0001558370-21-015649.txt : 20211112 0001558370-21-015649.hdr.sgml : 20211112 20211112075048 ACCESSION NUMBER: 0001558370-21-015649 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 55 CONFORMED PERIOD OF REPORT: 20210930 FILED AS OF DATE: 20211112 DATE AS OF CHANGE: 20211112 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Elevation Oncology, Inc. CENTRAL INDEX KEY: 0001783032 STANDARD INDUSTRIAL CLASSIFICATION: BIOLOGICAL PRODUCTS (NO DIAGNOSTIC SUBSTANCES) [2836] IRS NUMBER: 841771427 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-40523 FILM NUMBER: 211399652 BUSINESS ADDRESS: STREET 1: 888 SEVENTH AVE STREET 2: 12TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10106 BUSINESS PHONE: 212-651-6380 MAIL ADDRESS: STREET 1: 888 SEVENTH AVE STREET 2: 12TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10106 FORMER COMPANY: FORMER CONFORMED NAME: 14ner Oncology, Inc. DATE OF NAME CHANGE: 20190719 10-Q 1 elev-20210930x10q.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 September 30, 2021

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: 001-40523

Elevation Oncology, Inc.

(Exact name of registrant as specified in its charter)

Delaware

84-1771427

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification Number)

888 Seventh Ave.

12th Floor

New York, New York 10106

(Address of Principal Executive Offices)

(716) 371-1125

(Registrant’s telephone number)

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

Non-accelerated filer

Smaller reporting company

Emerging growth company

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

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

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

Title of Each Class

Trading symbol

Name of Exchange on which registered

Common stock, par value $0.0001 per share

ELEV

The Nasdaq Stock Market LLC

As of November 9, 2021, there were 23,225,637 shares of the registrant’s common stock outstanding.

TABLE OF CONTENTS

    

    

Page

Part I

Financial Information

5

Item 1.

Condensed Financial Statements (unaudited)

5

Condensed Balance Sheets as of September 30, 2021 (unaudited) and December 31, 2020

5

Condensed Statements of Operations for the Three and Nine Months Ended September 30, 2021 and 2020 (unaudited)

6

Condensed Statements of Convertible Preferred Stock and Stockholders’ Equity (Deficit) for the Three and Nine Months Ended September 30, 2021 and 2020 (unaudited)

7

Condensed Statements of Cash Flows for the Nine Months Ended September 30, 2021 and 2020 (unaudited)

8

Notes to Condensed Financial Statements (unaudited)

9

Item 2.

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

19

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

28

Item 4.

Controls and Procedures

28

Part II

Other Information

28

Item 1.

Legal Proceedings

28

Item 1A.

Risk Factors

29

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

86

Item 3.

Defaults Upon Senior Securities

87

Item 4.

Mine Safety Disclosures

87

Item 5.

Other Information

87

Item 6.

Exhibits

87

Exhibit Index

88

Signatures

89

2

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q, or Quarterly Report, contains forward-looking statements. In some cases, you can identify forward-looking statements by terms such as “believe,” “may,” “will,” “potentially,” “estimate,” “continue,” “anticipate,” “intend,” “could,” “would,” “project,” “plan,” “expect,” “predict,” “potential” and similar expressions that convey uncertainty of future events or outcomes, although not all forward-looking statements contain these words. These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those described in “Risk factors” and elsewhere in this filing. Moreover, we operate in a competitive and rapidly changing environment, and new risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this Quarterly Report may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements. The forward-looking statements in this Quarterly Report include, among other things, statements about:

our ability to develop, obtain regulatory approval and commercialize seribantumab and our future product candidates;
the timing of our preclinical studies and clinical trials for our product candidates;
estimates of our addressable market and market growth;
our expectations regarding demand for, and market acceptance of, our product candidates;
our ability to maintain and expand access to human genetics data;
our ability to compete effectively with existing competitors and new market entrants;
the potential effects of extensive government regulations relating to our industry;
our ability to obtain, maintain, and protect and enforce intellectual property and proprietary rights;
our ability to operate our business without infringing, misappropriating or otherwise violating the intellectual property rights and proprietary technology of third parties;
our ability to establish and maintain collaborations, including our existing joint ventures;
our ability to expand our pipeline of product candidates;
our ability to attract and retain key management and technical personnel;
the effects of the COVID-19 pandemic on any of the above or any other aspect of our business operations; and
our expectations regarding expenses, future revenue, capital requirements, and our needs for additional financing.

The forward-looking statements made in this filing relate only to events or information as of the date on which the statements are made in this Quarterly Report. You should not rely upon forward-looking statements as predictions of future events. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee that the future results, levels of activity, performance or events and circumstances reflected in the forward-looking statements will be achieved or occur. We undertake no obligation to update publicly any forward-looking statements for any reason after the date of this Quarterly Report to conform these statements to actual results or to changes in our expectations, except as required by law. We intend the forward-looking statements contained in this Quarterly

3

Report to be covered by the safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act.

4

PART I —FINANCIAL INFORMATION

Item 1. Financial Statements

ELEVATION ONCOLOGY, INC.

Condensed Balance Sheets

(in thousands, except share and per share data)

September 30, 

December 31, 

    

2021

    

2020

    

(unaudited)

(Note 2)

Assets

    

  

    

  

Current assets:

 

  

 

  

Cash and cash equivalents

$

155,198

$

79,400

Prepaid expenses and other current assets

 

3,237

 

1,386

Total current assets

 

158,435

 

80,786

Property and equipment, net

 

43

 

56

Other non-current assets

 

40

 

65

Total assets

$

158,518

$

80,907

Liabilities, Convertible Preferred Stock and Stockholders’ Equity (Deficit)

 

  

 

  

Current liabilities:

 

  

 

  

Accounts payable

$

5,435

$

5,679

Accrued expenses

 

3,445

 

1,106

Total current liabilities

 

8,880

 

6,785

Non-current liabilities:

 

  

 

  

Restricted stock repurchase liability

 

10

 

15

Total liabilities

 

8,890

 

6,800

Commitments and contingencies

 

  

 

  

Series A convertible preferred stock, $0.0001 par value; 0 and 32,450,000 authorized, issued and outstanding as of September 30, 2021 and December 31, 2020, respectively; aggregate liquidation preference of $0 and $32,450 as of September 30, 2021 and December 31, 2020, respectively

 

 

32,373

Series B convertible preferred stock, $0.0001 par value; 0 and 34,043,889 authorized, issued and outstanding as of September 30, 2021 and December 31, 2020, respectively; aggregate liquidation preference of $0 and $65,000 as of September 30, 2021 and December 31, 2020, respectively

 

 

64,815

Stockholders’ equity (deficit):

 

  

 

  

Common stock, $0.0001 par value; 500,000,000 and 86,000,000 shares authorized as of September 30, 2021 and December 31, 2020, respectively; 23,225,637 and 836,177 issued as of September 30, 2021 and December 31, 2020, respectively; 23,201,971 and 800,679 outstanding as of September 30, 2021 and December 31, 2020, respectively

 

2

 

Additional paid-in capital

 

195,190

 

66

Accumulated deficit

 

(45,564)

 

(23,147)

Total stockholders’ equity (deficit)

 

149,628

 

(23,081)

Total liabilities, convertible preferred stock and stockholders’ equity (deficit)

$

158,518

$

80,907

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

5

ELEVATION ONCOLOGY, INC.

