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Registrant’s telephone number, including area code: (857) 259-3840

    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 definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

    

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

    

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

    As of November 2, 2020, there were 39,851,475 shares of common stock, $0.001 par value per share, outstanding.

Table of Contents

						Page
PART I. FINANCIAL INFORMATION
Item 1.			Financial Statements (unaudited)			3
			Condensed Consolidated Balance Sheets as of September 30, 2020 and December 31, 2019			3
			Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income for the Three and Nine Months Ended September 30, 2020 and 2019			4
			Condensed Consolidated Statements of Stockholders’ Equity for the Three and Nine Months Ended September 30, 2020 and 2019			5
			Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2020 and 2019			6
			Notes to Condensed Consolidated Financial Statements			7
Item 2.			Management's Discussion and Analysis of Financial Condition and Results of Operations			19
Item 3.			Quantitative and Qualitative Disclosures about Market Risk			28
Item 4.			Controls and Procedures			28
PART II. OTHER INFORMATION
Item 1.			Legal Proceedings			29
Item 1A.			Risk Factors			29
Item 2.			Unregistered Sales of Equity Securities and Use of Proceeds			61
Item 5.			Other Information			61
Item 6.			Exhibits			63
SIGNATURES

References to Jounce

Throughout this Quarterly Report on Form 10-Q, the “Company,” “Jounce,” “Jounce Therapeutics,” “we,” “us,” and “our,” except where the context requires otherwise, refers to Jounce Therapeutics, Inc. and its consolidated subsidiary, and “board of directors” refers to the board of directors of Jounce Therapeutics, Inc.

Cautionary Note Regarding Forward-Looking Statements and Industry Data

This Quarterly Report on Form 10-Q contains forward-looking statements that involve substantial risks and uncertainties. All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q, including statements regarding our strategy, future operations, future financial position, future revenue, projected costs, prospects, plans, objectives of management and expected market growth, are forward-looking statements. These statements involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements.

The words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “goal,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “target,” “will” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. These forward-looking statements include, among other things, statements about:

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

•our plans and expectations in light of the COVID-19 pandemic and its impacts on global healthcare systems;

•the timing, scope, or likelihood of regulatory filings and approvals, including, as applicable, timing of our investigational new drug applications for, biologics license application filing for, and final Food and Drug Administration approval of our current and future product candidates;

•our ability to use our Translational Science Platform to identify targets for future product candidates and to match immunotherapies to select patient subsets;

•our ability to identify, develop and advance future product candidates into, and successfully complete, clinical studies;

•our ability to develop combination therapies, whether on our own or in collaboration with third parties, for our current and future product candidates;

•our expectations regarding the size of the patient populations for our product candidates, if approved for commercial use, and any product candidates we may develop;

•our commercialization and marketing capabilities and strategy;

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

•the implementation of our business model and our strategic plans for our business, our current and future product candidates, and our technology;

•our ability to develop and commercialize a companion diagnostic or complementary diagnostic for our current and future product candidates;

•the rate and degree of market acceptance and clinical utility of our current and future product candidates;

•the potential benefits of our exclusive license of JTX-1811 to Gilead Sciences, Inc.;

•our ability to establish or maintain future collaborations or strategic relationships or obtain additional funding;

•our ability to retain the continued service of our key professionals and to identify, hire and retain additional qualified professionals;

•our intellectual property position, including the scope of protection we are able to establish and maintain for intellectual property rights covering our current and future product candidates, and our ability not to infringe, misappropriate or otherwise violate any third-party intellectual property rights;

•our competitive position, and developments and projections relating to our competitors and our industry;

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

•the impact of laws and regulations.

There are a number of important risks and uncertainties that could cause our actual results to differ materially from those indicated by forward-looking statements. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements we make. We have included important factors in the cautionary statements included in this Quarterly Report on Form 10-Q, particularly in the section entitled “Risk Factors” in Part II, Item 1A that could cause actual results or events to differ materially from the forward-looking statements that we make. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments that we may make.

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

This Quarterly Report on Form 10-Q may include industry and market data, which we may obtain from our own internal estimates and research, as well as from industry and general publications and research, surveys, and studies conducted by third parties. Industry publications, studies, and surveys generally state that they have been obtained from sources believed to be reliable, although they do not guarantee the accuracy or completeness of such information. While we believe that such studies and publications are reliable, we have not independently verified market and industry data from third-party sources.

Website and Social Media Disclosure

From time to time, we may use our website (www.jouncetx.com), investor and media relations website (http://ir.jouncetx.com), Facebook page (https://www.facebook.com/jouncetx), LinkedIn page (https://www.linkedin.com/company/3494537/) and Twitter feed (https://twitter.com/JounceTx) as channels for the distribution of information. The information we post through these channels may be deemed material. Accordingly, investors should monitor these channels, in addition to following our press releases, Securities and Exchange Commission filings and public conference calls and webcasts. The contents of our website and social media channels are not, however, a part of this report.

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Jounce Therapeutics, Inc.

