0001558370-22-008103.txt : 20220510 0001558370-22-008103.hdr.sgml : 20220510 20220510161502 ACCESSION NUMBER: 0001558370-22-008103 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 62 CONFORMED PERIOD OF REPORT: 20220331 FILED AS OF DATE: 20220510 DATE AS OF CHANGE: 20220510 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Reneo Pharmaceuticals, Inc. CENTRAL INDEX KEY: 0001637715 STANDARD INDUSTRIAL CLASSIFICATION: PHARMACEUTICAL PREPARATIONS [2834] IRS NUMBER: 472309515 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-40315 FILM NUMBER: 22909783 BUSINESS ADDRESS: STREET 1: 18575 JAMBOREE ROAD STREET 2: SUITE 275-S CITY: IRVINE STATE: CA ZIP: 92612 BUSINESS PHONE: (858) 283-0280 MAIL ADDRESS: STREET 1: 18575 JAMBOREE ROAD STREET 2: SUITE 275-S CITY: IRVINE STATE: CA ZIP: 92612 10-Q 1 rphm-20220331x10q.htm 10-Q
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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 March 31, 2022

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: 001-40315

Graphic

Reneo Pharmaceuticals, Inc.

(Exact name of registrant as specified in its charter)

Delaware

47-2309515

(State or other jurisdiction of incorporation or organization)

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

18575 Jamboree Road, Suite 275-S, Irvine, CA

(Address of Principal Executive Offices)

92612

(Zip Code)

(Registrant’s telephone number, including area code): (858) 283-0280

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

Title of each class

  

Trading symbol

  

Name of each exchange on which registered

Common Stock, par value $0.0001 per share

RPHM

The Nasdaq Stock Market LLC

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.

Large accelerated filer

  

  

Accelerated filer

Smaller reporting company

Non-accelerated filer

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 May 4, 2022, there were 24,458,550 shares of the registrant’s common stock, $0.0001 par value per share, outstanding.

TABLE OF CONTENTS

  

Page

Part I

Financial Information

3

Item 1.

Consolidated Financial Statements (Unaudited)

3

Consolidated Balance Sheets

3

Consolidated Statements of Operations and Comprehensive Loss

4

Consolidated Statements of Changes in Convertible Preferred Stock and Stockholders’ Equity (Deficit)

5

Consolidated Statements of Cash Flows

6

Notes to Consolidated Financial Statements (Unaudited)

7

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

17

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

26

Item 4.

Controls and Procedures

26

Part II

Other Information

26

Item 1.

Legal Proceedings

26

Item 1A.

Risk Factors

27

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

98

Item 3.

Defaults Upon Senior Securities

99

Item 4.

Mine Safety Disclosures

99

Item 5.

Other Information

99

Item 6.

Exhibits

99

Signatures

101

2

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

RENEO PHARMACEUTICALS, INC.

Consolidated Balance Sheets

(In thousands, except share and par value data)

As of March 31, 2022

As of December 31, 2021

(Unaudited)

Assets

Current assets:

Cash and cash equivalents

$

121,094

$

124,660

Short-term investments

 

17,568

 

23,010

Prepaid expenses and other current assets

 

4,053

 

6,064

Total current assets

 

142,715

 

153,734

Property and equipment, net

 

237

 

212

Right-of-use assets

1,382

Other non-current assets

 

78

78

Total assets

$

144,412

$

154,024

Liabilities and stockholders’ equity

Current liabilities:

 

  

 

  

Accounts payable

$

1,566

$

2,022

Accrued expenses

 

5,887

 

4,180

Operating lease liabilities, current portion

457

Total current liabilities

 

7,910

 

6,202

Operating lease liabilities, less current portion

1,127

Other long-term liabilities

 

 

167

Performance award

57

444

Total liabilities

 

9,094

 

6,813

Commitments and contingencies

 

  

 

  

Stockholders’ equity:

 

  

 

  

Common stock, $0.0001 par value; 200,000,000 shares authorized at March 31, 2022 and December 31, 2021; 24,458,550 shares issued and outstanding at March 31, 2022; and 24,457,838 and 24,455,390 shares issued and outstanding at December 31, 2021, respectively

 

3

 

3

Additional paid-in capital

 

233,015

 

231,902

Accumulated deficit

 

(97,764)

 

(84,728)

Accumulated other comprehensive income

 

64

 

34

Total stockholders’ equity

 

135,318

 

147,211

Total liabilities and stockholders’ equity

$

144,412

$

154,024

The accompanying notes are an integral part of these consolidated financial statements.

3

RENEO PHARMACEUTICALS, INC.

Consolidated Statements of Operations and Comprehensive Loss

(In thousands, except share and per share data)

(Unaudited)

Three Months Ended March 31, 

2022

    

2021

Operating expenses:

Research and development

$

9,278

$

5,472

General and administrative

 

3,737

 

1,742

Total operating expenses

 

13,015

 

7,214

Loss from operations

 

(13,015)

 

(7,214)

Other (loss) income

 

(21)

 

2

Net loss

 

(13,036)

 

(7,212)

Unrealized gain on short-term investments

 

30

 

Comprehensive loss

$

(13,006)

$

(7,212)

Net loss per share attributable to common stockholders, basic and diluted

$

(0.53)

$

(3.48)

Weighted-average shares used in computing net loss per share, basic and diluted

 

24,458,290

 

2,070,935

The accompanying notes are an integral part of these consolidated financial statements.

4

RENEO PHARMACEUTICALS, INC.

Consolidated Statements of Changes in Convertible Preferred Stock and Stockholders’ Equity (Deficit)

(In thousands, except share data)

(Unaudited)

Three Months Ended March 31, 2022

Convertible

Accumulated

Preferred Stock

Additional

Other

Total

Series A

Series B

Common Stock

Paid-In

Comprehensive

Accumulated

Stockholders'

    

Shares

    

Amount

    

Shares

    

Amount

Shares

    

Amount

    

Capital

    

Income

Deficit

Equity

Balances, December 31, 2021

$

$

24,455,390

$

3

$

231,902

$

34

$

(84,728)

$

147,211

Stock based compensation

 

1,107

1,107

Stock option exercise and common shares vested

 

3,160

6

6

Other comprehensive income

30

30

Net loss

(13,036)

(13,036)

Balances, March 31, 2022

 

$

$

24,458,550

$

3

$

233,015

$

64

$

(97,764)

$

135,318

Three Months Ended March 31, 2021

Convertible

Accumulated

Preferred Stock

Additional

Other

Total

Series A

Series B

Common Stock

Paid-In

Comprehensive

Accumulated

Stockholders'

    

Shares

    

Amount

    

Shares

    

Amount

Shares

    

Amount

    

Capital

    

Income

Deficit

Deficit

Balances, December 31, 2020

24,302,472

$

45,652

23,440,514

$

47,068

2,053,070

$

$

2,843

$

$

(44,958)

$

(42,115)

Issuance of series B convertible preferred stock, net of issuance costs of $29

 

23,440,514

47,356

Stock based compensation

 

471

471

Stock option exercise

 

70,663

139

139

Net loss

(7,212)

(7,212)

Balances, March 31, 2021

 

24,302,472

$

45,652

46,881,028

$

94,424

2,123,733

$

$

3,453

$

$

(52,170)

$

(48,717)

The accompanying notes are an integral part of these consolidated financial statements.

5

RENEO PHARMACEUTICALS, INC.

Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

Three Months Ended

March 31, 

2022

    

2021

Cash flows from operating activities

  

 

  

Net loss

$

(13,036)

$

(7,212)

Adjustments to reconcile net loss to net cash used in operating activities:

 

  

 

  

Stock-based compensation

 

1,107

471

Depreciation and amortization

 

19

10

Amortization/accretion on short-term investments

 

1

Changes in the fair value of performance award

 

(387)

Non-cash lease expense

143

Changes in operating assets and liabilities:

 

Accounts payable and accrued expenses

 

1,251

(927)

Prepaid expenses and other assets

 

2,011

(929)

Operating lease liabilities

(108)

Other current and long-term liabilities

 

(2)

Net cash used in operating activities

 

(8,999)

 

(8,589)

Cash flows from investing activities

Purchases of property and equipment

 

(44)

(25)

Purchase of available-for-sale short-term investments

 

(16,029)

Proceeds from maturities of available-for-sale short-term investments

 

21,500

Net cash provided by (used in) investing activities

 

5,427

 

(25)

Cash flows from financing activities

Proceeds from issuance of Series B convertible preferred stock, net of issuance costs

 

47,258

Proceeds from issuance of common stock pursuant to equity award plans

 

6

187

Costs paid in connection with initial public offering

(1,223)

Net cash provided by financing activities

 

6

 

46,222

Net (decrease) increase in cash and cash equivalents

 

(3,566)

 

37,608

Cash and cash equivalents, beginning of period

 

124,660

53,613

Cash and cash equivalents, end of period

$

121,094

$

91,221

Noncash operating activities:

 

  

 

  

Right-of-use assets obtained in exchange for lease obligations

$

1,524

$

Noncash investing and financing activities:

Property and equipment in accounts payable

$

$

2

Unpaid Series B convertible preferred stock issuance costs

$

$

19

Accrued deferred initial public offering costs

$

$

361

The accompanying notes are an integral part of these consolidated financial statements.

