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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 September 30, 2019
OR
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: 001-38311
Denali Therapeutics Inc.
(Exact name of registrant as specified in its charter)

Delaware46-3872213
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
161 Oyster Point Blvd.
South San Francisco, CA, 94080
(Address of principal executive offices and zip code)
(650) 866-8548
(Registrant’s telephone number, including area code)
_______________________________________
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading SymbolName of each exchange on which registered
Common Stock, par value $0.01 per shareDNLINASDAQ 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, a 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. (Check one):
Large accelerated filerAccelerated filer
Non-accelerated filerSmaller 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  
The number of outstanding shares of the registrant’s common stock as of October 30, 2019 was 96,031,223.




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Page
Item 1.
Item 2.
Item 3.
Item 4.
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.

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PART I. FINANCIAL INFORMATION
ITEM 1.  FINANCIAL STATEMENTS
Denali Therapeutics Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
(In thousands, except share amounts)

September 30, 2019December 31, 2018
Assets
Current assets:
Cash and cash equivalents$82,673  $77,123  
Short-term marketable securities396,717  387,174  
Prepaid expenses and other current assets14,987  16,539  
Total current assets494,377  480,836  
Long-term marketable securities23,534  147,881  
Property and equipment, net47,481  25,162  
Operating lease right-of-use asset34,344  —  
Other non-current assets3,242  8,105  
Total assets$602,978  $661,984  
Liabilities and stockholders' equity
Current liabilities:
Accounts payable$2,022  $1,891  
Accrued liabilities15,467  8,520  
Accrued compensation7,528  9,952  
Contract liabilities18,185  11,427  
Other current liabilities3,483  996  
Total current liabilities46,685  32,786  
Contract liabilities, less current portion47,795  57,350  
Operating lease liability, less current portion69,915  —  
Deferred rent, less current portion—  24,532  
Other non-current liabilities386  471  
Total liabilities164,781  115,139  
Commitments and contingencies (Note 8)
Stockholders' equity:
Convertible preferred stock, $0.01 par value; 40,000,000 shares authorized as of September 30, 2019 and December 31, 2018; 0 shares issued and outstanding as of September 30, 2019 and December 31, 2018
    
Common stock, $0.01 par value;400,000,000 shares authorized as of September 30, 2019 and December 31, 2018; 95,987,607 shares and 94,662,435 shares issued and outstanding as of September 30, 2019 and December 31, 2018, respectively
1,286  1,273  
Additional paid-in capital807,875  774,158  
Accumulated other comprehensive income (loss)562  (649) 
Accumulated deficit(371,526) (227,937) 
Total stockholders' equity438,197  546,845  
Total liabilities and stockholders’ equity$602,978  $661,984  
See accompanying notes to unaudited condensed consolidated financial statements.
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Table of Contents
Denali Therapeutics Inc.
Condensed Consolidated Statements of Operations and Comprehensive Loss
(Unaudited)
(In thousands, except share and per share amounts)

Three Months Ended September 30,Nine Months Ended September 30,
2019201820192018
Collaboration revenue$13,604  $1,195  $22,006  $3,484  
Operating expenses:
Research and development52,544  30,321  141,831  103,274  
General and administrative11,215  8,838  35,601  21,304  
Total operating expenses63,759  39,159  177,432  124,578  
Loss from operations(50,155) (37,964) (155,426) (121,094) 
Interest and other income, net3,782  2,593  11,411  7,321  
Loss before income taxes(46,373) (35,371) (144,015) (113,773) 
Income tax benefit113    426    
Net loss (46,260) (35,371) (143,589) (113,773) 
Other comprehensive income (loss):
Net unrealized gain (loss) on marketable securities, net of tax
(317) 77  1,211  (1,048) 
Comprehensive loss$(46,577) $(35,294) $(142,378) $(114,821) 
Net loss per share, basic and diluted$(0.48) $(0.38) $(1.50) $(1.24) 
Weighted average number of shares outstanding, basic and diluted
95,859,048  93,665,231  95,449,570  92,056,812  
See accompanying notes to unaudited condensed consolidated financial statements.
 


