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Document and Entity Information - USD ($) $ in Millions	12 Months Ended
Document and Entity Information - USD ($) $ in Millions	Dec. 31, 2019	Mar. 02, 2020	Jun. 28, 2019
Document and Entity Information
Document Type	10-K
Document Period End Date	Dec. 31, 2019
Entity Registrant Name	RUBIUS THERAPEUTICS, INC.
Entity Well-known Seasoned Issuer	No
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	true
Entity Ex Transition Period	false
Entity Shell Company	false
Entity Public Float			$ 548.7
Entity Common Stock, Shares Outstanding		80,321,978
Entity Central Index Key	0001709401
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2019
Document Fiscal Period Focus	FY
Amendment Flag	false

CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Dec. 31, 2019	Dec. 31, 2018
Current assets:
Cash and cash equivalents	$ 91,898	$ 307,064
Investments	191,389	96,987
Prepaid expenses and other current assets	5,979	9,737
Restricted cash		622
Total current assets	289,266	414,410
Operating lease, right-of-use-asset	46,559
Property, plant and equipment, net	56,924	62,796
Restricted cash	1,735	1,735
Other assets	357	168
Total assets	394,841	479,109
Current liabilities:
Accounts payable	7,178	7,886
Accrued expenses and other current liabilities	16,042	12,118
Operating lease liabilities	10,540
Total current liabilities	33,760	20,004
Long-term debt, net of discount	49,596	24,347
Other long-term liabilities	405	309
Operating lease liabilities, net of current portion	36,867
Lease financing obligation		41,441
Total liabilities	120,628	86,101
Commitments and contingencies (see Note 12)
Stockholders' equity:
Preferred stock, $0.001 par value; 10,000,000 shares authorized at December 31, 2019 and December 31, 2018; no shares issued or outstanding at December 31, 2019 and December 31, 2018
Common stock, $0.001 par value; 150,000,000 shares authorized at December 31, 2019 and December 31, 2018; 80,016,245 and 79,234,853 shares issued and outstanding at December 31, 2019 and December 31, 2018, respectively	80	79
Additional paid-in capital	586,798	543,040
Accumulated other comprehensive income (loss)	75	(29)
Accumulated deficit	(312,740)	(150,082)
Total stockholders' equity	274,213	393,008
Total liabilities and stockholders' equity	$ 394,841	$ 479,109

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Operating expenses:
Research and development	$ 112,419	$ 51,769	$ 21,226
General and administrative	57,182	39,894	22,038
Total operating expenses	169,601	91,663	43,264
Loss from operations	(169,601)	(91,663)	(43,264)
Other income (expense):
Interest income	7,994	5,078	584
Interest expense	(2,590)	(464)	(309)
Change in fair value of preferred stock warrant liability		(2,187)	(785)
Other income (expense), net	739	41	(73)
Total other income (expense), net	6,143	2,468	(583)
Net loss	(163,458)	(89,195)	(43,847)
Accretion of Series A redeemable convertible preferred stock to redemption value			(656)
Net loss attributable to common stockholders	$ (163,458)	$ (89,195)	$ (44,503)
Net loss per share attributable to common stockholders, basic and diluted	$ (2.08)	$ (2.27)	$ (5.55)
Weighted average common shares outstanding, basic and diluted	78,688,878	39,285,468	8,023,785
Comprehensive loss:
Net loss	$ (163,458)	$ (89,195)	$ (43,847)
Other comprehensive income (loss):
Unrealized gains (losses) on investments, net of tax of $0	104	(29)
Comprehensive loss	$ (163,354)	$ (89,224)	$ (43,847)

CONSOLIDATED STATEMENTS OF CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT) - USD ($) $ in Thousands	Common stock	Additional paid-in capital	Accumulated other comprehensive loss	Accumulated deficit	Convertible preferred stock	Series B convertible preferred stock	Series C convertible preferred stock	Total
Balances at Beginning of period (in shares) at Dec. 31, 2016	7,886,292
Balances at Beginning of period at Dec. 31, 2016	$ 8			$ (17,132)				$ (17,124)
Issuance of common stock upon exercise of stock options (in shares)	250,572
Issuance of common stock upon exercise of stock options		$ 37						37
Issuance of common stock for one‑time bonus payment (in shares)	213,439
Issuance of restricted common stock upon early exercise of stock options (in shares)	1,400,000
Issuance of restricted common stock upon early exercise of stock options	$ 1	(1)
Issuance of restricted common stock (in shares)	5,227,014
Issuance of restricted common stock	$ 6	(6)
Stock-based compensation expense		17,903						17,903
Accretion of Series A redeemable convertible preferred stock to redemption value		(656)						(656)
Net loss				(43,847)				(43,847)
Balances at End of period (in shares) at Dec. 31, 2017	14,977,317
Balances at End of period at Dec. 31, 2017	$ 15	17,277		(60,979)				(43,687)
Balances at Beginning of period (in shares) at Dec. 31, 2016					29,570,662
Balances at Beginning of period at Dec. 31, 2016					$ 19,067
Convertible preferred stock
Issuance of stock, net of issuance costs (in shares)						14,362,344
Issuance of stock, net of issuance costs						$ 120,067
Accretion of Series A redeemable convertible preferred stock to redemption value					$ 656
Balances at End of period (in shares) at Dec. 31, 2017					43,933,006
Balances at End of period at Dec. 31, 2017					$ 139,790
Shares issued	12,055,450
Issuance of common stock, initial public offering, net of issuance cost $3,548	$ 12	254,306						254,318
Cashless exercise of warrants	131,273
Issuance of common stock upon exercise of stock options (in shares)	225,375
Issuance of common stock upon exercise of stock options		64						64
Stock-based compensation expense		27,528						27,528
Vesting of restricted common stock		180						180
Conversion of preferred stock warrant to common stock warrant upon closing of initial public offering		3,053						3,053
Conversion of redeemable convertible preferred stock to common stock (in shares)	51,845,438
Conversion of redeemable convertible preferred stock to common stock	$ 52	240,724						240,776
Unrealized gains (losses) on investments			$ (29)					(29)
Net loss				(89,195)				(89,195)
Balances at End of period (in shares) at Dec. 31, 2018	79,234,853
Balances at End of period at Dec. 31, 2018	$ 79	543,040	(29)	(150,082)				$ 393,008
Convertible preferred stock
Issuance of stock, net of issuance costs (in shares)							7,912,432
Issuance of stock, net of issuance costs							$ 100,986
Conversion of redeemable convertible preferred stock to common stock (in shares)					(51,845,438)
Conversion of redeemable convertible preferred stock to common stock					$ (240,776)
Balances at End of period (in shares) at Dec. 31, 2018								0
Cumulative effect adjustment for adoption		(92)		92
Issuance of common stock upon exercise of stock options (in shares)	1,449,309
Issuance of common stock upon exercise of stock options	$ 2	2,443						$ 2,445
Stock-based compensation expense		41,271						41,271
Repurchase of unvested restricted common stock (in shares)	(667,917)
Repurchase of unvested restricted common stock	$ (1)							(1)
Vesting of restricted common stock		44						44
Unrealized gains (losses) on investments			104					104
Net loss				(163,458)				(163,458)
Balances at End of period (in shares) at Dec. 31, 2019	80,016,245
Balances at End of period at Dec. 31, 2019	$ 80	$ 586,798	$ 75	(312,740)				$ 274,213
Balances at End of period (in shares) at Dec. 31, 2019								0
Cumulative effect adjustment for adoption				$ 800				$ 800

CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Cash flows from operating activities:
Net loss	$ (163,458)	$ (89,195)	$ (43,847)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation expense	41,271	27,528	17,903
Depreciation and amortization expense	2,995	1,263	447
Change in fair value of preferred stock warrant liability		2,187	785
Accretion of discount on investments	(2,320)	(329)
Loss on disposal of property and equipment	335
Non-cash interest expense	289	86	42
Changes in operating assets and liabilities:
Prepaid expenses and other current assets	2,655	(9,037)	(647)
Operating lease, right-of-use-asset	4,991
Other assets	2	(74)
Accounts payable	(1,037)	4,938	1,110
Accrued expenses and other current liabilities	6,503	4,307	2,247
Deferred rent		(15)	22
Operating lease liabilities	(2,670)
Net cash used in operating activities	(110,444)	(58,341)	(21,938)
Cash flows from investing activities:
Purchases of property, plant and equipment	(40,657)	(14,952)	(2,251)
Purchases of investments	(319,133)	(160,972)
Sales and maturities of investments	227,155	64,285
Net cash used in investing activities	(132,635)	(111,639)	(2,251)
Cash flows from financing activities:
Proceeds from issuance of convertible preferred stock, net of issuance costs		100,986	120,067
Proceeds from initial public offering of common stock, net of commissions and underwriting discounts		257,866
Payments of initial public offering costs		(3,548)
Proceeds from the sale of restricted common stock			100
Proceeds from repayment of promissory note		246
Payments of debt issuance costs		(285)	(11)
Repurchase of unvested restricted common stock	(122)
Proceeds from borrowings under loan and security agreement	25,000	25,000	1,500
Payment of long-term debt		(5,500)
Proceeds from issuance of common stock upon exercise of stock options	2,413	64	37
Net cash provided by financing activities	27,291	374,829	121,693
Net increase (decrease) in cash, cash equivalents and restricted cash	(215,788)	204,849	97,504
Cash, cash equivalents and restricted cash at beginning of period	309,421	104,572	7,068
Cash, cash equivalents and restricted cash at end of period	93,633	309,421	104,572
Supplemental cash flow information:
Cash paid for interest, net of interest capitalized	2,961	385	265
Cash paid for leases	5,375
Supplemental disclosure of non-cash investing and financing information:
Lease assets obtained in exchange for new operating lease liabilities	49,799
Purchases of property, plant and equipment included in accounts payable or accrued expenses	3,095	1,550	9
Amounts capitalized under build-to-suit transaction		45,142
Proceeds from issuance of common stock upon exercise of stock options in other current assets	$ 32
Reclassification of warrant liability to additional paid-in capital		3,053
Conversion of preferred stock to common stock upon closing of the initial public offering		240,776
Issuance of preferred stock warrant in connection with loan and security agreement			14
Accretion of Series A redeemable convertible preferred stock to redemption value			$ 656
Debt issuance costs included in accounts payable and accrued expenses		$ 489

Summary of Significant Accounting Policies

12 Months Ended

Dec. 31, 2019

Summary of Significant Accounting Policies

Summary of Significant Accounting Policies

2. Summary of Significant Accounting Policies

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting periods. Significant estimates and assumptions reflected in these consolidated financial statements include, but are not limited to, the accrual of research and development expenses, the valuation of common stock and the preferred stock warrant liability prior to the IPO and the valuation of stock-based awards. The Company bases its estimates on historical experience, known trends and other market-specific or other relevant factors that it believes to be reasonable under the circumstances. On an ongoing basis, management evaluates its estimates as there are changes in circumstances, facts and experience. Actual results may differ from those estimates or assumptions.

Concentrations of Credit Risk and of Significant Suppliers

Financial instruments that potentially expose the Company to concentrations of credit risk consist primarily of cash, cash equivalents, and investments. The Company’s cash equivalents and investments as of December 31, 2019 consisted of U.S. government money market funds, U.S government treasury bills, U.S. government agency bonds and U.S. government treasury notes. The Company does not believe that it is subject to unusual credit risk beyond the normal credit risk associated with commercial banking relationships.

The Company relies, and expects to continue to rely, on a small number of vendors to manufacture supplies and raw materials for its development programs. These programs could be adversely affected by a significant interruption in these manufacturing services or the availability of raw materials.

Deferred Offering Costs

The Company capitalizes certain legal, professional accounting and other third-party fees that are directly associated with in-process equity financings as deferred offering costs until such financings are consummated. After consummation of an equity financing, these costs are recorded in stockholders’ equity (deficit) as a reduction of additional paid-in capital generated as a result of the offering. Should the in-process equity financing be abandoned, the deferred offering costs will be expensed immediately as a charge to operating expenses in the statements of operations and comprehensive loss.

Deferred Financing Costs

The Company capitalizes certain legal and other third‑party fees that are directly associated with obtaining access to capital under credit facilities. Deferred financing costs incurred in connection with obtaining access to capital are recorded in other assets and are amortized over the term of the credit facility. Deferred financing costs related to a recognized debt liability are recorded as a reduction of the carrying amount of the debt liability and amortized to interest expense using the effective interest method over the repayment term.

Cash Equivalents

The Company considers all highly liquid investments with original maturities of three months or less at the date of purchase to be cash equivalents.

Restricted Cash

As of December 31, 2019 and 2018, the Company maintained letters of credit for the benefit of the landlords of its leased properties totaling $1.7 million and $1.7 million, respectively. As of December 31, 2018, the Company also maintained restricted cash of $0.5 million to collateralize its corporate credit card. The Company was required to maintain separate cash balances of these amounts to secure the letters of credit. Related to these separate cash balances, the Company classified $1.7 million and $1.7 million as restricted cash (non-current) in its consolidated balance sheet as of December 31, 2019 and 2018, respectively. The Company also classified $0.6 million as restricted cash (current) in its consolidated balance sheet as of December 31, 2018. The Company did not have any restricted cash (current) as of December 31, 2019.

Cash, cash equivalents and restricted cash was $93.6 million, $309.4 million and $104.6 million for the years ended December 31, 2019, 2018 and 2017, respectively, of which $1.7 million, $2.3 million and $0.3 million was restricted cash, respectively.

Property, Plant and Equipment

Property and equipment are stated at cost less accumulated depreciation and amortization. Depreciation and amortization expense is recognized using the straight‑line method over the estimated useful life of each asset as follows:


		Estimated useful life
Laboratory and office equipment		5 years
Computers and software		3 years
Furniture and fixtures		7 years
Building		30 years
Leasehold improvements		Shorter of life of lease or 10 years

Costs for capital assets not yet placed into service are capitalized as construction‑in‑progress and depreciated once placed into service. Interest costs incurred during the construction of major capital projects are capitalized until the underlying asset is ready for its intended use, at which point the interest costs are amortized as depreciation expense over the life of the underlying asset. Upon retirement or sale, the cost of assets disposed of and the related accumulated depreciation and amortization are removed from the accounts and any resulting gain or loss is included in loss from operations. Expenditures for major renewals and improvements which extend the life or usefulness of the asset are capitalized. Items of an ordinary repair or maintenance nature are charged directly to operating expense as incurred.

Impairment of Long‑Lived Assets

Long‑lived assets consist of property and equipment. Long‑lived assets to be held and used are tested for recoverability whenever events or changes in business circumstances indicate that the carrying amount of the assets may not be fully recoverable. Factors that the Company considers in deciding when to perform an impairment review include significant underperformance of the business in relation to expectations, significant negative industry or economic trends and significant changes or planned changes in the use of the assets. If an impairment review is performed to evaluate a long‑lived asset group for recoverability, the Company compares forecasts of undiscounted cash flows expected to result from the use and eventual disposition of the long‑lived asset group to its carrying value. An impairment loss would be recognized in loss from operations when estimated undiscounted future cash flows expected to result from the use of an asset group are less than its carrying amount. The impairment loss would be based on the excess of the carrying value of the impaired asset group over its fair value, determined based on discounted cash flows. The Company did not record any impairment losses on long‑lived assets during the periods presented.

Fair Value Measurements

Certain assets and liabilities are carried at fair value under GAAP. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. Financial assets and liabilities carried at fair value are to be classified and disclosed in one of the following three levels of the fair value hierarchy, of which the first two are considered observable and the last is considered unobservable:

Level 1—Quoted prices in active markets for identical assets or liabilities.

Level 2—Observable inputs (other than Level 1 quoted prices), such as quoted prices in active markets for similar assets or liabilities, quoted prices in markets that are not active for identical or similar assets or liabilities, or other inputs that are observable or can be corroborated by observable market data.

Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to determining the fair value of the assets or liabilities, including pricing models, discounted cash flow methodologies and similar techniques.

The Company’s cash equivalents and investments are carried at fair value, determined according to the fair value hierarchy described above (see Note 3). The carrying values of the Company’s accounts payable and accrued expenses approximate their fair values due to the short-term nature of these liabilities. The carrying value of the Company’s long‑term debt approximates its fair value due to its variable interest rate, which approximates a market interest rate.

Investments

The Company’s investments are classified as available-for-sale and are carried at fair value, with the unrealized gains and losses reported as a component of accumulated other comprehensive income (loss) in stockholders’ equity (deficit). Realized gains and losses and declines in value determined to be other than temporary are based on the specific identification method and are included as a component of other income (expense), net in the consolidated statements of operations and comprehensive loss. The Company classifies its investments with maturities beyond one year as short-term, based on their highly liquid nature and because such investments are available for current operations.