6

RENEO PHARMACEUTICALS, INC.

Notes to Consolidated Financial Statements

(Unaudited)

1. Organization and Business

Organization

Reneo Pharmaceuticals, Inc. (Reneo or the Company) commenced operations on September 22, 2014 as a clinical-stage pharmaceutical company focused on the development of therapies for patients with rare genetic mitochondrial diseases. In December 2017, the Company in-licensed REN001, a novel oral peroxisome proliferator-activated receptor (PPAR) agonist.

Reverse Stock Split

On April 5, 2021, the Company effected a 1-for-4.4748 reverse stock split of its common stock. The par value and the authorized number of shares of the common stock were not adjusted as a result of the reverse stock split. The reverse stock split resulted in an adjustment to the Series A and Series B convertible preferred stock conversion prices to reflect a proportional decrease in the number of shares of common stock to be issued upon conversion. The accompanying consolidated financial statements and notes to the consolidated financial statements give retroactive effect to the reverse stock split for all periods presented.

Initial Public Offering

On April 13, 2021, the Company completed an initial public offering (IPO) of its common stock. In connection with its IPO, the Company issued and sold 6,250,000 shares of its common stock at a price to the public of $15.00 per share. The gross proceeds from the IPO were approximately $93.8 million before deducting underwriting discounts and commissions of $6.6 million and offering expenses of approximately $2.6 million payable by the Company.

At the closing of the IPO, 71,183,500 shares of outstanding convertible preferred stock were automatically converted into 15,907,629 shares of common stock. Following the IPO, there were no shares of preferred stock outstanding.

Liquidity

Since inception in 2014, the Company has incurred significant losses and negative cash flows from operations. As of March 31, 2022, the Company had cash, cash equivalents and short-term investments of $138.7 million and an accumulated deficit of $97.8 million. Due to the Company’s continuing research and development activities, the Company expects to continue to incur net losses into the foreseeable future and may never become profitable. As a result, the Company will need to raise capital through public or private equity or debt financings, government or other third-party funding, collaborations, strategic alliances and licensing arrangements or a combination of these.

2. Summary of Significant Accounting Policies

Basis of Presentation and Consolidation

The Company has prepared the accompanying unaudited consolidated financial statements pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and note disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in

7

the United States of America (GAAP) have been condensed or omitted, although the Company believes that the disclosures made are adequate to make the information not misleading. The Company recommends that the unaudited consolidated financial statements be read in conjunction with the audited consolidated financial statements and the notes thereto included in the Company’s latest Annual Report on Form 10-K.

In the opinion of management, all adjustments, including normal recurring adjustments, considered necessary for a fair statement of the financial statements, have been included in the accompanying unaudited financial statements. Interim results are not necessarily indicative of results that may be expected for any other interim period or for an entire year.

The accompanying unaudited consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries as of March 31, 2021; all intercompany transactions and balances have been eliminated.

Summary of Significant Accounting Policies

The significant accounting policies used in the preparation of these consolidated financial statements for the three months ended March 31,2022 are consistent with those discussed in Note 2 to the consolidated financial statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.

New Accounting Pronouncements

Recently Adopted Accounting Pronouncements

In February 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2016-02, Leases (ASC 842) in order to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheets for those leases classified as operating leases under previous GAAP. ASU 2016-02 requires a lessee to recognize a liability for lease payments (lease liability) and a right-of-use (ROU)assets (representing its right to use the underlying asset for the lease term) on the balance sheet. In July 2018, the FASB issued ASU 2018-11, Leases (ASC 842): Targeted Improvements, which provides entities an optional transition method to apply the new guidance as of the adoption date, rather than as of the earliest period presented. In transition, entities may also elect a package of practical expedients that must be applied in its entirety to all leases commencing before the effective date, unless the lease was modified, to not reassess (a) whether a contract is or contains a lease, (b) lease classification or (c) determination of initial direct costs, which effectively allows entities to carryforward accounting conclusions under previous GAAP. The Company early adopted this standard on January 1, 2022, using the optional transitional method and elected the package of practical expedients in transition for leases that commenced prior to January 1, 2022.

As a result of implementing ASC 842, the Company recognized operating lease ROU assets of $1.5 million and lease liabilities of $1.7 million on January 1, 2022, with no impact on its beginning retained earnings, consolidated statements of operations and comprehensive loss, or cash flows. See Note 6, Leases, for further details.

In December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes. The standard simplifies the accounting for income taxes, eliminates certain exceptions within Accounting Standards Codification (ASC) 740, Income Taxes, and clarifies certain aspects of the current guidance to promote consistency among reporting entities. The new guidance was effective for the Company as of January 1, 2022. Most amendments within the standard are required to be applied on a prospective basis, while certain amendments must be applied on a retrospective or modified retrospective basis. The Company adopted this standard on January 1, 2022. Adoption of this standard had no material impact on the Company’s consolidated financial position, results of operations or cash flows.

8

Recent Accounting Pronouncements Not Yet Adopted

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (ASC 326), Measurement of Credit Losses on Financial Instruments. The standard amends the impairment model by requiring entities to use a forward-looking approach based on expected losses to estimate credit losses for most financial assets and certain other instruments that aren’t measured at fair value through net income. For available-for-sale debt securities, entities will be required to recognize an allowance for credit losses rather than a reduction in the carrying value of the asset. Entities will no longer be permitted to consider the length of time that fair value has been less than amortized cost when evaluating when credit losses should be recognized. This new guidance is effective for the Company as of January 1, 2023. The Company is currently evaluating the impact of this ASU and does not expect that adoption of this standard will have a material impact on its consolidated financial statements and related disclosures.

3. Net Loss Per Share

The Company computes basic loss per share by dividing the net loss attributable to common stockholders by the weighted average number of common shares outstanding for the period, without consideration for common stock equivalents. Diluted net loss per share assumes the conversion, exercise or issuance of all potential common stock equivalents, unless the effect of inclusion would be anti-dilutive. For purposes of this calculation, common stock equivalents include the Company’s stock options and convertible preferred stock, which are convertible into shares of the Company’s common stock. As of March 31, 2022, no shares of convertible preferred stock were outstanding. No shares related to the convertible preferred stock were included in the diluted net loss per share calculation for the three months ended March 31, 2021 because the inclusion of such shares would have had an anti-dilutive effect. The shares to be issued upon exercise of all outstanding stock options and restricted stock units were also excluded from the diluted net loss per share calculation for the three months ended March 31, 2022 and 2021 because such shares are anti-dilutive.

Historical outstanding anti-dilutive securities not included in the diluted net loss per share calculation include the following:

As of March 31, 

    

2022

    

2021

Convertible preferred stock (as converted)

 

15,907,629

Common stock options outstanding

4,262,702

 

3,113,640

Unvested restricted stock units

279,500

Total

4,542,202

 

19,021,269

4. Fair Value Measurements

ASC 820, Fair Value Measurement, establishes a fair value hierarchy for instruments measured at fair value that distinguishes between assumptions based on market data (observable inputs) and the Company’s own assumptions (unobservable inputs). Observable inputs are inputs that market participants would use in pricing an asset or liability based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the inputs that market participants would use in pricing the asset or liability and are developed based on the best information available in the circumstances.

ASC 820 identifies fair value as the exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As a basis for considering market

9

participant assumptions in fair value measurements, ASC 820 establishes a three-tier fair value hierarchy that distinguishes between the following:

Level 1 – Observable inputs such as quoted prices in active markets for identical assets or liabilities.

Level 2 – Inputs, other than quoted prices in active markets, that are observable for the asset or liability, either directly or indirectly.

Level 3 – Unobservable inputs in which there is little or no market data, which requires the Company to develop its own assumptions.

Assets and liabilities measured at fair value are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires management to make judgments and consider factors specific to the asset or liability. The Company’s financial assets are subject to fair value measurements on a recurring basis.

The Company categorized its money market funds as Level 1, using the quoted prices in active markets. Commercial paper is valued using Level 2 significant other observable inputs. The Company considers all highly liquid investments purchased with a remaining maturity of three months or less to be cash equivalents. The fair value of the Company’s investments in certain money market funds is their face value and such instruments are classified as Level 1 and are included in cash and cash equivalents on the consolidated balance sheets.

In November 2020, in connection with the CEO’s employment agreement he is entitled to receive a special performance award in the amount of $7.5 million (Performance Award), payable in cash, common stock or a combination of cash and common stock, at the election of the Company, based on achievement of certain conditions as described in more detail in Note 8. The Company estimated the fair value of the Performance Award using a Monte Carlo simulation, which incorporates the stock price at the date of the valuation and utilizes Level 3 inputs such as volatility, probabilities of success, and other inputs that are not observable in active markets. The Performance Award is required to be measured at fair value on a recurring basis each reporting period, with changes in the fair value recognized in general and administrative expense in the consolidated statements of operations and comprehensive loss over the derived service period of the award.

No assets or liabilities were transferred into or out of their classifications during the three months ended March 31, 2022.

