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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended June 30, 2022

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

For the transition period from to

Commission file number: 001-37539

Global Blood Therapeutics, Inc.

(Exact name of registrant as specified in its charter)

Delaware

27-4825712

(State or other jurisdiction of
incorporation or organization)

(I.R.S. Employer
Identification No.)

181 Oyster Point Boulevard

South San Francisco, CA 94080

(Address of principal executive offices)

(650) 741-7700

(Registrant’s telephone number, including area code)

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

Title of each class
  

Trading
Symbol(s)
  

Name of each exchange
on which registered
  

Common Stock, par value $0.001 per share

GBT

The NASDAQ Global Select Market

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

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

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


Large accelerated filer	☒	Accelerated filer	☐

Non-accelerated filer	☐	Smaller reporting company	☐

		Emerging growth company	☐

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

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

As of August 4, 2022, there were 67,463,704 shares of the registrant’s Common Stock, par value $0.001 per share, outstanding.

TABLE OF CONTENTS



		Page
PART I. – FINANCIAL INFORMATION		3

Item 1.	Financial Statements	3
	Condensed Consolidated Balance Sheets as of June 30, 2022 (Unaudited) and December 31, 2021	3
	Condensed Consolidated Statements of Operations and Comprehensive Loss for the Three and Six Months Ended June 30, 2022, and 2021 (Unaudited)	4
	Condensed Consolidated Statements of Stockholders’ Equity for the Three and Six Months Ended June 30, 2022, and 2021 (Unaudited)	5
	Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2022, and 2021 (Unaudited)	6
	Notes to Unaudited Condensed Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	28
Item 4.	Controls and Procedures	28

PART II. – OTHER INFORMATION		28

Item 1.	Legal Proceedings	28
Item 1A.	Risk Factors	28
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	72
Item 3.	Defaults Upon Senior Securities	72
Item 4.	Mine Safety Disclosures	72
Item 5.	Other Information	72
Item 6.	Exhibits	72

SIGNATURES		74

PART I. – FINANCIAL INFORMATION

Item 1. Financial Statements

GLOBAL BLOOD THERAPEUTICS, INC.

Condensed Consolidated Balance Sheets

(In thousands, except share and per share amounts)


	June 30, 2022			December 31, 2021
Assets	(Unaudited)
Current assets:
Cash and cash equivalents	$	261,152		$	684,717
Short-term marketable securities		256,006			—
Accounts receivable, net		29,765			28,800
Inventories		65,816			58,202
Prepaid expenses and other current assets		27,272			30,251
Total current assets		640,011			801,970
Long-term marketable securities		146,863			50,057
Property and equipment, net		32,425			34,918
Operating lease right-of-use assets		46,497			48,015
Restricted cash		2,432			2,436
Other assets, noncurrent		2,214			1,812
Total assets	$	870,442		$	939,208
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	8,260		$	15,097
Accrued liabilities		53,266			39,297
Accrued compensation		25,187			27,712
Other liabilities, current		6,379			5,892
Total current liabilities		93,092			87,998
Long-term debt, net		247,130			246,352
Convertible debt, net		334,815			334,089
Operating lease liabilities, noncurrent		70,322			73,506
Other liabilities, noncurrent		6,723			853
Total liabilities		752,082			742,798
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $0.001 par value, 5,000,000 shares authorized as of June 30, 2022 (unaudited) and December 31, 2021; no shares issued and outstanding		—			—
Common stock, $0.001 par value, 150,000,000 shares authorized as of June 30, 2022 (unaudited) and December 31, 2021, respectively; 67,272,761 and 64,636,641 shares issued and outstanding as of June 30, 2022 (unaudited) and December 31, 2021, respectively		67			65
Additional paid-in capital		1,575,719			1,485,805
Accumulated other comprehensive income		(3,973	)		100
Accumulated deficit		(1,453,453	)		(1,289,560	)
Total stockholders’ equity		118,360			196,410
Total liabilities and stockholders’ equity	$	870,442		$	939,208

See accompanying notes to unaudited condensed consolidated financial statements.