The Company evaluates its investments with unrealized losses for other-than-temporary impairment. When assessing investments for other-than-temporary declines in value, the Company considers such factors as, among other things, how significant the decline in value is as a percentage of the original cost, how long the market value of the investment has been less than its original cost, the Company’s ability and intent to retain the investment for a period of time sufficient to allow for any anticipated recovery in fair value and market conditions in general. If any adjustment to fair value reflects a decline in the value of the investment that the Company considers to be “other than temporary,” the Company reduces the investment to fair value through a charge to the statement of operations and comprehensive loss. No such adjustments were necessary during the periods presented.

Leases

In February 2016, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. 2016-02, Leases (Topic 842) (“ASU 2016-02”), which was codified as Accounting Standards Codification (“ASC”), 842, Leases, to enhance the transparency and comparability of financial reporting related to leasing arrangements. The Company adopted the standard effective January 1, 2019 using the modified retrospective transition method. The prior period results continue to be presented under ASC 840 based on the accounting standards originally in effect for such periods. The adoption of the new standard resulted in the recognition of a cumulative effect adjustment of $0.8 million to accumulated deficit due to the derecognition of the Company’s build-to-suit lease.

At the inception of an arrangement as lessee or lessor, the Company determines whether the arrangement is or contains a lease. Operating lease cost is recognized over the lease term on a straight-line basis. Variable lease cost and short-term leases (lease terms less than 12 months) are recognized as incurred. For both lessee and lessor arrangements, variable lease payments are the amounts owed by the Company to a lessor that are not fixed, such as reimbursement for common area maintenance and utilities costs, and are expensed when incurred. When determining the lease term, the Company includes options to extend or terminate the lease when it is reasonably certain that it will exercise that option.

For lessee arrangements, operating lease liabilities and their corresponding right-of-use assets are recorded based on the present value of lease payments over the expected lease term. The interest rate implicit in lease contracts is typically not readily determinable. As such, the Company utilizes its incremental borrowing rate, which is the rate incurred to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment. Certain adjustments to the right-of-use asset may be required for items such as initial direct costs paid or incentives received. Operating leases are recognized on the balance sheet as right-of-use assets, operating lease liabilities current and operating lease liabilities non-current.

The Company has elected to adopt the following lease policies in conjunction with the adoption of ASU 2016-02: (1) for lessee and lessor arrangements within all asset classes, combine lease and non-lease components as a single component, with the lease expense recognized over the expected term on a straight-line basis and (2) for lessee arrangements, apply short-term lease exemption for all leases that qualify, where a right-of-use asset or lease liability will not be recognized for leases with terms of one year or less.

Classification and Accretion of Convertible Preferred Stock

The carrying value of the Company’s Series A redeemable convertible preferred stock was being accreted to its redemption value from the date of issuance of such shares through the earliest date of redemption. During the year ended December 31, 2017, the redemption rights were removed from the Series A redeemable convertible preferred stock (see Note 7), and as such, the Company no longer recorded adjustments to the carrying value of its outstanding convertible preferred stock for accretion to redemption value. The Company’s Series A, Series B and Series C convertible preferred stock were classified outside of stockholders’ equity (deficit) because the holders of such shares had liquidation rights in the event of a deemed liquidation that, in certain situations, were not solely within the control of the Company.

Segment Information

The Company manages its operations as a single segment for the purposes of assessing performance and making operating decisions. The Company is developing red cell therapeutics for the treatment of patients with severe diseases. All of the Company’s tangible assets are held in the United States.

Research and Development Costs

Research and development costs are expensed as incurred. Research and development expenses consist of costs incurred in performing research and development activities, including salaries and bonuses, stock‑based compensation, employee benefits, facilities costs, laboratory supplies, depreciation, manufacturing expenses and external costs of vendors engaged to conduct preclinical development activities and clinical trials, as well as the cost of licensing technology.

Upfront payments and milestone payments made for the licensing of technology are expensed as research and development in the period in which they are incurred. Advance payments for goods or services to be received in the future for use in research and development activities are recorded as prepaid expenses. The prepaid amounts are expensed as the related goods are delivered or the services are performed.

Research and Manufacturing Contract Costs and Accruals

The Company has entered into various research and development and manufacturing contracts with research institutions and other companies both inside and outside of the U.S. When billing terms under these contracts do not coincide with the timing of when the work is performed, the Company is required to make estimates of outstanding obligations as of period end with those third parties to record accruals for estimated ongoing research and development costs. Any accrual estimates are based on a number of factors, including the Company’s knowledge of the progress towards completion of the research and development activities, invoicing to date under the contracts, communication from the research institution or other companies of any actual costs incurred during the period that have not yet been invoiced, and the costs included in the contracts. Significant judgments and estimates are made in determining the accrued balances at the end of any reporting period. Actual results could differ from the Company’s estimates. The Company’s historical accrual estimates have not been materially different from the actual costs.

Patent Costs

All patent‑related costs incurred in connection with filing and prosecuting patent applications are expensed as incurred due to the uncertainty about the recovery of the expenditure. Amounts incurred are classified as general and administrative expenses.

Stock‑Based Compensation

The Company measures stock options with service-based vesting or performance-based vesting granted to employees, non-employees and directors based on the fair value on the date of grant using the Black‑Scholes option‑pricing model. The Company measures restricted common stock awards using the difference between the purchase price per share of the award, if any, and the fair value of the Company’s common stock. Compensation expense for those awards is recognized over the requisite service period, which is generally the vesting period of the respective award. The Company measures restricted stock units with service-based vesting as the market value of the Company’s stock on the date of grant. The Company uses the straight‑line method to record the expense of awards with only service‑based vesting conditions. The Company uses the graded‑vesting method to record the expense of awards with both service‑based and performance‑based vesting conditions, commencing once achievement of the performance condition becomes probable. The Company accounts for forfeitures as they occur and records compensation cost assuming all option holders will complete the requisite service period. If an award is forfeited, the Company reverses compensation expense previously recognized in the period the award is forfeited.

Prior to the adoption of ASU 2018-07 effective January 1, 2018 discussed below, the Company measured the fair value of stock-based awards granted to non-employees on the date that the related service was complete, which was generally the vesting date of the award. Prior to the service completion date, compensation expense was recognized over the period during which services were rendered by such non-employees. At the end of each financial reporting period prior to the service completion date, the fair value of these awards was remeasured using the then-current fair value of the Company's common stock and updated assumption inputs in the Black-Scholes option-pricing model for options or the difference between the purchase price per share of the award, if any, and the then-current fair value of the Company's common stock for restricted common stock awards.

For stock-based awards with market-based vesting conditions, the Company measures the fair value on the date of grant using a Monte Carlo simulation model. When service-based vesting conditions also exist, the Company recognizes stock-based compensation expense using the graded-vesting method over the longer of the derived service period from the market condition or the required service period. In accordance with accounting guidance for awards with market conditions, the stock-based compensation expense will be recognized over the appropriate period regardless of whether the award achieves the market condition and will only be adjusted to the extent the service condition is not met. When an award contains a market-based vesting condition and a performance-based vesting condition where both must be achieved to earn the award, the Company recognizes stock-based compensation expense over the longer of the derived service period from the market condition or the period estimated for the performance-based vesting condition to be achieved. The Company begins recording stock based compensation expense for this type of award once the achievement of the performance-based vesting condition becomes probable regardless of whether the market condition has been achieved.

For restricted stock awards under which restricted common stock is purchased by the holder with a promissory note treated as a nonrecourse note for accounting purposes, the Company measures the fair value of the award using the Black‑Scholes option‑pricing model.

The Company classifies stock‑based compensation expense in its consolidated statements of operations and comprehensive loss in the same manner in which the award recipient’s payroll costs are classified or in which the award recipient’s service payments are classified.

Comprehensive Loss

Comprehensive loss includes net loss as well as other changes in stockholders’ equity (deficit) that result from transactions and economic events other than those with stockholders. For the years ended December 31, 2019 and 2018, the Company’s only element of other comprehensive loss was unrealized gains (losses) on investments. For the year ended December 31, 2017, there was no difference between net loss and comprehensive loss in the accompanying consolidated financial statements.

Net Income (Loss) per Share

Prior to the closing of its IPO, the Company followed the two-class method when computing net income (loss) per share, as the Company had issued shares that met the definition of participating securities. The two-class method determines net income (loss) per share for each class of common and participating securities according to dividends declared or accumulated and participation rights in undistributed earnings. The two-class method requires income available to common stockholders for the period to be allocated between common and participating securities based upon their respective rights to receive dividends as if all income for the period had been distributed. The Company’s redeemable convertible preferred stock contractually entitled the holders of such shares to participate in dividends but did not contractually require the holders of such shares to participate in losses of the Company. Accordingly, in periods in which the Company reported a net loss, such losses were not allocated to such participating securities, and as a result, basic and diluted net loss per share were the same.

