Repurchase of common stock, shares

431

(41,935)

(14,775)

Ending balance at Mar. 31, 2018

(27)

69,104

$ 149,397

$ 1

3,951

(71)

(84,174)

Ending balance, shares at Mar. 31, 2018

16,215,896

6,709,207

Beginning balance at Dec. 31, 2017

83,462

$ 149,397

$ 1

3,507

(44)

(69,399)

Beginning balance, shares at Dec. 31, 2017

16,215,896

6,751,157

(53,156)

Ending balance at Sep. 30, 2018

149,235

$ 3

271,819

(32)

(122,555)

Ending balance, shares at Sep. 30, 2018

31,048,089

Beginning balance at Mar. 31, 2018

69,104

$ 149,397

$ 1

3,951

(71)

(84,174)

Beginning balance, shares at Mar. 31, 2018

16,215,896

6,709,207

Issuance of common stock for exercise of stock options

Issuance of common stock for exercise of stock options, shares

28,630

171

616

(16,722)

Ending balance at Jun. 30, 2018

53,267

$ 149,397

$ 1

4,793

(28)

(100,896)

Ending balance, shares at Jun. 30, 2018

16,215,896

6,737,837

Issuance of common stock upon initial public offering, net of issuance costs

116,336

$ 1

116,335

Issuance of common stock upon initial public offering, net of issuance costs, shares

8,090,250

Preferred stock conversion to common stock

$ (149,397)

$ 1

149,396

Preferred stock conversion to common stock, shares

(16,215,896)

16,215,896

Issuance of common stock for exercise of stock options

Issuance of common stock for exercise of stock options, shares

4,106

1,271

(21,659)

Ending balance at Sep. 30, 2018

(4)

149,235

$ 3

271,819

(32)

(122,555)

Ending balance, shares at Sep. 30, 2018

31,048,089

Beginning balance at Dec. 31, 2018

133,221

^[1]

$ 3

273,069

(82)

(139,769)

Beginning balance, shares at Dec. 31, 2018

31,079,150

Issuance of common stock for exercise of stock options

789

Issuance of common stock for exercise of stock options, shares

174,793

Issuance of common stock pursuant to the ESPP

588

Issuance of common stock pursuant to the ESPP, shares

44,656

113

1,104

(23,016)

Ending balance at Mar. 31, 2019

100

112,899

$ 3

275,663

(162,785)

Ending balance, shares at Mar. 31, 2019

31,298,599

Beginning balance at Dec. 31, 2018

133,221

^[1]

$ 3

273,069

(82)

(139,769)

Beginning balance, shares at Dec. 31, 2018

31,079,150

(61,385)

Ending balance at Sep. 30, 2019

172

158,330

$ 4

359,390

(201,154)

Ending balance, shares at Sep. 30, 2019

42,271,052

Beginning balance at Mar. 31, 2019

112,899

$ 3

275,663

(162,785)

Beginning balance, shares at Mar. 31, 2019

31,298,599

Issuance of common stock for exercise of stock options

612

Issuance of common stock for exercise of stock options, shares

133,723

1,125

(23,206)

Ending balance at Jun. 30, 2019

91,484

$ 3

277,413

(185,991)

Ending balance, shares at Jun. 30, 2019

31,432,322

Issuance of common stock in public offering, net of issuance costs

80,461

$ 1

80,460

Issuance of common stock in public offering, net of issuance costs, shares

10,781,250

Issuance of common stock for exercise of stock options

Issuance of common stock for exercise of stock options, shares

7,568

Issuance of common stock pursuant to the ESPP

272

Issuance of common stock pursuant to the ESPP, shares

49,912

1,208

(15,163)

Ending balance at Sep. 30, 2019

$ 158,330

$ 4

$ 359,390

$ 90

$ (201,154)

Ending balance, shares at Sep. 30, 2019

42,271,052

[1]	The balance sheet as of December 31, 2018 is derived from the audited financial statements as of that date.

Condensed Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018
Cash flows from operating activities:
Net loss	$ (61,385)	$ (53,156)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation	3,437	2,318
Depreciation and amortization	386	289
Amortization of right-of-use assets	759	0
Accretion of discounts on marketable securities	(977)	(293)
Realized gain on sale of available-for-sale securities	(6)	0
Change in fair value of embedded derivative	(13)	0
Changes in operating assets and liabilities:
Prepaid expenses and other current assets	(3,748)	(2,172)
Other assets	(445)	69
Accounts payable	(1,469)	185
Accrued liabilities	7,631	554
Deferred grant funding	841	1,375
Lease related liabilities	(866)	(86)
Other long-term liabilities	0	(1)
Net cash used in operating activities	(55,855)	(50,918)
Cash flows from investing activities:
Purchases of property and equipment	(328)	(106)
Purchases of available-for-sale securities	(166,040)	(138,071)
Proceeds from sales of available-for-sale securities	3,996	0
Proceeds from maturities of available-for-sale securities	156,427	71,478
Net cash used in investing activities	(5,945)	(66,699)
Cash flows from financing activities:
Proceeds from issuance of common stock upon ESPP purchase	859	0
Proceeds from issuance of common stock upon exercise of stock options	1,426	166
Proceeds from public offering of common stock, net of issuance costs	80,461	116,460
Net cash provided by financing activities	82,746	116,626
Net increase (decrease) in cash and cash equivalents	20,946	(991)
Cash and cash equivalents — beginning of period	10,837	24,417
Cash and cash equivalents — end of period	31,783	23,426
Supplemental disclosures of cash flow information:
Operating cash flows paid for operating leases	1,015	0
Noncash investing and financing activities:
Purchases of property and equipment included in accounts payable	13	0
Lease liability obtained in exchange for right-of-use asset	712	0
Conversion of convertible preferred stock to common stock at close of initial public offering	0	149,397
Deferred offering costs included in accounts payable and accrued liabilities	$ 0	$ 124

