0001558370-22-007217.txt : 20220506 0001558370-22-007217.hdr.sgml : 20220506 20220505070040 ACCESSION NUMBER: 0001558370-22-007217 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 56 CONFORMED PERIOD OF REPORT: 20220331 FILED AS OF DATE: 20220505 DATE AS OF CHANGE: 20220505 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: 22893953 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-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: 001-40523

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 April 29, 2022, there were 23,253,966 shares of the registrant’s common stock outstanding.

TABLE OF CONTENTS

    

    

Page

Part I

Financial Information

5

Item 1.

Condensed Consolidated Financial Statements (unaudited)

5

Condensed Consolidated Balance Sheets as of March 31, 2022 (unaudited) and December 31, 2021

5

Condensed Consolidated Statements of Operations and Comprehensive Loss for the Three Months Ended March 31, 2022 and 2021 (unaudited)

6

Condensed Consolidated Statements of Convertible Preferred Stock and Stockholders’ Equity (Deficit) for the Three Months Ended March 31, 2022 and 2021 (unaudited)

7

Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2022 and 2021 (unaudited)

8

Notes to Condensed Consolidated 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

27

Item 4.

Controls and Procedures

28

Part II

Other Information

29

Item 1.

Legal Proceedings

29

Item 1A.

Risk Factors

29

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

86

Item 3.

Defaults Upon Senior Securities

86

Item 4.

Mine Safety Disclosures

86

Item 5.

Other Information

86

Item 6.

Exhibits

86

Exhibit Index

87

Signatures

88

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. Condensed Consolidated Financial Statements (unaudited)

ELEVATION ONCOLOGY, INC.

Condensed Consolidated Balance Sheets

(in thousands, except share and per share data)

March 31, 

December 31, 

    

2022

    

2021

    

(unaudited)

(Note 2)

Assets

    

  

    

  

Current assets:

 

  

 

  

Cash and cash equivalents

$

53,008

$

146,284

Marketable securities, available for sale

79,054

Prepaid expenses and other current assets

 

2,187

 

3,140

Total current assets

 

134,249

 

149,424

Property and equipment, net

 

34

 

38

Other non-current assets

 

25

 

32

Total assets

$

134,308

$

149,494

Liabilities and Stockholders’ Equity

 

  

 

  

Current liabilities:

 

  

 

  

Accounts payable

$

882

$

5,648

Accrued expenses

 

9,553

 

3,141

Total current liabilities

 

10,435

 

8,789

Non-current liabilities:

 

  

 

  

Restricted stock repurchase liability

 

7

 

8

Total liabilities

 

10,442

 

8,797

Commitments and contingencies (see note 10)

 

  

 

  

Stockholders’ equity:

 

  

 

  

Preferred stock, $0.0001 par value; 10,000,000 shares authorized as of March 31, 2022 and December 31, 2021; no shares issued or outstanding as of March 31, 2022 and December 31, 2021, respectively

Common stock, $0.0001 par value; 500,000,000 shares authorized as of March 31, 2022 and December 31, 2021, respectively; 23,269,742 and 23,225,637 issued as of March 31, 2022 and December 31, 2021, respectively; 23,253,966 and 23,205,915 outstanding as of March 31, 2022 and December 31, 2021, respectively

 

2

 

2

Additional paid-in capital

 

196,529

 

195,881

Accumulated other comprehensive loss

(204)

Accumulated deficit

 

(72,461)

 

(55,186)

Total stockholders’ equity

 

123,866

 

140,697

Total liabilities and stockholders’ equity

$

134,308

$

149,494

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

5

ELEVATION ONCOLOGY, INC.

Condensed 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

$

13,575

$

4,134

General and administrative

 

3,793

 

952

Total operating expenses

 

17,368

 

5,086

Loss from operations

 

(17,368)

 

(5,086)

Other income (expense), net

 

93

 

(5)

Net loss

$

(17,275)

$

(5,091)

Net loss per share, basic and diluted

$

(0.74)

$

(6.36)

Weighted average common shares outstanding, basic and diluted

 

23,216,206

 

800,679

Comprehensive loss:

Net loss

$

(17,275)

$

(5,091)

Other comprehensive loss:

Unrealized loss on marketable securities

(204)

Total other comprehensive loss

$

(204)

$

Total comprehensive loss

$

(17,479)

$

(5,091)

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

6

ELEVATION ONCOLOGY, INC.

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

(in thousands, except share data)

(unaudited)

Accumulated

Series A Convertible

    

Series B Convertible

    

    

    

    

    

Additional

    

Other

    

    

    

Total

Preferred Stock

Preferred Stock

Common Stock

Paid-in

Comprehensive

Accumulated

Stockholders’

    

Shares

    

Amount

    

Shares

    

Amount

    

Shares

    

Amount

    

Capital

    

(loss)

    

Deficit

    

Equity (Deficit)

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

3,944

2

2

Stock-based compensation

 

 

 

 

 

 

 

65

 

 

 

65

Net loss

 

 

 

 

 

 

 

 

 

(5,091)

 

(5,091)

Balance at March 31, 2021

 

32,450,000

$

32,373

 

34,043,889

$

64,815

 

804,623

$

$

133

$

$

(28,238)

$

(28,105)

Accumulated

Series A Convertible

    

Series B Convertible

    

    

    

    

    

Additional

    

Other

    

    

    

Total

Preferred Stock

Preferred Stock

Common Stock

Paid-in

Comprehensive

Accumulated

Stockholders’

    

Shares

    

Amount

    

Shares

    

Amount

    

Shares

    

Amount

    

Capital

    

(loss)

    

Deficit

    

Equity (Deficit)

Balance at December 31, 2021

 

$

$

23,205,915

$

2

$

195,881

$

$

(55,186)

$

140,697

Vesting of restricted common stock

 

 

 

 

 

3,946

 

 

2

 

 

 

2

Issuance of common stock upon stock option exercises

44,105

19

19

Stock-based compensation

 

 

 

 

 

 

 

627

 

 

 

627

Unrealized loss on marketable securities

(204)

(204)

Net loss

 

 

 

 

 

 

 

 

 

(17,275)

 

(17,275)

Balance at March 31, 2022

 

$

 

$

 

23,253,966

$

2

$

196,529

$

(204)

$

(72,461)

$

123,866

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

7

ELEVATION ONCOLOGY, INC.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

Three months ended March 31, 

    

2022

    

2021

Operating activities

    

  

    

  

Net loss

$

(17,275)

$

(5,091)

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

 

  

 

  

Stock-based compensation

 

627

 

65

Accretion of premium and interest on marketable securities

13

Depreciation expense

 

4

 

4

Changes in operating assets and liabilities:

 

  

 

  

Prepaid expenses and other assets

 

960

 

(347)

Accounts payable

 

(4,765)

 

(5,007)

Accrued expenses

 

6,412

 

899

Net cash used in operating activities

 

(14,024)

 

(9,477)

Investing activities

Purchase of marketable securities

(79,271)

Net cash used in investing activities

(79,271)

Financing activities

 

  

 

  

Cash paid for issuance costs of convertible preferred stock

 

 

(11)

Proceeds from issuance of common stock upon stock option exercises

19

Net cash provided by (used in) financing activities

 

19

 

(11)

Decrease in cash and cash equivalents

 

(93,276)

 

(9,488)

Cash and cash equivalents, beginning of period

 

146,284

 

79,400

Cash and cash equivalents, end of period

$

53,008

$

69,912

Supplemental disclosure of non-cash financing activities

 

  

 

  

Deferred offering costs in accrued expenses

$

$

448

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

8

ELEVATION ONCOLOGY, INC.

