0001558370-23-009680.txt : 20230515 0001558370-23-009680.hdr.sgml : 20230515 20230515070045 ACCESSION NUMBER: 0001558370-23-009680 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 70 CONFORMED PERIOD OF REPORT: 20230331 FILED AS OF DATE: 20230515 DATE AS OF CHANGE: 20230515 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: 23918327 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-20230331x10q.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, 2023

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 May 10, 2023, there were 24,337,846 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, 2023 (unaudited) and December 31, 2022

5

Condensed Consolidated Statements of Operations and Comprehensive Loss for the Three Months Ended March 31, 2023 and 2022 (unaudited)

6

Condensed Consolidated Statements of Stockholders’ Equity for the Three Months Ended March 31, 2023 and 2022 (unaudited)

7

Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2023 and 2022 (unaudited)

8

Notes to Condensed Consolidated Financial Statements (unaudited)

9

Item 2.

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

24

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

34

Item 4.

Controls and Procedures

34

Part II

Other Information

35

Item 1.

Legal Proceedings

35

Item 1A.

Risk Factors

35

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

94

Item 3.

Defaults Upon Senior Securities

94

Item 4.

Mine Safety Disclosures

94

Item 5.

Other Information

94

Item 6.

Exhibits

94

Exhibit Index

95

Signatures

96

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 EO-3021 and our other product candidates;
the timing of our preclinical studies and clinical trials for EO-3021 and our other product candidates;
our ability to establish and maintain collaborations, including with CSPC Pharmaceutical Group Limited (collectively with its affiliates, “CSPC”), our licensor and partner for EO-3021;
estimates of our addressable market and market growth;
our expectations regarding demand for, and market acceptance of, EO-3021 and our other product candidates;
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 maintain secure, efficient and uninterrupted operation of our information technology systems from security breaches, cyberattacks, loss or leakage of data and other disruptions;
our ability to expand our pipeline of product candidates;
our ability to attract and retain key management and technical personnel;
general economic, market and geopolitical conditions, including rising interest rates, market volatility and inflation, and the impact of geopolitical tensions with China and the war in Ukraine;
the effects of the continued presence of COVID-19 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.

3

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 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, 

    

2023

    

2022

    

(unaudited)

(Note 2)

Assets

    

  

    

  

Current assets:

 

  

 

  

Cash and cash equivalents

$

55,902

$

45,917

Marketable securities, available for sale

18,027

44,363

Prepaid expenses and other current assets

 

1,906

 

2,697

Total current assets

 

75,835

 

92,977

Property and equipment, net

 

88

 

98

Other non-current assets

 

975

 

1,086

Total assets

$

76,898

$

94,161

Liabilities and Stockholders’ Equity

 

  

 

  

Current liabilities:

 

  

 

  

Accounts payable

$

4,043

$

6,362

Accrued expenses

 

9,491

 

9,330

Total current liabilities

 

13,534

 

15,692

Non-current liabilities:

 

  

 

  

Long-term debt, net of discount

29,600

29,435

Restricted stock repurchase liability

 

 

2

Total liabilities

 

43,134

 

45,129

Commitments and contingencies (see Note 12)

 

  

 

  

Stockholders’ equity:

 

  

 

  

Preferred stock, $0.0001 par value; 10,000,000 shares authorized as of March 31, 2023 and December 31, 2022; no shares issued or outstanding as of March 31, 2023 and December 31, 2022, respectively

Common stock, $0.0001 par value; 500,000,000 shares authorized as of March 31, 2023 and December 31, 2022, respectively; 23,819,751 and 23,345,115 shares issued as of March 31, 2023 and December 31, 2022, respectively; 23,786,337 and 23,312,529 shares outstanding as of March 31, 2023 and December 31, 2022, respectively

 

2

 

2

Additional paid-in capital

 

201,185

 

199,492

Accumulated other comprehensive loss

(51)

(161)

Treasury stock, 33,414 and 28,641 shares as of March 31, 2023 and December 31, 2022, respectively; at cost

