SEC Filing — Icosavax, Inc.

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10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

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

For the quarterly period ended June 30, 2021

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

For the transition period from ________to_________.

Commission File Number: 001-40655

ICOSAVAX, INC.

(Exact name of Registrant as specified in its charter)


Delaware		82-3640549
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

1616 Eastlake Avenue E., Suite 208 Seattle, Washington		98102
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (206) 737-0085

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

Title of each class

Trading

Symbol(s)

Name of each exchange on which registered

Common Stock, $0.0001 par value per share

ICVX

Nasdaq Global Select Market

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

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

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


Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☑	Smaller reporting company	☑
Emerging growth company	☑

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

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

As of September 10, 2021, the registrant had 39,387,386 shares of common stock ($0.0001 par value) outstanding.

TABLE OF CONTENTS


PART I. FINANCIAL INFORMATION

Item 1	Financial Statements (Unaudited)	3
	Condensed Balance Sheets	3
	Condensed Statements of Operations	4
	Condensed Statements of Convertible Preferred Stock and Stockholders’ Deficit	5
	Condensed Statements of Cash Flows	6
	Notes to Unaudited Condensed Financial Statements	7
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	21
Item 3	Quantitative and Qualitative Disclosures About Market Risk	29
Item 4	Controls and Procedures	29

PART II. OTHER INFORMATION

Item 1	Legal Proceedings	30
Item 1A	Risk Factors	30
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	76
Item 3	Defaults Upon Senior Securities	77
Item 4	Mine Safety Disclosures	77
Item 5	Other Information	77
Item 6	Exhibits	77
	Exhibit Index	77
	Signatures	79

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements (unaudited)

ICOSAVAX, INC.

Condensed Balance Sheets

(in thousands, except share and par value data)


	June 30,			December 31,
	2021			2020
	(Unaudited)			(Note 2)
Assets
Current assets:
Cash	$	110,585		$	13,114
Restricted cash		1,179			2,384
Prepaid expenses and other current assets		4,119			662
Total current assets		115,883			16,160
Property and equipment, net		561			10
Deferred offering costs		2,265			—
Total assets	$	118,709		$	16,170
Liabilities, convertible preferred stock, and stockholders' deficit
Current liabilities:
Accounts payable	$	3,111		$	1,918
Accrued and other current liabilities		1,825			1,532
Deferred revenue		1,179			2,384
Total current liabilities		6,115			5,834
Long-term convertible promissory note		—			4,947
Embedded derivative liability		—			1,604
Other noncurrent liabilities		279			426
Total liabilities		6,394			12,811
Commitments and contingencies (Note 2)
Convertible preferred stock, $0.0001 par value; 89,908,215 and 54,039,749 shares authorized at June 30, 2021 and December 31, 2020, respectively; 89,908,215 and 32,198,879 shares issued and outstanding at June 30, 2021 and December 31, 2020, respectively; $150,837 and $30,007 aggregate liquidation preference at June 30, 2021 and December 31, 2020, respectively		151,613			30,062
Stockholders' deficit:
Common stock, $0.0001 par value; 134,329,408 and 78,000,000 shares authorized at June 30, 2021 and December 31, 2020; 3,741,667 and 3,596,936 shares issued as of June 30, 2021 and December 31, 2020, respectively; 3,072,402 and 2,639,026 shares outstanding as of June 30, 2021 and December 31, 2020, respectively		2			2
Additional paid-in capital		2,201			393
Accumulated deficit		(41,501	)		(27,098	)
Total stockholders' deficit		(39,298	)		(26,703	)
Total liabilities, convertible preferred stock and stockholders' deficit	$	118,709		$	16,170

See accompanying notes to financial statements

ICOSAVAX, INC.