Condensed Statements of Operations

(in thousands, except share and per share data)

(unaudited)

    

Three months ended September 30, 

Nine months ended September 30, 

    

2021

    

2020

2021

    

2020

Operating expenses:

    

  

    

  

  

    

  

Research and development

$

9,298

$

2,550

$

17,346

$

7,042

General and administrative

 

2,979

 

462

 

5,076

 

1,347

Total operating expenses

 

12,277

 

3,012

 

22,422

 

8,389

Loss from operations

 

(12,277)

 

(3,012)

 

(22,422)

 

(8,389)

Other income

 

10

 

1

 

5

 

14

Net loss

$

(12,267)

$

(3,011)

$

(22,417)

$

(8,375)

Net loss per share, basic and diluted

$

(0.53)

$

(3.80)

$

(2.67)

$

(10.60)

Weighted average common shares outstanding, basic and diluted

 

23,114,715

 

792,790

 

8,402,277

 

790,175

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

6

ELEVATION ONCOLOGY, INC.

Condensed Statements of Convertible Preferred Stock and Stockholders’ Equity (Deficit)

(in thousands, except share and per share data)

(unaudited)

Series A Convertible

    

Series B Convertible

    

    

    

    

    

Additional

    

    

    

Total

Preferred Stock

Preferred Stock

Common Stock

Paid-in

Accumulated

Stockholders’

    

Shares

    

Amount

    

Shares

    

Amount

    

Shares

    

Amount

    

Capital

    

Deficit

    

Equity (Deficit)

Balance at June 30, 2020

 

32,450,000

$

32,373

 

$

 

792,791

$

$

33

$

(11,246)

$

(11,213)

Vesting of restricted common stock

3,944

1

1

Stock based compensation

 

 

 

 

 

 

 

15

 

 

15

Net loss

 

 

 

 

 

 

 

 

(3,011)

 

(3,011)

Balance at September 30, 2020

 

32,450,000

$

32,373

 

$

 

796,735

$

$

49

$

(14,257)

$

(14,208)

Balance at June 30, 2021

 

$

 

$

 

22,794,620

$

2

$

188,632

$

(33,297)

$

155,337

Vesting of restricted common stock

 

 

 

 

 

3,944

 

 

1

 

 

1

Stock based compensation

 

 

 

 

 

 

 

659

 

 

659

Issuance of initial public offering common stock, net

403,407

5,898

5,898

Net loss

 

 

 

 

 

 

 

 

(12,267)

 

(12,267)

Balance at September 30, 2021

 

$

 

$

 

23,201,971

$

2

$

195,190

$

(45,564)

$

149,628

Series A Convertible

    

Series B Convertible

    

    

    

    

    

Additional

    

    

    

Total

Preferred Stock

Preferred Stock

Common Stock

Paid-in

Accumulated

Stockholders’

    

Shares

    

Amount

    

Shares

    

Amount

    

Shares

    

Amount

    

Capital

    

Deficit

    

Equity (Deficit)

Balance at December 31, 2019

 

7,266,750

$

7,190

 

$

 

788,847

$

$

9

$

(5,882)

$

(5,873)

Issuance of Series A convertible preferred stock, net of issuance costs of $77

 

25,183,250

 

25,183

 

 

 

 

 

 

 

Vesting of restricted common stock

7,888

4

4

Stock based compensation

 

 

 

 

 

 

 

36

 

 

36

Net loss

 

 

 

 

 

 

 

 

(8,375)

 

(8,375)

Balance at September 30, 2020

 

32,450,000

$

32,373

 

$

 

796,735

$

$

49

$

(14,257)

$

(14,208)

Balance at December 31, 2020

 

32,450,000

$

32,373

 

34,043,889

$

64,815

 

800,679

$

$

66

$

(23,147)

$

(23,081)

Vesting of restricted common stock

 

 

 

 

 

11,832

 

 

5

 

 

5

Stock based compensation

 

 

 

 

 

 

 

882

 

 

882

Issuance of initial public offering common stock, net

(32,450,000)

(32,373)

(34,043,889)

(64,815)

22,389,460

2

194,237

194,239

Net loss

 

 

 

 

 

 

 

 

(22,417)

 

(22,417)

Balance at September 30, 2021

 

$

 

$

 

23,201,971

$

2

$

195,190

$

(45,564)

$

149,628

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

7

ELEVATION ONCOLOGY, INC.

Condensed Statements of Cash Flows

(in thousands)

(unaudited)

Nine months ended September 30, 

    

2021

    

2020

Operating activities

    

  

    

  

Net loss

$

(22,417)

$

(8,375)

Reconciliation of net loss to net cash used in operating activities:

 

  

 

  

Stock-based compensation

 

882

 

36

Depreciation and amortization expense

 

13

 

Changes in operating assets and liabilities:

 

  

 

  

Prepaid expenses and other assets

 

(1,826)

 

(1,244)

Accounts payable

 

(244)

 

199

Accrued expenses

 

2,339

 

469

Net cash used in operating activities

 

(21,253)

 

(8,915)

Financing activities

 

  

 

  

Proceeds from the issuance of restricted common stock

20

Proceeds from issuance of common stock upon initial public offering, net of issuance costs

97,062

Proceeds from the issuance of convertible preferred stock

 

 

25,183

Cash paid for issuance costs of convertible preferred stock

 

(11)

 

Net cash provided by financing activities

 

97,051

 

25,203

Increase in cash and cash equivalents

 

75,798

 

16,288

Cash and cash equivalents, beginning of period

 

79,400

 

1,740

Cash and cash equivalents, end of period

$

155,198

$

18,028

Supplemental disclosure of non-cash financing activities

 

  

 

  

Conversion of convertible preferred stock upon IPO

$

97,188

$

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

8

ELEVATION ONCOLOGY, INC.

Notes to Condensed Financial Statements

(dollars in thousands, except share and per share data)

(unaudited)

1. Nature of business

Elevation Oncology, Inc. (the “Company” or “Elevation”), which was formerly known as 14ner, Inc., was incorporated under the laws of Delaware on April 29, 2019 (“Inception”). The Company is a clinical-stage biopharmaceutical company focused on the development of precision medicines for patients with genomically-defined cancers. The Company acquired its lead product candidate, seribantumab, pursuant to an asset purchase agreement executed with Merrimack Pharmaceuticals, Inc. (the “previous sponsor”) during the period ended December 31, 2019. Seribantumab inhibits tumor growth driven by NRG1 fusions and is currently being tested in the Company’s Phase 2 CRESTONE clinical trial for patients with tumors of any origin that have an NRG1 fusion. The Company is actively evaluating opportunities for pipeline expansion, prioritizing targeted therapy approaches in tumor types defined by genomic driver alterations.

Risks and uncertainties

The Company is subject to risks and uncertainties common to early-stage companies in the biotechnology industry, including, but not limited to, development by competitors of new technological innovations, dependence on key personnel, protection of proprietary technology, compliance with government regulations and the ability to secure additional capital to fund operations. Product candidates currently under development will require significant additional research and development efforts, including preclinical and clinical testing and regulatory approval, prior to commercialization. These efforts require significant amounts of additional capital, adequate personnel and infrastructure, and extensive compliance-reporting capabilities.

There can be no assurance that the Company’s research and development of its product candidates will be successfully completed, that adequate protection for the Company’s intellectual property will be obtained, that any products developed will obtain necessary government regulatory approval or that any approved products will be commercially viable. Even if the Company’s product development efforts are successful, it is uncertain when, if ever, the Company will generate significant revenue from product sales. The Company operates in an environment of rapid change in technology and substantial competition from pharmaceutical and biotechnology companies.

