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Document and Entity Information - shares	9 Months Ended
Document and Entity Information - shares	Sep. 30, 2018	Nov. 05, 2018
Document Information [Line Items]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Sep. 30, 2018
Document Fiscal Year Focus	2018
Document Fiscal Period Focus	Q3
Trading Symbol	GRTS
Entity Registrant Name	GRITSTONE ONCOLOGY, INC.
Entity Central Index Key	0001656634
Current Fiscal Year End Date	--12-31
Entity Filer Category	Non-accelerated Filer
Entity Common Stock, Shares Outstanding		29,038,308
Entity Emerging Growth Company	true
Entity Small Business	false
Entity Ex Transition Period	true

Condensed Balance Sheets - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017
Current assets:
Cash and cash equivalents	$ 65,936	$ 39,007
Marketable securities	11,486	46,946
Prepaid expenses and other current assets	6,728	2,526
Total current assets	84,150	88,479
Property and equipment, net	27,012	27,211
Deposits and other long-term assets	2,039	1,610
Total assets	113,201	117,300
Current liabilities:
Accounts payable	3,874	3,935
Accrued compensation	2,400	2,227
Accrued liabilities	2,238	1,490
Deferred revenue, current portion	5,210
Total current liabilities	13,722	7,652
Deferred rent, net of current portion	1,567	1,749
Other non-current liabilities	25	96
Lease financing obligation, net of current portion	10,502	10,521
Deferred revenue, net of current portion	14,694
Total liabilities	40,510	20,018
Commitments and contingencies (Note 6)
Stockholders' equity:
Convertible preferred stock, $0.001 par value; 139,228,319 and 125,362,551 shares authorized at September 30, 2018 and December 31, 2017, respectively; 19,409,132 and 17,797,529 shares issued and outstanding at September 30, 2018 and December 31, 2017, respectively; aggregate liquidation preference of $178,283 and $157,268 at September 30, 2018 and December 31, 2017, respectively	177,872	156,937
Common stock, $0.0001 par value; 172,250,000 and 160,000,000 shares authorized at September 30, 2018 and December 31, 2017, respectively; 2,489,871 and 2,152,525 shares issued and outstanding at September 30, 2018 and December 31, 2017, respectively	2	1
Additional paid-in capital	3,885	2,045
Accumulated other comprehensive loss	(5)	(74)
Accumulated deficit	(109,063)	(61,627)
Total stockholders' equity	72,691	97,282
Total liabilities and stockholders' equity	$ 113,201	$ 117,300

Condensed Statements of Operations and Comprehensive Loss - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Collaboration revenue	$ 96		$ 96
Operating expenses:
Research and development	15,622	$ 8,084	39,712	$ 19,939
General and administrative	3,088	1,404	7,940	4,244
Total operating expenses	18,710	9,488	47,652	24,183
Loss from operations	(18,614)	(9,488)	(47,556)	(24,183)
Interest income, net	26	37	120	175
Net loss	(18,588)	(9,451)	(47,436)	(24,008)
Other comprehensive loss:
Unrealized gain on marketable securities, net of tax	27	2	69	3
Comprehensive loss	$ (18,561)	$ (9,449)	$ (47,367)	$ (24,005)
Net loss per share, basic and diluted	$ (7.60)	$ (4.59)	$ (20.27)	$ (12.27)
Weighted average number of shares used in computing net loss per share, basic and diluted	2,445,547	2,057,040	2,339,705	1,957,381

Condensed Statements of Cash Flows - USD ($) $ in Thousands	9 Months Ended
Condensed Statements of Cash Flows - USD ($) $ in Thousands	Sep. 30, 2018	Sep. 30, 2017
Operating activities
Net loss	$ (47,436)	$ (24,008)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation	2,885	1,316
Net amortization of premiums and discounts on marketable securities	(204)	(64)
Stock-based compensation	1,674	811
Changes in operating assets and liabilities:
Prepaid expenses and other current assets	(2,475)	(24)
Deposits and other long term assets	(429)	172
Accounts payable	179	255
Accrued compensation	173	637
Accrued and other non-current liabilities	745	483
Deferred rent	(182)	(209)
Deferred revenue	19,904
Net cash used in operating activities	(25,166)	(20,631)
Investing activities
Purchase of marketable securities	(1,487)	(16,302)
Maturities of marketable securities	37,220	38,967
Purchase of property and equipment	(3,375)	(8,017)
Disposition of property and equipment		31
Net cash provided by investing activities	32,358	14,679
Financing activities
Proceeds from issuance of common stock under equity incentive plan	79	14
Payments of deferred IPO costs	(1,277)
Proceeds from issuance of convertible preferred stock, net of issuance costs	20,935	92,556
Net cash provided by financing activities	19,737	92,570
Net increase in cash, cash equivalents and restricted cash	26,929	86,618
Cash, cash equivalents and restricted cash at beginning of period	39,999	12,410
Cash, cash equivalents and restricted cash at end of period	66,928	99,028
Supplemental disclosures of non-cash investing and financing information
Property and equipment purchases accrued but not yet paid	211	807
Assets acquired under leasing obligations		9,300
Receivable for lessor funded financing		$ 1,226
Deferred IPO costs included in accrued liabilities and accounts payable	$ 1,727

Summary of Significant Accounting Policies

9 Months Ended

Sep. 30, 2018

Summary of Significant Accounting Policies

2.	Summary of Significant Accounting Policies

Basis of Presentation

The accompanying condensed financial statements have been prepared in accordance with United States generally accepted accounting principles (“U.S. GAAP”) and the rules and regulations of Securities and Exchange Commission (“SEC”) for interim reporting.

The condensed financial statements are unaudited and, in the opinion of management, reflect all adjustments, consisting only of normal recurring adjustments, necessary for the fair presentation for interim reporting. The results of operations for any interim period are not necessarily indicative of results of operations for any future period.

Certain information and footnote disclosures typically included in annual financial statements prepared in accordance with U.S. GAAP have been condensed or omitted. Accordingly, these unaudited interim condensed financial statements should be read in conjunction with the Company’s financial statements as of and for the year ended December 31, 2017, which are included in the Company’s prospectus related to the Company’s IPO, filed September 27, 2018 (the “Prospectus”), pursuant to Rule 424 (b) under the Securities Act of 1933, as amended with the SEC.

Reverse Stock Split

On September 20, 2018, the Company amended and restated its amended and restated certificate of incorporation to effect a 1-for-6.9 reverse split (“Reverse Split”) of shares of the Company’s common and convertible preferred stock. The par value and the authorized shares of common stock and convertible preferred stock were not adjusted as a result of the Reverse Split. All of the share and per share information included in the accompanying financial statements has been adjusted to reflect the Reverse Split.

Need for Additional Capital

The Company has incurred operating losses and has an accumulated deficit as a result of ongoing efforts to develop drug product candidates, including conducting preclinical and clinical trials and providing general and administrative support for these operations. The Company had an accumulated deficit of $109.1 million and $61.6 million as of September 30, 2018 and December 31, 2017, respectively. The Company had net losses of $47.4 million and $24.0 million for the nine months ended September 30, 2018 and 2017, respectively, and net cash used in operating activities of $25.2 million and $20.6 million for the nine months ended September 30, 2018 and 2017, respectively. To date, none of the Company’s drug candidates have been approved for sale and therefore the Company has not generated any revenue from contracts with customers. The Company has evaluated and concluded there are no conditions or events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern for a period of one year following the date that these financial statements are issued. Management expects operating losses to continue for the foreseeable future. As a result, the Company will need to raise additional capital. If sufficient funds on acceptable terms are not available when needed, the Company could be required to significantly reduce its operating expenses and delay, reduce the scope of, or eliminate one or more of its development programs. Failure to manage discretionary spending or raise additional financing, as needed, may adversely impact the Company’s ability to achieve its intended business objectives.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and judgments that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities as of the date of the condensed financial statements and the reported amounts of revenue and expenses in the condensed financial statements and accompanying notes during the reporting period. On an ongoing basis, management evaluates its estimates, including those related to revenue recognition, clinical and preclinical study trial accruals, fair value of assets and liabilities, the fair value of leased buildings and other assumptions associated with lease financing transactions, and the fair value of common stock and stock-based compensation. Management bases its estimates on historical experience and on various other market-specific and relevant assumptions that management believes to be reasonable under the circumstances. Actual results could differ from those estimates.