Condensed Statements of Operations and Comprehensive Loss

(Unaudited)

(in thousands, except share and per share data)


	Three Months Ended June 30,						Six Months Ended June 30,
	2021			2020			2021			2020
Grant revenue	$	1,904		$	—		$	3,905		$	—
Operating expenses:
Research and development		8,277			4,666			13,830			7,586
General and administrative		2,221			541			3,312			1,153
Total operating expenses		10,498			5,207			17,142			8,739
Loss from operations		(8,594	)		(5,207	)		(13,237	)		(8,739	)
Other income (expense):
Change in fair value of embedded derivative liability		—			—			(205	)		—
Loss on extinguishment of convertible promissory note		—			—			(754	)		—
Interest and other income (expense)		42			9			(207	)		70
Total other income (expense)		42			9			(1,166	)		70
Net loss and comprehensive loss	$	(8,552	)	$	(5,198	)	$	(14,403	)	$	(8,669	)
Net loss per share, basic and diluted	$	(2.86	)	$	(2.45	)	$	(5.00	)	$	(4.23	)
Weighted-average common shares outstanding, basic and diluted		2,985,183			2,119,312			2,878,163			2,047,803

See accompanying notes to financial statements

ICOSAVAX, INC.

Condensed Statements of Convertible Preferred Stock and Stockholders’ Deficit

(Unaudited)

(in thousands, except share amounts)


										Additional					Total
	Convertible Preferred Stock					Common Stock				Paid-in		Accumulated			Stockholders'
	Shares		Amount			Shares		Amount		Capital		Deficit			Deficit
Balance at December 31, 2020		32,198,879	$	30,062			2,639,026	$	2	$	393	$	(27,098	)	$	(26,703	)
Issuance of Series A-1 convertible preferred stock for cash of $0.9615 per share net of $95,000 of issuance costs		21,944,874		21,005			—		—		—		—			—
Issuance of Series B-1 convertible preferred stock for cash of $2.82172 per share net of $346,000 in issuance costs		32,958,612		92,654			—		—		—		—			—
Issuance of Series B-2 convertible preferred stock from convertible note		2,805,850		7,917			—		—		—		—			—
Shares released from restriction upon vesting of early-exercised stock options		—		—			100,238		—		63		—			63
Exercise of common stock options		—		—			35,143		—		29		—			29
Vesting of shares of restricted common stock		—		—			117,369		—		—		—			—
Stock-based compensation		—		—			—		—		276		—			276
Net loss and comprehensive loss		—		—			—		—		—		(5,851	)		(5,851	)
Balance at March 31, 2021		89,908,215		151,638			2,891,776		2		761		(32,949	)		(32,186	)

Issuance costs incurred related to Series A-1 convertible preferred stock		—		(1	)		—		—		—		—			—
Issuance costs incurred related to Series B-1 convertible preferred stock		—		(24	)		—		—		—		—			—
Shares released from restriction upon vesting of early-exercised stock options		—		—			63,257		—		32		—			32
Vesting of shares of restricted common stock		—		—			117,369		—		—		—			—
Stock-based compensation		—		—			—		—		1,408		—			1,408
Net loss and comprehensive loss		—		—			—		—		—		(8,552	)		(8,552	)
Balance at June 30, 2021		89,908,215	$	151,613			3,072,402	$	2	$	2,201	$	(41,501	)	$	(39,298	)


									Additional					Total
	Convertible Preferred Stock				Common Stock				Paid-in		Accumulated			Stockholders'
	Shares		Amount		Shares		Amount		Capital		Deficit			Deficit
Balance at December 31, 2019		32,198,879	$	30,062		1,901,656	$	1	$	—	$	(8,244	)	$	(8,243	)

Shares released from restriction upon vesting of early-exercised stock options		—		—		25,641		—		1		—			1
Vesting of shares of restricted common stock		—		—		117,369		—		—		—			—
Stock-based compensation		—		—		—		—		54		—			54
Net loss and comprehensive loss		—		—		—		—		—		(3,471	)		(3,471	)
Balance at March 31, 2020		32,198,879		30,062		2,044,666		1		55		(11,715	)		(11,659	)

Stock-based compensation		—		—		—		—		63		—			63
Net loss and comprehensive loss		—		—		—		—		—		(5,198	)		(5,198	)
Balance at June 30, 2020		32,198,879	$	30,062	$	2,044,666	$	1	$	118	$	(16,913	)	$	(16,794	)

See accompanying notes to financial statements

ICOSAVAX, INC.