On March 10, 2020, the World Health Organization characterized the novel COVID-19 virus as a global pandemic. There is significant uncertainty as to the likely effects of this disease which may, among other things, materially impact the Company’s ongoing clinical trial, and planned future clinical trials. This pandemic or outbreak could result in difficulty securing clinical trial site locations, contract research organizations, and/or trial monitors and other critical vendors and consultants supporting the trial. These situations, or others associated with COVID-19, could cause delays in the Company’s clinical trial plans, could increase expected costs, and impact the ability to raise additional capital, all of which could have a material adverse effect on the Company’s business and its financial condition. COVID-19 has not had a significant impact on the operations or financial results of the Company to date.

Initial Public Offering

On June 29, 2021, the Company closed its initial public offering, (“IPO”) and issued 6,250,000 shares of its common stock at a price of $16.00 per share for net proceeds of $91,059, after deducting underwriting discounts, commissions, and other expenses of $8,941. In connection with the IPO, all shares of Series A and Series B convertible preferred stock converted into 15,736,053 shares of common stock. Additional issuance cost of $11 was paid for convertible preferred stock in 2021. On July 19, 2021, in connection with the Company’s IPO, the underwriters exercised the right to purchase an additional 403,407 shares of the Company’s common stock at a price of $16.00 per share for net proceeds of $6,003, after deducting underwriting discounts of $452.

9

Liquidity

The Company has historical losses from operations and anticipates that it will continue to incur losses for the foreseeable future as it continues the research and development of its product candidates. The Company incurred net losses of $12,267 and $3,011 for the three months ended September 30, 2021 and 2020, respectively, and $22,417 and $8,375 for the nine months ended September 30, 2021 and 2020, respectively, and had an accumulated deficit of $45,564 as of September 30, 2021. The Company has funded its operations primarily through proceeds from its IPO and the sale of convertible preferred stock. The future success of the Company is dependent on its ability to successfully obtain additional working capital, obtain regulatory approval for and successfully launch and commercialize its product candidates and to ultimately attain profitable operations.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. The financial statements do not reflect any adjustments relating to the recoverability and reclassification of assets and liabilities that might be necessary if the Company is unable to continue as a going concern.

The Company believes that the $155.2 million of cash and cash equivalents on hand as of September 30, 2021 will be sufficient to fund its operations in the normal course of business and meet its liquidity needs through at least the next 12 months from the issuance of these financial statements.

2. Basis of Presentation and Significant Accounting Policies

Basis of presentation of interim financial statements

The unaudited condensed interim financial statements have been prepared in conformity with U.S. generally accepted accounting principles ("U.S. GAAP"). The accompanying unaudited condensed interim financial statements were prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) and, in the opinion of management, include all normal and recurring adjustments necessary to present fairly the results of the interim periods shown. The December 31, 2020 balance sheet was derived from December 31, 2020 audited financial statements. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such SEC rules and regulations. Management believes that the disclosures made are adequate to make the information presented not misleading. The results for the interim periods are not necessarily indicative of results to be expected for the fiscal year ending December 31, 2021.

The accompanying unaudited condensed interim financial statements should be read in conjunction with the audited financial statements and the related notes thereto for the year ended December 31, 2020, which are included in the Company’s prospectus related to the Company’s IPO, filed with the SEC on June 24, 2021, pursuant to Rule 424(b) under the Securities Act of 1933, amended.

On June 17, 2021, the Company effected a 1.0-for-4.225582 reverse stock split of its issued and outstanding shares of common stock and proportional adjustment to the existing conversion ratios for each series of the Company’s convertible preferred stock. Accordingly, all share and per share amounts for all periods presented in the accompanying financial statements and notes thereto have been adjusted retroactively, where applicable, to reflect this reverse stock split and adjustment of the preferred stock conversion ratios.

Significant accounting policies

Use of estimates

The preparation of the Company’s financial statements in accordance with U.S. GAAP requires the use of estimates and assumptions, based on judgments considered reasonable, which affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. The Company bases its estimates and assumptions on known trends and events and various other factors that management believes to be reasonable under the circumstances, the results of which form the basis for

10

making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Changes in estimates are recorded in the period in which they become known. Due to the risks and uncertainties involved in the Company’s business and evolving market conditions and, given the subjective element of the estimates and assumptions made, actual results may differ from estimated results.

Concentrations of credit risk and significant suppliers

Financial instruments that potentially subject the Company to concentration of credit risk consist of cash and cash equivalents. The Company’s money market funds are invested in highly rated funds. Periodically, the Company maintains deposits in accredited financial institutions in excess of federally insured limits. The Company has not experienced any losses on its deposits of cash and cash equivalents and does not believe that it is exposed to any unusual credit risk beyond the normal credit risk associated with commercial banking relationships.

The Company is dependent on third-party manufacturers to supply products for research and development activities of its programs, including preclinical and clinical testing. These programs could be adversely affected by a significant interruption in the supply of such drug substance and drug products. As of December 31, 2020, the Company had one vendor that accounted for approximately 95% of the total accounts payable. As of September 30, 2021, the Company had two vendors that accounted for approximately 86% of the total accounts payable. During the three months ended September 30, 2021, the Company had three vendors that accounted for approximately 74% its research and development expense. During the nine months ended September 30, 2021, the Company had two vendors that accounted for approximately 58% its research and development expense.

Patent costs

The legal and professional costs incurred by the Company to maintain its patent rights have been expensed as part of general and administrative expenses since Inception. As of September 30, 2021 and 2020, the Company has determined that these expenses have not met the criteria to be capitalized. Intellectual property related expenses for the three months ended September 30, 2021 and 2020 were $18 and $13, respectively.  Intellectual property related expenses for the nine months ended September 30, 2021 and 2020 were $173 and $118, respectively.

Recently issued accounting pronouncements

In December 2019, the Financial Accounting Standards Board issued Accounting Standards Update (“ASU”) 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. Among other items, the amendments in ASU 2019-12 simplify the accounting treatment of tax law changes and year-to-date losses in interim periods. An entity generally recognizes the effects of a change in tax law in the period of enactment; however, there is an exception for tax laws with delayed effective dates. Under current guidance, an entity may not adjust its annual effective tax rate for a tax law change until the period in which the law is effective. This exception was removed under ASU 2019-12, thereby providing that all effects of a tax law change are recognized in the period of enactment, including adjustment of the estimated annual effective tax rate. Regarding year-to-date losses in interim periods, an entity is required to estimate its annual effective tax rate for the full fiscal year at the end of each interim period and use that rate to calculate its income taxes on a year-to-date basis. However, current guidance provides an exception that when a loss in an interim period exceeds the anticipated loss for the year, the income tax benefit is limited to the amount that would be recognized if the year-to-date loss were the anticipated loss for the full year. ASU 2019-12 removes this exception and provides that in this situation, an entity would compute its income tax benefit at each interim period based on its estimated annual effective tax rate. ASU 2019-12 is effective for fiscal years beginning after December 15, 2021, with early adoption permitted. The Company has not elected to early adopt ASU 2019-12 and is currently evaluating the impact the adoption of the standard will have on its financial statements and related disclosures.

