View Filing Data

Document and Entity Information - shares	6 Months Ended
Document and Entity Information - shares	Jun. 30, 2018	Aug. 06, 2018
Document and Entity Information
Entity Registrant Name	LEAP THERAPEUTICS, INC.
Entity Central Index Key	0001509745
Document Type	10-Q
Document Period End Date	Jun. 30, 2018
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Current Reporting Status	Yes
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		14,700,681
Document Fiscal Year Focus	2018
Document Fiscal Period Focus	Q2

CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017
Current assets:
Cash and cash equivalents	$ 30,481	$ 25,737
Research and development incentive receivable	959	1,744
Prepaid expenses and other current assets	608	177
Total current assets	32,048	27,658
Property and equipment, net	111	135
Research and development incentive receivable, net of current portion	851
Deferred tax asset	151	158
Other assets	1,246	1,111
Total assets	34,407	29,062
Current liabilities:
Accounts payable	4,766	2,622
Accrued expenses	1,261	3,461
Total current liabilities	6,027	6,083
Non Current liabilities:
Warrant liability	16,245	11,862
Total liabilities	22,272	17,945
Commitments and contingencies (Note 10)
Stockholders' equity:
Common stock, $0.001 par value; 100,000,000 shares authorized; 14,700,681 and 12,354,014 shares issued and outstanding as of June 30, 2018 and December 31, 2017, respectively	15	12
Additional paid-in capital	160,522	141,770
Accumulated other comprehensive loss	(19)	(268)
Accumulated deficit	(148,383)	(130,397)
Total stockholders' equity	12,135	11,117
Total liabilities and stockholders' equity	$ 34,407	$ 29,062

CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares	Jun. 30, 2018	Dec. 31, 2017
CONDENSED CONSOLIDATED BALANCE SHEETS
Common stock, par value (in dollars per share)	$ 0.001	$ 0.001
Common stock, authorized shares	100,000,000	100,000,000
Common stock, issued shares	14,700,681	12,354,014
Common stock, outstanding shares	14,700,681	12,354,014

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Operating expenses:
Research and development	$ 4,234	$ 4,881	$ 8,465	$ 11,285
General and administrative	2,603	2,135	4,716	5,939
Total operating expenses	6,837	7,016	13,181	17,224
Loss from operations	(6,837)	(7,016)	(13,181)	(17,224)
Interest income	122	49	199	99
Interest expense	(8)		(14)
Interest expense - related party				(121)
Australian research and development incentives	243	494	889	891
Foreign currency gains (loss)	(222)	(432)	(366)	36
Change in fair value of warrant liability	(662)		(5,513)
Net loss	(7,364)	(6,905)	(17,986)	(16,319)
Accretion of preferred stock to redemption value				(244)
Net loss attributable to common stockholders	$ (7,364)	$ (6,905)	$ (17,986)	$ (16,563)
Net loss per share - basic and diluted (in dollars per share)	$ (0.50)	$ (0.74)	$ (1.32)	$ (2.03)
Weighted average common shares outstanding - basic and diluted (in shares)	14,691,890	9,392,081	13,576,850	8,171,078

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
Net loss	$ (7,364)	$ (6,905)	$ (17,986)	$ (16,319)
Other comprehensive income:
Foreign currency translation adjustments	139	436	249	37
Comprehensive loss	$ (7,225)	$ (6,469)	$ (17,737)	$ (16,282)

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY - 6 months ended Jun. 30, 2018 - USD ($) $ in Thousands	Common Stock	Additional Paid-in Capital	Accumulated Other Comprehensive Loss	Accumulated Deficit	Total
Balance at the beginning of the period (in shares) at Dec. 31, 2017	12,354,014
Increase (Decrease) in Shares Outstanding
Issuance of stock (in shares)	2,146,667
Issuance of common stock upon exercise of warrants (in shares)	200,000
Balance at the end of the period (in shares) at Jun. 30, 2018	14,700,681
Balance at the beginning of the period at Dec. 31, 2017	$ 12	$ 141,770	$ (268)	$ (130,397)	$ 11,117
Increase (Decrease) in Stockholders' Equity
Issuance of stock	3	14,793			14,796
Issuance of common stock upon exercise of warrants		2,347			2,347
Foreign currency translation adjustment			249		249
Stock-based compensation		1,612			1,612
Net loss				(17,986)	(17,986)
Balance at the end of the period at Jun. 30, 2018	$ 15	$ 160,522	$ (19)	$ (148,383)	$ 12,135

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (Parenthetical) $ in Thousands	6 Months Ended
	Jun. 30, 2018 USD ($)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Parenthetical)
Issuance of common stock, issuance costs	$ 1,304

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017
Cash flows from operating activities:
Net loss	$ (17,986)	$ (16,319)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation expense	24	25
Stock-based compensation expense	1,612	4,256
Non-cash interest expense - related party		121
Change in fair value of warrant liability	5,513
Changes in operating assets and liabilities, net of impact of assumed net assets of Macrocure:
Prepaid expenses and other assets	(570)	(134)
Research and development incentive receivable	(168)	(891)
Accounts payable and accrued expenses	44	(469)
Net cash used in operating activities	(11,531)	(13,411)
Cash flows from investing activities:
Purchases of property and equipment		(66)
Net cash used in investing activities		(66)
Cash flows from financing activities:
Proceeds from issuance of common stock in connection with merger with Macrocure		21,165
Proceeds from issuance of common stock in connection with Subscription Agreement		10,000
Proceeds from the issuance of common stock, net of underwriter commissions and discounts	15,034
Proceeds from exercise of common stock warrants	1,217
Proceeds from notes payable - related party		750
Proceeds from the exercise of stock options		20
Payment of deferred offering costs	(238)	(2,067)
Net cash provided by financing activities	16,013	29,868
Effect of exchange rate changes on cash and cash equivalents	262	(13)
Net increase in cash and cash equivalents	4,744	16,378
Cash and cash equivalents at beginning of period	25,737	793
Cash and cash equivalents at end of period	30,481	17,171
Supplemental disclosure of non-cash financing activities:
Reduction in fair value of warrant liability as a result of exercise of common stock warrants	$ 1,130
Accretion of preferred stock to redemption value		244
Conversion of notes payable - related party and accrued interest into common stock		31,145
Conversion of convertible preferred stock into common stock		70,775
Value of net assets acquired in connection with merger with Macrocure, excluding cash		$ 96

Nature of Business, Basis of Presentation and Liquidity	6 Months Ended
Nature of Business, Basis of Presentation and Liquidity	Jun. 30, 2018
Nature of Business, Basis of Presentation and Liquidity
Nature of Business, Basis of Presentation and Liquidity	1. Nature of Business, Basis of Presentation and Liquidity Nature of Business Leap Therapeutics, Inc. was incorporated in the state of Delaware as Dekkun Corporation on January 3, 2011 and changed its name to HealthCare Pharmaceuticals, Inc. effective May 29, 2014, and then to Leap Therapeutics, Inc. effective November 16, 2015 (the “Company”). During 2015, HealthCare Pharmaceuticals Pty Ltd. (“HCP Australia”) was formed and is a wholly owned subsidiary of the Company. During 2017, the Company merged with Macrocure Ltd. (now “Leap Therapeutics Ltd.”) and its wholly owned subsidiary Macrocure, Inc. The Company is a biopharmaceutical company acquiring and developing novel therapeutics at the leading edge of cancer biology. The Company’s approach is designed to target compelling tumor-promoting and immuno-oncology pathways to generate durable clinical benefit and enhanced outcomes for patients. The Company’s programs are monoclonal antibodies that target key cellular pathways that enable cancer to grow and spread and specific mechanisms that activate the body’s immune system to identify and attack cancer. Basis of Presentation The accompanying condensed consolidated financial statements as of June 30, 2018 and for the three and six months ended June 30, 2018 and 2017 have been prepared by the Company, pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) for interim financial statements. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been condensed or omitted pursuant to such rules and regulations. However, the Company believes that the disclosures are adequate to make the information presented not misleading. These condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and the notes thereto for the year ended December 31, 2017 included in the Company’s Annual Report on Form 10-K filed with the SEC on February 23, 2018. The condensed consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements. In the opinion of management, the accompanying condensed consolidated financial statements contain all adjustments which are necessary for the fair presentation of the Company’s financial position as of June 30, 2018, statements of operations and statements of comprehensive loss for the three and six months ended June 30, 2018 and 2017 and statements of cash flows for the six months ended June 30, 2018 and 2017. Such adjustments are of a normal and recurring nature. The results of operations for the three and six months ended June 30, 2018 are not necessarily indicative of the results of operations that may be expected for the year ending December 31, 2018. Liquidity Since inception, the Company has been engaged in organizational activities, including raising capital, and research and development activities. The Company does not yet have a product that has been approved by the Food and Drug Administration (the “FDA”), has not generated any revenues and has not yet achieved profitable operations, nor has it ever generated positive cash flows from operations. There is no assurance that profitable operations, if achieved, could be sustained on a continuing basis. Further, the Company’s future operations are dependent on the success of the Company’s efforts to raise additional capital, its research and commercialization efforts, regulatory approval, and, ultimately, the market acceptance of the Company’s products. In accordance with ASC 205-40, Going Concern, the Company has evaluated whether there are conditions and events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the condensed consolidated financial statements are issued. As of June 30, 2018, the Company had an accumulated deficit of $148,383 and during the six months ended June 30, 2018, the Company incurred a net loss of $17,986. The Company expects to continue to generate operating losses in the foreseeable future. The Company expects that its cash and cash equivalents of $30,481 at June 30, 2018, together with the receipt of $959 of research and development tax incentive payments in 2018 from the Commonwealth of Australia as a result of the 2017 research and development activities of the Company’s Australian subsidiary, HCP Australia, will be sufficient to fund its operating expenses for at least the next 12 months from issuance of the condensed consolidated financial statements. In addition, the Company will seek additional funding through public or private equity financings or government programs and will seek funding or development program cost-sharing through collaboration agreements or licenses with larger pharmaceutical or biotechnology companies. If the Company does not obtain additional funding or development program cost-sharing, the Company would be forced to delay, reduce or eliminate certain clinical trials or research and development programs, reduce or eliminate discretionary operating expenses, and delay company and pipeline expansion, which would adversely affect its business prospects. The inability to obtain funding, as and when needed, would have a negative impact on the Company’s financial condition and ability to pursue its business strategies.