Other Risks and Uncertainties

The Company is subject to a number of risks similar to those of other early-stage immuno-oncology companies, including dependence on key individuals; the need to develop commercially viable therapeutics; competition from other companies, many of which are larger and better capitalized; and the need to obtain adequate additional financing to fund the development of its products. The Company currently depends on third-party suppliers for key materials and services used in its research and development manufacturing process, and is subject to certain risks related to the loss of these third-party suppliers or their inability to supply the Company with adequate materials and services.

Cash, Cash Equivalents, and Restricted Cash

Cash equivalents, which consist primarily of highly liquid investments with maturities of three months or less when purchased, are stated at cost which approximates fair value. These assets include investments in money market funds that invest in U.S. Treasury obligations and certificates of deposit which are stated at fair value.

The Company has issued a letter of credit under a lease agreement which has been collateralized by a cash deposit for an equal amount and is recorded within deposits and other long-term assets on the balance sheet based on the term of the underlying lease. The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the balance sheets that sum to the total of the same amounts shown in the statements of cash flows (in thousands).


	September 30, 2018		December 31, 2017

Cash and cash equivalents		$65,936		$39,007
Restricted cash		992		992

Total, cash, cash equivalents and restricted cash		$66,928		$39,999

Revenue Recognition

The Company analyzes its collaboration agreements to assess 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. For collaboration arrangements that are considered to be in the scope of the collaboration guidance and that contain multiple elements, the Company first determines which elements of the collaboration are deemed to be within the scope of the collaboration guidance and those that are more reflective of a vendor-customer relationship and, therefore, within the scope of the revenue with contracts with customer guidance. For elements of collaboration arrangements that are accounted for pursuant to the revenue from contracts with customer guidance, an appropriate recognition method is determined and applied consistently, generally by analogy to the revenue from contracts with customers guidance.

The terms of the licensing and collaboration agreements entered into typically include payment of one or more of the following: non-refundable, up-front fees; development, regulatory, and commercial milestone payments; payments for manufacturing supply services; and royalties on net sales of licensed products. Each of these payments results in license, collaboration, and other revenues, except for revenues from royalties on net sales of licensed products, which are classified as royalty revenues. The core principle of the accounting for revenue from contracts with customers guidance is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration that is expected to be received in exchange for those goods or services.

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.

Amounts received prior to satisfying the revenue recognition criteria are recorded as deferred revenue in the Company’s balance sheets. If the related performance obligation is expected to be satisfied within the next twelve months this will be classified in current liabilities. Amounts recognized as revenue prior to receipt are recorded as contract assets in the Company’s balance sheets. If the Company expects to have an unconditional right to receive consideration in the next twelve months, this will be classified in current assets. A net contract asset or liability is presented for each contract with a customer.

At contract inception, the Company assesses the goods or services promised in a contract with a customer and identifies those distinct goods and services that represent a performance obligation. A promised good or service may not be identified as a performance obligation if it is immaterial in the context of the contract with the customer, if it is not separately identifiable from other promises in the contract (either because it is not capable of being separated or because it is not separable in the context of the contract), or if the performance obligation does not provide the customer with a material right.

The Company considers the terms of the contract and its customary business practices to determine the transaction price. The transaction price is the amount of consideration to which the Company expects to be entitled in exchange for transferring promised goods or services to a customer. The consideration promised in a contract with a customer may include fixed amounts, variable amounts, or both. Variable consideration will only be included in the transaction price when it is not considered constrained, which is when it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur.

If it is determined that multiple performance obligations exist, the transaction price is allocated at the inception of the agreement to all identified performance obligations based on the relative standalone selling prices. The relative selling price for each deliverable is estimated using objective evidence if it is available. If objective evidence is not available, the Company uses its best estimate of the selling price for the deliverable.

Revenue is recognized when, or as, the Company satisfies a performance obligation by transferring a promised good or service to a customer. An asset is transferred when, or as, the customer obtains control of that asset, which for a service, is considered to be as the services are received and used. The Company recognizes revenue over time by measuring the progress toward complete satisfaction of the relevant performance obligation using an appropriate input or output method based on the nature of the good or service promised to the customer.

After contract inception, the transaction price is reassessed at every period end and updated for changes such as resolution of uncertain events. Any change in the transaction price is allocated to the performance obligations on the same basis as at contract inception.

Management may be required to exercise considerable judgment in estimating revenue to be recognized. Judgment is required in identifying performance obligations, estimating the transaction price, estimating the stand-alone selling prices of identified performance obligations, which may include forecasted revenue, development timelines, reimbursement rates for personnel costs, discount rates and probabilities of technical and regulatory success, and estimating the progress towards satisfaction of performance obligations.

Net Loss per Share

Basic net loss per share is calculated by dividing the net loss by the weighted-average number of shares of common stock outstanding during the period, without consideration for common stock equivalents. Diluted net loss per share is the same as basic net loss per share, since the effects of potentially dilutive securities are antidilutive given the net loss for each period presented.

Recently Issued Accounting Pronouncements

In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-02, Leases (Topic 842). ASU No. 2016-02 amends a number of aspects of lease accounting, including requiring lessees to recognize almost all leases with a term greater than one year as a right-of-use asset and corresponding liability, measured at the present value of the lease payments. Subsequent measurement, including the presentation of expenses and cash flows, will depend on the classification of the lease as either a finance or an operating lease. Initial costs directly attributable to negotiating and arranging the lease will be included in the asset. For public entities, this standard is effective for annual reporting periods beginning after December 31, 2018, including interim periods within that reporting period. Originally, entities were required to adopt ASU No. 2016-02 using a modified retrospective approach, which required prior periods to be presented under this new standard with various practical expedients allowed. In July 2018, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2018-11, Leases (Topic 842): Targeted Improvements, which now allow entities the option of recognizing the cumulative effect of applying the new standard as an adjustment to the opening balance of retained earnings in the year of adoption (January 1, 2019) while continuing to present all prior periods under previous lease accounting guidance. The Company will adopt this standard on January 1, 2019 using the modified retrospective approach with a cumulative effect adjustment to accumulated deficit at the beginning of the period of adoption. The Company will also adopt certain practical expedients provided by ASU 2018-11. Management is in the process of inventorying and scoping the Company’s population of leased assets in order to assess the impact of Topic 842. While the Company is currently evaluating the impact of the adoption of this standard on its financial statements and related disclosures, the Company anticipates recognition of additional assets and corresponding liabilities related to leases on its balance sheets, expanded footnote disclosures and potential changes to how the Company has accounted for its Pleasanton Lease.

In June 2018, the FASB issued ASU No. 2018-07, Compensation—Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting. ASU No. 2018-07 is intended to reduce cost and complexity and to improve financial reporting for share-based payments issued to non-employees (for example, service providers, external legal counsel, suppliers, etc.). The ASU expands the scope of Topic 718, Compensation—Stock Compensation, which currently only includes share-based payments issued to employees, to also include share-based payments issued to non-employees for goods and services. Consequently, the accounting for share-based payments to non-employees and employees will be substantially aligned. ASU No. 2018-07 is effective for annual and interim periods beginning after December 15, 2018. Early adoption of the standard is permitted. The standard will be applied in a retrospective approach for each period presented. The Company is currently evaluating the timing and impact of adopting this accounting standard update on its financial statements and related disclosures.

In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement. ASU No. 2018-13 eliminates, adds and modifies certain disclosure requirements for fair value measurements and requires companies to disclose certain information. The Company is currently evaluating the impact of adopting this accounting update on its financial statements and related disclosures.