The recurring fair value measurement of the Company’s assets and liabilities measured at fair value at March 31, 2022 consisted of the following (in thousands):

Quoted Prices in

Significant

Active Markets

Significant Other

Unobservable

  

For Identical Items

Observable Inputs

Inputs

    

(Level 1)

    

(Level 2)

    

(Level 3)

    

Total

Assets

 

  

  

 

  

 

Cash and cash equivalents:

Money market investments

$

117,921

$

$

$

117,921

Short-term Investments:

Commercial paper

17,568

17,568

Total

$

117,921

$

17,568

$

$

135,489

Liabilities

Performance award

$

$

$

57

$

57

Total

$

$

$

57

$

57

10

The following table summarizes changes in fair value measurements of the Performance Award during the three months ended March 31, 2022 (in thousands):

Balance as of January 1, 2022

$

444

Change in fair value

(387)

Balance as of March 31, 2022

$

57

The recurring fair value measurement of the Company’s assets and liabilities measured at fair value at December 31, 2021 consisted of the following (in thousands):

Quoted Prices in

Significant

Active Markets

Significant Other

Unobservable

  

For Identical Items

Observable Inputs

Inputs

    

(Level 1)

    

(Level 2)

    

(Level 3)

    

Total

Assets

 

  

  

 

  

 

Cash and cash equivalents:

Money market investments

$

118,535

$

$

$

118,535

Short-term Investments:

Commercial paper

23,010

23,010

Total

$

118,535

$

23,010

$

$

141,545

Liabilities

Performance award

$

$

$

444

$

444

Total

$

$

$

444

$

444

5. Accrued Expenses

Accrued expenses consisted of the following (in thousands):

    

As of March 31, 2022

    

As of December 31, 2021

Accrued clinical and regulatory

$

2,049

$

1,236

Accrued contract manufacturing cost

2,176

 

1,482

Accrued compensation

1,218

1,027

Accrued research and development-other

 

444

 

435

Total accrued expenses

$

5,887

$

4,180

6. Leases

The Company’s headquarters are located in Irvine, California, where it leases office space. The Company leases additional office space located in San Diego, California, and in Kent, United Kingdom. The lease terms for the Irvine, San Diego, and Kent offices extend through November 30, 2026, July 31, 2023, and December 20, 2022, respectively.

The Company adopted ASU 2016-02 on January 1, 2022, which requires it to recognize a liability for lease payments and a ROU asset on the balance sheet. The Company elected the package of practical expedients permitted within the standard, which allows an entity to forego reassessing (i) whether a contract contains a lease, (ii) classification of leases, and (iii) whether capitalized costs associated with a lease meet the definition of initial direct costs. Also, the Company elected the expedient allowing an entity to use hindsight to determine the lease term and impairment of ROU assets and the expedient to allow the Company to not have to separate lease and non-lease components.

At March 31, 2022, the weighted average incremental borrowing rate and the weighted average remaining lease term for the operating leases held by the Company were 5% and 4.1 years, respectively. During the three months

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ended March 31, 2022, operating lease expenses recognized and cash paid for amounts included for the measurement of lease liabilities were immaterial. The Company has elected to net the amortization of the ROU assets and the reduction of the lease liabilities principal in other current and long-term liabilities in the consolidated statements of cash flows.

Maturities of lease liabilities by fiscal year for our operating leases are as follows:

As of March 31, 2022

2022 (remaining nine months)

$

399

2023

414

2024

323

2025

332

Thereafter

285

Total lease payments

1,753

Less: Imputed interest

(169)

Present value of lease liabilities

$

1,584

7. Convertible Preferred Stock and Stockholders’ Equity

Series A Convertible Preferred Stock

As of March 31, 2022, there were no shares of Series A convertible preferred stock outstanding. In connection with the IPO (Note 1) in April 2021, all outstanding shares of Series A convertible preferred stock were converted into 5,430,957 shares of common stock.

Series B Convertible Preferred Stock

As of March 31, 2022, there were no shares of Series B convertible preferred stock outstanding. In March 2021, the Company completed milestone closing of it’s the Series B convertible preferred stock financing and sold a total of 23,440,514 shares of Series B convertible preferred stock, at $2.0215 per share for aggregate net proceeds of approximately $47.4 million.

In connection with the IPO in April 2021, all outstanding shares of Series B convertible preferred stock were converted into 10,476,672 shares of common stock.

8. Stock-Based Compensation

In March 2021, the Company’s board of directors adopted the Company’s 2021 Equity Incentive Plan (2021 Plan), which is the successor to the 2014 Equity Incentive Plan (2014 Plan). As of the effectiveness of the 2021 Plan, awards granted under the 2014 Plan that are forfeited or otherwise become available under the 2014 Plan will be included and available for issuance under the 2021 Plan. Under the 2021 Plan, the Company may grant stock options, stock appreciation rights, restricted stock, restricted stock units, and other awards to individuals who are then employees, officers, directors or consultants of the Company, and employees and consultants of the Company’s affiliates.

Under the 2014 Plan, certain employees were granted the ability to early exercise their options. The shares of common stock issued pursuant to the early exercise of unvested stock options are restricted and continue to vest over the requisite service period after issuance. The Company has the option to repurchase any unvested shares at the original purchase price upon any voluntary or involuntary termination. The shares purchased by the employees pursuant to the early exercise of stock options are not deemed, for accounting purposes, to be outstanding until

12

those shares vest. As of March 31, 2022, there were no shares subject to stock options that have been early exercised.

Shares Reserved for Future Issuance

As of March 31, 2022, the Company had reserved shares of its common stock for future issuance as follows:

    

Shares

Reserved

Common stock options outstanding

 

4,262,702

Unvested restricted stock units

279,500

Available for future grants under the 2021 Equity Incentive Plan

 

2,165,387

Available for future grants under the 2021 Employee Stock Purchase Plan

479,012

Available for future grants outside of the 2021 Plan as inducement award

100,000

Total shares of common stock reserved

 

7,286,601

Stock Options

A summary of the Company’s stock option activity and related information during the three months ended March 31, 2022 is as follows:

Options
Outstanding

Weighted-
Average Exercise
Price

Weighted-Average
Remaining
Contractual Term

 

Aggregate
Intrinsic Value

Outstanding at December 31, 2021

4,215,643

$

5.49

8.5

Granted

233,600

$

6.80

Exercised

(713)

$

3.45

Forfeited/Expired

 

(185,828)

 

$

6.48

 

  

Outstanding at March 31, 2022

 

4,262,702

 

$

5.52

 

8.0

$

379

Vested at March 31, 2022

 

1,490,020

 

$

4.20

 

6.4

$

368

Exercisable at March 31, 2022

 

2,703,228

 

$

4.49

 

7.2

$

375

Options exercisable at March 31, 2022 include vested options and options eligible for early exercise. All outstanding options as of March 31, 2022 are expected to vest.

Unrecognized stock-based expense at March 31, 2022 was $10.4 million, which is expected to be recognized over a weighted-average vesting term of 2.9 years.

The weighted-average assumptions used in the Black-Scholes option pricing model to determine the fair value of the employee stock option grants were as follows:

    

 

Three Months Ended March 31, 

 

    

2022

    

2021

 

Risk-free interest rate

 

1.8

%  

0.7

%

Expected volatility

 

85.2

%  

71.2

%

Expected term (in years)

 

6.0

 

5.9

Expected dividend yield

 

%  

%

Risk-free interest rate. The Company bases the risk-free interest rate assumption on the U.S. Treasury’s rates for U.S. Treasury zero-coupon bonds with maturities similar to those of the expected term of the award being valued.

13

Expected volatility. Since the Company recently completed its IPO and does not have sufficient trading history for its common stock the expected volatility assumption is based on volatilities of a peer group of similar companies whose share prices are publicly available. The peer group was developed based on companies in the biotechnology industry.

Expected term. The expected term represents the period of time that options are expected to be outstanding. Because the Company does not have historical exercise behavior, it determines the expected life assumption using the simplified method, which is an average of the contractual term of the option and its vesting period.

Expected dividend yield. The Company bases the expected dividend yield assumption on the fact that it has never paid cash dividends and has no present intention to pay cash dividends.

Fair value of common stock. For periods prior to the IPO, since there had been no public market for the Company’s common stock, the Company’s board of directors, with input from management, determined the fair value of the Company’s common stock on each grant date by considering a number of objective and subjective factors, including the most recent independent third-party valuations of the Company’s common stock, sales of the Company’s convertible preferred stock to unrelated third-parties, operating and financial performance of the Company, the lack of liquidity of capital stock and general and industry-specific economic outlook, and the Company’s board of directors’ assessment of additional objective and subjective factors that it believed were relevant. 

Performance-Based Restricted Stock Units (PSUs)

The following table summarizes PSU activity as of March 31, 2022, under the 2021 Plan:

Weighted-

Number of

Average Grant Date

PSUs

Fair Value

Outstanding at December 31, 2021

299,500

$

6.32

Granted

10,000

8.98

Released

Cancelled

(30,000)

6.69

Outstanding at March 31, 2022

279,500

$

6.37

The PSUs vest based on the Company achieving certain regulatory milestones and are subject to the employee’s continued employment with the Company through the achievement date. The fair value of the awards was based on the value of the Company’s common stock at the date of the award and expense recognition is based on the probability of achieving the performance metric. The Company concluded that achievement of the performance conditions was not probable as of March 31, 2022, and therefore no compensation expense was recognized for the three months ended March 31, 2022 in connection with the PSUs. Compensation cost is adjusted in future periods for subsequent changes in the expected outcome of the performance related conditions.