Description of Business

9 Months Ended

Sep. 30, 2019

Organization Consolidation And Presentation Of Financial Statements [Abstract]

Basis of Presentation

1.	Description of Business

The Company is a clinical-stage immuno-oncology company focused on developing novel checkpoint therapies to activate macrophages in the fight against cancer. Forty Seven was founded based on the insight that blocking CD47, a key signaling molecule that is over-expressed on cancer cells, renders tumors susceptible to macrophages and the innate immune system. By harnessing macrophages, the Company believes that its lead product candidate, magrolimab (formerly known as 5F9), dosed as a monotherapy and in combination with marketed cancer therapies, can transform the treatment of cancer.

Liquidity

In the course of its development activities, the Company has sustained operating losses and expects to continue to generate operating losses for the foreseeable future. The Company’s ultimate success depends on the outcome of its research and development activities. The Company had cash, cash equivalents and short-term investments of $166.7 million as of September 30, 2019. Since inception through September 30, 2019, the Company has incurred cumulative net losses of $201.2 million. Management expects to incur additional losses in the future to conduct product research and development and recognizes the need to raise additional capital to fully implement its business plan.

The Company intends to raise such capital through the issuance of additional equity financing and/or third-party collaboration funding. However, if such financing is not available at adequate levels, the Company will need to reevaluate its operating plan and may be required to delay the development of its products. The Company expects that its cash, cash equivalents and short-term investments will be sufficient to fund operating expenses and capital expenditure requirements for a period of at least one year from the date these interim condensed financial statements are filed with the Securities and Exchange Commission (“SEC”).

In July 2019, the Company filed a Registration Statement on Form S-3, as amended (File No. 333-232498), declared effective by the SEC on July 12, 2019 (the “Shelf Registration Statement”), related to the offering of up to $250.0 million of common stock, preferred stock, debt securities and warrants. The Company may seek to use the Shelf Registration Statement at any time or from time to time to offer, in one or more offerings, common stock, preferred stock, debt securities and/or warrants. The Shelf Registration Statement also included a prospectus covering the offering, issuance and sale of up to $60.0 million of shares of the Company’s common stock, from time to time, in “at-the-market offerings” pursuant to a Controlled Equity Offering^SM Sales Agreement (the “Sales Agreement”) entered into with Cantor Fitzgerald & Co. (the “Sales Agent”) on July 1, 2019. As of September 30, 2019, the Company had not sold any securities pursuant to the Sales Agreement.

In July 2019, pursuant to the Shelf Registration Statement, the Company completed an underwritten public offering of 10,781,250 shares of the Company’s common stock, including 1,406,250 shares sold pursuant to the underwriters’ exercise of their option to purchase additional shares at a public offering price of $8.00 per share. The net proceeds from the offering to the Company were $80.5 million.

Summary of Significant Accounting Policies

9 Months Ended

Sep. 30, 2019

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

2.	Summary of Significant Accounting Policies

Basis of Presentation

The interim condensed financial statements are unaudited. The unaudited interim condensed financial statements have been prepared on the same basis as the annual financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary to present fairly the Company’s financial position, results of operations and cash flows for the periods presented. The results of operations for the three and nine months ended September 30, 2019 are not necessarily indicative of the results to be expected for the year ending December 31, 2019 or for any other future annual or interim period. The condensed balance sheet as of December 31, 2018 included herein was derived from the audited financial statements as of that date. These condensed financial statements should be read in conjunction with the Company's audited financial statements and related notes as set forth in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018, as filed with the SEC on March 28, 2019.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Significant estimates and assumptions made in the accompanying financial statements include but are not limited to revenue recognition, the fair value of stock options, the fair value of investments, income tax uncertainties, lease liability, and certain accruals. The Company evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors and adjusts those estimates and assumptions when facts and circumstances dictate. Actual results could differ from those estimates.