GLOBAL BLOOD THERAPEUTICS, INC.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(Unaudited)

(In thousands, except share and per share amounts)


	Three Months Ended June 30,						Six Months Ended June 30,
	2022			2021			2022			2021
Product sales, net	$	71,550		$	47,555		$	126,710		$	86,598
Costs and operating expenses:
Cost of sales		1,413			748			2,468			1,332
Research and development		64,775			51,784			117,608			102,641
Selling, general and administrative		81,088			61,093			155,622			120,059
Total costs and operating expenses		147,276			113,625			275,698			224,032
Loss from operations		(75,726	)		(66,070	)		(148,988	)		(137,434	)
Other income (expense):
Interest income		1,664			164			2,164			493
Interest expense		(8,402	)		(3,677	)		(16,607	)		(7,366	)
Other income (expense), net		186			21			(100	)		(62	)
Total other income (expense), net		(6,552	)		(3,492	)		(14,543	)		(6,935	)
Loss before income taxes		(82,278	)		(69,562	)		(163,531	)		(144,369	)
Provision for income taxes		192			30			362			153
Net loss		(82,470	)		(69,592	)		(163,893	)		(144,522	)
Other comprehensive expense:
Net unrealized loss on marketable securities, net of tax		(1,711	)		(78	)		(3,626	)		(259	)
Cumulative translation adjustment		(300	)		259			(446	)		259
Total other comprehensive expense, net		(2,011	)		181			(4,072	)		—
Comprehensive loss	$	(84,481	)	$	(69,411	)	$	(167,965	)	$	(144,522	)
Basic and diluted net loss per common share	$	(1.26	)	$	(1.12	)	$	(2.51	)	$	(2.32	)
Weighted-average number of shares used in computing basic and diluted net loss per common share		65,594,792			62,312,418			65,220,518			62,207,328

See accompanying notes to unaudited condensed consolidated financial statements.

GLOBAL BLOOD THERAPEUTICS, INC.

Condensed Consolidated Statements of Stockholders’ Equity

(Unaudited)

(In thousands, except share amounts)


								Accumulated
					Additional			Other						Total
	Common Stock				Paid-In			Comprehensive			Accumulated			Stockholders'
	Shares		Amount		Capital			Income (Loss)			Deficit			Equity
Balance at December 31, 2021		64,636,641	$	65	$	1,485,805		$	100		$	(1,289,560	)	$	196,410
Issuance of common stock upon exercise of stock options		21,653		—		324			—			—			324
Issuance of common stock upon vesting of restricted share units, net of shares withheld for employee taxes		308,118		—		(981	)		—			—			(981	)
Issuance of common stock pursuant to ESPP purchases		89,050		—		2,259			—			—			2,259
Stock-based compensation expenses		—		—		19,475			—			—			19,475
Other comprehensive income									(2,062	)		—			(2,062	)
Net loss		—		—		—			—			(81,423	)		(81,423	)
Balance at March 31, 2022		65,055,462	$	65	$	1,506,882		$	(1,962	)	$	(1,370,983	)	$	134,002
Issuance of common stock upon exercise of stock options		15,015		—		216			—			—			216
Issuance of common stock upon vesting of restricted share units, net of shares withheld for employee taxes		136,916		—		(114	)		—			—			(114	)
Issuance of common stock upon at-the-market offering		2,065,368		2		48,493			—			—			48,495
Stock-based compensation expenses		—		—		20,242			—			—			20,242
Other comprehensive income									(2,011	)		—			(2,011	)
Net loss		—		—		—			—			(82,470	)		(82,470	)
Balance at June 30, 2022		67,272,761	$	67	$	1,575,719		$	(3,973	)	$	(1,453,453	)	$	118,360


								Accumulated
					Additional			Other						Total
	Common Stock				Paid-In			Comprehensive			Accumulated			Stockholders'
	Shares		Amount		Capital			Income (Loss)			Deficit			Equity
Balance at December 31, 2020		61,898,090	$	62	$	1,402,262		$	302		$	(986,469	)	$	416,157
Issuance of common stock upon exercise of stock options		47,763		—		1,110			—			—			1,110
Issuance of common stock upon vesting of restricted share units, net of shares withheld for employee taxes		229,087		—		(1,897	)		—			—			(1,897	)
Issuance of common stock pursuant to ESPP purchases		65,110		—		2,558			—			—			2,558
Stock-based compensation expenses		—		—		20,378			—			—			20,378
Other comprehensive income									(181	)		—			(181	)
Net loss		—		—		—			—			(74,930	)		(74,930	)
Balance at March 31, 2021		62,240,050	$	62	$	1,424,411		$	121		$	(1,061,399	)	$	363,195
Issuance of common stock upon exercise of stock options		28,575		—		403			—			—			403
Issuance of common stock upon vesting of restricted share units, net of shares withheld for employee taxes		110,493		—		(65	)		—			—			(65	)
Stock-based compensation		—		—		21,644			—			—			21,644
Other comprehensive losses		—		—		—			181			—			181
Net loss		—		—		—			—			(69,592	)		(69,592	)
Balance at June 30, 2021		62,379,118	$	62	$	1,446,393		$	302		$	(1,130,991	)	$	315,766

See accompanying notes to unaudited condensed consolidated financial statements.

