The contractual obligation table does not include
any potential future royalty payments we may be required to make under our license assignment with Johns Hopkins University, due
to the uncertainty of the occurrence of the events requiring payment under that agreement.
In April 2012, the Jumpstart Our Business Startups
Act, or JOBS Act was enacted in the United States. Section 107 of the JOBS Act provides that an “emerging growth company,”
or EGC, can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying
with new or revised accounting standards. Thus, an emerging growth company can delay the adoption of certain accounting standards
until those standards would otherwise apply to private companies. We have irrevocably elected not to avail ourselves of this extended
transition period and, as a result, we will adopt new or revised accounting standards on the relevant dates on which adoption of
such standards is required for non-emerging growth public companies.
Item 3. Qualitative and Quantitative Disclosures about Market Risk
The market risk inherent in our financial instruments
and in our financial position represents the potential loss arising from adverse changes in interest rates. As of June 30, 2017,
we had cash equivalents and available-for-sale investments of $31.7 million consisting primarily of investments in U.S. Treasuries
and certificates of deposit. Our primary exposure to market risk is interest rate sensitivity, which is affected by changes in
the general level of U.S. interest rates, particularly because our investments are in short-term marketable securities. Our marketable
securities are subject to interest rate risk and could fall in value if market interest rates increase. Due to the short-term duration
of our investment portfolio and the low risk profile of our investments, an immediate 10% change in interest rates would not have
a material effect on the fair market value of our investment portfolio. We have the ability to hold our marketable securities until
maturity, and therefore, we would not expect our operating results or cash flows to be affected to any significant degree by the
effect of a change in market interest rates on our investments.
We contract with CROs and contract manufacturers
internationally. Transactions with one of our contract manufacturers is settled in Swiss Francs and therefore, while we believe
we have some foreign currency exposure, we have entered into forward foreign currency contracts to purchase Swiss Francs to manage
this risk. The last outstanding forward foreign currency contract was executed during December 2016.
Item 4. Controls and Procedures
Management’s Evaluation of our Disclosure Controls and
We maintain disclosure controls and procedures
(as defined in Rules 13a-15(e) or 15d-15(e) under the Exchange Act) that are designed to ensure that information required to be
disclosed in the reports that we file or submit under the Exchange Act is (1) recorded, processed, summarized, and reported within
the time periods specified in the SEC’s rules and forms and (2) accumulated and communicated to our management, including
our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.
As of June 30, 2017, our management, with the
participation of our principal executive officer and principal financial officer, evaluated the effectiveness of our disclosure
controls and procedures as of the end of the period covered by this Quarterly Report. Our management recognizes that any controls
and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives,
and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
Our principal executive officer and principal financial officer have concluded based upon the evaluation described above that,
as of June 30, 2017 our disclosure controls and procedures were effective at the reasonable assurance level.