Subsequent to the closing of its IPO, basic net income (loss) per common share is computed by dividing the net income (loss) by the weighted average number of shares of common stock outstanding for the period. Diluted net income (loss) per common share is computed by dividing net income (loss) by the weighted average number of common shares outstanding for the period, including potential dilutive common shares assuming the dilutive effect of outstanding common stock equivalents. Accordingly, in periods in which the Company reported a net loss, dilutive common shares were not assumed to have been issued as their effect was anti-dilutive, and as a result, diluted net loss per common share was the same as basic net loss per common share.

Income Taxes

The Company accounts for income taxes using the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in the consolidated financial statements or in the Company’s tax returns. Deferred tax assets and liabilities are determined on the basis of the differences between the financial statements and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Changes in deferred tax assets and liabilities are recorded in the provision for income taxes. The Company assesses the likelihood that its deferred tax assets will be recovered from future taxable income and, to the extent it believes, based upon the weight of available evidence, that it is more likely than not that all or a portion of the deferred tax assets will not be realized, a valuation allowance is established through a charge to income tax expense. Potential for recovery of deferred tax assets is evaluated by estimating the future taxable profits expected and considering prudent and feasible tax planning strategies.

The Company accounts for uncertainty in income taxes recognized in the consolidated financial statements by applying a two‑step process to determine the amount of tax benefit to be recognized. First, the tax position must be evaluated to determine the likelihood that it will be sustained upon external examination by the taxing authorities. If the tax position is deemed more‑likely‑than‑not to be sustained, the tax position is then assessed to determine the amount of benefit to recognize in the consolidated financial statements. The amount of the benefit that may be recognized is the largest amount that has a greater than 50% likelihood of being realized upon ultimate settlement. The provision for income taxes includes the effects of any resulting tax reserves, or unrecognized tax benefits, that are considered appropriate as well as the related net interest and penalties.

Recently Adopted Accounting Pronouncements

ASU No. 2018-07, Compensation — Stock Compensation

In June 2018, the Financial Accounting Standards Board, (the “FASB”) issued Accounting Standards Update (“ASU”) No. 2018-07, Compensation — Stock Compensation (Topic 718), Improvements to Non-Employee Share-Based Payment Accounting (“ASU 2018-07”). This ASU is intended to simplify aspects of share-based compensation issued to non-employees by making the guidance consistent with the accounting for employee share-based compensation. For public entities, ASU 2018-07 was required to be adopted for annual periods beginning after December 15, 2018, including interim periods within those fiscal years. For non-public entities, ASU 2018-07 is effective for annual periods beginning after December 15, 2019. Early adoption was permitted for all entities but no earlier than the Company’s adoption of ASU 2014-09.

Effective January 1, 2018, the Company adopted ASU 2018-07 by remeasuring outstanding equity-classified awards issued to non-employees for which a measurement date had not been established as of January 1, 2018 through a cumulative-effect adjustment to accumulated deficit as of January 1, 2018. The Company elected to estimate the expected term of options utilizing the “simplified” method for both employee and non-employee options that qualify as “plain-vanilla” options. The Company elected to account for forfeitures for non-employee options as they occur rather than apply an estimated forfeiture rate to stock-based compensation expense.

The following table summarizes the cumulative effect to the Company’s consolidated balance sheet upon the adoption of ASU 2018-07 on January 1, 2018 (in thousands):


	Balance at				Balance at
	December 31, 2017		Adjustments		January 1, 2018
Additional paid-in capital	$	17,277	$	(92)	$	17,185
Accumulated deficit		(60,979)		92		(60,887)

The $0.1 million adjustment was the result of the change in fair value of the unvested awards, representing awards for which a measurement date had not been established, using an expected term rather than the contractual term of the awards.

As of the adoption date of January 1, 2018, the Company had 330,917 outstanding options to non-employees for which a measurement date had not been established. As of the adoption date of January 1, 2018, the Company had 4,767,014 shares of restricted common stock held by non-employees that were being accounted for as stock options for which a measurement date had not been established (see Note 10). The weighted average fair value of these awards was $5.88 per share as of January 1, 2018. The following table presents, on a weighted average basis, the assumptions used in the Black-Scholes option-pricing model to determine the fair value of outstanding awards granted to non-employees for which a measurement date had not been established as of the adoption date of January 1, 2018:


Risk-free interest rate		2.3	%
Expected volatility		74	%
Expected dividend yield		—
Expected term (in years)		6.1
Common stock value	$	6.28

ASU No. 2016-02, Leases

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) (“ASU 2016-02”), which sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract (i.e., lessees and lessors). The new standard requires lessees to classify leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase by the lessee. This classification determines whether lease expense is recognized over the lease term based on an effective interest method for financing leases or on a straight-line basis for operating leases. A lessee is also required to record a right-of-use asset and a lease liability for all leases with a term of greater than 12 months regardless of their classification. Leases with a term of 12 months or less may be accounted for similar to previous guidance for operating leases under ASC 840. For public entities, the guidance was effective for annual reporting periods beginning after December 15, 2018 and for interim periods within those fiscal years.

ASU 2016-02 initially required adoption using a modified retrospective approach, under which all years presented in the financial statements would be prepared under the revised guidance. In July 2018, the FASB issued ASU 2018-11, Leases (Topic 842), which added an optional transition method under which financial statements may be prepared under the revised guidance for the year of adoption, but not for prior years. Under the latter method, entities will recognize a cumulative catch-up adjustment to the opening balance of retained earnings in the period of adoption.

The Company adopted ASC 842 using the modified retrospective approach with an effective date of January 1, 2019 for leases that existed on that date. Prior period results continue to be presented under ASC 840 based on the accounting standards originally in effect for such periods. This standard provides a number of optional practical expedients in transition. The Company applied the package of practical expedients to leases that commenced prior to the effective date, whereby it elected not to reassess the following: (i) whether any expired or existing contracts contain leases; (ii) the lease classification for any expired or existing leases; and (iii) initial direct costs for any existing leases. The Company elected the short-term lease recognition exemption for all leases that qualify, where a right-of-use asset or lease liability will not be recognized for short term leases that have terms of one year or less. The most significant effects of adoption were the recognition of material new right-of-use assets and corresponding liabilities on its consolidated balance sheet related to its existing facility operating leases (see Note 13). In addition, the Company has a material lease where the Company was deemed the owner during the construction period and for which the construction was not complete as of January 1, 2019. The Company took control of the leased space during the first quarter of 2019, at which time the lease commenced. Under ASC 842, as the commencement date of this material lease had not occurred, the new right-of-use assets and corresponding liabilities related to this lease were not recognized on the consolidated balance sheet as of date of adoption, January 1, 2019, however, were recognized upon the commencement date of January 28, 2019. The adoption of this standard has had a material impact on the Company’s financial position did not significantly affect the Company’s results of operations.

The following table summarizes the financial impact on the Company’s consolidated balance sheet upon the adoption of ASU 2016-02 and the cumulative effect adjustment on January 1, 2019 (in thousands):


	Balance at				Balance at
	December 31, 2018		Adjustments		January 1, 2019
Operating lease, right-of-use-asset	$	—	$	1,751	$	1,751
Property, plant and equipment, net		62,796		(45,142)		17,654
Deferred rent		143		(143)		—
Accrued expenses and other current liabilities		12,118		(4,451)		7,667
Lease financing obligation		41,441		(41,441)		—
Operating lease liabilities		—		616		616
Operating lease liabilities, net of current portion		—		1,226		1,226
Accumulated deficit		(150,082)		800		(149,282)

ASU No. 2018-15, Intangibles–Goodwill and Other–Internal-Use Software

In August 2018, the FASB issued ASU No. 2018-15, Intangibles–Goodwill and Other–Internal-Use Software (Topic 350): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract. This new guidance aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. For public entities, the guidance was effective for annual reporting periods beginning after December 15, 2019 and for interim periods within those fiscal years. Early adoption was permitted. The Company early-adopted this standard on January 1, 2019 on a prospective basis. The adoption did not have a material impact on the Company’s consolidated financial statements.

Recently Issued Accounting Pronouncements

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 2018-13”), which modifies the disclosure requirements for fair value measurements. For all entities, this guidance is required to be adopted for annual periods beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted. The Company currently is evaluating the impact the adoption of ASU 2018-13 may have on its disclosures.