Summary of Significant Accounting Policies

6 Months Ended

Jun. 30, 2018

Summary of Significant Accounting Policies

Summary of Significant Accounting Policies

2. Summary of Significant Accounting Policies

Principles of Consolidation

The accompanying condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany accounts and transactions are eliminated upon consolidation.

Use of Estimates

The presentation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Research and development incentive income and receivable

The Company recognizes other income from Australian research and development incentives when there is reasonable assurance that the income will be received, the relevant expenditure has been incurred, and the consideration can be reliably measured. The research and development incentive is one of the key elements of the Australian Government’s support for Australia’s innovation system and is supported by legislative law primarily in the form of the Australian Income Tax Assessment Act 1997, as long as eligibility criteria are met.

Management has assessed the Company’s research and development activities and expenditures to determine which activities and expenditures are likely to be eligible under the research and development incentive regime described above. At each period end, management estimates the refundable tax offset available to the Company based on available information at the time. This estimate is also reviewed by external tax advisors on an annual basis.

Under the program, a percentage of eligible research and development expenses incurred by the Company through its subsidiary in Australia are reimbursed. The percentage was 43.5% for the year ended December 31, 2017 and for the six months ended June 30, 2018.

The research and development incentive receivable represents an amount due in connection with the above program. The Company has recorded a research and development incentive receivable of $1,810 and $1,744 as of June 30, 2018 and December 31, 2017, respectively, in the condensed consolidated balance sheets and other income from Australian research and development incentives of $243 and $494, respectively, for the three months ended June 30, 2018 and 2017 and $889 and $891, respectively, for the six months ended June 30, 2018 and 2017 in the condensed consolidated statements of operations related to refundable research and development incentive program payments in Australia.

The following table shows the change in the research and development incentive receivable from December 31, 2016 to June 30, 2018 (in thousands):

Balance at December 31, 2016	$	3,053
Australian research and development incentive income	1,715		(1)
Cash received for 2016 eligible expenses	(3,245		)
Foreign currency translation	221

Balance at December 31, 2017	1,744
Australian research and development incentive income	889
Cash received for 2016 eligible overseas research and development expenses	(740		)
Foreign currency translation	(83		)

Balance at June 30, 2018	$	1,810

(1) Certain supporting research and development activity is performed outside of Australia when there are no Australian facilities that support the activity (“Overseas research and development activities”). In October 2017, the Commonwealth of Australia issued the Company a favorable ruling on its Overseas research and development activities, considering such activities to be eligible research and development activities under the Australian Incentive Program. As such, the Company recorded Australian research and development incentives during the three months ended September 30, 2017 for its Overseas research and development activities performed during the year ended December 31, 2016 and the six months ended June 30, 2017, of $347 and $412, respectively.

Foreign Currency Translation

The financial statements of the Company’s Australian subsidiary are measured using the local currency as the functional currency. Assets and liabilities of this subsidiary are translated into U.S. dollars at an exchange rate as of the consolidated balance sheet date. Equity is translated at historical exchange rates. Revenues and expenses are translated into U.S. dollars at average rates of exchange in effect during the year. The resulting cumulative translation adjustments have been recorded as a separate component of stockholders’ equity. Realized foreign currency transaction gains and losses are included in the results of operations.

Other Assets

Other assets as of June 30, 2018 and December 31, 2017 included $1,176 and $1,076, respectively, of deposits made by the Company with certain service providers that are to be applied to future payments due under the service agreements or returned to the Company if not utilized. In addition, as of June 30, 2018, other assets included a deposit of $70 related to the operating lease for the Company’s office space in Cambridge, Massachusetts.

Fair Value of Financial Instruments

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

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

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

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

During the periods presented, the Company has not changed the manner in which it values assets and liabilities that are measured at fair value using Level 3 inputs. The Company recognizes transfers between levels of the fair value hierarchy as of the end of the reporting period. There were no transfers within the hierarchy during the six months ended June 30, 2018 and the year ended December 31, 2017.

A summary of the assets and liabilities carried at fair value in accordance with the hierarchy defined above is as follows (in thousands):

	Total		Level 1		Level 2		Level 3
June 30, 2018
Assets:
Cash equivalents	$	30,481	$	30,481	$	—	$	—

Total assets	$	30,481	$	30,481	$	—	$	—


Liabilities:
Warrant liability	$	16,245	$	—	$	—	$	16,245

Total liabilities	$	16,245	$	—	$	—	$	16,245


December 31, 2017
Assets:
Cash equivalents	$	25,737	$	25,737	$	—	$	—

Total assets	$	25,737	$	25,737	$	—	$	—


Liabilities:
Warrant liability	$	11,862	$	—	$	—	$	11,862

Total liabilities	$	11,862	$	—	$	—	$	11,862

Cash equivalents of $30,481 and $25,737 as of June 30, 2018 and December 31, 2017, respectively, consisted of overnight investments and money market funds and are classified within Level 1 of the fair value hierarchy because they are valued using quoted market prices in active markets.

The carrying value of the research and development incentive receivable, accounts payable and accrued liabilities approximate their fair value due to the short-term nature of these assets and liabilities.

A roll-forward of the recurring fair value measurements of the warrant liability categorized with Level 3 inputs are as follows (in thousands):

Balance—December 31, 2017	11,862
Change in fair value	4,851

Balance—March 31, 2018	16,713

Exercise of warrants	(1,130		)
Change in fair value	662

Balance—June 30, 2018	$	16,245

The warrant liability in the table above is composed of the fair value of warrants to purchase common shares that the Company issued in connection with the private placement of common stock in November 2017. The fair value of the warrant liability was determined based on significant inputs not observable in the market, which represents a Level 3 measurement within the fair value hierarchy. The Company utilized a Monte Carlo simulation, which is a statistical method used to generate a defined number of share price paths to develop a reasonable estimate of the range of the future expected share prices, to value the warrant liability. The Monte Carlo simulation incorporated assumptions and estimates to value the warrant liability. Estimates and assumptions impacting the fair value measurement included the estimated probability of adjusting the exercise price of the warrants, the number of shares for which the warrants will be exercisable, the remaining contractual term of the warrants, the risk-free interest rate, the expected dividend yield, and the expected volatility of the price of the underlying common shares.

The Company historically has been a private company and lacks company-specific historical and implied volatility information of its shares. Therefore, it estimated its expected share volatility based on the historical volatility of publicly traded peer companies for a term equal to the remaining contractual term of the warrants. The risk-free interest rate was determined by reference to the U.S. Treasury yield curve for time periods approximately equal to the remaining contractual term of the warrants. The Company estimated a 0% expected dividend yield based on the fact that the Company has never paid or declared dividends and does not intend to do so in the foreseeable future.

Net Loss per Share

Basic net loss per share is computed using the weighted average number of common shares outstanding during the period. Diluted net loss per share is computed using the weighted average number of common shares outstanding during the period and, if dilutive, the weighted average number of potential shares of common stock, including the assumed exercise of stock options and warrants.