GLOBAL BLOOD THERAPEUTICS, INC.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(In thousands)



	Six Months Ended June 30,
	2022			2021
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(163,893	)	$	(144,522	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		3,052			2,908
Amortization (accretion) of premium (discount) on marketable securities		88			112
Non-cash interest expense		1,541			476
Amortization of operating lease right-of-use assets		1,518			1,301
Stock-based compensation		38,984			41,184
Changes in operating assets and liabilities:
Accounts receivables		(965	)		(2,044	)
Inventories		(6,806	)		(6,841	)
Prepaid expenses and other assets, current		2,977			(7,121	)
Other assets, non-current		(394	)		—
Accounts payable		(6,844	)		(9,730	)
Accrued liabilities		13,971			7,683
Accrued compensation		(2,525	)		(4,655	)
Operating lease liabilities		(2,735	)		(2,328	)
Other liabilities, noncurrent		5,870			—
Net cash used in operating activities		(116,161	)		(123,577	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment		(636	)		(1,920	)
Purchases of marketable securities		(386,025	)		—
Maturities of marketable securities		29,500			47,670
Net cash provided by (used in) investing activities		(357,161	)		45,750
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock in settlement of employee stock purchase plan and exercise of stock options		2,799			4,083
Proceeds from issuance of common stock upon at-the-market offering, net of issuance cost		48,495			—
Taxes paid related to net share settlement of equity awards		(1,095	)		(1,962	)
Payment of debt issuance costs		—			(49	)
Net cash provided by financing activities		50,199			2,072
Effect of exchange rate changes on cash and cash equivalents		(446	)		259
Net decrease in cash, cash equivalents and restricted cash		(423,569	)		(75,496	)
Cash, cash equivalents and restricted cash at beginning of period		687,153			497,202
Cash, cash equivalents and restricted cash at end of period	$	263,584		$	421,706
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for interest	$	14,511		$	6,788
Cash paid for income taxes	$	80		$	—
SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND FINANCING INFORMATION:
Accrued issuance costs	$	—		$	(26	)
Accrued purchase of property and equipment	$	7		$	(36	)
RECONCILIATION OF CASH, CASH EQUIVALENTS, AND RESTRICTED CASH TO THE CONSOLIDATED BALANCE SHEETS
Cash, cash equivalents	$	261,152		$	419,311
Restricted cash	$	2,432			2,395
Total cash and cash equivalents and restricted cash	$	263,584		$	421,706

See accompanying notes to unaudited condensed consolidated financial statements.

GLOBAL BLOOD THERAPEUTICS, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

1. Organization

Global Blood Therapeutics, Inc., or the Company, we, us or our, was incorporated in Delaware in February 2011 and commenced operations in May 2012. We are a biopharmaceutical company dedicated to the discovery, development and delivery of life-changing treatments that provide hope to underserved patient communities, starting with sickle cell disease, or SCD. In November 2019, we received U.S. Food and Drug Administration, or FDA, accelerated approval for our first medicine, Oxbryta® (voxelotor) tablets for the treatment of SCD in adults and children 12 years of age and older, and we began to make Oxbryta available to patients through our specialty pharmacy partner network in December 2019. We have since received additional regulatory approvals of Oxbryta in and outside of the United States, including the accelerated approval we received from the FDA in December 2021 to expand Oxbryta’s indication for the treatment of SCD to children ages 4 to less than 12 years. In addition, in February 2022, we received Marketing Authorization from the European Commission for the use of Oxbryta for the treatment of hemolytic anemia (which is low hemoglobin due to red blood cell destruction) due to SCD in adult and pediatric patients 12 years of age and older as monotherapy or in combination with hydroxycarbamide (hydroxyurea). Our principal operations are based in South San Francisco, California.

