10-Q

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

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, 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.

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

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

As of May 6, 2022, the registrant had 41,629,367 shares of common stock, $0.001 par value per share, outstanding.

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

1. Organization and Summary of Significant Accounting Policies

Organization

Janux Therapeutics, Inc. (the “Company”) was incorporated in the State of Delaware in June 2017 and is based in San Diego, California. The Company is a preclinical stage biopharmaceutical company developing a broad pipeline of novel immunotherapies by applying its proprietary technology to its Tumor Activated T Cell Engager ("TRACTr") and Tumor Activated Immunomodulator ("TRACIr") platforms to better treat patients suffering from cancer.

Forward Stock Split

In June 2021, the Company’s board of directors and stockholders approved an amendment to the Company’s certificate of incorporation to effect a forward split of shares of the Company’s common stock on a one-for-1.281 basis, which was effected on June 4, 2021 (the “Forward Stock Split”). The number of authorized shares and the par values of the common stock and convertible preferred stock were not adjusted as a result of the Forward Stock Split. The accompanying financial statements and notes to the financial statements give retroactive effect to the Forward Stock Split for all periods presented.

Liquidity and Capital Resources

From its inception through March 31, 2022, the Company has devoted substantially all its efforts to organizing and staffing, business planning, raising capital and developing its TRACTr and TRACIr therapeutic platforms and preclinical assets. The Company has incurred net losses and negative cash flows from operations since inception and had an accumulated deficit of $60.8 million as of March 31, 2022. The Company has a limited operating history, has not generated any product revenue, and the sales and income potential of its business is unproven. To date the Company has funded its operations primarily with the net proceeds from the issuance of convertible promissory notes, the issuance of convertible preferred stock, the issuance of common stock in its initial public offering (“IPO”), the exercise of common stock options and amounts received under a collaboration agreement. The Company expects to incur substantial operating losses for the next several years and will need to obtain additional financing in order to continue its research and development activities, initiate and complete clinical trials and launch and commercialize any product candidates for which it receives regulatory approval. The Company plans to continue to fund its losses from operations and capital funding needs through public or private equity or debt financings or other sources. The COVID-19 pandemic continues to rapidly evolve and has already resulted in a significant disruption of global capital markets. The impact of the COVID-19 pandemic on capital markets may affect the availability, amount and type of financing available to us in the future. If the Company is not able to secure adequate additional funding, the Company may be forced to make reductions in spending, extend payment terms with suppliers, liquidate assets where possible, or suspend or curtail planned programs. Any of these actions could materially harm the Company’s business, results of operations and future prospects. There can be no assurance that such financing will be available or will be at terms acceptable to the Company. Management believes the Company has sufficient capital to fund its operation for at least 12 months from the issuance date of these unaudited condensed financial statements.

Unaudited Interim Financial Information

The unaudited condensed financial statements as of March 31, 2022, and for the three months ended March 31, 2022 and 2021, have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”), and with accounting principles generally accepted in the United States (“GAAP”) applicable to interim financial statements. These unaudited condensed financial statements have been prepared on the same basis as the Company’s audited financial statements and include all adjustments, consisting of only normal recurring accruals, which in the opinion of management are necessary to present fairly the Company’s financial position as of the interim date and results of operations for the interim periods presented. Interim results are not necessarily indicative of results for a full year or future periods. The condensed balance sheet data as of December 31, 2021 was derived from the Company’s audited financial statements but does not include all disclosures required by GAAP. These unaudited condensed financial statements should be read in conjunction with the Company’s audited financial statements for the year ended December 31, 2021.

Use of Estimates

The Company’s financial statements are prepared in accordance with GAAP. The preparation of the Company’s financial statements requires it to make estimates and assumptions that impact the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities in the Company’s financial statements and accompanying notes. The most

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Janux Therapeutics, Inc.

Notes to Unaudited Condensed Financial Statements–(Continued)

significant estimates in the Company’s financial statements relate to estimates to complete the performance obligations and the estimated transaction price for collaboration revenue, accruals for research and development expenses, stock-based compensation and fair value measurements. These estimates and assumptions are based on current facts, historical experience and various other factors believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the recording of revenues and expenses that are not readily apparent from other sources. Although the impact of the COVID-19 pandemic to the Company’s business and operating results presents additional uncertainty, the Company continues to use the best information available to update its accounting estimates. Actual results may differ materially and adversely from these estimates.

Fair Value Measurements

The accounting guidance defines fair value, establishes a consistent framework for measuring fair value and expands disclosure for each major asset and liability category measured at fair value on either a recurring or non-recurring basis. Fair value is defined as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, the accounting guidance establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:

Level 1: Observable inputs such as quoted prices in active markets.

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

Level 3: Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.