(47)

(35)

Accumulated deficit

 

(167,325)

 

(150,266)

Total stockholders’ equity

 

33,764

 

49,032

Total liabilities and stockholders’ equity

$

76,898

$

94,161

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, 

2023

    

2022

Operating expenses:

  

    

  

Research and development

$

7,292

$

13,575

General and administrative

 

4,346

 

3,793

Restructuring charges

5,107

Total operating expenses

 

16,745

 

17,368

Loss from operations

 

(16,745)

 

(17,368)

Other income (expense), net

 

(309)

 

93

Loss before income taxes

(17,054)

(17,275)

Income tax expense

5

Net loss

$

(17,059)

$

(17,275)

Net loss per share, basic and diluted

$

(0.72)

$

(0.74)

Weighted average common shares outstanding, basic and diluted

 

23,618,559

 

23,216,206

Comprehensive loss:

Net loss

$

(17,059)

$

(17,275)

Other comprehensive gain (loss):

Unrealized gain (loss) on marketable securities

110

(204)

Total other comprehensive gain (loss)

110

(204)

Total comprehensive loss

$

(16,949)

$

(17,479)

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

6

ELEVATION ONCOLOGY, INC.

Condensed Consolidated Statements of Stockholders’ Equity

(in thousands, except share data)

(unaudited)

Accumulated

    

    

    

    

Additional

    

    

Other

    

    

    

Total

Common Stock

Paid-in

Treasury

Comprehensive

Accumulated

Stockholders’

    

Shares

    

Amount

    

Capital

    

Stock

    

(loss)

    

Deficit

    

Equity

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

Accumulated

    

    

    

    

Additional

    

    

Other

    

    

    

Total

Common Stock

Paid-in

Treasury

Comprehensive

Accumulated

Stockholders’

    

Shares

    

Amount

    

Capital

    

Stock

    

(loss)

    

Deficit

    

Equity

Balance at December 31, 2022

 

23,312,529

$

2

$

199,492

$

(35)

$

(161)

$

(150,266)

$

49,032

Vesting of restricted common stock

 

3,946

 

 

1

 

 

 

 

1

Issuance of common stock upon stock option exercises

462,073

228

228

Stock-based compensation

 

 

 

1,464

 

 

 

 

1,464

Common stock repurchase

7,789

 

 

 

(12)

 

 

 

(12)

Unrealized gain on marketable securities

110

110

Net loss

 

 

 

 

 

 

(17,059)

 

(17,059)

Balance at March 31, 2023

 

23,786,337

$

2

$

201,185

$

(47)

$

(51)

$

(167,325)

$

33,764

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, 

    

2023

    

2022

Operating activities

    

  

    

  

Net loss

$

(17,059)

$

(17,275)

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

 

  

 

  

Stock-based compensation

 

1,464

 

627

Non-cash interest expense

165

Accretion of premium and interest on marketable securities

(153)

13

Depreciation expense

 

10

 

4

Changes in operating assets and liabilities:

 

  

 

Prepaid expenses and other assets

 

901

 

960

Accounts payable

 

(2,320)

 

(4,765)

Accrued expenses

 

161

 

6,412

Net cash used in operating activities

 

(16,831)

 

(14,024)

Investing activities

Purchase of marketable securities

(79,271)

Proceeds from sales and maturities of marketable securities

26,600

Net cash provided by (used in) investing activities

26,600

(79,271)

Financing activities

 

  

 

  

Proceeds from issuance of common stock upon stock option exercises

228

19

Common stock repurchase

(12)

Net cash provided by financing activities

 

216

 

19

Increase (decrease) in cash and cash equivalents

 

9,985

 

(93,276)

Cash and cash equivalents, beginning of period

 

45,917

 