Liquidity

We have incurred significant operating losses since inception and have cumulative net losses of $1.453 billion. Our ultimate success depends on the outcome of our commercialization of Oxbryta and research and development activities. We expect to incur additional losses for the foreseeable future to commercialize Oxbryta and conduct product research and development. If needed, we intend to raise additional capital through borrowings, the issuance of additional equity, and potentially through strategic alliances with partner companies or other transactions. However, if such financing is not available at adequate levels, we will need to re-evaluate our operating plans. We believe that our existing cash and cash equivalents and investments of $664.0 million as of June 30, 2022 will be sufficient to fund our cash requirements for at least twelve months subsequent to the issuance of these financial statements.

2. Summary of Significant Accounting Policies

Basis of Preparation and Presentation of Financial Information

The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America, or U.S. GAAP, and applicable rules and regulations of the Securities and Exchange Commission, or SEC, regarding interim financial reporting. As permitted under those rules, certain footnotes or other financial information that are normally required by U.S. GAAP have been condensed or omitted, and, accordingly, the balance sheet as of December 31, 2021, has been derived from audited consolidated financial statements at that date but does not include all of the information required by U.S. GAAP for complete financial statements. These unaudited interim condensed consolidated financial statements have been prepared on the same basis as our annual consolidated financial statements and, in the opinion of management, reflect all adjustments (consisting only of normal recurring adjustments) that are necessary for a fair presentation of our financial information. The results of operations for the six months ended June 30, 2022, are not necessarily indicative of the results to be expected for the year ending December 31, 2022, or for any other interim period or for any other future year.

The accompanying unaudited interim condensed consolidated financial statements and related financial information should be read in conjunction with the audited financial statements and the related notes thereto for the year ended December 31, 2021, included in the Annual Report on Form 10-K we filed with the SEC on February 23, 2022.

Use of Estimates

The preparation of the accompanying unaudited interim condensed consolidated financial statements in accordance with U.S. GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements, and the reported amounts of variable consideration and costs and expenses during the reporting period. We base our estimates and assumptions on historical experience when available and on various factors that we believe to be reasonable under the circumstances. We evaluate our estimates and assumptions on an ongoing basis. Our actual results could differ from these estimates under different assumptions or conditions.

Concentration of Risk

Credit Risk

We invest in a variety of financial instruments and, by our Board approved investment policy, limit the amount of credit exposure with any one issuer, industry or geographic area for investments other than instruments backed by the U.S. federal government.

Major Customers

We have entered into agreements with certain limited specialty pharmacies and specialty distributors for the distribution of Oxbryta in the United States. For the six months ended June 30, 2022, our three largest customers represented approximately 98% of our product revenue and approximately 97% of our accounts receivable balance at June 30, 2022.

Major Suppliers

We do not currently have any of our own manufacturing facilities, and, therefore, depend on an outsourced manufacturing strategy for the production of Oxbryta for commercial use and for the production of Oxbryta and our product candidates for clinical trials. We have contracts in place with third-party manufacturers that are approved for the commercial production of Oxbryta and third-party suppliers that are approved for Oxbryta’s active pharmaceutical ingredient. Although there are potential sources of supply other than our existing manufacturers and suppliers, any new supplier would be required to qualify under applicable regulatory requirements.

Principles of Consolidation

The accompanying unaudited interim condensed consolidated financial statements include the accounts of the Company and our wholly owned subsidiaries. All intercompany transactions and balances have been eliminated upon consolidation.

Significant Accounting Policies

Except as noted below, there have been no material revisions in our significant accounting policies described in Note 2 to the consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2021.

Stock-Based Compensation

We measure and recognize stock-based compensation expense, including employee and non-employee equity awards, based on fair value at the grant date. We use the Black-Scholes-Merton option-pricing model to calculate grant date fair value. For performance-based awards that do not include market-based conditions, we record share-based compensation expense only when the performance-based award is deemed probable of achievement. We utilize both quantitative and qualitative criteria to judge whether the awards are probable of achievement. For awards with market-based performance conditions, we use a Monte-Carlo simulation model to estimate grant date fair value and we recognize the share-based compensation expense of the award over the derived service period regardless of whether the underlying performance condition is met. Stock-based compensation expense recognized in the consolidated statements of operations is based on stock awards ultimately vested, taking into consideration actual forfeitures.