Condensed Statements of Cash Flows

(Unaudited)

(in thousands)


	Six Months Ended June 30,
	2021			2020

Operating activities:
Net loss	$	(14,403	)	$	(8,669	)
Adjustments to reconcile net loss to cash used in operating activities:
Stock-based compensation		1,684			117
Depreciation		17			—
Non-cash interest expense		264			—
Change in fair value of embedded derivative liability		205			—
Loss on extinguishment of convertible promissory note		754			—
Changes in operating assets and liabilities:
Prepaids and other current assets		(3,457	)		(385	)
Accounts payable		359			130
Accrued and other current liabilities		(396	)		724
Deferred revenue		(1,205	)		—
Net cash used in operating activities		(16,178	)		(8,083	)
Investing activities:
Purchases of property and equipment		(568	)		(5	)
Net cash used in investing activities		(568	)		(5	)
Financing activities:
Proceeds from issuance of convertible preferred stock, net of issuance costs		113,634			—
Proceeds from exercise of stock options, including early exercise		120			66
Payment of deferred offering costs		(742	)		—
Net cash provided by financing activities		113,012			66

Net increase (decrease) in cash and restricted cash		96,266			(8,022	)
Cash and restricted cash at beginning of period		15,498			23,079
Cash and restricted cash at end of period	$	111,764		$	15,057

Supplemental disclosure of noncash activities
Conversion of convertible note (including accrued interest) and embedded derivative liability for Series B-2 convertible preferred stock	$	7,917		$	—
Unpaid initial public offering costs	$	1,524		$	—
Purchases of property and equipment included in accounts payable	$	151		$	5

See accompanying notes to financial statements

NOTES TO CONDENSED FINANCIAL STATEMENTS

(Unaudited)

1. Description of Business

Organization

Icosavax, Inc. (the “Company”) was incorporated in the state of Delaware on November 1, 2017, and is located in Seattle, Washington. The Company is focused on the research and development of vaccines against infectious diseases. The Company was founded on computationally designed virus-like particle technology, exclusively licensed for a variety of infectious disease indications from the Institute for Protein Design at the University of Washington.

The Company’s business involves inherent risks. These risks include, among others, dependence on key personnel, licensors and third-party service providers, patentability of the Company’s products and processes, and clinical efficacy of the Company’s products under development. In addition, any of the technologies covering the Company’s existing products under development could become obsolete or diminished in value by discoveries and developments at other organizations.

In July 2021, the Company effected a one-for-4.1557 reverse stock split of its issued and outstanding shares of common stock and a proportional adjustment to the existing conversion ratios for each series of the Company’s preferred stock. Accordingly, all share and per share amounts for all periods presented in the accompanying condensed financial statements and notes thereto have been adjusted retroactively, where applicable, to reflect this reverse stock split and adjustment of the preferred stock conversion ratios.

On August 2, 2021, the Company completed its initial public offering (“IPO”) pursuant through which it issued 12,133,333 shares of its common stock at a public offering price of $15.00 per share, and on August 2, 2021, the Company sold an additional 1,819,999 shares pursuant to the exercise by the underwriters of their option to purchase additional shares. The Company received net proceeds from its IPO, inclusive of the exercise by the underwriters of their option to purchase additional shares, of approximately $190.6 million, after deducting underwriting discounts and commissions and estimated offering expenses. Upon the closing of the IPO, all 89,908,215 shares of the then outstanding preferred stock automatically converted into 21,634,898 shares of common stock.