Notes to Condensed Consolidated 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 the State 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 (see Note 9). Seribantumab has been shown preclinically to inhibit 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 including prioritizing additional 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.

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. The extent of the impact of COVID-19 on the Company’s operational and financial performance will continue to depend on certain developments, including the duration and spread of the outbreak, new variants, the vaccination and booster rate, impact on the Company’s clinical studies, employee or industry events, and effect on our suppliers and manufacturers, all of which are uncertain and cannot be predicted. COVID-19 has not had a significant impact on the operations or financial results of the Company to date.

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 $17.3 million and $5.1 million for the three months ended March 31, 2022 and 2021, respectively, and had an accumulated deficit of $72.5 million as of March 31, 2022. Through March 31, 2022, the Company has funded its operations with proceeds from the sale of convertible preferred stock and proceeds from the initial public offering (“IPO”) completed in June 2021. The Company expects that its cash, cash equivalents and marketable securities will be sufficient to fund its operating expenses and capital expenditure requirements through at least 12 months from the issuance date of the condensed consolidated financial statements.

9

The accompanying condensed consolidated 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.

2. Basis of Presentation and Significant Accounting Policies

Principles of Consolidation

The condensed consolidated interim financial statements include the accounts of the Company and its wholly-owned subsidiary, Elevation Oncology Securities Corporation, which was established on November 19, 2021. All significant intercompany balances and transactions have been eliminated in consolidation.

Basis of presentation of unaudited interim consolidated financial statements

The condensed consolidated interim financial statements have been prepared in conformity with U.S. generally accepted accounting principles ("U.S. GAAP"). The accompanying unaudited condensed consolidated 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, 2021 condensed consolidated balance sheet was derived from the December 31, 2021 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, 2022.

The accompanying condensed consolidated interim financial statements should be read in conjunction with the Company’s audited financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021 (the “Annual Report”).

Significant accounting policies

Use of estimates

The preparation of the Company’s consolidated 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 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.

Deferred offering costs

The Company capitalizes certain legal, accounting and other third-party fees that are directly associated with in-process preferred stock or common stock financings as deferred offering costs until such financings are consummated. After consummation of the equity financing, these costs are recorded as a reduction to the carrying value of convertible preferred stock or in stockholders’ equity (deficit) as a reduction of additional paid-in capital generated as a result of the offering. Should a planned equity financing be abandoned, the deferred offering costs were expensed immediately as a charge to operating expenses in the statements of operations. The Company had $0.5 million of deferred offering costs for the three months ended March 31, 2021.

10

Concentrations of credit risk and significant suppliers

Financial instruments that potentially subject the Company to concentration of credit risk consist of cash, cash equivalents and marketable securities. 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 March 31, 2022, the Company had two vendors that accounted for approximately 41% of the total accounts payable. During the three months ended March 31, 2022, the Company had two vendors that accounted for approximately 77% of its research and development expense. During the three months ended March 31, 2021, the Company had two vendors that, combined, represented approximately 56% of its research and development expense. As of December 31, 2021, the Company had one vendor that accounted for approximately 74% of the total accounts payable.

Fair value measurements

Certain assets and liabilities are carried at fair value under U.S. GAAP. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. Financial assets and liabilities carried at fair value are to be classified and disclosed in one of the following three levels of the fair value hierarchy, of which the first two are considered observable and the last is considered unobservable:

Level 1—Quoted prices in active markets for identical assets or liabilities.

Level 2—Observable inputs (other than Level 1 quoted prices), such as quoted prices in active markets for similar assets or liabilities, quoted prices in markets that are not active for identical or similar assets or liabilities, or other inputs that are observable or can be corroborated by observable market data.

Level 3—Non-observable inputs that are supported by little or no market activity and that are significant to determining the fair value of the assets or liabilities, including pricing models, discounted cash flow methodologies and similar techniques.

The carrying amounts of certain of the Company’s financial instruments, including cash and cash equivalents, prepaid expenses and other current assets and accounts payable, approximate fair value due to the short-term nature of these items.

Marketable Securities, Available for Sale

All marketable securities have been classified as “available-for-sale” and are carried at fair value, based upon quoted market prices. The Company considers its available-for-sale portfolio as available for use in current operations. Accordingly, the Company may classify certain investments as short-term marketable securities, even though the stated maturity date may be one year or more beyond the current balance sheet date.

Unrealized gains and losses, net of any related tax effects, are excluded from earnings and are included in other comprehensive income (loss) and reported as a separate component of stockholders’ equity (deficit) until realized. Interest income, realized gains and losses, and declines in value judged to be other than temporary, if any, on available-for-sale securities are included in other income, net. The cost of securities sold is based on the specific-identification method. The amortized cost of securities is adjusted for accretion of premiums and amortization of discounts to maturity. In accordance with the Company’s investment policy, management invests in money market funds, corporate bonds, commercial paper, asset-backed securities and government securities. The Company has not realized any losses on its marketable securities to date.

11

Comprehensive Income (Loss)

The Company’s only element of other comprehensive income (loss) is unrealized gains and losses on available-for-sale marketable securities.

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 March 31, 2022 and 2021, the Company has determined that these expenses have not met the criteria to be capitalized. Intellectual property related expenses for the three months ended March 31, 2022 and 2021 were $0.1 million, respectively.

Recently adopted accounting pronouncements

In June 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Statements (“ASU 2016-13”). The new standard requires that expected credit losses relating to financial assets measured on an amortized cost basis and available-for-sale debt securities be recorded through an allowance for credit losses. It also limits the amount of credit losses to be recognized for available-for-sale debt securities to the amount by which carrying value exceeds fair value and also requires the reversal of previously recognized credit losses if fair value increases. The targeted transition relief standard allows filers an option to irrevocably elect the fair value option of ASC 825-10, Financial Instruments-Overall, applied on an instrument-by-instrument basis for eligible instruments. The Company adopted ASU 2016-13 on January 1, 2022, using the modified retrospective method for all financial assets measured at amortized cost. The adoption of ASU 2016-13 did not have a material impact on the Company’s financial position or results of operations upon adoption.

In December 2019, the FASB issued 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 adopted ASU 2019-12 on January 1, 2022. The adoption of the standard did not have a material impact on the Company’s financial position,  results of operations or cash flows.