In November 2018, the FASB issued ASU No. 2018-18, Collaborative Arrangements (Topic 808): Clarifying the Interaction between Topic 808 and Topic 606, which clarifies that certain transactions between collaborative arrangement participants should be accounted for as revenue under Topic 606 when the collaborative arrangement participant is a customer in the context of a unit of account. In those situations, all the guidance in Topic 606 should be applied, including recognition, measurement, presentation, and disclosure requirements. The standard adds unit-of-account guidance in Topic 808 to align with the guidance in Topic 606 (that is, a distinct good or service) when an entity is assessing whether the collaborative arrangement or a part of the arrangement is within the scope of Topic 606, and requires that in a transaction with a collaborative arrangement participant that is not directly related to sales to third parties, presenting the transaction together with revenue recognized under Topic 606 is precluded if the collaborative arrangement participant is not a customer. The standard is effective for interim and annual periods beginning after December 15, 2019, with early adoption permitted, including adoption in any interim period for public business entities for periods in which financial statements have not been issued. Amendments in the standard should be applied retrospectively to the date of initial application of Topic 606, but entities may elect to apply the amendments in this Update retrospectively either to all contracts or only to contracts that are not completed at the date of initial application of Topic 606, and should disclose the election. An entity may also elect to apply the practical expedient for contract modifications that is permitted for entities using the modified retrospective transition method in Topic 606. The Company is currently assessing the impact of this standard on its condensed financial statements.


*Recently Adopted Accounting Pronouncements*

In January 2017, the FASB issued ASU No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business. This ASU clarifies the definition of a business when evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The Company adopted ASU No. 2017-01 effective January 1, 2018. The adoption of this accounting standards update did not have a material impact on the Company’s condensed financial statements.

In May 2017, the FASB issued ASU No. 2017-09, Compensation – Stock Compensation (Topic 718): Scope of Modification Accounting, which clarifies when to account for a change to the terms or conditions of a share-based payment award as a modification. Under the new guidance, modification accounting is required only if the fair value, the vesting conditions, or the classification of the award (as equity or liability) changes as a result of the change in the terms or conditions. This standard was adopted as of January 1, 2018 and will be applied prospectively to any award modified after the adoption date, and the adoption of this standard did not have a material impact on the Company’s financial statements.

On December 22, 2017, the U.S. federal government enacted the Tax Cuts and Jobs Act (“the Act”). The Tax Act contains, among other things, significant changes to corporate taxation, including reduction of the corporate tax rate from a top marginal rate of 35% to a flat rate of 21% for tax years beginning after December 31, 2017, limitation of the deduction for net operating losses to 80% of current year taxable income and elimination of net operating loss carrybacks, implementing a territorial tax system, and requiring a mandatory one-time tax on U.S. owned undistributed foreign earnings and profits known as the transition tax. In December 2017, SEC staff issued Staff Accounting Bulletin No. 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act (“SAB 118”) to address the accounting implications of recently enacted U.S. federal tax reform. SAB 118 allows companies to record provisional amounts during a measurement period not to extend beyond one year of the enactment date to address ongoing guidance and tax interpretations that are expected over the next 12 months. The Company has adopted SAB 118 and currently considers its accounting of the impact of U.S. federal tax reform to be incomplete but continues to make a reasonable estimate of the effects on our existing deferred tax assets. The Company expects to complete the remainder of the analysis within the measurement period in accordance with SAB 118. Adjustments, if any, are not expected to impact the statement of operations and comprehensive loss due to the full valuation allowance on the Company’s deferred tax assets.

In August 2018, the SEC adopted amendments to certain disclosure requirements in Securities Act Release No. 33-10532, Disclosure Update and Simplification. These amendments eliminate, modify, or integrate into other SEC requirements certain disclosure rules. Among the amendments is the requirement to present an analysis of changes in stockholders’ equity in the interim financial statements included in quarterly reports on Form 10-Q. The analysis, which can be presented as a footnote or separate statement, is required for the current and comparative quarter and year-to-date interim periods. The amendments are effective for all filings made on or after November 5, 2018. In light of the anticipated timing of effectiveness of the amendments and expected proximity of effectiveness to the filing date for most filers’ quarterly reports, the SEC’s Division of Corporate Finance issued a Compliance and Disclosure Interpretation related to Exchange Act Forms, or CDI – Question 105.09, that provides transition guidance related to this disclosure requirement. CDI – Question 105.09 states that the SEC would not object if the filer’s first presentation of the changes in shareholders’ equity is included in its Form 10-Q for the quarter that begins after the effective date of the amendments. As such, the Company adopted these SEC amendments on November 5, 2018 and will present the analysis of changes in stockholders’ equity in its interim financial statements in its March 31, 2019 Form 10-Q. The Company does not anticipate that the adoption of these SEC amendments will have a material effect on the Company’s financial position, results of operations, cash flows or stockholders’ equity.

Fair Value Measurements

9 Months Ended

Sep. 30, 2018

Fair Value Measurements

4.	Fair Value Measurements

The Company determines the fair value of financial and non-financial assets and liabilities based on the assumptions that market participants would use in pricing the asset or liability in orderly transaction between market participants at the measurement date. The identification of market participant assumptions provides a basis for determining what inputs are to be used for pricing each asset or liability. A fair value hierarchy has been established which gives precedence to fair value measurements calculated using observable inputs over those using unobservable inputs. This hierarchy prioritizes the inputs into three broad levels as follows:

•

Level 1 inputs are quoted prices in active markets that are accessible at the market date for identical assets or liabilities.

•

Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.

•

Level 3 inputs are unobservable inputs that reflect the Company’s own assumptions about the assumptions market participants would use in pricing the assets or liability. Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.

The carrying amounts reflected on the balance sheets for cash and cash equivalents, prepaid expenses and other current assets, accounts payable, accrued compensation and accrued liabilities approximate their fair values due to their short-term nature.

The Company’s financial assets and liabilities subject to fair value measurements on a recurring basis and the level of inputs used in such measurements were as follows (in thousands):


	September 30, 2018
Description	Total		Level 1		Level 2		Level 3
Money market funds		$37,229		$37,229		$ —		$—
Commercial paper		6,988		—		6,988		—
Corporate debt securities		4,498		—		4,498		—

		$48,715		$37,229		$11,486		$—

	December 31, 2017
Description	Total		Level 1		Level 2		Level 3
Money market funds		$27,711		$27,711		$ —		$—
Commercial paper		32,209		—		32,209		—
Corporate debt securities		19,904		—		19,904		—

		$79,824		$27,711		$52,113		$—

The Company measures the fair value of money market funds based on quoted prices in active markets for identical securities. Commercial paper and corporate debt securities are valued taking into consideration valuations obtained from third-party pricing services. The pricing services utilize industry standard valuation models, including both income and market-based approaches, for which all significant inputs are observable, either directly or indirectly, to estimate fair value. These inputs include reported trades of and broker/dealer quotes on the same or similar securities, issuer credit spreads; benchmark securities; prepayment/default projections based on historical data; and other observable inputs.

There were no transfers between Level 1 and Level 2 during the periods presented.

- 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

Commitments and Contingencies

9 Months Ended

Sep. 30, 2018

Commitments and Contingencies

6.	Commitments and Contingencies

Leases

In November 2015, the Company entered into an 84-month non-cancelable operating lease, effective March 2016, for a new facility in Emeryville, California, with laboratory and office space. In conjunction with signing the lease, the Company paid a cash security deposit of $0.05 million. The lease agreement includes an escalation clause for increased rent and a renewal provision allowing the Company to extend this lease for an additional three years at the prevailing rental rate. In September 2018 the Emeryville lease was amended whereby the Company entered into a 12-month operating lease for additional temporary space. The Company may terminate the temporary space lease agreement with 30 days advanced written notice to the Landlord.

In February 2016, the Company entered into a 67-month non-cancelable operating lease effective October 2016 for a new facility in Cambridge, Massachusetts, with laboratory and office space. In conjunction with signing the lease, the Company paid a cash security deposit of $0.3 million. The lease agreement includes an escalation clause for increased rent and a renewal provision allowing the Company to extend this lease for an additional three years at the prevailing rental rate. The lessor provided the Company a tenant improvement allowance for a total of $2.1 million to complete the laboratory and office renovation. The Company recorded the tenant allowance received as leasehold improvements under the property and equipment account and deferred rent liability on the accompanying condensed balance sheets.

In March 2017, the Company entered into a noncancelable operating lease (the Pleasanton Lease) to lease 42,620 square feet of office, cleanroom, and laboratory support manufacturing space in Pleasanton, California (the Pleasanton Facility). Subsequently, in April 2017, the Company took possession of the space. The Pleasanton Lease includes a free rent period, escalating rent payments and a term that expires on November 30, 2024. The Company has the option to extend the lease term for a period of five years at the then market rental rate. The Company’s obligation to pay rent commenced on December 1, 2017. The Company obtained an irrevocable letter of credit in March 2017 in the initial amount of approximately $1.0 million as a security deposit to the Pleasanton Lease, which may be drawn down by the landlord in the event the Company fails to fully and faithfully perform all of its obligations. The letter of credit may be reduced based on certain levels of cash and cash equivalents the Company holds. The Pleasanton Lease further provides that the Company is obligated to pay to the landlord its proportionate share of certain basic operating costs, including taxes and operating expenses.