Condensed Consolidated Balance Sheets (unaudited)

(amounts in thousands, except par value amounts)

d

			September 30,						December 31,
			2020						2019
Assets:
Current assets:
Cash and cash equivalents			$	67,103					$	53,241
Short-term investments			37,144						115,602
Prepaid expenses and other current assets			3,210						4,854
Total current assets			107,457						173,697
Property and equipment, net			8,097						10,672
Long-term investments			1,034						1,601
Operating lease right-of-use asset			15,567						17,615
Other non-current assets			3,678						2,297
Total assets			$	135,833					$	205,882
Liabilities and stockholders’ equity:
Current liabilities:
Accounts payable			$	2,707					$	2,460
Accrued expenses			10,323						8,907
Operating lease liability, current			3,176						2,901
Other current liabilities			74						132
Total current liabilities			16,280						14,400
Operating lease liability, net of current portion			14,466						16,889
Total liabilities			30,746						31,289
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $0.001 par value: 5,000 shares authorized at September 30, 2020 and December 31, 2019; no shares issued or outstanding at September 30, 2020 or December 31, 2019			—						—
Common stock, $0.001 par value: 160,000 shares authorized at September 30, 2020 and December 31, 2019; 34,287 and 33,738 shares issued and outstanding at September 30, 2020 and December 31, 2019, respectively			34						34
Additional paid-in capital			291,481						281,664
Accumulated other comprehensive income			45						54
Accumulated deficit			(186,473)						(107,159)
Total stockholders’ equity			105,087						174,593
Total liabilities and stockholders’ equity			$	135,833					$	205,882

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

Jounce Therapeutics, Inc.

Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income (unaudited)

(amounts in thousands, except per share amounts)

			Three Months Ended September 30,												Nine Months Ended September 30,
			2020						2019						2020						2019
Revenue:
License and collaboration revenue—related party			$	—					$	119,445					$	—					$	147,872
Operating expenses:
Research and development			18,002						15,115						58,671						50,525
General and administrative			7,102						6,483						21,867						20,998
Total operating expenses			25,104						21,598						80,538						71,523
Operating (loss) income			(25,104)						97,847						(80,538)						76,349
Other income, net			203						1,025						1,238						3,177
(Loss) income before provision for income taxes			(24,901)						98,872						(79,300)						79,526
Provision for income taxes			2						12						14						36
Net (loss) income			$	(24,903)					$	98,860					$	(79,314)					$	79,490
Net (loss) income per share, basic			$	(0.73)					$	2.99					$	(2.33)					$	2.41
Net (loss) income per share, diluted			$	(0.73)					$	2.90					$	(2.33)					$	2.33
Weighted-average common shares outstanding, basic			34,159						33,112						34,081						33,015
Weighted-average common shares outstanding, diluted			34,159						34,141						34,081						34,160
Comprehensive (loss) income:
Net (loss) income			$	(24,903)					$	98,860					$	(79,314)					$	79,490
Other comprehensive (loss) income:
Unrealized (loss) gain on available-for-sale securities			(88)						(57)						(9)						156
Comprehensive (loss) income			$	(24,991)					$	98,803					$	(79,323)					$	79,646

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

Jounce Therapeutics, Inc.

Condensed Consolidated Statements of Stockholders’ Equity (unaudited)

(amounts in thousands)

			Common Stock												Additional Paid-In Capital						Accumulated Other Comprehensive Income						Accumulated Deficit						Total Stockholders’ Equity
			Shares						Amount
Balance at December 31, 2019			33,738						$	34					$	281,664					$	54					$	(107,159)					$	174,593
Issuance of common stock from at the market offering, net of issuance costs			201						—						1,648						—						—						1,648
Exercises of common stock options			9						—						38						—						—						38
Vesting of restricted stock units			101						—						—						—						—						—
Stock-based compensation expense			—						—						2,618						—						—						2,618
Other comprehensive income			—						—						—						90						—						90
Net loss			—						—						—						—						(26,443)						(26,443)
Balance at March 31, 2020			34,049						34						285,968						144						(133,602)						152,544
Exercises of common stock options			16						—						61						—						—						61
Stock-based compensation expense			—						—						2,643						—						—						2,643
Other comprehensive loss			—						—						—						(11)						—						(11)
Net loss			—						—						—						—						(27,968)						(27,968)
Balance at June 30, 2020			34,065						34						288,672						133						(161,570)						127,269
Exercises of common stock options			75						—						348						—						—						348
Vesting of restricted stock units			147						—						—						—						—						—
Stock-based compensation expense			—						—						2,461						—						—						2,461
Other comprehensive loss			—						—						—						(88)						—						(88)
Net loss			—						—						—						—						(24,903)						(24,903)
Balance at September 30, 2020			34,287						$	34					$	291,481					$	45					$	(186,473)					$	105,087
			Common Stock												Additional Paid-In Capital						Accumulated Other Comprehensive (Loss) Income						Accumulated Deficit						Total Stockholders’ Equity
			Shares						Amount
Balance at December 31, 2018			32,941						$	33					$	268,081					$	(78)					$	(163,907)					$	104,129
Exercise of common stock options			24						—						69						—						—						69
Vesting of restricted stock awards			2						—						7						—						—						7
Stock-based compensation expense			—						—						2,542						—						—						2,542
Other comprehensive income			—						—						—						129						—						129
Cumulative effect adjustment upon adoption of ASC 842			—						—						—						—						(75)						(75)
Net loss			—						—						—						—						(12,377)						(12,377)
Balance at March 31, 2019			32,967						33						270,699						51						(176,359)						94,424
Exercises of common stock options			9						—						29						—						—						29
Vesting of restricted stock awards			2						—						7						—						—						7
Stock-based compensation expense			—						—						2,513						—						—						2,513
Other comprehensive income			—						—						—						84						—						84
Net loss			—						—						—						—						(6,993)						(6,993)
Balance at June 30, 2019			32,978						33						273,248						135						(183,352)						90,064
Exercises of common stock options			88						—						247						—						—						247
Vesting of restricted stock awards and restricted stock units			158						—						6						—						—						6
Stock-based compensation expense			—						—						2,289						—						—						2,289
Other comprehensive loss			—						—						—						(57)						—						(57)
Net income			—						—						—						—						98,860						98,860
Balance at September 30, 2019			33,224						$	33					$	275,790					$	78					$	(84,492)					$	191,409

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

Jounce Therapeutics, Inc.

