0001193125-20-286853 | 10-Q | XBRL Viewer

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Cover Page - shares	9 Months Ended
Cover Page - shares	Sep. 30, 2020	Nov. 02, 2020
Cover [Abstract]
Document Type	10-Q
Document Quarterly Report	true
Document Transition Report	false
Amendment Flag	false
Document Period End Date	Sep. 30, 2020
Document Fiscal Year Focus	2020
Document Fiscal Period Focus	Q3
Entity Registrant Name	Chiasma, Inc.
Entity Central Index Key	0001339469
Entity File Number	001-37500
Entity Tax Identification Number	76-0722250
Entity Incorporation, State or Country Code	DE
Current Fiscal Year End Date	--12-31
Entity Interactive Data Current	Yes
Entity Current Reporting Status	Yes
Entity Address, Address Line One	140 Kendrick Street, Building C East
Entity Address, City or Town	Needham
Entity Address, State or Province	MA
Entity Address, Postal Zip Code	02494
City Area Code	617
Local Phone Number	928-5300
Entity Shell Company	false
Entity Filer Category	Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	true
Entity Ex Transition Period	true
Entity Common Stock, Shares Outstanding		57,804,095
Trading Symbol	CHMA
Security Exchange Name	NASDAQ
Title of 12(b) Security	Common Stock

Condensed Consolidated Balance Sheets - USD ($) $ in Thousands	Sep. 30, 2020	Dec. 31, 2019
Current assets
Cash and cash equivalents	$ 72,840	$ 27,855
Marketable securities	83,917	64,520
Accounts receivable	179
Inventory	8,942
Prepaid expenses and other current assets	5,383	3,881
Total current assets	171,261	96,256
Property and equipment, net	581	334
Other assets	2,419	2,236
Restricted cash	20,300
Total assets	194,561	98,826
Current liabilities
Accounts payable	7,149	3,253
Accrued expenses	10,275	7,576
Other current liabilities	722	546
Total current liabilities	18,146	11,375
Deferred royalty obligation	63,529
Long-term liabilities	2,548	1,682
Total liabilities	84,223	13,057
Commitments and contingencies (Note 11)
Stockholders' equity:
Common stock, $0.01 par value; authorized 125,000,000 shares at September 30, 2020 and December 31, 2019; issued and outstanding 57,804,095 shares at September 30, 2020 and 42,078,416 shares at December 31, 2019	578	421
Preferred stock, $0.01 par value; authorized 5,000,000 shares; none outstanding	0
Additional paid-in capital	437,659	358,245
Accumulated other comprehensive income	6	37
Accumulated deficit	(327,905)	(272,934)
Total stockholders' equity	110,338	85,769
Total liabilities and stockholders' equity	$ 194,561	$ 98,826

Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares	Sep. 30, 2020	Dec. 31, 2019
Statement of Financial Position [Abstract]
Common stock, par value	$ 0.01	$ 0.01
Common stock, shares authorized	125,000,000	125,000,000
Common stock, shares issued	57,804,095	42,078,416
Common stock, shares outstanding	57,804,095	42,078,416
Preferred stock, par value	$ 0.01	$ 0.01
Preferred stock, shares authorized	5,000,000	5,000,000
Preferred stock, shares outstanding	0	0

Condensed Consolidated Statements of Operations - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Product revenue, net	$ 142		$ 142
Cost of goods sold	3		3
Gross profit	139		139
Operating expenses:
Selling, general and administrative	13,048	$ 4,116	31,295	$ 9,210
Research and development	4,523	4,110	22,320	16,103
Total operating expenses	17,571	8,226	53,615	25,313
Loss from operations	(17,432)	(8,226)	(53,476)	(25,313)
Interest and other income, net	1,122	549	1,648	1,074
Interest expense	(2,126)		(3,033)
Loss before income taxes	(18,436)	(7,677)	(54,861)	(24,239)
Provision for income taxes	21	6	110	34
Net loss	$ (18,457)	$ (7,683)	$ (54,971)	$ (24,273)
Earnings per share
Basic	$ (0.30)	$ (0.20)	$ (1.13)	$ (0.77)
Diluted	$ (0.30)	$ (0.20)	$ (1.13)	$ (0.77)
Weighted-average shares outstanding:
Basic	61,459,491	38,490,768	48,685,024	31,569,731
Diluted	61,459,491	38,490,768	48,685,024	31,569,731

Condensed Consolidated Statements of Comprehensive Loss - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Statement of Comprehensive Income [Abstract]
Net loss	$ (18,457)	$ (7,683)	$ (54,971)	$ (24,273)
Other comprehensive income (loss):
Unrealized gain (loss) on available for sale securities, net	(20)	(3)	(31)	65
Total other comprehensive income (loss):	(20)	(3)	(31)	65
Comprehensive loss	$ (18,477)	$ (7,686)	$ (55,002)	$ (24,208)

- Definition

The portion of profit or loss for the period, net of income taxes, which is attributable to the parent.

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+ Details

- Definition

Amount after tax and reclassification adjustments of other comprehensive income (loss).

+ References

+ Details

Condensed Consolidated Statements of Stockholders' Equity - USD ($) $ in Thousands	Total	Common Stock [Member]	Additional Paid-in Capital [Member]	Accumulated Other Comprehensive Income (Loss) [Member]	Accumulated Deficit [Member]
Beginning balance at Dec. 31, 2018	$ 34,124	$ 245	$ 270,509	$ (16)	$ (236,614)
Beginning balance, shares at Dec. 31, 2018		24,456,120
Stock-based compensation	622		622
Exercise of stock options	3		3
Exercise of stock options, shares		33,839
Additional paid in capital on account of vested portion of restricted stock	16		16
Other comprehensive income (loss)	18			18
Net loss	(8,750)				(8,750)
Ending balance at Mar. 31, 2019	26,033	$ 245	271,150	2	(245,364)
Ending balance, shares at Mar. 31, 2019		24,489,959
Beginning balance at Dec. 31, 2018	34,124	$ 245	270,509	(16)	(236,614)
Beginning balance, shares at Dec. 31, 2018		24,456,120
Other comprehensive income (loss)	65
Net loss	(24,273)
Ending balance at Sep. 30, 2019	96,740	$ 420	357,158	49	(260,887)
Ending balance, shares at Sep. 30, 2019		42,005,465
Beginning balance at Mar. 31, 2019	26,033	$ 245	271,150	2	(245,364)
Beginning balance, shares at Mar. 31, 2019		24,489,959
Stock-based compensation	627		627
Exercise of stock options	26		26
Exercise of stock options, shares		24,110
Issuance of common stock in follow-on offering, net	32,233	$ 73	32,160
Issuance of common stock in follow-on offering, net, shares		7,263,158
Other comprehensive income (loss)	50			50
Net loss	(7,840)				(7,840)
Ending balance at Jun. 30, 2019	51,129	$ 318	303,963	52	(253,204)
Ending balance, shares at Jun. 30, 2019		31,777,227
Stock-based compensation	944		944
Exercise of stock options	10	$ 1	9
Exercise of stock options, shares		61,811
Issuance of common stock in follow-on offering, net	52,343	$ 101	52,242
Issuance of common stock in follow-on offering, net, shares		10,166,427
Other comprehensive income (loss)	(3)			(3)
Net loss	(7,683)				(7,683)
Ending balance at Sep. 30, 2019	96,740	$ 420	357,158	49	(260,887)
Ending balance, shares at Sep. 30, 2019		42,005,465
Beginning balance at Dec. 31, 2019	85,769	$ 421	358,245	37	(272,934)
Beginning balance, shares at Dec. 31, 2019		42,078,416
Stock-based compensation	1,162		1,162
Exercise of stock options	232	$ 2	230
Exercise of stock options, shares		186,925
Other comprehensive income (loss)	(34)			(34)
Net loss	(15,386)				(15,386)
Ending balance at Mar. 31, 2020	71,743	$ 423	359,637	3	(288,320)
Ending balance, shares at Mar. 31, 2020		42,265,341
Beginning balance at Dec. 31, 2019	85,769	$ 421	358,245	37	(272,934)
Beginning balance, shares at Dec. 31, 2019		42,078,416
Other comprehensive income (loss)	(31)
Net loss	(54,971)
Ending balance at Sep. 30, 2020	110,338	$ 578	437,659	6	(327,905)
Ending balance, shares at Sep. 30, 2020		57,804,095
Beginning balance at Mar. 31, 2020	71,743	$ 423	359,637	3	(288,320)
Beginning balance, shares at Mar. 31, 2020		42,265,341
Stock-based compensation	1,335		1,335
Exercise of stock options	5		5
Exercise of stock options, shares		3,591
Other comprehensive income (loss)	23			23
Net loss	(21,128)			0	(21,128)
Ending balance at Jun. 30, 2020	51,978	$ 423	360,977	26	(309,448)
Ending balance, shares at Jun. 30, 2020		42,268,932
Stock-based compensation	1,345		1,345
Exercise of stock options	13		13
Exercise of stock options, shares		5,399
Issuance of common stock and pre-funded warrants in follow-on offering, net	75,479	$ 151	75,328
Issuance of common stock and pre-funded warrants in follow-on offering, net , shares		15,125,000
Issuance of common stock from cashless warrant exercise	0	$ 4	(4)
Issuance of common stock from cashless warrant exercise , shares		404,764
Other comprehensive income (loss)	(20)			(20)
Net loss	(18,457)				(18,457)
Ending balance at Sep. 30, 2020	$ 110,338	$ 578	$ 437,659	$ 6	$ (327,905)
Ending balance, shares at Sep. 30, 2020		57,804,095

Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019
Operating Activities:
Net loss	$ (54,971)	$ (24,273)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation	122	42
Stock-based compensation	3,813	2,193
Accretion on marketable securities, net	(71)	(414)
Non-cash lease expense	376	135
Amortization of debt discount and issuance costs	171
Change in fair value of embedded derivative liability	(1,060)
Benefit for deferred income taxes	(8)	(18)
Changes in operating assets and liabilities:
Accounts receivable	(179)
Inventory	(8,913)
Prepaid expenses and other current assets	(1,500)	(526)
Insurance Recovery (Note 11)		18,288
Accounts payable and accrued expenses	7,690	(1,924)
Settlement Liability (Note 11)		(18,750)
Other assets	(688)	53
Other current and long-term liabilities	920	(67)
Net cash used in operating activities	(54,298)	(25,261)
Investing Activities:
Purchases of marketable securities	(92,879)	(97,000)
Maturities of marketable securities	73,522	43,051
Purchases of property and equipment	(369)	(140)
Net cash used in investing activities	(19,726)	(54,089)
Financing Activities:
Proceeds from the issuance of common stock and pre-funded warrants, net	75,479	84,576
Exercise of stock options	250	39
Proceeds from short-term borrowing		1,675
Payments of short-term borrowing	(838)	(335)
Proceeds from deferred royalty obligation, net	64,418
Net cash provided by financing activities	139,309	85,955
Net increase in cash, cash equivalents and restricted cash	65,285	6,605
Cash, cash equivalents and restricted cash, beginning of period	27,855	13,060
Cash, cash equivalents and restricted cash, end of period	93,140	19,665
Reconciliation of cash, cash equivalents and restricted cash reported within the condensed consolidated balance sheets
Total cash, cash equivalents and restricted cash	$ 93,140	$ 19,665