Market-Based Awards

Restricted Stock Units

In December 2021, the Company granted 100,000 market-based restricted stock units (MRSUs) to its chief executive officer (CEO) pursuant to the 2021 Plan. The MRSUs vest based on the Company’s closing stock price trading above $20 per share for 30 consecutive trading days subject to the employee’s continued employment with the Company through the date of achievement. The share price of the Company’s common stock on the date of issuance of the MRSUs was $6.69 per share. The fair value was $0.4 million based on Monte Carlo simulation model on the grant date. Compensation expense is recognized over the derived service period of 3 years. Stock-

14

based compensation expense in connection with the MRSUs was immaterial for the three months ended March 31, 2022. As of March 31, 2022, there was $0.4 million of unrecognized compensation expense related to this MRSU.

Performance Award

In November 2020, in connection with the CEO’s employment agreement he is entitled to receive a Performance Award in the amount of $7.5 million, payable in cash, common stock or a combination of cash and common stock, at the election of the Company, in the event that (i) the Company’s market value exceeds $750 million utilizing the volume-weighted average of the closing sale price of its common stock on the Nasdaq Stock Market or other principal exchange for each of the 30 trading days immediately prior to the measurement date, or (ii) the fair market value of the net proceeds available for distribution to the Company’s stockholders in connection with a change in control as defined in the Company’s severance benefit plan, as determined in good faith by its board of directors, exceeds $750 million. The Company has determined that the Performance Award is subject to ASC 718, Compensation – Stock Compensation and includes both market and performance conditions. Since the IPO, neither of the events have yet been satisfied. The Company estimated the fair value of the Performance Award at each reporting period using the Monte Carlo simulation (Note 4), which is recognized as compensation cost over the derived service period.

During the three-months ended March 31, 2022, the Company reversed $0.4 million in compensation expenses as a direct result of decreased value of the Performance Award caused by a decline in the Company’s common stock price.

As of March 31, 2021, prior to the IPO, the Performance Award was not probable of being achieved; therefore, no stock-based compensation expense was recognized during the three months ended March 31, 2021.

2021 Employee Stock Purchase Plan (ESPP)

In March 2021, the Company’s board of directors adopted the ESPP, which became effective immediately prior to the execution of the underwriting agreement in connection with the Company’s IPO. As of March 31, 2022, 8,624 shares have been issued under the ESPP.

In September 2021, the Company’s board of directors adopted the Company’s 2021 UK Sharesave Sub-plan (SAYE). An allocation of 25,875 shares of common stock from the ESPP reserve pool was approved and reserved for issuance under the SAYE. No shares have been issued under the SAYE through March 31, 2022.

The stock-based compensation expense related to the ESPP and SAYE for the three months ended March 31, 2022, was immaterial.

The following table summarizes stock compensation expense, including expense associated with award modifications for unvested options, reflected in the unaudited consolidated statements of operations and comprehensive loss (in thousands):

Three Months Ended March 31, 

2022

    

2021

Research and development

$

387

$

364

General and administrative

720

107

Total

$

1,107

$

471

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9. License Agreement

In December 2017, the Company entered into a License Agreement with vTv Therapeutics LLC (vTv Therapeutics) (the vTv License Agreement), under which the Company obtained an exclusive, worldwide, sublicensable license under certain vTv Therapeutics intellectual property to develop, manufacture and commercialize PPARδ agonists and products containing such PPARδ agonists, including REN001, for any therapeutic, prophylactic or diagnostic application in humans. To date, the Company has paid a $3.0 million upfront payment and a total of $2.0 million in milestone payments and issued an aggregate of 576,443 shares of our common stock to vTv Therapeutics.

Upon the achievement of certain pre-specified development and regulatory milestones, the Company is also required to pay vTv Therapeutics milestone payments totaling up to $64.5 million. The Company is also required to pay vTv Therapeutics up to $30.0 million in total sales-based milestones upon achievement of certain sales thresholds of the licensed product. In addition, the Company is obligated to make royalty payments to vTv Therapeutics at mid-single digit to low teen percentage royalty rates, based on tiers of annual net sales of licensed products, subject to certain customary reductions. There were no milestone payments achieved or recorded for the three months ended March 31, 2022 and 2021.

10. Subsequent Events

On May 2, 2022, the Company entered into a sales agreement with SVB Securities LLC (ATM facility), under which the Company may offer and sell, from time to time at its sole discretion, up to $20.0 million in shares of its common stock. The Company has not yet sold any shares of its common stock under the ATM facility.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

You should read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q and our audited consolidated financial statements and notes thereto and the related Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year ended December 31, 2021. Unless otherwise indicated, all references in this Quarterly Report on Form 10-Q to “Reneo,” the “company,” “we,” “our,” “us” or similar terms refer to Reneo Pharmaceuticals, Inc. and its subsidiary.

Forward-Looking Statements

In addition to historical financial information, this discussion contains forward-looking statements based upon current expectations that involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth in the section titled “Risk Factors” under Part II, Item 1A below. In some cases, you can identify forward-looking statements by terminology such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potentially,” “predict,” “should,” “will” or the negative of these terms or other similar expressions.

In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this Quarterly Report on Form 10-Q, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain, and investors are cautioned not to unduly rely upon these statements.

Overview

Reneo is a clinical-stage pharmaceutical company focused on the development and commercialization of therapies for patients with rare genetic mitochondrial diseases, which are often associated with the inability of mitochondria to produce adenosine triphosphate (ATP). Our lead product candidate, REN001, is a potent and selective agonist of the peroxisome proliferator-activated receptor delta (PPARδ). REN001 has been shown to increase transcription of genes involved in mitochondrial function and increase fatty acid oxidation, and may increase production of new mitochondria.

The PPAR family of nuclear hormone receptors, PPARα, PPARγ, and PPARδ, control the transcription of genes critical for regulating energy metabolism and homeostasis. PPARδ is highly expressed in muscle, kidney, brain, and liver tissue. Activation of PPARδ results in changes in the expression of genes involved with multiple aspects of energy metabolism including uptake of fatty acids, utilization of fatty acids as an energy source, and mitochondrial biogenesis.

Increases in PPARδ activity also correlate with a shift in muscle tissue towards oxidative, fat-consuming type I fibers that are associated with endurance as opposed to glycolytic, type II fibers. In preclinical and clinical studies, increased PPARδ activity through transgenic overexpression or pharmacological activation increases muscular strength and endurance across a variety of functional measures. REN001 was studied in healthy volunteers with one leg immobilized to produce muscle atrophy. Compared to placebo, administration of REN001 resulted in statistically significant increases in expression of genes involved in mitochondrial oxidative phosphorylation, and statistically significant improvements in muscle strength. REN001 was also studied in an open-label trial in patients with primary mitochondrial myopathies (PMM). In this trial, administration of REN001 improved function, reduced symptoms, and increased expression of genes involved in mitochondrial activity.

17

As a PPARδ agonist, REN001 may benefit patients with genetic mitochondrial myopathies who experience weakness, fatigue, or deterioration in muscle due to impaired mitochondrial energy production. We are currently developing REN001 in rare genetic diseases that typically present with myopathy and have high unmet medical needs, including PMM and long-chain fatty acid oxidation disorders (LC-FAOD). Patients with these diseases are unable to perform many everyday activities, can experience cardiomyopathy and other organ dysfunction, and typically have a reduced life expectancy.

We completed an open-label Phase 1b study in patients with PMM to assess the safety and tolerability of REN001, and measure changes in functional tests such as walk distance, exercise capacity and patient-reported symptoms that could serve as potential endpoints in future clinical studies. REN001 was well-tolerated and had an adequate safety profile in this trial. Compared to baseline, patients receiving REN001 once-daily for 12 weeks experienced an average increase in distance of 104.4 meters in the 12-minute walk test (12MWT), an average increase in weight-adjusted peak oxygen consumption (VO2) of 1.7 mL/kg/min, a reduction in fatigue and pain, and increased expression of genes involved with transport and metabolism of nutrients in the mitochondria including Pyruvate dehydrogenase lipoamide kinase isozyme 4 (PDK4), Angiopoietin-like 4 (ANGPTL4), and Solute carrier family 25 member 34 (SLC25A34).

Based on these results, we initiated a global, randomized, double-blind, placebo-controlled Phase 2b study of REN001 in patients with PMM (STRIDE study). The first patient was dosed in July 2021, and as of May 2022 we achieved 50% of our target enrollment. We expect to complete enrollment by year-end 2022 and announce results in 2023. We are also conducting an open-label, long-term safety trial outside the United States in a subset of patients from the STRIDE study (STRIDE AHEAD study). The first patient was dosed in January 2022, and we anticipate preliminary data from this study in 2023. Following our interactions with United States and several European regulatory agencies, we believe that positive results from these trials could support registration of REN001 for PMM in both the United States and in Europe.