Condensed Consolidated Statements of Cash Flows (unaudited)

(amounts in thousands)

			Nine Months Ended September 30,
			2020						2019
Operating activities:
Net (loss) income			$	(79,314)					$	79,490
Adjustments to reconcile net (loss) income to net cash used in operating activities:
Stock-based compensation expense			7,722						7,344
Depreciation expense			2,601						2,906
Net amortization of premiums and discounts on investments			(68)						(1,247)
Other non-cash items			(1)						—
Changes in operating assets and liabilities:
Prepaid expenses and other current assets			1,641						(1,774)
Other non-current assets			(1,378)						(582)
Accounts payable			411						167
Accrued expenses and other current liabilities			1,358						30
Deferred revenue—related party			—						(97,872)
Other liabilities			(100)						8
Net cash used in operating activities			(67,128)						(11,530)
Investing activities:
Purchases of investments			(37,203)						(147,995)
Proceeds from maturities of investments			116,287						178,661
Purchases of property and equipment			(55)						(985)
Net cash provided by investing activities			79,029						29,681
Financing activities:
Proceeds from at the market offering, net of issuance costs			1,514						—
Proceeds from exercise of stock options			447						345
Net cash provided by financing activities			1,961						345
Net increase in cash, cash equivalents and restricted cash			13,862						18,496
Cash, cash equivalents and restricted cash, beginning of period			54,511						49,176
Cash, cash equivalents and restricted cash, end of period			$	68,373					$	67,672
Supplemental cash flow information:
Cash paid for lease liabilities			$	2,924					$	3,200
Cash paid for income taxes			$	45					$	101

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

Notes to Condensed Consolidated Financial Statements

(unaudited)

1. Nature of Business

Jounce Therapeutics, Inc. (the “Company”) is a clinical-stage immunotherapy company dedicated to transforming the treatment of cancer by developing therapies that enable the immune system to attack tumors and provide long-lasting benefits to patients. The Company is subject to a number of risks similar to those of other clinical-stage companies, including dependence on key individuals; the need to develop commercially viable products; competition from other companies, many of which are larger and better capitalized; and the need to obtain adequate additional financing to fund the development of its products.

As of September 30, 2020, the Company had cash, cash equivalents and investments of $105.3 million. The Company expects that its existing cash, cash equivalents and investments, together with cash proceeds of $120.0 million received from the transaction with Gilead Sciences, Inc. (“Gilead”) that closed in October 2020, will enable the Company to fund its expected operating expenses and capital expenditure requirements for at least 12 months from November 6, 2020, the filing date of this Quarterly Report on Form 10-Q. The Company expects to finance its future cash needs through a combination of equity or debt financings, collaborations, licensing arrangements and strategic alliances.

2. Basis of Presentation and Summary of Significant Accounting Policies

Basis of Presentation and Consolidation

The accompanying condensed consolidated financial statements as of September 30, 2020 and December 31, 2019, and for the three and nine months ended September 30, 2020 and 2019, have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (the “SEC”) and generally accepted accounting principles in the United States of America (“GAAP”) as found in the Accounting Standards Codification (“ASC”) of the Financial Accounting Standards Board (“FASB”) for condensed consolidated financial information. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, these condensed consolidated financial statements reflect all normal recurring adjustments which are necessary for a fair presentation of the Company’s financial position and results of its operations, as of and for the periods presented. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 filed with the SEC on February 27, 2020 (the “Annual Report on Form 10-K”).

The information presented in the condensed consolidated financial statements and related notes as of September 30, 2020, and for the three and nine months ended September 30, 2020 and 2019, is unaudited. The December 31, 2019 condensed consolidated balance sheet included herein was derived from the audited financial statements as of that date, but does not include all disclosures, including notes, required by GAAP for complete financial statements.

Interim results for the nine months ended September 30, 2020 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2020, or any future period.

The accompanying condensed consolidated financial statements include the accounts of Jounce Therapeutics, Inc. and its wholly-owned subsidiary, Jounce Mass Securities, Inc. All intercompany transactions and balances have been eliminated in consolidation.

Summary of Significant Accounting Policies

The significant accounting policies and estimates used in the preparation of the condensed consolidated financial statements are described in the Company’s audited financial statements as of and for the year ended December 31, 2019, and the notes thereto, which are included in the Annual Report on Form 10-K. There have been no material changes in the Company’s significant accounting policies during the nine months ended September 30, 2020.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. On an ongoing basis, the Company’s management evaluates its estimates which include, but are not limited to, accrued expenses, stock-based compensation expense and income taxes. The Company bases its estimates on historical experience and other market specific or other relevant assumptions it believes to be reasonable under the circumstances. Actual results could differ from those estimates.

Recent Accounting Pronouncements

In June 2016, the FASB issued Accounting Standards Update (“ASU”) 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. This standard requires that credit losses be reported using an expected losses model rather than the incurred losses model that is currently used, and it establishes additional disclosure requirements related to credit risks. For available-for-sale debt securities with expected credit losses, this standard now requires allowances to be recorded instead of reducing the amortized cost of the investment. This guidance was originally effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years, and early adoption was permitted. In November 2019, the FASB subsequently issued ASU 2019-10, Financial Instruments—Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842): Effective Dates, which deferred the effective date of this standard for smaller reporting companies to fiscal years beginning after December 15, 2022, including interim periods within those fiscal years, and early adoption is still permitted. Accordingly, the Company will now adopt this standard effective January 1, 2023, and it is currently evaluating the potential impact that ASU 2016-13 may have on the consolidated financial statements.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement, which eliminates, adds and modifies certain disclosure requirements for fair value measurements. This guidance became effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Accordingly, the Company adopted ASU 2018-13 effective January 1, 2020, and there was no impact to the condensed consolidated financial statements due to the adoption of this guidance.