146,284

Cash and cash equivalents, end of period

$

55,902

$

53,008

Supplemental disclosure of cash flow information

Interest paid

$

532

$

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 an innovative oncology company focused on the discovery and development of selective cancer therapies to treat patients across a range of solid tumors with significant unmet medical needs. The Company is rethinking drug development by seeking innovative, selective cancer therapies that can be matched to a patient’s unique tumor characteristics. The Company obtained exclusive worldwide rights outside Greater China (the People’s Republic of China, Hong Kong, Macau and Taiwan) to develop and commercialize EO-3021, a clinical stage antibody drug conjugate targeting Claudin 18.2, pursuant to a license agreement executed with CSPC Megalith Biopharmaceutical Co., Ltd., a subsidiary of CSPC Pharmaceutical Group Limited, during the year ended December 31, 2022 (see Note 11). During the quarter ended March 31, 2023, the Company announced that it paused further investment in the clinical development of seribantumab, an anti-HER3 monoclonal antibody for solid tumors driven by neuregulin-1, or NRG1 fusions, a type of genomic alteration and oncogenic driver in solid tumors. As a result, further enrollment in the Phase 2 CRESTONE study of seribantumab was paused. Long-term follow-up of all patients who have been treated with seribantumab to date remains ongoing. The Company intends to pursue further clinical development of seribantumab only in collaboration with a partner. The Company is exploring opportunities through new or existing partnerships and business development opportunities to expand its novel oncology pipeline.

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 Company continues to monitor the COVID-19 pandemic. 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 the Company’s 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.

9

Going Concern

The Company has incurred recurring net losses since inception and has funded its operations to date through the proceeds from the sale of convertible preferred stock, proceeds from its IPO, and borrowings under loan agreements. The Company incurred net losses of approximately $17.1 million and $17.3 million for the three months ended March 31, 2023 and 2022, respectively. As of March 31, 2023, the Company had an accumulated deficit of $167.3 million and cash, cash equivalents, and marketable securities totaling $73.9 million. Based on current operating plans, the Company does not expect that this amount will meet its anticipated capital requirements over the next 12 months, when giving effect to financial covenant compliance under the Company’s debt facility.

The Company is subject to risks, expenses, and uncertainties frequently encountered by companies in its industry. The Company intends to continue its research and development of its product candidates, which will require significant additional funding. If the Company is unable to obtain additional funding in the future and/or its research, development, and commercialization efforts require higher than anticipated capital, there may be a negative impact on the financial viability of the Company. The Company plans to fund its operations through public and private placements of equity and/or debt, payments from potential strategic research and development arrangements, licensing and/or collaboration arrangements with pharmaceutical companies or other institutions, or funding from other third parties. Such financing and funding may not be available at all, or on terms that are favorable to the Company. Failure to raise additional capital could have a material adverse effect on the Company’s ability to achieve its intended business objectives.

As a result of these factors, together with the anticipated increase in spending that will be necessary to continue to research, develop, and commercialize the Company’s product candidates, there is substantial doubt about the Company’s ability to continue as a going concern within one year after the date that these condensed consolidated financial statements are issued. The condensed consolidated financial statements do not contain any adjustments that might result from the resolution of any of the above uncertainties.

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. 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, 2022 condensed consolidated balance sheet was derived from the December 31, 2022 audited consolidated 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, 2023.

The accompanying condensed consolidated interim financial statements should be read in conjunction with the Company’s audited consolidated financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022 (the “Annual Report”).

10

Significant accounting policies

Use of estimates

The preparation of 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. Significant estimates and assumptions reflected in these consolidated financial statements include, but are not limited to, the accruals for research and development expenses, the valuation of common stock and the assumptions used in the valuation of share-based compensation awards. 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 Financing Costs

The incremental cost, including the fair value of warrants, directly associated with obtaining debt financing is capitalized as deferred financing costs upon the issuance of the debt and amortized over the term of the related debt agreement using the effective-interest method with such amortized amounts included as a component of interest expense in the condensed consolidated statements of operations. Unamortized deferred financing costs are presented on the consolidated balance sheets as a direct deduction from the carrying amount of the related debt obligation.