11

3. Fair value measurements of financial assets

The Company’s financial assets subject to fair value measurements on a recurring basis and the level of inputs used for such measurements were as follows:

As of September 30, 2021

    

Fair Value

    

Unrealized 

    

Unrealized 

    

Fair 

Hierarchy

Cost

gains

losses

value

Money market funds included in cash and cash equivalents

Level 1

$

64,515

$

$

$

64,515

As of December 31, 2020

    

Fair Value

    

Unrealized 

    

Unrealized 

    

Fair 

Hierarchy

Cost

gains

losses

value

Money market funds included in cash and cash equivalents

Level 1

$

76,013

$

$

$

76,013

During the three and nine months ended September 30, 2021, the Company had no transfers between Level 1, Level 2 or Level 3 financial assets.

4. Accrued expenses

Accrued expenses consist of the following:

    

September 30, 

    

December 31, 

2021

2020

Accrued preclinical and clinical trial costs

$

2,276

$

505

Accrued compensation

 

901

 

429

Accrued consulting

 

52

 

127

Accrued professional services

 

174

 

28

Accrued other

 

42

 

17

Total accrued expenses

$

3,445

$

1,106

5. Convertible preferred stock

The Company had issued Series A and Series B convertible preferred stock (collectively, the “Convertible Preferred Stock”). As of December 31, 2020, the Company’s certificate of incorporation, as amended and restated, authorized the Company to issue 66,493,889 shares of $0.0001 par value convertible preferred stock, of which 32,450,000 were designated as Series A convertible preferred stock (“Series A”) and 34,043,889 were designated as Series B convertible preferred stock (“Series B”). As of December 31, 2020, all of the Company’s Convertible Preferred Stock was classified outside of stockholders’ deficit because the shares contained deemed liquidation rights that were a contingent redemption feature not solely within the control of the Company.

Series A and B

On July 12, 2019, the Company sold 5,450,000 shares of Series A at a price of $1.00 per share (“Series A Original Issue Price”) pursuant to the Series A stock purchase agreement (the “Series A Purchase Agreement”), for gross proceeds of $5,450. On August 7, 2019, investors purchased an additional 1,816,750 shares of Series A at the Series A Original Issue Price, for gross proceeds of $1,817.

Upon achievement of the Milestone Closing (as defined in the Series A Purchase Agreement) and approval by the Company’s board of directors, the Company issued an additional 25,183,250 shares of Series A at the Series A Original Issue Price on January 9, 2020 for gross proceeds of $25,183.

12

On November 10, 2020, the Company sold 34,043,889 shares of Series B at a price of $1.9093 per share, (“Series B Original Issue Price”), pursuant to the Series B stock purchase agreement for gross proceeds of $65,000.

Conversion

Upon the closing of the IPO in June 2021, all shares of convertible preferred stock then outstanding were automatically converted into 15,736,053 shares of common stock. No convertible stock was outstanding as of September 30, 2021.

6. Common stock

As of September 30, 2021, the Company’s certificate of incorporation, as amended and restated, authorized the Company to issue 500,000,000 shares of $0.0001 par value common stock.

Each share of common stock entitles the holder to one vote on all matters submitted to a vote of the Company’s stockholders. Common stockholders are entitled to receive dividends, as may be declared by the board of directors, if any.

Reverse Stock Split

On June 17, 2021, the Company effected a 1.0-for-4.225582 reverse stock split of its issued and outstanding shares of common stock and proportional adjustment to the existing conversion ratios for each series of the Company’s convertible preferred stock. Accordingly, all share and per share amounts for all periods presented in the accompanying financial statements and notes thereto have been adjusted retroactively, where applicable, to reflect this reverse stock split and adjustment of the preferred stock conversion ratios.

Initial Public Offering

On June 29, 2021, the Company closed its initial public offering (“IPO”) and issued 6,250,000 shares of its common stock at a price of $16.00 per share for net proceeds of $91,059, after deducting underwriting discounts and commissions and expenses of $8,941. In connection with the IPO, all shares of Series A and Series B convertible preferred stock converted into 15,736,053 shares of common stock. On July 19, 2021, in connection with the Company’s IPO, the underwriters exercised the right to purchase 403,407 shares of the Company’s common stock at a price of $16.00 per share for net proceeds of $6,003, after deduction underwriting discounts of $452.  

As of September 30, 2021, 23,225,637 and 23,201,971 shares of common stock were issued and outstanding, respectively, including 788,847 shares issued to founders. As of December 31, 2020, 836,177 and 800,679 shares of common stock were issued and outstanding, respectively, including 788,847 shared issued to founders. The Company has reserved a total of 27,565,320 shares of common stock as of September 30, 2021 for common stock outstanding, the exercise of outstanding stock options and the number of shares remaining available for future grant under the Company’s 2021 Stock Incentive Plan.

7. Stock-based compensation

Stock-based compensation expense as reflected in the Company’s statements of operations was as follows:

Three months ended September 30, 

Nine months ended September 30, 

    

2021

    

2020

2021

    

2020

Research and development

$

83

$

8

$

157

$

16

General and administrative

 

576

 

7

 

725

 

20

Stock-based compensation expense included in operating expenses

$

659

$

15

$

882

$

36

13

2021 Equity Incentive Plan

The Company has adopted the 2021 Equity Incentive Plan (“2021 Plan”), which became effective on June 24, 2021, the date the prospectus related to the Company's IPO was deemed effective by the SEC. The 2021 Plan authorizes the award of stock options, restricted stock awards (“RSAs”), stock appreciation rights (“SARs”), restricted stock units (“RSUs”), cash awards, performance awards and stock bonus awards. The Company has initially reserved 1,483,445 shares of its common stock, plus any reserved shares not issued or subject to outstanding grants under the 2019 Plan on the effective date of the 2021 Plan, for issuance pursuant to awards granted under the 2021 Plan. The number of shares reserved for issuance under the 2021 Plan will increase automatically on January 1 of each of 2022 through 2031 by the number of shares equal to the lesser of 5% of the aggregate number of outstanding shares of the Company’s common stock as of the immediately preceding December 31, or a number as may be determined by our board of directors.

2019 Stock Incentive Plan

The Company’s Board of Directors adopted the Company’s 2019 Stock Incentive Plan, (“2019 Plan”) in May 2019 to provide long-term incentives for its employees, non-employee directors and certain consultants. For the nine months ended September 30, 2021, 1,016,337 options were granted under the 2019 Plan, which terminated in connection with the Company’s IPO. The Company will not grant any additional awards under the 2019 Plan thereafter.

2021 Employee Stock Purchase Plan

The Company has adopted the Employee Stock Purchase Plan (“ESPP”) which became effective June 24, 2021, the date the prospectus related to the Company's IPO was deemed effective by the SEC, to enable eligible employees to purchase shares of its common stock with accumulated payroll deductions at a discount beginning on a date to be determined by the board of directors or compensation committee. The ESPP is intended to qualify under Section 423 of the Code. The Company has initially reserved 228,222 shares of its common stock for sale under the ESPP. The aggregate number of shares reserved for sale under the ESPP will increase automatically on January 1st of each of 2022 through 2031 by the number of shares equal to the lesser of 1% of the total outstanding shares of the Company’s common stock as of the immediately preceding December 31 (rounded to the nearest whole share) or a number of shares as may be determined by the board of directors in any particular year. The aggregate number of shares issued over the term of the ESPP, subject to stock-splits, recapitalizations or similar events, may not exceed 4,564,440 shares of the Company’s common stock.