In August 2018, the FASB issued ASU 2018-15, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract. This 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 (and hosting arrangements that include an internal-use software license). The accounting for the service element of a hosting arrangement that is a service contract is not affected. This guidance became effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The amendments in this update are able to be applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption. Accordingly, the Company adopted ASU 2018-15 effective January 1, 2020, and it elected to apply this guidance on a prospective basis. There was no impact to the condensed consolidated financial statements due to the adoption of this guidance.

In November 2018, the FASB issued ASU 2018-18, Collaborative Arrangements (Topic 808): Clarifying the Interaction between Topic 808 and Topic 606, which clarifies that certain transactions between participants in a collaborative arrangement should be accounted for under ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”) when the counterparty is a customer. In addition, ASU 2018-18 adds unit-of-account guidance to ASC Topic 808, Collaborative Arrangements, in order to align this guidance with ASC 606 and also precludes an entity from presenting consideration from a transaction in a collaborative arrangement as revenue from contracts with customers if the counterparty is not a customer for that transaction. This guidance became effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Accordingly, the Company adopted ASU 2018-18 effective January 1, 2020, and there was no impact to the condensed consolidated financial statements due to the adoption of this guidance.

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which eliminates certain exceptions to the guidance in ASC 740 related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities when investment ownership changes. In addition, ASU 2019-12 simplifies the accounting for the interim period effects of changes in tax laws or rates and transactions that result in a step-up in the tax basis of goodwill. While this guidance is effective for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years, early adoption is permitted. The Company elected to early adopt ASU 2019-12 effective January 1, 2020. Due to the adoption of this guidance, the Company did not record an intraperiod tax allocation to other comprehensive income for the three and nine months ended September 30, 2020. In accordance with ASU 2019-12, the Company has applied the new provisions related to the intraperiod tax allocation on a prospective basis.

3.     License and Collaboration Revenue

Celgene License Agreement

On July 22, 2019, the Company entered into a License Agreement (the “Celgene License Agreement”) with Celgene Corporation (“Celgene”). Pursuant to the Celgene License Agreement, the Company granted to Celgene a worldwide and exclusive license to develop, manufacture and commercialize JTX-8064 and certain derivatives thereof (an “Initial Licensed Compound”), as well as any antibody (other than the Initial Licensed Compound) or other biologic controlled by the Company as of July 22, 2019 that is specifically directed to the LILRB2 receptor (the “Licensed Compounds”), and Celgene paid the Company a one-time, non-refundable upfront payment of $50.0 million.

As of November 2019, Celgene became a Bristol Myers Squibb company. As part of its Celgene integration process, Bristol Myers Squibb streamlined its pipeline to address areas of overlap. As a result, Celgene provided the Company with a notice of termination and the Celgene License Agreement was terminated effective June 3, 2020 (the “Celgene License Agreement Termination Date”). As of the Celgene License Agreement Termination Date, the Company has sole worldwide rights to JTX-8064, and all of the Company’s intellectual property rights pertaining to JTX-8064 and licensed to Celgene were reacquired by the Company. No party had any further financial or service obligations to one another beyond transition costs and efforts, which were completed during the quarter ended September 30, 2020.

Accounting Analysis

Identification of the Contract(s)

The Company assessed the Celgene License Agreement and concluded that it represents a contract with a customer within the scope of ASC 606.

Identification of Promises and Performance Obligations

The Company determined that the Celgene License Agreement contained the following promises: (i) delivery of a worldwide and exclusive license to develop, manufacture and commercialize an Initial Licensed Compound and the Licensed Compounds (the “JTX-8064 License”) and (ii) provision of certain transition activities, specifically outlined within the Celgene License Agreement, related to the delivery of the JTX-8064 License (the “Transition Activities”).

The Company also evaluated certain other optional activities outlined within the Celgene License Agreement and concluded that none conveyed a material right to Celgene. Accordingly, these options were not considered to be promises within the Celgene License Agreement.

The Company assessed the above promises and concluded that the JTX-8064 License was both capable of being distinct and distinct within the context of the Celgene License Agreement. The Company also assessed its promise to perform the Transition Activities and concluded that it was both quantitatively and qualitatively immaterial in the context of the Celgene License Agreement. Accordingly, the Company did not assess the Transition Activities as a performance obligation. Based upon this evaluation, the Company concluded that its promise to deliver the JTX-8064 License represented the sole performance obligation in the Celgene License Agreement.

Determination of Transaction Price

As noted above, the Company received a non-refundable upfront payment of $50.0 million upon the execution of the Celgene License Agreement. This upfront payment represented an element of fixed consideration under the Celgene License Agreement.

The Company also evaluated as possible variable consideration clinical, regulatory and sales milestone payments and royalties that the Company was eligible to receive under the Celgene License Agreement. With respect to clinical and regulatory milestones, based upon the high degree of uncertainty and risk associated with these potential payments, the Company concluded that all such amounts should be fully constrained as it was not probable that a significant reversal in the amount of cumulative revenue recognized would not occur. As for royalties and sales milestones, the Company determined that the royalties and milestones related solely to the JTX-8064 License, which is a license of intellectual property (“IP”). Accordingly, the Company did not include any potential royalty or sales milestone amounts in the initial transaction price, and the Company determined it would not recognize revenue related to these royalties and sales milestones until the associated sales occurred and relevant thresholds were met.

Based upon the above considerations, the Company concluded that the initial transaction price associated with the Celgene License Agreement consisted solely of the upfront payment of $50.0 million.

Allocation of Transaction Price to Performance Obligations

As the Company’s promise to deliver the JTX-8064 License represented the sole performance obligation in the Celgene License Agreement, the entirety of the $50.0 million transaction price was allocated to this performance obligation.