Warrant Liability

In connection with entering into the Private Placement, the Company issued a warrant to purchase common stock with each share of common stock sold in the Private Placement. The Company classified the warrants as a liability on its consolidated balance sheet because each warrant represents a freestanding financial instrument that is not indexed to the Company’s own shares. The warrant liability was initially recorded at fair value upon entering into the Private Placement agreement and is subsequently remeasured to fair value at each reporting date. Changes in the fair value of the warrant liability are recognized as gains (losses) in the condensed consolidated statement of operations. Changes in the fair value of the warrant liability will continue to be recognized until the warrants are exercised, expire or qualify for equity classification.

If the Company issues shares to discharge the liability, the derivative financial liability is derecognized and common stock and additional paid-in capital are recognized on the issuance of those shares. Warrants are valued using the Monte Carlo simulation model. If the terms of warrants that initially require the warrant to be classified as a liability lapse, the liability is reclassified out of financial liabilities into equity at its fair value on that date. The cash proceeds received from exercises of warrants are recorded in common stock and additional paid-in capital.

Subsequent Events

The Company considers events or transactions that occur after the balance sheet date but prior to the issuance of the financial statements to provide additional evidence for certain estimates or to identify matters that require additional disclosure. Subsequent events have been evaluated as required.

New Accounting Pronouncements

The Company’s significant accounting policies are described in Note 2, “Summary of Significant Accounting Policies”, in the Company’s previously filed Annual Report on Form 10-K for the year ended December 31, 2017.

Merger with Macrocure and Related Transactions	6 Months Ended
Merger with Macrocure and Related Transactions	Jun. 30, 2018
Merger with Macrocure and Related Transactions
Merger with Macrocure and Related Transactions	3. Merger with Macrocure and Related Transactions Merger with Macrocure Ltd. The Company entered into a definitive merger agreement (the “Merger Agreement”), dated as of August 29, 2016, with Macrocure Ltd. (“Macrocure”), a publicly held, clinical-stage biotechnology company based in Petach Tikva, Israel, and M-Co Merger Sub Ltd. (“Merger Sub”), a wholly owned subsidiary of the Company which provided for the merger of Macrocure with and into Merger Sub, with Macrocure continuing after the merger as a wholly owned subsidiary of the Company. On January 23, 2017, the Company issued 3,256,898 shares of its common stock, net of fractional shares paid in cash, in exchange for 100% of the outstanding ordinary shares of Macrocure Ltd. upon consummation of the merger. Pursuant to the terms of the merger agreement, each holder of Macrocure’s ordinary shares received approximately 0.1815 shares of the Company’s common stock, plus cash in lieu of fractional shares based on a value of the Company’s common stock of $9.90 per share. The exchange ratio was based on a final net cash calculation, as of the closing, of $21,875. The merger was accounted for as an in-substance recapitalization of the Company, as the transaction was, in essence, an exchange of shares of the Company’s common stock (and options and warrants exercisable therefor) for cash. Apart from cash, the net assets acquired were $96, and all Macrocure employees were terminated as of the effective time of the merger. Macrocure’s cash and nominal assets and liabilities were measured and recognized at their fair values as of the date of the merger, and combined with the assets, liabilities and results of operations of the Company. All Macrocure stock options granted under the Macrocure stock option plans (whether or not then exercisable) and all warrants to purchase Macrocure ordinary shares that were outstanding prior to the effective time of the merger became options and warrants, respectively, to purchase the Company’s common stock equal to the number of ordinary shares of Macrocure issuable upon exercise of such stock options and warrants multiplied by the exchange ratio, with a corresponding exercise price equal to the exercise price of such stock options or warrants divided by the exchange ratio. All outstanding and unexercised Macrocure stock options and warrants assumed by the Company may be exercised solely for shares of the Company’s common stock. Vesting of all unvested Macrocure equity awards issued and outstanding was accelerated at the effective time of the merger, and all such equity awards issued and outstanding at the time of the merger remained issued and outstanding. For accounting purposes, since the acceleration of vesting was negotiated in contemplation of the merger, the remaining unrecognized compensation expense associated with the original grant date fair value of the awards of $280 was recognized as a charge in the Company’s condensed consolidated statement of operations and comprehensive loss for the six months ended June 30, 2017. In addition, the exercise period for all Macrocure options outstanding at the effective time of the merger was extended beyond the respective periods provided in the original awards. The Company recorded a charge of $504 in connection with the extension of the exercise periods in the unaudited consolidated statement of operations and comprehensive loss for the six months ended June 30, 2017 equal to the difference in the fair value of the options immediately prior to and immediately following the modification of the exercise period. In connection with the merger, the Company applied to be listed on the NASDAQ Global Market. NASDAQ approved the listing, and trading in the Company’s common stock commenced on January 24, 2017, under the trading symbol “LPTX”. Recapitalization and Amendments to Certificate of Incorporation On January 20, 2017, in connection with and prior to the completion of the merger with Macrocure, (a) all of the Company’s outstanding shares of convertible preferred stock were converted into 3,174,523 shares of common stock, (b) the outstanding note payable and accrued interest was converted into 1,950,768 shares of common stock, and (c) the Company amended and restated its certificate of incorporation and bylaws to, among other things: (i) authorize 100,000,000 shares of common stock; (ii) eliminate all references to the previously existing series of the Company’s preferred stock; (iii) authorize 10,000,000 shares of undesignated preferred stock that may be issued from time to time by the Company’s board of directors and (iv) effect a one for 19.86754 reverse stock split of the Company’s common stock outstanding immediately prior to the filing of the amended and restated certificate of incorporation. Subscription Agreement On January 20, 2017, prior and subject to the consummation of the merger, the Company and HealthCare Ventures IX, L.P. (“HCV IX”) entered into a subscription agreement pursuant to which HCV IX purchased 1,010,225 shares of the Company’s common stock for $10,000, at a purchase price per share of $9.90. Stock Option Grants On January 20, 2017, in connection with the consummation of the merger with Macrocure, the Company made an option grant to each of three executives to purchase 330,303 of shares of common stock, for a total of 990,909 shares of common stock, pursuant to our Amended and Restated 2012 Equity Incentive Plan. The options were granted at an exercise price $9.90 per share. The options vested 33% on the first anniversary of the date of grant, and vest thereafter in equal monthly installments over a period of two years, generally subject to the executive’s continued employment. Royalty Agreement and Letter Agreement On January 23, 2017, immediately prior to the merger, the Company entered into a royalty agreement with Leap Shareholder Royalty Vehicle, LLC, a Delaware limited liability company (the “Royalty Vehicle”), a special purpose vehicle formed for the specific purpose of entering into the royalty agreement. In connection with the transactions contemplated by the merger agreement, the Company declared a special distribution of certain royalty rights to each of its holders of common stock outstanding immediately prior to the effective time of the merger. These holders collectively beneficially owned or controlled 100% of the Company’s outstanding common stock at the time of the merger. Pursuant to the royalty agreement, the Company will pay to the special purpose vehicle (i) 5% of the Company’s net sales of products incorporating its TRX518 compound and (ii) 2% of the Company’s net sales of products incorporating its DKN-01 compound. The royalty agreement has an indefinite term, and neither the Company nor the special purpose vehicle has the right to terminate. The Company accounted for the royalty rights as a contingent liability.

Accrued Expenses

6 Months Ended

Jun. 30, 2018

Accrued Expenses

Accrued Expenses

4. Accrued Expenses

Accrued expenses consist of the following:

	June 30,		December 31,
	2018		2017

Clinical trials	$	649	$	2,116
Professional fees	120		390
Payroll and related expenses	492		955

Accrued expenses	$	1,261	$	3,461

Notes Payable-Related Party	6 Months Ended
Notes Payable-Related Party	Jun. 30, 2018
Notes Payable-Related Party
Notes Payable-Related Party	5. Notes Payable—Related Party During 2014, the Company entered into a convertible promissory note with a stockholder, and made multiple drawdowns under the note throughout 2014, 2015 and 2016. The note accrued interest at a rate of 8% per year until the principal of the note was either repaid or otherwise converted. As of December 31, 2016, the Company owed $29,000 aggregate principal and $1,274 of accrued interest in connection with the promissory note. Interest expense from the related-party note was $0 and $121 for the six months ended June 30, 2018 and 2017, respectively. On January 13, 2017, the Company received aggregate proceeds of $750 from an amendment and restatement of the promissory note. On January 20, 2017, in accordance with its terms and in connection with and prior and subject to the consummation of the merger with Macrocure, the outstanding note payable, including principal and accrued interest totaling $31,145, was converted into 1,950,768 shares of common stock.