Investments and Fair Value of Financial Assets and Liabilities

12 Months Ended

Dec. 31, 2019

Investments and Fair Value of Financial Assets and Liabilities

Investments and Fair Value of Financial Assets and Liabilities

3. Investments and Fair Value of Financial Assets and Liabilities

Investments by security type consisted of the following (in thousands):


	December 31, 2019
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
U.S. treasury bills and notes (due within one year)	$	189,816	$	91	$	(20)	$	189,887
U.S. government agency bonds (due within one year)		1,498		4		—		1,502
	$	191,314	$	95	$	(20)	$	191,389


	December 31, 2018
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
U.S. treasury notes (due within one year)	$	79,312	$	—	$	(26)	$	79,286
U.S. government agency bonds (due within one year)		17,704		—		(3)		17,701
	$	97,016	$	—	$	(29)	$	96,987

The following tables present the Company’s fair value hierarchy for its assets and liabilities, which are measured at fair value on a recurring basis (in thousands):


	Fair value measurements at December 31, 2019 using:

	Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents:
Money market funds	$	91,898	$	—	$	—	$	91,898
Investments:
U.S. government agency bonds		—		1,502		—		1,502
U.S. treasury bills and notes		—		189,887		—		189,887
	$	91,898	$	191,389	$	—	$	283,287


	Fair value measurements at December 31, 2018 using:

	Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents:
Money market funds	$	282,160	$	—	$	—	$	282,160
U.S. treasury bills		—		24,904		—		24,904
Investments:
U.S. government agency bonds		—		17,701		—		17,701
U.S. treasury notes		—		79,286		—		79,286
	$	282,160	$	121,891	$	—	$	404,051

U.S. government money market funds were valued by the Company based on quoted market prices, which represent a Level 1 measurement within the fair value hierarchy. U.S. treasury notes and U.S. government agency bonds were valued by the Company using quoted prices in active markets for similar securities, which represent a Level 2 measurement within the fair value hierarchy. There have been no changes to the valuation methods during the year ended December 31, 2019. The Company evaluates transfers between levels at the end of each reporting period. There were no transfers between Level 1, Level 2 or Level 3 during the year ended December 31, 2019 and 2018, respectively.

- 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

Debt

12 Months Ended

Dec. 31, 2019

Debt

Debt

6. Debt

Long‑term debt consisted of the following (in thousands):


	December 31,
		2019	2018
Principal amount of long‑term debt	$	50,000	$	25,000
Less: Current portion of long‑term debt		—		—
Long‑term debt, net of current portion		50,000		25,000
Accrued final interest payment		213		16
Debt discount		(617)		(669)
Long‑term debt, net of discount and current portion	$	49,596	$	24,347

2015 Credit Facility

The Company was party to a loan and security agreement, as amended (the “2015 Credit Facility”), under which the Company had borrowed an aggregate of $5.5 million. Until May 2018, borrowings under the 2015 Credit Facility bore interest at an annual rate equal to the bank’s prime rate plus 1.25%, subject to a floor of 4.5%, and were repayable in monthly interest-only payments through May 2018 and in equal monthly payments of principal plus accrued interest from June 2018 until the maturity date in November 2019. In May 2018, the Company further amended the 2015 Credit Facility to modify the interest rate and extend the interest-only payment period and the maturity date. Subsequent to this amendment, outstanding borrowings under the 2015 Credit Facility bore interest at an annual rate equal to the bank’s prime rate plus 0.75%, subject to a floor of 5.5%, and were repayable in monthly interest-only payments through May 2019 and in equal monthly payments of principal plus accrued interest from June 2019 until the scheduled maturity date in November 2020.

In December 2018, the Company repaid all borrowings under the 2015 Credit Facility. The aggregate principal amount of the loan outstanding at the time of repayment was $5.5 million and the Company did not incur any penalties as a result of the repayment. The Company recognized a loss on the extinguishment of the 2015 Credit Facility of less than $0.1 million related to the unamortized debt discount at the time of repayment. The loss on extinguishment was recorded as additional interest expense.

2018 Credit Facility

On December 21, 2018 (the “Closing Date”), the Company entered into a loan and security agreement (the “Loan Agreement”) with Solar Capital Ltd. as collateral agent for the lenders party thereto for an aggregate principal amount of $75.0 million. The aggregate principal amount will be funded in three tranches of term loans of $25.0 million each. On the Closing Date, the Company made an initial borrowing of $25.0 million. In June 2019, the Company made a second borrowing of $25.0 million. The third tranche will be available to the Company through June 30, 2020, subject to the satisfaction of certain financial covenants.

Interest on the outstanding loan balance will accrue at a rate of the one-month U.S. LIBOR rate plus 5.50%. Monthly principal payments will commence 36 months after the Closing Date and will be amortized over the following 24 months. Certain backend fees are due to the lender at the time of final repayment based on the total funded term loans. The Company accrues the backend fees that will be due at final repayment to outstanding debt by charges to interest expense over the term of the loans using the effective-interest method. The term loans are subject to a prepayment fee of 1.00% in the first year, 0.50% in the second year and 0.25% in the third year. In conjunction with 2018 Credit Facility, the Company incurred issuance costs of $0.8 million.

The Loan Agreement contains financial covenants that require the Company to maintain either a certain minimum cash balance or a minimum market capitalization threshold. The Company was in compliance with all such covenants as of December 31, 2019. The Loan Agreement contains customary representations, warranties and covenants and also includes customary events of default, including payment defaults, breaches of covenants, change of control and a material adverse change default. Upon the occurrence of an event of default, a default interest rate of an additional 4.00% per annum may be applied to the outstanding loan balances, and the lenders may declare all outstanding obligations immediately due and payable. Borrowings under the Loan Agreement are collateralized by substantially all of the Company’s assets, other than its intellectual property.

As of December 31, 2019, the estimated future principal payments due were as follows (in thousands):


Year ending December 31,
2020	$	—
2021		—
2022		25,000
2023		25,000
2024 and thereafter		—
	$	50,000

Stock-Based Compensation

12 Months Ended

Dec. 31, 2019

Stock-Based Compensation

Stock-Based Compensation

10. Stock-Based Compensation

2014 Stock Incentive Plan

The Company’s 2014 Stock Incentive Plan (the “2014 Plan”) provided for the Company to sell or issue incentive stock options or nonqualified stock options, restricted stock, restricted stock units and other equity awards to employees, directors and consultants of the Company. The 2014 Plan was administered by the board of directors or, at the discretion of the board of directors, by a committee of the board of directors. The exercise prices, vesting and other restrictions were determined at the discretion of the board of directors, or its committee if so delegated.

Stock options granted under the 2014 Plan with service‑based vesting conditions generally vested over three or four years and expired after ten years. The 2014 Plan allowed for the early exercise of unvested stock options, subject to certain restrictions, including the ability of the Company to repurchase such options upon an option holder’s termination of employment with the Company if such options had not yet vested. Restricted stock granted under the 2014 Plan with service‑based vesting conditions generally vested over three or four years.

The exercise price for stock options granted was not less than the fair value of common shares as determined by the board of directors as of the date of grant. The Company’s board of directors valued the Company’s common stock, taking into consideration its most recently available valuation of common stock performed by third parties as well as additional factors which may have changed since the date of the most recent contemporaneous valuation through the date of grant. Stock options were only granted under the 2014 Plan during the period that the Company was privately held.

The total number of shares of common stock that could have been issued under the 2014 Plan was 19,152,328 shares, of which 47,447 shares remained available for future issuance prior to the effectiveness of the Company’s 2018 Stock Option and Incentive Plan (the “2018 Plan”). Upon effectiveness of the 2018 Plan in July 2018, the remaining shares available under the 2014 Plan ceased to be available for issuance and no future issuances will be made under the 2014 Plan. The shares of common stock underlying outstanding awards under the 2014 Plan that are forfeited, cancelled, held back upon exercise or settlement of an award to satisfy the exercise price or tax withholding, reacquired by the Company prior to vesting, satisfied without the issuance of stock, expire or are otherwise terminated (other than by exercise) will be added to the shares of common stock available for issuance under the 2018 Plan.