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 (in thousands):

As of March 31, 2022

Level 1

Level 2

Level 3

Total

Marketable Securities

Asset-backed securities

$

$

9,633

$

$

9,633

Corporate debt securities

20,664

20,664

Commercial paper

25,104

25,104

U.S. Government debt securities

23,653

23,653

Total

$

$

79,054

$

$

79,054

12

As of December 31, 2021

Level 1

Level 2

Level 3

Total

Cash Equivalents:

Money market funds included in cash and cash equivalents

$

106,000

$

$

$

106,000

During the three months ended March 31, 2022 and December 31, 2021, the Company had no transfers between Level 1, Level 2 or Level 3 financial assets.

4. Marketable Securities

The following table summarizes the Company’s marketable securities as of March 31, 2022 (in thousands). The Company did not hold any marketable securities as of December 31, 2021.

As of March 31, 2022

    

Amortized

    

Unrealized 

    

Unrealized 

    

Fair 

Cost

gains

losses

value

Marketable Securities:

Asset-backed securities

$

9,676

$

$

(43)

$

9,633

Corporate debt securities

20,819

(155)

20,664

Commercial paper

25,104

25,104

U.S. Government debt securities

23,659

2

(8)

23,653

Total

$

79,258

$

2

$

(206)

$

79,054

5. Accrued Expenses

Accrued expenses consist of the following (in thousands):

    

March 31, 

    

December 31, 

2022

2021

Accrued preclinical and clinical trial costs

$

8,282

$

1,260

Accrued compensation

 

565

 

1,059

Accrued consulting

 

92

 

77

Accrued professional services

 

507

 

499

Accrued other

 

107

 

246

Total accrued expenses

$

9,553

$

3,141

6. Convertible Preferred Stock

As of November 10, 2020, the Company had issued Series A and Series B convertible preferred stock (collectively, the “Convertible Preferred Stock”).

On June 29, 2021, upon the closing of the Company’s IPO, all outstanding convertible preferred stock automatically converted into shares of common stock.

7. Equity

Preferred stock

The Company has authorized preferred stock amounting to 10,000,000 shares as of March 31, 2022 and December 31, 2021, respectively. The authorized preferred stock was classified under stockholders’ equity at March 31, 2022 and December 31, 2021.

13

Common stock

As of March 31, 2022, 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. No dividends have been declared or paid by the Company since its inception.

8. Stock-Based Compensation

Stock-based compensation expense as reflected in the Company’s condensed consolidated statements of operations and comprehensive loss was as follows (in thousands):

Three months ended March 31, 

2022

    

2021

Research and development

$

83

$

27

General and administrative

 

544

 

38

Stock-based compensation expense included in operating expenses

$

627

$

65

2021 Equity Incentive Plan

The Company has two equity incentive plans: the 2019 Equity Incentive Plan (“2019 Plan”), and the 2021 Equity Incentive Plan (“2021 Plan”). New awards can only be granted under the 2021 Plan, under which it is able to issue equity to employees, board members, consultants, and advisors. The 2021 Plan 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. Of this amount, 1,712,174 shares were available for future grants as of March 31, 2022. 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. As such, 1,160,296 shares were added to the Plan in January 2022.

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. As such, 232,059 shares were added to the Plan in January 2022.

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.

14

Stock options

The following is a summary of the Company’s stock option activity for the three months ended March 31, 2022:

    

    

Weighted- 

    

Weighted- average 

    

Aggregate 

average 

remaining contractual 

intrinsic value

Options

exercise price

term (in years)

(in thousands)

Outstanding at December 31, 2021

 

3,021,799

$

3.71

 

8.94

$

10,903

Granted

 

1,314,200

 

3.46

 

 

Exercised

(44,105)

0.43

Cancelled

(145,787)

4.10

Outstanding at March 31, 2022

 

4,146,107

 

2.55

 

9.31

$

2,529

Vested at March 31, 2022

 

760,028

 

1.37

 

8.23

$

1,188

Vested and expected to vest at March 31, 2022

 

4,146,107

$

2.55

 

9.31

$

2,529

The following is a summary of the Company’s stock option activity for the three months ended March 31, 2021:

    

    

Weighted- 

    

Weighted- average 

    

Aggregate 

average 

remaining contractual 

intrinsic value

Options

exercise price

term ( in years)

(in thousands)

Outstanding at December 31, 2020

 

1,761,062

$

0.95

 

9.54

$

723

Granted

 

39,663

 

1.36

 

 

Outstanding at March 31, 2021

 

1,800,725

 

0.96

 

9.30

$

3,842

Vested at March 31, 2021

 

242,240

 

0.43

 

8.57

$

645

Vested and expected to vest at March 31, 2021

 

1,701,566

$

0.94

 

9.28

$

3,670

The weighted average grant-date fair value of stock options granted during the three months ended March 31, 2022 and 2021 was $2.31 and $0.90 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 March 31, 

 

2022

    

2021

 

Risk-free interest rate

1.62 - 2.41

%  

0.95

%

Volatility

75-76

%  

77

%

Dividend yield

0.00

%  

0.00

%

Expected term (years)

6

 

6

The fair value of options that vested during the three months ended March 31, 2022 and 2021 was $0.7 and less than $0.1 million, respectively. The Company recorded stock-based compensation expense associated with stock option awards of $0.4 million and $0.1 million during the three months ended March 31, 2022 and 2021, respectively. As of March 31, 2022, there was $8.4 million of total unrecognized compensation cost related to unvested stock-based awards, which the Company expects to recognize over a remaining weighted-average period of 3.3 years.

Restricted Common Stock

The terms of the 2019 Plan permitted certain option holders to exercise options before their options were 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 less than $0.01 million as a liability from the early exercise in the accompanying

15

condensed consolidated balance sheets as of March 31, 2022 and December 31, 2021, respectively. The Company recorded stock-based compensation expense associated with restricted common stock of less than $0.1 million during the three months ended March 31, 2022 and 2021.

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 quarterly 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.

The following table summarizes activity related to restricted stock units:

    

    

Weighted- average

grant date

Number of shares

fair value

Unvested at December 31, 2021

 

200,996

$

16.00

Granted

 

 

Unvested at March 31, 2022

 

200,996

16.00

The Company recorded stock-based compensation expense of $0.2 million for the three months ended March 31, 2022, related to RSUs. As of March 31, 2022, the total unrecognized expense related to all RSUs was $2.6 million, which the Company expects to recognize over a weighted-average period of 3.2 years.

9. 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 $3.5 million at closing. If the Company succeeds in developing and commercializing seribantumab, the Company may be obligated to pay the previous sponsor up to $54.5 million 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 $9.3 million 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

16

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.

Ligand Pharmaceuticals—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 0.2 million annually and less than one percent on net sales of seribantumab. 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. In November of 2021, the Selexis agreement was assigned to Ligand Pharmaceuticals Incorporated.
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 $0.4 million 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 $3.5 million was expensed as research and development expenses in the statement of operations for the year ended 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 as of March 31, 2022 and 2021, and concluded no such payments were required.