The carrying amounts of the Company’s financial instruments, including cash and cash equivalents, restricted cash, accounts receivable, prepaid and other current assets, accounts payable, and accrued liabilities, approximate fair value due to the short-term nature of those instruments. The fair value of assets classified within Level 1 is based on quoted prices in active markets as provided by the Company’s investment managers. The fair value of short-term investments classified within Level 2 is based on standard observable inputs, including reported trades, broker/dealer quotes, and bids and/or offers. The Company validates the quoted market prices provided by its investment managers by comparing the investment managers’ assessment of the fair values of the Company’s investment portfolio balance against the fair values of the Company’s investment portfolio balance obtained from an independent source. The Company has no financial liabilities recorded at fair value on a recurring basis. None of the Company’s non-financial assets or liabilities are recorded at fair value on a non-recurring basis. No transfers between levels have occurred during the periods presented.

The following tables summarize the Company’s financial instruments measured at fair value on a recurring basis (in thousands):


			Fair Value Measurements at Reporting Date Using
	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
As of March 31, 2022:
Assets:
Cash equivalents:
Money market funds	$	25,189	$	25,189	$	—	$	—
Commercial paper		9,982		—		9,982		—
Total cash equivalents		35,171		25,189		9,982		—
Short-term investments:
U.S. Treasury securities		123,357		123,357		—		—
Commercial paper		182,714		—		182,714		—
Total short-term investments		306,071		123,357		182,714		—
Restricted cash:
Money market account		816		816		—		—
Total restricted cash		816		816		—		—
Total assets measured at fair value on a recurring basis	$	342,058	$	149,362	$	192,696	$	—

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Janux Therapeutics, Inc.

Notes to Unaudited Condensed Financial Statements–(Continued)


			Fair Value Measurements at Reporting Date Using
	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
As of December 31, 2021:
Assets:
Cash equivalents:
Money market funds	$	15,020	$	15,020	$	—	$	—
Commercial paper		9,998		—		9,998		—
Total cash equivalents		25,018		15,020		9,998		—
Short-term investments:
U.S. Treasury securities		99,247		99,247		—		—
Corporate debt securities		6,026		—		6,026		—
Commercial paper		234,110		—		234,110		—
Total short-term investments		339,383		99,247		240,136		—
Restricted cash:
Money market account		816		816		—		—
Total restricted cash		816		816		—		—
Total assets measured at fair value on a recurring basis	$	365,217	$	115,083	$	250,134	$	—

Cash and Cash Equivalents

The Company considers all highly liquid investments with original maturities of three months or less when purchased to be cash equivalents. Cash and cash equivalents include cash in readily available checking accounts, commercial paper and money market funds.

Restricted Cash

Restricted cash consists of a money market account securing a standby letter of credit issued in connection with the Company’s Torrey Plaza operating lease (as defined and described in Note 3).

The following table provides a reconciliation of cash and cash equivalents and restricted cash reported within the accompanying balance sheets that sum to the amounts shown in the statements of cash flows (in thousands):


	March 31, 2022		December 31, 2021
Cash and cash equivalents	$	55,129	$	35,582
Restricted cash		816		816
Total cash and cash equivalents and restricted cash	$	55,945	$	36,398

Short-Term Investments

Short-term investments consist of U.S. treasury securities, corporate debt securities and commercial paper. The Company has classified these investments as available-for-sale, as the sale of such investments may be required prior to maturity to implement management strategies, and therefore has classified all investment securities as current assets. Those investments with maturity dates of three months or less at the date of purchase are presented as cash equivalents in the accompanying balance sheets. Short-term investments are carried at fair value with the unrealized gains and losses included in accumulated other comprehensive income (loss) as a component of stockholders’ equity (deficit) until realized. Any premium or discount arising at purchase is amortized or accreted to interest income as an adjustment to yield using the straight-line method over the life of the instrument. The Company records an allowance for credit losses when unrealized losses are due to credit-related factors. Realized gains and losses are calculated using the specific identification method and recorded as interest income.

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Janux Therapeutics, Inc.