2018 Equity Incentive Plan

On July 6, 2018, the Company’s board of directors adopted, and its stockholders approved, the 2018 Plan, which became effective on July 16, 2018. The 2018 Plan provides for the grant of incentive stock options, non-qualified options, stock appreciation rights, restricted stock awards, restricted stock units and other stock-based awards. The number of shares initially reserved for issuance under the 2018 Plan is 5,708,931, which shall be cumulatively increased on January 1, 2019 and each January 1 thereafter by 4% of the number of shares of the Company’s common stock outstanding on the immediately preceding December 31 or such lesser number of shares determined by the Company’s board of directors or compensation committee of the board of directors. The shares of common stock underlying any awards that are forfeited, cancelled, held back upon exercise or settlement of an award to satisfy the exercise price or tax withholding, reacquired by the Company prior to vesting, satisfied without the issuance of stock, expire or are otherwise terminated (other than by exercise) under the 2018 Plan and the 2014 Plan will be added back to the shares of common stock available for issuance under the 2018 Plan. As of December 31, 2019, 3,334,533 shares remained available for issuance under the 2018 Plan. The number of authorized shares reserved for issuance under the 2018 Plan was increased by 3,200,649 shares effective as of January 1, 2020.

2018 Employee Stock Purchase Plan

On July 6, 2018, the Company’s board of directors adopted and its stockholders approved the 2018 Employee Stock Purchase Plan (the “ESPP”), which became effective on July 16, 2018. A total of 951,488 shares of common stock were reserved for issuance under this plan. In addition, the number of shares of common stock that may be issued under the ESPP will automatically increase on January 1, 2019, and each January 1 thereafter through January 1, 2028, by the least of (i) 951,488 shares of common stock, (ii) 1% of the number of shares of the Company’s common stock outstanding on the immediately preceding December 31 or (iii) such lesser number of shares as determined by the administrator of the Company’s ESPP. As of December 31, 2019, all 1,751,650 shares remained available for issuance under the 2018 ESPP. The number of authorized shares reserved for issuance under the ESPP was not increased on January 1, 2020.

Stock Option Valuation

Service-Based and Performance-Based Stock Options

The fair value of stock option grants with service-based and performance-based vesting conditions is estimated using the Black-Scholes option-pricing model. The Company estimates expected volatility based on the historical volatility of publicly traded peer companies. The Company expects to continue to do so until such time as it has adequate historical data regarding the volatility of its traded stock price following our July 2018 IPO. For options with service-based vesting conditions, the expected term of the Company’s stock options has been determined utilizing the “simplified” method for awards that qualify as “plain-vanilla” options. For periods prior to the adoption of ASU 2018-07 on January 1, 2018, the expected term of stock options granted to non-employees was equal to the contractual term of the option award. Upon the adoption of ASU 2018-07 on January 1, 2018, the expected term of stock options granted to non-employees has been determined utilizing the “simplified” method for awards that qualify as “plain-vanilla” options. The risk‑free interest rate is determined by reference to the U.S. Treasury yield curve in effect at the time of grant of the award for time periods approximately equal to the expected term of the award. Expected dividend yield is based on the fact that the Company has never paid cash dividends and does not expect to pay any cash dividends in the foreseeable future.

The following table presents, on a weighted average basis, the assumptions used in the Black-Scholes option-pricing model to determine the fair value of stock-based awards granted to employees, directors, and, in 2019 and 2018, non-employees:


	Year ended December 31,
	2019		2018		2017
Risk-free interest rate	2.07	%	2.71	%	2.05	%
Expected volatility	76.9	%	74.0	%	75.6	%
Expected dividend yield	—		—		—
Expected term (in years)	6.06		6.21		6.39

The following table presents the assumptions used in the Black-Scholes option-pricing model to determine the fair value of stock awards granted to non-employees, prior to the adoption of ASU 2018-07:


		Year ended December 31,
		2017
Risk-free interest rate		2.02% - 2.31%
Expected volatility		74% - 85%
Expected dividend yield		—
Expected term (in years)		6 - 10
Fair value of common stock		$0.19 - $6.28

The following table summarizes the Company’s service-based and performance-based option activity since December 31, 2018:


		Weighted		Weighted
		average		average	Aggregate
	Number of	exercise		contractual	intrinsic
	shares	price		term	value
				(in years)	(in thousands)
Outstanding as of December 31, 2018	14,784,770	$	8.93	8.89	$	126,367
Granted	3,059,004		12.67
Exercised	(1,449,309)		1.68
Forfeited	(1,290,558)		8.58
Outstanding as of December 31, 2019	15,103,907	$	10.41	8.22	$	36,006
Vested and expected to vest as of December 31, 2019	15,103,907	$	10.41	8.22	$	36,006
Options exercisable as of December 31, 2019	5,182,808	$	6.33	7.49	$	21,743

The aggregate intrinsic value of stock options is calculated as the difference between the exercise price of the stock options and the fair value of the Company’s common stock for those stock options that had exercise prices lower than the fair value of the Company’s common stock. The aggregate intrinsic value of stock options exercised during the years ended December 31, 2019, 2018 and 2017 was $17.7 million, $3.7 million and $3.7 million, respectively.

The weighted average grant-date fair value of stock options granted during the years ended December 31, 2019, 2018 and 2017 was $8.58 per share, $8.71 per share and $2.74 per share, respectively.

In April 2017, an executive officer early exercised an option to purchase 1,400,000 shares of common stock, at an exercise price of $0.18 per share, for cash proceeds of $0.1 million and a promissory note for $0.2 million (see Note 15). The employee received shares of restricted common stock upon such exercise. The unvested shares of restricted common stock issued upon exercise are subject to the Company’s repurchase right at the lesser of the original exercise price per share or the fair value of such shares on the repurchase date. The $0.1 million of cash proceeds from the early exercise of this stock option was recorded as a liability in the Company’s consolidated balance sheet and will be reclassified to stockholders’ equity (deficit) as the shares vest and the Company’s repurchase rights related to such shares lapse. The promissory note was partial-recourse, but was treated as nonrecourse for accounting purposes. As a result, (i) this early exercise of common stock with a promissory note continued to be accounted for as an outstanding stock option and (ii) no receivable for amounts due under the promissory note was recorded on the Company’s consolidated balance sheet. Stock-based compensation expense related to this award is being recognized over the requisite service period of the award based on the grant-date fair value of the award, which was determined using the Black-Scholes option-pricing model. On June 21, 2018, the principal balance of $0.2 million and all interest that had accrued thereon, totaling less than $0.1 million, was repaid in full by the executive officer and the promissory note was terminated (see Note 15). The portion of the repayment that was associated with vested shares for which the Company’s repurchase obligations had lapsed was recorded to stockholders’ equity (deficit) and the remaining amount was recorded as a liability in the consolidated balance sheet and will be recorded to stockholders’ equity (deficit) as the shares vest and the Company’s repurchase rights related to such shares lapse.

Market-Based Stock Options

The fair value of stock option grants with market-based vesting conditions is estimated using a Monte Carlo simulation model.

In October 2018, the Company granted to an executive officer an option to purchase 164,400 shares of common stock (“Option A”) at an exercise price of $16.43 per share, vesting upon the achievement of a specified thirty-day average closing price of its common stock and the satisfaction of service-based vesting conditions, and an option to purchase 193,400 shares of common stock (“Option B”) at an exercise price of $16.43 per share, vesting upon the achievement of a specified thirty-day average closing price of its common stock and the achievement of certain other performance-based vesting conditions. The Company used a Monte Carlo simulation model to estimate the grant-date fair value of the awards. Assumptions and estimates utilized in the model include the risk-free interest rate, dividend yield, expected stock volatility based on a combination of the Company’s historical stock volatility since its July 2018 IPO and the historical volatility of a publicly traded set of peer companies and the estimated period to achievement of the market condition. Stock-based compensation expense for Option A is being recognized using the graded-vesting method over the longer of the derived service period from the market condition or the explicit service period required to be completed for each vesting tranche. Stock-based compensation expense for Option B will be recognized when the achievement of the performance-based vesting conditions become probable regardless of whether the market condition has been achieved. The aggregate grant date fair value of these options was $4.3 million. During the years ended December 31, 2019 and 2018 the Company recorded stock-based compensation expense on Option A of $0.9 million and $0.2 million, respectively. No stock-based compensation expense has been recorded on Option B, as the performance-based vesting conditions have not yet been determined to be probable.

The following table presents, on a weighted average basis, the assumptions used in the Monte Carlo simulation model to determine the fair value of stock-based awards granted to employees:


	Year ended December 31,
	2018
Risk-free interest rate	3.15	%
Expected volatility	69.0	%
Expected dividend yield	—
Derived service period (in years)	2.30

The weighted average grant-date fair value of stock options with market-based vesting conditions granted during the year ended December 31, 2018 was $11.88 per share. The Company did not grant market-based stock options during the year ended December 31, 2019. During the years ended December 31, 2019, none of the outstanding stock awards with market-based vesting conditions were exercised, forfeited or vested and they had no intrinsic value at December 31, 2019.