Stock options

The following is a summary of the Company’s stock option activity for the nine months ended September 30, 2021:

    

    

Weighted- 

    

Weighted- average 

    

average 

remaining contractual 

Aggregate 

Options

exercise price

term (years)

intrinsic value

Outstanding at December 31, 2020

 

1,761,062

$

0.95

 

9.54

$

723

Granted

 

1,088,000

 

7.78

 

 

3,087

Outstanding at September 30, 2021

 

2,849,062

 

3.56

 

9.13

$

12,056

Vested at September 30, 2021

 

398,157

 

0.96

 

8.30

$

2,805

Vested and expected to vest at September 30, 2021

 

2,849,062

$

3.56

 

9.13

$

12,056

14

The following is a summary of the Company’s stock option activity for the nine months ended September 30, 2020:

    

    

Weighted- 

    

Weighted- average 

    

average 

remaining contractual 

Aggregate 

Options

exercise price

term (years)

intrinsic value

Outstanding at December 31, 2019

 

459,650

$

0.43

 

9.72

$

Granted

 

364,889

 

0.43

 

 

Early exercise

(47,330)

0.43

Outstanding at September 30, 2020

 

777,209

 

0.43

 

9.20

$

Vested at September 30, 2020

 

 

 

$

Vested and expected to vest at September 30, 2020

 

777,209

$

0.43

 

9.20

$

The weighted average grant-date fair value of stock options granted during the nine months ended September 30, 2021 and 2020 was $5.17 and $0.27 per share, respectively. The fair value of each stock option was estimated using a Black-Scholes option-pricing model with the following assumptions:

    

Three months ended September 30, 

 

Nine months ended September 30, 

 

2021

    

2020

 

2021

    

2020

 

Risk-free interest rate

 

1.19

%  

%

0.95 - 1.19

%  

0.2 - 0.75

%

Volatility

 

76

%  

%

76-77

%  

75-76

%

Dividend yield

 

0.00

%  

%

0.00

%  

0.00

%

Expected term (years)

 

6

 

6

 

3-6

The fair value of options that vested during the nine months ended September 30, 2021 and 2020 was $304 and $0, respectively. The Company recorded stock-based compensation expense associated with stock option awards of $454 and $14 during the three months ended September 30, 2021 and 2020, respectively, and $662 and $35 during the nine months ended September 30, 2021 and 2020, respectively. As of September 30, 2021, there was $6,227 of total unrecognized compensation cost related to unvested stock-based awards, which the Company expects to recognize over a remaining weighted-average period of 3.4 years.

Restricted Common Stock

The terms of the 2019 Plan permitted certain option holders to exercise options before their options are vested, subject to certain limitations. Upon early exercise, the awards become subject to a restricted stock agreement and are subject to the same vesting provisions in the original stock option awards. Shares issued as a result of early exercise that have not vested are subject to repurchase by the Company upon termination of the purchaser’s employment, at the lesser of the price paid by the purchaser or the fair value of the shares at the time of repurchase. Such shares are not deemed to be issued for accounting purposes until they vest and are therefore excluded from shares outstanding until the repurchase right lapses and the shares are no longer subject to the repurchase feature. The liability is reclassified into common stock and additional paid-in capital as the shares vest and the repurchase right lapses. Accordingly, the Company has recorded the unvested portion of the exercise proceeds of $10 and $15 as a liability from the early exercise in the accompanying balance sheets as of September 30, 2021 and December 31, 2020, respectively. The Company recorded stock-based compensation expense associated with restricted common stock of $1 and $3 during the three and nine months ended September 30, 2021, respectively.

Restricted Stock Units

The Company issues RSUs to employees that generally vest over a four-year period with 25% of awards vesting after one year and then monthly thereafter. Any unvested shares will be forfeited upon termination of services. The fair value of an RSU is equal to the fair market value price of the Company’s common stock on the date of grant. RSU expense is amortized straight-line over the vesting period.

15

The following table summarizes activity related to restricted stock units:

    

    

Weighted- average

grant date

Number of shares

fair value

Unvested at December 31, 2020

 

$

Granted

 

200,996

 

16.00

Unvested at September 30, 2021

 

200,996

 

16.00

The Company recorded stock-based compensation expense of $204 and $217 for the three and nine months ended September 30, 2021, related to RSUs. As of September 30, 2021, the total unrecognized expense related to all RSUs was $3,000, which the Company expects to recognize over a weighted-average period of 3.7 years.

8. Commitments and Contingencies

Asset Purchase and License Agreements

In May 2019, the Company entered into an asset purchase agreement with the previous sponsor, pursuant to which it acquired all rights and interest to patents, know-how, and inventory for assets related to seribantumab, a fully humanized immunoglobulin G2 monoclonal antibody against HER3.

Pursuant to the asset purchase agreement, the Company made an upfront, non-refundable payment of $3,500 at closing. If the Company succeeds in developing and commercializing seribantumab, the Company may be obligated to pay the previous sponsor up to $54,500 in development, regulatory and sales milestone payments.

Under the terms of the asset purchase agreement, the Company assumed the rights and obligations of the following collaboration and license agreements previously held by the previous sponsor:

Dyax—The Company assumed all rights and obligations provided for under the amended and restated collaboration agreement executed between Dyax Corp. (“Dyax”) and the previous sponsor (the “Dyax Agreement”). Pursuant to the Dyax Agreement, Dyax utilized its proprietary phage technology to identify antibodies that would bind to targets of interest to the previous sponsor. Additionally, Dyax granted to the previous sponsor a world-wide, non-exclusive, royalty free right to use and make any and all of the antibodies identified by Dyax for certain research purposes. Seribantumab was identified as a result of the research activities performed under the Dyax Agreement.

Pursuant to the terms of the Dyax Agreement, the Company may be obligated to pay Dyax milestone payments of up to approximately $9,300 if certain development and regulatory milestones are achieved. In addition, Dyax is entitled to mid-single digit royalties based on net sales of seribantumab. The Company’s obligation to pay royalties to Dyax continues on a product-by-product and country-by-country basis until the later of a specified number of years after the first commercial sale in such country and the expiration of the patent rights covering seribantumab in such country.

The Dyax Agreement will remain in effect, unless earlier terminated, for so long as the Company continues to develop or commercialize seribantumab. Either party may terminate the agreement in the event of an uncured material breach by the other party. The Company also has the right to terminate the agreement in its entirety or on a product-by-product basis at any time upon 90 days’ prior written notice.

Selexis—The Company assumed all rights and obligations provided for under the amended commercial license agreement executed between Selexis SA (“Selexis”) and the previous sponsor (the “Selexis Agreement”). Pursuant to the Selexis Agreement, the Company received non-exclusive rights to technology for use in the manufacture of seribantumab and may be required to make milestone payments of up to approximately 900, per licensed product, if certain development and regulatory milestones are achieved. Additionally, Selexis may have the right to obtain a royalty of the greater of 200 annually and less than one percent on net sales of seribantumab.

16

The obligation to pay royalties with respect to each product sold in a country continues until the expiration of the patent rights covering the product in such country.

Either party may terminate the agreement in the event of an uncured material breach by the other party. The Company also has the right to terminate the agreement at any time upon 60 days’ prior written notice.

National Institute of Health—The Company assumed all rights and obligations provided for under the amended commercial license agreement executed between the U.S. Public Health Service, a division of the U.S. Department of Health and Human Services (the “NIH”) and the previous sponsor (the “NIH Agreement”). Pursuant to the NIH Agreement, the Company received non-exclusive rights in the United States to patents related to certain antibodies associated with seribantumab. If certain development and regulatory milestones are achieved, the Company may be obligated to pay NIH additional milestone payments of up to approximately $350 per licensed product.

