Ikena Oncology | SEC Filing

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10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended September 30, 2021

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

For the transition period from __________________ to __________________

Commission File Number: 001-40287

IKENA ONCOLOGY, INC.

(Exact Name of Registrant as Specified in its Charter)


Delaware		81-1697316
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
645 Summer Street, Suite 101 Boston, MA		02210
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (857) 273-8343

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

Title of each class

Trading

Symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.001 per share

IKNA

The Nasdaq Global Market

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

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

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

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

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

As of October 31, 2021, the registrant had 35,906,794 shares of common stock, $0.001 par value per share, outstanding.

Table of Contents


		Page

PART I.	FINANCIAL INFORMATION	1
Item 1.	Financial Statements (Unaudited)	1
	Condensed Consolidated Balance Sheets	1
	Condensed Consolidated Statements of Operations and Comprehensive Loss	2
	Condensed Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders' Equity (Deficit)	3
	Condensed Consolidated Statements of Cash Flows	5
	Notes to Unaudited Condensed Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	13
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	22
Item 4.	Controls and Procedures	22
PART II.	OTHER INFORMATION	24
Item 1.	Legal Proceedings	24
Item 1A.	Risk Factors	24
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	72
Item 3.	Defaults Upon Senior Securities	72
Item 4.	Mine Safety Disclosures	72
Item 5.	Other Information	72
Item 6.	Exhibits	73
Signatures		74

SUMMARY OF THE MATERIAL AND OTHER RISKS ASSOCIATED WITH OUR BUSINESS

Our business is subject to numerous material and other risks and uncertainties that you should be aware of in evaluating our business. These risks include, but are not limited to, the following:



We are a targeted oncology company with a limited operating history.



We have incurred significant net losses since our inception and anticipate that we will continue to incur losses for the foreseeable future.



We have no products approved for commercial sale and have not generated any revenue from product sales.



We will require additional capital to finance our operations, which may not be available on acceptable terms, or at all. If we are unable to raise capital when needed or on terms acceptable to us, we would be forced to delay, reduce or eliminate some of our product development programs or commercialization efforts.



Raising additional capital may cause dilution to our stockholders, restrict our operations or require us to relinquish rights to our technologies or product candidates.



The COVID-19 pandemic, or a similar pandemic, epidemic, or outbreak of an infectious disease, may materially and adversely affect our business and our financial results and could cause a disruption to the development of our product candidates.



We have never successfully completed any clinical trials for our oncology programs, and we may be unable to do so for any product candidates we develop. Certain of our oncology programs are still in preclinical development and may never advance to clinical development.



Our programs are focused on the development of oncology therapeutics for patients with genetically defined or biomarker-driven cancers, which is a rapidly evolving area of science, and the approach we are taking to discover and develop drugs is novel and may never lead to approved or marketable products.



Clinical product development involves a lengthy and expensive process, with an uncertain outcome.



We face substantial competition, which may result in other companies discovering, developing or commercializing products before or more successfully than we do.



If the market opportunities for our programs and product candidates are smaller than we estimate or if any regulatory approval that we obtain is based on a narrower definition of the patient population, our revenue and ability to achieve profitability will be adversely affected, possibly materially.



We rely on third parties to conduct our Phase 1 clinical trial of IK-175 and Phase 1b clinical trial of IK-007 and expect to rely on third parties to conduct clinical trials for our targeted oncology and other tumor microenvironment programs, as well as investigator-sponsored clinical trials of our product candidates. If these third parties do not successfully carry out their contractual duties, comply with regulatory requirements or meet expected deadlines, we may not be able to obtain regulatory approval for or commercialize our product candidates and our business could be substantially harmed.



We have entered into collaborations and may enter into additional collaborations in the future, and we might not realize the anticipated benefits of such collaborations.



If we are unable to obtain and maintain patent and other intellectual property protection for our technology and product candidates or if the scope of the intellectual property protection obtained is not sufficiently broad, our competitors could develop and commercialize technology and drugs similar or identical to ours, and our ability to successfully commercialize our technology and drugs may be impaired.



Obtaining and maintaining regulatory approval of our product candidates in one jurisdiction does not mean that we will be successful in obtaining regulatory approval of our product candidates in other jurisdictions.



Our future success depends on our ability to retain key executives and experienced scientists and to attract, retain and motivate qualified personnel.



The dual class structure of our common stock may limit your ability to influence corporate matters and may limit your visibility with respect to certain transactions.