Concentrations of credit risk and significant suppliers

Financial instruments that potentially subject the Company to concentration of credit risk consist of cash and cash equivalents. The Company’s money market funds are invested in highly rated funds. Periodically, the Company maintains deposits in accredited financial institutions in excess of federally insured limits. The Company has not experienced any losses on its deposit 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. During the three months ended March 31, 2023 and 2022, the Company had two vendors that accounted for approximately 57% and 77% of its research and development expense, respectively. As of March 31, 2023 and December 31, 2022, the Company had two vendors that accounted for approximately 76% and 87% of the total accounts payable, respectively.

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.

11

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.

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 are expensed and included as part of general and administrative expenses. As of March 31, 2023 and 2022, the Company has determined that these expenses have not met the criteria to be capitalized. Intellectual property related expenses for each of the three months ended March 31, 2023 and 2022 were $0.1 million, respectively.

3. Fair Value Measurements of Financial Assets

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

As of March 31, 2023

Level 1

Level 2

Level 3

Total

(in thousands)

Cash and Cash Equivalents:

Money market funds

$

9,786

$

$

$

9,786

$

9,786

$

$

$

9,786

Marketable Securities

Corporate debt securities

$

$

9,555

$

$

9,555

Commercial paper

6,486

6,486

U.S. Government debt securities

1,986

1,986

Total

$

$

18,027

$

$

18,027

12

As of December 31, 2022

Level 1

Level 2

Level 3

Total

(in thousands)

Cash and Cash Equivalents:

Money market funds

$

3,298

$

$

$

3,298

$

3,298

$

$

$

3,298

Marketable Securities

Corporate debt securities

$

$

15,460

$

$

15,460

Commercial paper

14,999

14,999

U.S. Government debt securities

13,904

13,904

Total

$

$

44,363

$

$

44,363

During the three months ended March 31, 2023 and 2022, 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, 2023 and December 31, 2022.

As of March 31, 2023

    

Amortized

    

Unrealized 

    

Unrealized 

    

Fair 

Cost

gains

losses

value

(in thousands)

Marketable Securities:

Corporate debt securities

$

9,606

$

$

(51)

$

9,555

Commercial paper

6,486

6,486

U.S. Government debt securities

1,986

1,986

Total

$

18,078

$

$

(51)

$

18,027

As of December 31, 2022

    

Amortized

    

Unrealized 

    

Unrealized 

    

Fair 

Cost

gains

losses

value

(in thousands)

Marketable Securities:

Corporate debt securities

$

15,627

$

$

(167)

$

15,460

Commercial paper

14,999

14,999

U.S. Government debt securities

13,898

6

13,904

Total

$

44,524

$

6

$

(167)

$

44,363

13

5. Accrued Expenses

Accrued expenses consist of the following:

    

March 31, 

    

December 31, 

2023

2022

(in thousands)

Accrued preclinical and clinical trial costs

$

4,724

$

6,174

Accrued restructuring charges

3,401

Accrued compensation

 

701

 

2,498

Accrued consulting

 

171

 

75

Accrued professional services

 

108

 

218

Accrued other

 

386

 

365

Total accrued expenses

$

9,491

$

9,330

6. Restructuring Charges

On January 6, 2023, the Company announced a pipeline prioritization and realignment of resources to advance its EO-3021 product candidate. The Company paused further investment in the clinical development of its seribantumab product candidate and realigned its resources to focus on advancing EO-3021 and other pipeline programs. The Company intends to pursue further development of seribantumab only in collaboration with a partner. Concurrently with this announcement, the Board of Directors of the Company (the “Board”) approved a reduction of the Company’s workforce across all areas of the Company. The workforce reduction was substantially completed in January 2023 and was fully completed in April 2023. These actions reflect the Company’s determination to refocus its strategic priorities around EO-3021 and other pipeline programs.