The Company evaluated the asset purchase agreement with the previous sponsor under ASC Topic 805, Business Combinations, and concluded that the transaction did not meet the requirements to be accounted for as a business combination and therefore was accounted for as an asset acquisition. Accordingly, the upfront payment of $3,500 was expensed as research and development expenses in the statement of operations for the period from Inception through December 31, 2019. Additionally, the Company concluded that all consideration to be paid under the asset purchase agreement is contingent in nature and will be recognized when the respective contingency is resolved. The Company assessed the contingent events which would result in the payment of a milestone during the nine months ended September 30, 2021 and 2020, and concluded no such payments were required.

Other Research Arrangements

On June 14, 2021, the Company entered into a collaboration agreement (the “Caris Agreement”) with Caris Life Sciences (“Caris”). Under the terms of the Caris Agreement, Caris will identify targets for the collaboration and provide those targets to the Company at regular intervals for review and approval. Once a target is selected by the collaboration’s joint steering committee, the collaboration will retain exclusive access to the selected targets. The financial terms surrounding development and commercialization of each product candidate identified for the collaboration and included in the Caris Agreement vary based on the level of participation elected by each party in the development and commercialization efforts following identification of a target. There are no upfront or milestone payments or royalties due to either party under the collaboration. With respect to proceeds from a product resulting from the collaboration, Caris will be entitled to an initial percentage ranging from the mid-single digits to low teens with the remaining proceeds allocated based on each party’s pro rata share of expenses incurred in development of the product.

The Caris Agreement provides flexibility for Caris and the Company to jointly develop and commercialize, or for either the Company or Caris to incur development and commercialization expenses. The ultimate percentage of proceeds payable to the Company and Caris will depend on the level of development and commercialization participation elected by each party.

The Company will own the intellectual property rights to the therapeutics developed under the collaboration, and Caris will own the intellectual property rights to the diagnostics developed under the collaboration.

Either party may terminate the Caris Agreement for uncured material breach by the other party or in the case of the other party’s insolvency. The term of the Caris Agreement is three years, automatically renewing for one-year terms. Either party may terminate the agreement at the end of a term by written notice to the other, subject to the continuation of exclusivity with respect to any target selected by the Joint Steering Committee, so long as commercially reasonable efforts are used to discover, identify, develop and/or commercialize a therapeutic related to such target.

17

9. Net loss per share

The following table summarizes the computation of basic and diluted net loss per share of the Company:

Three months ended

Nine months ended

September 30, 

September 30, 

    

2021

    

2020

2021

    

2020

Net loss

$

(12,267)

$

(3,011)

$

(22,417)

$

(8,375)

Weighted average common stock outstanding, basic and diluted

23,114,715

792,790

8,402,277

790,175

Net loss per share, basic and diluted

$

(0.53)

$

(3.80)

$

(2.67)

$

(10.60)

The Company’s potentially dilutive securities, which include convertible preferred stock, options to purchase common stock and unvested restricted stock, have been excluded from the computation of diluted net loss per share as the effect would be to reduce the net loss per share. Therefore, the weighted average number of common shares outstanding used to calculate both basic and diluted net loss per share is the same. The Company excluded the following potential common shares, presented based on amounts outstanding at each period end, from the computation of diluted net loss per share for the periods indicated because including them would have had an anti-dilutive effect:

September 30, 

    

2021

    

2020

Convertible preferred shares

 

 

32,450,000

Outstanding stock options

 

2,849,062

 

777,209

Unvested restricted stock

23,666

39,442

Unvested RSUs

 

200,996

 

 

3,073,724

 

33,266,651

18

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 the “Selected Consolidated Financial Data” section of this Quarterly Report on Form 10-Q and our consolidated financial statements and the related notes. This discussion and other parts of this Quarterly Report on Form 10-Q contain forward-looking statements that involve risks and uncertainties, such as statements of our plans, objectives, expectations and intentions. As a result of many factors, including those factors set forth in the “Risk Factors” section of this Quarterly Report on Form 10-Q, our actual results could differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.

Overview

We are a precision oncology company focused on the development of targeted therapeutics for the treatment of cancer in genomically-defined patient populations. Our vision is to elevate precision medicine to the forefront of every cancer treatment journey, as we believe that each patient living with cancer deserves the opportunity to benefit from a genomically-driven treatment decision. We utilize our deep expertise in developing drugs for rare, genomically-defined patient populations and strategic collaborations with our diagnostic collaborators to work towards a future where each tumor’s unique genomic test result can be matched with a purpose-built precision medicine.

We are focused on identifying oncogenic drivers that are known to be predominantly mutually exclusive with other driver alterations, and pursuing innovations and efficiencies in the conduct of clinical trials that we believe may enable development of targeted therapeutics against those oncogenic drivers.

Our lead program is focused on NRG1 fusions, which are rare genomic alterations that have recently been identified as oncogenic driver alterations and that we believe have the potential to be therapeutically actionable through targeted HER3 inhibition. We have designed and initiated our potentially registration-enabling Phase 2 CRESTONE trial to investigate the safety and efficacy of seribantumab, an anti-HER3 monoclonal antibody, in advanced solid tumors harboring an NRG1 fusion. We are conducting this trial in a tumor-agnostic fashion, such that any patient with a solid tumor that harbors an NRG1 fusion, regardless of the tissue of origin, may be eligible. We believe that the design and conduct of the CRESTONE trial has the possibility to produce results that may provide support for us to seek accelerated approval of seribantumab for patients with advanced solid tumors harboring an NRG1 fusion, subject to discussions with the FDA. Any accelerated marketing approval is subject to continued discussions with the FDA, and agreement on post-approval confirmatory trials to confirm an anticipated clinical benefit. If the CRESTONE trial meets its primary endpoint, and subject to continued discussions with the FDA, we anticipate submitting a BLA under an accelerated approval pathway for the treatment of patients with solid tumors harboring an NRG1 fusion. Even if the CRESTONE trial meets its primary endpoint, there can be no assurance that the FDA or other regulators will find such data sufficient to support a BLA submission or that additional trials will not be required. Further updates on the CRESTONE trial may be provided following additional information including, but not limited to, interactions with the FDA or other regulators, with whom we plan to discuss the interim clinical data and any resulting development pathways and opportunities. We expect to complete enrollment of the first 20 patients in Cohort 1 of CRESTONE in mid-2022. We also anticipate presenting initial clinical data at a major medical meeting in mid-2022, which will include results from approximately 10 patients from Cohort 1 with meaningful follow-up who have been treated with seribantumab at 3 grams weekly.

We intend to continue to expand our pipeline by leveraging our partnerships, as well as our own internal expertise and capabilities, to potentially accelerate the identification of additional actionable oncogenic targets that are unique drivers of cancer and are suitable for therapeutic intervention. We then expect to in-license, acquire or discover assets with potential against those identified oncogenic driver targets. In June 2021, we announced a joint discovery and development collaboration with Caris Life Sciences focused on identifying actionable oncogenic fusions and driver alterations and jointly discovering and developing therapeutics to target them. Through this collaboration, we continually leverage Caris’s screening capabilities to identify potential targets. Caris and we can then elect to initiate a novel drug discovery program for those targets, or evaluate existing therapeutics for potential in-licensing or product acquisition, while retaining exclusive access to all targets selected by the parties.