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Denali Therapeutics Inc.
Condensed Consolidated Statements of Stockholders’ Equity
(Unaudited)
(In thousands, except share amounts)
Common StockAdditional Paid-in CapitalAccumulated Other Comprehensive Income (Loss)Accumulated DeficitTotal Stockholders' Equity
SharesAmount
Balance at December 31, 201894,662,435  $1,273  $774,158  $(649) $(227,937) $546,845  
Issuances under equity incentive plans
781,107  7  4,149  —  —  4,156  
Vesting of early exercised common stock
125,001  2  83  —  —  85  
Vesting of restricted stock awards and units
419,064  4  (4) —  —    
Stock-based compensation
—  —  29,489  —  —  29,489  
Net loss
—  —  —  —  (143,589) (143,589) 
Other comprehensive income
—  —  —  1,211  —  1,211  
Balance at September 30, 201995,987,607  $1,286  $807,875  $562  $(371,526) $438,197  
Balance at June 30, 201995,656,896  $1,283  $798,277  $879  $(325,266) $475,173  
Issuances under equity incentive plans
233,983  2  677  —  —  679  
Vesting of early exercised common stock
31,249  —  21  —  —  21  
Vesting of restricted stock units
65,479  1  (1) —  —    
Stock-based compensation
—  —  8,901  —  —  8,901  
Net loss
—  —  —  —  (46,260) (46,260) 
Other comprehensive loss
—  —  —  (317) —  (317) 
Balance at September 30, 201995,987,607  $1,286  $807,875  $562  $(371,526) $438,197  
Balance at December 31, 201787,480,362  $1,201  $656,660  $(368) $(191,697) $465,796  
Issuance of common stock in connection with the Takeda Collaboration Agreement
4,214,559  42  94,364  —  —  94,406  
Issuances under equity incentive plans
558,335  5  2,306  —  —  2,311  
Vesting of early exercised common stock
187,497  3  339  —  —  342  
Vesting of restricted stock awards
1,532,994  15  (15) —  —    
Stock-based compensation
—  —  13,145  —  —  13,145  
Net loss
—  —  —  —  (113,773) (113,773) 
Other comprehensive loss
—  —  —  (1,048) —  (1,048) 
Balance at September 30, 201893,973,747  $1,266  $766,799  $(1,416) $(305,470) $461,179  
Balance at June 30, 201893,321,745  $1,259  $760,605  $(1,493) $(270,099) $490,272  
Issuances under equity incentive plans
197,926  2  657  —  —  659  
Vesting of early exercised common stock
46,873  1  31  —  —  32  
Vesting of restricted stock awards
407,203  4  (4) —  —    
Stock-based compensation
—  —  5,510  —  —  5,510  
Net loss
—  —  —  —  (35,371) (35,371) 
Other comprehensive income
—  —  —  77  —  77  
Balance at September 30, 201893,973,747  $1,266  $766,799  $(1,416) $(305,470) $461,179  
See accompanying notes to unaudited condensed consolidated financial statements.
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Denali Therapeutics Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)

Nine Months Ended
September 30,
20192018
Operating activities
Net loss$(143,589) $(113,773) 
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization5,936  5,036  
Stock–based compensation expense29,489  13,145  
Net amortization of discounts on marketable securities(4,032) (1,864) 
Non-cash rent expense2,333  (1,182) 
Gain on disposal of property and equipment  (36) 
Other non-cash items(427)   
Changes in operating assets and liabilities:
Prepaid expenses and other assets5,812  (5,379) 
Accounts payable466  1,235  
Accrued and other current liabilities2,876  2,639  
Contract liabilities(2,797) 57,110  
Net cash used in operating activities(103,933) (43,069) 
Investing activities
Purchases of marketable securities(219,139) (400,637) 
Purchases of property and equipment(15,146) (1,956) 
Maturities of marketable securities339,612  176,574  
Net cash provided by (used in) investing activities105,327  (226,019) 
Financing activities
Payments of issuance costs related to issuance of common stock  (1,342) 
Payments of issuance costs related to issuance of preferred stock  (44) 
Issuance of common stock in connection with the Takeda Collaboration Agreement  94,406  
Proceeds from exercise of awards under equity incentive plans4,156  2,309  
Net cash provided by financing activities4,156  95,329  
Net increase (decrease) in cash, cash equivalents and restricted cash5,550  (173,759) 
Cash, cash equivalents and restricted cash at beginning of period78,623  218,910  
Cash, cash equivalents and restricted cash at end of period$84,173  $45,151  
Supplemental disclosures of cash flow information
Tenant improvements provided by the landlord$11,343  $4,364  
Property and equipment purchases accrued but not yet paid$1,500  $37  
See accompanying notes to unaudited condensed consolidated financial statements.
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Denali Therapeutics Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
1. Significant Accounting Policies
Organization and Description of Business

Denali Therapeutics Inc. ("Denali" or the “Company”) is a biopharmaceutical company, incorporated in Delaware, that discovers and develops therapeutics to defeat neurodegenerative diseases. The Company is headquartered in South San Francisco, California.
Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and the instructions to Form 10-Q and Article 10 of SEC Regulation S-X for interim financial information.