Description of Business and Summary of Significant Accounting Policies	9 Months Ended
	Sep. 30, 2020
Accounting Policies [Abstract]
Description of Business and Summary of Significant Accounting Policies	1. Description of Business and Summary of Significant Accounting Policies Chiasma, Inc. is a commercial - stage biopharmaceutical company incorporated in 2001 under the laws of the State of Delaware. Chiasma, Inc. is headquartered in Massachusetts and has two wholly owned subsidiaries; Chiasma (Israel) Ltd., and Chiasma Securities Corp, collectively referred to as “the Company,” “we,” “us,” “our” or “Chiasma”. We are focused on developing and commercializing oral therapies to improve the lives of patients who face challenges associated with their existing treatments for rare and serious chronic disease. Employing our Transient Permeability Enhancer (“TPE”) technology platform, we seek to develop oral medications that are currently available only as injections. On June 26, 2020, we received approval from the U.S. Food and Drug Administration (“FDA”) of our oral octreotide capsules product candidate, MYCAPSSA , for long-term maintenance treatment in acromegaly patients who have responded to and tolerated treatment with octreotide or lanreotide. We commenced our U.S. commercial launch of MYCAPSSA in September 2020. Acromegaly is a rare and debilitating condition that is caused by the body’s production of excess growth hormone. Octreotide is an analog of somatostatin, a natural inhibitor of growth hormone secretion. Octreotide capsules have been granted orphan designation in the United States and the European Union for the treatment of acromegaly. We retain worldwide rights to develop and commercialize octreotide capsules. We are currently conducting an international Phase 3 clinical trial, referred to as MPOWERED, of oral octreotide capsules for the maintenance treatment of adult patients with acromegaly to support regulatory approval in the European Union by the European Medicines Agency (“EMA”). The MPOWERED trial is a global, randomized, open-label and active-controlled 15-month trial initially designed to enroll up to 150 patients. The EMA requested that a minimum of 80 patients who are responders to octreotide capsules per the protocol following the six-month run-in phase be randomized to either remain on octreotide capsules or return to injectable somatostatin receptor ligands (octreotide or lanreotide), and then followed for an additional nine months. In June 2019, we completed the enrollment of 146 total patients in MPOWERED and in January 2020 completed the randomization in that trial. In April 2019, we completed an underwritten public offering of 7,263,158 shares of common stock at $4.75 per share for aggregate net proceeds of approximately $32.2 million after underwriting fees and offering expenses. In August 2019, we completed a follow-on public offering of common stock in which we sold 10,166,427 shares of common stock at $5.50 per share for aggregate net proceeds of approximately $52.3 million after underwriting fees and offering expenses. In April 2020, we entered into an Open Market Sales Agreement (“ATM Agreement”) for “at the market offerings” with Jefferies LLC (“Jefferies”), under which we may offer and sell from time to time shares of our common stock having an aggregate offering price of up to $60.0 million through Jefferies, acting as our sales agent or principal. To date, we have not sold any common stock under the ATM Agreement. In April 2020, we entered into a Revenue Interest Financing Agreement (the “Revenue Interest Financing Agreement”) with Healthcare Royalty Partners IV, L.P. (“HCR”) for up to $75.0 million. As of September 30, 2020, we have received aggregate proceeds of $65.0 million, less certain transaction expenses (see Note 7). In July 2020, we completed an underwritten public offering of 15,125,000 shares of common stock and pre-funded warrants (the “Pre-Funded Warrants”) to purchase an aggregate of 5,000,000 shares of common stock . The public offering price was $4.00 per share of common stock. We received aggregate net proceeds of approximately $75.5 million after deducting underwriting fees and offering expenses. The Pre-Funded Warrants are immediately exercisable at an exercise price per share of $0.0001. We have incurred substantial operating losses since inception, and we expect our operating losses and negative operating cash flows to continue for the foreseeable future. We are heavily dependent on the commercial success of MYCAPSSA in the United States and the regulatory approval and subsequent commercial success of MYCAPSSA in the European Union, both of which may never occur. We plan to continue to invest in our U.S. commercial launch and, the manufacturing of octreotide capsules for market consumption, including in manufacturing scale-up activities, and continuing the open label extension portion of our international Phase 3 CHIASMA OPTIMAL clinical trial of octreotide capsules in acromegaly and our international Phase 3 MPOWERED clinical trial of octreotide capsules in acromegaly for participants outside the United States. In addition, if the MPOWERED trial results are positive, we plan to prepare and submit a marketing authorization application, or MAA, to the European Medicines Agency, or EMA, seeking potential regulatory approval of octreotide capsules as a treatment for acromegaly in the European Union . We currently expect our existing cash, cash equivalents and marketable securities to fund our operations for at least one year after the date these condensed consolidated financial statements are issued. Successful transition to attaining profitable operations is dependent upon achieving a level of revenues adequate to support our cost structure. We plan to continue to fund our losses from operations and capital funding needs from existing balances of cash, cash equivalents and marketable securities and potentially through additional equity financings. We may also opportunistically consider license and collaboration agreements with potential partners or convertible debt financing to the extent such sources are identified and available. If our anticipated U.S. revenues are insufficient to fund our operations to attaining and sustaining profitability, additional financing may be required. Such financing, if required, may not be available on a timely basis on terms acceptable to us, or at all. If we are not able to secure adequate additional funding when required, we may be forced to make reductions in spending, extend payment terms with suppliers, suspend or curtail our development opportunities, or it may negatively impact our ability to adequately fund or delay our potential commercial preparations or launch readiness outside the United States if the MPOWERED trial results are positive and MYCAPSSA is approved by the EMA. Any of these actions could materially harm our business, results of operations and future prospects. Failure to successfully commercialize octreotide capsules in acromegaly will prevent us from achieving profitability and positive cash flows, which could raise significant concerns about our continued viability as a business. Basis of Presentation We have prepared the accompanying unaudited condensed consolidated financial statements pursuant to the rules and regulations of the SEC regarding interim financial reporting. Accordingly, certain information and footnote disclosures required by accounting principles generally accepted in the United States (“U.S. GAAP”) for annual financial statements have been condensed or omitted. The information included in this quarterly report on Form 10-Q should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2019. The year-end condensed consolidated balance sheet data presented for comparative purposes was derived from our audited financial statements but does not include all disclosures required by U.S. GAAP. In the opinion of management, we have prepared the accompanying unaudited condensed consolidated financial statements on the same basis as our audited financial statements, and these financial statements include all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the results of the interim period s presented. Interim results are not necessarily indicative of results for a full year or for any other subsequent interim period. Cash Equivalents Cash equivalents consist of highly liquid instruments that mature within three months or less from the date of purchase. Marketable Securities Our investments primarily consist of commercial paper and corporate and government debt securities. These marketable securities are classified as available-for-sale, and as such, are reported at fair value on our condensed consolidated balance sheets. Unrealized holding gains and losses are reported within accumulated other comprehensive income (loss) as a separate component of stockholders’ equity. The amortized cost of debt securities is adjusted for amortization of premiums and accretion of discounts to maturity. Such amortization, together with interest on securities, are included in interest and other income, net, on our condensed consolidated statements of operations. If a decline in the fair value of a marketable security below our cost basis is determined to be other than temporary, such marketable security is written down to its estimated fair value as a new cost basis and the amount of the write-down is included in earnings as an impairment charge. The cost of securities sold is based on the specific identification method. Accounts Receivable Our accounts receivable consist of amounts due from one specialty pharmacy (the “customer”) for sales of MYCAPSSA and which have standard payments terms. We extend credit to our customer based on our evaluation of the customer’s financial condition. Accounts receivable are stated at amounts due net of applicable prompt pay discounts and other adjustments. We assess the need for an allowance for doubtful accounts by considering a number of factors, including the length of time trade accounts receivable are past due and the customer’s ability to pay its obligation. Based on a review of these factors, as of September 30, 2020, we determined that an allowance for doubtful accounts was not required. Concentrations of credit risk Financial instruments that potentially subject us to significant concentration of credit risk consist primarily of cash, cash equivalents and marketable securities, and accounts receivable. During the three months ended September 30, 2020, one customer comprised 100% of our accounts receivable and product revenues. We routinely maintain deposits in financial institutions in excess of government insured limits. Management believes that we are not exposed to significant credit risk as our deposits are held at financial institutions that management believes to be of high credit quality and we have not experienced any significant losses in these deposits. We regularly invest excess operating cash in deposits with major financial institutions and money market funds and in notes issued by the U.S. government, as well as in fixed income investments and U.S. bond funds, both of which can be readily purchased and sold using established markets. We believe that the market risk arising from our holdings of these financial instruments is mitigated based on the fact that many of these securities are either government backed or of high credit rating. Inventory Prior to FDA approval of MYCAPSSA, all costs related to the manufacturing of MYCAPSSA that could potentially be available to support the planned U.S. commercial launch were charged to research and development expense in the period incurred. Generally, inventory may be capitalized if it is probable that future revenues will be generated from the sale of the inventory and that these revenues will exceed the cost of the inventory. Through the FDA approval date of MYCAPSSA, we expensed all of our manufacturing costs due to the high risk inherent in drug development and uncertainty as to whether MYCAPSSA would be approved. We began to capitalize our manufacturing-related costs to inventory starting July 1, 2020. We capitalize the costs to manufacture our products incurred after regulatory approval when, based on our judgment, future commercialization is considered probable and the future economic benefit is expected to be realized. In connection therewith, we value our inventories at the lower of cost or estimated net realizable value. We determine the cost of our inventories, which includes amounts related to active pharmaceutical ingredient (“API”), and other raw materials, third party manufacturing costs and other overhead costs, on a first-in, first-out basis. Inventories that may be used for either research and development or commercial sale are classified as inventory until the material is consumed or otherwise allocated for research and development. If the material is intended to be used for research and development, it is expensed as research and development once that determination is made. On a quarterly basis, we review inventory quantities on hand and analyze the provision for excess and obsolete inventory based primarily on remaining product shelf life and our estimated sales forecast which is based on anticipated future demand. We build demand forecasts by considering factors such as, but not limited to, overall market potential, market share, market acceptance, and patient usage. Our estimates of future product demand may prove to be imprecise and changes in estimates will result in a change to the provision required for excess and obsolete inventory. Accordingly, any significant unanticipated changes in demand could have a significant impact on the value of our inventory and results of operations. Deferred Royalty Obligation We treat the deferred royalty obligation, as discussed further in Note 7 , as a debt obligation, amortized under the effective interest rate method over the estimated life of the agreement. We recognize interest expense thereon using the effective rate, which is based on our current estimates of future revenues over the life of the arrangement. In connection therewith, we periodically assess our expected revenues using internal projections, impute interest on the carrying value of the deferred royalty obligation, and record interest expense using the effective interest rate. To the extent our estimates of future revenues are greater or less than previous estimates or the estimated timing of such payments is materially different than previous estimates, we will account for any such changes by adjusting the effective interest rate on a prospective basis, with a corresponding impact to the reclassification of our deferred royalty obligation between short- and long-term. The assumptions used in determining the expected repayment term of the deferred royalty obligation and amortization period of the issuance costs requires that we make estimates that could impact the short-term and long-term classification of such costs, as well as the period over which such costs will be amortized. Revenue Recognition In accordance with accounting guidance for revenue recognition, we recognize revenue when a customer obtains control of promised goods or services, in an amount that reflects the consideration which we expect to receive in exchange for those goods or services. To determine revenue recognition for arrangements that we determine to be within the scope of such guidance, we perform the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the entity satisfies a performance obligation. We only apply the five-step model to contracts when it is probable that we will collect the consideration we are entitled to in exchange for the goods or services that we transfer to the customer. For a further discussion of accounting for net product revenue see Note 2. Use of Estimates The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes during the reporting period. We base these estimates and assumptions on historical experience when available, and on various factors that we believe to be reasonable under the specific circumstances. Significant estimates relied upon in preparing the accompanying condensed consolidated financial statements include, but are not limited to, recognition of product revenues, accounting for stock-based compensation, income taxes, the fair value of embedded derivatives and our deferred royalty obligation and accounting for certain accruals. We assess the above estimates on an ongoing basis; however, actual results could materially differ from those estimates. Recently Issued Accounting Pronouncements In June 2016, the Financial Accounting Standards Board issued new guidance which will require more timely recording of credit losses on loans and other financial instruments held by financial institutions and other organizations. The new guidance requires the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions and reasonable and supportable forecasts. The new guidance also requires enhanced disclosures regarding significant estimates and judgments used in estimating credit losses. On January 1, 2020, we adopted this standard. The adoption of this standard did not have a material impact on our condensed consolidated financial statements.