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We were incorporated in April 2019. We have devoted substantially all of our resources to developing our lead product candidate, initiating the CRESTONE clinical trial, building our intellectual property portfolio, business planning, raising capital and providing general and administrative support for these operations. To date, we have financed our operations through private placements of convertible preferred stock and our initial public offering, or IPO. On June 29, 2021, we closed our IPO and issued 6,250,000 shares of our common stock at a price of $16.00 per share, for net proceeds of $91.1 million, after deducting underwriting discounts, commissions, and other expenses of $8.9 million. In connection with the IPO, all shares of Series A and Series B convertible preferred stock outstanding automatically converted into 15,736,053 shares of common stock. On July 19, 2021, in connection with our IPO, the underwriters exercised the right to purchase 403,407 shares of our common stock at a price of $16.00 for net proceeds of $6.0 million.  Prior to our IPO, we had received net proceeds of approximately $97.2 million from sales of our convertible preferred stock.

Since inception, we have incurred significant operating losses on an aggregate basis. Our ability to generate product revenue sufficient to achieve profitability will depend on the successful development and eventual commercialization of 12.3or more of our current or future product candidates. Our net losses were $12.3 million and $3.0 million for the three months ended September 30, 2021 and 2020, respectively, and $22.4 million and $8.4 million for the nine months ended September 30, 2021 and 2020, respectively. As of September 30, 2021, we had an accumulated deficit of $45.6 million. These losses have resulted primarily from costs incurred in connection with research and development activities, acquisition, patent investment, and general and administrative costs associated with our operations. We expect to continue to incur significant expenses and increasing operating losses for at least the next several years.

We believe our cash and cash equivalents of $155.2 million as of September 30, 2021 will enable us to fund our operating expenses and capital expenditure requirements into the second quarter of 2023. We have based this estimate on assumptions that may prove to be wrong, and we could exhaust our available capital resources sooner than we expect. We will need to raise additional capital in the future to continue developing the drugs in our pipeline and to commercialize any approved drug. We may seek to obtain additional financing in the future through the issuance of our common stock, through other equity or debt financings or through collaborations or partnerships with other companies. We may not be able to raise additional capital on terms acceptable to us, or at all, and any failure to raise capital as and when needed could compromise our ability to execute on our business plan.

Impact of COVID-19

Since it was reported to have surfaced in December 2019, COVID-19 has spread across the world and has been declared a pandemic by the World Health Organization. Efforts to contain the spread of COVID-19 have intensified and the United States, Europe and Asia have implemented severe travel restrictions, social distancing requirements, stay-at-home orders and have delayed the commencement of non-COVID-19-related clinical trials, among other restrictions. As a result, the current COVID-19 pandemic has presented a substantial public health and economic challenge around the world and is affecting our employees, patients, communities and business operations, as well as contributing to significant volatility and negative pressure on the U.S. economy and in financial markets.

While we are currently continuing the clinical trials we have underway, COVID-19 precautions may directly or indirectly impact the timeline for some of our clinical trials. To date, we have been able to continue to enroll our patients in our Phase 2 CRESTONE clinical trial and currently do not anticipate any interruptions of clinical enrollment. However, we are continuing to assess the potential impact of the COVID-19 pandemic on our current and future business and operations, including our expenses and clinical trials, as well as on our industry and the healthcare system.

The full extent to which the COVID-19 pandemic will directly or indirectly impact our business, results of operations and financial condition, including expenses, clinical trials and research and development costs, will depend on future developments that are highly uncertain, including as a result of new information that may emerge concerning COVID-19 and the actions taken to contain or treat COVID-19, as well as the economic impact on local, regional, national and international markets.

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Components of our Results of Operations

Operating Expenses

Research and Development Expenses

Our operating expenses have consisted solely of research and development costs and general and administrative costs. Research and development expenses consist primarily of costs incurred for our research activities, including the development of our product candidates, which include:

employee-related expenses, including salaries, related benefits, and stock-based compensation expense for employees engaged in research and development activities;
external research and development expenses incurred in connection with the preclinical and clinical development of seribantumab, including expenses incurred under agreements with contract research organizations, and consultants;
costs incurred with contract manufacturing organizations that manufacture drug products for use in our preclinical studies and clinical trials of seribantumab;
fees paid to consultants for services directly related to our product development and regulatory efforts; and
costs related to compliance with regulatory requirements related to conducting our clinical activity.

Research and development costs consist of salaries and benefits, including associated stock-based compensation, and fees paid to other entities that conduct certain research and development activities on our behalf. Research and development costs are expensed as incurred. We estimate preclinical study and clinical trial expenses based on the services performed pursuant to contracts with research institutions and contract research organizations, and clinical manufacturing organizations that conduct and manage preclinical studies and clinical trials on our behalf based on actual time and expenses incurred by them. Further, we accrue expenses related to clinical trials based on the level of patient activity according to the related agreement. We monitor patient enrollment levels and related activity to the extent reasonably possible and adjust estimates accordingly.

To date, all of our research and development expenses have been incurred to advance our lead product candidate, seribantumab. We expect that significant additional spending will be required to progress seribantumab through the remainder of its clinical development, as well as advance any future product candidate through clinical development. These expenses will primarily consist of expenses for the administration of clinical studies as well as manufacturing costs for clinical material supply. At this time, we cannot reasonably estimate or know the nature, timing and costs of the efforts that will be necessary to complete the preclinical and clinical development of any of our product candidates.

The following table provides a breakout of our research and development expenses by major categories of expense:

Three months ended

Nine months ended

September 30, 

September 30, 

    

2021

    

2020

2021

    

2020

(in thousands)

Seribantumab

$

7,745

$

1,806

$

13,881

$

4,717

Unallocated and other research and development expenses

 

611

 

378

1,240

 

1,505

Unallocated personnel costs (including stock based compensation)

 

942

 

366

2,225

 

820

Total research and development expenses

$

9,298

$

2,550

$

17,346

$

7,042

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The successful development and commercialization of seribantumab or our other future product candidates is highly uncertain. The success of seribantumab, or any other future product candidate will depend on several factors, including the following:

successful completion of preclinical studies and clinical trials, including our CRESTONE trial;
acceptance of a biologic license application, or BLA, by the FDA, or other similar clinical trial applications from foreign regulatory authorities for seribantumab and our future clinical trials for our future product candidates;
timely and successful enrollment of patients in, and completion of, clinical trials with favorable results;
demonstration of safety, efficacy and acceptable risk-benefit profiles of our product candidates, including our lead product candidate, seribantumab, to the satisfaction of the FDA and foreign regulatory agencies;
our ability, or that of our collaborators, to develop and obtain clearance or approval of companion diagnostics, on a timely basis, or at all;
receipt and related terms of marketing approvals from applicable regulatory authorities, including the completion of any required post-marketing studies or trials;
raising additional funds necessary to complete clinical development of and commercialize our lead product candidate;
successfully identifying future acquisition, collaboration or in-license candidates to expand our product candidate pipeline;
obtaining and maintaining patent, trade secret and other intellectual property protection and regulatory exclusivity for our product candidates, including our lead product candidate, seribantumab;
making arrangements with third-party manufacturers, or establishing manufacturing capabilities, for both clinical and commercial supplies of our product candidates;
developing and implementing marketing and reimbursement strategies;
establishing sales, marketing and distribution capabilities and launching commercial sales of our products, if and when approved, whether alone or in collaboration with others;
acceptance of our products, if and when approved, by patients, the medical community and third-party payors;
effectively competing with other therapies;
obtaining and maintaining third-party payor coverage and adequate reimbursement;
protecting and enforcing our rights in our intellectual property portfolio; and
maintaining a continued acceptable safety profile of the products following approval.