Accounting Pronouncement Issued But Not Yet Adopted

In March 2020, Financial Accounting Standards Board, or FASB, issued Accounting Standards Update, ASU, No. 2020-04, Reference Rate Reform (Topic 848). The guidance contains practical expedients for reference rate reform related activities that impact debt, leases, derivatives, and other contracts. The guidance in ASU 2020-04 is optional and may be elected over time as reference rate reform activities occur. We continue to evaluate the impact of the guidance and may apply the elections as applicable as changes occur.

3. Fair Value Measurements

Fair value accounting is applied for all financial assets and liabilities that are recognized or disclosed at fair value in the interim condensed consolidated financial statements on a recurring basis (at least annually). Our financial instruments consist of cash and cash equivalents, marketable securities, accounts receivables, accounts payable, accrued liabilities, convertible debt and long-term debt. Long-term debt and convertible debt are reported at amortized cost on our interim condensed consolidated balance sheets. Cash and cash equivalents, marketable securities and restricted cash are reported at their respective fair values on our interim condensed consolidated balance sheets. The remaining financial instruments are reported on our interim condensed consolidated balance sheets at cost that approximate current fair values due to their relatively short maturities.

Assets and liabilities recorded at fair value on a recurring basis in the interim condensed consolidated balance sheets are categorized based upon the level of judgment associated with the inputs used to measure their fair values. Fair value is defined as the exchange price that would be received for an asset or an exit price that would be paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.

In accordance with ASC 820-10, Fair Value Measurements and Disclosures, we determine the fair value of financial and non-financial assets liabilities using the three-tier fair value hierarchy for disclosure of fair value measurements as follows:

Level 1 – Inputs are unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date;

Level 2 – Inputs are observable, unadjusted quoted prices in active markets for similar assets or liabilities, unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the related assets or liabilities; and

Level 3 – Unobservable inputs that are significant to the measurement of the fair value of the assets or liabilities that are supported by little or no market data.

The following table summarizes our financial assets measured at fair value on a recurring basis (in thousands):


	June 30, 2022
	Total		Level 1		Level 2		Level 3
Financial Assets:
Money market funds	$	224,325	$	224,325	$	—	$	—
Corporate debt securities		63,362		—		63,362		—
U.S. government agency securities		49,124		—		49,124		—
Certificates of deposits		1,942		—		1,942		—
U.S. government securities		192,485		—		192,485		—
U.S. treasury bills		100,956		5,000		95,956		—
Total financial assets	$	632,194	$	229,325	$	402,869	$	—

	December 31, 2021
	Total		Level 1		Level 2		Level 3
Financial Assets:
Money market funds	$	671,845	$	671,845	$	—	$	—
Corporate debt securities		10,006		—		10,006		—
U.S. government agency securities		4,843		—		4,843		—
Certificates of deposits		244		—		244		—
U.S. government securities		34,964		—		34,964		—
Total financial assets	$	721,902	$	671,845	$	50,057	$	—

We estimate the fair values of our investments in corporate debt securities, government and government related securities and certificates of deposits by taking into consideration valuations obtained from third-party pricing services. The fair value of our marketable securities classified within Level 2 is based upon observable inputs that may include benchmark yields, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers and reference data including market research publications. At June 30, 2022, and December 31, 2021, the weighted average remaining contractual maturities of our Level 2 investments were 15 months and 18 months, respectively, and all of these investments are rated A-1/P-1 or A/A2, or higher, by Moody’s and Standard & Poor’s. There were no transfers between Level 1 and Level 2 during the periods presented.

There were no sales of available-for-sale securities except for money market funds in the periods presented. No credit loss allowance was recorded as of June 30, 2022, as we do not believe the unrealized loss is a result of a credit loss due to the nature of our investments. We also considered the current and expected future economic and market conditions and determined that the estimate of credit losses was not significantly impacted.

4. Available-for-Sale Securities

Estimated fair values of available-for-sale securities are generally based on prices obtained from commercial pricing services. The following table is a summary of available-for-sale securities recorded in cash and cash equivalents, restricted cash, or marketable securities in our interim condensed consolidated balance sheets (in thousands):


	June 30, 2022
	Amortized		Unrealized		Unrealized			Estimated Fair
	Cost		Gains		(Losses)			Value
Financial Assets:
Money market funds	$	224,325	$	—	$	—		$	224,325
Corporate debt securities		64,089		2		(729	)		63,362
U.S. government agency securities		49,891		4		(771	)		49,124
Certificates of deposits		1,959		—		(17	)		1,942
U.S. government securities		194,572		39		(2,126	)		192,485
U.S. treasury bills		101,202		—		(246	)		100,956
Total	$	636,038	$	45	$	(3,889	)	$	632,194