The material and other risks summarized above should be read together with the text of the full risk factors below and with the other information set forth in this Quarterly Report, including our condensed consolidated financial statements and the related notes, as well as with other documents that we file with the SEC. If any such material and other risks and uncertainties actually occur, our business, prospects, financial condition and results of operations could be materially and adversely affected. The risks summarized above, or described in full below, are not the only risks that we face. Additional risks and uncertainties not currently known to us, or that we currently deem to be immaterial may also materially adversely affect our business, prospects, financial condition and results of operations.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains express or implied forward-looking statements which are made pursuant to the safe harbor provisions of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These statements involve risks, uncertainties, and other factors that may cause actual results, performance, or achievements to be materially different from the information expressed or implied by these forward-looking statements. All statements, other than statements of historical facts, contained in this Quarterly Report on Form 10-Q, including statements regarding our strategy, future operations, future financial position, future revenue, projected costs, prospects, plans and objectives of management and expected market growth are forward-looking statements. The words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “should,” “target,” “would” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words.

Forward-looking statements in this prospectus include, but are not limited to, statements about:



the initiation, timing, progress, results, and cost of our research and development programs and our current and future preclinical studies and clinical trials, including statements regarding the timing of initiation and completion of studies or trials and related preparatory work, the period during which the results of the trials will become available, and our research and development programs;



our ability to efficiently discover and develop product candidates;



our ability and the potential to successfully manufacture our drug substances and product candidates for preclinical use, for clinical trials, and on a larger scale, for commercial use, if approved;



the ability and willingness of our third-party strategic collaborators to continue research and development activities relating to our development candidates and product candidates;



our ability to obtain funding for our operations necessary to complete further development and commercialization of our product candidates;



our ability to obtain and maintain regulatory approval of our product candidates;



our ability to commercialize our products, if approved;



the pricing and reimbursement of our product candidates, if approved;



the implementation of our business model, and strategic plans for our business and product candidates;



the scope of protection we are able to establish and maintain for intellectual property rights covering our product candidates;



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



the potential benefits of strategic collaboration agreements, our ability to enter into strategic collaborations or arrangements, and our ability to attract collaborators with development, regulatory and commercialization expertise;



future agreements with third parties in connection with the commercialization of product candidates and any other approved product;



the size and growth potential of the markets for our product candidates, and our ability to serve those markets;



our financial performance;



the rate and degree of market acceptance of our product candidates;



regulatory developments in the United States and relevant foreign countries;



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



our ability to produce our products or product candidates with advantages in turnaround times or manufacturing cost;



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



our ability to attract and retain key scientific or management personnel;



the impact of laws and regulations;



our use of proceeds from our initial public offering;



developments relating to our competitors and our industry;



the effect of the COVID-19 pandemic, including mitigation efforts and economic effects, on any of the foregoing or other aspects of our business operations, including but not limited to our preclinical studies and clinical trials and any future studies or trials; and



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

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

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

iii

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

IKENA ONCOLOGY, INC.

Condensed Consolidated Balance Sheets

(in thousands, except share and per share amounts)

(Unaudited)


	September 30, 2021			December 31, 2020
Assets
Current assets:
Cash and cash equivalents	$	245,899		$	162,491
Prepaid expenses and other current assets		5,966			3,478
Total current assets		251,865			165,969
Property and equipment, net		2,125			1,393
Right-of-use asset		6,843			170
Other assets		872			872
Total assets	$	261,705		$	168,404
Liabilities, Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit)
Current liabilities:
Accounts payable	$	1,928		$	2,122
Accrued expenses and other current liabilities		4,232			5,402
Operating lease liability		1,838			186
Deferred revenue		22,574			20,622
Total current liabilities		30,572			28,332
Long-term portion of lease liabilities		5,449			—
Deferred revenue, net of current portion		22,421			35,141
Total liabilities		58,442			63,473
Commitments and contingencies (Note 13)
Redeemable convertible preferred stock (Series A, A-1 and B), $0.001 par value, No shares authorized, issued and outstanding as of September 30, 2021; 169,396,576 shares authorized, issued and outstanding as of December 31, 2020 (liquidation preference of $0 as of September 30, 2021 and $202.2 million as of December 31, 2020)		—			205,979
Stockholders’ equity (deficit):
Preferred Stock, $0.001 par value - 10,000,000 shares authorized as of September 30, 2021 and no shares authorized as of December 31, 2020; No shares issued and outstanding as of September 30, 2021 or December 31, 2020		—			—
Common stock, $0.001 par value, 150,000,000 shares authorized, 35,877,794 issued and outstanding as of September 30, 2021; 230,000,000 shares authorized, 3,096,903 issued and outstanding as of December 31, 2020		36			3
Additional paid-in capital		351,478			10,288
Accumulated deficit		(148,251	)		(111,339	)
Total stockholders’ equity (deficit)		203,263			(101,048	)
Total liabilities, redeemable convertible preferred stock and stockholders’ equity (deficit)	$	261,705		$	168,404