In connection with the Pleasanton Lease, the Company received a tenant improvement allowance of $1.2 million from the landlord for the costs associated with the design, development and construction of tenant improvements for the Pleasanton Facility. The scope of the tenant improvements did not qualify under the lease accounting guidance as “normal tenant improvements” and the Company was deemed owner of the leased building during the construction period for accounting purposes. The Company has therefore capitalized the $9.3 million fair value of the leased building within property and equipment, net, and recognized a corresponding non-current lease financing obligation in the condensed balance sheet as of December 31, 2017 and September 30, 2018. The fair value of the leased building was estimated using a market approach that utilized comparable observable sales for similar assets (Level 2 inputs). The Company has also recognized building improvements totaling $6.1 million for additions to the leased building incurred by the Company during the construction period, of which $1.2 million were due but had not yet been received from the landlord as of December 31, 2017 and were recorded as an increase to the lease financing obligation and prepaid and other current assets on the condensed balance sheet. Such amount were subsequently reimbursed by the landlord in April 2018. In November 2017, construction on the Pleasanton Facility was substantially completed and the leased property was placed into service. The Company determined the completed construction project did not qualify for sale-leaseback accounting due to the collateral held by the landlord in the form of a letter of credit and instead has been accounted for as a financing lease transaction. The leased building for the Pleasanton Facility and related improvements remain on the Company’s balance sheet as of December 31, 2017 and rental payments associated with the Pleasanton Lease have been allocated to operating lease expense for the ground underlying the leased building and principal and interest payments on the lease financing obligation.

Rent expense recorded by the Company associated with the ground lease was not material for any period presented. Total interest, which represents the cost of the lease financing obligation under the Pleasanton Lease agreement, was approximately $0.2 million and $0.6 million for the three and nine months ended September 30, 2018, which was recognized within the statement of operations and comprehensive loss. No interest expense was recognized for the lease financing obligation while the leased building was being constructed during the three and nine months ended September 30, 2017. The allocation of the Pleasanton Lease payment to ground lease rent expense and principal and interest expense on the lease financing obligation was estimated using income and market approaches that utilized comparable observable sales for similar assets, land capitalization rates and an estimate of the Company’s incremental borrowing rate (Level 2 and Level 3 inputs).

In September 2018, the Company entered into a 24-month non-cancellable operating lease for an additional facility in Cambridge, Massachusetts with laboratory and office space. In conjunction with signing the lease, the Company prepaid the first twelve months base rent in the amount of $1.3 million which is included in prepaid expenses and other current assets on the condensed balance sheet as of September 30, 2018 and a cash security deposit of $0.3 million recorded in deposits and other long-term assets. The lease agreement includes an escalation clause for increased rent.

As of September 30, 2018, minimum annual rental payments under the Company’s non-cancelable operating lease agreements and lease financing obligation are as follows (in thousands):


	Lease Financing Obligation		Operating Leases
2018 (remaining three months)	$	197	$	455
2019		794		2,329
2020		818		2,673
2021		843		1,803
2022		868		1,118
Thereafter		1,737		396

Total minimum payments		5,257	$	8,774

Less: Amount representing interest expense		(4,627)

		630
Residual value of lease financing obligation		9,896

		10,526
Less: Lease financing obligation, short-term		(24)

Lease financing obligation, long-term	$	10,502

Rent expense was $0.5 million and $1.1 million for the three and nine month periods ended September 30, 2018 and $0.3 million and $0.9 million for the three and nine month periods ended September 30, 2017, respectively.

Agreement with CRO

In September 2017, the Company entered into a contract research and development agreement with a third party contract research organization (“CRO”) to provide research, analysis and antibody samples to further the Company’s development of its drug candidates. Under the agreement, the Company paid an upfront payment of $0.5 million to the CRO. The upfront payment has been capitalized and will be recognized as research and development expense using the straight-line method over the term of the agreement, which is one year. The Company is also obligated to pay up to $0.9 million to the CRO upon the completion of certain phases of the research services. These costs will be recorded to research and development expense over the expected period of each phase of the research services. The Company is also obligated to pay the CRO certain milestone payments of up to $36.4 million on achievement of specified events. None of these events had occurred as of September 30, 2018. During the three and nine months ended September 30, 2018, the Company recognized a total of $0.2 million and $0.9 million of research and development expense under the agreement.

Collaboration and License Agreements

9 Months Ended

Sep. 30, 2018

Collaboration and License Agreements

8.	Collaboration and License Agreements

bluebird bio, Inc.

In August 2018, the Company entered into a Research Collaboration and License Agreement (“Collaboration Agreement”) with bluebird bio, Inc. (“bluebird”). Under the terms of the Collaboration Agreement, the Company will provide to bluebird tumor-specific targets across several tumor types and, in certain cases, T-cell receptors (“TCR”) directed to those targets. The Company received a non-refundable upfront payment of $20.0 million and bluebird also concurrently acquired 768,115 shares of the Company’s Series C convertible preferred stock for $10.0 million at $13.04 per share. Per the Collaboration Agreement, bluebird was also provided an option to acquire shares of the Company’s common stock at the same price as all other investors in connection with the IPO. In October 2018, bluebird purchased 666,667 shares of the Company’s common stock at the price to the public of $15.00 per share for a total of $10.0 million. Under the terms of the Collaboration Agreement, the Company is eligible to earn development, regulatory, and sales-based milestones in an amount of up to $1.2 billion, and single-digit royalties on sales of products that utilize the technology subject to the Collaboration Agreement. None of these events had occurred as of September 30, 2018 and no royalties were due from the sale of licensed products.

bluebird may terminate the Collaboration Agreement by giving a 120 day prior written notice to the Company at any time after the effective date of the agreement. Unless terminated early the agreement has a term that ends upon the last payment owed by Gritstone on a licensed product . The Collaboration Agreement may be terminated for cause by either party based on uncured material breach by the other party or bankruptcy of the other party. Upon early termination, all ongoing activities under the agreement and all mutual collaboration, development and commercialization licenses and sublicenses will terminate. The licenses granted by the Company to bluebird under the licensed intellectual property will remain in effect in accordance with their respective terms. Additionally, all of bluebird’s payment obligations that have not yet accrued related to future milestone and royalty payments will be reduced by fifty percent for the remainder of the agreement term.

The Company concluded that bluebird is a customer, and the contract is not subject to accounting literature on collaborative arrangements. This is because the Company granted to bluebird a license to its intellectual property, and provided research and development services, all of which are outputs of the Company’s ongoing activities, in exchange for consideration.

The Company identified the following three material promises under the Collaboration Agreement: 1) transfer of a license to intellectual property and related technology know-how (“License and Know-How”); 2) the obligation to perform target selection and TCR generation services (“Research and Development Services”); and 3) participation on the Joint Steering Committee (“JSC”). The Company provided to bluebird standard indemnification and protection of licensed intellectual property, which is part of assurance that the license meets the contract’s specifications and is not an obligation to provide goods or services.

The Company considered that the License and Know-How has standalone functionality, was considered to be functional intellectual property, and is capable of being distinct. However, the Company determined that the License and Know-How is not distinct from the Research and Development Services or participation on the JSC within the context of the agreement because bluebird is dependent on the Company to execute the Research and Development Services and participate on the JSC in order for bluebird to benefit from the License and Know-How. As such, the License and Know-How is combined with the Research and Development Services and participation on the JSC into a single performance obligation. As such, the transaction price under this arrangement will be allocated to this single performance obligation.

The Company has also determined that all other goods or services which are contingent upon bluebird reaching various milestones are not considered performance obligations at the inception of the arrangement.

The transaction price at the inception of the Collaboration Agreement consisted of the upfront payment of $20.0 million and the $10.0 million received from bluebird for the purchase of the Company’s Series C convertible preferred stock. The sale of the Series C convertible preferred stock was not considered to be a performance obligation as it was a separate financing component of the transaction. Accordingly, $10.0 million of the transaction price was allocated to the issuance of 768,115 shares of Series C convertible preferred stock at fair value of $13.04 per share and recorded in stockholders’ equity.