Warrants

6 Months Ended

Jun. 30, 2018

Warrants

Warrants

6. Warrants

As of June 30, 2018, outstanding warrants to purchase common stock consisted of the following:

June 30, 2018
Number of Shares Issuable	Exercise Price		Exercisable for	Classification

54,516	$	0.01	Common Stock	Equity
2,758,094	$	6.085	Common Stock	Liability
2,812,610

2017 Warrants

On November 14, 2017, in connection with the Private Placement, the Company issued immediately exercisable warrants to purchase 2,958,094 shares of common stock to investors. The warrants have an exercise price of $6.085 per share and expire on November 14, 2024. During the three months ended June 30, 2018, there were 200,000 warrants exercised resulting in gross proceeds to the Company of $1,217.

The warrants contain full ratchet anti-dilution protection provisions. Company classifies the warrants as a liability on its consolidated balance sheet because each warrant represents a freestanding financial instrument that, due to the potential variable nature of the exercise price, is not considered to be indexed to the Company’s own shares. The warrant liability was initially recorded at fair value upon entering into the Private Placement and is subsequently remeasured to fair value at each reporting date. Changes in the fair value of the warrant liability are recognized as gains (losses) in the Company’s consolidated statement of operations. Changes in the fair value of the warrant liability will continue to be recognized until the warrants are exercised, expire or qualify for equity classification.

The fair value of the warrant liability was determined to be $11,862 as of December 31, 2017. The Company remeasured the liability as of March 31 and June 30, 2018, resulting in a loss of $662 and $5,513, respectively, recorded in the condensed consolidated statements of operations for the three and six months ended June 30, 2018.

Common Stock	6 Months Ended
Common Stock	Jun. 30, 2018
Common Stock
Common Stock	7. Common Stock Each share of common stock entitles the holder to one vote on all matters submitted to a vote of the Company’s stockholders. Common stockholders are entitled to receive dividends, as may be declared by the board of directors, if any, subject to the preferential dividend rights of the preferred stockholders. Through June 30, 2018 no dividends have been declared. As of June 30, 2018, the Company had reserved shares of common stock for the exercise of outstanding stock options and warrants, and the number of shares remaining for grant under the Company’s 2012 Equity Incentive Plan. Private Placement of Common Stock On November 14, 2017, the Company entered into purchase agreements (collectively, the “Purchase Agreements”) with certain accredited institutional investors (collectively, the “Purchasers”), each with substantially similar terms and conditions. Pursuant to the Purchase Agreements, the Company agreed to issue and sell to the Purchasers an aggregate of 2,958,094 shares of unregistered common stock at a price per share of $6.085, for gross proceeds of $18,000 (the “Private Placement”). Each common share was issued with a detachable warrant to purchase one share of common stock at an exercise price of $6.085 per share, expiring seven years after the closing of the Purchase Agreements. The common shares issued in the Private Placement have the same rights and privileges as all other issued and outstanding common shares. The gross proceeds of $18,000 were first allocated to the fair value of the warrants of $14,344 with the remaining proceeds of $3,656 being allocated to the common stock. After giving effect to issuance costs related to the Private Placement, net proceeds were $17,250. If all of the Warrants are exercised in cash at the stated exercise price during the term, the Company will receive additional proceeds of approximately $18,000 and will issue an aggregate of 2,958,094 shares of common stock (the “Warrant Shares”). During the three months ended June 30, there were 200,000 warrants exercised, resulting in gross proceeds to the Company of $1,217. The Company incurred $750 of issuance costs associated with the Private Placement which consisted of legal, consulting and regulatory fees. The costs were allocated between the issuance of the common stock and warrants on a pro rata basis with the allocation of the proceeds, with approximately 80% of the costs allocated to the warrants and approximately 20% allocated to the common stock. The issuance costs associated with the common stock totaled $152 and were recorded as a reduction to additional paid-in capital on the consolidated balance sheet. The issuance costs associated with the warrants totaled $598 and were recorded within other expense on the consolidated statement of operations for the year ended December 31, 2017. HealthCare Ventures IX, L.P. and Eli Lilly and Company, each a holder of more than 5% of the Company’s outstanding common stock, also purchased common stock and warrants in the Private Placement. Each of HealthCare Ventures IX, L.P. and Eli Lilly and Company agreed to purchase the common stock and warrants on the same terms and conditions as the other Purchasers in the Private Placement. Three of the Company’s directors and executive officers are affiliated with HealthCare Ventures IX, L.P. and its affiliates. Public Offering of Common Stock On March 27, 2018, the Company completed a public offering whereby the Company issued 2,146,667 shares of its common stock at a price of $7.50 per share, which included 280,000 shares issued pursuant to the underwriters’ exercise of their option to purchase additional shares of common stock. The aggregate net proceeds received by the Company from the offering were approximately $14,796, net of underwriting discounts and commissions and estimated offering expenses payable by the Company. The shares were offered pursuant to an effective shelf registration statement on Form S-3 (File No. 333-223419) that was previously filed by the Company with the SEC on March 2, 2018 and was declared effective by the SEC on March 16, 2018.

Equity Incentive Plans

6 Months Ended

Jun. 30, 2018

Equity Incentive Plans

Equity Incentive Plans

8. Equity Incentive Plans

Equity Incentive Plans

In September 2012, the Company adopted the 2012 Equity Incentive Plan, as amended (the “Plan”), which provides designated employees of the Company and its affiliates, certain consultants and advisors who perform services for the Company and its affiliates, and nonemployee members of the Board of Directors of the Company and its affiliates with the opportunity to receive grants of incentive stock options, nonqualified stock options and stock awards. On January 20, 2017, the Company’s stockholders approved the amended and restated 2012 Equity Incentive Plan (the “2012 Plan”), which amended and restated the Plan and was effective in connection with the completion of the Company’s merger with Macrocure. As of June 30, 2018, there were 1,380,468 outstanding options issued under the 2012 Plan.

On January 20, 2017, the Company’s stockholders approved the 2016 Equity Incentive Plan (the “2016 Plan”), which was effective in connection with the completion of the Company’s merger with Macrocure. The number of shares of common stock issuable pursuant to outstanding awards granted under the 2016 Plan may not exceed the number that is equal to the sum of (i) 854,321 shares of common stock plus (ii) the number of shares of common stock (not to exceed 103,023 shares) subject to out-of-the-money options issued by Macrocure prior to the closing of the merger and assumed by the Company pursuant to the merger agreement upon consummation of the merger that expire unexercised. Beginning on January 1, 2018, the number of shares of common stock authorized for issuance pursuant to the 2016 Plan will be increased each January 1 by an amount equal to four percent (4%) of the Company’s outstanding common stock as of the end of the immediately preceding calendar year or such other amount as determined by the compensation committee of the Company’s Board of Directors.

In connection with the merger with Macrocure in January 2017, the Company assumed the Macrocure 2013 Share Incentive Plan (the “2013 Plan”), the Macrocure 2008 Stock Option Plan (the “2008 Plan”) and all stock options outstanding under each of the 2013 Plan and the 2008 Plan immediately prior to the consummation of the merger. By virtue of the terms of the Merger Agreement and the 2013 Plan or the 2008 Plan, as applicable, each stock option outstanding immediately prior to the consummation of the merger was automatically converted into a stock option exercisable for a number of shares of the Company’s common stock calculated based on the exchange ratio and the exercise price per share of such outstanding stock option.

The Company could also make awards of restricted stock under the 2016 Plan. Restricted stock may be issued for such consideration, in cash, other property or services, or any combination thereof, as is determined by the Board of Directors. During the restriction period applicable to the shares of restricted stock, such shares shall be subject to limitations on transferability, subject to forfeiture or repurchase by the Company and/or subject to other terms and conditions. Upon lapse of such restrictions, the stock certificates representing shares of common stock shall be delivered to the grantee.

A summary of activity under the Equity Plans is as follows:

			Weighted
			Average		Weighted	Aggregate
			Exercise Price		Average Remaining	Intrinsic
	Options		Per Share		Life in Years	Value

Outstanding at December 31, 2017	2,257,621		$	12.38	8.66	$	68
Granted	432,300		$	7.73
Exercised	—		$	—
Forfeited	(39,466	)	$	7.25
Outstanding at June 30, 2018	2,650,455		$	11.70	8.32	$	1,728

Options exercisable at June 30, 2018	1,312,399		$	15.02	7.49	$	429
Options vested and expected to vest at June 30, 2018	2,650,455		$	11.70	8.32	$	1,728

The grant date fair value of the options granted during the year ended December 31, 2017 and the six months ended June 30, 2018, was estimated at the date of grant using the Black-Scholes option valuation model. The expected life was estimated using the “simplified” method as defined by the Securities and Exchange Commission’s Staff Accounting Bulletin 107, Share-Based Payment. The expected volatility was based on the historical volatility of comparable public companies from a representative peer group selected based on industry and market capitalization data. The risk-free interest rate was based on the continuous rates provided by the U.S. Treasury with a term approximating the expected life of the option. The expected dividend yield was 0% because the Company does not expect to pay any dividends for the foreseeable future. The Company elected the straight-line attribution method in recognizing the grant date fair value of options issued over the requisite service periods of the awards, which are generally the vesting periods.