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

IKENA ONCOLOGY, INC.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(in thousands, except share and per share amounts)

(Unaudited)


	Three Months Ended September 30,						Nine Months Ended September 30,
	2021			2020			2021			2020
Research and development revenue under collaboration agreement	$	3,746		$	2,829		$	10,768		$	9,129
Operating expenses:
Research and development		13,375			7,218			34,770			21,445
General and administrative		4,893			1,844			12,928			6,150
Total operating expenses		18,268			9,062			47,698			27,595
Loss from operations		(14,522	)		(6,233	)		(36,930	)		(18,466	)
Other income, net		7			11			18			261
Net loss and comprehensive loss	$	(14,515	)	$	(6,222	)	$	(36,912	)	$	(18,205	)
Net loss per share attributable to common stockholders basic and diluted	$	(0.40	)	$	(2.34	)	$	(1.46	)	$	(6.85	)
Weighted-average common stocks outstanding, basic and diluted		35,860,284			2,658,800			25,305,212			2,657,793

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

IKENA ONCOLOGY, INC.

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

(in thousands, except share amounts)

(Unaudited)


	Redeemable Convertible Preferred Stock				Common Stock				Additional Paid-in		Accumulated			Total Stockholders’ Equity
	Shares		Amount		Shares		Amount		Capital		Deficit			(Deficit)
Balance as of December 31, 2019		75,727,268	$	78,867		2,651,333	$	3	$	5,617	$	(67,083	)	$	(61,463	)
Exercise of stock options		—		—		7,461		—		21		—			21
Stock-based compensation		—		—		—		—		375		—			375
Net loss and comprehensive loss		—		—		—		—		—		(6,945	)		(6,945	)
Balance as of March 31, 2020		75,727,268		78,867		2,658,794		3		6,013		(74,028	)	$	(68,012	)
Stock-based compensation		—		—		—		—		354		—			354
Net loss and comprehensive loss		—		—		—		—		—		(5,038	)		(5,038	)
Balance as of June 30, 2020		75,727,268		78,867		2,658,794		3		6,367		(79,066	)		(72,696	)
Stock-based compensation		—		—		—		—		418		—			418
Net loss and comprehensive loss		—		—		—		—		—		(6,222	)		(6,222	)
Balance as of September 30, 2020		75,727,268	$	78,867		2,658,794	$	3	$	6,785	$	(85,288	)	$	(78,500	)

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

IKENA ONCOLOGY, INC.

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

(in thousands, except share amounts)

(Unaudited)


	Redeemable Convertible Preferred Stock						Common Stock				Additional Paid-in		Accumulated			Total Stockholders’ Equity
	Shares			Amount			Shares		Amount		Capital		Deficit			(Deficit)
Balance as of December 31, 2020		169,396,576		$	205,979			3,096,903	$	3	$	10,288	$	(111,339	)	$	(101,048	)
Initial public offering, net of issuance costs of $2.4 million		—			—			8,984,375		9		131,293		—			131,302
Conversion of convertible preferred stock into common stock		(169,396,576	)		(205,979	)		23,678,568		24		205,955		—			205,979
Stock-based compensation		—			—			—		—		885		—			885
Exercise of stock options		—			—			91,395		—		242		—			242
Net loss and comprehensive loss		—			—			—		—		—		(9,716	)		(9,716	)
Balance as of March 31, 2021		—			—			35,851,241		36		348,663		(121,055	)		227,644
Stock-based compensation		—			—			—		—		1,262		—			1,262
Exercise of stock options		—			—			7,878		—		35		—			35
Net loss and comprehensive loss		—			—			—		—		—		(12,681	)		(12,681	)
Balance as of June 30, 2021		—			—			35,859,119		36		349,960		(133,736	)		216,260
Stock-based compensation		—			—			—		—		1,449		—			1,449
Exercise of stock options		—			—			18,675		—		69		—			69
Net loss and comprehensive loss		—			—			—		—		—		(14,515	)		(14,515	)
Balance as of September 30, 2021		—		$	—			35,877,794	$	36	$	351,478	$	(148,251	)	$	203,263