Additionally, on January 5, 2023, the Company and the former President and Chief Executive Officer (“the former CEO”) of the Company, entered into a Separation Agreement (the “Separation Agreement”) following the mutual agreement between the Board and the former CEO regarding his departure from his positions with the Company. Pursuant to the Separation Agreement, the former CEO ceased his role as the Company’s President and CEO and resigned as a director of the Board, effective January 5, 2023.

The reprioritization and realignment of resources included total restructuring charges of approximately $5.1 million, which included $1.6 million of one-time termination and contractual termination benefits for severance, healthcare and related benefits. The one-time termination benefits were recorded in January 2023 under the provisions of Accounting Standards Codification (“ASC”) 420, Exit or Disposal Cost Obligation, as this is the period the termination plan was both approved and communicated to the impacted employees. The contractual termination benefits were recorded in January 2023 under the provisions of ASC 712, Compensation-Nonretirement Postemployment Benefits, which is the period in which the contractual postemployment benefits became probable of recognition. In addition, the Company recorded a one-time stock-based compensation charge of $0.5 million.

The following table summarizes the components of the Company’s restructuring activity recorded in accounts payable and accrued expenses in the accompanying condensed consolidated balance sheet at March 31, 2023.

Expense incurred
during the three months
ended March 31, 2023

Amounts paid
during the three months
ended March 31, 2023

Amounts unpaid
at March 31, 2023

(in thousands)

Employee severance, benefits and related costs

$

1,610

$

(1,474)

$

136

Obligations under manufacturing and development contracts

3,497

(136)

3,361

$

5,107

$

(1,610)

$

3,497

14

7. Debt

K2 HealthVentures Loan and Security Agreement

In July 2022, the Company entered into a loan and security agreement (the “Loan Agreement”) with K2 HealthVentures LLC (together with its affiliates, “K2HV”, and together with any other lender from time to time party thereto, the “Lenders”), as administrative agent for the Lenders, and Ankura Trust Company, LLC, as collateral agent for the Lenders. The Loan Agreement provides up to $50.0 million principal in term loans (the “Term Loan”) consisting of a first tranche of $30.0 million funded at closing and a subsequent second tranche of up to $20.0 million upon the Company’s request before March 1, 2025, subject to review by the Lenders of certain information from the Company and discretionary approval by the Lenders.

In connection with entering into the Loan Agreement, the Company also issued to K2HV a warrant to purchase shares of common stock (see Note 8), which was an incremental cost to the Loan Agreement; thus, the allocated fair value of the warrant was recorded as part of the issuance cost.

The Term Loan will mature on August 1, 2026, with interest only payments for 30 months, and thereafter interest and principal payments for the remaining 18 months. It bears a variable interest rate equal to the greater of (i) 7.95% and (ii) the sum of (A) the prime rate last quoted in The Wall Street Journal (or a comparable replacement rate, as determined by the Lenders, if The Wall Street Journal ceases to quote such rate) and (B) 3.20%. Upon the final payment under the Loan Agreement, the Lenders are entitled to an end of term charge equal to 6.45% of the aggregate original principal amount of the term loans made pursuant to the Loan Agreement. The final payment fee is being accreted and amortized into interest expense using the effective interest rate method over the term of the loan. The effective interest is 11.19% for the first tranche. This could change given it is a variable interest rate facility.

The Company may prepay, at its option, all, but not less than all, of the outstanding principal balance and all accrued and unpaid interest with respect to the principal balance being prepaid of the term loans, subject to a prepayment premium as follows: 3% of the loan amounts prepaid if such prepayment occurs in the first year after funding; 2% if such prepayment occurs in the second year after funding; 1% if such prepayment occurs in the third year after funding; and 0% thereafter.

The Lenders may elect at any time following the closing and prior to the full repayment of the term loans to convert any portion of the principal amount of the term loans then outstanding, up to an aggregate of $3.25 million in principal amount, into shares of the Company’s common stock, $0.0001 par value per share, at a conversion price of $2.6493, subject to customary 19.99% Nasdaq beneficial ownership limitations. The Company also granted registration rights to the Lenders with respect to shares received upon such conversion.