Recognition of Revenue

The Company determined that the JTX-8064 License was a functional license as the underlying IP had significant standalone functionality. In addition, the Company determined that the JTX-8064 License represented a right to use certain of the Company’s IP as it existed at a point in time. Finally, the Company determined that July 22, 2019 represented (i) the date at which the Company made available the IP to Celgene and (ii) the beginning of the period during which Celgene was able to use and benefit from its right to use the IP. Based upon these considerations, the Company recognized $50.0 million of license revenue during the three months ended September 30, 2019. As the upfront payment was non-refundable, the subsequent termination of the Celgene License Agreement had no impact on this revenue recognition. Up through the Celgene License Agreement Termination Date, the Company did not receive any milestone or royalty payments.

Celgene Collaboration Agreement

In July 2016, the Company entered into a Master Research and Collaboration Agreement (the “Celgene Collaboration Agreement”) with Celgene. The primary goal of the collaboration was to co-develop and co-commercialize innovative biologic immunotherapies that either activate or suppress the immune system by binding to targets identified by leveraging the Company’s Translational Science Platform. Under the Celgene Collaboration Agreement, the Company granted Celgene exclusive options to develop and commercialize the Company’s lead product candidate, vopratelimab, and up to four early-stage programs, consisting of targets to be selected from a pool of certain B cell, T regulatory cell and tumor-associated macrophage targets. Additionally, the Company granted Celgene an exclusive option to develop and commercialize the Company’s product candidate JTX-4014, an anti-PD-1 antibody, which, upon exercise of such option, would have been a shared program to be used by both parties in and outside of the collaboration. The Company and Celgene terminated the Celgene Collaboration Agreement effective July 22, 2019.

The Company received a non-refundable upfront cash payment of $225.0 million in July 2016 upon the execution of the Celgene Collaboration Agreement. The Company also received $36.1 million from the sale of 10,448,100 shares of Series B-1 convertible preferred stock upon the execution of a Series B-1 Preferred Stock Purchase Agreement with Celgene, which shares converted into 2,831,463 shares of common stock upon the completion of the Company’s initial public offering (“IPO”). If Celgene had elected to exercise any of the program options, Celgene would have been required to pay the Company an option-exercise fee that varied by program. The initial research term of the collaboration was four years, which could have been extended, at Celgene’s option, annually for up to three additional years.

Worldwide Development Cost and U.S. Operating Profit and Loss Sharing

Prior to Celgene exercising any of its options, the Company was responsible for all research and development activities under the Celgene Collaboration Agreement. Upon the exercise of each program option, the parties would have entered into a co-development and co-commercialization agreement (the “Co-Co Agreements”) or, in the case of JTX-4014, a license agreement (the “JTX-4014 License Agreement”) to govern the development and commercialization of the applicable program. As part of the Celgene Collaboration Agreement, the parties agreed to the terms of the Co-Co Agreements and the JTX-4014 License Agreement that would have been executed upon Celgene’s exercise of any option.

Milestones and Royalties

Under the Co-Co Agreements and the JTX-4014 License Agreement, Celgene would have been required to pay the Company for specified development, regulatory and commercial milestones, if achieved, across all collaboration programs. Development milestones were payable on the initiation of certain clinical trials, regulatory approval milestones were payable upon regulatory approval in the United States and outside the United States and commercial milestones were payable upon achievement of specified aggregate product sales outside the United States for each program. The Company was also eligible to receive royalties on product sales outside the United States.

Accounting Analysis

Identification of the Contract(s)

The Company assessed the Celgene Collaboration Agreement and concluded that it represented a contract with a customer within the scope of ASC 606. The Company also concluded that each of the Co-Co Agreements and the JTX-4014 License Agreement, if any had been executed, would have represented separate contracts apart from the Celgene Collaboration Agreement.

Identification of Promises and Performance Obligations

The Company determined that the Celgene Collaboration Agreement contained the following promises: (i) research and development services for vopratelimab (“Vopratelimab Research Services”), (ii) research and development services for JTX-4014 (“JTX-4014 Research Services”), (iii) research and development services associated with the Lead Program and Other Programs (“Lead and Other Programs Research Services”), (iv) research services associated with target screening (“Target Screening Services”), (v) non-transferable, limited sub-licensable and non-exclusive licenses to use the Company’s intellectual property and the Company’s rights in the collaboration intellectual property to conduct certain activities, on a program-by-program basis (the “Research Licenses”), (vi) various record-keeping and reporting requirements on a program-by-program basis, (vii) exclusivity provisions with respect to each Collaboration Exclusive Target and biologics binding to such Collaboration Exclusive Targets and (viii) establishment of and participation in a joint steering committee (the “JSC”) and a joint patent committee (the “JPC”). The Company also evaluated the six program options as well as the research term extension options and concluded that none conveyed a material right to Celgene. Accordingly, neither the program options nor the research term extension options were considered to be promises within the Celgene Collaboration Agreement.

The Company assessed the above promises and concluded that each of the Vopratelimab Research Services, JTX-4014 Research Services, Lead and Other Programs Research Services and Target Screening Services were both capable of being distinct and distinct within the context of the Celgene Collaboration Agreement. Therefore, the Company concluded that each of the Vopratelimab Research Services, JTX-4014 Research Services, Lead and Other Programs Research Services and Target Screening Services represented separate performance obligations.

The Company determined that the Research Licenses were not distinct within the context of the Celgene Collaboration Agreement as the Research Licenses allowed Celgene to evaluate the results of the research and development services performed by the Company and the right to perform its duties under the Celgene Collaboration Agreement, but did not provide Celgene with any commercialization rights. Celgene could only benefit from the Research Licenses in conjunction with the related research and development services. Accordingly, the Research Licenses related to vopratelimab, JTX-4014 and the Lead and Other Programs were combined with their respective research and development services performance obligations.