Liquidity

The Company had an accumulated deficit of $41.5 million, cash of $110.6 million, and restricted cash of $1.2 million at June 30, 2021.

Management believes the Company has sufficient capital to execute its strategic plan and fund operations through at least the next twelve months from the date these condensed financial statements are issued.

The Company has devoted substantially all of its resources to organizing and staffing the Company, business planning, raising capital, in-licensing intellectual property rights, developing vaccines candidates, scaling up manufacturing of vaccine candidates, and preparing for its ongoing and planned preclinical studies and clinical trials. The Company has a limited operating history, and the sales and income potential of its business is unproven. The Company has incurred net losses and negative cash flows from operating activities since its inception and expects to continue to incur net losses into the foreseeable future as it continues the development of its vaccine candidates. From inception to June 30, 2021, the Company has funded its operations through the issuance of convertible promissory notes and sale of its convertible preferred stock. On August 2, 2021, the Company completed its IPO and received net proceeds of $190.6 million.

As the Company continues to pursue its business plan, it expects to finance its operations through equity offerings, debt financings or other capital sources, including potential strategic collaborations, licenses, and other similar arrangements. However, there can be no assurance that any additional financing or strategic transactions will be available to the Company on acceptable terms, if at all. If events or circumstances occur such that the Company does not obtain additional funding, it may need to delay, reduce or eliminate its product development or future commercialization efforts, which could have a material adverse effect on the Company’s business, results of operations or financial condition. The accompanying financial statements do not include any adjustments that might be necessary if the Company were unable to continue as a going concern.

2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited condensed financial statements as of June 30, 2021 and for the three and six months ended June 30, 2021 and 2020 have been prepared in conformity with generally accepted accounting principles (“GAAP”) in the United States of America for interim financial information and pursuant to Article 10 of Regulation S-X of the Securities Act of 1933, as amended (the

“Securities Act”). Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. These unaudited condensed financial statements include only normal and recurring adjustments that the Company believes are necessary to fairly state the Company’s financial position and the results of its operations and cash flows. The results for the three and six months ended June 30, 2021 are not necessarily indicative of the results expected for the full fiscal year or any subsequent interim period. The condensed balance sheet at December 31, 2020 has been derived from the audited financial statements at that date but does not include all disclosures required by GAAP for complete financial statements. Because all of the disclosures required by GAAP for complete financial statements are not included herein, these unaudited condensed financial statements and the notes accompanying them should be read in conjunction with the Company’s audited financial statements for the year ended December 31, 2020 included in the Company’s final prospectus for its IPO filed pursuant to Rule 424(b)(4) under the Securities Act, with the Securities and Exchange Commission (the “SEC”) on July 22, 2021.

Use of Estimates

The Company’s significant accounting policies are described in Note 2, “Summary of significant accounting policies,” of the Company’s audited financial statements for the year ended December 31, 2020 included in the Company’s final prospectus for its IPO filed with the SEC. There have been no material changes to the significant accounting policies previously disclosed in those audited financial statements.

The full extent to which the COVID-19 pandemic will directly or indirectly impact the Company’s business, results of operations and financial condition, including expenses, clinical trials and research and development costs, will depend on future developments that are highly uncertain, including as a result of new information that may emerge concerning COVID-19 and the actions taken to contain or treat COVID-19, as well as the economic impact on local, regional, national and international markets. The Company has considered potential impacts arising from the COVID-19 pandemic and is not presently aware of any events or circumstances that would require the Company to update its estimates, judgments or revise the carrying value of its assets or liabilities.

Deferred Offering Costs

At June 30, 2021, the Company has deferred offering costs consisting of legal, accounting and other fees and costs directly attributable to its IPO. Deferred offering costs of $2.3 million that were recorded within long-term assets on the condensed balance sheet at June 30, 2021 were offset against the proceeds received upon completion of the IPO in August 2021.