The assumptions that the Company used to determine the grant-date fair value of stock options granted to employees and directors during the year ended December 31, 2017 and the six months ended June 30, 2018 were as follows, presented on a weighted average basis:

	Year Ended December 31,		Six Months Ended June 30,
	2017		2018

Expected volatility	68.7	%	66.9	%
Weighted average risk-free interest rate	2.1	%	2.8	%
Expected dividend yield	0.0	%	0.0	%
Expected term (in years)	6.6		7.0

Stock options generally vest over a three or four year period, as determined by the Compensation Committee of the Board of Directors at the time of grant. The options expire ten years from the grant date. As of June 30, 2018, there was approximately $7,268 of unrecognized compensation cost related to non-vested stock options, which is expected to be recognized over a remaining weighted-average period of approximately 2.41 years.

The Company recognized stock-based compensation expense related to the issuance of stock option awards to employees and non-employees in the condensed consolidated statements of operations and comprehensive loss as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
	2018		2017		2018		2017

Research and development	$	162	$	38	$	279	$	1,716
General and administrative	722		595		1,333		2,540

Total	$	884	$	633	$	1,612	$	4,256

Net Loss Per Share

6 Months Ended

Jun. 30, 2018

Net Loss Per Share

Net Loss Per Share

9. Net Loss Per Share

Basic and diluted net loss per share for the three and six months ended June 30, 2018 and 2017 was calculated as follows (in thousands except share and per share amounts):

	Three Months Ended June 30,						Six Months Ended June 30,
	2018			2017			2018			2017
Numerator:
Net loss	$	(7,364	)	$	(6,905	)	$	(17,986	)	$	(16,319	)
Accretion of preferred stock to redemption value	—			—			—			(244		)

Net loss attributable to common stockholders	$	(7,364	)	$	(6,905	)	$	(17,986	)	$	(16,563	)

Denominator:
Weighted average number of common shares outstanding - basic and diluted	14,691,890			9,392,081			13,576,850			8,171,078

Net loss per share attributable to common stockholders - basic and diluted	$	(0.50	)	$	(0.74	)	$	(1.32	)	$	(2.03	)

The Company’s potentially dilutive securities include stock options and warrants. These securities were excluded from the computations of diluted net loss per share for the three and six months ended June 30, 2018 and 2017, as the effect would be to reduce the net loss per share. The following table includes the potential common shares, presented based on amounts outstanding at each period end, that were excluded from the computation of diluted net loss per share attributable to common stockholders for the periods indicated because including them would have had an anti-dilutive effect:

	Three Months Ended June 30,		Six Months Ended June 30,
	2018	2017	2018	2017

Options to purchase common stock	2,650,455	1,863,722	2,650,455	1,863,722
Warrants assumed from Macrocure	54,516	54,516	54,516	54,516
Warrants issued with the Private Placement	2,758,094	—	2,758,094	—

	5,463,065	1,918,238	5,463,065	1,918,238

Commitments and Contingencies	6 Months Ended
Commitments and Contingencies	Jun. 30, 2018
Commitments and Contingencies
Commitments and Contingencies	10. Commitments and Contingencies Lease Agreement—Effective January 1, 2017, the Company entered into an assignment agreement to assume an operating lease for its office space in Cambridge, Massachusetts. Annual rent under the lease, exclusive of operating expenses and real estate taxes, was $289 for the 12-month period ending July 31, 2017, increasing to $297 for the 12-month period ending July 31, 2018 and increasing to $305 for the period ending April 30, 2019. The lease agreement expires April 30, 2019, and the Company has the option to extend the term through April 30, 2022. Manufacturing Agreements—The Company is party to manufacturing agreements with vendors to manufacture TRX518 and DKN-01, its lead product candidates, for use in clinical trials. As of June 30, 2018, noncancelable commitments under these agreements totaled $1,075. License and Service Agreement—On January 3, 2011, the Company entered into a license agreement with Eli Lilly and Company (“Lilly”) to grant a license to the Company for certain intellectual property rights relating to pharmaceutically active compounds that may be useful in the treatment of bone healing, cancer and, potentially, other medical conditions. The Company previously issued 9,000,000 shares of Series A Stock to Lilly in consideration for the grant of the license. As defined in the license agreement, the Company would be required to pay royalties to Lilly based upon a percentage in the low single digits of net sales of developed products, if and when achieved. However, there can be no assurance that clinical or commercialization success of developed products will occur, and no royalties have been paid or accrued through June 30, 2018. License Agreement—On May 28, 2015, the Company entered into a license agreement with Lonza Sales AG (“Lonza”), pursuant to which Lonza granted the Company a world-wide, non-exclusive license for certain intellectual property relating to a gene expression system for manufacturing DKN-01. As defined in the license agreement, the Company would be required to pay royalties to Lonza based on a percentage in the low single digits of net sales of DKN-01, if and when achieved. However, there can be no assurance that clinical or commercialization success will occur, and no royalties have been paid or accrued through June 30, 2018. Legal Proceedings—At each reporting date, the Company evaluates whether or not a potential loss amount or a potential range of loss is probable and reasonably estimable under the provisions of the authoritative guidance that addresses accounting for contingencies. The Company expenses as incurred the costs related to its legal proceedings. A patent covering TRX518 and its uses was granted to the Company by the European Patent Office. Three notices of opposition to this patent were filed by two major pharmaceutical companies and an individual, possibly on behalf of a major pharmaceutical company. At the conclusion of the opposition proceedings in 2016, the Opposition Division of the European Patent Office that heard the case issued an interlocutory decision indicating that the Company’s patent should be maintained with modified claims that differ from the claims as originally granted. These claims cover the TRX518 antibody and uses of TRX518 in a method of enhancing an immune response in a subject. In July 2016, the Company filed an appeal of the decision of the Opposition Division seeking to obtain broader claims that more closely reflect the claims as granted in the patent. The Board of Appeal has not scheduled a date for the appeal hearing. In 2016, a patent covering the use of TRX518 in combination with a chemotherapeutic agent for treating cancer was granted to the Company by the European Patent Office. In March 2017, notices of opposition to this patent were filed by ten different entities, including several major pharmaceutical companies. The Company filed responses to all grounds of opposition argued by the Opponents. Subsequently, the Opposition Division scheduled oral proceedings to begin at the European Patent Office on December 4, 2018. The Opposition Division also rendered a preliminary opinion that many of the claims of the patent did not comply with certain requirements for patentability at the European Patent Office. The Company is developing arguments and evidence to rebut the preliminary opinion of the Opposition Division and intends to defend the patent through the Opposition proceedings. Indemnification Agreements—In the ordinary course of business, the Company may provide indemnification of varying scope and terms to vendors, lessors, business partners and other parties with respect to certain matters including, but not limited to, losses arising out of breach of such agreements or from intellectual property infringement claims made by third parties. In addition, the Company has entered into indemnification agreements with members of its board of directors that will require the Company, among other things, to indemnify them against certain liabilities that may arise by reason of their status or service as directors or officers. The maximum potential amount of future payments the Company could be required to make under these indemnification agreements is, in many cases, unlimited. To date, the Company has not incurred any material costs as a result of such indemnifications. The Company is not aware of any claims under indemnification arrangements, and it has not accrued any liabilities related to such obligations in its condensed consolidated financial statements as of June 30, 2018 or December 31, 2017.

Related Party Transactions	6 Months Ended
Related Party Transactions	Jun. 30, 2018
Related Party Transactions
Related Party Transactions	11. Related Party Transactions During the six months ended June 30, 2017, the Company executed promissory notes with stockholders (See Note 5). The Company has a license agreement with a stockholder (See Note 10). On November 14, 2017, the Company entered into Purchase Agreements with certain Purchasers. Each of the Purchase Agreements was on terms and conditions substantially similar to each other Purchase Agreement and pursuant to such Purchase Agreements, the Company, in a private placement, agreed to issue and sell to the Purchasers an aggregate of 2,958,094 Shares of unregistered Common Stock, at a price per share of $6.085, each share issued with a Warrant to purchase one share of Common Stock at an exercise price of $6.085. HealthCare Ventures IX, L.P. and Eli Lilly and Company, each a more than 5% direct holder of the Company’s Common Stock, purchased Common Stock and Warrants in the Private Placement. Each of HealthCare Ventures IX, L.P. and Eli Lilly and Company agreed to purchase the Common Stock and Warrants on the same terms and conditions as the other Purchasers. Three of the Company’s directors and executive officers are affiliated with HealthCare Ventures IX, L.P. and its affiliates.