Other Research Arrangements

In June 2021, the Company entered into a collaboration agreement with Caris (the “Caris Agreement”). 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 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 any potential commercial transaction related to a product resulting from the collaboration, Caris will be entitled to a tiered initial percentage ranging from the mid-single digits to low teens based on the product candidate’s potential peak sales revenue with the remaining proceeds allocated based on each party’s pro rata share of expenses incurred in development of the product. In the case of an out-licensing transaction of an asset instead of a sale, Caris and the Company will split all consideration received in the transaction in a similar manner. 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.

17

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.

10. Commitments and Contingencies

The Company, from time to time, may be involved in legal proceedings, regulatory actions, claims and litigation arising in the ordinary course of business. The Company was not a defendant in any lawsuits from Inception to the date of these condensed consolidated financial statements.

11. Net Loss Per Share

The following table summarizes the computation of basic and diluted net loss per share of the Company (in thousands, except share and per share data):

Three months ended

March 31, 

2022

    

2021

Net loss

$

(17,275)

$

(5,091)

Weighted average common stock outstanding, basic and diluted

23,216,206

800,679

Net loss per share, basic and diluted

$

(0.74)

$

(6.36)

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:

March 31, 

    

2022

    

2021

Convertible preferred shares

 

 

15,736,031

Outstanding stock options

 

4,146,107

 

1,800,732

Unvested restricted stock

15,776

31,554

Unvested RSUs

 

200,996

 

 

4,362,879

 

17,568,317

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 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 the CRESTONE study in mid-2022, and to present initial clinical data from approximately 10 patients from Cohort 1 of the CRESTONE study treated with seribantumab at 3 grams weekly at the American Society of Clinical Oncology (ASCO) 2022 Annual Meeting.

We also plan to expand our drug development pipeline beyond seribantumab into additional genomically defined cancers by leveraging our value-driving partnerships with Caris Life Sciences and others, as well as by exploring further opportunities to selectively partner on additional precision oncology assets.

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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 one or more of our current or future product candidates. Our net losses were $17.3 million and $5.1 million for the three months ended March 31, 2022 and 2021, respectively. As of March 31, 2022, we had an accumulated deficit of $72.5 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, cash equivalents and marketable securities of $132.1 million as of March 31, 2022 will enable us to fund our operating expenses and capital expenditure requirements into the fourth 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 (in thousands):

Three months ended

March 31, 

2022

    

2021

Seribantumab

$

10,903

$

3,327

Unallocated and other research and development expenses

676

 

259

Unallocated personnel costs (including stock based compensation)

1,996

 

548

Total research and development expenses

$

13,575

$

4,134

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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

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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 March 31, 2022 and 2021

The following table summarizes our results of operations for the three months ended March 31, 2022 and 2021:

Three months ended

March 31, 

    

2022

    

2021

    

Change

(in thousands)

Operating expenses:

 

  

 

  

 

  

Research and development

$

13,575

$

4,134

$

9,441

General and administrative

 

3,793

 

952

 

2,841

Total operating expenses

 

17,368

 

5,086

 

12,282

Loss from operations

 

(17,368)

 

(5,086)

 

(12,282)

Other income

 

93

 

(5)

 

98

Net loss

$

(17,275)

$

(5,091)

$

(12,184)

Research and Development Expenses

Research and development expenses were $13.6 million for the three months ended March 31, 2022, compared to $4.1 million for the three months ended March 31, 2021. The increase of $9.4 million was primarily due to a $7.2 million increase in costs related to manufacturing clinical supply of seribantumab for use in the CRESTONE clinical trial, a $1.4 million increase in employee related costs, including stock-based compensation, and an increase of $0.8 million in clinical trial expenses associated with the CRESTONE clinical trial, regulatory, consulting, and other expenses.

General and Administrative Expenses

General and administrative expenses were $3.8 million for the three months ended March 31, 2022, compared to $1.0 million for the three months ended March 31, 2021. The increase of $2.8 million was primarily due to an increase of $1.4 million in personnel costs, including stock-based compensation, an increase of $1.1 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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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.

Through March 31, 2022, we have funded our operations with proceeds from the sale of convertible preferred stock and proceeds from our IPO. As of March 31, 2022, we had cash, cash equivalents and marketable securities of $132.1 million.

Cash Flows

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

Three months ended

March 31, 

    

2022

    

2021

(in thousands)

Statement of cash flows data:

  

  

Cash used in operating activities

$

(14,024)

$

(9,477)

Cash used in investing activities

 

(79,271)

 

Cash provided by (used in) financing activities

 

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(11)

Net decrease in cash and cash equivalents

$

(93,276)

$

(9,488)

Operating Activities

During the three months ended March 31, 2022, cash used in operating activities was $14.0 million, which consisted primarily of our net loss of $17.3 million, partially offset by $2.6 million of cash used in changes in our operating assets and liabilities, and $0.7 million of stock-based compensation expense. Net cash provided in changes in our operating assets and liabilities consisted primarily of an increase of $6.4 million in accrued expenses and an increase of $1.0 million in prepaid expenses and other assets, partially offset a decrease of $4.8 million in accounts payable, by due to the timing of payments related to research and development costs.

During the three months ended March 31, 2021, cash used in operating activities was $9.5 million, which consisted primarily of our net loss of $5.1 million and $4.4 million of cash used in changes in our operating assets and liabilities. Net cash used in changes in our operating assets and liabilities consisted primarily of a decrease in accounts payable due to the timing of payments related to research and development costs.

Investing Activities

During the three months ended March 31, 2022, net cash used in investing activities was $79.3 million, due to cash investment in marketable securities.

During the three months ended March 31, 2021, there was no cash used in or provided by investing activities.

Financing Activities

During the three months ended March 31, 2022, cash provided by financing activities was less than $0.1 million, due to proceeds from issuance of common stock upon stock option exercises.

During the three months ended March 31, 2021, cash used in financing activities consisted of issuance costs related to the sale and issuance of for our Series B convertible preferred stock during the year ended December 31, 2020 that were paid during the three months ended March 31, 2021.

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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 for our clinical trials and, if any of our product candidates are approved, commercial manufacturing;
addition and retention of key research and development personnel;
our efforts to enhance operational, financial and information management systems, and hire additional personnel, including personnel to support development of our product candidates;
the costs and timing of future commercialization activities, including product manufacturing, marketing, sales and distribution, for any of our product candidates for which we obtain marketing approval;
the legal patent costs involved in prosecuting patent applications and enforcing patent claims and other intellectual property claims; and
the terms and timing of any collaboration, license or other arrangement, including the terms and timing of any milestone payments thereunder.

We believe our cash, cash equivalents and marketable securities of $132.1 million as of March 31, 2022 will enable us to fund our operating expenses and capital expenditure requirements into the fourth 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.