Revenue Recognition

License and Collaboration Arrangements

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

The Company enters into collaborative arrangements with partners that fall under the scope of ASC, Collaborative Arrangements (Topic 808) (“ASC 808”). The Company analyzes it collaboration arrangements to assess whether they are within the scope of ASC 808 to determine whether such arrangements involve joint operating activities performed by parties that are both active participants in the activities and exposed to significant risks and rewards dependent on the commercial success of such activities. This assessment is performed throughout the life of the arrangement based on changes in the responsibilities of all parties in the arrangement. The accounting for some of the activities under collaboration arrangements may be analogized to ASC 606 for distinct units of account that are reflective of a vendor-customer relationship. For other elements of collaboration arrangements, such as research and development performed under cost-sharing arrangements, the Company follows the illustrative examples in ASC 808 and generally records research and development reimbursements received as a reduction of research and development expenses.

In determining the appropriate amount of revenue to be recognized as the Company fulfills its obligations under each of its agreements, the Company performs the following steps: (i) identification of the promised goods or services in the contract; (ii) determination of whether the promised goods or services are performance obligations including whether they are distinct in the context of the contract; (iii) measurement of the transaction price, including the constraint on variable consideration; (iv) allocation of the transaction price to the performance obligations based on estimated selling prices; and (v) recognition of revenue when (or as) the Company satisfies each performance obligation.

If a license to the Company’s intellectual property is determined to be distinct from the other performance obligations identified in the arrangement, the Company recognizes revenues attributed to the license when the license is transferred to the customer and the customer is able to use and benefit from the license.

At the inception of each arrangement that includes development milestone payments, the Company evaluates whether the milestones are considered probable of being reached and estimates the amount to be included in the transaction price using the most likely amount method. If it is probable that a significant revenue reversal would not occur, the associated milestone value is included in the transaction price. Milestone payments that are not within the control of the Company or the licensee, such as regulatory approvals, are not generally considered probable of being achieved until those approvals are received. At the end of each reporting period, the Company re-evaluates the probability of achievement of any development milestones, and if necessary, adjusts its estimate of the transaction price. Any such adjustments would be recorded on a cumulative catch-up basis, which would affect revenues and earnings in the period of adjustment.

Foreign Currency Transactions

Gains or losses from foreign currency transactions are included in interest and other income, net, in the statements of operations and comprehensive loss. The Company recognized $0.3 million in foreign currency gains for the three months and nine months ended September 30, 2019. Foreign currency losses for the three months ended September 30, 2018 were immaterial. The Company recognized $0.2 million in foreign currency losses for the nine months ended September 30, 2018.

Fair Value Measurement

Assets and liabilities recorded at fair value on a recurring basis in the balance sheets are categorized based upon the level of judgment associated with the inputs used to measure their fair values. Fair value is defined as the exchange price that would be received for an asset or an exit price that would be paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. The authoritative guidance on fair value measurements establishes a three-tier fair value hierarchy for disclosure of fair value measurements as follows:

Level 1—Observable inputs such as unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date;

Level 2—Inputs (other than quoted prices included in Level 1) are either directly or indirectly observable for the asset or liability. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active;

Level 3— Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

Leases

The Company adopted Accounting Standards Update No. 2016-02, Leases on January 1, 2019 using the modified retrospective method. For its operating leases in excess of 12 months, the Company recognizes a right-of-use asset and a lease liability on its balance sheet. The lease liability is determined as the present value of future lease payments using an estimated rate of interest that the Company would pay to borrow equivalent funds on a collateralized basis at the adoption date for the existing lease and at lease commencement date for new leases. The right-of-use asset is based on the liability adjusted for any prepaid or deferred rent, and lease incentives, as applicable. The lease term at the commencement date is determined by considering whether renewal options and termination options are reasonably assured of exercise.

Rent expense for the operating leases is recognized on a straight-line basis over the lease term and is included in operating expenses on the statements of operations and comprehensive loss. Variable lease payments include lease operating expenses.

The accompanying condensed financial statements as of and for the three and nine months ended September 30, 2019 are presented under ASC 842. The prior periods continue to be reported in accordance with previous lease guidance, ASC 840, Leases. The Company elected the package of practical expedients permitted under the transition guidance within the new standard, which among other things, allows the Company to carry forward the historical lease classification of the leases in place as of January 1, 2019. As allowed under ASC 842, the Company has elected to not separate lease and nonlease components. The Company has also elected to not apply the recognition requirement of ASC 842 to leases with a term of 12 months or less.

The impact of the adoption of ASC 842 on the accompanying condensed balance sheet as of January 1, 2019 was as follows:

	December 31, 2018		Adjustments due to the adoption of ASC 842			January 1, 2019
	(In thousands)
Assets
Operating lease right-of-use asset	$	—	$	2,328		$	2,328
Liabilities and stockholders' equity
Deferred rent classified as accrued liabilities	$	155	$	(155	)	$	—
Lease liability, current	$	—	$	968		$	968
Lease liability, noncurrent	$	—	$	1,847		$	1,847
Deferred rent, noncurrent	$	331	$	(331	)	$	—

The adjustments due to the adoption of ASC 842 related to the recognition of an operating lease right-of-use asset and lease liability for the Company's existing property operating lease and the derecognition of the deferred rent recognized under ASC 840. There was no impact on the Company’s statement of operations and comprehensive loss from the adoption and no cumulative-effect adjustment to the beginning accumulated deficit.