Many of these factors are beyond our control, and it is possible that none of our product candidates, including our lead product candidate, seribantumab, will ever obtain regulatory approval even if we expend substantial time and resources seeking such approval. If we do not achieve one or more of these factors in a timely manner or at all, we could experience significant delays or an inability to successfully commercialize our product candidates, which would materially harm our

22

business. For example, our business could be substantially harmed if results of our ongoing CRESTONE clinical trial of seribantumab vary adversely from our expectations.

General and Administrative Expenses

General and administrative expenses consist primarily of salaries and other related costs, including stock-based compensation, for personnel in our executive and administrative functions. General and administrative expenses also include legal fees relating to patent and corporate matters; professional fees for accounting, auditing, tax and consulting services; and insurance costs.

We anticipate that our general and administrative expenses will increase in the future as we support our continued research activities and development of our product candidates. We also expect to incur increased expenses associated with operating as a public company, including costs of accounting, audit, legal, investor and public relations, directors and officers insurance, and regulatory and tax related services associated with maintaining compliance with exchange listings and SEC requirements. In addition, if we obtain regulatory approval for seribantumab, or any of our future product candidates, we expect to incur significant expenses related to building a sales and marketing team to support product sales, and marketing and distribution activities, to the extent that such activities are not supported by one or more third-party collaborators.

Results of Operations

Three months ended September 30, 2021 and 2020

The following table summarizes our results of operations for the three months ended September 30, 2021 and 2020:

Three months ended

September 30, 

    

2021

    

2020

    

Change

(in thousands)

Operating expenses:

 

  

 

  

 

  

Research and development

$

9,298

$

2,550

$

6,748

General and administrative

 

2,979

 

462

 

2,517

Total operating expenses

 

12,277

 

3,012

 

9,265

Loss from operations

 

(12,277)

 

(3,012)

 

(9,265)

Other income

 

10

 

1

 

9

Net loss

$

(12,267)

$

(3,011)

$

(9,256)

Research and Development Expenses

Research and development expenses were $9.3 million for the three months ended September 30, 2021, compared to $2.6 million for the three months ended September 30, 2020. The increase of $6.7 million was primarily due to a $4.9 million increase in costs related to manufacturing clinical supply of seribantumab for use in the CRESTONE clinical trial, a $1.1 million increase in clinical trial expenses associated with the CRESTONE clinical trial, a $0.5 million increase in employee related costs, including stock-based compensation, and an increase of $0.2 million in regulatory, consulting, and other expenses.

General and Administrative Expenses

General and administrative expenses were $3.0 million for the three months ended September 30, 2021, compared to $0.5 million for the three months ended September 30, 2020. The increase of $2.5 million was primarily due to an increase of $1.3 million in personnel costs, including stock-based compensation, an increase of $0.9 million in administrative costs including Directors and Officers insurance, and an increase of $0.3 million of professional fees and other consulting costs.

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Nine months ended September 30, 2021 and 2020

The following table summarizes our results of operations for the nine months ended September 30, 2021 and 2020:

Nine months ended

September 30, 

    

2021

    

2020

    

Change

(in thousands)

Operating expenses:

 

  

 

  

 

  

Research and development

$

17,346

$

7,042

$

10,304

General and administrative

 

5,076

 

1,347

 

3,729

Total operating expenses

 

22,422

 

8,389

 

14,033

Loss from operations

 

(22,422)

 

(8,389)

 

(14,033)

Other income

 

5

 

14

 

(9)

Net loss

$

(22,417)

$

(8,375)

$

(14,042)

Research and Development Expenses

Research and development expenses were $17.3 million for the nine months ended September 30, 2021, compared to $7.0 million for the nine months ended September 30, 2020. The increase of $10.3 million was primarily due to a $5.7 million increase in costs related to manufacturing clinical supply of seribantumab for use in the CRESTONE clinical trial, a $3.5 million increase in clinical trial expenses associated with the CRESTONE clinical trial, a $1.4 million increase in employee related costs, including stock-based compensation, partially offset by a $0.3 million reduction in regulatory, consulting, and other expenses.

General and Administrative Expenses

General and administrative expenses were $5.1 million for the nine months ended September 30, 2021, compared to $1.3 million for the nine months ended September 30, 2020. The increase of $3.7 million was primarily due to an increase of $1.8 million in personnel costs, including stock-based compensation, an increase of $0.9 million of professional fees and consulting costs, and an increase of $1.0 million in administrative costs including Directors and Officers insurance.

Liquidity and Capital Resources

Since inception, we have not generated any revenue from product sales or any other sources and have incurred significant operating losses. We have not yet commercialized any products and we do not expect to generate revenue from sales of any product candidates for several years, if ever.

On June 29, 2021, we closed our IPO and issued 6,250,000 shares of our common stock for net proceeds of approximately $91.1 million. On July 19, 2021, in conjunction with our IPO, the underwriters exercised the right to purchase 403,407 shares of our common stock at a price of $16.00 per share for net proceeds of $6.0 million.  Prior to our IPO, we had received net proceeds of approximately $97.2 million from the sale of our convertible preferred stock. As of September 30, 2021, we had cash and cash equivalents of $155.2 million.

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Cash Flows

The following table summarizes our sources and uses of cash for each of the periods presented:

Nine months ended

September 30, 

    

2021

    

2020

(in thousands)

Statement of cash flows data:

  

  

Cash used in operating activities

$

(21,253)

$

(8,915)

Cash provided by financing activities

 

97,051

 

25,203

Net increase in cash and cash equivalents

$

75,798

$

16,288

Operating Activities

During the nine months ended September 30, 2021, cash used in operating activities was $21.3 million, which consisted primarily of our net loss of $22.3 million, partially offset by $0.1 million of cash used in changes in our operating assets and liabilities, and $0.9 million of stock-based compensation expense. Net cash used in changes in our operating assets and liabilities consisted primarily of a decrease in accrued expenses due to the timing of payments related to research and development costs.

During the nine months ended September 30, 2020, cash used in operating activities was $8.9 million, which consisted primarily of our net loss of $8.4 million and $0.5 million of cash used in changes in our operating assets and liabilities.

Investing Activities

During the nine months ended September 30, 2021 and 2020, there was no cash used in or provided by investing activities.

Financing Activities

During the nine months ended September 30, 2021, cash provided by financing activities was $97.1 million, which consisted of net proceeds from the issuance of common stock upon the completion of our IPO. During the nine months ended September 30, 2020, cash provided by financing activities was $25.2 million which consisted of net proceeds from the sale and issuance of our Series A convertible preferred stock.

Future Funding Requirements

We expect our expenses to increase substantially in connection with our ongoing activities, particularly as we advance the preclinical activities and clinical trials for seribantumab, and seek to develop or acquire additional product candidates. In addition, upon the closing of this offering, we expect to incur additional costs associated with operating as a public company. The timing and amount of our operating expenditures will depend largely on:

the timing and progress of preclinical and clinical development activities;
successful enrollment in and completion of clinical trials, including CRESTONE;
the timing and outcome of regulatory review of our product candidates;
the cost to develop companion diagnostics as needed for each of our product candidates;
our ability to establish agreements with third-party manufacturers for clinical supply f