	December 31, 2021
	Amortized		Unrealized		Unrealized			Estimated Fair
	Cost		Gains		(Losses)			Value
Financial Assets:
Money market funds	$	671,845	$	—	$	—		$	671,845
Corporate debt securities		10,037		—		(31	)		10,006
U.S. government agency securities		4,862		—		(19	)		4,843
Certificates of deposits		245		—		(1	)		244
U.S. government securities		35,133		—		(169	)		34,964
Total	$	722,122	$	—	$	(220	)	$	721,902

The following table summarizes the classification of the available-for-sale securities on our interim condensed consolidated balance sheets (in thousands):



	June 30, 2022		December 31, 2021
Cash and cash equivalents	$	229,325	$	671,845
Short-term marketable securities		256,006		—
Long-term marketable securities		146,863		50,057
Total	$	632,194	$	721,902

We do not intend to sell the investments that are in an unrealized loss position, and it is unlikely that we will be required to sell the investments before recovery of their amortized cost basis, which may be maturity. We have determined that the gross unrealized losses on our marketable securities at June 30, 2022, were temporary in nature.

5. Balance Sheet Components

Inventories

Inventories consist of the following (in thousands):


	June 30, 2022		December 31, 2021
Raw materials	$	5,425	$	10,616
Work-in-process	$	57,753		45,662
Finished goods	$	2,638		1,924
Total inventories	$	65,816	$	58,202

We have capitalized $400,000 and $408,000 of stock-based compensation expense to our inventories for the three months ended June 30, 2022, and 2021, respectively; and $733,000 and $838,000 for the six months ended June 30, 2022 and 2021, respectively. The depreciation expense capitalized into inventories are not material for the three- and six-months ended June 30, 2022 and 2021. See Note 9—Stock-based Compensation for details on stock-based compensation expenses recognized during the three- and six-months ended June 30, 2022, and 2021.

Property and Equipment

Property and equipment consists of the following (in thousands):


	June 30, 2022			December 31, 2021
Laboratory equipment	$	15,041		$	14,373
Computer equipment		2,850			2,841
Leasehold improvements		32,281			32,281
Construction-in-progress		257			934
Total property and equipment		50,429			50,429
Less: accumulated depreciation and amortization		(18,004	)		(15,511	)
Property and equipment, net	$	32,425		$	34,918

Accrued liabilities

Accrued liabilities consist of the following (in thousands):


	June 30, 2022		December 31, 2021
Accrued research and development costs	$	11,184	$	8,525
Accrued manufacturing costs		13,599		11,327
Accrued professional and consulting services		12,134		7,863
Accrued sales deductions		14,956		10,205
Other		1,393		1,377
Total accrued liabilities	$	53,266	$	39,297

Other liabilities, current

Other liabilities consist of the following (in thousands):


	June 30, 2022		December 31, 2021
Operating lease liabilities, current	$	6,119	$	5,670
Other current liabilities	$	260		222
Total other liabilities, current	$	6,379	$	5,892

6. Long-term Debt

Amended and Restated Loan Agreement

In December 2019, we entered into a term loan agreement, or 2019 Term Loan, with funds managed by Pharmakon Advisors LP, which are BioPharma Credit PLC, as collateral agent, Biopharma Credit Investments V (Master) LP, as a lender, and BPCR Limited Partnership, as a lender, and collectively with Biopharma Credit Investments V (Master) LP, the Lenders, for a senior secured credit facility consisting of an initial term loan of $75.0 million, with an option to draw an additional $75.0 million until December 31, 2020. The first tranche of $75.0 million was funded in December 2019 and the second tranche of $75.0 million was funded in November 2020.

In December 2021, we entered into an amended and restated loan agreement, or A&R Term Loan, which superseded in its entirety the 2019 Term Loan, and provided us with an additional term loan commitment from the Lenders in the aggregate principal amount of $100.0 million, or which we refer to as the Tranche C Loan. Further, the A&R Term Loan extended the maturity date and interest payments for the previous tranches under the 2019 Term Loan to conform with the new Tranche C Loan. The maturity date of the A&R Term Loan was extended to December 17, 2027, with interest-only payments extended to March 31, 2025. The Term Loan bears interest at a floating per annum interest rate equal to 7.00% plus the greater of (a) the 3-month LIBOR rate and (b) 2%. Interest on amounts outstanding are payable quarterly in arrears. The obligations under the A&R Term Loan are secured by a first priority security interest in and a lien on substantially all of our assets, subject to certain exceptions. The Tranche C Loan was funded in December 2021.