The variable consideration related to the remaining development, regulatory, and sales-based milestones payments has not been included in the initial transaction price as these were fully constrained as of September 30, 2018. As part of its evaluation of the constraint, the Company considered numerous factors, including that receipt of the milestones is outside the control of the Company and contingent upon initiation of clinical trials for early stage targets and bluebird’s development efforts. Any variable consideration related to sales-based milestones (including royalties) will be recognized when the related sales occur as they were determined to relate predominantly to the License and Know-How granted to bluebird. The Company will re-evaluate the transaction price in each reporting period and as uncertain events are resolved or other changes in circumstances occur.

For revenue recognition purposes, the Company determined that the duration of the contract began on the effective date in August 2018 and ends upon completion of the Research and Development Services which is also when the participation on the JSC is no longer an obligation. The contract duration is defined as the period in which parties to the contract have present enforceable rights and obligations. We analyzed the impact of bluebird terminating the agreement prior to August 2023 and determined that there were substantive non-monetary penalties to bluebird for doing so. We considered quantitative and qualitative factors to reach this conclusion.

Revenue is recognized when, or as, the Company satisfies its performance obligation by transferring the promised services to bluebird. Revenue will be recognized over time using a cost-based input method, based on internal labor cost effort to perform the research services, since the internal labor cost incurred over time is thought to best reflect the transfer of services to bluebird. In applying a cost-based input method of revenue recognition, we use actual costs incurred relative to budgeted costs to fulfill the combined performance obligation. A cost-based input method of revenue recognition requires us to make estimates of costs to complete the performance obligation. The cumulative effect of any revisions to estimated costs to complete the performance obligation will be recorded in the period in which changes are identified and amounts can be reasonably estimated. A significant change in these assumptions and estimates could have a material impact on the timing and amount of revenue recognized in future periods.

For the three and nine months ended September 30, 2018, the Company has recognized $0.1 million as collaboration revenue as a result of satisfying its performance obligation by transferring the promised services estimated by the labor cost incurred. A deferred revenue balance of $19.9 million is recorded on the condensed balance sheet in both current and long-term liabilities as of September 30, 2018, which relates to the performance obligation identified, with such amounts to be recognized over the period the performance obligation is expected to be satisfied, which is currently expected to be through mid-2023.

Changes in the deferred revenue balance during the nine months ended September 30, 2018 are as follows (in thousands):


	Deferred Revenue
Balance at January 1, 2018		$ -

Additions		20,000

Deductions		(96)

Balance at September 30, 2018		$ 19,904

There were no receivables or net contract assets recorded as of September 30, 2018 associated with the Collaboration Agreement.

The Company expensed all incremental costs of obtaining Collaboration Agreement as such amounts were insignificant.

Arbutus Biopharma Corporation

In October 2017, the Company entered into an Exclusive License Agreement by and between Arbutus Biopharma Corporation (“Arbutus”) and Protiva Biotherapeutics Inc. a wholly owned subsidiary of Arbutus. Certain terms of the agreement were modified by amendment in July 2018. Under the license agreement, the Company has an exclusive license to utilize certain Arbutus intellectual property including patents and know-how relating to immunotherapy. Under this license agreement, the Company paid an upfront payment of $5.0 million which was included in research and development expenses during 2017. The Company also reimbursed Arbutus for materials and personnel costs totaling $0.2 million, which were included in research and development expenses during 2017. During the nine months ended September 30, 2018, the Company reimbursed Arbutus for materials and personnel costs totaling $0.4 million. The Company is obligated to pay Arbutus certain milestone payments up to $123.5 million on achievement of specified events, and royalties of not more than 3.5% on sales of its licensed products. Following the acceptance of our investigational new drug application for GRANITE-001 by the U.S. Food and Drug Administration, the Company made a $2.5 million development milestone payment to Arbutus in September 2018 that was recorded as research and development expense. None of the other events had occurred as of September 30, 2018 and no royalties were due from the sale of licensed products.

Non-Profit Hospital Cancer Center

In January 2016, the Company entered into an Exclusive License Agreement with a non-profit hospital cancer center. Under the license agreement, the Company has an exclusive license to utilize certain patents and know-how relating to immunotherapy for an insignificant upfront payment, cash milestone payments on achievement of specified events, and a low single digit royalty on sales of licensed products. The achievement of the milestones and payment of royalties is dependent upon obtaining regulatory approval. None of the events had occurred as of September 30, 2018 and no royalties were due from the sales of licensed products. The Company also issued a ten-year warrant to the cancer center for the right to purchase 40,257 shares of its common stock at $0.35 per share. The estimated fair value of the warrant was not significant and was included in research and development expense and additional paid-in-capital. The warrant was exercised in full in January 2018.

Convertible Preferred Stock

9 Months Ended

Sep. 30, 2018

Convertible Preferred Stock

9.	Convertible Preferred Stock

Series A Equity Financing

The Company entered into a Series A preferred stock purchase agreement (“Series A Preferred Stock Purchase Agreement”), with certain investors on September 18, 2015, and upon approval by the Company’s Board of Directors, the Company completed a Series A convertible preferred stock financing (“Series A—First Tranche”) at a price per share of $6.90. The net cash proceeds from this round of financing totaled $25.4 million, and 3,699,259 shares of Series A convertible preferred stock were issued. Issuance costs totaled $0.1 million and were recorded as a reduction of the proceeds.

On April 1, 2016, and upon approval by the Company’s Board of Directors, the Company completed a Series A convertible preferred stock financing (“Series A—Second Tranche”) at a price per share of $6.90. The net cash proceeds from this round of financing totaled $35.7 million, and 5,178,968 shares of Series A convertible preferred stock were issued. Issuance costs totaled $0.02 million and were recorded as a reduction of the proceeds.

Upon approval by the Company’s Board of Directors and a majority of the holders of the Series A convertible preferred stock, the Company could proceed with the third closing of the Series A convertible preferred stock for a total of 5,918,840 shares at a purchase price of $6.90 per share (“Series A—Third Tranche”). However, for a period of 90 days following such approval, the Company may solicit alternative financing at financially superior terms to those of the Series A—Third Tranche, including a purchase price greater than $6.90 per share (the “Superior Financing Transaction”). If approved by the Board of Directors, the Company’s obligation to complete the Series A—Third Tranche shall terminate, and the Superior Financing Transaction would proceed. Each Series A convertible preferred stockholder will have the right to purchase at least 50% of its original Series A— Third Tranche amount in the Superior Financing Transaction. The Series A—Second Tranche and Series A—Third Tranche rights are considered to be mutual options as neither the purchasers nor the Company have a commitment or obligation to purchase or sell additional shares. As such, these rights are not accounted for separately. In connection with the Company’s Series B Equity Financing the Company’s Board of Directors and investors terminated the ability to complete the Series A—Third Tranche.

Series B Equity Financing

The Company entered into a Series B preferred stock purchase agreement (“Series B Preferred Stock Purchase Agreement”), with certain investors on September 6, 2017 and October 20, 2017, and upon approval by the Company’s Board of Directors, the Company completed a Series B convertible preferred stock financing (“Series B”) at a price per share of $10.76. The net cash proceeds totaled $95.8 million and 8,919,302 shares of Series B convertible preferred stock were issued. Issuance costs totaled $0.2 million and were recorded as a reduction of the proceeds.

Series C Equity Financing

The Company entered into a Series C preferred stock purchase agreement (“Series C Preferred Stock Purchase Agreement”), with certain investors on June 29, 2018, and upon approval by the Company’s Board of Directors, the Company completed a Series C convertible preferred stock financing (“Series C”) at a price per share of $13.04. The net cash proceeds totaled $8.9 million and 690,128 shares of Series C convertible preferred stock were issued. Issuance costs totaled $0.1 million and were recorded as a reduction of the proceeds. In July 2018, the Company sold an additional 153,360 shares of Series C convertible preferred stock at a price of $13.04 per share for net cash proceeds of $2.0 million. In August 2018, in conjunction with the Collaboration Agreement entered into with bluebird, the Company sold bluebird 768,115 shares of Series C convertible preferred stock at a price of $13.04 per share for gross proceeds of $10.0 million.