We completed enrollment of an open-label Phase 1b study in patients with four different LC-FAOD enzyme defects to assess the safety and tolerability of REN001, and measure changes in functional tests such as walk distance, exercise capacity and patient-reported symptoms that could serve as potential endpoints in future clinical studies. We also completed enrollment of a natural history study in patients with LC-FAOD (FORWARD study). The FORWARD study is an observational, non-interventional study to better understand the changes in patient function and symptoms over time. We anticipate results from both studies in July 2022.

Since our inception in 2014, our operations have primarily focused on raising capital, establishing and protecting our intellectual property portfolio, organizing and staffing our company, business planning, and conducting preclinical, clinical and manufacturing development for REN001. We do not have any product candidates approved for sale, have not generated any revenue from product sales, and do not expect to generate revenues from the commercial sale of our product candidate for several years, if ever. Since inception, we have incurred significant operating losses. Our net losses were $13.0 million and $7.2 million for the three months ended March 31, 2022 and 2021, respectively. As of March 31, 2022, we had an accumulated deficit of $97.8 million, and cash, cash equivalents and short-term investments of $138.7 million. We have funded our operations primarily through the issuance and sale of equity securities.

In May 2022, we entered into a sales agreement with SVB Securities LLC (ATM facility) under which we may offer and sell, from time to time at its sole discretion, up to $20.0 million in shares of our common stock. We have not yet sold any shares of our common stock under the ATM facility.

We expect to continue to incur net operating losses for at least the next several years, and we expect our research and development expenses, general and administrative expenses, and capital expenditures will continue to increase as we conduct our ongoing and planned clinical trials and preclinical studies, engage in other research and

18

development activities, seek regulatory approvals for any product candidates that successfully complete clinical trials, incur development milestone payments related to our research and development activities, prepare for commercialization, hire additional personnel, and protect our intellectual property.

Our net losses may fluctuate significantly from quarter-to-quarter and year-to-year, depending on the timing of our clinical trials and our expenditures on other research and development activities. As a result, we will need to raise additional capital. Until such time as we can generate significant revenue from sales of our product candidate, if ever, we expect to finance our operations through public or private equity offerings or debt financings, credit or loan facilities, collaborations, strategic alliances, licensing arrangements or a combination of one or more of these funding sources. Additional funds may not be available to us on acceptable terms or at all. Our ability to raise additional funds may be adversely impacted by potential worsening global economic conditions and disruptions to, and volatility in, the credit and financial markets in the United States and worldwide resulting from the ongoing COVID-19 pandemic, as well as actual or perceived changes in interest rates and economic inflation. If we fail to obtain necessary capital when needed on acceptable terms, or at all, it could force us to delay, limit, reduce or terminate our product development programs, commercialization efforts or other operations. Based upon our current operating plan, we believe that our cash, cash equivalents, and short-term investments as of March 31, 2022 will enable us to fund our operating expenses and capital expenditure requirements into 2024.

We do not own or operate manufacturing facilities. We rely, and expect to continue to rely, on third parties for the manufacture of REN001 for preclinical studies and clinical trials, as well as for commercial manufacturing if REN001 obtains marketing approval. We also rely, and expect to continue to rely, on third parties to manufacture, package, label, store, and distribute REN001, if marketing approval is obtained. We believe that this strategy allows us to maintain a more efficient infrastructure by eliminating the need for us to invest in our own manufacturing facilities, equipment, and personnel while also enabling us to focus our expertise and resources on the development of REN001.

COVID-19

The COVID-19 pandemic continues to evolve, and we will continue to monitor the COVID-19 situation closely. The extent of the impact of COVID-19 on our business, operations and clinical development timelines and plans remains uncertain, and will depend on certain developments, including the duration and spread of the pandemic, including new variants of the virus, and its impact on our clinical trial enrollment, trial sites, contract research organizations, third-party manufacturers, and other third parties with whom we do business, as well as its impact on regulatory authorities and our key scientific and management personnel. For example, our Phase 1b study of REN001 in PMM patients was closed early as a result of COVID-19, and we may face future clinical trial disruptions. The ultimate impact of the COVID-19 pandemic or a similar health epidemic is highly uncertain and subject to change. As a result of COVID-19, we have taken precautionary measures in order to minimize the risk of the virus to our employees and the communities in which we operate. While we have experienced impacts to our clinical development activities as a result of COVID-19, there has been a minimal disruption to date in our ability to ensure the effective operation of our business. We will continue to actively monitor the rapidly evolving situation related to COVID-19 and may take further actions that alter our operations, including those that may be required by federal, state or local authorities, or that we determine are in the best interests of our employees and other third parties with whom we do business. At this point, the extent to which the COVID-19 pandemic may affect our business, operations and clinical development timelines and plans, including the resulting impact on our expenditures and capital needs, remains uncertain.

19

License Agreement

In December 2017, we entered into a License Agreement with vTv Therapeutics LLC (vTv Therapeutics) (the vTv License Agreement), under which we obtained an exclusive, worldwide, sublicensable license under certain vTv Therapeutics intellectual property to develop, manufacture and commercialize PPARδ agonists and products containing such PPARδ agonists, including REN001, for any therapeutic, prophylactic or diagnostic application in humans. Under the terms of the vTv License Agreement, we paid vTv Therapeutics an initial upfront license fee of $3.0 million and $2.0 million of milestone payments and issued an aggregate of 576,443 shares of our common stock to vTv Therapeutics.

Upon the achievement of certain pre-specified development and regulatory milestones, we are also required to pay vTv Therapeutics milestone payments totaling up to $64.5 million. We are also required to pay vTv Therapeutics up to $30.0 million in total sales-based milestones upon achievement of certain sales thresholds of the licensed product. In addition, we are obligated to make tiered royalty payments to vTv Therapeutics at mid-single digit to low teen percentage royalty rates, based on tiers of annual net sales of licensed products, subject to certain customary reductions. There were no milestone payments achieved or recorded for the three months ended March 31, 2022 and 2021.

Components of Our Results of Operations

Operating Expenses

Research and Development Expenses

To date, our research and development expenses have primarily related to preclinical and clinical development of REN001. Research and development expenses include:

personnel expenses, including salaries, benefits, and stock-based compensation expense;
external expenses incurred under agreements with contract research organizations (CROs), investigative sites and consultants to conduct and support our preclinical studies and clinical trials;
raw materials related to manufacturing of our product candidate for clinical trials and preclinical studies, including fees paid to third-party manufacturers;
expenses related to regulatory activities, including filing fees paid to regulatory agencies;
facility costs including rent, depreciation, and maintenance expenses; and
fees for maintaining licenses under our third-party licensing agreements.

Research and development expenses are recognized as incurred and payments made prior to the receipt of goods or services to be used in research and development are capitalized until the goods or services are received. Costs for certain activities, such as manufacturing and preclinical studies and clinical trials, are generally recognized based on an evaluation of the progress to completion of specific tasks using information and data provided to us by our vendors and collaborators. We expense amounts paid to acquire licenses associated with products under

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development when the ultimate recoverability of the amounts paid is uncertain and the technology has no alternative future use when acquired.

The following table summarizes our research and development expenses for the three months ended March 31, 2022 and 2021 (in thousands):

    

Three Months Ended March 31, 

    

2022

    

2021

Clinical and regulatory

$

4,711

$

3,272

Contract manufacturing cost

 

2,339

 

1,241

Nonclinical

1,392

563

Research and development-other expense

 

836

 

396

Total

$

9,278

$

5,472

We expect our research and development expenses to increase substantially for the foreseeable future as we advance our product candidate into and through clinical trials, continue to conduct preclinical studies and pursue regulatory approval of our product candidate. The process of conducting the necessary clinical research to obtain regulatory approval is costly and time-consuming. The actual probability of success for our product candidate may be affected by a variety of factors including: the safety and efficacy of our product candidate, early clinical data, investment in our clinical program, competition, manufacturing capability and commercial viability. We may never succeed in achieving regulatory approval for our product candidate. As a result of the uncertainties discussed above, at this time we cannot reasonably estimate or know the nature, timing and estimated costs of the efforts that will be necessary to complete the development of and obtain regulatory approval for our product candidate. Our research and development costs may vary significantly based on factors such as:

the scope, rate of progress, expense and results of clinical trials and preclinical studies;
per patient trial costs;
the number of trials required for approval;
the number of sites included in the trials;
the countries in which the trials are conducted;
the number of patients that participate in the trials;
uncertainties in patient enrollment or drop out or discontinuation rates, particularly in light of the current COVID-19 pandemic environment;
potential additional safety monitoring requested by regulatory agencies;
the duration of patient participation in the trials and follow-up;
the safety and efficacy of our product candidate;
the cost and timing of manufacturing our product candidates; and
the extent to which we establish strategic collaborations or other arrangements.

General and Administrative Expenses

General and administrative expenses consist primarily of personnel expenses, including salaries, benefits, and stock-based compensation expense, for personnel in executive, finance, accounting, and human resource and other administrative functions. General and administrative expenses also include corporate facility costs not

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otherwise included in research and development expenses, legal fees related to intellectual property and corporate matters, insurance costs and fees for accounting and consulting services.