Fair Value Measurements

9 Months Ended

Sep. 30, 2019

Fair Value Disclosures [Abstract]

Fair Value Measurements

3.	Fair Value Measurements

The Company measures and records its cash equivalents and short-term investments at fair value.

Money market funds and US government debt securities are measured at fair value on a recurring basis using quoted prices and are classified as a Level 1 input. Short-term investments are measured at fair value based on inputs other than quoted prices that are derived from observable market data and are classified as Level 2 inputs. There were no transfers between Levels 1, 2 or 3 for any of the periods presented. All of the investments held as of September 30, 2019 and December 31, 2018 had maturities of less than one year. There were no significant realized gains or losses on investments for the three and nine months ended September 30, 2019 and 2018. Any identified unrealized losses were deemed to be temporary. The Company does not intend to sell its securities that are in an unrealized loss position, if any, and it is unlikely that the Company will be required to sell its securities before recovery of their amortized cost basis, which may be maturity.

The fair value and amortized cost of cash equivalents and available-for-sale securities by major security type as of September 30, 2019 and December 31, 2018 are presented in the following tables:

	As of September 30, 2019
	Fair Value Hierarchy	Amortized Cost		Unrealized Gains		Unrealized Losses			Market Value
	(In thousands)
Money market funds	Level 1	$	30,546	$	—	$	—		$	30,546
US government debt securities	Level 1		28,039		13		(10	)		28,042
Commercial paper	Level 2		29,612		—		—			29,612
Corporate debt securities	Level 2		52,167		66		—			52,233
Asset-backed securities	Level 2		25,051		22		(1	)		25,072
Total cash equivalents and available-for-sale securities		$	165,415	$	101	$	(11	)	$	165,505

	As of December 31, 2018
	Fair Value Hierarchy	Amortized Cost		Unrealized Gains		Unrealized Losses			Market Value
	(In thousands)
Money market funds	Level 1	$	7,959	$	—	$	—		$	7,959
US government debt securities	Level 1		15,963		—		(1	)		15,962
Commercial paper	Level 2		43,277		—		—			43,277
Corporate debt securities	Level 2		46,186		—		(54	)		46,132
Asset-backed securities	Level 2		22,842		—		(27	)		22,815
Total cash equivalents and available-for-sale securities		$	136,227	$	—	$	(82	)	$	136,145

The Company’s contingent milestone payments in its agreement with the Leukemia & Lymphoma Society, Inc. (“LLS”) were concluded to be an embedded derivative. The embedded derivative contains unobservable inputs that are supported by little or no market activity at the measurement date. Accordingly, the Company’s embedded derivative is measured at fair value on a recurring basis using unobservable inputs that are classified as Level 3 inputs. The Company recorded a liability for the derivative of approximately $0.3 million, as part of other long-term liabilities as of September 30, 2019 and December 31, 2018. Refer to Note 5 for the valuation techniques and assumptions used in estimating the fair value of the embedded derivative.

The change in fair value of the embedded derivative is presented in the following table:

	Nine Months Ended September 30,
	2019
	(In thousands)
Beginning balance	$	331
Change in fair value of embedded derivative		(13	)
Ending balance	$	318

- 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

Balance Sheet Components

9 Months Ended

Sep. 30, 2019

Balance Sheet Related Disclosures [Abstract]

Balance Sheet Components

4.	Balance Sheet Components

Accrued Liabilities

Accrued liabilities consist of the following:

	September 30, 2019		December 31, 2018
	(In thousands)
Accrued research and development expenses	$	12,605	$	5,870
Accrued bonuses		2,119		1,602
Deferred rent, current		—		155
Other		1,795		1,417
Total accrued liabilities	$	16,519	$	9,044

Research and License Agreements

9 Months Ended

Sep. 30, 2019

Research And License Agreements [Abstract]

Research and License Agreements

5.	Research and License Agreements

California Institute of Regenerative Medicine Grants

In January 2017, the Company was awarded a research grant from the California Institute of Regenerative Medicine (“CIRM”). The CIRM grant stipulates various milestone-based payments to the Company with the total award of $10.2 million over a period of four years. During the three months ended September 30, 2019, the Company did not receive any funding related to this grant. During the nine months ended September 30, 2019, the Company received $2.0 million related to this grant. As of September 30, 2019, and December 31, 2018, the Company had received $9.2 million and $7.2 million under the award, respectively.