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

the progress, timing and results of preclinical studies and clinical trials for our current or any future product candidates;
disruptions or delays in enrollment of our clinical trials due to the COVID-19 pandemic;
the extent to which we develop, in-license or acquire other pipeline product candidates or technologies;
the number and development requirements of other future product candidates that we may pursue, and other indications for our current product candidates that we may pursue;
the costs, timing and outcome of obtaining regulatory approvals of our current or future product candidates and any companion diagnostics we may pursue;

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the scope and costs of making arrangements with third-party manufacturers, or establishing manufacturing capabilities, for both clinical and commercial supplies of our current or future product candidates;
the costs involved in growing our organization to the size needed to allow for the research, development and potential commercialization of our current or future product candidates;
the costs associated with commercializing any approved product candidates, including establishing sales, marketing and distribution capabilities;
the costs associated with completing any post-marketing studies or trials required by the Food and Drug Administration, or FDA, or other regulatory authorities;
the revenue, if any, received from commercial sales of seribantumab, if approved, or any other future product candidates that receive marketing approval;
the costs of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending intellectual property-related claims that we may become subject to, including any litigation costs and the outcome of such litigation;
the costs associated with potential product liability claims, including the costs associated with obtaining insurance against such claims and with defending against such claims; and
to the extent we pursue strategic collaborations, including collaborations to commercialize seribantumab or to develop any future product candidates, our ability to establish and maintain collaborations on favorable terms, if at all, as well as the timing and amount of any milestone or royalty payments we are required to make or are eligible to receive under such collaborations, if any.

We will not generate revenue from product sales unless and until we successfully complete clinical development and obtain regulatory approval for seribantumab or our other future product candidates. If we obtain regulatory approval for any of our product candidates, we expect to incur significant expenses related to developing our internal commercialization capability to support product sales, marketing and distribution.

Until such time as we can generate significant revenue from product sales, if ever, we expect to finance our operations through a combination of public or private equity or debt financings or other sources, which may include collaborations with third parties. Adequate additional financing may not be available to us on favorable terms, or at all. 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. If we are unable to raise capital or debt when needed or on favorable terms, we could be forced to delay, reduce or eliminate our research and development programs, our commercialization plans or other operations.

Because of the numerous risks and uncertainties associated with product development, we are unable to predict the timing or amount of increased expenses or when or if we will be able to achieve or maintain profitability. Even if we are able to generate revenue from product sales, we may not become profitable. If we fail to become profitable or are unable to sustain profitability on a continuing basis, then we may be unable to continue our operations at planned levels and be forced to reduce or terminate our operations.

Contractual Obligations and Commitments

We enter into contracts in the normal course of business with various third parties for clinical trials, preclinical research studies and testing, manufacturing and other services and products for operating purposes. These contracts do not contain any minimum purchase commitments and provide for termination upon notice. Payments due upon cancellation consist only of payments for services provided and expenses incurred up to the date of cancellation.

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In May 2019, we entered into an asset purchase agreement with the previous sponsor, pursuant to which we acquired all rights and interest to patents, know-how, and inventory for assets related to seribantumab. If we are successful in developing and commercializing seribantumab, we may be obligated to pay the previous sponsor up to $54.5 million in development, regulatory and sales milestone payments pursuant to the terms of the asset purchase agreement. Additionally, in conjunction with the asset purchase agreement with the previous sponsor, we assumed the rights and obligations under certain collaboration and license agreements which may require the payment of milestones and/or royalties on future sales of seribantumab. We are currently unable to estimate the timing or likelihood of achieving these milestones or generating future product sales. See “Business — Asset purchase, licensing and collaboration agreements” for additional information about these license agreements, including with respect to potential payments thereunder.

Critical Accounting Policies and Significant Judgments and Estimates

Our management’s discussion and analysis of financial condition and results of operations is based on our condensed consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States, or U.S. GAAP. The preparation of our condensed consolidated financial statements and related disclosures requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, costs and expenses and the disclosure of contingent assets and liabilities in our condensed consolidated financial statements. We base our estimates on known trends and events and various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. We evaluate our estimates and assumptions on an ongoing basis. Our actual results may differ from these estimates under different assumptions or conditions.

For a discussion of our critical accounting estimates, see Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2021 (the “Annual Report”),  filed with the SEC on March 3, 2022 in connection with the notes to our audited financial statements appearing in the Annual Report and the notes to the condensed consolidated financial statements appearing elsewhere in this Quarterly Report on Form 10-Q. There have been no material changes to these critical accounting policies and estimates through March 31, 2022, from those discussed in our Annual Report.

Recently Issued and Adopted Accounting Pronouncements

A description of recently issued accounting pronouncements that may potentially impact our financial position and results of operation is disclosed in our condensed interim financial statements in Part I, Item 1 of this quarterly report on Form 10-Q.

Emerging Growth Company Status

The Jumpstart Our Business Startups Act of 2012 permits an “emerging growth company” such as us to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies until those standards would otherwise apply to private companies. We have elected not to “opt out” of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, we will adopt the new or revised standard at the time private companies adopt the new or revised standard and will do so until such time that we either (i) irrevocably elect to “opt out” of such extended transition period or (ii) no longer qualify as an emerging growth company.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

As of March 31, 2022, we had cash, cash equivalents and marketable securities of $132.1 million. Interest income is sensitive to changes in the general level of interest rates; however, due to the nature these investments, an immediate 10% change in interest rates would not have a material effect on the fair market value of our investment portfolio.

We are not currently exposed to significant risk related to changes in foreign currency exchange rates; however, we have contracted with and may continue to contract with foreign vendors. Our operations may be subject to fluctuations in foreign currency exchange rates in the future.

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Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rule 13a-15(e) and 15d-15(e) under the Exchange Act as of the end of the period covered by this report. Our disclosure controls and procedures are designed to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including the Chief Executive Officer and the Chief Financial Officer, to allow timely decisions regarding required disclosures. Any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objective and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective at a reasonable assurance level as of March 31, 2022.

Changes in Internal Control over Financial Reporting

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

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. We have not identified any material changes in our internal control over financial reporting as a result of these changes to the working environment. We have been and will continue to monitor and assess the COVID-19 pandemic to determine any potential impacts on our internal controls over financial reporting.

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PART II — OTHER INFORMATION

Item 1. Legal Proceedings

None.

Item 1A. Risk Factors

RISK FACTORS

Investing in our common stock involves a high degree of risk. Before making your decision to invest in shares of our common stock, you should carefully consider and read carefully all of the risks described below, together with the other information contained in this Quarterly Report on Form 10-Q, including our financial statements and the related notes and the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations”. We cannot assure you that any of the events discussed below will not occur. These events could have a material and adverse impact on our business, financial condition, results of operations and prospects. Unless otherwise indicated, references to our business being harmed in these risk factors will include harm to our business, reputation, financial condition, results of operations, net revenue and future prospects. In such event, the trading price of our common stock could decline, and you could lose all or part of your investment. Additional risks and uncertainties not presently known to us or that we currently deem immaterial also may impair our business operations and the market price of our common stock. This Quarterly Report on Form 10-Q also contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in the forward-looking statements as a result of factors that are described below and elsewhere in this Quarterly Report on Form 10-Q.