In the event we default, the interest rate would be 3% above the rate that is otherwise applicable thereto. Interest on amounts outstanding are payable quarterly in arrears.

We have the option to prepay all or a portion of the borrowed amounts under the A&R Term Loan. If we exercise this option, we must pay a prepayment fee between 1% and 3% of the principal amount being prepaid, or Prepayment Fee, depending on the timing of the prepayment. If the prepayment occurs before December 2024, we must also pay an amount equal to the sum of all

interest that would have accrued and been payable from date of prepayment through December 2026, or Make Whole Amount. We are obligated to pay an additional fee to the Lenders determined by multiplying the principal amount being paid or prepaid multiplied by 2%, or Paydown Fee, when such payments are made.

In the event of default or change in control, all unpaid principal and all accrued and unpaid interest amounts (if any) become immediately due and payable, at which point, we will be subject to the Prepayment Fee, the Make Whole Amount (if any) and the Paydown Fee. Events of default include, but are not limited to, a payment default, a material adverse change and insolvency.

Using the net present value method, we concluded the amendment and restatement of the 2019 Term Loan should be accounted for as a debt modification as the present value of the remaining cash flows of the A&R Term Loan are not substantially different from the present value of the remaining cash flows of the 2019 Term Loan. As the amendment was accounted for as a debt modification, no gain or loss was recognized.

Debt issuance costs associated with the Tranche C Loan paid directly to the Lenders of $3.4 million were treated as discounts on the A&R Term Loan and the other debt issuance costs of $0.1 million were expensed as incurred. The debt discounts associated with the Tranche C Loan, the remaining unamortized debt discounts associated with the 2019 Term Loan as of the debt amendment date, and the Paydown Fee are being amortized or accreted to interest expenses throughout the remaining life of the A&R Term Loan using the effective interest rate method. As of June 30, 2022, there were unamortized issuance costs and debt discounts of $4.4 million, which were recorded as a direct deduction from the A&R Term Loan on the consolidated balance sheet.

Future payments of principal and interest on the A&R Term Loan as of June 30, 2022 (in thousands):


2022 (six months)	$	11,250
2023		22,500
2024		22,500
2025		104,688
2026		97,188
2027		89,688
Total minimum payments		347,814
Less: amount representing interest		(92,814	)
Less: amount representing Paydown Fee		(5,000	)
Long-term debt, gross		250,000
Discount on notes payable		(4,419	)
Accretion of Paydown Fee		1,549
Long-term debt	$	247,130

7. Convertible Debt

Convertible Notes

In December 2021, we issued in a private placement an aggregate principal amount of $345.0 million of 1.875% convertible senior notes due 2028, or 2028 Notes. The aggregate principal amount on the 2028 Notes sold reflects the full exercise by the initial purchasers of their option to purchase an additional $45.0 million in aggregate principal amount of the 2028 Notes. We received total proceeds, net of debt issuance and offering costs of $11.0 million, of $334.0 million from the offering. We used $46.8 million of the net proceeds to pay the costs of the capped call transactions described below.

The 2028 Notes are senior unsecured obligations and accrue interest at a rate of 1.875% per annum payable semiannually in arrears on June 15 and December 15 of each year, beginning on June 15, 2022. The 2028 Notes mature on December 15, 2028, unless converted, redeemed or repurchased in accordance with their terms prior to such date.

The 2028 Notes are convertible into cash, shares of our common stock or a combination of cash and shares of our common stock, at our election, on or after December 20, 2027 and prior to the 31st scheduled trading day immediately preceding the maturity date, at an initial conversion rate of 31.4985 shares of our common stock per $1,000 principal amount of the 2028 Notes, which is equivalent to an initial conversion price of approximately $31.75 per share of our common stock. The 2028 Notes are convertible at the option of the holders prior to the close of business on the second scheduled trading day immediately preceding the maturity date.