In November 2017, the Company was awarded a second research grant from CIRM for a separate clinical trial study. The total amount of the research grant awarded was $5.0 million in various milestone-based payments over a period of five years. During 2018, the award was amended to $3.2 million in various-milestone payments over a period of five years, as was provided for under the terms of the original award because the Company opted not to expand the patient population participating in the study. In July 2019, the award was further amended to include the patient population expansion that the Company previously opted out of in 2018. In connection with the same, the award was reinstated to $5.0 million consistent with the original award amount. During the three and nine months ended September 30, 2019, the Company received $0.5 million and $1.2 million related to this grant, respectively. As of September 30, 2019, and December 31, 2018, the Company had received $3.6 million and $2.4 million under the award, respectively. Under the terms of the CIRM grants, the Company is obligated to pay royalties and licensing fees based on a low single digit royalty percentage on net sales of CIRM-funded product candidates or CIRM-funded technology. The Company has the option to decline any and all amounts awarded by CIRM. As an alternative to royalty payments, the Company has the option to convert the award to a loan. No such election has been made as of the date of the issuance of these financial statements. In the event that the Company terminates a CIRM-funded clinical trial, it will be obligated to repay any remaining unspent CIRM funds.

Leukemia & Lymphoma Society Grant

In March 2017, the Company entered into an agreement with the LLS and amended the agreement to include an additional study in June 2018. The LLS research grant stipulates various milestone-based payments with a total award of $4.2 million through December 2019. During the three and nine months ended September 30, 2019, the Company received $0.3 million related to this grant. As of September 30, 2019, and December 31, 2018, the Company had received $4.2 million and $3.9 million under the award, respectively. The Company could be required in the future to pay amounts to LLS upon reaching certain development and regulatory approval milestones as well as a low single digit percentage royalty rate on net sales, up to a maximum of $15.0 million in total. The Company concluded that the contingent milestone payments were an embedded derivative and the Company recorded a liability for the derivative of approximately $0.3 million, as part of other long-term liabilities as of September 30, 2019 and December 31, 2018. The value of the embedded derivative was estimated using the probability-adjusted and discounted future milestone payments.

In July 2019, the Company entered into an amendment to its agreement with LLS to further advance the treatment of myelodysplastic syndromes (“MDS”). Under the amendment, the Company is eligible for up to $3.0 million in additional grant funding based on milestone payments from LLS upon the achievement of certain clinical or regulatory milestones in addition to the $4.2 million award that the Company has received pursuant to the March 2017 agreement, as amended. Pursuant to the amendment, the Company could be required in the future to pay amounts to LLS upon reaching certain development and regulatory approval milestones on the additional funding, up to a maximum of $6.0 million in the aggregate. The Company concluded that the contingent milestone payments under the amendment were an embedded derivative. As of September 30, 2019, the Company had not received any funding related to this grant and therefore the Company did not record any liability related to this derivative as of September 30, 2019.

The Company recognizes research grants as a reduction of research and development expense when the eligible costs are incurred. Under both CIRM and LLS grants, the Company recognized a total of $0.6 million and $2.2 million as a reduction to research and development expenses for research grants for the three months ended September 30, 2019 and 2018, respectively. The Company recognized a total of $2.6 million and $5.6 million as a reduction to research and development expenses for research grants for the nine months ended September 30, 2019 and 2018, respectively.

Other Collaboration Agreements

Master Combination Study Agreement with Genentech, Inc.

In November 2017, the Company entered into a master clinical trial collaboration agreement with Genentech to evaluate the safety, tolerability and preliminary efficacy of magrolimab combined with Genentech’s cancer immunotherapy, atezolizumab, a fully humanized monoclonal antibody targeting PD-L1, in two separate Phase 1b clinical trials (in patients with bladder cancer and AML, respectively). Pursuant to the agreement, the Company will supply magrolimab for the studies and will partially reimburse Genentech for its costs in connection with the bladder cancer study, and Genentech will supply atezolizumab for the studies and be solely responsible for all of its costs in connection with the AML study.

Merck Collaboration Agreement

In January 2018, the Company entered into a clinical trial collaboration and supply agreement with Ares Trading S.A, a subsidiary of Merck KGaA (“Merck”), to evaluate magrolimab combined with Merck’s cancer immunotherapy, avelumab, in a Phase 1b clinical trial in patients with ovarian cancer. Pursuant to the agreement, the parties will jointly pay for the cost of the study.

bluebird bio, Inc. Research Collaboration Agreement

In September 2019, the Company entered into a research collaboration with bluebird bio, Inc. (“bluebird”) to pursue clinical proof-of-concept for the Company’s novel antibody-based conditioning regimen, FSI-174 (anti-cKIT antibody) plus magrolimab (anti-CD47 antibody), with bluebird’s ex vivo lentiviral vector hematopoietic stem cell (LVV HSC) gene therapy platform. This collaboration will focus initially on diseases that have the potential to be corrected with transplantation of autologous gene-modified blood-forming stem cells.

As of September 30, 2019, the Company recorded a total receivable of $1.0 million from these collaborations for reimbursement of research and development costs incurred. Reimbursement under these collaboration agreements is recorded as a reduction to research and development expense. For the three months ended September 30, 2019 and 2018, the Company recognized $1.0 million and $0.4 million, respectively, as a reduction to research and development expenses under these collaboration agreements. For the nine months ended September 30, 2019 and 2018, the Company recognized $1.9 million and $1.0 million, respectively, as a reduction to research and development expenses under these collaboration agreements.

