warrants

Royalty Interest

Upon the exercise of the 3,981 First Tranche Warrants referenced above, the Investors’ collective ownership of the Royalty Interest increased to 38.7%.

Accounting Treatment

The Company received aggregate net proceeds of $64.4 million at the closing of the 2021 Financing after deducting offering expenses of $0.6 million payable by the Company.

The common stock, Series X1 Preferred Stock, Warrants and Royalty Interest were determined to be freestanding instruments, as they are legally detachable and separately exercisable from each other.

First Tranche Warrant Reclassification to Equity

On May 23, 2022, the Company announced the achievement of statistical significance on the primary endpoint of the CTP-543 THRIVE-AA1 Phase 3 clinical trial and determined that there were no safety or other issues that would impede the Company’s filing of an NDA without first requiring an additional clinical trial that was not already contemplated by the Company’s development plans for CTP-543, which established the expiration date of the First Tranche Warrants as August 21, 2022. As a result, the First Tranche Warrants were no longer based on an observable index other than the Company’s own operations, and therefore, were no longer precluded from equity classification.

As of May 23, 2022

First Tranche Warrants

Expected volatility

91.20%

Expected term

0.25 years

Risk-free interest rate

1.07%

Expected dividend yield

—%

First Tranche Warrants Modification and Partial Exercise

As of June 1, 2022

First Tranche Warrants (Post-Modification)

Expected volatility

104.20%

Expected term

0.25 years

Risk-free interest rate

1.15%

Expected dividend yield

—%

Warrant Liability Fair Value Assumptions

As of June 30, 2022

Second Tranche Warrants

Expected volatility

74.23%

Expected term

2.27 years

Risk-free interest rate

2.86%

Expected dividend yield

—%


	As of December 31, 2021
	First Tranche Warrants	Second Tranche Warrants
Expected volatility	75.90%	76.40%
Expected term	2.68 years	2.80 years
Risk-free interest rate	0.97%	0.97%
Expected dividend yield	—%	—%

Down Round Feature of Warrants

Related Party Participation in the 2021 Financing

As a participant in the First Tranche Warrant exercise in June 2022, RA Capital purchased 1,875 shares of Series X1 Preferred Stock and increased their Royalty Interest to 17.9%.

2022 Sale of Common Stock

Related Party Participation in the 2022 Financing

- Definition

+ References

+ Details

2022 Sale of Common Stock

6 Months Ended

Jun. 30, 2022

Equity [Abstract]

2022 Sale of Common Stock

Open Market Sale Agreement

During the six months ended June 30, 2022, the Company did not sell any shares of common stock pursuant to the ATM Agreement.

2021 Sale of Common and Preferred Stock, Warrants and Royalty Interest

Preferred Stock

Warrants

Royalty Interest

Upon the exercise of the 3,981 First Tranche Warrants referenced above, the Investors’ collective ownership of the Royalty Interest increased to 38.7%.

Accounting Treatment

The Company received aggregate net proceeds of $64.4 million at the closing of the 2021 Financing after deducting offering expenses of $0.6 million payable by the Company.

The common stock, Series X1 Preferred Stock, Warrants and Royalty Interest were determined to be freestanding instruments, as they are legally detachable and separately exercisable from each other.

First Tranche Warrant Reclassification to Equity

On May 23, 2022, the Company announced the achievement of statistical significance on the primary endpoint of the CTP-543 THRIVE-AA1 Phase 3 clinical trial and determined that there were no safety or other issues that would impede the Company’s filing of an NDA without first requiring an additional clinical trial that was not already contemplated by the Company’s development plans for CTP-543, which established the expiration date of the First Tranche Warrants as August 21, 2022. As a result, the First Tranche Warrants were no longer based on an observable index other than the Company’s own operations, and therefore, were no longer precluded from equity classification.