Summary of Significant Accounting Policies (Policies)

6 Months Ended

Jun. 30, 2018

Summary of Significant Accounting Policies

Principles of Consolidation

Use of Estimates

Research and development incentive income and receivable

The following table shows the change in the research and development incentive receivable from December 31, 2016 to June 30, 2018 (in thousands):

Balance at December 31, 2016	$	3,053
Australian research and development incentive income	1,715		(1)
Cash received for 2016 eligible expenses	(3,245		)
Foreign currency translation	221

Balance at December 31, 2017	1,744
Australian research and development incentive income	889
Cash received for 2016 eligible overseas research and development expenses	(740		)
Foreign currency translation	(83		)

Balance at June 30, 2018	$	1,810

Foreign Currency Translation

Other Assets

Fair Value of Financial Instruments

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

A summary of the assets and liabilities carried at fair value in accordance with the hierarchy defined above is as follows (in thousands):

	Total		Level 1		Level 2		Level 3
June 30, 2018
Assets:
Cash equivalents	$	30,481	$	30,481	$	—	$	—

Total assets	$	30,481	$	30,481	$	—	$	—


Liabilities:
Warrant liability	$	16,245	$	—	$	—	$	16,245

Total liabilities	$	16,245	$	—	$	—	$	16,245


December 31, 2017
Assets:
Cash equivalents	$	25,737	$	25,737	$	—	$	—

Total assets	$	25,737	$	25,737	$	—	$	—


Liabilities:
Warrant liability	$	11,862	$	—	$	—	$	11,862

Total liabilities	$	11,862	$	—	$	—	$	11,862

A roll-forward of the recurring fair value measurements of the warrant liability categorized with Level 3 inputs are as follows (in thousands):

Balance—December 31, 2017	11,862
Change in fair value	4,851

Balance—March 31, 2018	16,713

Exercise of warrants	(1,130		)
Change in fair value	662

Balance—June 30, 2018	$	16,245

Net Loss per Share

Warrant Liability

Subsequent events

Subsequent Events

New Accounting Pronouncements

Summary of Significant Accounting Policies (Tables)

6 Months Ended

Jun. 30, 2018

Summary of Significant Accounting Policies

Schedule of change in the research and development incentive receivable

The following table shows the change in the research and development incentive receivable from December 31, 2016 to June 30, 2018 (in thousands):

Balance at December 31, 2016	$	3,053
Australian research and development incentive income	1,715		(1)
Cash received for 2016 eligible expenses	(3,245		)
Foreign currency translation	221

Balance at December 31, 2017	1,744
Australian research and development incentive income	889
Cash received for 2016 eligible overseas research and development expenses	(740		)
Foreign currency translation	(83		)

Balance at June 30, 2018	$	1,810

Summary of assets and liabilities carried at fair value in accordance with the hierarchy

A summary of the assets and liabilities carried at fair value in accordance with the hierarchy defined above is as follows (in thousands):

	Total		Level 1		Level 2		Level 3
June 30, 2018
Assets:
Cash equivalents	$	30,481	$	30,481	$	—	$	—

Total assets	$	30,481	$	30,481	$	—	$	—


Liabilities:
Warrant liability	$	16,245	$	—	$	—	$	16,245

Total liabilities	$	16,245	$	—	$	—	$	16,245


December 31, 2017
Assets:
Cash equivalents	$	25,737	$	25,737	$	—	$	—

Total assets	$	25,737	$	25,737	$	—	$	—


Liabilities:
Warrant liability	$	11,862	$	—	$	—	$	11,862

Total liabilities	$	11,862	$	—	$	—	$	11,862

Schedule of the recurring fair value measurements of the warrant derivative liability categorized with Level 3 inputs

A roll-forward of the recurring fair value measurements of the warrant liability categorized with Level 3 inputs are as follows (in thousands):

Balance—December 31, 2017	11,862
Change in fair value	4,851

Balance—March 31, 2018	16,713

Exercise of warrants	(1,130		)
Change in fair value	662

Balance—June 30, 2018	$	16,245

Accrued Expenses (Tables)

6 Months Ended

Jun. 30, 2018

Accrued Expenses

Schedule of accrued expenses

	June 30,		December 31,
	2018		2017

Clinical trials	$	649	$	2,116
Professional fees	120		390
Payroll and related expenses	492		955

Accrued expenses	$	1,261	$	3,461

Warrants (Tables)

6 Months Ended

Jun. 30, 2018

Warrants

Schedule of warrants

June 30, 2018
Number of Shares Issuable	Exercise Price		Exercisable for	Classification

54,516	$	0.01	Common Stock	Equity
2,758,094	$	6.085	Common Stock	Liability
2,812,610

- Definition

Tabular disclosure of warrants or rights issued. Warrants and rights outstanding are derivative securities that give the holder the right to purchase securities (usually equity) from the issuer at a specific price within a certain time frame. Warrants are often included in a new debt issue to entice investors by a higher return potential. The main difference between warrants and call options is that warrants are issued and guaranteed by the company, whereas options are exchange instruments and are not issued by the company. Also, the lifetime of a warrant is often measured in years, while the lifetime of a typical option is measured in months. Disclose the title of issue of securities called for by warrants and rights outstanding, the aggregate amount of securities called for by warrants and rights outstanding, the date from which the warrants or rights are exercisable, and the price at which the warrant or right is exercisable.

+ References + Details

Equity Incentive Plans (Tables)

6 Months Ended

Jun. 30, 2018

Equity Incentive Plans

Summary of stock option activity under the Equity Plans

			Weighted
			Average		Weighted	Aggregate
			Exercise Price		Average Remaining	Intrinsic
	Options		Per Share		Life in Years	Value

Outstanding at December 31, 2017	2,257,621		$	12.38	8.66	$	68
Granted	432,300		$	7.73
Exercised	—		$	—
Forfeited	(39,466	)	$	7.25
Outstanding at June 30, 2018	2,650,455		$	11.70	8.32	$	1,728

Options exercisable at June 30, 2018	1,312,399		$	15.02	7.49	$	429
Options vested and expected to vest at June 30, 2018	2,650,455		$	11.70	8.32	$	1,728

Schedule of assumptions used to determine grant-date fair value of stock options

	Year Ended December 31,		Six Months Ended June 30,
	2017		2018

Expected volatility	68.7	%	66.9	%
Weighted average risk-free interest rate	2.1	%	2.8	%
Expected dividend yield	0.0	%	0.0	%
Expected term (in years)	6.6		7.0

Schedule of stock-based compensation expense related to issuance of stock option awards recognized in condensed consolidated statements of operations and comprehensive loss

	Three Months Ended June 30,				Six Months Ended June 30,
	2018		2017		2018		2017

Research and development	$	162	$	38	$	279	$	1,716
General and administrative	722		595		1,333		2,540

Total	$	884	$	633	$	1,612	$	4,256

Net Loss Per Share (Tables)

6 Months Ended

Jun. 30, 2018

Net Loss Per Share

Schedule of basic and diluted net loss per share

Basic and diluted net loss per share for the three and six months ended June 30, 2018 and 2017 was calculated as follows (in thousands except share and per share amounts):

	Three Months Ended June 30,						Six Months Ended June 30,
	2018			2017			2018			2017
Numerator:
Net loss	$	(7,364	)	$	(6,905	)	$	(17,986	)	$	(16,319	)
Accretion of preferred stock to redemption value	—			—			—			(244		)

Net loss attributable to common stockholders	$	(7,364	)	$	(6,905	)	$	(17,986	)	$	(16,563	)

Denominator:
Weighted average number of common shares outstanding - basic and diluted	14,691,890			9,392,081			13,576,850			8,171,078

Net loss per share attributable to common stockholders - basic and diluted	$	(0.50	)	$	(0.74	)	$	(1.32	)	$	(2.03	)

Schedule of potentially anti-dilutive securities excluded from calculation of diluted net loss per share

	Three Months Ended June 30,		Six Months Ended June 30,
	2018	2017	2018	2017

Options to purchase common stock	2,650,455	1,863,722	2,650,455	1,863,722
Warrants assumed from Macrocure	54,516	54,516	54,516	54,516
Warrants issued with the Private Placement	2,758,094	—	2,758,094	—