Further, the Lenders may elect to invest up to $5.0 million in future equity financings of the Company, provided such investment is limited to no more than 10% of the total amount raised in such equity financing.

The Loan Agreement contains customary representations and warranties, events of default and affirmative and negative covenants, including covenants that limit or restrict the Company’s ability to, among other things, dispose of assets, make changes to the Company’s business, management, ownership or business locations, merge or consolidate, incur additional indebtedness, pay dividends or other distributions or repurchase equity, make investments, and enter into certain transactions with affiliates, in each case subject to certain exceptions. The Loan Agreement also contains covenants requiring that the Company maintain cash, cash equivalents and marketable securities balance of at least $25.0 million so long as the Company’s total market capitalization is less than $250.0 million.

As security for its obligations under the Loan Agreement, the Company granted the Lenders a first priority security interest on substantially all of the Company’s assets (other than intellectual property), subject to certain exceptions.

The Company capitalized $0.9 million of debt issuance costs which consist of incremental costs incurred for the Lenders and third-party legal firms as well as the fair value of the warrant issued in conjunction with the origination of the term loan. The book value of debt approximates its fair value given the variable interest rate. Long-term debt and the unamortized discount balances are as follows:

15

March 31,
2023

December 31,
2022 

(in thousands)

Outstanding principal amount

$

30,000

$

30,000

Add: accreted liability of final payment fee

313

198

Less: unamortized debt discount, long term

(713)

(763)

Long-term debt, net of discount

$

29,600

$

29,435

The Company's total interest expense was $1.0 million for the three months ended March 31, 2023. The following summarizes the components of total interest expense:

For the Three Months Ended
March 31, 2023

(in thousands)

Interest paid or accrued

$

816

Non-Cash amortization of Debt discount (Including Warrants)

50

Non-Cash accrued Back-end fee

115

$

981

Scheduled future principal payments on total outstanding debt, as of March 31, 2023 are as follows:

Year Ending December 31,

(in thousands)

2023 (remainder of the year)

$

2024

2025

17,713

2026

12,287

$

30,000

The Company was in compliance with all covenants and requirements of its financing arrangements as of March 31, 2023.

8. Warrant

In connection with the Term Loan and Loan Agreement (see Note 7), the Company issued warrants to purchase 339,725 shares of the Company’s common stock with an exercise price of $1.3246 (the “Warrant”).  K2HV may at any time and from time to time exercise this Warrant, in whole or in part, by delivering to the Company the original of this Warrant together with a duly executed Notice of Exercise.

The Company also granted registration rights to the Lenders with respect to shares issuable upon exercise of the Warrant.

16

All of the 339,725 shares are outstanding as of March 31, 2023.

Shares

Initial Recognition Date

Exercise Price

Expiration Date

Warrant

339,725

July 27, 2022

$

1.3246

July 27, 2032

The warrant’s allocated fair value upon issuance was estimated to be approximately $0.4 million, and was measured using a Black-Scholes option-pricing model with the following assumptions:

Stock price

$1.41

Strike price

$1.32

Volatility (annual)

75.30%

Risk-free rate

2.74%

Estimated time to expiration (years)

10

Dividend yield

—%

9. Equity

Preferred stock

The Company has authorized preferred stock amounting to 10,000,000 shares as of March 31, 2023 and December 31, 2022, respectively.

Common stock

The Company has authorized common stock amounting to 500,000,000 shares of $0.0001 par value as of March 31, 2023 and December 31, 2022, respectively.

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.

At-the-Market Offering

In July 2022, the Company entered into a Sales Agreement (the “Sales Agreement”) with Cowen and Company, LLC (“Cowen”), under which the Company may offer and sell, from time to time, shares of common stock having aggregate gross proceeds of up to $50.0 million (the “ATM Shares”). The Company will pay Cowen a commission of up to 3% of the gross proceeds of any sales of the ATM Shares pursuant to the Sales Agreement. As of March 31, 2023, the Company has not sold any shares under the Sales Agreement.