Ono License and Collaboration Agreement

In July 2019, the Company entered into an exclusive license and collaboration agreement with Ono Pharmaceutical Co., Ltd., (“Ono”). Under the agreement, the Company granted Ono an exclusive license to develop, manufacture and commercialize magrolimab, the Company’s monoclonal antibody against CD47, as well as other anti-CD47 antibodies controlled by the Company in Japan, South Korea, Taiwan and the ASEAN countries (the “Ono Territory”). The Company retains all rights to magrolimab and other licensed antibodies outside of the Ono Territory.

Under the agreement, the parties will collaborate on the development, manufacturing and commercialization of magrolimab and other licensed antibodies. Each party will be responsible for conducting development and commercialization of licensed antibodies in its respective territory at its own cost. Further, each party will have the right to participate, at its cost, in global clinical studies of magrolimab and other licensed antibodies conducted by the other party.

The Company received a one-time upfront nonrefundable payment from Ono of 1.7 billion Japanese Yen ($15.7 million US Dollars based on the exchange rate as of the date of the agreement) and is eligible to receive up to an additional 11.2 billion Japanese Yen if specified future development and commercial milestones are achieved by Ono. The Company is also eligible to receive tiered percentage royalties spanning from the mid-teens to the low-twenties on future net sales of magrolimab and other licensed antibodies in the Ono Territory, subject to certain offsets.

The Company accounts for the Ono Agreement as a collaboration arrangement under ASC 808. The Company concluded that the license delivered to Ono is a distinct unit of account for which there is a vendor-customer relationship. For the license, the Company analogized to ASC 606 for the recognition, measurement and reporting of this unit of account. The up-front payment, future milestones and royalties are attributed to the license component of the Ono Agreement. For the cost-sharing and reimbursement-based activities, the Company will follow the presentation and disclosure guidance of ASC 808. As of September 30, 2019, the cost-sharing and reimbursement-based activities had not commenced under the agreement.

The transaction price at inception included upfront fixed nonrefundable consideration of $15.7 million. All potential future milestones and other payments were considered constrained at the inception of the Ono Agreement. Revenue for the license of $15.7 million was recognized upon delivery of the license in July 2019.

Leases

9 Months Ended

Sep. 30, 2019

Leases [Abstract]

Leases

7. Leases

The Company leases office property and laboratory space at its headquarters in Menlo Park (the “Menlo Park Lease”) through August 2021. The lease requires monthly lease payments subject to annual increases throughout the lease term and includes a renewal option at the election of the Company to extend the lease for an additional five years. The landlord provided the Company with a tenant improvement allowance of $646,000.

In April 2019, the Company entered into a sublease (the “Sublease”) to obtain 6,230 rentable square feet to expand its current headquarters through February 2021. The lease requires monthly lease payments subject to annual increases throughout the lease term.

In April 2019, the Company also entered into an amendment of the Menlo Park Lease to add additional space to its headquarter lease upon the expiration of the Sublease in February 2021. Under the terms of the lease amendment, the lease for the additional space will commence on March 1, 2021 and the base rent for the additional space will be approximately $36,000 per month.

As of September 30, 2019, the weighted average remaining lease term was 1.8 years and the weighted average incremental borrowing rate used to determine the operating lease liabilities was 7.0%.

The undiscounted future non-cancellable lease payments under the Company's operating leases are as follows:

	September 30, 2019
	(In thousands)
Years
Remaining 2019	$	392
2020		1,584
2021		864
Total undiscounted lease payments		2,840
Present value adjustment for minimum lease commitments		(178	)
Lease liabilities	$	2,662

As of September 30, 2019, the current and noncurrent portion of the lease liabilities was $1.4 million and $1.2 million. Rent expense for the operating leases was $0.4 million and $0.2 million for the three months ended September 30, 2019 and 2018, respectively. Rent expense for the operating leases was $0.9 million and $0.8 million for the nine months ended September 30, 2019 and 2018, respectively. Variable lease payments for operating expenses were $0.2 million and $0.1 million for the three months ended September 30, 2019 and 2018, respectively. Variable lease payments for operating expenses were $0.4 million for the nine months ended September 30, 2019 and 2018.

Stockholders' Equity

9 Months Ended

Sep. 30, 2019

Equity [Abstract]

Stockholders' Equity

8.	Stockholders’ Equity

2015 and 2018 Equity Incentive Plans

The following summarizes option activity for the nine months ended September 30, 2019:

	Shares Issuable Under Options			Weighted- Average Exercise Price		Weighted- Average Remaining Contract Term		Aggregate Intrinsic Value
						(In years)		(In thousands)
Balance, December 31, 2018		3,404,847		$	6.55		8.82	$	31,388
Options granted		233,652			13.55
Options exercised		(316,084	)		4.51
Options forfeited		(114,612	)		7.86
Balance outstanding September 30, 2019		3,207,803		$	7.21		8.22	$	3,158
Exercisable, September 30, 2019		2,161,959		$	6.48		8.07	$	2,505
Vested and expected to vest, September 30, 2019		3,207,803		$	7.21		8.22	$	3,158

Total stock-based compensation was as follows:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2019		2018		2019		2018
	(In thousands)				(In thousands)
Research and development	$	437	$	477	$	1,323	$	774
General and administrative		771		794		2,114		1,544
Total	$	1,208	$	1,271	$	3,437	$	2,318

Restricted Stock

As of September 30, 2019, and December 31, 2018, there was $4,000 and $144,000, respectively, recorded in other long-term liabilities related to shares held by employees and directors that were subject to repurchase.