As of May 23, 2022

First Tranche Warrants

Expected volatility

91.20%

Expected term

0.25 years

Risk-free interest rate

1.07%

Expected dividend yield

—%

First Tranche Warrants Modification and Partial Exercise

As of June 1, 2022

First Tranche Warrants (Post-Modification)

Expected volatility

104.20%

Expected term

0.25 years

Risk-free interest rate

1.15%

Expected dividend yield

—%

Warrant Liability Fair Value Assumptions

As of June 30, 2022

Second Tranche Warrants

Expected volatility

74.23%

Expected term

2.27 years

Risk-free interest rate

2.86%

Expected dividend yield

—%


	As of December 31, 2021
	First Tranche Warrants	Second Tranche Warrants
Expected volatility	75.90%	76.40%
Expected term	2.68 years	2.80 years
Risk-free interest rate	0.97%	0.97%
Expected dividend yield	—%	—%

Down Round Feature of Warrants

Related Party Participation in the 2021 Financing

As a participant in the First Tranche Warrant exercise in June 2022, RA Capital purchased 1,875 shares of Series X1 Preferred Stock and increased their Royalty Interest to 17.9%.

2022 Sale of Common Stock

Related Party Participation in the 2022 Financing

- Definition

+ References

+ Details

Subsequent Events	6 Months Ended
Subsequent Events	Jun. 30, 2022
Subsequent Events [Abstract]
Subsequent Events	Subsequent Events On August 1, 2022, the Company announced the achievement of statistical significance on the primary endpoint of the CTP-543 THRIVE-AA2 Phase 3 clinical trial. On August 2, 2022, the Company determined that there were no safety or other issues that would impede the Company’s filing of an NDA without first requiring an additional clinical trial that was not already contemplated by the Company’s development plans for CTP-543. As a result, the expiration date of the remaining First Tranche Warrants and the Second Tranche Warrants became August 22, 2022 and October 31, 2022, respectively. The Company is evaluating the accounting impact as it relates to the Warrants.

Basis of Presentation Significant Accounting Policies (Policies)	6 Months Ended
	Jun. 30, 2022
Accounting Policies [Abstract]
Basis of Presentation	Basis of Presentation The condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments, consisting of normal recurring accruals and revisions of estimates, considered necessary for a fair presentation of the condensed consolidated financial statements have been included. Interim results for the six months ended June 30, 2022 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2022 or any other future period. The accompanying condensed consolidated financial statements reflect the accounts of the Company and its subsidiaries. All intercompany transactions between the Company and its subsidiaries have been eliminated. Management has determined that the Company operates in one segment: the development of pharmaceutical products on its own behalf or in collaboration with others. The information included in this Quarterly Report on Form 10-Q should be read in conjunction with the Company’s consolidated financial statements and the accompanying notes included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021 filed with the Securities and Exchange Commission, or SEC, on March 3, 2022. Unless otherwise indicated, all amounts in the following tables are in thousands except share and per share amounts.
Use of Estimates and Summary of Significant Accounting Policies	Use of Estimates and Summary of Significant Accounting Policies The preparation of the consolidated financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, equity, revenue and expenses, the disclosure of contingent assets and liabilities and the Company’s ability to continue as a going concern. In preparing the consolidated financial statements, management used estimates in the following areas, among others: revenue recognition; prepaid and accrued research and development expenses; stock-based compensation expense; fair value of warrant equity and liabilities; and the evaluation of the existence of conditions and events that raise substantial doubt regarding the Company’s ability to continue as a going concern. Actual results could differ from those estimates. During the six months ended June 30, 2022, there have been no material changes to the significant accounting policies previously disclosed in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021.
Recently Adopted Accounting Pronouncements	Recently Adopted Accounting Pronouncements In August 2020, the Financial Accounting Standards Board, or FASB, issued Accounting Standards Update, or ASU, 2020-06, Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. ASU 2020-06 simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts in an entity’s own stock, by eliminating the cash conversion and beneficial conversion feature accounting models for convertible debt and convertible preferred stock. Additionally, ASU 2020-06 eliminates the treasury stock method to calculate diluted earnings per share for convertible instruments. ASU 2020-06 is effective for public business entities for fiscal years beginning after December 15, 2021 and interim periods within those fiscal years, or December 31, 2023 and interim periods within those fiscal years for companies who meet the SEC definition of smaller reporting company. Early adoption is permitted, and entities are allowed to adopt the guidance through either a modified retrospective method of transition or a fully retrospective method of transition. The Company early adopted this standard effective January 1, 2022 on a modified retrospective basis, and it did not have a material effect on the condensed consolidated financial statements and related disclosures. In May 2021, the FASB issued ASU 2021-04, Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options (a consensus of the FASB Emerging Issues Task Force), which provides guidance on modifications or exchanges of a freestanding equity-classified written call option that is not within the scope of another topic. An entity should treat a modification of the terms or conditions or an exchange of a freestanding equity-classified written call option that remains equity classified after modification or exchange as an exchange of the original instrument for a new instrument, and provides further guidance on measuring the effect of a modification or an exchange of a freestanding equity-classified written call option that remains equity classified after modification or exchange. ASU 2021-04 also provides guidance on the recognition of the effect of a modification or an exchange of a freestanding equity-classified written call option that remains equity classified after modification or exchange on the basis of the substance of the transaction, in the same manner as if cash had been paid as consideration. ASU 2021-04 is effective for all entities for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. An entity should apply ASU 2021-04 prospectively to modifications or exchanges occurring on or after the effective date of ASU 2021-04. The Company adopted ASU 2021-04 effective January 1, 2022, on a prospective basis. In conjunction with the warrant amendments discussed in Note 13, the Company recorded issuance costs of $7.2 million as a reduction of proceeds in additional paid-in capital for the warrant exercise and a corresponding increase to the remeasured fair value of the equity-classified warrants as of the modification date, resulting in no impact. Pending Accounting Pronouncements In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses. This standard requires entities to measure all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions and reasonable and supportable forecasts. As a smaller reporting company, ASU 2016-13 will become effective for the Company for fiscal years beginning after December 15, 2022, and early adoption is permitted. The Company is currently evaluating the impact that ASU 2016-13 will have on its financial statements and related disclosures.