These unaudited condensed consolidated financial statements and notes should be read in conjunction with the audited consolidated financial statements and notes thereto contained in the Annual Report on Form 10-K for the year ended December 31, 2018, as filed with the Securities and Exchange Commission on March 12, 2019 (the "2018 Annual Report on Form 10-K"). The Condensed Consolidated Balance Sheet as of December 31, 2018 was derived from the audited annual consolidated financial statements as of the period then ended. Certain information and footnote disclosures typically included in the Company's annual consolidated financial statements have been condensed or omitted. The accompanying unaudited condensed consolidated financial statements reflect all adjustments that, in the opinion of management, are necessary for a fair statement of the results of the interim periods presented. All such adjustments are of a normal recurring nature except for the impacts of adopting new accounting standards discussed below. These interim financial results are not necessarily indicative of results expected for the full fiscal year or for any subsequent interim period.

During the nine months ended September 30, 2019, except as discussed below in the sections titled "Leases" and "Recently Adopted Accounting Pronouncement," there were no material changes to the Company's significant accounting and financial reporting policies from those reflected in the 2018 Annual Report on Form 10-K. For further information with regard to the Company’s Significant Accounting Policies, please refer to Note 1, "Significant Accounting Policies," to the Company’s Consolidated Financial Statements included in the 2018 Annual Report on Form 10-K.
Principles of Consolidation

These unaudited condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary. All intercompany balances and transactions have been eliminated in consolidation. For the Company and its subsidiary, the functional currency has been determined to be U.S. dollars. Monetary assets and liabilities denominated in foreign currency are remeasured at period-end exchange rates. Non-monetary assets and liabilities denominated in foreign currencies are remeasured at historical rates. Foreign currency transaction gains and losses resulting from remeasurement are recognized in interest and other income, net in the Condensed Consolidated Statements of Operations and Comprehensive Loss.
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Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires the Company to make certain estimates, judgments 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, as well as the reported amounts of expenses during the reporting period. Actual results could differ from those estimates, and such differences could be material to the Condensed Consolidated Financial Position and Statements of Operations and Comprehensive Loss.
Concentration of Credit Risk and Other Risks and Uncertainties

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash, cash equivalents, marketable securities and forward foreign currency exchange contracts. Substantially all of the Company’s cash and cash equivalents are deposited in accounts with financial institutions that management believes are of high credit quality. Such deposits have and will continue to exceed federally insured limits. The Company maintains its cash with accredited financial institutions and accordingly, such funds are subject to minimal credit risk. The Company has not experienced any losses on its cash deposits.

The Company’s investment policy limits investments to certain types of securities issued by the U.S. government, its agencies and institutions with investment-grade credit ratings and places restrictions on maturities and concentration by type and issuer. The Company is exposed to credit risk in the event of a default by the financial institutions holding its cash, cash equivalents and marketable securities and issuers of marketable securities to the extent recorded on the consolidated balance sheets. As of September 30, 2019 and December 31, 2018, the Company had no off-balance sheet concentrations of credit risk.

The Company is exposed to counterparty credit risk on all of its derivative financial instruments. The Company has established and maintains strict counterparty credit guidelines and enters into hedges only with financial institutions that are investment grade or better to minimize the Company’s exposure to potential defaults. The Company does not require collateral to be pledged under these agreements.