10. Stock-Based Compensation

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

Three months ended
March 31, 

    

2023

    

2022

(in thousands)

Research and development

$

449

$

83

General and administrative

 

1,015

 

544

Stock-based compensation expense included in operating expenses

$

1,464

$

627

17

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 the Company is able to issue equity awards 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 initially reserved 1,483,445 shares of its common stock, plus any reserved shares not issued or subject to outstanding grants under the 2019 Plan on the effective date of the 2021 Plan, for issuance pursuant to awards granted under the 2021 Plan. The number of shares reserved for issuance under the 2021 Plan will increase automatically on January 1 of 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 the Company’s board of directors in any particular year. As such, 1,165,626 shares were added to the Plan in January 2023. As of March 31, 2023, 1,407,388 shares remained available for future issuance under the 2021 Plan.

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 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 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 Company’s board of directors in any particular year. As such, 233,125 shares were added to the Plan in January 2023. As of March 31, 2023, no offering periods have commenced, and 693,406 shares remained available for future issuance under the ESPP.

The aggregate number of shares issued over the term of the ESPP, subject to stock splits, recapitalizations or similar events, may not exceed 4,564,440 shares of the Company’s common stock.

Stock options

The following is a summary of the Company’s stock option activity for the three months ended March 31, 2023:

    

    

Weighted- 

    

Weighted- average 

    

Aggregate 

average 

remaining contractual 

intrinsic value

Options

exercise price

term (in years)

(in thousands)

Outstanding at December 31, 2022

 

4,408,274

$

3.44

 

8.52

$

350

Granted

 

2,101,316

 

1.06

 

 

Exercised

(462,073)

0.49

Cancelled

(893,071)

2.64

Outstanding at March 31, 2023

 

5,154,446

 

2.87

 

7.63

$

2,819

Vested at March 31, 2023

 

2,569,967

 

2.42

 

4.17

$

1,092

Vested and expected to vest at March 31, 2023

 

5,154,446

$

2.87

 

7.63

$

2,819

18

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 weighted average grant-date fair value of stock options granted during the three months ended March 31, 2023 and 2022 was $0.62 and $2.31 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, 

 

2023

    

2022

 

Risk-free interest rate

 

3.67 - 4.24

%  

1.62 - 2.41

%

Volatility

 

73-74

%  

75-76

%

Dividend yield

 

0.00

%  

0.00

%

Expected term (years)

 

2-6

 

6

The fair value of options that vested during the three months ended March 31, 2023 and 2022 was $4.0 million and $0.7 million, respectively. The Company recorded stock-based compensation expense associated with stock option awards of $1.3 million and $0.4 million during the three months ended March 31, 2023 and 2022, respectively. As of March 31, 2023, there was $5.4 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 2.5 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 as 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 condensed consolidated balance sheets as of each of March 31, 2023 and December 31, 2022. The Company recorded stock-based compensation expense associated with restricted common stock of $0.2 and less than $0.1 million during each of the three and three months ended March 31 2023 and 2022, respectively.

Restricted Stock Units

The Company issues RSUs to employees that generally vest over a four-year period with 25% of awards vesting after one year and then 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.

19

The following table summarizes activity related to RSUs:

    

    

Weighted- average

grant date

Number of shares

fair value

Unvested at December 31, 2022

 

125,622

$

16.00

Granted

 

96,025

 

0.98

Vested

(12,562)

$

16.00

Unvested at March 31, 2023

 

209,085

$

9.10

The Company recorded stock-based compensation expense of $0.2 for the three months ended March 31, 2023 and 2022, related to RSUs, respectively. As of March 31, 2023, the total unrecognized expense related to all RSUs was $2.1 million, which the Company expects to recognize over a weighted-average period of 2.5 years.