Similarly, the Company also determined that the various record-keeping and reporting requirements related to each program and the exclusivity provisions with respect to each Collaboration Exclusive Target and biologics binding to such Collaboration Exclusive Targets were not distinct within the context of the Celgene Collaboration Agreement. Accordingly, the various record-keeping and reporting requirements on a program-by-program basis and the exclusivity provisions with respect to each Collaboration Exclusive Target and biologics binding to such Collaboration Exclusive Targets were combined with their respective research and development services performance obligations.

Finally, the Company assessed its participation in the JSC and the JPC and concluded that it was both quantitatively and qualitatively immaterial in the context of the Celgene Collaboration Agreement. Accordingly, the Company did not assess its participation in the JSC and the JPC as a performance obligation.

Determination of Transaction Price

As noted above, the Company received a non-refundable upfront payment of $225.0 million upon the execution of the Celgene Collaboration Agreement. This upfront payment represented an element of fixed consideration under the Celgene Collaboration Agreement. Celgene also purchased 10,448,100 shares of Series B-1 convertible preferred stock (“Series B-1 Preferred Stock”) for gross proceeds of $36.1 million, which shares converted into 2,831,463 shares of common stock upon the completion of the IPO. The Company determined the shares of Series B-1 Preferred Stock were sold at fair value. Therefore, the proceeds from the issuance of Series B-1 Preferred Stock did not impact the transaction price to be allocated to the performance obligations.

The Company evaluated as possible variable consideration the milestones, royalties, development cost sharing and profit-sharing provisions discussed above. The Company concluded that none of these items represented variable consideration under the Celgene Collaboration Agreement as all such amounts were dependent upon the execution of a related Co-Co Agreement or the JTX-4014 License Agreement. The Co-Co Agreements and the JTX-4014 License Agreement, if any had been executed, would have represented separate contracts apart from the Celgene Collaboration Agreement.

The Company also considered the existence of any significant financing component within the Celgene Collaboration Agreement given its upfront payment structure. Based upon this assessment, the Company concluded that any difference between the promised consideration and the cash selling price of the services under the Celgene Collaboration Agreement arose for reasons other than the provision of financing, and the difference between those amounts was proportional to the reason for the difference. Accordingly, the Company concluded that the upfront payment structure of the Celgene Collaboration Agreement did not result in the existence of a significant financing component.

Based upon the above considerations, the Company concluded that the transaction price associated with the Celgene Collaboration Agreement consisted solely of the upfront payment of $225.0 million.

Allocation of Transaction Price to Performance Obligations

The Company allocated the transaction price to each performance obligation on a relative standalone selling price basis. For all performance obligations, the Company determined the standalone selling price using estimates of the costs to perform the research and development services, including expected internal and external costs for services and supplies, adjusted to reflect a reasonable profit margin. The total estimated cost of the research and development services reflected the nature of the services to be performed and the Company’s best estimate of the length of time required to perform the services.

Recognition of Revenue

Prior to the termination of the Celgene Collaboration Agreement, the Company was recognizing revenue over time as the services related to each performance obligation were rendered. The Company concluded that an input method under ASC 606 was a representative depiction of the transfer of services under the Celgene Collaboration Agreement. The method of measuring progress towards delivery of the services incorporated actual internal and external costs incurred, relative to total internal and external costs expected to be incurred to satisfy the performance obligations. The period over which total costs were estimated reflected the Company’s estimate of the period over which it would perform the research and development services to deliver a pre-defined data package to Celgene for each program subject to an option. The Company was recognizing revenue for each performance obligation over periods ranging from twelve months to four years. Changes in estimates of total internal and external costs expected to be incurred were recognized in the period of change as a cumulative catch-up adjustment.

For the nine months ended September 30, 2019, the Company recognized collaboration revenue of $97.9 million under the Celgene Collaboration Agreement related to the $225.0 million upfront payment received in 2016. Following the termination of the Celgene Collaboration Agreement, which was effective July 22, 2019, the Company had no further performance obligations. Accordingly, all remaining deferred revenue related to the Celgene Collaboration Agreement was recognized during the three months ended September 30, 2019. Up through the termination of the Celgene Collaboration Agreement, the Company did not receive any option exercise, research term extension, milestone or royalty payments.

4.    Fair Value Measurements

Fair value is an exit price, representing the amount that would be received from the sale of an asset or paid to transfer a liability in an orderly transaction between market participants. Fair value is determined based on observable and unobservable inputs. Observable inputs reflect readily obtainable data from independent sources, while unobservable inputs reflect certain market assumptions. As a basis for considering such assumptions, GAAP establishes a three-tier value hierarchy, which prioritizes the inputs used to develop the assumptions and for measuring fair value as follows: (Level 1) observable inputs such as quoted prices in active markets for identical assets; (Level 2) inputs other than the quoted prices in active markets that are observable either directly or indirectly; and (Level 3) unobservable inputs in which there is little or no market data, which requires the Company to develop its own assumptions. This hierarchy requires the Company to use observable market data, when available, and to minimize the use of unobservable inputs when determining fair value.

The Company measures the fair value of money market funds, U.S. Treasuries and government agency securities based on quoted prices in active markets for identical securities. Investments also include corporate debt securities which are valued either based on recent trades of securities in inactive markets or based on quoted market prices of similar instruments and other significant inputs derived from or corroborated by observable market data.

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

Assets measured at fair value on a recurring basis as of September 30, 2020 were as follows (in thousands):

Assets measured at fair value on a recurring basis as of December 31, 2019 were as follows (in thousands):

There were no changes in valuation techniques during the nine months ended September 30, 2020 or during the year ended December 31, 2019. There were no liabilities measured at fair value on a recurring basis as of September 30, 2020 or December 31, 2019.