The Company is subject to a number of risks similar to other early-stage biopharmaceutical companies, including, but not limited to, the need to obtain adequate additional funding, possible failure of current or future preclinical testing or clinical trials, its reliance on third parties to conduct its clinical trials, the need to obtain regulatory and marketing approvals for its product candidates, competitors developing new technological innovations, the need to successfully commercialize and gain market acceptance of the Company’s product candidates, its right to develop and commercialize its product candidates pursuant to the terms and conditions of the licenses granted to the Company, protection of proprietary technology, the ability to make milestone, royalty or other payments due under any license or collaboration agreements, and the need to secure and maintain adequate manufacturing arrangements with third parties. If the Company does not successfully commercialize or partner any of its product candidates, it will be unable to generate product revenue or achieve profitability.
Segments

The Company has one operating segment. The Company’s chief operating decision maker, its Chief Executive Officer, manages the Company’s operations on a consolidated basis for the purposes of allocating resources.
Restricted Cash

The Company’s restricted cash consists of the letter of credit for the Company’s headquarters building lease, and is included within other non-current assets on the accompanying Condensed Consolidated Balance Sheets.
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Derivatives and Hedging Activities

The Company accounts for its derivative instruments as either assets or liabilities on the Condensed Consolidated Balance Sheets and measures them at fair value. Derivatives are adjusted to fair value through interest and other income, net in the Condensed Consolidated Statements of Operations and Comprehensive Loss.
Leases
The Company adopted Accounting Standards Update ("ASU") No. 2016-02, Leases as of January 1, 2019. A determination is made as to whether an arrangement is a lease at inception. A right-of-use (“ROU”) asset and operating lease liability is recognized for identified operating leases in the Condensed Consolidated Balance Sheets.
ROU assets represent the Company’s right to use the underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at the lease commencement date based on the present value of lease payments due over the lease term, with the ROU assets adjusted for lease incentives received. When determining the present value of lease payments, the Company uses its incremental borrowing rate (“IBR”) on the date of lease commencement, or the rate implicit in the lease, if known. The Company does not assume renewals in its determination of the lease term unless the renewals are deemed by management to be reasonably certain at lease inception.
Leases with an initial term of 12 months or less are not recorded on the balance sheet, unless they include an option to purchase the underlying asset that the Company is reasonably certain to exercise. The Company recognizes lease expenses on a straight-line basis over the lease term. The Company has leases with lease and non-lease components, which the Company has elected to account for as a single lease component.
Revenue Recognition

License and Collaboration Revenue

The Company analyzes its collaboration arrangements to assess whether they are within the scope of ASC 808, Collaborative Arrangements (“ASC 808”) to determine whether such arrangements involve joint operating activities performed by parties that are both active participants in the activities and exposed to significant risks and rewards dependent on the commercial success of such activities.  This assessment is performed throughout the life of the arrangement based on changes in the responsibilities of all parties in the arrangement.  For collaboration arrangements within the scope of ASC 808 that contain multiple elements, the Company first determines which elements of the collaboration are deemed to be within the scope of ASC 808 and those that are more reflective of a vendor-customer relationship and, therefore, within the scope of Topic 606. For elements of collaboration arrangements that are accounted for pursuant to ASC 808, an appropriate recognition method is determined and applied consistently, generally by analogy to Topic 606. The accounting treatment pursuant to Topic 606 is outlined below.  

The terms of licensing and collaboration agreements entered into typically include payment of one or more of the following: non-refundable, up-front license fees; development, regulatory and commercial milestone payments; payments for manufacturing supply services; and royalties on net sales of licensed products. Each of these payments results in license, collaboration and other revenue, except for revenues from royalties on net sales of licensed products, which are classified as royalty revenue. The core principle of Topic 606 is to recognize revenue when promised goods or services are transferred to customers in an amount that reflects the consideration that is expected to be received in exchange for those goods or services.
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In determining the appropriate amount of revenue to be recognized as the Company fulfills its obligations under each of its agreements, the Company performs the following steps: (i) identification of the promised goods or services in the contract; (ii) determination of whether the promised goods or services are performance obligations including whether they are distinct in the context of the contract; (iii) measurement of the transaction price, including the constraint on variable consideration; (iv) allocation of the transaction price to the performance obligations based on estimated selling prices; and (v) recognition of revenue when (or as) the Company satisfies each performance obligation.

Amounts received prior to satisfying the revenue recognition criteria are recorded as contract liabilities in the Company’s consolidated balance sheets. If the related performance obligation is expected to be satisfied within the next twelve months this will be classified in current liabilities. Amounts recognized as revenue prior to receipt are recorded as contract assets in the Company's consolidated balance sheets. If the Company expects to have an unconditional right to receive the consideration in the next twelve months, this will be classified in current assets. A net contract asset or liability is presented for each contract with a customer.