Restricted Common Stock Awards

The Company has granted restricted common stock with service-based vesting conditions. Shares of unvested restricted common stock may not be sold or transferred by the holder. These restrictions lapse according to the time-based vesting conditions of each award. The following table summarizes the Company’s restricted common stock award activity since December 31, 2018:


		Weighted average
		grant‑date
	Shares	fair value
Unvested restricted common stock as of December 31, 2018	1,559,401	$	0.502
Issued	—		—
Vested	(1,258,837)		0.519
Forfeited	(201,250)		0.387
Unvested restricted common stock as of December 31, 2019	99,314	$	0.526

In the table above, the number of shares of unvested restricted common stock outstanding as of December 31, 2018 excludes 670,834 shares of restricted common stock that remained unvested as of that date related to the early exercise of a stock option during the year ended December 31, 2017 in exchange for 1,400,000 shares of restricted common stock. During 2019, 466,667 shares of unvested restricted common stock remaining from that early exercise were repurchased by the Company. As of December 31, 2019, shares of unvested restricted common stock awards totaled 99,314 shares.

The aggregate intrinsic value of restricted stock awards is calculated as the positive difference between the prices paid, if any, of the restricted stock awards and the fair value of the Company’s common stock. The aggregate intrinsic value of restricted stock awards that vested during the years ended December 31, 2019, 2018 and 2017 was $16.3 million, $34.0 million and $0.9 million, respectively.

In April 2017, the Company issued 460,000 shares of restricted common stock, at a price of $0.19 per share, to an executive officer in exchange for a promissory note in the principal amount of $0.1 million. The promissory note was partial-recourse, but was treated as nonrecourse for accounting purposes and, as such, (i) this purchase of common stock with a promissory note was accounted for as if it were a stock option grant and (ii) no receivable for amounts due under the promissory note was recorded on the Company’s consolidated balance sheet. Stock-based compensation expense related to this award is being recognized over the requisite service period of the award based on the grant-date fair value of the award, which was determined using the Black-Scholes option-pricing model. On June 21, 2018, the principal balance of $0.1 million and all interest that had accrued thereon, totaling less than $0.1 million, was repaid in full by the executive officer and the promissory note was terminated (see Note 15).

In January 2017 and May 2017, the Company issued 3,667,014 shares and 1,100,000 shares, respectively, of restricted common stock at prices of $0.19 per share and $1.65 per share, respectively, to the chairman of the Company’s board of directors in exchange for two promissory notes totaling $2.5 million. The promissory notes are partial-recourse, but were treated as nonrecourse for accounting purposes and, as such, (i) each of these purchases of common stock with a promissory note was accounted for as if it were a stock option grant and (ii) no receivable for amounts due under the promissory note was recorded on the Company’s consolidated balance sheet. All of the stock-based awards issued to the chairman of the Company’s board of directors were issued for his services as a consultant and prior to the adoption of ASU 2018-07, which was effective January 1, 2018, were being accounted for as non-employee stock-based awards. As a result, stock-based compensation expense related to the awards was being recognized over the requisite service period of the award based on the remeasured fair value of the award at each reporting period until the award vested, which was determined using the Black-Scholes option-pricing model. Upon the adoption of ASU 2018-07, the Company valued the remaining unvested options issued to non-employees as of January 1, 2018 and is recognizing stock-based compensation over the remaining vesting period. Effective January 1, 2018, the Company no longer remeasures the fair value of options granted to non-employees at each reporting period end (see Note 2). On June 21, 2018, the aggregate principal balance of both promissory notes of $2.5 million and all interest that had accrued thereon, totaling $0.1 million, was forgiven by the Company and the promissory notes were terminated (see Note 15). The forgiveness of these promissory notes by the Company was treated as an option modification and resulted in the recognition of incremental stock-based compensation expense of $1.5 million during the year ended December 31, 2018, which represents the change in the fair value of the award on the modification date. The aggregate amount of stock-based compensation expense related to these restricted stock awards recognized during the years ended December 31, 2019 and 2018 was $7.6 million and $7.3 million, respectively. Stock-based compensation expense related to these awards will continue to be recognized over the requisite service period of the awards.

Restricted Stock Units

The Company has also granted restricted stock units to its employees. During the year ended December 31, 2019, the Company granted restricted stock units to employees that were subject to time-based vesting conditions that lapse over three years from date of grant. Restricted stock units with time-based vesting conditions are valued on the grant date using the grant date market price of the underlying shares. The following table summarizes the Company’s restricted stock unit activity since December 31, 2018:


		Weighted average
		grant‑date
	Shares	fair value
Unvested restricted common stock as of December 31, 2018	—	$	—
Issued	277,200		10.660
Vested	—		—
Forfeited	—		—
Unvested restricted common stock as of December 31, 2019	277,200	$	10.660

No outstanding restricted stock units vested or were forfeited during the year ended December 31, 2019.

Stock-Based Compensation

The Company recorded stock-based compensation expense in the following expense categories of its consolidated statements of operations and comprehensive loss (in thousands):


	Year ended December 31,
	2019		2018		2017
Research and development expenses	$	9,011	$	3,787	$	1,756
General and administrative expenses		32,260		23,741		16,147
	$	41,271	$	27,528	$	17,903

In October 2017, the Company issued 213,439 shares of common stock to the Company’s chairman of its board of directors as payment of a one‑time bonus that was payable, at his election, in cash or shares of common stock. The shares were issued out of the 2014 Plan. In connection with this issuance, the Company recorded $1.0 million of stock‑based compensation expense, equal to the aggregate fair value of this common stock on the date of issuance.

Stock-based compensation expense for the year ended December 31, 2018 includes $2.2 million of stock-based compensation expense related to options for the purchase of an aggregate of 447,000 shares of common stock that have non-market, performance-based vesting conditions for which the performance condition was achieved during the year ended December 31, 2018. During 2019, options for the purchase of 257,854 shares of common stock were canceled before the performance conditions were met. As of December 31, 2019, the Company has no outstanding options with non-market, performance-based vesting conditions.

As of December 31, 2019, total unrecognized compensation cost related to unvested stock‑based awards was $70.6 million, which is expected to be recognized over a weighted average period of 2.2 years.

CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares	Dec. 31, 2019	Dec. 31, 2018
CONSOLIDATED BALANCE SHEETS
Preferred stock, par value (in dollars per share)	$ 0.001	$ 0.001
Preferred stock, share authorized (in shares)	10,000,000	10,000,000
Preferred stock, shares issued (in shares)	0	0
Preferred stock, shares outstanding (in shares)	0	0
Common stock, par value (in dollars per share)	$ 0.001	$ 0.001
Common stock, share authorized (in shares)	150,000,000	150,000,000
Common stock, shares issued (in shares)	80,016,245	79,234,853
Common stock, shares outstanding (in shares)	80,016,245	79,234,853

CONSOLIDATED STATEMENTS OF CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT) (Parenthetical) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017
Net of issuance cost	$ 3,548
Series B convertible preferred stock
Net of issuance cost		$ 433
Series C convertible preferred stock
Net of issuance cost	$ 214