We may redeem for cash all or any portion of the 2028 Notes, at our option, on or after December 20, 2027 and prior to the 31st scheduled trading day immediately preceding the maturity date, if the last reported sale price of our common stock has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period (including the last trading day of such period) ending on the trading day immediately preceding the date on which we provide notice of redemption, at a redemption price equal to 100% of the principal amount of the 2028 Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date. If we elect to redeem fewer than all the outstanding notes, at least $100.0 million aggregate principal amount of notes must be outstanding and not subject to redemption as of, and after giving effect to,

delivery of the relevant notice of redemption. We have elected to irrevocably fix the settlement method to physical settlement in the indenture governing the 2028 Notes. No “sinking fund” is provided for the 2028 Notes, which means that we are not required to redeem or retire the 2028 Notes periodically.

If we undergo a fundamental change (as set forth in the indenture governing the 2028 Notes), noteholders may require us to repurchase for cash all or any portion of their 2028 Notes at a repurchase price equal to 100% of the principal amount of the 2028 Notes to be repurchased, plus accrued and unpaid interest to, but excluding, the fundamental change repurchase date.

As a result of adopting ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40), we accounted for the 2028 Notes as a single liability. As of June 30, 2022, the 2028 Notes were recorded at the aggregate principal amount of $345.0 million less unamortized issuance costs of $10.2 million as a long-term liability on the consolidated balance sheets. The debt issuance costs are amortized to interest expense over the contractual term of the 2028 Notes at an effective interest rate of 2.37%.

The following table presents the components of interest expense related to 2028 Notes (in thousands):


	Three months ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Stated coupon interest	$	1,617	$	—	$	3,234	$	—
Amortization of debt issuance cost		364		—		726		—
Total interest expense	$	1,981	$	—	$	3,960	$	—

As of June 30, 2022, the fair value of the 2028 Notes was $407.2 million. The fair value was estimated using a third-party valuation model based on observable inputs and is considered Level 2 in the fair value hierarchy.

Capped Calls

In connection with the issuance of the 2028 Notes, we entered into capped call transactions with certain of the initial purchasers of the 2028 Notes and other financial institutions, totaling $46.8 million, which we refer to as the Capped Calls. The Capped Calls cover, subject to customary adjustments, the number of shares of our common stock that initially underlie the 2028 Notes (or 10,866,983 shares of our common stock). The Capped Calls have an initial strike price and an initial cap price of $31.7475 per share and $49.80 per share, respectively, subject to certain adjustments. Conditions that cause adjustments to the initial strike price of the Capped Calls mirror conditions that result in corresponding adjustments to the conversion price of the 2028 Notes. The Capped Calls are expected to offset the potential dilution to our common stock as a result of any conversion of the 2028 Notes, subject to a cap based on the cap price.

We considered the Capped Calls as separate financial instruments and not part of the 2028 Notes. We recorded the cost of the Capped Calls, totaling $46.8 million, as a reduction to additional paid-in capital for the year ended December 31, 2021.

8. Commitments and Contingencies

Leases

We have operating leases for our headquarters in South San Francisco, where we have office and research and development laboratory facilities and equipment. Our leases have remaining lease terms of 1 to 10 years. Most of these leases require monthly lease payments that may be subject to annual increases throughout the lease term. Certain of these leases include renewal options at our election, with renewal terms that can extend the lease term from 1 to 10 years. These optional periods have not been considered in the determination of the right-of-use assets, or ROU assets, or lease liabilities associated with these leases as we did not consider it reasonably certain that we would exercise the options.

Lease costs included in operating expense in the interim condensed consolidated statement of operations and comprehensive loss in relation to these operating leases were $2.4 million and $2.4 million for the three months ended June 30, 2022, and 2021, respectively and $4.9 million and $5.6 million for the six months ended June 30, 2022 and 2021, respectively. Included in these lease costs were variable lease costs, which were not included within the measurement of our operating ROU assets and operating lease liabilities in the amount of $1.0 million and $1.2 million for the three months ended June 30, 2022, and 2021, respectively; and $2.0 million and $2.0 million for the six months ended June 30, 2022 and 2021, respectively. The variable lease cost is comprised primarily of our cost in certain research and development arrangements that contain embedded equipment, and our proportionate share of operating expenses, property taxes, and insurance in relation with our facility lease. These costs are classified as operating lease expense due to our election to not separate lease and non-lease components.

Supplemental information related to leases for the periods reported is as follows (in thousands, except weighted-average remaining lease term and weighted-average discount rate):


	Six Months Ended June 30,
	2022		2021
Cash paid for amounts included in the measurement of lease liabilities	$	6,073	$	5,883
Weighted-average remaining lease term of operating leases (in years)		7.8		8.7

Global Blood Therapeutics, Inc. 10-Q