At contract inception, the Company assesses the goods or services promised in a contract with a customer and identifies those distinct goods and services that represent a performance obligation. A promised good or service may not be identified as a performance obligation if it is immaterial in the context of the contract with the customer, if it is not separately identifiable from other promises in the contract (either because it is not capable of being separated or because it is not separable in the context of the contract), or if the performance obligation does not provide the customer with a material right.

The Company considers the terms of the contract to determine the transaction price. The transaction price is the amount of consideration to which the Company expects to be entitled in exchange for transferring promised goods or services to a customer. The consideration promised in a contract with a customer may include fixed amounts, variable amounts, or both. Variable consideration will only be included in the transaction price when it is not considered constrained, which is when it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur.

If it is determined that multiple performance obligations exist, the transaction price is allocated at the inception of the agreement to all identified performance obligations based on the relative standalone selling prices ("SSP"). The relative SSP for each deliverable is estimated using external sourced evidence if it is available. If external sourced evidence is not available, the Company uses its best estimate of the SSP for the deliverable.

Revenue is recognized when, or as, the Company satisfies a performance obligation by transferring a promised good or service to a customer. An asset is transferred when, or as, the customer obtains control of that asset, which for a service is considered to be as the services are received and used. The Company recognizes revenue over time by measuring the progress toward complete satisfaction of the relevant performance obligation using an appropriate input or output method based on the nature of the service promised to the customer.

After contract inception, the transaction price is reassessed at every period end and updated for changes such as resolution of uncertain events. Any change in the transaction price is allocated to the performance obligations on the same basis as at contract inception.

Management may be required to exercise considerable judgment in estimating revenue to be recognized. Judgment is required in identifying performance obligations, estimating the transaction price, estimating the SSP of identified performance obligations, which may include forecasted revenue, development timelines, reimbursement rates for personnel costs, discount rates and probabilities of technical and regulatory success, and estimating the progress towards satisfaction of performance obligations.
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Income Taxes
Intraperiod tax allocation rules require allocation of the provision for income taxes between continuing operations and other categories of earnings, such as other comprehensive income. In periods in which the Company has a year-to-date pre-tax loss and pre-tax income in other categories of earnings, such as other comprehensive income, the Company must allocate the tax provision to the other categories of earnings. A related tax benefit is then recorded in continuing operations.
Net Loss per Share
Basic net loss per share is calculated by dividing the net loss by the weighted-average number of shares of common stock outstanding during the period, without consideration for common stock equivalents. Diluted net loss per share is the same as basic net loss per share, since the effects of potentially dilutive securities are antidilutive given the net loss for each period presented.
Recently Issued Accounting Pronouncement
In June 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update No. 2016-13, Financial Instruments-Credit Losses: Measurement of Credit Losses on Financial Instruments. ASU 2016-13 requires measurement and recognition of expected credit losses for financial assets. In April 2019, the FASB issued clarification to ASU 2016-13 within ASU 2019-04, Codification Improvements to Topic 326, Financial Instruments-Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments. The guidance will become effective as of January 1, 2020, and must be adopted using a modified retrospective approach, with certain exceptions. Management is currently evaluating the impact of the adoption of this standard, but does not expect a material impact on the Company’s condensed consolidated financial statements.
Recently Adopted Accounting Pronouncement
In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which supersedes the guidance in former ASC 840, Leases. The FASB issued further updates to this guidance in July 2018 through ASU 2018-10, Codification Improvements to Topic 842, Leases and ASU 2018-11, Leases (Topic 842): Targeted Improvements, in December 2018 through ASU 2018-20, Leases (Topic 842): Narrow-Scope Improvements for Lessors and in March 2019 through ASU 2019-01 Leases (Topic 842): Codification Improvements. The new standard requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase by the lessee. This classification will determine whether lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease. A lessee is also required to record a right-of-use asset and a lease liability for all leases with a term of greater than 12 months regardless of their classification. The standard is effective for interim and annual periods beginning after December 15, 2018, with early adoption permitted, and is required to be adopted using a modified retrospective approach.
The Company has adopted this standard as of January 1, 2019, applying the optional transition method such that it is not required to adjust prior period presentations. ASU 2016-02 has impacted the Company’s Condensed Consolidated Balance Sheets as the Company has certain operating lease arrangements for which the Company is the lessee and one operating lease arrangement for which the Company is the lessor. The Company has no financing leases. Management has elected the package of practical expedients permitted under the transition guidance within the new standard, which among other things, allows us to carryforward the historical lease classification. The impact of adoption of the standard is that the Company as of January 1, 2019 recognized a ROU asset of $46.1 million and operating lease liability of $71.3 million. The standard did not have a material impact on the Company’s Condensed Consolidated Statements of Operations and Comprehensive Loss and Stockholders' Equity.
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2. Fair Value Measurements
Assets and liabilities measured at fair value at each balance sheet date are as follows (in thousands):