	5,463,065	1,918,238	5,463,065	1,918,238

Nature of Business, Basis of Presentation and Liquidity - Liquidity (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017	Dec. 31, 2017
Liquidity
Accumulated deficit	$ 148,383		$ 148,383		$ 130,397
Net loss	7,364	$ 6,905	17,986	$ 16,319
Cash and cash equivalents	$ 30,481		30,481		$ 25,737
Expected research and development tax incentive payments			$ 959
Minimum period to fund operating expense			12 months

Summary of Significant Accounting Policies - Significant Accounting Policies (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017	Dec. 31, 2017	Dec. 31, 2016
Research and development incentive income and receivable
Research and development expenses reimbursed (as a percent)			43.50%		43.50%
Research and development incentive income and receivable
Balance at the beginning of the period			$ 1,744	$ 3,053	$ 3,053
Australian research and development incentive income	$ 243	$ 494	889	891	1,715
Cash received for 2016 eligible overseas research and development expenses			(740)		(3,245)
Foreign currency translation			(83)		221
Balance at the end of the period	1,810		1,810		1,744	$ 3,053
Overseas research and development incentive income				$ 412		$ 347
Other Assets
Deposits with service providers that are to be applied to future payments	1,176		1,176		$ 1,076
Deposit related to operating lease for office space in Cambridge, Massachusetts	$ 70		$ 70

Summary of Significant Accounting Policies - Fair Value of Financial Instruments (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Mar. 31, 2018	Jun. 30, 2018	Dec. 31, 2017	Nov. 14, 2017
Assets:
Cash equivalents	$ 30,481		$ 30,481	$ 25,737
Total assets	30,481		30,481	25,737
Liabilities:
Warrant liability	16,245		16,245	11,862	$ 14,344
Total liabilities	16,245		$ 16,245	11,862
Fair value measurements of the warrant liability
Expected dividend yield			0.00%
Recurring \| Warrant Liability
Fair value measurements of the warrant liability
Beginning Balance	16,713	$ 11,862	$ 11,862
Change in fair value	662	4,851
Exercise of warrants	(1,130)
Ending Balance	16,245	$ 16,713	16,245
Level 1
Assets:
Cash equivalents	30,481		30,481	25,737
Total assets	30,481		30,481	25,737
Level 3
Liabilities:
Warrant liability	16,245		16,245	11,862
Total liabilities	$ 16,245		$ 16,245	$ 11,862

Merger with Macrocure and Related Transactions - Merger with Macrocure Ltd. (Details) $ / shares in Units, $ in Thousands		6 Months Ended
	Jan. 23, 2017 USD ($) $ / shares shares	Jun. 30, 2017 USD ($)	Jun. 30, 2018 USD ($)
Merger with Macrocure
Value of net assets acquired in connection with merger with Macrocure, excluding cash		$ 96
Compensation cost related to Macrocure equity awards, not yet recognized			$ 7,268
Macrocure \| Common Stock
Merger with Macrocure
Common stock shares issued \| shares	3,256,898
Percentage of outstanding ordinary shares acquired	100.00%
Approximate number of the Company's shares issued for each share of Macrocure's ordinary shares	0.1815
Common share value (in dollars per share) \| $ / shares	$ 9.90
Final net cash calculation at closing	$ 21,875
Value of net assets acquired in connection with merger with Macrocure, excluding cash	$ 96
Compensation cost related to Macrocure equity awards, not yet recognized		280
One-time charge with the extension of the exercise periods		$ 504

Merger with Macrocure and Related Transactions - Recapitalization and Amendments to Certificate of Incorporation (Details)	Jan. 20, 2017 shares	Jun. 30, 2018 shares	Dec. 31, 2017 shares
Merger with Macrocure
Common stock, shares authorized		100,000,000	100,000,000
Common Stock
Merger with Macrocure
Common stock, shares authorized	100,000,000
Preferred stock, shares authorized	10,000,000
Stock split ratio	0.05033
Common Stock \| Conversion of preferred stock into common stock
Merger with Macrocure
Shares issued on conversion of preferred stock	3,174,523
Common Stock \| Conversion of notes payable - related party and accrued interest into common stock
Merger with Macrocure
Shares issued on conversion of notes payable and related accrued interest	1,950,768

Merger with Macrocure and Related Transactions - Subscription Agreement (Details) - USD ($) $ / shares in Units, $ in Thousands		6 Months Ended
	Jan. 20, 2017	Jun. 30, 2018
Merger with Macrocure
Purchase price		$ 14,796
HCV IX \| Subscription Agreement
Merger with Macrocure
Issuance of stock (in shares)	1,010,225
Purchase price	$ 10,000
Price per share (in dollars per share)	$ 9.90

Merger with Macrocure and Related Transactions - Stock Option Grants (Details) - 2012 Plan - Macrocure	Jan. 20, 2017 item $ / shares shares
Merger with Macrocure
Number of executives \| item	3
Common Stock
Merger with Macrocure
Number of shares which can be purchased by each executive	330,303
Aggregate number of shares which can be purchased by executives	990,909
Exercise price \| $ / shares	$ 9.90
Vesting period subsequent to the first anniversary of the grant date	2 years
Common Stock \| Vesting on first anniversary
Merger with Macrocure
Options vesting on the first anniversary date of the grants (as a percent)	33.00%
Vesting period	1 year

Merger with Macrocure and Related Transactions - Royalty Agreement and Letter Agreement (Details) - Royalty Vehicle	Jan. 23, 2017
Merger with Macrocure
Collective beneficial ownership (as a percent)	100.00%
TRX 518 compound \| Royalty Agreement
Merger with Macrocure
Royalties payable	5.00%
DKN-01 compound \| Royalty Agreement
Merger with Macrocure
Royalties payable	2.00%

Accrued Expenses (Details) - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017
Accrued Expenses
Clinical trials	$ 649	$ 2,116
Professional fees	120	390
Payroll and related expenses	492	955
Accrued expenses	$ 1,261	$ 3,461

Notes Payable-Related Party (Details) - USD ($) $ in Thousands			6 Months Ended
	Jan. 20, 2017	Jan. 13, 2017	Jun. 30, 2018	Jun. 30, 2017	Dec. 31, 2016	Dec. 31, 2014
Proceeds from promissory notes
Interest expense-related party				$ 121
Proceeds from promissory notes				750
Conversion of notes payable - related party and accrued interest into common stock				31,145
Conversion of notes payable - related party and accrued interest into common stock \| Common Stock
Proceeds from promissory notes
Shares issued on conversion of notes payable and related accrued interest	1,950,768
Convertible Promissory notes \| Convertible promissory note executed with stockholder \| Stockholder
Proceeds from promissory notes
Note interest rate (as a percent)						8.00%
Promissory notes payable outstanding					$ 29,000
Accrued interest expense					$ 1,274
Interest expense-related party			$ 0	$ 121
Proceeds from promissory notes		$ 750
Convertible Promissory notes \| Convertible promissory note executed with stockholder \| Stockholder \| Conversion of notes payable - related party and accrued interest into common stock
Proceeds from promissory notes
Conversion of notes payable - related party and accrued interest into common stock	$ 31,145

Warrants - (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Mar. 31, 2018	Jun. 30, 2018	Dec. 31, 2017	Nov. 14, 2017
Warrants
Number of Shares Issuable	2,812,610		2,812,610
Number of warrants exercised	200,000
Proceeds from exercise of warrants	$ 1,217		$ 1,217
Fair value of warrant liability	16,245		16,245	$ 11,862	$ 14,344
Loss from change in fair value of warrant liability	$ 662	$ 662	$ 5,513
Common Stock \| Equity
Warrants
Number of Shares Issuable	54,516		54,516
Exercise price of warrant	$ 0.01		$ 0.01
Common Stock \| Liability
Warrants
Number of Shares Issuable	2,758,094		2,758,094
Exercise price of warrant	$ 6.085		$ 6.085
Common Stock \| Private placement \| Warrants expires on 2024
Warrants
Number of Shares Issuable					2,958,094
Warrant Liability \| Private placement
Warrants
Exercise price of warrant					$ 6.085
Warrant Liability \| Private placement \| Warrants expires on 2024
Warrants
Exercise price of warrant					$ 6.085

Common Stock - (Details) $ in Thousands	6 Months Ended
Common Stock - (Details) $ in Thousands	Jun. 30, 2018 USD ($) item
Common Stock
Number of votes each common share is entitled to \| item	1
Dividend declared \| $	$ 0