Risk Factor Summary

The following summarizes the most material risks that make an investment in our securities risky or speculative. If any of the following risks occur or persist, our business, financial condition and results of operations could be materially harmed and the price of our common stock could significantly decline.

We have a limited operating history, which may make it difficult to evaluate the success of our business to date and to assess our future viability. We have incurred significant operating losses since our inception in 2019 and have not generated any revenue. We expect to incur continued losses for the foreseeable future and may never achieve or maintain profitability.
We are highly dependent on the success of our lead product candidate, seribantumab. We have not completed clinical development or obtained regulatory approval for any product candidate. We may never obtain approval for seribantumab or any other product candidate.
The COVID-19 pandemic could adversely impact our business, including the conduct of our clinical trials.
If we experience delays or difficulties in enrolling patients in our ongoing or planned clinical trials, our receipt of necessary regulatory approval could be delayed or prevented.
Adverse side effects or other safety risks associated with seribantumab or our other future product candidates could delay or preclude approval, cause us to suspend or discontinue clinical trials or abandon further development, limit the commercial profile of an approved product or result in significant negative consequences following marketing approval, if any.
We may in the future seek to engage in strategic transactions to acquire or in-license new products, product candidates or technologies. If we are unable to realize the benefits from such transactions, it may adversely affect our ability to develop and commercialize product candidates, negatively impact our cash position, increase our expenses and present significant distractions to our management.

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The development and commercialization of biological products are subject to extensive regulation, and we may not obtain regulatory approvals for seribantumab or any other future product candidates, on a timely basis or at all.
If we are unable to successfully develop, validate, obtain regulatory approval of and commercialize companion diagnostic tests for seribantumab or any future product candidates that require or would benefit from such tests, or experience significant delays in doing so, we may not realize the full commercial potential of these product candidates.
Manufacturing biological products is complex and subject to product loss for a variety of reasons. We rely on third-party suppliers, including single source suppliers, to manufacture clinical supplies of our lead product candidate and we intend to rely on third parties to produce commercial supplies of any approved product.
The incidence and prevalence for target patient populations of seribantumab and our future product candidates have not been established with precision. If the market opportunities for our product candidates are smaller than we estimate or if any approval that we obtain is based on a narrower definition of the patient population, then our revenue potential and ability to achieve profitability will be adversely affected.
We face substantial competition, which may result in others discovering, developing or commercializing products before or more successfully than we do.
We expect to significantly expand our development and regulatory capabilities as we grow our company, and as a result, we may encounter difficulties in managing our growth, which could disrupt our operations.
If we are unable to obtain and maintain sufficient patent protection for our product candidates, or if the scope of the patent protection is not sufficiently broad, third parties, including our competitors, could develop and commercialize products similar or identical to ours, and our ability to commercialize our seribantumab and our future product candidates may be adversely affected.

Risks related to our financial position and need for additional capital

We have a limited operating history, which may make it difficult to evaluate the success of our business to date and to assess our future viability. We have incurred significant operating losses since our inception in 2019 and have not generated any revenue. We expect to incur continued losses for the foreseeable future and may never achieve or maintain profitability.

Investment in drug development is a highly speculative undertaking and involves a substantial degree of risk. We commenced operations in 2019 and are a clinical-stage biologics company with a limited operating history. We have not yet commercialized any product, nor do we expect to generate revenue from sales of any products for several years, if at all. Consequently, there have been limited operations upon which you can evaluate our business, and predictions about our future success or viability may not be as cancer therapies. For three months ended March 31, 2022 and 2021, we had a net loss of $17.3 million and $5.1 million, respectively. As of March 31, 2022, we had an accumulated deficit of $72.5 million. We expect to continue to incur significant research and development and other expenses related to our ongoing operations, which we anticipate will result in net losses for at least the next several years.

Since our inception, we have focused substantially all of our efforts and financial resources on the acquisition and clinical development of our lead product candidate, seribantumab. To date, we have funded our operations with proceeds from sales of shares of our convertible preferred stock and proceeds from the sale of common stock in our IPO. As of March 31, 2022, our cash, cash equivalents and marketable securities were $132.1 million.

We expect to incur increasing levels of operating losses for the foreseeable future, particularly as we advance seribantumab and potential future product candidates through clinical development. Our prior losses, combined with expected future losses, have had, and will continue to have, an adverse effect on our stockholders’ equity and working capital. We expect

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our research and development expenses to significantly increase in connection with our additional planned clinical trials for seribantumab, including our ongoing Phase 2 clinical trial, CRESTONE, and the planned exploratory cohorts, and the development of other future product candidates we may choose to pursue. In addition, if we obtain marketing approval for seribantumab or another future product candidate, we will incur significant sales, marketing and outsourced manufacturing expenses in connection with the commercialization of seribantumab or such other future product candidate. After our initial public offering, we incurred and will continue to incur additional costs associated with operating as a public company. As a result, we expect to continue to incur significant and increasing operating losses for the foreseeable future.

Our ability to become profitable depends upon our ability to generate revenue. To date, we have not generated any revenue and we do not know when, or if, we will generate any revenue. We do not expect to generate significant revenue unless and until we obtain marketing approval for, and begin to sell, seribantumab or another future product candidate. Our ability to generate revenue and become profitable will depend on a number of factors, including, but not limited to, our ability to:

successfully meet our clinical endpoints in our Phase 2 CRESTONE clinical trial;
initiate and successfully complete all safety, pharmacokinetic and other registrational-enabling studies required to obtain U.S. and foreign marketing approval for seribantumab as a treatment for patients with solid tumors driven by an NRG1 gene fusion;
initiate and complete successful later-stage clinical trials that meet their clinical endpoints;
submit a BLA for seribantumab to the FDA that is filed by the FDA;
obtain marketing approval for seribantumab and our other potential future product candidates;
establish licenses, collaborations or strategic partnerships that may increase the value of our programs;
successfully manufacture or contract with others to manufacture seribantumab and our other future product candidates;
commercialize seribantumab, if approved, by building a sales force or entering into collaborations with third parties;
obtain, maintain, protect and defend our intellectual property portfolio;
achieve market acceptance of seribantumab and our other potential future product candidates with the medical community and with third-party payors; and
attract, hire and retain additional administrative, clinical, regulatory and scientific personnel.

We are only in the preliminary stages of most of these activities. We may never succeed in these activities and, even if we do, may never generate revenues that are significant enough to achieve profitability.

In cases where we are successful in obtaining regulatory approval to market our product candidates, our revenue will be dependent, in part, upon the size of the markets in the territories for which we gain regulatory approval, the accepted price for the product, the ability to obtain coverage and reimbursement, and whether we own the commercial rights for that territory. If the number of our addressable patients is significantly lower than we estimate, the indication approved by regulatory authorities is narrower than we expect, or the treatment population is narrowed by competition, physician choice or treatment guidelines, we may not generate significant revenue from sales of such products, even if they are approved.