Fair Value Measurements (Tables)

6 Months Ended

Jun. 30, 2022

Fair Value Disclosures [Abstract]

Schedule of financial assets and liabilities recognized at fair value


	Level 1		Level 2		Level 3		Total
June 30, 2022
Cash equivalents:
Money market funds	$	123,380	$	—	$	—	$	123,380


Investments, available for sale:
U.S. Treasury obligations	—		14,488		—		14,488
Marketable equity securities:
Corporate equity securities	839		—		—		839
Total	$	124,219	$	14,488	$	—	$	138,707

Warrant liabilities (Note 13)	$	—	$	11,619	$	—	$	11,619


	Level 1		Level 2		Level 3		Total
December 31, 2021
Cash equivalents:
Money market funds	$	132,850	$	—	$	—	$	132,850

Marketable equity securities:
Corporate equity securities	1,463		—		—		1,463
Total	$	134,313	$	—	$	—	$	134,313

Warrant liabilities (Note 13)	$	—	$	15,438	$	—	$	15,438

Cash, Cash Equivalents, Investments and Marketable Equity Securities (Tables)

6 Months Ended

Jun. 30, 2022

Cash and Cash Equivalents [Abstract]

Schedule of cash, cash equivalents and investments, available for sale

Cash, cash equivalents, available-for-sale investments and marketable equity securities included the following as of June 30, 2022 and December 31, 2021:


	Average Maturity	Amortized Cost		Unrealized Gains		Unrealized Losses		Fair Value
June 30, 2022
Cash		$	15,864	$	—	$	—	$	15,864
Money market funds		123,381		—		—		123,381
Total cash and cash equivalents		$	139,245	$	—	$	—	$	139,245

U.S. Treasury obligations	82 days	$	14,497	$	—	$	(9)	$	14,488

Total investments, available for sale		$	14,497	$	—	$	(9)	$	14,488

June 30, 2022		Acquisition Value		Unrealized Gains		Unrealized Losses		Fair Value
Marketable equity securities		$	10,451	$	—	$	(9,612)	$	839


	Amortized Cost		Unrealized Gains		Unrealized Losses		Fair Value
December 31, 2021
Cash	$	8,786	$	—	$	—	$	8,786
Money market funds	132,850		—		—		132,850

Total cash and cash equivalents	$	141,636	$	—	$	—	$	141,636

December 31, 2021	Acquisition Value		Unrealized Gains		Unrealized Losses