Product Revenue, Net

9 Months Ended

Sep. 30, 2020

Revenue from Contract with Customer [Abstract]

Product Revenue, Net

2. Product Revenue, Net

We began selling MYCAPSSA in September 2020. We currently sell MYCAPSSA in the United States to a specialty pharmacy, which dispenses the product directly to patients. We recognize revenue when the customer obtains control of the product, which occurs at a point in time, when the product is received by them.

Revenue Reserves for Variable Consideration

Revenue from sales of MYCAPSSA are recorded at the net sales price, which is the amount of consideration we expect to receive in exchange for transferring the product to a customer (“transaction price”). This transaction price for product sales includes variable consideration for which reserves are established and which may result from discounts, returns, chargebacks, rebates,

co-pay

co-insurance

assistance and other allowances that are offered within contracts with our customer and payors. We estimate the amount of variable consideration that should be included in the transaction price under the expected value method for all sales deductions other than trade discounts, which are estimated under the most likely amount method. These provisions represent our best estimate of the amount of consideration to which we are entitled. Actual amounts of consideration ultimately received may differ from these estimates. If actual results in the future vary from our estimates, we will adjust these estimates, which would affect net product revenue and earnings in the period such variances become known.

Trade Discounts and Specialty Pharmacy Fees

: we provide customary discounts to our

customer

for prompt payment, the terms for which are explicitly stated in our

contract

with such

customer

. We record these discounts as a reduction of revenue with a corresponding reduction to accounts receivable. In addition, we also pay fees for data and distribution services from our specialty pharmacy. We have determined that such fees are not for a distinct g

d or service and, accordingly, are being recorded as a reduction of product revenue and a component of accrued expenses.

Government and Payor Rebates:

We are subject to discount obligations under state Medicaid programs, Medicare, and other government programs. Additionally, we may contract with various private payor organizations, primarily insurance companies and pharmacy benefit managers, for the payment of rebates with respect to utilization of MYCAPSSA. Provisions for both government and payor rebates are based on the estimated amount of rebates and incentives to be

claimed on the related sales from the period. These reserves are recorded in the same period in which the related revenue is recognized, resulting in a reduction of product revenue and the establishment of a current liability that is included in accrued expenses in our condensed consolidated balance sheet. For Medicare, we must also estimate the number of patients in the prescription drug coverage gap for whom we will owe an additional liability under the Medicare Part D program. Our liability for these rebates currently consists of estimates of claims for the current quarter, and estimated future claims that will be made for product that has been recognized as revenue, but which remains in distribution channel inventories at the end of the reporting period.

Other Incentives/Patient Assistance Programs:

We offer voluntary patient assistance programs such as

co-pay

and

co-insurance

assistance. These programs are intended to provide financial assistance to qualified commercially insured patients with prescription drug

co-payments

and

co-insurance

required by payors. The calculation of the accrual for

co-pay

and

co-insurance

assistance is based on an estimate of claims and the cost per claim that we expect to receive associated with product that has been recognized as revenue, but remains in the distribution channel inventories at period end.

Product Returns

offer customers a limited right of return for unopened damaged or defective product, and, under certain circumstances, for unopened product for a limited time before its expiration date. We estimate the amount of product revenues that may be returned by customers and record this estimate as a reduction of revenue in the period in which the related product revenue is recognized. We currently estimate our provision for sales returns based on our expectations and adjust the transaction price with such estimate at the time of sale to our customer. Once sufficient history has been collected for product returns, we will utilize that history to inform our estimate assumption.

The following table summarizes activity in each of the above product revenue allowances and reserve categories for the nine months ended September 30, 2020:


	Discounts and Fees		Rebates and Other Incentives		Returns		Total
			($ in thousands)
Balance, January 1, 2020	$	—	$	—	$	—	$	—
Provision		17		26		1		44
Payments or credits		—		—		—		—

Balance, September 30, 2020	$	17	$	26	$	1	$	44

- Definition

The entire disclosure of revenue from contract with customer to transfer good or service and to transfer nonfinancial asset. Includes, but is not limited to, disaggregation of revenue, credit loss recognized from contract with customer, judgment and change in judgment related to contract with customer, and asset recognized from cost incurred to obtain or fulfill contract with customer. Excludes insurance and lease contracts.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-URI http://asc.fasb.org/topic&trid=49130388

Reference 2: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 10
-URI http://asc.fasb.org/extlink&oid=121604090&loc=SL49130551-203045

Reference 3: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 13
-Subparagraph (b)(2)
-URI http://asc.fasb.org/extlink&oid=121604090&loc=SL49130556-203045

Reference 4: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 12
-Subparagraph (b)
-URI http://asc.fasb.org/extlink&oid=121604090&loc=SL49130554-203045

Reference 5: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 9
-URI http://asc.fasb.org/extlink&oid=121604090&loc=SL49130550-203045

Reference 6: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 12
-Subparagraph (e)
-URI http://asc.fasb.org/extlink&oid=121604090&loc=SL49130554-203045

Reference 7: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 12
-Subparagraph (a)
-URI http://asc.fasb.org/extlink&oid=121604090&loc=SL49130554-203045

Reference 8: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 12
-Subparagraph (d)
-URI http://asc.fasb.org/extlink&oid=121604090&loc=SL49130554-203045

Reference 9: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 15
-URI http://asc.fasb.org/extlink&oid=121604090&loc=SL49130558-203045

Reference 10: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 12
-Subparagraph (c)
-URI http://asc.fasb.org/extlink&oid=121604090&loc=SL49130554-203045

+ Details

Investments

9 Months Ended

Sep. 30, 2020

Investments, All Other Investments [Abstract]

Investments

3. Investments

Our investments consisted of the following as of September 30, 2020 and December 31, 2019:


	As of September 30, 2020
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
			($ in thousands)
Money market funds	$	32,697	$	—	$	—		$	32,697
Corporate notes		16,796		1		(1	)		16,796
Commercial paper		88,191		8		(3	)		88,196
U.S. treasury securities		21,525		1		—			21,526

Total	$	159,209	$	10	$	(4	)	$	159,215


	As of December 31, 2019
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
	($ in thousands)
Money market funds	$	23,012	$	—	$	—	$	23,012
Corporate notes		45,584		20		—		45,604
Commercial paper		20,899		17		—		20,916

Total	$	89,495	$	37	$	—	$	89,532

As of September 30, 2020, we consider the unrealized losses in our investment portfolio to be temporary in nature and not due to credit losses. We have the ability to hold such investments until recovery of the fair value. We utilize the specific identification method in computing realized gains and losses. We had

no realized gains and losses on our

available-for-sale

securities for the three and nine months ended September 30, 2020 or 2019.