Because of the numerous risks and uncertainties associated with drug development, we are unable to accurately predict the timing or amount of increased expenses we will incur and when, or if, we will be able to achieve profitability. If we decide to or are required by the FDA or regulatory authorities in other jurisdictions to perform studies or clinical trials in

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addition to those we currently anticipate, or if there are any delays in establishing appropriate manufacturing arrangements for, in initiating or completing our current and planned clinical trials for, or in the development of, our product candidates, our expenses could increase materially and our potential profitability could be further delayed.

Even if we do achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis. Accordingly, you should not rely upon the results of any quarterly or annual periods as predictions or indications of future operating performance. We expect our financial condition and operating results to fluctuate from quarter-to-quarter and year-to-year due to a variety of factors, many of which are beyond our control. Our failure to become and remain profitable would decrease the value of our company and could impair our ability to raise capital, expand our business, maintain our research and development efforts, diversify our product offerings or even continue our operations. A decline in the value of our company could also cause you to lose all or part of your investment.

We require substantial additional funding to pursue our business objectives. If we are unable to raise additional capital when needed or on terms acceptable to us, we could be forced to delay, reduce or terminate our research or drug development programs, any future commercialization efforts or other operations.

Identifying and developing potential product candidates and conducting preclinical studies and clinical trials is a time-consuming, expensive and uncertain process that takes years to complete, and we may never generate the necessary data or results required to obtain regulatory approval and begin selling any approved product. We expect our expenses to increase substantially in connection with our ongoing activities, particularly as we advance the clinical development of seribantumab and seek to develop or acquire additional product candidates. We expect increased expenses as we continue our research and development activities, initiate additional clinical trials and seek marketing approval for seribantumab and our future product candidates. In addition, if we obtain marketing approval for seribantumab, we expect to incur significant commercialization expenses related to product manufacturing, marketing, sales and distribution. Furthermore, following the closing of our initial public offering, we expect to incur additional costs associated with operating as a public company. Accordingly, we will need to obtain substantial additional funding in connection with our continuing operations. Adequate additional financing may not be available to us on favorable terms, or at all. 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. If we are unable to raise additional capital when needed or on favorable terms, we could be forced to delay, reduce or eliminate our research and development programs, our commercialization plans or other operations.

We believe that our existing cash, cash equivalents and marketable securities as of March 31, 2022 will enable us to fund our operating expenses and capital expenditure requirements into the fourth quarter of 2023. We have based this estimate on assumptions that may prove to be wrong, and we could use our capital resources sooner than we currently expect. Changes beyond our control may occur that would cause us to use our available capital before that time, including changes in and progress of our drug development activities and changes in government regulations. Our future capital requirements will depend on many factors, including:

the progress, timing and results of preclinical studies and clinical trials for seribantumab or any future product candidates;
disruptions or delays in enrollment of our clinical trials;
the extent to which we develop, in-license or acquire other product candidates or technologies;
the number and development requirements of other future product candidates that we may pursue, and other indications for seribantumab that we may pursue;
the costs, timing and outcome of obtaining regulatory approvals of seribantumab or future product candidates and any companion diagnostics that we may pursue;

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the scope and costs of making arrangements with third-party manufacturers, or establishing manufacturing capabilities, for both clinical and commercial supplies of seribantumab or future product candidates;
the costs involved in growing our organization to the size needed to allow for the research, development and potential commercialization of seribantumab or future product candidates;
the costs associated with commercializing any approved product candidates, including establishing sales, marketing and distribution capabilities;
the costs associated with completing any post-marketing studies or trials required by the FDA or other regulatory authorities;
the revenue, if any, received from commercial sales of seribantumab, if approved, or any other future product candidates that receive marketing approval;
the costs of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending intellectual property-related claims that we may become subject to, including any litigation costs and the outcome of such litigation;
the costs associated with potential product liability claims, including the costs associated with obtaining insurance against such claims and with defending against such claims; and
to the extent we pursue strategic collaborations, including collaborations to commercialize seribantumab or to develop any future product candidates, our ability to establish and maintain collaborations on favorable terms, if at all, as well as the timing and amount of any milestone or royalty payments that we are required to make or are eligible to receive under any such collaborations.

We require additional capital to complete our planned clinical development programs for our current product candidates to obtain regulatory approval. Our ability to raise additional funds will depend on financial, economic and market conditions and other factors over which we may have no or limited control. If adequate funds are not available on commercially acceptable terms when needed, we may be forced to delay, reduce or terminate the development or commercialization of seribantumab or future product candidates or we may be unable to take advantage of future business opportunities. Furthermore, any additional capital-raising efforts may divert our management from their day-to-day activities, which may adversely affect our ability to develop and commercialize seribantumab and future product candidates.

Raising additional capital may cause dilution to our stockholders, restrict our operations or require us to relinquish proprietary rights to our technologies or product candidates.

Until such time, if ever, as we can generate substantial product revenue, we expect to finance our cash needs through a combination of equity offerings, debt financings, collaborations, strategic alliances and marketing, distribution or licensing arrangements. In addition, we may seek additional capital due to favorable market conditions or strategic considerations, even if we believe that we have sufficient funds for our current or future operating plans. 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 common stockholder. Debt financing and preferred equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making acquisitions or capital expenditures or declaring dividends.

If we raise additional funds through collaborations, strategic alliances or marketing, distribution 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 grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings or other arrangements when needed, we may be required to delay, limit, reduce or

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terminate our research, product development or future commercialization efforts or grant rights to third parties to develop and market product candidates that we would otherwise prefer to develop and market ourselves.

Risks related to the design and development of our product candidates

We are highly dependent on the success of our lead product candidate, seribantumab. We have not completed clinical development or obtained regulatory approval for any product candidate. We may never obtain approval for seribantumab or any other product candidate.

Our future success is highly dependent on our ability to obtain regulatory approval for, and then successfully commercialize or identify a strategic partner to commercialize, our lead product candidate, seribantumab. Seribantumab is currently being evaluated in a Phase 2 clinical trial, which we refer to as CRESTONE. We currently have no products that are approved for sale in any jurisdiction. Seribantumab or any of our other future product candidates may not achieve success in their clinical trials or obtain regulatory approval. If we do not obtain regulatory approval for seribantumab and successfully commercialize seribantumab in one or more indications or if we experience significant delays in doing so, we may never generate any revenue or become profitable.

Our ability to generate product revenues, which we do not expect will occur for many years, if ever, will depend heavily on the successful development and eventual commercialization of seribantumab or other future product candidates. 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;
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 seribantumab and our future product candidates to the satisfaction of the FDA and other 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 for seribantumab and our future product candidates, including the completion of any required post-marketing studies or trials;
raising additional funds necessary to complete the clinical development of and commercialization of seribantumab;
successfully identifying and developing, acquiring or in-licensing additional product candidates to expand our pipeline;
acceptance of an IND by the FDA or other similar clinical trial applications from other regulatory authorities for clinical trials for future product candidates;
obtaining and maintaining patent, trade secret and other intellectual property protection and regulatory exclusivity for seribantumab and our future product candidates;
making arrangements with third-party manufacturers, or establishing manufacturing capabilities, for both clinical and commercial supplies of our product candidates;
establishing sales, marketing and distribution capabilities and launching commercial sales of our products, if approved, whether alone or in collaboration with third parties;
acceptance of our products, if approved, by patients, the medical community and third-party payors;

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effectively competing with other therapies available on the market or in development;
obtaining and maintaining third-party payor coverage and adequate reimbursement; and
maintaining a continued acceptable safety profile of any products following regulatory approval.