Fair Value of Financial Instruments

The accounting guidance defines fair value, establishes a consistent framework for measuring fair value, and expands disclosure for each major asset and liability category measured at fair value on either a recurring or nonrecurring basis. Fair value is defined as an exit price representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability.

The carrying amounts of all cash, restricted cash, prepaid expenses and other assets, accounts payable, and accrued and other current liabilities are considered to be representative of their respective fair values due to their short maturities.

Derivative Liability, Convertible Notes Discount and Amortization

The Company’s convertible note (see Note 7) had conversion and redemption features that met the definition of an embedded derivative and were therefore subject to bifurcation and derivative accounting. The initial recognition of the fair value of the derivative resulted in a discount to the convertible note, with a corresponding derivative liability. The discount to the convertible note was amortized using the effective interest method. The amortization of the discount is included in interest and other income (expense) in the statements of operations and comprehensive loss. The derivative liability related to these features was recorded at estimated fair value and is remeasured on a recurring basis. Any changes in fair value are reflected as change in change in fair value of derivative liability in the statements of operations and comprehensive loss at each reporting date while such instruments were outstanding. The derivative liability was settled in March 2021 upon conversion of the underlying convertible note into Series B convertible preferred stock, resulting in a loss on extinguishment of convertible promissory note.

Liability for Early Exercise of Stock Options

Certain individuals were granted the ability to early exercise their stock options. The shares of common stock issued from the early exercise of unvested stock options are restricted and continue to vest in accordance with the original vesting schedule. The Company has the option to repurchase any unvested shares at the original purchase price upon any voluntary or involuntary termination. The shares purchased by the employees and non-employees pursuant to the early exercise of stock options are not deemed, for accounting purposes, to be outstanding until those shares vest. The cash received in exchange for exercised and unvested

shares related to stock options granted is recorded as a liability for the early exercise of stock options on the accompanying balance sheets and will be reclassified as common stock and additional paid-in capital as the shares vest. Unvested shares issued under early exercise provisions subject to repurchase by the Company totaled 434,250 and 488,226 shares as of June 30, 2021 and December 31, 2020, respectively. As of June 30, 2021 and December 31, 2020, the Company recorded $279,000 and $283,000, respectively, associated with shares issued with repurchase rights as other noncurrent liabilities in the accompanying condensed balance sheets.

Commitments and Contingencies

The Company recognizes a liability with regard to loss contingencies when it believes it is probable a liability has been incurred, and the amount can be reasonably estimated. If some amount within a range of loss appears at the time to be a better estimate than any other amount within the range, the Company accrues that amount. When no amount within the range is a better estimate than any other amount the Company accrues the minimum amount in the range.

In the event the Company becomes subject to claims or suits arising in the ordinary course of business, the Company would accrue a liability for such matters when it is probable that future expenditures will be made and such expenditures can be reasonably estimated.

The Company has not recorded any such liabilities at either June 30, 2021 or December 31, 2020.

Net Loss Per Share

Basic net loss per share is calculated by dividing the net loss attributable to common stockholders by the weighted- average number of shares of common stock outstanding for the period. Diluted net loss per share is computed by dividing the net loss by the weighted average number of shares of common stock and common stock equivalents outstanding for the period. Common stock equivalents are only included when their effect is dilutive. The Company’s potentially dilutive securities include outstanding stock options under the Company’s equity incentive plan and have been excluded from the computation of diluted net loss per share as they would be anti-dilutive to the net loss per share. For all periods presented, there is no difference in the number of shares used to calculate basic and diluted shares outstanding due to the Company’s net loss position.

The following tables summarize the computation of the basic and diluted net loss per share (in thousands, except share and per share data):


	Three Months Ended June 30,						Six Months Ended June 30,
	2021			2020			2021		2020
Numerator:
Net Loss	$	(8,552	)	$	(5,198	)	$	(