The preferred stock has various features, including convertibility and non-cumulative dividends. The Company determined that none of the features required bifurcation from the underlying shares, either because they are clearly and closely related to the underlying shares or because they do not meet the definition of a derivative. The Series A, Series B and Series C convertible preferred stock are considered permanent equity and have not been accreted up to their redemption value. The Second and Third Tranche rights are considered to be mutual options as neither the purchasers nor the Company have a commitment or obligation to purchase or sell additional shares. As such, these rights are not accounted for separately. Moreover, in any such redemption (i.e. deemed liquidation) all equity holders (common and preferred) will receive the same form of consideration. The preferred stockholders cannot contractually redeem their shares, or redeem their shares through separate negotiation, without the Company’s common stockholders being able to also redeem their shares for the same form of consideration.

Convertible preferred stock consisted of the following (in thousands, except share and per share amounts):


	September 30, 2018
	Shares Authorized		Shares Issued and Outstanding		Issuance Price Per Share		Carrying Value		Liquidation Preference
Series C		16,425,000		1,611,603		$13.04		$ 20,935		$ 21,015
Series B		61,543,319		8,919,302		$10.76		95,798		96,008
Series A—First Tranche		61,260,000		3,699,259		$6.90		25,425		25,525
Series A—Second Tranche		—		5,178,968		$6.90		35,714		35,735

		139,228,319		19,409,132				$177,872		$178,283


	December 31, 2017
	Shares Authorized		Shares Issued and Outstanding		Issuance Price Per Share		Carrying Value		Liquidation Preference
Series B		64,102,551		8,919,302		$10.76		$ 95,798		$ 96,008
Series A—First Tranche		61,260,000		3,699,259		$6.90		25,425		25,525
Series A—Second Tranche		—		5,178,968		$6.90		35,714		35,735

		125,362,551		17,797,529				$156,937		$157,268

The rights, preferences, and privileges of the convertible preferred stock are as follows:

Redemption Rights

The preferred stock is not redeemable by holders unless a redemption event occurs. A redemption event will only occur upon the liquidation or winding up of the Company, a greater than 50% change in control, or the sale of substantially all of the assets of the Company. Management has also elected not to adjust the carrying values of the Series A, Series B and Series C convertible preferred stock to the redemption value of such shares, since it is uncertain whether or when a redemption event will occur. Subsequent adjustments to increase the carrying value to the redemption values will be made when it becomes probable that such a redemption will occur.

Dividends Rights

The holders of Series A, Series B and Series C convertible preferred stock are entitled to receive dividends, from any assets legally available, prior and in preference to any declaration or payment of any dividend to the common stockholders, at the rate of 8% of the original issue price (as determined on a per annum basis and on an as-converted basis). Such dividends are payable if and when declared by the Board of Directors and are not cumulative. After payment of such dividends, any additional dividends shall be distributed among the holders of the Series A, Series B and Series C convertible preferred stock and common stock pro rata based on the number of shares of common stock then held by each holder (assuming conversion of all such preferred stock into common stock). As of September 30, 2018 and December 31, 2017, no such dividends had been declared or accrued.

Liquidation Rights

In the event of any liquidation, dissolution, or winding up of the Company, whether voluntary or involuntary (“Liquidation Event”), the holders of Series C convertible preferred stock are entitled to receive, prior and in preference to any distribution of any of the assets of the Company to the holders of the Series A and B convertible preferred stock, $13.04 per share (as adjusted for any stock splits, combinations, reorganizations, or similar transactions, plus any declared and unpaid dividends). The holders of Series B convertible preferred stock are entitled to receive, prior and in preference to any distribution of any of the assets of the Company to the holders of the Series A convertible preferred stock, $10.76 per share (as adjusted for any stock splits, combinations, reorganizations, or similar transactions, plus any declared and unpaid dividends). After payment of the above, the holders of Series A convertible preferred stock are entitled to receive, prior and in preference to any distribution of any of the assets of the Company to the holders of common stock, $6.90 per share (as adjusted for any stock splits, combinations, reorganizations, or similar transactions, plus any declared and unpaid dividends).

If, upon the occurrence of such an event, the proceeds to be distributed are insufficient to permit the payment to such holders of the full preferential amounts, then the entire amount legally available for distribution shall be distributed among the holders of the Series A, Series B and Series C preferred stock in proportion to the full preferential amount that each such holder is otherwise entitled to receive had such proceeds been available.

After liquidation preference payments have been made to the holders of the convertible preferred stock as described above, all of the remaining assets and funds of the Company are to be distributed ratably among the holders of the preferred and common stock, as if the preferred stock had been converted to common stock. However, Series C preferred stock holders are limited to the greater of (1) $65.21 per share (as adjusted for any stock splits, combinations, reorganizations or similar transactions) and (2) the amount the holder would have received if all shares of Series C convertible preferred stock had been converted to common stock prior to such liquidation, dissolution, or winding up of the Company. Series B preferred stockholders are limited to the greater of (1) $53.82 per share (as adjusted for any stock splits, combinations, reorganizations or similar transactions) and (2) the amount the holder would have received if all shares of Series B convertible preferred stock had been converted to common stock prior to such liquidation, dissolution, or winding up of the Company. Series A preferred stockholders are limited to the greater of (1) $34.50 per share (as adjusted for any stock splits, combinations, reorganizations or similar transactions) and (2) the amount the holder would have received if all shares of Series A convertible preferred stock had been converted to common stock prior to such liquidation, dissolution, or winding up of the Company.

Voting Rights

Except as otherwise required by law, the holders of common and Series A, Series B and Series C convertible preferred stock vote together as a single class. The holders of the convertible preferred stock are entitled to the number of votes equal to the number of shares of common stock into which the convertible preferred stock could be converted on the record date for the vote, or upon the written consent of the stockholders.

The holders of the Series A convertible preferred stock are entitled to elect three directors of the Company, the holders of the Series B convertible preferred stock are entitled to elect one director of the Company, and the holders of common stock shall be entitled to elect one director of the Company.

Conversion Rights

Each share of Series A, Series B and Series C convertible preferred stock, at the option of the holder and at any time after the date of issuance, is convertible into the number of shares of common stock determined by dividing the respective original issue price by the conversion price (the Conversion Price). At September 30, 2018, the Series A, Series B and Series C Conversion Prices are $6.90, $10.76 and $13.04, respectively, and are subject to certain future adjustments.

Conversion occurs at the conversion rate (i) upon the closing of the sale of common stock at a price of at least $15.66 per share, in a firm commitment underwritten public offering pursuant to an effective registration statement under the Securities Act of 1933, as amended, resulting in at least $50.0 million of net proceeds, or (ii) at the election of the holders of at least a majority of the then outstanding shares of convertible preferred stock, voting together as a single class and on an as-converted to common stock basis. Through September 30, 2018, the Company has sufficient authorized and unissued common shares available to settle any conversion event. As part of the Company’s Series C convertible preferred stock financing, the Company’s certificate of incorporation was amended to reduce the initial public offering automatic conversion price for the Series A and B convertible preferred stock from $21.53 to $15.66 per share. The Company accounted for this as a modification of an instrument akin to equity that resulted in no incremental fair value being attributed to the Series A and Series B convertible preferred stock.

Stock-Based Compensation

9 Months Ended

Sep. 30, 2018

Stock-Based Compensation

10.

Stock-Based Compensation

2015 Equity Incentive Plan

In February 2018, the Company’s board of directors approved a 507,246 share increase in the number of shares to be reserved under the Company’s 2015 Equity Incentive Plan (“2015 Plan”). In connection with the Company’s IPO and the effectiveness of the 2018 Award Incentive Plan (“2018 Plan”), the 2015 Plan terminated and no further awards will be granted under the 2015 Plan. The 92,815 shares of common stock shares that were then unissued and available for future issuance under the 2015 Plan became available under the 2018 Plan. The 2015 Plan will continue to govern all outstanding awards by their existing terms.