The fair values of our investments by classification in our condensed consolidated balance sheets as of September 30, 2020 and December 31, 2019 were as follows:


	September 30, 2020		December 31, 2019
	($ in thousands)
Cash and cash equivalents	$	54,998	$	25,012
Marketable securities		83,917		64,520
Restricted cash		20,300		—

Total	$	159,215	$	89,532

Cash and cash equivalents in the table above exclude cash of $17.8 million and $2.8 million as of September 30, 2020 and December 31, 2019, respectively. The contractual maturity dates of all of our investments are less than one year.

Fair Value Measurements of Financial Instruments

9 Months Ended

Sep. 30, 2020

Fair Value Disclosures [Abstract]

Fair Value Measurements of Financial Instruments

4. Fair Value Measurements of Financial Instruments

Certain assets and liabilities are reported at fair value on a recurring basis. 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 at the measurement date. The fair value accounting guidance requires that assets and liabilities carried at fair value be classified and disclosed in one of the following three categories:

•

Level 1

— Quoted prices in active markets for identical assets or liabilities that we have the ability to access at the measurement date.

•

Level 2

— Inputs other than quoted prices in active markets that are observable for the asset or liability, either directly or indirectly.

•

Level 3

— Inputs that are unobservable for the asset or liability.

To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised by us in determining fair value is greatest for instruments categorized in Level 3. A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.

The fair value measurements of our financial instruments are summarized in the table below:


	Fair Value Measurements at September 30, 2020
Description	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Financial assets	($ in thousands)
Cash equivalents:
Money market funds	$	32,697	$	—	$	—	$	32,697
U.S. treasury s ecuriti es		—		8,499		—		8,499
Corporate notes		—		3,605		—		3,605
Commercial paper		—		30,497		—		30,497

Total cash equivalents	$	32,697	$	42,601	$	—	$	75,298
Marketable securities:
U.S. treasury s ecuriti es	$	13,027	$	—	$	—	$	13,027
Corporate notes		—		13,191		—		13,191
Commercial paper		—		57,699		—		57,699

Total marketable securities		13,027		70,890		—		83,917

Total	$	45,724	$	113,491	$	—	$	159,215

Financial liabilities
Derivative liabilities	$	—	$	—	$	2,040	$	2,040


	Fair Value Measurements at December 31, 2019
Description	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Financial assets	($ in thousands)
Cash equivalents:
Money market funds	$	23,012	$	—	$	—	$	23,012
Corporate notes		—		2,000		—		2,000

Total cash equivalents	$	23,012	$	2,000	$	—	$	25,012
Marketable securities:
Corporate notes	$	—	$	43,604	$	—	$	43,604
Commercial paper		—		20,916		—		20,916

Total marketable securities		—		64,520		—		64,520

Total	$	23,012	$	66,520	$	—	$	89,532

Our cash equivalents are composed of money market funds as well as U.S. treasury securities, corporate notes and commercial paper with maturity dates of 90 days or less from the date of purchase. We measure these investments at fair value. The fair value of cash equivalents held in money market is determined based on Level 1 inputs.

Items classified as Level 2 within the valuation hierarchy consist of U.S. treasury securities, corporate notes and commercial paper. We estimate the fair values of these marketable securities by taking into consideration valuations obtained from independent pricing services, which normally derive security prices from recently reported trades for identical or similar securities, making adjustments based upon other significant observable market transactions. At the end of each reporting period, we perform quantitative and qualitative analysis of prices received from third parties to determine whether prices are reasonable estimates of fair value. After completing our analysis, we did not adjust or override any fair value measurements provided by our pricing services as of September 30, 2020 or December 31, 2019.

In certain cases where there is limited activity or less transparency around inputs to valuation, the related assets or liabilities are classified as Level 3. We recorded derivative liabilities associated with our deferred royalty obligation, as discussed further in Note 7. These derivative liabilities are measured at fair value using an option pricing Monte Carlo simulation model and is included as a component of the deferred royalty obligation. The embedded derivative liabilities are subject to remeasurement at the end of each reporting period, with changes in fair value recognized as a component

interest and other income, net. The assumptions used in the option pricing Monte Carlo simulation model include: (1) the expected net sales of MYCAPSSA; (2) our risk-adjusted discount rate that includes a company specific risk premium; (3) our cost of debt; (4) volatility; (5) the probability and timing of a change in control occurring during the term of the instrument; and (6) the probability and timing of an event of default during the term of the instrument. We did not have any Level 3 assets or liabilities being measured at fair value on a recurring basis as of December 31, 2019.

The following table sets forth a summary of the changes in the fair value of the embedded derivative for the three months ended September 30, 2020:


($ in thousands)	Fair Value Measurement of Embedded Derivative using Significant Unobservable Inputs (Level 3)
Balance, June 30, 2020	$	1,308
Additions during the period		1,792
Change in fair value during the period		(1,060	)

Balance, September 30, 2020	$	2,040

- 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

Inventory

9 Months Ended

Sep. 30, 2020

Inventory Disclosure [Abstract]

Inventory

5. Inventory

Our inventory of MYCAPSSA consisted of the following as of September 30, 2020:


($ in thousands)	September 30, 2020
Raw materials and supplies	$	6,745
Work in process		1,879
Finished goods		318

Total inventory	$	8,942

We began to capitalize inventory on July 1, 2020 following FDA approval of MYCAPSSA.

Accrued Expenses

9 Months Ended

Sep. 30, 2020

Payables and Accruals [Abstract]

Accrued Expenses

6. Accrued Expenses

As of September 30, 2020 and December 31, 2019, accrued expenses consisted of the following:


	September 30, 2020		December 31, 2019
	($ in thousands)
Accrued research and development expenses	$	3,895	$	4,219
Accrued selling, general, administrative and other expenses		3,209		1,485
Accrued payroll and employee benefits		3,171		1,872