Many of these factors are beyond our control, and it is possible that none of our product candidates, including seribantumab, will ever obtain regulatory approval even if we expend substantial time and resources seeking such approval. If we experience significant delays or are otherwise unable to successfully commercialize our product candidates, it would materially harm our business.

Drug development is a lengthy and expensive process, and clinical testing is uncertain as to the outcome.

We currently have one product candidate in Phase 2 clinical development, and the risk of failure is high. We are unable to predict when or if seribantumab will prove effective and safe in humans or will obtain marketing approval. Before obtaining marketing approval from regulatory authorities for the sale of any product candidate, we must complete preclinical development and then conduct extensive clinical trials to demonstrate the safety and efficacy of our product candidate in humans. Clinical testing is expensive, difficult to design and implement, can take many years to complete and is uncertain as to the outcome.

A failure of one or more clinical trials can occur at any stage of testing. The outcomes of preclinical testing and early clinical trials may not be predictive of the success of later clinical trials or of clinical trials of the same product candidates in other indications, and interim or preliminary results of a clinical trial do not necessarily predict final results. For example, Merrimack Pharmaceuticals, Inc., or the previous sponsor, terminated its Phase 2 clinical trial of seribantumab in combination with docetaxel in patients with heregulin positive non-small cell lung cancer based on an interim analysis that demonstrated that the addition of seribantumab to docetaxel did not improve progression-free survival over docetaxel alone in this patient population. The previous sponsor also terminated its Phase 2 clinical trial of seribantumab in combination with fulvestrant in patients with heregulin positive, hormone receptor positive, ERBB2 (HER2) negative, metastatic breast cancer based on the interim analysis of the results of the non-small lung cancer trial. Although our CRESTONE trial of seribantumab is in a tumor-agnostic NRG1 fusion indication and therefore differs from the previous trials conducted by the previous sponsor, we may observe similar outcomes that could limit our ability to receive regulatory approval for seribantumab. While we believe that oncogenic driver events are a primary cause for the oncogenesis and progression of certain tumors, the signaling pathways in cancer are complex and treatment with a monotherapy may not produce a durable clinical benefit and combinations with other anti-cancer agents may need to be explored. There are no approved therapies for patients with tumors harboring an NRG1 fusion and our approach of inhibiting HER3 may not result in a durable clinical outcome. In addition, while some results in patients, such as observations of stable disease, may suggest encouraging clinical activity with respect to seribantumab, we expect that stable disease would not be considered to be a sufficient response for regulatory approval purposes. Furthermore, we may observe adverse safety events in the CRESTONE trial or later trials that were not observed in prior trials, which would alter the anticipated risk-benefit profile of seribantumab and reduce the likelihood that seribantumab receives regulatory approval.

The COVID-19 pandemic could adversely impact our business, including the conduct of our clinical trials and potential supply chain disruptions.

The ongoing COVID-19 pandemic, both in the United States and in other countries in which we have planned or have active clinical trial sites and where our third-party manufacturers operate, could cause significant disruptions that could severely impact our business, including:

delays or difficulties in screening, enrolling and maintaining patients in our clinical trials;
delays or difficulties in clinical site initiation, including difficulties in recruiting clinical site investigators and clinical site staff;

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diversion of healthcare resources away from the conduct of clinical trials, including the diversion of hospitals serving as our clinical trial sites and hospital staff supporting the conduct of our clinical trials;
inability or unwillingness of subjects to travel to the clinical trial sites;
delays, difficulties or incompleteness in data collection and analysis and other related activities;
decreased implementation of protocol required clinical trial activities and quality of source data verification at clinical trial sites;
interruption of key clinical trial activities, such as clinical trial site monitoring, due to limitations on travel imposed or recommended by federal or state governments, employers and others;
limitations in employee resources that would otherwise be focused on the conduct of our clinical trials and our other research and development activities, including because of sickness of employees or their families or mitigation measures such as lock-downs and social distancing;
delays due to production shortages resulting from any events affecting raw material supply or manufacturing capabilities domestically and abroad;
delays in receiving approval from local regulatory authorities to initiate our planned clinical trials;
delays in clinical sites receiving the supplies and materials needed to conduct our clinical trials;
interruption in global and domestic shipping that may affect the transport of clinical trial materials, such as investigational drug products used in our clinical trials;
changes in local regulations as part of a response to the COVID-19 pandemic which may require us to change the ways in which our clinical trials are conducted, which may result in unexpected costs, delays or require us to discontinue the clinical trials altogether;
delays in necessary interactions with local regulators, ethics committees and other important agencies and contractors due to limitations in employee resources or forced furlough of government employees;
refusal of regulatory authorities such as FDA or European Medicines Agency, or the European Medicines Agency, or EMA, to accept data from clinical trials in affected geographies; and
adverse impacts on global economic conditions which could have an adverse effect on our business and financial condition, including impairing our ability to raise capital when needed.

Such disruptions could impede, delay, limit or prevent completion of our ongoing clinical trials and preclinical studies or commencement of new clinical trials and ultimately lead to the delay or denial of regulatory approval of seribantumab, which would seriously harm our operations and financial condition and increase our costs and expenses. Furthermore, if either we or any third party in the supply chain for materials used in the production of our product candidates are adversely impacted by restrictions resulting from the COVID-19 pandemic, our supply chain may be disrupted, limiting our ability to manufacture product candidates for our clinical trials. We are in close contact with our clinical research organizations, or CROs, our contract manufacturing organizations, or CMOs, and clinical sites as we seek to mitigate the impact of COVID-19 on our CRESTONE trial and current timelines. Measures we have taken in response to COVID-19 include, where feasible, conducting remote clinical trial site activations and data monitoring, and limiting on-site patient visits by adjusting patient assessments and protocol. However, despite these efforts, we have experienced limited delays in trial site initiations, patient participation and patient enrollment in some of our clinical trials and we may continue to experience some delays in our clinical trials and preclinical studies and delays in data collection and analysis.

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These negative impacts could be exacerbated as the COVID-19 pandemic and the response to it continues to evolve. The COVID-19 pandemic could also affect the business of the FDA, EMA or other health authorities, which could result in delays in meetings related to planned or completed clinical trials and ultimately of reviews and approvals of seribantumab. The extent to which the pandemic impacts our business and clinical trials will depend on future developments, which are highly uncertain and cannot be predicted with confidence, such as the success of mass vaccination efforts globally, travel restrictions and social distancing in the United States and other countries, business closures or business disruptions and the effectiveness of actions taken by governmental authorities to contain and address the challenges posed by COVID-19.