A summary of restricted stock activity follows:

	Number of Restricted Shares Outstanding
Unvested shares—December 31, 2018		49,052
Restricted shares vested		(45,289	)
Unvested shares—September 30, 2019		3,763

Employee Share Purchase Plan (ESPP)

In June 2018, the Company adopted the 2018 Employee Stock Purchase Plan (“ESPP”), which became effective upon the execution of the underwriting agreement related to the IPO. The initial offering period began June 27, 2018 and will end on August 15, 2020 with purchase dates of February 15, 2019, August 15, 2019, February 15, 2020, and August 15, 2020. Each subsequent offering will be approximately 24 months long and will consist of four purchase periods with purchase dates occurring on February 15 and August 15 of each year. On each purchase date, ESPP participants will purchase shares of common stock at a price per share equal to 85% of the lesser of (1) the fair market value per share of the common stock on the offering date or (2) the fair market value of the common stock on the purchase date. Total stock-based compensation related to the ESPP for the three and nine months ended September 30, 2019 was $175,000 and $592,000, respectively. Total stock-based compensation related to the ESPP for the three and nine months ended September 30, 2018 was $231,000.

A total of 94,568 shares of common stock were purchased pursuant to the ESPP during the nine months ended September 30, 2019 for total proceeds of $860,000.

Convertible preferred stock

Through December 31, 2017, the Company’s convertible preferred stock was classified in permanent equity as redemption of the convertible preferred stock was in the control of the Company. In February 2018, the Company appointed an additional director which increased the influence of the convertible preferred stockholders on the board of directors. This change to the Company’s board composition resulted in the convertible preferred stock being reclassified outside of stockholders’ deficit because, in the event of certain “liquidation events” that were not solely within the Company’s control (including merger, acquisition, or sale of all or substantially all of the Company’s assets), the shares could become redeemable at the option of the holders. Upon the closing of the initial public offering on July 2, 2018, all outstanding shares of convertible preferred stock were automatically converted into 16,215,896 shares of common stock.

Net Loss Per Share

9 Months Ended

Sep. 30, 2019

Earnings Per Share [Abstract]

Net Loss Per Share

9.	Net Loss Per Share

The following outstanding potentially dilutive shares have been excluded from the calculation of diluted net loss per share for the periods presented due to their anti-dilutive effect:

	As of September 30,
	2019		2018
Stock options to purchase common stock		3,207,803		3,345,155
Restricted stock subject to future vesting		3,763		60,342
Shares committed under ESPP		24,836		18,728
Total		3,236,402		3,424,225

Summary of Significant Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2019

Accounting Policies [Abstract]

Basis of Presentation

Use of Estimates

Revenue Recognition

License and Collaboration Arrangements

Foreign Currency Transactions

Fair Value Measurement

Level 1—Observable inputs such as unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date;

Level 3— Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

Leases

The impact of the adoption of ASC 842 on the accompanying condensed balance sheet as of January 1, 2019 was as follows:

	December 31, 2018		Adjustments due to the adoption of ASC 842			January 1, 2019
	(In thousands)
Assets
Operating lease right-of-use asset	$	—	$	2,328		$	2,328
Liabilities and stockholders' equity
Deferred rent classified as accrued liabilities	$	155	$	(155	)	$	—
Lease liability, current	$	—	$	968		$	968
Lease liability, noncurrent	$	—	$	1,847		$	1,847
Deferred rent, noncurrent	$	331	$	(331	)	$	—

Summary of Significant Accounting Policies (Tables)

9 Months Ended

Sep. 30, 2019

Accounting Policies [Abstract]

Schedule of Impact of Adoption of ASC 842 on Accompanying Condensed Balance Sheet

The impact of the adoption of ASC 842 on the accompanying condensed balance sheet as of January 1, 2019 was as follows:

	December 31, 2018		Adjustments due to the adoption of ASC 842			January 1, 2019
	(In thousands)
Assets
Operating lease right-of-use asset	$	—	$	2,328		$	2,328
Liabilities and stockholders' equity
Deferred rent classified as accrued liabilities	$	155	$	(155	)	$	—
Lease liability, current	$	—	$	968		$	968
Lease liability, noncurrent	$	—	$	1,847		$	1,847
Deferred rent, noncurrent	$	331	$	(331	)	$	—

Fair Value Measurements (Tables)