Common Stock - Private Placement of Common Stock (Details) $ / shares in Units, $ in Thousands		3 Months Ended	6 Months Ended		12 Months Ended
	Nov. 14, 2017 USD ($) director $ / shares shares	Jun. 30, 2018 USD ($) shares	Jun. 30, 2018 USD ($) shares	Jun. 30, 2017 USD ($)	Dec. 31, 2017 USD ($)
Private Placement of Common Stock
Gross proceeds	$ 18,000
Fair value of warrant liability	14,344	$ 16,245	$ 16,245		$ 11,862
Net proceeds from issuance of stock in private placement	17,250
Additional proceeds from exercise of warrants	$ 18,000
Additional shares issuable on exercise in cash of warrants \| shares	2,958,094
Number Of Warrants Exercised \| shares		200,000
Proceeds from exercise of warrants		$ 1,217	1,217
Issuance costs associated with private placement			238	$ 2,067
Issuance costs associated with common stock			$ 1,304
Private placement
Private Placement of Common Stock
Number of warrants issued per common stock \| shares	1
Issuance costs associated with private placement	$ 750
Allocation of issuance cost to warrants (as a percentage)	80.00%
Allocation of issuance cost to common stock (as a percentage)	20.00%
Issuance costs associated with common stock	$ 152
HCV IX and Eli Lilly \| Private placement
Private Placement of Common Stock
Number of affiliated directors and executive officers \| director	3
Common Stock
Private Placement of Common Stock
Issuance of stock (in shares) \| shares			2,146,667
Remaining proceeds allocated to common stock	$ 3,656
Common Stock \| Private placement
Private Placement of Common Stock
Issuance of stock (in shares) \| shares	2,958,094
Price per share (in dollars per share) \| $ / shares	$ 6.085
Warrant Liability \| Private placement
Private Placement of Common Stock
Exercise price of warrant \| $ / shares	$ 6.085
Exercise expiring period	7 years
Other expense \| Private placement
Private Placement of Common Stock
Issuance costs associated with warrants					$ 598
Minimum \| HCV IX and Eli Lilly \| Private placement
Private Placement of Common Stock
Direct holding percentage	5.00%

Common Stock - Public Offering of Common Stock (Details) - USD ($) $ / shares in Units, $ in Thousands		6 Months Ended
	Mar. 27, 2018	Jun. 30, 2017
Proceeds from the issuance of common stock		$ 10,000
Common Stock \| Public offering
Shares issued	2,146,667
Price per share (in dollars per share)	$ 7.50
Proceeds from the issuance of common stock	$ 14,796
Common Stock \| Over-Allotment Option
Shares issued	280,000

Equity Incentive Plans - Equity Incentive Plans (Details) - shares		6 Months Ended
	Jan. 20, 2017	Jun. 30, 2018
2012 Plan amended in January 2017
Stock-Based Compensation
Number of options issued under the plan		1,380,468
Common Stock \| 2016 Plan
Stock-Based Compensation
Annual increase in authorized shares (as a percent)	4.00%
Common Stock \| 2016 Plan \| Maximum
Stock-Based Compensation
Shares issuable	854,321
Out-of-the-money options \| Common Stock \| 2016 Plan \| Maximum
Stock-Based Compensation
Additional shares issuable	103,023

Equity Incentive Plans - Stock options (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017	Dec. 31, 2017
Options
Outstanding balance at the beginning of the period (in shares)			2,257,621
Granted (in shares)			432,300
Forfeited (in shares)			(39,466)
Outstanding balance at the end of the period (in shares)	2,650,455		2,650,455		2,257,621
Options exercisable at the end of the period (in shares)	1,312,399		1,312,399
Options vested and expected to vest at end of period (in shares)	2,650,455		2,650,455
Weighted Average Exercise Price Per Share
Outstanding balance at the beginning of the period (in dollars per share)			$ 12.38
Granted (in dollars per share)			7.73
Forfeited (in dollars per share)			7.25
Outstanding balance at the end of the period (in dollars per share)	$ 11.70		11.70		$ 12.38
Exercisable at the end of the period (in dollars per share)	15.02		15.02
Options vested and expected to vest at end of the period (in dollars per share)	$ 11.70		$ 11.70
Weighted Average Remaining Life in Years
Outstanding balance			8 years 3 months 26 days		8 years 7 months 28 days
Options exercisable at end of period			7 years 5 months 27 days
Options vested and expected to vest at end of the period			8 years 3 months 26 days
Aggregate Intrinsic Value
Outstanding balance	$ 1,728		$ 1,728		$ 68
Options exercisable at the end of the period	429		429
Options vested and expected to vest at end of the period	1,728		1,728
Stock-based compensation expense	884	$ 633	$ 1,612	$ 4,256
Assumptions used to determine grant-date fair value
Expected Volatility			66.90%		68.70%
Weighted average risk-free interest rate			2.80%		2.10%
Expected dividend yield (as a percentage)			0.00%		0.00%
Expected term (in years)			7 years		6 years 7 months 6 days
Expiration period			10 years
Compensation cost related to the non-vested awards not yet recognized	7,268		$ 7,268
Weighted average period for recognition of compensation cost			2 years 4 months 28 days
Research and development
Aggregate Intrinsic Value
Stock-based compensation expense	162	38	$ 279	1,716
General and administrative
Aggregate Intrinsic Value
Stock-based compensation expense	$ 722	$ 595	$ 1,333	$ 2,540
Minimum
Assumptions used to determine grant-date fair value
Vesting period			3 years
Maximum
Assumptions used to determine grant-date fair value
Vesting period			4 years

Net Loss Per Share - Basic and Diluted (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Numerator:
Net loss	$ (7,364)	$ (6,905)	$ (17,986)	$ (16,319)
Accretion of preferred stock to redemption value				(244)
Net loss attributable to common stockholders	$ (7,364)	$ (6,905)	$ (17,986)	$ (16,563)
Denominator:
Weighted average number of common shares outstanding - basic and diluted (in shares)	14,691,890	9,392,081	13,576,850	8,171,078
Net loss per share attributable to common stockholders - basic and diluted (in dollars per share)	$ (0.50)	$ (0.74)	$ (1.32)	$ (2.03)

Net Loss Per Share - Antidilutive (Details) - shares	3 Months Ended		6 Months Ended
Net Loss Per Share - Antidilutive (Details) - shares	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Securities excluded from computation of diluted net loss per share
Anti-dilutive securities excluded from calculation of diluted net loss per share	5,463,065	1,918,238	5,463,065	1,918,238
Options to purchase common stock
Securities excluded from computation of diluted net loss per share
Anti-dilutive securities excluded from calculation of diluted net loss per share	2,650,455	1,863,722	2,650,455	1,863,722
Warrants assumed from Macrocure
Securities excluded from computation of diluted net loss per share
Anti-dilutive securities excluded from calculation of diluted net loss per share	54,516	54,516	54,516	54,516
Warrants issued with the Private Placement
Securities excluded from computation of diluted net loss per share
Anti-dilutive securities excluded from calculation of diluted net loss per share	2,758,094		2,758,094

Commitments and Contingencies - Lease Agreements (Details) $ in Thousands	Jan. 01, 2017 USD ($)
Operating lease - 12 month period ending July 31, 2017
Commitments and Contingencies
Annual rent	$ 289
Operating lease - 12 month period ending July 31, 2018
Commitments and Contingencies
Annual rent	297
Operating lease - period ending April 30, 2019
Commitments and Contingencies
Annual rent	$ 305

Commitments and Contingencies - Manufacturing, License and Other Agreements (Details) - USD ($) $ in Thousands	Dec. 30, 2016	Jun. 30, 2018
TRX518 and DKN-01
Commitments and Contingencies
Noncancelable commitments		$ 1,075
License and service agreements
Commitments and Contingencies
Accrued royalties		0
License and service agreements \| Preferred Class A
Commitments and Contingencies
Issuance of stock in consideration for license (in shares)	9,000,000
Licensing agreements
Commitments and Contingencies
Accrued royalties		$ 0

Commitments and Contingencies - Legal Proceedings (Details) - TRX518	6 Months Ended
	Jun. 30, 2018 company individual item
Loss Contingencies
Number of notices of opposition filed \| item	3
Number of major companies that filed notices of opposition \| company	2
Number of individuals that filed notices of opposition \| individual	1

Related Party Transactions (Details)		6 Months Ended
Related Party Transactions (Details)	Nov. 14, 2017 director $ / shares shares	Jun. 30, 2018 shares
Private placement
Related Party Transactions
Number of warrants issued per common stock	1
Private placement \| HCV IX and Eli Lilly
Related Party Transactions
Number of affiliated directors and executive officers \| director	3
Private placement \| HCV IX and Eli Lilly \| Minimum
Related Party Transactions
Direct holding percentage	5.00%
Common Stock
Related Party Transactions
Issuance of stock (in shares)		2,146,667
Common Stock \| Private placement
Related Party Transactions
Issuance of stock (in shares)	2,958,094
Price per share (in dollars per share) \| $ / shares	$ 6.085
Warrant Liability \| Private placement
Related Party Transactions
Exercise price of warrant \| $ / shares	$ 6.085