2018 Award Incentive Plan

In September 2018, the Company’s board of directors approved the 2018 Plan. The 2018 Plan became effective on September 28, 2018. Under the 2018 Plan, the Company may grant stock options, stock appreciation rights, restricted stock, restricted stock units and other certain awards to individuals who are employees, officers, directors or consultants of the Company. A total of 2,690,000 shares of our common stock are initially reserved for issuance pursuant to a variety of stock-based compensation awards, including stock options, stock appreciation rights, or SARs, restricted stock awards, restricted stock unit awards and other stock-based awards, plus the number of shares remaining available for future awards under the 2015 Plan, as of the effective date of the 2018 Plan. The number of shares of common stock reserved for issuance under the 2018 Plan will automatically increase on January 1 of each year, beginning on January 1, 2019 and continuing through and including January 1, 2028, by 4% of the total number of shares of our stock outstanding on December 31 of the preceding calendar year, or a lesser number of shares determined by the Company’s board of directors. The maximum number of shares that may be issued upon the exercise of ISOs under the 2018 Plan is 45,000,000.

The board of directors has the authority to determine to whom options will be granted, the number of shares, the term, and the exercise price. If an individual owns stock representing 10% or more of the outstanding shares, the price of each share shall be at least 110% of the fair market value, as determined by the board of directors. Options granted under the Plan have a term of up to 10 years and generally vest over a 4-year period with a straight-line vesting.

2018 Employee Stock Purchase Plan

In September 2018, the Company’s board of directors approved the 2018 Employee Stock Purchase Plan (“2018 ESPP”). The 2018 ESPP became effective on September 28, 2018. A total of 282,334 shares were initially reserved for issuance under the 2018 ESPP. Additionally, the number of shares of common stock reserved for issuance under the 2018 ESPP will increase automatically each year, beginning on January 1, 2019 and continuing through and including January 1, 2028, by the lesser of (1) 1% of the shares of common stock outstanding on December 31 of the preceding calendar year or (2) such lesser number of shares determined by the Company’s board of directors. The maximum number of shares that may be issued under the 2018 ESPP is 5,000,000.

Stock Option Activity

A summary of the 2015 Plan and 2018 Plan activity is as follows:


			Options Outstanding
	Number of Shares Available for Issuance		Number of Shares		Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value (in thousands)
Balance at December 31, 2017		626,229		1,351,840		$ 0.89
Authorized		3,197,246
Granted		(1,231,483)		1,231,483		$ 7.49
Exercised				(67,241)		$ 0.57
Cancelled		99,411		(99,411)		$ 1.31
Repurchased		30,117				$ 0.35

Balance at September 30, 2018		2,721,520		2,416,671		$ 4.25		9.04		$ 13,245

For the nine months ended September 30, 2018 and 2017, the total intrinsic value of stock option awards exercised was $0.52 million and $0.02 million, respectively, determined at the date of option exercise, and the total cash received upon exercise of stock options was not significant for either period. The total intrinsic value of options exercisable was $4.2 million as of September 30, 2018. The aggregate intrinsic value was calculated as the difference between the exercise prices of the underlying stock option awards and the estimated fair value of the common stock on the date of exercise.

At September 30, 2018, $8.0 million of total unrecognized compensation cost related to non-vested employee and consultant options is expected to be recognized over a weighted-average period of 3.23 years. The total fair value of shares vested during the period ended September 30, 2018 was $1.3 million.

Stock-based compensation expense and awards granted to non-employees were not material for either the three or nine months ended September 30, 2018 or September 30, 2017.

Stock-Based Compensation Expense

Total stock-based compensation for all awards granted to employees and consultants, before taxes is as follows (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2018		2017		2018		2017
Research and development expenses	$	421	$	245	$	979	$	640
General and administrative expenses		117		60		695		171

Total	$	538	$	305	$	1,674	$	811

Summary of Significant Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2018

Basis of Presentation

Basis of Presentation

Reverse Stock Split

Reverse Stock Split

Need for Additional Capital

Need for Additional Capital

Use of Estimates

Use of Estimates

Other Risks and Uncertainties

Other Risks and Uncertainties

Cash, Cash Equivalents, and Restricted Cash

Cash, Cash Equivalents, and Restricted Cash


	September 30, 2018		December 31, 2017

Cash and cash equivalents		$65,936		$39,007
Restricted cash		992		992

Total, cash, cash equivalents and restricted cash		$66,928		$39,999

Revenue Recognition

Revenue Recognition

Net Loss per Share

Net Loss per Share

Recently Issued Accounting Pronouncements

Recently Issued Accounting Pronouncements

Recently Adopted Accounting Pronouncements


*Recently Adopted Accounting Pronouncements*

Organization - Additional Information (Detail) - USD ($) $ / shares in Units, $ in Millions	1 Months Ended
	Oct. 31, 2018	Oct. 02, 2018	Sep. 30, 2018	Dec. 31, 2017
Organization and Nature of Operations [Line Items]
Common stock, shares authorized			172,250,000	160,000,000
Common stock, par value			$ 0.0001	$ 0.0001
Preferred stock, shares authorized			139,228,319	125,362,551
Preferred stock, par value			$ 0.001	$ 0.001
Deferred IPO costs			$ 3.0	$ 0.0
Amended and Restated Certificate of Incorporation [Member] \| Subsequent Event [Member]
Organization and Nature of Operations [Line Items]
Common stock, shares authorized		300,000,000
Common stock, par value		$ 0.0001
Preferred stock, shares authorized		10,000,000
Preferred stock, par value		$ 0.0001
IPO [Member] \| Subsequent Event [Member]
Organization and Nature of Operations [Line Items]
Number of common shares sold	6,854,202
Stock issued, price per share	$ 15.00
Net proceeds from issuance of stock	$ 95.6
Conversion of preferred stock shares into common stock shares	19,409,132
Reclassified common stock and additional paid in capital	$ 177.9
Over-Allotment Option [Member] \| Subsequent Event [Member]
Organization and Nature of Operations [Line Items]
Number of common shares sold	187,535

Summary of Significant Accounting Policies - Additional Information (Detail) $ in Thousands		9 Months Ended		12 Months Ended
	Sep. 20, 2018	Sep. 30, 2018 USD ($)	Sep. 30, 2017 USD ($)	Dec. 31, 2017 USD ($)
Summary Of Significant Accounting Policies [Line Items]
Reverse stock split	0.1449
Accumulated deficit		$ (109,063)		$ (61,627)
Net loss		(47,436)	$ (24,008)
Net cash used in operating activities		$ (25,166)	$ (20,631)
Federal statutory income tax rate		21.00%		35.00%
Deduction in net operating losses		80.00%

- Definition

The consolidated profit or loss for the period, net of income taxes, including the portion attributable to the noncontrolling interest.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 220
-SubTopic 10
-Section 45
-Paragraph 1A
-Subparagraph (a)
-URI http://asc.fasb.org/extlink&oid=114867106&loc=SL7669619-108580

Reference 2: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 810
-SubTopic 10
-Section 50
-Paragraph 1A
-Subparagraph (a)(1)
-URI http://asc.fasb.org/extlink&oid=109239629&loc=SL4573702-111684

Reference 3: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 220
-SubTopic 10
-Section 45
-Paragraph 1B
-Subparagraph (a)
-URI http://asc.fasb.org/extlink&oid=114867106&loc=SL7669625-108580

Reference 4: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 810
-SubTopic 10
-Section 50
-Paragraph 1A
-Subparagraph (c)(1)
-URI http://asc.fasb.org/extlink&oid=109239629&loc=SL4573702-111684

Reference 5: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 280
-SubTopic 10
-Section 50
-Paragraph 22
-URI http://asc.fasb.org/extlink&oid=115929826&loc=d3e8736-108599

Reference 6: http://www.xbrl.org/2003/role/exampleRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 810
-SubTopic 10
-Section 55
-Paragraph 4J
-URI http://asc.fasb.org/extlink&oid=84234705&loc=SL4591551-111686

Reference 7: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 230
-SubTopic 10
-Section 45
-Paragraph 2
-URI http://asc.fasb.org/extlink&oid=109223946&loc=d3e3000-108585

Reference 8: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 810
-SubTopic 10
-Section 45
-Paragraph 19
-URI http://asc.fasb.org/extlink&oid=108774443&loc=SL4569616-111683

Reference 9: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 280
-SubTopic 10
-Section 50
-Paragraph 32
-Subparagraph (c)
-URI http://asc.fasb.org/extlink&oid=115929826&loc=d3e8933-108599

Reference 10: http://www.xbrl.org/2003/role/exampleRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 810
-SubTopic 10
-Section 55
-Paragraph 4K
-URI http://asc.fasb.org/extlink&oid=84234705&loc=SL4591552-111686