Nature of the Business and Basis of Presentation	12 Months Ended
Nature of the Business and Basis of Presentation	Dec. 31, 2019
Nature of the Business and Basis of Presentation
Nature of the Business and Basis of Presentation	1. Nature of the Business and Basis of Presentation Rubius Therapeutics, Inc. (“Rubius” or the “Company”) is a therapeutics company focused on using its platform to develop red cell therapeutics for the treatment of patients with severe diseases. Rubius was incorporated in April 2013 as VL26, Inc. under the laws of the State of Delaware. In January 2015, the Company changed its name to Rubius Therapeutics, Inc. The Company is subject to risks and uncertainties common to early-stage companies in the biotechnology industry, including, but not limited to, development by competitors of new technological innovations, dependence on key personnel, protection of proprietary technology, compliance with government regulations, the ability to establish clinical- and commercial-scale manufacturing processes and the ability to secure additional capital to fund operations. In addition, the Company is subject to uncertainty regarding the performance and safety of red cell therapeutics in humans. Product candidates currently under development will require significant additional research and development efforts, including extensive preclinical and clinical testing and regulatory approval prior to commercialization. These efforts require significant amounts of additional capital, adequate personnel and infrastructure and extensive compliance-reporting capabilities. Even if the Company’s drug development efforts are successful, it is uncertain when, if ever, the Company will realize significant revenue from product sales. On July 20, 2018, the Company completed its initial public offering (“IPO”), pursuant to which it issued and sold 12,055,450 shares of common stock, inclusive of 1,572,450 shares sold by the Company pursuant to the full exercise of the underwriters’ option to purchase additional shares. The aggregate net proceeds received by the Company from the IPO were $254.3 million, after deducting underwriting discounts and commissions and other offering costs. Upon the closing of the IPO, all of the shares of the Company’s outstanding convertible preferred stock then outstanding automatically converted into 51,845,438 shares of common stock (see Note 7). The accompanying consolidated financial statements have been prepared on the basis of continuity of operations, realization of assets and the satisfaction of liabilities and commitments in the ordinary course of business. The Company has incurred recurring losses since inception, including net losses of $163.5 million, $89.2 million and $43.8 million for the years ended December 31, 2019, 2018 and 2017, respectively. As of December 31, 2019, the Company had an accumulated deficit of $312.7 million. The Company expects to continue to generate operating losses in the foreseeable future. As of March 12, 2020, the issuance date of the consolidated financial statements, the Company expects that its cash, cash equivalents and investments will be sufficient to fund its operating expenses and capital expenditure requirements for at least 12 months from the issuance date of the consolidated financial statements. The Company will seek additional funding through private or public equity financings, debt financings, collaborations, strategic alliances and marketing, distribution or licensing arrangements. The Company may not be able to obtain financing on acceptable terms, or at all, and the Company may not be able to enter into collaborations or other arrangements. The terms of any financing may adversely affect the holdings or the rights of the Company's stockholders. If the Company is unable to obtain funding, the Company could be forced to delay, reduce or eliminate some or all of its research and development programs, product portfolio expansion or commercialization efforts, which could adversely affect its business prospects. Although management continues to pursue these plans, there is no assurance that the Company will be successful in obtaining sufficient funding on terms acceptable to the Company to fund continuing operations, if at all. The Company’s consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”). The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiary. All intercompany accounts and transactions have been eliminated in consolidation. Certain prior period amounts have been reclassified to conform to the current year presentation.

Convertible Preferred Stock	12 Months Ended
Convertible Preferred Stock	Dec. 31, 2019
Convertible Preferred Stock.
Convertible Preferred Stock	7. Convertible Preferred Stock The Company had issued Series A redeemable convertible preferred stock (the “Series A Preferred Stock”), Series B convertible preferred stock (the “Series B Preferred Stock”) and Series C convertible preferred stock (the “Series C Preferred Stock”). The Series A Preferred Stock, the Series B Preferred Stock and the Series C Preferred Stock are referred to collectively as the “Preferred Stock”. Upon issuance of the Series A Preferred Stock, the holders of such shares were entitled to receive cumulative dividends of 8.0% per year, compounding annually, and such shares were redeemable at the option of the holder after five years from issuance date of the Series A Preferred Stock. In connection with the issuance and sale of Series B Preferred Stock in June 2017, the holders of Series A Preferred Stock agreed to remove the cumulative dividend rights and redemption features of the Series A Preferred Stock. The change to the terms of the Series A Preferred Stock was accounted for as a modification, rather than an extinguishment, of the Series A Preferred Stock based on a comparison of the fair value of the stock immediately before and after the change in terms, which resulted in a fair value change of less than 10%. This modification did not have any impact on the Company’s consolidated financial statements. For periods after the June 2017 date of the modification of the Series A Preferred Stock, the Company no longer accreted the carrying value of the Series A Preferred Stock to redemption value as such shares were no longer redeemable. In June 2017, the Company issued and sold 14,362,344 shares of Series B Preferred Stock at a price of $8.39 per share for gross proceeds of $120.5 million. The Company incurred issuance costs in connection with the Series B Preferred Stock of $0.4 million. In February 2018, the Company issued and sold 7,912,432 shares of Series C Preferred Stock at a price of $12.79 per share for gross proceeds of $101.2 million. The Company incurred issuance costs in connection with the Series C Preferred Stock of $0.2 million. Upon issuance of each class of Preferred Stock, the Company assessed the embedded conversion and liquidation features of the shares and determined that such features did not require the Company to separately account for these features. The Company also concluded that no beneficial conversion feature existed on the issuance date of each class of Preferred Stock. Upon the closing of the IPO in July 2018, all 51,845,438 shares of the Company’s outstanding convertible preferred stock automatically converted into shares of common stock and, therefore, there was no outstanding Preferred Stock at December 31, 2019 and 2018.

Warrants to Purchase Convertible Preferred Stock	12 Months Ended
Warrants to Purchase Convertible Preferred Stock	Dec. 31, 2019
Warrants to Purchase Convertible Preferred Stock.
Warrants to Purchase Convertible Preferred Stock	8. Warrants to Purchase Convertible Preferred Stock During 2015 and 2017, the Company issued warrants to purchase up to 133,333 shares of Series A Preferred Stock and 2,234 shares of Series B Preferred Stock, respectively, in connection with the 2015 Credit Facility, as amended (see Note 6). The warrants were exercisable at a price of $0.60 per share and $8.39 per share and had a contractual term of ten years from issuance. The fair value of the warrants on the issuance date was recorded as a debt discount and as a preferred stock warrant liability. The Company remeasured the fair value of the liability for these preferred stock warrants at each reporting date and recorded any adjustments as other income (expense). The warrants outstanding at each reporting date were remeasured using the Black-Scholes option-pricing model (see Note 3), and the resulting change in fair value was recorded in other income (expense) in the Company’s consolidated statements of operations and comprehensive loss. For the years ended December 31, 2018 and 2017, the Company recorded other expense of $2.2 million and $0.8 million, respectively. Upon the closing of the IPO in July 2018, the Company’s outstanding warrants to purchase Preferred Stock automatically became warrants to purchase an aggregate of 135,567 shares of common stock. In July 2018, the holders of such warrants completed a cashless exercise of the warrants, resulting in the Company’s issuance of 131,273 shares of common stock, whereby 4,294 shares of common stock were withheld by the Company to pay for the exercise price of the warrants.

Equity	12 Months Ended
Equity	Dec. 31, 2019
Equity
Equity	9. Equity Each share of common stock entitles the holder to one vote on all matters submitted to a vote of the Company’s stockholders. Common stockholders are not entitled to receive dividends, unless declared by the board of directors. In February 2018, the Company increased the number of authorized shares of common stock from 65,000,000 shares to 75,000,000 shares. In April 2018, the Company increased the number of authorized shares of common stock from 75,000,000 shares to 78,800,000 shares. In June 2018, the Company increased the number of authorized shares of common stock from 78,800,000 shares to 79,000,000 shares. On July 20, 2018, the Company filed a restated certificate of incorporation in the State of Delaware, which, among other things, restated the number of shares of all classes of stock that the Company has authority to issue to 160,000,000 shares, consisting of (i) 150,000,000 shares of common stock, $0.001 par value per share, and (ii) 10,000,000 shares of preferred stock, $0.001 par value per share. The preferred stock will have such rights, preferences, privileges and restrictions, including voting rights, dividend rights, conversion rights, redemption privileges and liquidation preferences, as shall be determined by the Company’s board of directors upon issuance. The shares of preferred stock are currently undesignated. Also on July 20, 2018, the Company completed its IPO, pursuant to which it issued and sold 12,055,450 shares of common stock, inclusive of 1,572,450 shares sold by the Company pursuant to the full exercise of the underwriters’ option to purchase additional shares. The aggregate net proceeds received by the Company from the IPO were $254.3 million, after deducting underwriting discounts and commissions and other offering costs. Upon the closing of the IPO, all of the shares of the Company’s outstanding convertible preferred stock then outstanding automatically converted into 51,845,438 shares of common stock (see Note 7). On August 1, 2019, the Company entered into a Distribution Agreement (the “Distribution Agreement”) with J.P. Morgan Securities LLC, Jefferies LLC and SVB Leerink LLC (the “Sales Agents”), pursuant to which the Company may issue and sell, from time to time, shares of its common stock having an aggregate offering price of up to $100.0 million through the Sales Agents. The Company’s registration statement on Form S-3 filed on August 1, 2019 was declared effective on August 21, 2019. The Sales Agents may sell common stock by any method permitted by law deemed to be an “at the market offering” as defined in Rule 415(a)(4) of the Securities Act of 1933, as amended, including sales made directly on or through the Nasdaq Global Select Market or any other existing trade market for the common stock, in negotiated transactions at market prices prevailing at the time of sale or at prices related to prevailing market prices, or any other method permitted by law. The Sales Agents will be entitled to receive 3.0% of the gross sales price per share of common stock sold pursuant to the Distribution Agreement. As of December 31, 2019, no shares of common stock have been issued and sold pursuant to the Distribution Agreement.