5.     Investments

Short-term investments consist of investments with maturities greater than ninety days and less than one year from the balance sheet date. Long-term investments consist of investments with maturities of greater than one year that are not expected to be used to fund current operations. The Company classifies all of its investments as available-for-sale securities. Accordingly, these investments are recorded at fair value. Realized gains and losses, amortization and accretion of discounts and premiums are included in other income, net. Unrealized gains and losses on available-for-sale securities are included in other comprehensive income as a component of stockholders’ equity until realized.

Cash equivalents, short-term investments and long-term investments as of September 30, 2020 were comprised as follows (in thousands):

Cash equivalents, short-term investments and long-term investments as of December 31, 2019 were comprised as follows (in thousands):

As of September 30, 2020 and December 31, 2019, the aggregate fair value of securities that were in an unrealized loss position for less than twelve months was $1.4 million and $28.3 million, respectively. There were no securities that were in an unrealized loss position for more than twelve months as of either September 30, 2020 or December 31, 2019. As of September 30, 2020, the Company did not intend to sell, and would not be more likely than not required to sell, the securities in an unrealized loss position before recovery of their amortized cost bases. Furthermore, the Company determined that there was no material change in the credit risk of these securities. As a result, the Company determined it did not hold any securities with any other-than-temporary impairment as of September 30, 2020.

There were immaterial realized gains on available-for-sale securities during the three and nine months ended September 30, 2020. There were no realized gains or losses on available-for-sale securities during the three or nine months ended September 30, 2019.

6.     Restricted Cash

As of both September 30, 2020 and December 31, 2019, the Company maintained non-current restricted cash of $1.3 million. This amount is included within “Other non-current assets” in the accompanying condensed consolidated balance sheets and is comprised solely of a letter of credit required pursuant to the lease for the Company’s corporate headquarters.

The following table provides a reconciliation of cash, cash equivalents and restricted cash that sums to the total of the same such amounts shown in the condensed consolidated statements of cash flows (in thousands):

7.     Accrued Expenses

Accrued expenses as of September 30, 2020 and December 31, 2019 were comprised as follows (in thousands):

8.   Common Stock and Preferred Stock

Common Stock

The Company is authorized to issue 160,000,000 shares of common stock. Holders of common stock are entitled to one vote per share. Holders of common stock are entitled to receive dividends, if and when declared by the board of directors.

On December 17, 2019, the Company entered into a Sales Agreement with Cowen and Company, LLC (“Cowen”) pursuant to which the Company may offer and sell shares of its common stock with an aggregate offering price of up to $50.0 million under an “at the market” offering program (the “ATM Offering”). The Sales Agreement provides that Cowen will be entitled to a sales commission equal to 3.0% of the gross sales price per share of all shares sold under the ATM Offering. From the initiation of the ATM Offering through September 30, 2020, the Company has sold an aggregate of 648,845 shares at an average price of $8.54 per share for net proceeds of $5.2 million after deducting sales commissions and offering expenses, $0.8 million of which was earned in 2020.

Preferred Stock

The Company is authorized to issue 5,000,000 shares of undesignated preferred stock in one or more series. As of September 30, 2020, no shares of preferred stock were issued or outstanding.

Shares Reserved for Future Issuance

As of September 30, 2020 and December 31, 2019, the Company had reserved for future issuance the following number of shares of common stock (in thousands):

In February 2013, the board of directors adopted and the Company’s stockholders approved the 2013 Stock Option and Grant Plan (the “2013 Plan”), as amended and restated, under which it could grant incentive stock options (“ISOs”), non-qualified stock options, restricted stock awards (“RSAs”) and restricted stock units (“RSUs”) to eligible employees, officers, directors, and consultants. The 2013 Plan was subsequently amended in January 2015, April 2015, July 2015, March 2016 and October 2016 to allow for the issuance of additional shares of common stock.

2017 Stock Option and Incentive Plan

In January 2017, the board of directors adopted and the Company’s stockholders approved the 2017 Stock Option and Incentive Plan (the “2017 Plan”). Upon the adoption of the 2017 Plan, no further awards will be granted under the 2013 Plan.

The 2017 Plan provides for the grant of ISOs, non-qualified stock options, RSAs, RSUs, stock appreciation rights and other stock-based awards. The Company’s employees, officers, directors and consultants and advisors are eligible to receive awards under the 2017 Plan. The terms of awards, including vesting requirements, are determined by the board of directors, subject to the provisions of the 2017 Plan.

The Company initially registered on Form S-8 1,753,758 shares of common stock under the 2017 Plan, which was comprised of (i) 1,510,000 shares of common stock reserved for issuance under the 2017 Plan, plus (ii) 243,758 shares of common stock originally reserved for issuance under the 2013 Plan that became available for issuance under the 2017 Plan upon the completion of the Company’s IPO. The 2017 Plan also provides that an additional number of shares will automatically be added to the shares authorized for issuance under the 2017 Plan on January 1, 2018 and each January 1st thereafter. The number of shares added each year will be equal to the lesser of (i) 4% of the outstanding shares on the immediately preceding December 31st or (ii) such amount as determined by the compensation committee of the board of directors. Effective January 1, 2018, 2019 and 2020, 1,290,609, 1,317,935 and 1,349,526 additional shares, respectively, were automatically added to the shares authorized for issuance under the 2017 Plan.

As of September 30, 2020, there were 1,198,253 shares available for future issuance under the 2017 Plan.