+ Details

Commitments and Contingencies - Additional Information (Detail) $ in Thousands	1 Months Ended	3 Months Ended		9 Months Ended		12 Months Ended
	Mar. 31, 2017 USD ($) ft²	Sep. 30, 2018 USD ($)	Sep. 30, 2017 USD ($)	Sep. 30, 2018 USD ($)	Sep. 30, 2017 USD ($)	Dec. 31, 2017 USD ($)	Feb. 28, 2016 USD ($)	Nov. 30, 2015 USD ($)
Commitments and Contingencies Disclosure [Line Items]
Operating lease cash security deposit		$ 632		$ 632		$ 368
Rent expense		500	$ 300	1,100	$ 900
Research and Development Expense		15,622	8,084	39,712	19,939
Contract Research and Development Agreement [Member] \| Contract Research Organization [Member]
Commitments and Contingencies Disclosure [Line Items]
Upfront payment					500
Maximum payment to CRO upon the completion of certain phases of research services			900		900
Maximum milestone payments			36,400		36,400
Research and Development Expense		200		$ 900
Emeryville California [Member]
Commitments and Contingencies Disclosure [Line Items]
Operating leasing term								84 months
Operating lease cash security deposit								$ 50
Operating leasing renewal option to extend lease								3 years
Operating lease for additional temporary space				12 months
Temporary space lease agreement				30 days
Cambridge Massachusetts [Member]
Commitments and Contingencies Disclosure [Line Items]
Operating leasing term							67 months
Operating lease cash security deposit							$ 300
Operating leasing renewal option to extend lease							3 years
Tenant improvement allowance							$ 2,100
Pleasanton [Member]
Commitments and Contingencies Disclosure [Line Items]
Operating leasing renewal option to extend lease	5 years
Tenant improvement allowance		1,200		$ 1,200
Net rentable area \| ft²	42,620
Lease expiration date	Nov. 30, 2024
Letters of credit outstanding, amount	$ 1,000
Property plant and equipment additions				9,300		9,300
Building improvements						6,100
Leased building improvements incurred but not yet received from landlord						$ 1,200
Total interest expense for the cost of the lease financing obligation		$ 200	$ 0	$ 600	$ 0
Cambridge [Member]
Commitments and Contingencies Disclosure [Line Items]
Operating leasing term		24 months		24 months
Operating lease cash security deposit		$ 300		$ 300
Base rent paid for the year		$ 1,300		$ 1,300

Commitments and Contingencies - Minimum Annual Rental Payments under Non-Cancelable Operating Lease Agreements and Lease Financing Obligation (Detail) $ in Thousands	Sep. 30, 2018 USD ($)
Lease Financing Obligation
2018 (remaining three months)	$ 197
2019	794
2020	818
2021	843
2022	868
Thereafter	1,737
Total minimum payments	5,257
Less: Amount representing interest expense	(4,627)
Total lease payment	630
Residual value of lease financing obligation	9,896
Capital lease	10,526
Less: Lease financing obligation, short-term	(24)
Lease financing obligation, long-term	10,502
Capital lease	10,526
Operating Leases
2018 (remaining three months)	455
2019	2,329
2020	2,673
2021	1,803
2022	1,118
Thereafter	396
Total minimum payments	$ 8,774

Cash Equivalents and Marketable Securities - Schedule of Amortized Cost, Unrealized Gains and Losses and Fair Value of Cash Equivalent and Marketable Securities (Detail) - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017
Cash, cash equivalents and marketable securities [Line Items]
Amortized Cost	$ 48,720	$ 79,898
Cash equivalents	37,229	32,878
Unrealized Gains	0	0
Marketable securities	11,486	46,946
Unrealized Losses	(5)	(74)
Fair Value	48,715	79,824
Money Market Funds [Member]
Cash, cash equivalents and marketable securities [Line Items]
Amortized Cost	37,229	27,711
Unrealized Gains	0	0
Fair Value	37,229	27,711
Commercial Paper [Member]
Cash, cash equivalents and marketable securities [Line Items]
Amortized Cost	6,990	32,257
Unrealized Gains	0	0
Unrealized Losses	(2)	(48)
Fair Value	6,988	32,209
Corporate Debt Securities [Member]
Cash, cash equivalents and marketable securities [Line Items]
Amortized Cost	4,501	19,930
Unrealized Gains	0	0
Unrealized Losses	(3)	(26)
Fair Value	$ 4,498	$ 19,904

Cash Equivalents and Marketable Securities - Additional Information (Detail)	9 Months Ended
	Sep. 30, 2018 USD ($)
Cash, cash equivalents and marketable securities [Line Items]
Realized gains or losses on marketable securities	$ 0
Marketable Securities contractual maturities	1 year

Fair Value Measurements - Financial Assets and Liabilities Subject To Fair Value Measurements on a Recurring Basis (Detail) - Fair Value, Measurements, Recurring [Member] - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017
Fair Value, Assets and Liabilities Measured on Recurring Basis [Line Items]
Assets fair value	$ 48,715	$ 79,824
Money Market Funds [Member]
Fair Value, Assets and Liabilities Measured on Recurring Basis [Line Items]
Assets fair value	37,229	27,711
Commercial Paper [Member]
Fair Value, Assets and Liabilities Measured on Recurring Basis [Line Items]
Assets fair value	6,988	32,209
Corporate Debt Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring Basis [Line Items]
Assets fair value	4,498	19,904
Fair Value, Inputs, Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring Basis [Line Items]
Assets fair value	37,229	27,711
Fair Value, Inputs, Level 1 [Member] \| Money Market Funds [Member]
Fair Value, Assets and Liabilities Measured on Recurring Basis [Line Items]
Assets fair value	37,229	27,711
Fair Value, Inputs, Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring Basis [Line Items]
Assets fair value	11,486	52,113
Fair Value, Inputs, Level 2 [Member] \| Commercial Paper [Member]
Fair Value, Assets and Liabilities Measured on Recurring Basis [Line Items]
Assets fair value	6,988	32,209
Fair Value, Inputs, Level 2 [Member] \| Corporate Debt Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring Basis [Line Items]
Assets fair value	$ 4,498	$ 19,904

Property and Equipment, Net - Summary of Property and Equipment and Related Accumulated Depreciation and Amortization (Detail) - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017
Property, Plant and Equipment [Line Items]
Property and equipment, gross	$ 32,687	$ 30,001
Less accumulated depreciation and amortization	(5,675)	(2,790)
Property and equipment, net	27,012	27,211
Computer Equipment And Software [Member]
Property, Plant and Equipment [Line Items]
Property and equipment, gross	470	353
Furniture and Fixtures [Member]
Property, Plant and Equipment [Line Items]
Property and equipment, gross	809	785
Laboratory Equipment [Member]
Property, Plant and Equipment [Line Items]
Property and equipment, gross	12,999	10,515
Leasehold Improvements [Member]
Property, Plant and Equipment [Line Items]
Property and equipment, gross	3,038	2,977
Buildings and improvements capitalized under a lease financing transaction [Member]
Property, Plant and Equipment [Line Items]
Property and equipment, gross	$ 15,371	$ 15,371

Balance Sheet Components - Schedule of Prepaid Expenses and Other Current Assets (Detail) - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017
Prepaid Expenses And Other Current Assets [Line Items]
Receivable from landlord		$ 1,226
Prepaid rent	$ 1,182	93
Prepaid research and development-related expenses	1,638	628
Prepaid IPO costs	3,004
Other	904	579
Total	$ 6,728	$ 2,526

Summary of Significant Accounting Policies - Reconciliation of Cash, Cash Equivalents, and Restricted Cash (Detail) - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017
Cash and Cash Equivalents [Line Items]
Cash and cash equivalents	$ 65,936	$ 39,007
Restricted cash	992	992
Total, cash, cash equivalents and restricted cash	$ 66,928	$ 39,999

Fair Value Measurements - Additional Information (Detail) - USD ($)	Sep. 30, 2018	Dec. 31, 2017
Fair Value, Assets, Level 1 to Level 2 Transfers	$ 0	$ 0
Fair Value, Liabilities, Level 1 to Level 2 Transfers	0	0
Fair Value, Assets, Level 2 to Level 1 Transfers	0	0
Fair Value, Liabilities, Level 2 to Level 1 Transfers	$ 0	$ 0