9 Months Ended

Sep. 30, 2019

Fair Value Disclosures [Abstract]

Fair Value, Assets Measured on Recurring and Nonrecurring Basis

The fair value and amortized cost of cash equivalents and available-for-sale securities by major security type as of September 30, 2019 and December 31, 2018 are presented in the following tables:

	As of September 30, 2019
	Fair Value Hierarchy	Amortized Cost		Unrealized Gains		Unrealized Losses			Market Value
	(In thousands)
Money market funds	Level 1	$	30,546	$	—	$	—		$	30,546
US government debt securities	Level 1		28,039		13		(10	)		28,042
Commercial paper	Level 2		29,612		—		—			29,612
Corporate debt securities	Level 2		52,167		66		—			52,233
Asset-backed securities	Level 2		25,051		22		(1	)		25,072
Total cash equivalents and available-for-sale securities		$	165,415	$	101	$	(11	)	$	165,505

	As of December 31, 2018
	Fair Value Hierarchy	Amortized Cost		Unrealized Gains		Unrealized Losses			Market Value
	(In thousands)
Money market funds	Level 1	$	7,959	$	—	$	—		$	7,959
US government debt securities	Level 1		15,963		—		(1	)		15,962
Commercial paper	Level 2		43,277		—		—			43,277
Corporate debt securities	Level 2		46,186		—		(54	)		46,132
Asset-backed securities	Level 2		22,842		—		(27	)		22,815
Total cash equivalents and available-for-sale securities		$	136,227	$	—	$	(82	)	$	136,145

Schedule of Change in Fair Value of Embedded Derivative

The change in fair value of the embedded derivative is presented in the following table:

	Nine Months Ended September 30,
	2019
	(In thousands)
Beginning balance	$	331
Change in fair value of embedded derivative		(13	)
Ending balance	$	318

Balance Sheet Components (Tables)

9 Months Ended

Sep. 30, 2019

Balance Sheet Related Disclosures [Abstract]

Schedule of Accrued Liabilities

Accrued liabilities consist of the following:

	September 30, 2019		December 31, 2018
	(In thousands)
Accrued research and development expenses	$	12,605	$	5,870
Accrued bonuses		2,119		1,602
Deferred rent, current		—		155
Other		1,795		1,417
Total accrued liabilities	$	16,519	$	9,044

Stockholders' Equity (Tables)

9 Months Ended

Sep. 30, 2019

Equity [Abstract]

Summary of Option Activity

The following summarizes option activity for the nine months ended September 30, 2019:

	Shares Issuable Under Options			Weighted- Average Exercise Price		Weighted- Average Remaining Contract Term		Aggregate Intrinsic Value
						(In years)		(In thousands)
Balance, December 31, 2018		3,404,847		$	6.55		8.82	$	31,388
Options granted		233,652			13.55
Options exercised		(316,084	)		4.51
Options forfeited		(114,612	)		7.86
Balance outstanding September 30, 2019		3,207,803		$	7.21		8.22	$	3,158
Exercisable, September 30, 2019		2,161,959		$	6.48		8.07	$	2,505
Vested and expected to vest, September 30, 2019		3,207,803		$	7.21		8.22	$	3,158

Schedule of Total Stock-Based Compensation

Total stock-based compensation was as follows:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2019		2018		2019		2018
	(In thousands)				(In thousands)
Research and development	$	437	$	477	$	1,323	$	774
General and administrative		771		794		2,114		1,544
Total	$	1,208	$	1,271	$	3,437	$	2,318

Summary of Restricted Stock Activity

A summary of restricted stock activity follows:

	Number of Restricted Shares Outstanding
Unvested shares—December 31, 2018		49,052
Restricted shares vested		(45,289	)
Unvested shares—September 30, 2019		3,763

Net Loss Per Share (Tables)

9 Months Ended

Sep. 30, 2019

Earnings Per Share [Abstract]

Summary of Outstanding Potentially Dilutive Shares Excluded from Calculation of Diluted Net Loss Per Share

The following outstanding potentially dilutive shares have been excluded from the calculation of diluted net loss per share for the periods presented due to their anti-dilutive effect:

	As of September 30,
	2019		2018
Stock options to purchase common stock		3,207,803		3,345,155
Restricted stock subject to future vesting		3,763		60,342
Shares committed under ESPP		24,836		18,728
Total		3,236,402		3,424,225

Description of Business - Additional Information (Details) - USD ($)

1 Months Ended

9 Months Ended

Jul. 12, 2019

Jul. 31, 2019

Sep. 30, 2019

Sep. 30, 2018

Dec. 31, 2018

^[1]

Cash, cash equivalents and short-term investments

$ 166,700,000

Cumulative net losses

201,154,000

$ 139,769,000

Issuance of common stock

859,000

$ 0

Net proceeds from offering

$ 80,461,000

$ 116,460,000

Maximum

Securities available for issuance under shelf registration statement

$ 250,000,000

At-The-Market Offerings | Maximum

Underwritten Public Offering

Issuance of common stock

$ 60,000,000