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

IKENA ONCOLOGY, INC.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(Unaudited)


	Nine Months Ended September 30,
	2021			2020
Cash flows from operating activities
Net loss	$	(36,912	)	$	(18,205	)
Adjustments to reconcile net loss to net cash used in operating activities
Depreciation		381			225
Stock-based compensation		3,596			1,147
Non-cash operating lease expense		868			713
Changes in operating assets and liabilities:
Prepaid expenses and other current assets		(3,118	)		341
Accounts payable		(94	)		89
Accrued expenses and other current liabilities		(397	)		266
Lease liability		(440	)		(703	)
Deferred revenue		(10,768	)		(9,129	)
Net cash flows used in operating activities		(46,884	)		(25,256	)
Cash flows from investing activities
Purchases of property and equipment		(1,210	)		(116	)
Net cash flows used in investing activities		(1,210	)		(116	)
Cash flows from financing activities
Proceeds from initial public offering, net of offering costs		131,302			—
Payment of preferred issuance costs		(146	)		—
Proceeds from exercise of stock options		346			21
Net cash flows provided by financing activities		131,502			21
Net increase (decrease) in cash and cash equivalents and restricted cash		83,408			(25,351	)
Cash, cash equivalents and restricted cash, beginning of period		163,363			82,083
Cash, cash equivalents and restricted cash, end of period	$	246,771		$	56,732
Cash and cash equivalents	$	245,899		$	55,860
Restricted cash included in other assets		872			872
Cash, cash equivalents and restricted cash, end of period	$	246,771		$	56,732
Supplemental disclosure of non-cash activities
Purchases of property and equipment in accrued expense	$	86		$	128
Right-of-use assets recognized upon adoption of ASC 842	$	—		$	956
Right-of-use asset obtained in exchange for operating lease liability	$	—		$	178
Right-of-use assets and lease liabilities recognized upon lease inception	$	7,541		$	—
Deferred transaction costs in accounts payable and accrued expenses	$	—		$	133

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

IKENA ONCOLOGY, INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Note 1. Organization and Basis of Presentation

The Company is a targeted oncology company developing novel therapies targeting key cancer signaling pathways. By leveraging the Company’s deep understanding of discovery chemistry, translational science, and patient-centric drug development, the Company has built a deep pipeline of programs, both wholly owned and partnered, focused on genetically defined or biomarker-driven cancers. This enables it to target specific patient populations that are in need of new treatment options and the Company believes are most likely to respond to treatment with its product candidates. Since the Company commenced operations in 2016, it has advanced multiple product candidates to Investigational New Drug Application, or IND, acceptance and clinical development. In addition, the Company has a robust pipeline of early stage programs.

On March 22, 2021, ahead of the initial public offering, the Company effected a one-for-7.154 reverse stock split of the Company’s common stock. All share and per share amounts in the condensed consolidated financial statements and notes thereto have been retroactively adjusted for all periods presented to give effect to this reverse stock split, including reclassifying an amount equal to the reduction in par value of common stock to additional paid-in capital. Shares of common stock underlying outstanding stock options and other equity instruments were proportionately reduced and the respective exercise prices, if applicable, were proportionately increased in accordance with the terms of the appropriate securities agreements. Shares of common stock reserved for issuance upon the conversion of the Company’s convertible preferred stock were proportionately reduced and the respective conversion prices were proportionately increased. Stockholders entitled to fractional shares as a result of the reverse stock split received a cash payment in lieu of receiving fractional shares.

On March 25, 2021, the Company’s registration statement on Form S-1 relating to its initial public offering of its common stock was declared effective by the Securities and Exchange Commission (“SEC”). In the IPO, which closed on March 30, 2021, the Company issued and sold 8,984,375 shares of common stock, including full exercise of the underwriters’ over-allotment option to purchase an additional 1,171,875 shares, at a public offering price of $16.00 per share and the aggregate gross proceeds before deducting underwriting discounts and commissions, and other estimated offering expenses payable by the Company, were approximately $143.8 million.

Basis of Presentation: The Company’s condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”). Any reference in these notes to applicable guidance is meant to refer to the authoritative U.S. GAAP as found in the ASC and Accounting Standards Update (“ASU”) of the Financial Accounting Standards Board (“FASB”).