September 30, 2019
Level 1Level 2Level 3Total
Assets:
Cash equivalents:
Money market funds$53,491  $  $  $53,491  
Short-term marketable securities:
U.S. government treasuries287,366      287,366  
U.S. government agency securities  11,993    11,993  
Corporate debt securities  64,344    64,344  
Commercial paper  33,014    33,014  
Long-term marketable securities:
U.S. government treasuries17,744      17,744  
Corporate debt securities  5,790    5,790  
Foreign currency derivative contracts  14    14  
Total$358,601  $115,155  $  $473,756  
Liabilities:
Foreign currency derivative contracts$  $229  $  $229  
Total$  $229  $  $229  

December 31, 2018
Level 1Level 2Level 3Total
Assets:
Cash equivalents:
Money market funds$42,225  $  $  $42,225  
U.S. government treasuries1,499      1,499  
Commercial paper  9,979    9,979  
Short-term marketable securities:
U.S. government treasuries219,754      219,754  
U.S. government agency securities  73,151    73,151  
Corporate debt securities  71,675    71,675  
Commercial paper  22,594    22,594  
Long-term marketable securities:
U.S. government treasuries117,131      117,131  
U.S. government agency securities  1,977    1,977  
Corporate debt securities  28,773    28,773  
Foreign currency derivative contracts  14    14  
Total$380,609  $208,163  $  $588,772  
Liabilities:
Foreign currency derivative contracts$  $182  $  $182  
Total$  $182  $  $182  
The carrying amounts of accounts payable and accrued liabilities approximate their fair values due to their short-term maturities.
The Company’s Level 2 securities are valued using third-party pricing sources. The pricing services utilize industry standard valuation models, including both income and market-based approaches, for which all significant inputs are observable, either directly or indirectly.
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There were no transfers of assets or liabilities between the fair value measurement levels during the three and nine months ended September 30, 2019 or 2018.
3. Cash and Marketable Securities
Cash, cash equivalents and restricted cash

A reconciliation of cash, cash equivalents, and restricted cash reported within the Condensed Consolidated Balance Sheets to the amount reported within the Condensed Consolidated Statements of Cash Flows is shown in the table below (in thousands):
September 30, 2019December 31, 2018September 30, 2018December 31, 2017
Cash and cash equivalents
$82,673  $77,123  $43,651  $218,375  
Restricted cash included within prepaid expenses and other current assets
      84  
Restricted cash included within other non-current assets
1,500  1,500  1,500  451  
Total cash, cash equivalents, and restricted cash
$84,173  $78,623  $45,151  $218,910  
Marketable securities
All marketable securities were considered available-for-sale at September 30, 2019 and December 31, 2018. On a recurring basis, the Company records its marketable securities at fair value using Level 1 or Level 2 inputs as discussed in Note 2, "Fair Value Measurements". The amortized cost, gross unrealized holding gains or losses, and fair value of the Company’s marketable securities by major security type at each balance sheet date are summarized in the tables below (in thousands):
September 30, 2019
Amortized CostUnrealized Holding GainsUnrealized Holding LossesAggregate Fair Value
Short-term marketable securities:
U.S. government treasuries
$286,712  $655  $(1) $287,366  
U.S. government agency securities
11,989  4    11,993  
Corporate debt securities
64,208  136    64,344  
Commercial paper
33,014      33,014  
Total short-term marketable securities
395,923  795  (1) 396,717  
Long-term marketable securities:
U.S. government treasuries
17,589  156  (1) 17,744  
Corporate debt securities
5,751  39    5,790  
Total long-term marketable securities
23,340  195  (1) 23,534