In connection with the vesting of RSUs, the Company adopted a net settlement method whereby shares of common stock are withheld to satisfy tax withholding and remittance obligations. During the three months ended March 31, 2023, the Company withheld 33,414 shares, which are held in Treasury Stock, for less than $0.1 million.

11. Asset Purchase and License Agreements

CSPC License Agreement

In July 2022, the Company entered into a license agreement (the “CSPC License Agreement”) with CSPC Megalith Biopharmaceutical Co., Ltd., a subsidiary of CSPC Pharmaceutical Group Limited (the “Licensor”), with an effective date of July 27, 2022 (the “Effective Date”), pursuant to which the Licensor granted to the Company a worldwide exclusive right and license (outside of the People’s Republic of China, Hong Kong, Taiwan, and Macau) under certain patents identified in the CSPC License Agreement (the “Licensed Patents”) and know-how (collectively, the “Licensed IP”) to develop and commercialize products (“Licensed Products”) containing EO-3021 (SYSA1801) (the “Licensed Compound”) in the treatment of cancer (the “Field”).

Subject to certain conditions set forth in the CSPC License Agreement, the Company may grant sublicenses (including the right to grant further sublicenses) to its rights under the CSPC License Agreement to any of its affiliates or any third party. Either party to the CSPC License Agreement may assign its rights under the CSPC License Agreement (i) in connection with the sale or transfer of all or substantially all of its assets to a third party, (ii) in the event of a merger or consolidation with a third party or (iii) to an affiliate; in each case contingent upon the assignee assuming in writing all of the obligations of its assignor under the CSPC License Agreement.

Under the terms of CSPC License Agreement, the Company paid to the Licensor a one-time upfront license fee of $27.0 million, and is required to pay to the Licensor milestone payments of up to $148.0 million following the achievement of certain development and regulatory milestones and additional milestone payments of up to approximately $1.0 billion following the achievement of certain commercial milestones.

During the Term (as defined below), the Company is also required to pay to the Licensor (i) royalties ranging from mid-single digits through low double digits on net sales of each Licensed Product and (ii) a percentage of non-royalty sublicense income received by the Company of up to an aggregate of $50.0 million.

Under the terms of the CSPC License Agreement, the development of the Licensed Compound and the first Licensed Product will be governed by a clinical development plan, including anticipated timeline goals in connection with the clinical trials for the first Licensed Product (the “Development Plan”). The Development Plan may be amended by a joint steering committee established by the Company and the Licensor.

The Company will purchase Licensed Products for any clinical or commercial supply from the Licensor under the terms of a supply agreement. Until the Company has completed the first Phase 2 clinical trial for the first Licensed Product in the United States, the Licensor shall supply the Licensed Compound to the Company for clinical purposes as the Company requests, but only to the extent necessary for the Company to conduct such clinical trial, at no cost to the Company.

20

The CSPC License Agreement will expire automatically upon the expiration of the last royalty term of the last Licensed Product (the “Term”), with each royalty term expiring on a country-by-country basis upon the later of: (i) the expiration or abandonment of the last-to-expire Licensed Patent covering a Licensed Product; (ii) 10 years after the date of first commercial sale in the applicable country; and (iii) expiration of regulatory exclusivity for the Licensed Product in the applicable country. Following the expiration of the Term, the License will become non-exclusive and fully-paid.

The CSPC License Agreement may be terminated by the Company for any reason upon 180 days prior written notice to the Licensor. The Licensor may terminate the CSPC License Agreement if the Company or any sublicensee commences an action challenging the Licensed Patents or following the occurrence of certain change of control transactions. Either party may terminate the CSPC License Agreement (i) for an uncured material breach of the CSPC License Agreement by the other party or (ii) if, at any time, the other party undergoes certain bankruptcy, insolvency or dissolution proceedings.

Merrimack License Agreement

In May 2019, the Company entered into an asset purchase agreement with Merrimack Pharmaceuticals, Inc. (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 finding a partner to develop and commercialize 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 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

21

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 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, 2023 and December 31, 2022, 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.

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.