The accompanying condensed consolidated financial statements and footnotes to the financial statements have been prepared on the same basis as the most recently audited annual financial statements and, in the opinion of management, reflect all normal recurring adjustments necessary for the fair presentation of the Company’s financial position as of September 30, 2021 and the results of its operations and its cash flows for the three and nine months ended September 30, 2021. The results for the three and nine months ended September 30, 2021 are not necessarily indicative of results to be expected for the year ending December 31, 2021, any other interim periods, or any future year or period. These condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and the notes thereto for the year ended December 31, 2020 included in the Company’s final prospectus for its IPO filed pursuant to Rule 424(b)(4) under the Securities Act of 1933, as amended (the “Securities Act”), with the Securities and Exchange Commission (the “SEC”) on March 25, 2021.

Note 2. Summary of Significant Accounting Policies

Principles of Consolidation: The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Arrys Therapeutics, Inc. (“Arrys”), Ikena Oncology Securities Corporation and Amplify Medicines, Inc, (“Amplify”). All intercompany balances and transactions have been eliminated in consolidation.

Use of Estimates: The preparation of the Company’s financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Estimates and judgments are based on historical information and other market-specific or various relevant assumptions, including in certain circumstances, future projections, that management believes to be reasonable under the circumstances. Actual results could differ materially from estimates. Significant estimates and assumptions are used for, but not limited to the accruals for research and development expenses, research

and development revenue under a collaboration agreement, the determination of fair value of equity instruments and intangible assets acquired in an asset acquisition and, for periods prior to the completion of the IPO, stock based compensation expense.

Summary of Significant Accounting Policies: The significant accounting policies and estimates used in the preparation of the accompanying consolidated financial statements are described in the Company’s audited consolidated financial statements for the year ended December 31, 2020 included in the Company’s final Prospectus for its IPO filed pursuant to Rule 424(b)(4) under the Securities Act with the SEC on March 25, 2021. There have been no material changes in the Company’s significant accounting policies during the nine months ended September 30, 2021.

Concentration of Credit Risk and of Significant Suppliers: Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents. As of September 30, 2021 substantially all of the Company’s cash and cash equivalents were deposited at two highly rated financial institutions. The Company maintains balances in operating accounts above federally insured limits. The Company has not experienced any losses on such accounts and does not believe it is exposed to any significant credit risk on cash and cash equivalents.

The Company is dependent on third-party manufacturers and clinical research organizations to supply products and provide services for research and development activities in its programs. In particular, the Company relies and expects to continue to rely on a small number of manufacturers to supply it with its requirements for the active pharmaceutical ingredients and formulated drugs related to these programs. These programs could be adversely affected by a significant interruption in the supply of active pharmaceutical ingredients and formulated drugs. In the second quarter 2021, we were notified that a key component required in the manufacturing of IK-412, our novel kynurenine-degrading enzyme, is similarly essential to the manufacturing of COVID-19 vaccines and therapies. As such, the availability of the component has been delayed as resources have been allocated towards vaccine production in the near-term.

Deferred Issuance Costs: On March 30, 2021, the Company completed its IPO. Accordingly, the Company recognized offering costs of approximately $2.4 million as a reduction from the gross proceeds associated with the closing of the IPO through additional paid-in capital in the accompanying condensed consolidated balance sheet. The Company incurred deferred offering costs of $0.5 million as of December 31, 2020 which were included in prepaid expenses and other current assets.

Recent Accounting Pronouncements:

From time to time, new accounting pronouncements are issued by the FASB or other standard setting bodies and adopted by us as of the specified effective date. Unless otherwise discussed, the Company believes that the impact of recently issued standards that are not yet effective will not have a material impact on our consolidated financial statements and disclosures.

Note 3. Fair Value Measurements

The following table presents information about the Company’s financial assets measured at fair value on a recurring basis and indicate the level of the fair value hierarchy utilized to determine such fair values (in thousands):


	As of September 30, 2021		Quoted Prices in Active Markets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Cash equivalents:
Money market funds (included in cash equivalents)	$	245,699	$	245,699	$	—	$	—
Total	$	245,699	$	245,699	$	—	$	—


	As of December 31, 2020		Quoted Prices in Active Markets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Cash equivalents:
Money market funds (included in cash equivalents)	$	162,290	$	162,290	$	—	$	—
Total	$	162,290	$	162,290	$	—	$	—

During the nine months ended September 30, 2021 and year ended December 31, 2020, there were no transfers between Level 1, Level 2 and Level 3.

Note 4. Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consist of the following (in thousands):


	As of September 30, 2021		As of December 31, 2020
Clinical, manufacturing and scientific development	$	3,276	$	1,917
Prepaid Insurance		1,662		23
Other		1,028