Total accrued expenses	$	10,275	$	7,576

Deferred Royalty Obligation	9 Months Ended
Deferred Royalty Obligation	Sep. 30, 2020
Text Block [Abstract]
Deferred Royalty Obligation	7. Deferred Royalty Obligation In April 2020, we entered into the Revenue Interest Financing Agreement with HCR whereby HCR will receive payments from us at a tiered percentage (the “Applicable Tiered Percentage”) of future net revenues of MYCAPSSA and any of our other future products, including worldwide net product sales and upfront payments and milestones received from third parties under license agreements (the “Revenue Interests”). Under the terms of the agreement, we received $25.0 million, less certain transaction expenses, from HCR in April 2020 and an additional $25.0 million in July 2020 following the FDA approval of MYCAPSSA. In September 2020 we received an additional $15.0 million upon meeting conditions related to commercial drug supply availability and first commercial sale of MYCAPSSA . We are also entitled to receive an additional $10.0 million in early 2022 subject to the achievement of a revenue milestone and customary closing conditions. In exchange for the total investment amount (“Investment Amount”) received, HCR will receive a tiered royalty starting in the low double digits on worldwide annual net revenues of MYCAPSSA and any other future products, subject to step-downs upon the achievement of certain annual revenues. HCR’s rights to receive the Revenue Interests shall terminate on the date on which HCR has received payments equal to 195% of the funded portion of the Investment Amount including the aggregate of all payments made to HCR as of such date, unless the Revenue Interest Financing Agreement is terminated earlier. If HCR has not received payments equal to the 195% of the funded portion of the Investment Amount by the ten-year anniversary of the initial closing date and no event of default has occurred or is ongoing, among other things, we shall pay HCR an amount equal to the funded portion of the Investment Amount plus a specific annual rate of return in the low to mid-teens less payments previously received. If a change of control of the Company occurs, we must immediately repay HCR the total amount actually funded (including unfunded amounts conditionally eligible to be funded) plus a change of control premium, the amount of which is variable up to 95% based on timing and circumstances of such change of control. Upon the occurrence of an event of default, including the withdrawal, suspension or other termination of the FDA approval of MYCAPSSA as a treatment for acromegaly that continues for 60 days that prevents us from marketing MYCAPSSA, HCR may accelerate payments due under the agreement to the 195% of the funded portion of the Investment Amount. If HCR has not received 60% of the funded portion of the Investment Amount by September 30, 2023 or 100% of the funded portion of the Investment Amount by September 30, 2024, we must make cash payments sufficient to gross HCR up to such minimum amounts. Further, the Revenue Interest Financing Agreement requires us to maintain a minimum of $20.0 million in securitized cash and investment accounts, which we recorded as restricted cash in the condensed consolidated balance sheet, during any quarter that the trailing four quarters of net revenue of MYCAPSSA is below a certain threshold. Our obligations under the Revenue Interest Financing Agreement are secured by a first priority perfected security interest in all of our Chiasma, Inc. cash and cash equivalents (as defined in the Revenue Interest Financing Agreement), all present and future net revenues of MYCAPSSA and all MYCAPSSA-related assets. We have evaluated the terms of the deferred royalty obligation and concluded that the features of the Investment Amount are similar to those of a debt instrument. Accordingly, we have accounted for the transaction as long-term debt. We have evaluated the terms of the debt and determined that the repayment of up to 195% of the Investment Amount, less any payments made to date, upon a change of control is an embedded derivative that requires bifurcation from the debt instrument and fair value recognition. In addition, we have determined that the repayment of 195% of the funded portion of the Investment Amount, less any payments made to date, upon an event of default is an embedded derivative that requires bifurcation from the debt instrument and fair value recognition. We determine the fair value of the derivatives using an option pricing Monte Carlo simulation model taking into account the probability and timing of a change of control and an event of default occurring and potential repayment amounts and timing of such payments that would result under various scenarios, as further described in Note 4. The aggregate fair value of the embedded derivative as of September 30, 2020 is $2.0 million and is presented in deferred royalty obligation in the condensed consolidated balance sheet. We remeasure the embedded derivative to fair value each reporting period until the termination of the Revenue Interest Financing Agreement. Such changes in fair value are recorded as interest and other income, net in the condensed consolidated statement of operations. The effective interest rate as of September 30, 2020 was approximately 17%. In connection with the deferred royalty obligation, we incurred debt issuance costs totaling $0.6 million during the nine months ended September 30, 2020. Debt issuance costs have been netted against the deferred royalty obligation and are being amortized over the estimated term of the obligation using the effective interest method, adjusted on a prospective basis for changes in the underlying assumptions and inputs. The assumptions used in determining the expected repayment term of the deferred royalty obligation and amortization period of the issuance costs requires that we make estimates that could impact the short- and long-term classification of these costs, as well as the period over which these costs will be amortized. The carrying value of the deferred royalty obligation, as presented on the condensed consolidated balance sheet, approximates fair value as of September 30, 2020 and was measured using Level 3 inputs. The estimated fair value was calculated using an option pricing Monte Carlo simulation model with inputs consistent with those used in determining the embedded derivative values as described in Note 4 .

Earnings per Share of Common Stock	9 Months Ended
Earnings per Share of Common Stock	Sep. 30, 2020
Earnings Per Share [Abstract]
Earnings per Share of Common Stock	8. Earnings per Share of Common Stock We include our outstanding shares of common stock and Pre-Funded Warrants in our calculation of the basic weighted-average shares outstanding. We include the Pre-Funded Warrants as their exercise price of $0.0001 per share is negligible and they are fully vested and exercisable at any time after the original issuance date. Our potential dilutive securities, which include all other common stock warrants outstanding and stock options, have been excluded from the computation of diluted weighted-average shares outstanding because such securities would have an anti-dilutive impact due to net losses reported during the three and nine months ended September 30, 2020 and 2019.

Warrants

9 Months Ended

Sep. 30, 2020

Text Block [Abstract]

Warrants

9. Warrants

A summary of warrants activity for the nine months ended September 30, 2020 is presented below.


Description	Exercise Price		Expiration Date		Balance, December 31, 2019		Warrants Issued		Warrants Exercised			Balance, September 30, 2020
October 2012 Warrants	$	0.0910		10/22/2022		829,686		—		(205,321	)		624,365
March 2013 Warrants	$	0.0910		3/28/2022		829,686		—		(205,321	)		624,365
December 2014 Warrants	$	9.1320		12/16/2024		923,527		—		—			923,527
February 2015 Warrants	$	9.1320		12/16/2024		984,116		—		—			984,116
July 2020 Pre-Funded Warrants	$	0.0001		No expiration		—		5,000,000		—			5,000,000

						3,567,015		5,000,000		(410,642	)		8,156,373

As described in Note 1, in July 2020 in connection with an underwritten public offering

, we issued Pre-Funded Warrants

to purchase an aggregate of 5,000,000 shares of common stock which are immediately exercisable at an exercise price per share of $0.0001.

Stock-based Compensation

9 Months Ended

Sep. 30, 2020

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Stock-based Compensation

10. Stock-based Compensation

In 2008, our board of directors adopted the 2008 Stock Incentive Plan (the “2008 Plan”), which provided for the grant of incentive stock options, nonqualified stock options, and restricted stock to employees, directors, and nonemployees of the Company up to 3,547,741 shares of common stock. Option awards expire 10 years from the grant date and generally vest over four years but vesting conditions can vary at the discretion of our board of directors.

In July 2015, the Company approved the 2015 Stock Option and Incentive Plan (the “2015 Plan”), which became effective upon our initial public offering. The 2015 Plan allows the grant of incentive stock options, nonqualified stock options, and restricted stock to employees, directors, and nonemployees of the Company initially up to 3,566,296 shares of common stock. In connection with the adoption of the 2015 Plan, no further option grants were permitted under the 2008 Plan and any expirations, cancellations, or terminations under the 2008 Plan are available for issuance under the 2015 Plan. On January 1, 2020, the number of shares reserved and available for issuance under the 2015 Plan increased by 1,683,136 shares of common stock pursuant to a provision in the 2015 Plan that provides that the number of shares reserved and available for issuance will automatically increase each January 1, beginning on January 1, 2016, by 4% of the number of shares of common stock issued and outstanding on the immediately preceding December 31 or such lesser number as determined by the compensation committee of the board of directors. As of September 30, 2020, the total number of shares authorized for stock award plans is 9,775,418 of which 1,179,160 remain available for grant. There are 8,243,861 stock options outstanding as of September 30, 2020.

Stock-based compensation for the three and nine months ended September 30, 2020 and 2019 consisted of the following:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
	($ in thousands)
Selling, general and administrative	$	1,079	$	702	$	3,092	$	1,373
Research and development		237		242		721		820

Total	$	1,316	$	944	$	3,813	$	2,193

Stock-based compensation of $29,000 was capitalized into inventory for the three and nine months ended September 30, 2020. Stock-based compensation capitalized into inventory is recognized as cost of goods sold when the related product is sold.

The fair value of each stock option issued was estimated at the date of grant using the Black-Scholes option model with the following weighted-average assumptions:


	Nine Months Ended September 30,
	2020			2019
Expected volatility		85	%		97	%
Expected term (years)		6.2			6.0
Risk-free interest rate		0.97	%		2.03	%
Expected dividend yield		0	%		0	%

We granted approximately 2,135,300 stock options in the nine months ended September 30, 2020. The weighted-average grant date fair value per share of stock options granted during the nine months ended September 30, 2020 was $3.36. We granted approximately 1,832,000 stock options in the nine months ended September 30, 2019. The weighted-average grant date fair value per share of options granted during the nine months ended September 30, 2019 was $5.05.