We expect our general and administrative expenses to increase for the foreseeable future to support continued research and development activities, including our ongoing and planned research and development of our product candidate for multiple indications.

Other (Loss) Income

Other (loss) income consists of interest income on our cash, cash equivalents, and short-term investments.

Results of Operations

Comparison of Three Months Ended March 31, 2022 and 2021 (Unaudited)

The following table summarizes our results of operations (in thousands):

Three Months Ended March 31, 

 

    

2022

    

2021

    

Change

Operating expenses:

 

Research and development

$

9,278

$

5,472

$

3,806

General and administrative

 

3,737

 

1,742

 

1,995

Total operating expenses

 

13,015

 

7,214

 

5,801

Loss from operations

 

(13,015)

 

(7,214)

 

(5,801)

Other (loss) income

 

(21)

 

2

 

(23)

Net loss

$

(13,036)

$

(7,212)

$

(5,824)

Operating Expenses

Research and Development Expenses

Research and development expenses for the three months ended March 31, 2022 were $9.3 million, compared to $5.5 million for the three months ended March 31, 2021. This increase of $3.8 million was primarily due to an increase of $2.2 million related to clinical trial and manufacturing costs associated with the launch of our STRIDE and FORWARD studies as well as our Phase 1b clinical trials of LC-FAOD. In addition, there was a $0.8 million increase in non-clinical activities and a $0.8 million increase in personnel-related costs due to the additional headcount required to support our clinical and manufacturing operations.

General and Administrative Expenses

General and administrative expenses for the three months ended March 31, 2022 were $3.7 million, compared to $1.7 million during the three months ended March 31, 2021. This increase of $2.0 million was primarily attributable to increased costs to operate as a public company, including increases in outside professional services of $0.7 million, personnel-related expenses of $0.6 million, and insurance premiums of $0.3 million.

Other (Loss) Income

Other (loss) income for the three months ended March 31, 2022 and 2021 was immaterial.

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Liquidity and Capital Resources

Since inception, we have incurred operating losses and negative cash flows from operations and have funded our operation primarily through the sale of preferred and common stock. We do not have any product candidates approved for sale and have not generated any revenue from product sales, and we do not expect to generate revenues from the commercial sale of our product candidate for at least the foreseeable future, if ever. We are subject to all the risks related to the development and commercialization of novel therapeutics, and we may encounter unforeseen expenses, difficulties, complications, delays, and other unknown factors that may adversely affect our business. We continue to incur additional costs associated with operating as a public company. We anticipate that we will need substantial additional funding in connection with our continuing operations.

In May 2022, we entered into the ATM facility under which we may offer and sell, from time to time at its sole discretion, up to $20.0 million in shares of our common stock. We have not yet sold any shares of our common stock under the ATM facility.

Cash Flows

The following table summarizes our cash flows (unaudited and in thousands):

Three Months Ended March 31, 

2022

    

2021

Net cash used in operating activities

$

(8,999)

$

(8,589)

Net cash provided by (used in) investing activities

 

5,427

 

(25)

Net cash provided by financing activities

 

6

 

46,222

Net (decrease) increase in cash and cash equivalents

$

(3,566)

$

37,608

Operating Activities

Net cash used in operating activities for the three months ended March 31, 2022 was $9.0 million, consisting primarily of our net loss of $13.0 million adjusted for non-cash items of $0.9 million primarily due to stock-based compensation expense and $3.2 million net change in operating assets and liabilities. The change in our net operating assets and liabilities was primarily due to an increase in prepaid and other current assets of $2.0 million as a result of prepayments made for clinical trial activities and an increase in accrued expense of $1.3 million due to timing of receipt of invoices and payments.

Net cash used in operating activities for the three months ended March 31, 2021 was $8.6 million, consisting primarily of our net loss of $7.2 million adjusted for non-cash items of $0.5 million primarily consisting of stock-based compensation expense and a $1.9 million net change in operating assets and liabilities.

Investing Activities

Net cash provided by investing activities for the three months ended March 31, 2022 was $5.4 million which was transferred to cash and cash equivalents, and consisted primarily of the proceeds from maturities of available-for-sale short-term investments of $21.5 million offset by the purchase of available-for-sale short-term investments of $16.0 million.

Net cash used in investing activities for the three months ended March 31, 2021 was immaterial.

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Financing Activities

Net cash provided by financing activities for the three months ended March 31, 2022 was immaterial.

Net cash provided by financing activities for the three months ended March 31, 2021 was $46.2 million, consisting primarily of $47.4 million of net proceeds from the issuance of Series B convertible preferred stock, offset by $1.2 million of costs incurred in connection with our initial public offering (IPO).

Funding Requirements

We will need to raise additional capital through public or private equity offerings or debt financings, credit or loan facilities, collaborations, strategic alliances, licensing arrangements or a combination of one or more of these funding sources. Additional funds may not be available to us on acceptable terms or at all. Our ability to raise additional funds may be adversely impacted by potential worsening global economic conditions and disruptions to, and volatility in, the credit and financial markets in the United States and worldwide resulting from the ongoing COVID-19 pandemic, as well as actual or perceived changes in interest rates and economic inflation. If we fail to obtain necessary capital when needed on acceptable terms, or at all, it could force us to delay, limit, reduce or terminate our product development programs, commercialization efforts or other operations.

Our future capital requirements will depend on many factors, including:

the scope, progress, results and costs of clinical trials and preclinical studies for REN001;
the scope, prioritization and number of our research and clinical indications we pursue;
the costs and timing of manufacturing for our product candidates;
the costs, timing, and outcome of regulatory review of REN001;
the timing and amount of the milestone or other payments we must make to vTv Therapeutics and any future licensors;
the terms and timing of establishing and maintaining collaborations, licenses and other similar arrangements;
the costs of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending intellectual property-related claims;
the extent to which we acquire or in-license other product candidates and technologies;
the costs of securing manufacturing arrangements for commercial production;
our ability to achieve sufficient market acceptance, coverage and adequate reimbursement from third-party payors and adequate market share and revenue for any approved products; and
the costs of establishing or contracting for sales and marketing capabilities if we obtain regulatory approvals to market any product candidates.

As of March 31, 2022, we had $138.7 million in cash, cash equivalents and short-term investments. We believe, based upon our current operating plan, that our cash, cash equivalents and short-term investments as of March 31, 2022 will be sufficient to fund our planned operations into 2024.

Identifying potential product candidates and conducting preclinical studies and clinical trials is a time-consuming, expensive, and uncertain process that takes many years to complete, and we may never generate the necessary data or results required to obtain marketing approval and achieve product sales. In addition, our product candidate, if approved, may not achieve commercial success. Our commercial revenues, if any, will be derived

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from sales of a product candidate that we do not expect to be commercially available for many years, if at all. Until such time as we can generate significant revenue from sales of our product candidate, if ever, we expect to finance our operations through public or private equity offerings or debt financings, credit or loan facilities, collaborations, strategic alliances, licensing arrangements or a combination of one or more of these funding sources. To the extent that we raise additional capital through the sale of equity or convertible debt securities, your ownership interest will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect your rights as a stockholder. Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures, or declaring dividends.

If we raise funds through collaborations, strategic alliances, or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or to grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market product candidate that we would otherwise prefer to develop and market ourselves.

Material Cash Requirements

The discussion below summarizes our significant contractual obligations and commitments as of March 31, 2022.

Leases. See Note 6 of Notes to Consolidated Financial Statements included in this Quarterly Report on Form 10-Q for information, including the future operating lease minimum payments.

Performance Award. See Note 8 of Notes to Consolidated Financial Statements included in this Quarterly Report on Form 10-Q for information, including the maximum payout.

vTv License Agreement. See Note 9 of Notes to Consolidated Financial Statements included in this Quarterly Report on Form 10-Q for information, including the milestone payments, associated with the vTv License Agreement.

In addition to contractual obligations above, we also expect to have future material cash requirements related to our contract manufacturing, preclinical and clinical programs, personnel expenses, and commercialization activities.

Critical Accounting Policies and Estimates

Our management’s discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, and expenses and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements. We base our estimates on historical experience, known trends and events, and various other factors that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ materially from these estimates under different assumptions or conditions.

Our critical accounting policies are described in the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Estimates” in our Annual Report on Form 10-K for the year ended December 31, 2021, and the notes to our consolidated financial statements appearing elsewhere in this Quarterly Report on Form 10-Q. During the three months ended March 31, 2022, there

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were no material changes to our critical accounting policies from those discussed in our Annual Report on Form 10-K for the year ended December 31, 2021.

Recent Accounting Pronouncements

See Note 2 of Notes to Consolidated Financial Statements included in this Quarterly Report on Form 10-Q for a description of recent accounting pronouncements applicable to our consolidated financial statements.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Not required for smaller reporting companies.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management, with the participation and supervision of our Principal Executive Officer and our Principal Financial Officer have evaluated our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the Exchange Act)), as of the end of the period covered by this Quarterly Report. Based on that evaluation, our Principal Executive Officer and our Principal Financial Officer have concluded that as of March 31, 2022, our disclosure controls and procedures were effective to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in Securities Exchange Commission rules and forms, and that such information is accumulated and communicated to our management, including our Principal Executive Officer and Principal Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

There have been no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended March 31, 2022 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II — OTHER INFORMATION

Item 1. Legal Proceedings

From time to time, we may become involved in legal proceedings arising in the ordinary course of our business. We are not currently a party to any material legal proceedings. Regardless of outcome, litigation can have an adverse impact on us due to defense and settlement costs, diversion of management resources, negative publicity, reputational harm and other factors, and there can be no assurances that favorable outcomes will be obtained.