Notes to Unaudited Condensed Financial Statements–(Continued)

The following tables summarize short-term investments (in thousands):


	As of March 31, 2022
	Amortized		Unrealized					Estimated
	Cost		Gains		Losses			Fair Value
U.S. Treasury securities	$	124,511	$	—	$	(1,154	)	$	123,357
Commercial paper		183,127		—		(


Delaware	82-2289112
( State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
11099 N. Torrey Pines Road, Suite 290, La Jolla, California	92037
(Address of principal executive offices)	(Zip Code)


		Page
PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements:	1
	Condensed Balance Sheets	1
	Unaudited Condensed Statements of Operations and Comprehensive Loss	2
	Unaudited Condensed Statements of Convertible Preferred Stock and Stockholders’ Equity (Deficit)	3
	Unaudited Condensed Statements of Cash Flows	4
	Notes to Unaudited Condensed Financial Statements	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	24
Item 4.	Controls and Procedures	24
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	25
Item 1A.	Risk Factors	25
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	73
Item 6.	Exhibits	74
SIGNATURES		75


	March 31, 2022			December 31, 2021
Assets	(unaudited)
Current assets:
Cash and cash equivalents	$	55,129		$	35,582
Short-term investments		306,071			339,383
Prepaid expenses and other current assets (includes related party amounts of $23 and $0, respectively)		3,454			2,054
Total current assets		364,654			377,019
Restricted cash		816			816
Property and equipment, net		2,660			1,412
Operating lease right-of-use assets		130			185
Other long-term assets		337			392
Total assets	$	368,597		$	379,824

Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	1,939		$	2,458
Accrued liabilities (includes related party amounts of $0 and $32, respectively)		5,074			3,779
Current portion of deferred revenue		4,649			5,163
Unvested stock liabilities		700			1,203
Current portion of operating lease liabilities		153			194
Total current liabilities		12,515			12,797
Deferred revenue, net of current portion		—			700
Total liabilities		12,515			13,497

Commitments and contingencies (Note 3)

Stockholders’ equity:
Preferred stock, $0.001 par value; authorized shares – 10,000,000 at March 31, 2022 and December 31, 2021, respectively; no shares issued and outstanding at March 31, 2022 and December 31, 2021		—			—
Common stock, $0.001 par value; authorized shares – 200,000,000 at March 31, 2022 and December 31, 2021, respectively; issued shares – 41,629,367 and 41,622,962 at March 31, 2022 and December 31, 2021, respectively; outstanding shares – 41,393,660 and 41,243,137 at March 31, 2022 and December 31, 2021, respectively		41			41
Additional paid-in capital		418,429			413,967
Accumulated other comprehensive loss		(1,567	)		(270	)
Accumulated deficit		(60,821	)		(47,411	)
Total stockholders’ equity		356,082			366,327
Total liabilities and stockholders’ equity	$	368,597		$	379,824


	Three Months Ended March 31,
	2022			2021
Collaboration revenue	$	1,589		$	380
Operating expenses:
Research and development (includes related party amounts of $208 and $486, respectively)		10,184			1,925
General and administrative (includes related party amounts of $42 and $104, respectively)		4,947			739
Total operating expenses		15,131			2,664
Loss from operations		(13,542	)		(2,284	)
Other income:
Interest income		132			—
Total other income		132			—
Net loss	$	(13,410	)	$	(2,284	)
Other comprehensive loss:
Unrealized loss on available-for-sale securities, net		(1,567	)		—
Comprehensive loss	$	(14,977	)	$	(2,284	)
Net loss per common share, basic and diluted	$	(0.32	)	$	(2.06	)
Weighted-average shares of common stock outstanding, basic and diluted		41,315,482			1,111,178


	Common Stock				Additional Paid-in		Accumulated Other Comprehensive Income			Accumulated			Total Stockholders’ Equity
	Shares		Amount		Capital		(Loss)			Deficit			(Deficit)
Balance at December 31, 2021		41,243,137	$	41	$	413,967	$	(270	)	$	(47,411	)	$	366,327
Exercise of common stock options		6,405		—		1		—			—			1
Vesting of restricted shares		144,118		—		503		—			—			503
Stock-based compensation		—		—		3,958		—			—			3,958
Unrealized gain (loss) on investment securities		—		—		—		(1,297	)		—			(1,297	)
Net loss		—		—		—		—			(13,410	)		(13,410	)
Balance at March 31, 2022		41,393,660	$	41	$	418,429	$	(1,567	)	$	(60,821	)	$	356,082


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


	Convertible Preferred Stock				Common Stock				Additional Paid-in		Accumulated			Total Stockholders’ Equity
	Shares		Amount		Shares		Amount		Capital		Deficit			(Deficit)
Balance at December 31, 2020		6,838,829	$	21,624		1,046,599	$	1	$	100	$	(14,739	)	$	(14,638	)
Issuance of Series A convertible preferred stock, net of $278 of issuance costs		5,894,740		55,722		—		—		—		—			—
Exercise of common stock options		—		—		113,418		—		20		—			20
Vesting of restricted shares		—		—		66,960		—		8		—			8
Stock-based compensation		—		—		—		—		123		—			123
Net loss		—		—		—		—		—		(2,284	)		(2,284	)
Balance at March 31, 2021		12,733,569	$	77,346		1,226,977	$	1	$	251	$	(17,023	)	$	(16,771	)