Commitments and Contingencies	9 Months Ended
Commitments and Contingencies	Sep. 30, 2020
Commitments and Contingencies Disclosure [Abstract]
Commitments and Contingencies	11. Commitments and Contingencies Manufacturing Commitments As of September 30, 2020, we had outstanding manufacturing commitments, including the acquisition of API, in the aggregate amount of $ 20.1 million of which $ 3.2 million is expected to be incurred in 2020 with the remainder to be incurred throughout 2021 . The payments on these commitments will occur following the deliveries of the API or completion of the manufacturing services. 2019 Litigation Settlement On June 9, 2016, Chiasma, Inc. and certain of our current and former officers were named as defendants in a purported federal securities class action lawsuit filed in the United States District Court for the District of Massachusetts, styled Gerneth v. Chiasma, Inc., et al . An amended complaint was filed by the lead plaintiff on February 10, 2017 challenging our statements regarding our first Phase 3 clinical trial methodology and results, and our ability to obtain FDA approval for octreotide capsules, in violation of Sections 11 and 15 of the Securities Act of 1933. The amended complaint added as defendants current and former members of our board of directors, as well as the investment banks that underwrote our initial public offering on July 15, 2015. The plaintiff sought an unspecified amount of compensatory damages on behalf of himself and members of a putative shareholder class, including interest and reasonable costs and expenses incurred in litigating the action, and any other relief the court determines is appropriate. The defendants filed a motion to dismiss the amended complaint on March 27, 2017 and on February 15, 2018, the court denied defendants’ motion to dismiss. The defendants filed an answer to the amended complaint on March 30, 2018. On February 27, 2019, the parties agreed to a settlement of all legal claims in which defendants expressly denied that they have committed any act or omission giving rise to any liability under Sections 11 or 15 of the Securities Act of 1933. On March 14, 2019, the court issued an order of preliminary approval of the settlement. As a result of this settlement agreement, we recorded a litigation settlement liability of $18.8 million as of December 31, 2018. Additionally, we recorded a litigation insurance settlement recovery receivable of $18.3 million as of December 31, 2018 , which represent ed the estimated insurance claim proceeds from our insurance carriers. On June 27, 2019, the court issued an order of final approval of the settlement. The litigation insurance settlement recovery and litigation settlement liability were settled during the three months ended June 30, 2019.

Leases

9 Months Ended

Sep. 30, 2020

Leases [Abstract]

Leases

12. Leases

We determine if an arrangement is a lease at inception. We have operating leases for our office spaces and certain automobiles.

Right-of-use

assets and lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at the commencement date. The

right-of-use

asset also includes direct costs incurred and is reduced by lease incentives. Lease agreements with lease and

non-lease

components are accounted for separately. As our leases do not provide an implicit rate, we use an estimated incremental borrowing rate based on the information available at the commencement date in determining the present value of future payments. We recognize operating lease expense on a straight-line basis over the lease term.


	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
	($ in thousands)
The components of lease expense were as follows:
Operating lease expense	$	170	$	58	$	505	$	159

Supplemental cash flow information related to leases was as follows:
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	205	$	54	$	476	$	154
Right-of-use assets obtained in exchange for lease obligations:
Operating leases	$	28	$	—	$	122	$	113


	September 30, 2020
	($ in thousands)
Supplemental balance sheet information related to leases was as follows:
Right-of-use assets	$	1,118

Other current liabilities	$	622
Long-term liabilities		645

Total lease liabilities	$	1,267


Weighted average remaining lease term—operating leases		24
Weighted average discount rate—operating leases		10.8	%

Our lease

right-of-use

assets are recorded within other assets on our condensed consolidated balance sheets.

Future lease payments under noncancelable leases as of September 30, 2020 are as follows:


	($ in thousands)
Remainder of 2020	$	186
2021		726
2022		497
2023		7

Total future minimum lease payments		1,416
Less: imputed interest		(149	)

Total	$	1,267

Description of Business and Summary of Significant Accounting Policies (Policies)	9 Months Ended
	Sep. 30, 2020
Accounting Policies [Abstract]
Basis of Presentation	Basis of Presentation We have prepared the accompanying unaudited condensed consolidated financial statements pursuant to the rules and regulations of the SEC regarding interim financial reporting. Accordingly, certain information and footnote disclosures required by accounting principles generally accepted in the United States (“U.S. GAAP”) for annual financial statements have been condensed or omitted. The information included in this quarterly report on Form 10-Q should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2019. The year-end condensed consolidated balance sheet data presented for comparative purposes was derived from our audited financial statements but does not include all disclosures required by U.S. GAAP. In the opinion of management, we have prepared the accompanying unaudited condensed consolidated financial statements on the same basis as our audited financial statements, and these financial statements include all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the results of the interim period s presented. Interim results are not necessarily indicative of results for a full year or for any other subsequent interim period.
Cash Equivalents	Cash Equivalents Cash equivalents consist of highly liquid instruments that mature within three months or less from the date of purchase.
Marketable Securities	Marketable Securities Our investments primarily consist of commercial paper and corporate and government debt securities. These marketable securities are classified as available-for-sale, and as such, are reported at fair value on our condensed consolidated balance sheets. Unrealized holding gains and losses are reported within accumulated other comprehensive income (loss) as a separate component of stockholders’ equity. The amortized cost of debt securities is adjusted for amortization of premiums and accretion of discounts to maturity. Such amortization, together with interest on securities, are included in interest and other income, net, on our condensed consolidated statements of operations. If a decline in the fair value of a marketable security below our cost basis is determined to be other than temporary, such marketable security is written down to its estimated fair value as a new cost basis and the amount of the write-down is included in earnings as an impairment charge. The cost of securities sold is based on the specific identification method.
Accounts Receivable	Accounts Receivable Our accounts receivable consist of amounts due from one specialty pharmacy (the “customer”) for sales of MYCAPSSA and which have standard payments terms. We extend credit to our customer based on our evaluation of the customer’s financial condition. Accounts receivable are stated at amounts due net of applicable prompt pay discounts and other adjustments. We assess the need for an allowance for doubtful accounts by considering a number of factors, including the length of time trade accounts receivable are past due and the customer’s ability to pay its obligation. Based on a review of these factors, as of September 30, 2020, we determined that an allowance for doubtful accounts was not required.
Concentrations of credit risk	Concentrations of credit risk Financial instruments that potentially subject us to significant concentration of credit risk consist primarily of cash, cash equivalents and marketable securities, and accounts receivable. During the three months ended September 30, 2020, one customer comprised 100% of our accounts receivable and product revenues. We routinely maintain deposits in financial institutions in excess of government insured limits. Management believes that we are not exposed to significant credit risk as our deposits are held at financial institutions that management believes to be of high credit quality and we have not experienced any significant losses in these deposits. We regularly invest excess operating cash in deposits with major financial institutions and money market funds and in notes issued by the U.S. government, as well as in fixed income investments and U.S. bond funds, both of which can be readily purchased and sold using established markets. We believe that the market risk arising from our holdings of these financial instruments is mitigated based on the fact that many of these securities are either government backed or of high credit rating.
Inventory	Inventory Prior to FDA approval of MYCAPSSA, all costs related to the manufacturing of MYCAPSSA that could potentially be available to support the planned U.S. commercial launch were charged to research and development expense in the period incurred. Generally, inventory may be capitalized if it is probable that future revenues will be generated from the sale of the inventory and that these revenues will exceed the cost of the inventory. Through the FDA approval date of MYCAPSSA, we expensed all of our manufacturing costs due to the high risk inherent in drug development and uncertainty as to whether MYCAPSSA would be approved. We began to capitalize our manufacturing-related costs to inventory starting July 1, 2020. We capitalize the costs to manufacture our products incurred after regulatory approval when, based on our judgment, future commercialization is considered probable and the future economic benefit is expected to be realized. In connection therewith, we value our inventories at the lower of cost or estimated net realizable value. We determine the cost of our inventories, which includes amounts related to active pharmaceutical ingredient (“API”), and other raw materials, third party manufacturing costs and other overhead costs, on a first-in, first-out basis. Inventories that may be used for either research and development or commercial sale are classified as inventory until the material is consumed or otherwise allocated for research and development. If the material is intended to be used for research and development, it is expensed as research and development once that determination is made. On a quarterly basis, we review inventory quantities on hand and analyze the provision for excess and obsolete inventory based primarily on remaining product shelf life and our estimated sales forecast which is based on anticipated future demand. We build demand forecasts by considering factors such as, but not limited to, overall market potential, market share, market acceptance, and patient usage. Our estimates of future product demand may prove to be imprecise and changes in estimates will result in a change to the provision required for excess and obsolete inventory. Accordingly, any significant unanticipated changes in demand could have a significant impact on the value of our inventory and results of operations.
Deferred Royalty Obligation	Deferred Royalty Obligation We treat the deferred royalty obligation, as discussed further in Note 7 , as a debt obligation, amortized under the effective interest rate method over the estimated life of the agreement. We recognize interest expense thereon using the effective rate, which is based on our current estimates of future revenues over the life of the arrangement. In connection therewith, we periodically assess our expected revenues using internal projections, impute interest on the carrying value of the deferred royalty obligation, and record interest expense using the effective interest rate. To the extent our estimates of future revenues are greater or less than previous estimates or the estimated timing of such payments is materially different than previous estimates, we will account for any such changes by adjusting the effective interest rate on a prospective basis, with a corresponding impact to the reclassification of our deferred royalty obligation between short- and long-term. The assumptions used in determining the expected repayment term of the deferred royalty obligation and amortization period of the issuance costs requires that we make estimates that could impact the short-term and long-term classification of such costs, as well as the period over which such costs will be amortized.
Revenue Recognition	Revenue Recognition In accordance with accounting guidance for revenue recognition, we recognize revenue when a customer obtains control of promised goods or services, in an amount that reflects the consideration which we expect to receive in exchange for those goods or services. To determine revenue recognition for arrangements that we determine to be within the scope of such guidance, we perform the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the entity satisfies a performance obligation. We only apply the five-step model to contracts when it is probable that we will collect the consideration we are entitled to in exchange for the goods or services that we transfer to the customer. For a further discussion of accounting for net product revenue see Note 2.
Use of Estimates	Use of Estimates The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes during the reporting period. We base these estimates and assumptions on historical experience when available, and on various factors that we believe to be reasonable under the specific circumstances. Significant estimates relied upon in preparing the accompanying condensed consolidated financial statements include, but are not limited to, recognition of product revenues, accounting for stock-based compensation, income taxes, the fair value of embedded derivatives and our deferred royalty obligation and accounting for certain accruals. We assess the above estimates on an ongoing basis; however, actual results could materially differ from those estimates.
Recently Issued Accounting Pronouncements	Recently Issued Accounting Pronouncements In June 2016, the Financial Accounting Standards Board issued new guidance which will require more timely recording of credit losses on loans and other financial instruments held by financial institutions and other organizations. The new guidance requires the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions and reasonable and supportable forecasts. The new guidance also requires enhanced disclosures regarding significant estimates and judgments used in estimating credit losses. On January 1, 2020, we adopted this standard. The adoption of this standard did not have a material impact on our condensed consolidated financial statements.