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Item 1A. Risk Factors

We face many risks and uncertainties, as more fully described in this section under the heading “Risk Factors.” Some of these risks and uncertainties are summarized below. The summary below does not contain all of the information that may be important to you, and you should read this summary together with the more detailed discussion of these risks and uncertainties contained in “Risk Factors.”

Risks Related to Our Business and Industry

We have incurred significant net losses since our inception in 2014 and anticipate that we will continue to incur significant net losses for the foreseeable future.
We will need substantial additional capital to develop REN001 and any future product candidates and implement our operating plan. If we fail to obtain additional financing, we may be forced to delay, reduce or eliminate our product development programs or commercialization efforts.
We currently depend entirely on the success of REN001, which is our only product candidate. If we are unable to advance REN001 in clinical development, obtain regulatory approval, and ultimately commercialize REN001, or experience significant delays in doing so, our business will be materially harmed.
Our clinical trials may fail to adequately demonstrate the safety and efficacy of REN001, which could prevent or delay regulatory approval and commercialization.
Preclinical and clinical drug development is a lengthy and expensive process with uncertain outcomes, and results of earlier studies and trials may not be predictive of future trial results.
Any delays in the commencement or completion, or termination or suspension, of our clinical trials could result in increased costs to us, delay or limit our ability to generate revenue, and adversely affect our commercial prospects.
The regulatory approval process is lengthy, expensive and uncertain, and we may be unable to obtain regulatory approval for our product candidates under applicable regulatory requirements. The denial or delay of any such approval would delay commercialization of our product candidates and adversely impact our ability to generate revenue, our business and our results of operations.
Our business has been and could continue to be adversely affected by the evolving and ongoing COVID-19 global pandemic in regions where we or third parties on which we rely have significant manufacturing facilities, concentrations of clinical trial sites or other business operations. The COVID-19 pandemic could adversely affect our operations, as well as the business or operations of our manufacturers, clinical research organizations (CROs), or other third parties with whom we conduct business.
If the market opportunities for REN001 and any future product candidates are smaller than we believe they are, or we face substantial competition in our markets, our future revenue may be adversely affected, and our business may suffer.
We may not be successful in our efforts to expand our pipeline by identifying additional indications for which to investigate REN001 in the future. We may expend our limited resources to pursue a particular indication or formulation for REN001 and fail to capitalize on product candidates, indications or formulations that may be more profitable or for which there is a greater likelihood of success.
We currently have no marketing and sales organization. If we are unable to establish marketing and sales capabilities or enter into agreements with third parties to market and sell REN001 and any future product candidates, we may not be able to generate product revenues.

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Risks Related to Our Reliance on Third Parties

We depend on a license agreement with vTv Therapeutics, and termination of this license could result in the loss of significant rights, which would harm our business.
We rely on third parties to conduct, supervise, and monitor our clinical trials. If these third parties do not successfully carry out their contractual duties, meet rigorously enforced regulatory requirements, or meet expected deadlines, we may not be able to obtain regulatory approval for or commercialize REN001.
We rely completely on third parties to manufacture our preclinical and clinical drug supplies and we intend to rely on third parties to produce commercial supplies of REN001 and any future product candidates, if approved, and these third parties may fail to obtain and maintain regulatory approval for their facilities, fail to provide us with sufficient quantities of drug product or fail to do so at acceptable quality levels or prices.

Risks Related to Our Intellectual Property

If the scope of any patent protection we obtain is not sufficiently broad, or if we lose any of our patent protection and/or other market exclusivity, our ability to prevent our competitors from commercializing similar or identical product candidates may be adversely affected.

Risks Related to Ownership of Our Common Stock

Our principal stockholders and management own a significant percentage of our stock and will be able to exert significant control over matters subject to stockholder approval.

RISK FACTORS

An investment in shares of our common stock involves a high degree of risk. You should carefully consider the risks described below, as well as the other information in this Quarterly Report on Form 10-Q, including our consolidated financial statements and the related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” before deciding whether to purchase, hold or sell shares of our common stock. The occurrence of any of the risks described below could harm our business, financial condition, results of operations, growth prospects, and/or stock price or cause our actual results to differ materially from those contained in forward-looking statements we have made in this Quarterly Report on Form 10-Q and those we may make from time to time. You should consider all of the risk factors described when evaluating our business. We have marked with an asterisk (*) those risk factors that reflect changes from the similarly titled risk factors included in our Annual Report on Form 10-K for the year ended December 31, 2021.

Risks Related to Our Business and Industry

We have incurred significant net losses since our inception in 2014 and anticipate that we will continue to incur significant net losses for the foreseeable future.*

We are a clinical-stage pharmaceutical company founded in 2014, and our operations to date have focused primarily on raising capital, establishing and protecting our intellectual property portfolio, organizing and staffing our company, business planning, and conducting preclinical and clinical development of, and manufacturing development for, our only product candidate, REN001. Additionally, as an organization, we have not yet demonstrated an ability to successfully complete clinical development, obtain regulatory approvals, manufacture a commercial-scale product, or conduct sales and marketing activities necessary for successful commercialization. As we build our capabilities and expand our organization, we have not yet demonstrated an ability to overcome many of the risks and uncertainties frequently encountered by companies in new and rapidly evolving fields, particularly

28

in the pharmaceutical area. Consequently, any predictions about our future performance may not be as accurate as they would be if we had a history of successfully developing and commercializing pharmaceutical products.

Investment in pharmaceutical product development is highly speculative because it entails substantial upfront capital expenditures and significant risk that any potential product candidate will fail to demonstrate adequate effectiveness in the targeted indication or an acceptable safety profile, gain regulatory approval and become commercially viable. We have no products approved for commercial sale and have not generated any revenue to date, and we continue to incur significant research and development and other expenses related to our ongoing operations. As a result, we are not profitable and have incurred significant net losses since our inception. If REN001 is not successfully developed and approved in the United States or Europe, we may never generate any revenue. For the three months ended March 31, 2022 and the year ended December 31, 2021, we reported a net loss of $13.0 million and $39.8 million, respectively. As of March 31, 2022, we had an accumulated deficit of $97.8 million.

We expect to continue to incur significant losses for the foreseeable future, and we expect these losses to increase as we continue our clinical development of, and seek regulatory approvals for, REN001 and any future product candidates. We may encounter unforeseen expenses, difficulties, complications, delays, and other unknown factors that may adversely affect our business. The size of our future net losses will depend, in part, on the rate of future growth of our expenses and our ability to generate revenues. Our prior net losses and expected future net losses have had and will continue to have an adverse effect on our stockholders’ equity and working capital. Because of the numerous risks and uncertainties associated with drug development, we are unable to accurately predict the timing or amount of increased expenses, or when, if at all, we will be able to achieve profitability.

We will need substantial additional capital to develop REN001 and any future product candidates and implement our operating plan. If we fail to complete additional financings, we may be forced to delay, reduce or eliminate our product development programs or commercialization efforts.*

Our operations have consumed substantial amounts of cash since our inception. We expect to continue to spend substantial amounts of capital to continue the clinical development of, and seek regulatory approval for, REN001 and any future product candidates. We will require significant additional amounts of capital in order to prepare for commercialization, and, if approved, to launch and commercialize REN001.

As of March 31, 2022, we had cash, cash equivalents and short-term investments of $138.7 million. We believe, based on our current operating plan, that our cash, cash equivalents and short-term investments as of March 31, 2022 will be sufficient to fund our planned operations into 2024. However, changing circumstances may cause us to consume capital significantly faster than we currently anticipate, and we may need to spend more money than currently expected because of circumstances beyond our control. Our future capital requirements will depend on many factors, including:

the scope, progress, results and costs of clinical trials and preclinical studies for REN001;
the scope, prioritization and number of our research and indications we pursue;
the costs and timing of manufacturing for our product candidate;
the costs, timing, and outcome of regulatory review of REN001;
the timing and amount of the milestone or other payments we must make to vTv Therapeutics and any future licensors;
the terms and timing of establishing and maintaining collaborations, licenses and other similar arrangements;
the costs of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending intellectual property-related claims;

29

the extent to which we acquire or in-license other product candidates and technologies;
the costs of securing manufacturing arrangements for commercial production;
our ability to achieve sufficient market acceptance, coverage and adequate reimbursement from third-party payors and adequate market share and revenue for any approved products; and
the costs of establishing or contracting for sales and marketing capabilities if we obtain regulatory approvals to market our product candidate.

In any event, we will require additional capital for the further development and commercialization of REN001 and any future product candidates and may need to raise additional funds sooner if we choose to expand more rapidly than we presently anticipate. In addition, we may seek additional capital due to favorable market conditions or strategic considerations even if we believe we have sufficient funds for our current or future operating plans.