2017 Employee Stock Purchase Plan

In January 2017, the board of directors adopted and the Company’s stockholders approved the 2017 Employee Stock Purchase Plan (the “2017 ESPP”). The Company initially reserved 302,000 shares of common stock for future issuance under the 2017 ESPP. The 2017 ESPP also provides that an additional number of shares will automatically be added to the shares authorized for issuance under the 2017 ESPP on January 1, 2018 and each January 1st thereafter through January 1, 2027. The number of shares added each year will be equal to the lesser of (i) 1% of the outstanding shares on the immediately preceding December 31st, (ii) 603,000 shares or (iii) such amount as determined by the compensation committee of the board of directors. Effective January 1, 2018, 2019 and 2020, 322,652, 329,483 and 337,381 additional shares, respectively, were automatically added to the shares authorized for issuance under the 2017 ESPP. No offering periods under the 2017 ESPP had been initiated as of September 30, 2020.

Stock-based Compensation Expense

Total stock-based compensation expense recognized in the condensed consolidated statements of operations and comprehensive loss for the three and nine months ended September 30, 2020 and 2019 was as follows (in thousands):

The aggregate fair value of RSUs that vested during the three and nine months ended September 30, 2020, based upon the fair values of the stock underlying the RSUs on the day of vesting, was $0.7 million and $1.5 million, respectively. The aggregate fair value of RSUs that vested during each of the three and nine months ended September 30, 2019, based upon the fair values of the stock underlying the RSUs on the day of vesting, was $0.7 million.

As of September 30, 2020, there was unrecognized stock-based compensation expense related to unvested RSUs of $2.5 million, which the Company expects to recognize over a weighted-average period of approximately 2.0 years.

Using the Black-Scholes option pricing model, the weighted-average grant date fair value of stock options granted during the three months ended September 30, 2020 and 2019 was $4.35 per share and $2.90 per share, respectively. The weighted-average grant date fair value of stock options granted during the nine months ended September 30, 2020 and 2019 was $4.23 per share and $2.88 per share, respectively.

The following table summarizes stock option activity during the nine months ended September 30, 2020 (in thousands, except per share amounts):

The aggregate intrinsic value of stock options exercised during the three months ended September 30, 2020 and 2019 was $0.4 million and $0.1 million, respectively. The aggregate intrinsic value of stock options exercised during the nine months ended September 30, 2020 and 2019 was $0.4 million and $0.2 million, respectively.

As of September 30, 2020, there was unrecognized stock-based compensation expense related to unvested stock options of $11.3 million, which the Company expects to recognize over a weighted-average period of approximately 2.3 years.

10.   Related-party Transactions

In July 2019, the Company entered into the Celgene License Agreement under which it received a non-refundable upfront payment of $50.0 million from Celgene. In July 2016, the Company entered into the Celgene Collaboration Agreement and a Series B-1 Preferred Stock Purchase Agreement with Celgene. Under the Celgene Collaboration Agreement, the Company received a non-refundable upfront payment of $225.0 million. Under the Series B-1 Preferred Stock Purchase Agreement, Celgene purchased 10,448,100 shares of Series B-1 convertible preferred stock for $36.1 million. These shares of Series B-1 convertible preferred stock converted into 2,831,463 shares of common stock upon the completion of the IPO. In addition, an affiliate of Celgene purchased 625,000 shares of the Company’s common stock in the IPO at the public offering price of $16.00 per share for a total of $10.0 million. As of September 30, 2020 there were no reimbursable expenses due from Celgene. As of and December 31, 2019 the Company had recorded $0.7 million of reimbursable expenses due from Celgene within prepaid expenses and other current assets in the accompanying condensed consolidated balance sheets.

See Note 3, “License and Collaboration Revenue”, for further information about the Company’s agreements with Celgene.

11.   Net (Loss) Income per Share

Basic net (loss) income per share is calculated based upon the weighted-average number of common shares outstanding during the period, excluding outstanding stock options, RSAs and RSUs that have been issued but are not yet vested. Diluted net (loss) income per share is calculated based upon the weighted-average number of common shares outstanding during the period plus the dilutive impact of weighted-average common equivalent shares outstanding during the period. The potentially dilutive

shares of common stock resulting from the assumed exercise of outstanding stock options and the assumed vesting of RSAs and RSUs were determined under the treasury stock method.

The following table summarizes the calculation of basic and diluted net (loss) income per share (in thousands, except per share amounts):

The following weighted-average amounts were excluded from the valuation of diluted net (loss) income per share because their effect would be anti-dilutive (in thousands):

12. Subsequent Events

The Company and Gilead entered into an exclusive license agreement (the “License Agreement”) to license the Company's JTX-1811 program to Gilead in August 2020. Concurrently with executing the License Agreement, the Company and Gilead entered into a stock purchase agreement (the “Stock Purchase Agreement”) and a registration rights agreement (the “Registration Rights Agreement”, and together with the License Agreement and the Stock Purchase Agreement, the “Transaction Agreements”). The transactions with Gilead were subject to review under the Hart-Scott Rodino Antitrust Improvements Act of 1976 and other customary closing conditions, and the closing date of the Transaction Agreements was October 16, 2020.

In October 2020, the Company received an upfront cash license payment of $85.0 million upon the closing of the Transaction Agreements and Gilead purchased 5,539,727 shares of the Company’s common stock for $35.0 million. After the issuance of common shares to Gilead, the Company had 39,838,781 of common shares outstanding.

In addition to the $85.0 million upfront cash payment from Gilead, the Company will also be eligible to receive up to $685.0 million in aggregate potential development, regulatory and commercial milestone payments as well as royalties based on a percentage of worldwide sales ranging from the high single digits to mid-teens, subject to adjustments in certain circumstances. The Company will be responsible for all expenses related to development activities until (i) the clearance of an investigational new drug application for JTX-1811 by the Food and Drug Administration, or (ii) an earlier date specified by Gilead. After such time, Gilead will have the sole right and responsibility and bear all expenses to develop and commercialize JTX-1811.