Product Revenue, Net (Tables)

9 Months Ended

Sep. 30, 2020

Revenue from Contract with Customer [Abstract]

Schedule Of Product Revenue And Allowances

The following table summarizes activity in each of the above product revenue allowances and reserve categories for the nine months ended September 30, 2020:


	Discounts and Fees		Rebates and Other Incentives		Returns		Total
			($ in thousands)
Balance, January 1, 2020	$	—	$	—	$	—	$	—
Provision		17		26		1		44
Payments or credits		—		—		—		—

Balance, September 30, 2020	$	17	$	26	$	1	$	44

Investments (Tables)

9 Months Ended

Sep. 30, 2020

Investments, All Other Investments [Abstract]

Schedule of Investments

Our investments consisted of the following as of September 30, 2020 and December 31, 2019:


	As of September 30, 2020
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
			($ in thousands)
Money market funds	$	32,697	$	—	$	—		$	32,697
Corporate notes		16,796		1		(1	)		16,796
Commercial paper		88,191		8		(3	)		88,196
U.S. treasury securities		21,525		1		—			21,526

Total	$	159,209	$	10	$	(4	)	$	159,215


	As of December 31, 2019
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
	($ in thousands)
Money market funds	$	23,012	$	—	$	—	$	23,012
Corporate notes		45,584		20		—		45,604
Commercial paper		20,899		17		—		20,916

Total	$	89,495	$	37	$	—	$	89,532

Schedule of Fair Value of Investments

The fair values of our investments by classification in our condensed consolidated balance sheets as of September 30, 2020 and December 31, 2019 were as follows:


	September 30, 2020		December 31, 2019
	($ in thousands)
Cash and cash equivalents	$	54,998	$	25,012
Marketable securities		83,917		64,520
Restricted cash		20,300		—

Total	$	159,215	$	89,532

Fair Value Measurements of Financial Instruments (Tables)

9 Months Ended

Sep. 30, 2020

Fair Value Disclosures [Abstract]

Fair Value Measurements of Company's Financial Instruments

The fair value measurements of our financial instruments are summarized in the table below:


	Fair Value Measurements at September 30, 2020
Description	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Financial assets	($ in thousands)
Cash equivalents:
Money market funds	$	32,697	$	—	$	—	$	32,697
U.S. treasury s ecuriti es		—		8,499		—		8,499
Corporate notes		—		3,605		—		3,605
Commercial paper		—		30,497		—		30,497

Total cash equivalents	$	32,697	$	42,601	$	—	$	75,298
Marketable securities:
U.S. treasury s ecuriti es	$	13,027	$	—	$	—	$	13,027
Corporate notes		—		13,191		—		13,191
Commercial paper		—		57,699		—		57,699

Total marketable securities		13,027		70,890		—		83,917

Total	$	45,724	$	113,491	$	—	$	159,215

Financial liabilities
Derivative liabilities	$	—	$	—	$	2,040	$	2,040


	Fair Value Measurements at December 31, 2019
Description	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Financial assets	($ in thousands)
Cash equivalents:
Money market funds	$	23,012	$	—	$	—	$	23,012
Corporate notes		—		2,000		—		2,000

Total cash equivalents	$	23,012	$	2,000	$	—	$	25,012
Marketable securities:
Corporate notes	$	—	$	43,604	$	—	$	43,604
Commercial paper		—		20,916		—		20,916

Total marketable securities		—		64,520		—		64,520

Total	$	23,012	$	66,520	$	—	$	89,532

Summary of the changes in the fair value of the embedded derivative

The following table sets forth a summary of the changes in the fair value of the embedded derivative for the three months ended September 30, 2020:


($ in thousands)	Fair Value Measurement of Embedded Derivative using Significant Unobservable Inputs (Level 3)
Balance, June 30, 2020	$	1,308
Additions during the period		1,792
Change in fair value during the period		(1,060	)

Balance, September 30, 2020	$	2,040

Inventory (Tables)

9 Months Ended

Sep. 30, 2020

Inventory Disclosure [Abstract]

Schedule of Inventory, Current

Our inventory of MYCAPSSA consisted of the following as of September 30, 2020:


($ in thousands)		September 30, 2020