Until such time as we can generate significant revenue from sales of our product candidate, if ever, we expect to finance our operations through public or private equity offerings or debt financings, credit or loan facilities, collaborations, strategic alliances, licensing arrangements or a combination of one or more of these funding sources. Additional funds may not be available to us on acceptable terms or at all. In May 2022, we entered into the ATM facility under which we may offer and sell, from time to time, at our sole discretion, up to $20.0 million in shares of our common stock. We have not yet sold any shares of our common stock under the ATM facility.

Our ability to raise additional funds may be adversely impacted by potential worsening global economic conditions and disruptions to, and volatility in, the credit and financial markets in the United States and worldwide resulting from the ongoing COVID-19 pandemic, as well as actual or perceived changes in interest rates and economic inflation. If we are unable to raise additional capital in sufficient amounts or on terms acceptable to us, we may have to significantly delay, scale back, or discontinue the development or commercialization of REN001 or other research and development initiatives. We also could be required to seek collaborators for REN001 and any future product candidates at an earlier stage than otherwise would be desirable or on terms that are less favorable than might otherwise be available or relinquish or license on unfavorable terms our rights to REN001 and any future product candidates in markets where we otherwise would seek to pursue development or commercialization ourselves.

We currently depend entirely on the success of REN001, which is our only product candidate. If we are unable to advance REN001 in clinical development, obtain regulatory approval, and ultimately commercialize REN001, or experience significant delays in doing so, our business will be materially harmed.*

We currently only have one product candidate, REN001, and our business and future success depends entirely on our ability to develop, obtain regulatory approval for, and then successfully commercialize, REN001, which is currently in clinical development for patients with primary mitochondrial myopathy (PMM) and patients with long-chain fatty acid oxidation disorder (LC-FAOD). This may make an investment in our company riskier than similar companies that have multiple product candidates in active development that may be able to better sustain failure of a lead product candidate.

The success of REN001 will depend on several factors, including the following:

successful enrollment in our ongoing and planned clinical trials and completion of such clinical trials with favorable results;
acceptance by the U.S. Food and Drug Administration (FDA) and European Medicines Agency (EMA) of data from our global Phase 2b or future clinical trials in patients with PMM;
demonstrating safety and efficacy to the satisfaction of applicable regulatory authorities;

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the outcome, timing, and cost of meeting regulatory requirements established by the FDA, EMA, and other comparable foreign regulatory authorities;
receipt of marketing approvals from applicable regulatory authorities, including one or more new drug applications (NDAs) from the FDA and marketing authorizations from the European Commission (based on the opinion of the Committee for Medicinal Products for Human Use (CHMP) of the EMA, and maintaining such approvals;
establishing commercial manufacturing relationships and receiving/importing commercial supplies approved by the FDA and other regulatory authorities from any future third-party manufacturer;
establishing sales, marketing, and distribution capabilities and commercializing REN001, if approved, whether alone or in collaboration with others;
acceptance, if and when approved, by patients, the medical community and third-party payors;
obtaining and maintaining third-party coverage and adequate reimbursement;
establishing and maintaining patent and trade secret protection and regulatory exclusivity for REN001;
maintaining an acceptable safety profile of REN001 following approval; and
maintaining and growing an organization of people who can develop REN001.

If we do not achieve one or more of these factors, many of which are beyond our control, in a timely manner or at all, we could experience significant delays or an inability to develop, obtain regulatory approvals or commercialize REN001.

Even if regulatory approvals are obtained, we may never be able to successfully commercialize REN001. In addition, we will need to transition at some point from a company with a development focus to a company capable of supporting commercial activities. We may not be successful in such a transition. Accordingly, we may not be able to generate sufficient revenue through the sale of REN001 to continue our business.

Our clinical trials may fail to adequately demonstrate the safety and efficacy of REN001, which could prevent or delay regulatory approval and commercialization.

Before obtaining regulatory approvals for the commercial sale of a product candidate, we must demonstrate through lengthy, complex, and expensive preclinical testing and clinical trials that a product candidate is both safe and effective for use in each target indication. Clinical trials often fail to demonstrate safety and efficacy of the product candidate studied for the target indication. Most product candidates that commence clinical trials are never approved by regulatory authorities for commercialization. Further, we have used patient reported outcomes in our clinical trials, including our Phase 1b study of REN001 of PMM, such as the Modified Fatigue Impact Scale, the Brief Pain Inventory assessment, and a 36-item short form survey (SF-36) that assesses the general health of patients. Such patient reported outcomes are based on subjective patient feedback and can be inherently difficult to evaluate. Such patient reported outcomes can be influenced by factors outside of our control and can vary widely from day to day for a particular patient, and from patient-to-patient and site-to-site within a clinical trial. It is possible that the FDA will not accept such patient reported outcomes, and any such non-acceptance may require changes to existing trial protocols or the conduct of additional clinical trials. Moreover, our Phase 2b study of REN001 in patients with PMM and our Phase 1b study in patients with LC-FAOD utilize a12-minute walk test (12MWT) as an assessment of functionality in patients with genetic mitochondrial diseases who commonly lack endurance rather than the more commonly used six-minute walk test (6MWT). Although we believe the 12MWT is the appropriate assessment tool, we cannot guarantee you that the FDA or other regulators will not require clinical results from a 6MWT for approval. Additionally, any safety concerns observed in any one of our clinical trials in our targeted indications could limit the prospects for regulatory approval of REN001 in other indications.

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Preclinical and clinical drug development is a lengthy and expensive process with uncertain outcomes, and results of earlier studies and trials may not be predictive of future trial results.

Preclinical and clinical testing is expensive and can take many years to complete, and its outcome is inherently uncertain. A failure of one or more preclinical or clinical trials can occur at any stage of testing. The results of preclinical studies and early clinical trials of REN001 may not be predictive of the results of later-stage clinical trials. In addition, product candidates in later stages of clinical trials may fail to show the desired safety and efficacy traits despite having progressed through preclinical studies and initial clinical trials. Also, because there are generally no approved drugs for our clinical indications, there are few regulatory precedents by which we can be guided with respect to clinical endpoints.

As such, we cannot be certain that our ongoing and planned clinical trials will be successful. A number of companies in the pharmaceutical industry have suffered significant setbacks in advanced clinical trials due to lack of efficacy or safety profiles, notwithstanding promising results in earlier trials. Moreover, preclinical and clinical data is often susceptible to varying interpretations and analyses. Our clinical trials have involved a limited number of patients and clinical trial sites. We may face significant setbacks as we expand the number of patients and clinical sites, potentially affecting the efficiency of trial execution and the consistency of trial data, which may delay or prevent regulatory approval of REN001. Any safety concerns observed in any one of our clinical trials in our targeted indications could limit the prospects for regulatory approval of REN001 in those and other indications, which could have a material adverse effect on our business, financial condition, results of operations and prospects.

Further, if patients drop out of our clinical trials, miss scheduled doses or follow-up visits, or otherwise fail to follow clinical trial protocols, whether as a result of the COVID-19 pandemic, actions taken to slow the spread of COVID-19 or otherwise, the integrity of data from our clinical trials may be compromised or not accepted by the FDA or other regulatory authorities, which would represent a significant setback for the applicable program.

If we encounter difficulties enrolling patients in our clinical trials, our clinical development activities could be delayed or otherwise adversely affected.

We may not be able to initiate or continue our clinical trials for REN001 and any future product candidates if we are unable to identify and enroll a sufficient number of eligible patients to participate in these trials as required by the FDA and comparable foreign regulatory authorities. Patient enrollment, a significant factor in the timing of clinical trials, is affected by many factors including the size and nature of the patient population, the proximity of patients to clinical sites, the eligibility criteria for the clinical trial, the design of the clinical trial, competing clinical trials, and clinicians’ and patients’ perceptions as to the potential advantages of the product candidate being studied in relation to other available therapies, including any new drugs that may be approved for the indications we are investigating.

In particular, each clinical indication for which we are evaluating REN001 is a rare genetic disease with limited patient populations from which to draw participants in clinical trials. We will be required to identify and enroll a sufficient number of patients with the disease under investigation for our clinical trials of REN001. Potential patients may not be adequately diagnosed or identified with the diseases which we are targeting or may not meet the entry criteria for our clinical trials. Additionally, other pharmaceutical companies with more resources and greater experience in drug development and commercialization are targeting certain of the genetic mitochondrial diseases we are targeting and may do so with respect to additional indications we target in the future. Any recruiting of clinical trial patients by competitors from the patient populations we are targeting in our ongoing or future clinical trials may delay or make it more difficult to fully enroll our clinical trials. Our inability to enroll a sufficient number of patients for any of our current or future clinical trials would result in significant delays or may require us to abandon one or more clinical trials altogether. In addition, we rely on CROs and clinical trial sites to

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ensure proper and timely conduct of our clinical trials and, while we have agreements governing their services, we will have limited influence over their actual performance.

We are unable to predict with confidence the likelihood or duration of such patient enrollment delays and difficulties, whether related to COVID-19 or otherwise. If patient enrollment is delayed for an extended period of time,