What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-11-06 compared with 2024-08-07 · 94 added, 76 removed, 295 unchanged (37% of the section changed)

21 unchanged sentences

No serious adverse events were reported.

We have initiated study activities for a Phase 2a open-label trial to investigate the safety, tolerability, pharmacokinetics, efficacy, and pharmacodynamics of ATI-2138 administered over 12 weeks in approximately 15 patients in the United States with moderate to severe atopic dermatitis.

In September 2024, we announced that we dosed the first patient in our Phase 2a open-label trial to investigate the safety, tolerability, PK, efficacy, and pharmacodynamics of ATI-2138 administered over 12 weeks in approximately 15 patients in the United States with moderate to severe atopic dermatitis.

The primary endpoints are safety related parameters.

1 unchanged sentence

90), Validated Investigator Global Assessment (vIGA) response, body surface area (BSA) response and other pertinent efficacy related measures .

We expect to announce top-line data in the first half of 2025.

Lepzacitinib, an Investigational Topical “Soft” JAK 1/3 Inhibitor

5 unchanged sentences

The trial randomized 250 patients with mild, moderate or severe atopic dermatitis, including adults and children as young as 12 years old, across 30 clinical trial sites in the United States.

The trial met the primary efficacy endpoint, the percent change from baseline in the Eczema Area and Severity Index, or EASI, score at week 4, with statistical significance for patients treated with lepzacitinib 2% BID compared to patients treated with vehicle (69.7% versus 58.7% in the pooled vehicle group, p=0.035).

The trial met the primary efficacy endpoint, the percent change from baseline in the EASI score at week 4, with statistical significance for patients treated with lepzacitinib 2% BID compared to patients treated with vehicle (69.7% versus 58.7% in the pooled vehicle group, p=0.035).

In addition, a PK analysis showed minimal levels of exposure to lepzacitinib.

26 unchanged sentences

Since our inception, we have incurred significant net losses.

Our net loss was $27.9 million for the six months ended June 30, 2024 and $88.5 million for the year ended December 31, 2023.

As of June 30, 2024, we had an accumulated deficit of $798.7 million.

Our net loss was $35.5 million for the nine months ended September 30, 2024 and $88.5 million for the year ended December 31, 2023.

As of September 30, 2024, we had an accumulated deficit of $806.3 million.

We expect to incur significant expenses and operating losses for the foreseeable future as we advance our drug candidates from discovery through preclinical and clinical development.

9 unchanged sentences

Unfavorable conditions in the economy both in the United States and abroad may negatively affect the growth of our business and our results of operations.

For example, macroeconomic events, including inflationary pressure, the U.S.

Federal Reserve raising interest rates and geopolitical conflicts, have led to economic uncertainty globally.

For example, macroeconomic events, including inflationary pressure and geopolitical conflicts, have led to economic uncertainty globally.

The effect of macroeconomic conditions may not be fully reflected in our results of operations until future periods.

If, however, economic uncertainty increases or the global economy worsens, our business, financial condition and results of operations may be harmed.

Recent Developments

Acquisition and License Agreements

Royalty Purchase Agreement with OCM IP Healthcare Portfolio LP

In July 2024, we entered into a royalty purchase agreement with OCM IP Healthcare Portfolio LP, an investment vehicle for Ontario Municipal Employees Retirement System, or OMERS.

Under the royalty purchase agreement, we sold to OMERS a portion of the future royalty payments and the remaining anniversary milestones associated with our existing license to Eli Lilly and Company, or Lilly, relating to OLUMIANT® (baricitinib) for the treatment of alopecia areata.

Under the terms of the royalty purchase agreement, we received an upfront payment of $26.5 million and are eligible to receive up to an additional $5.0 million based on the achievement of certain sales milestones for OLUMIANT in 2024.

1 unchanged sentence

The royalty payments and milestones we sold to OMERS represent our entire financial interest in the Lilly license agreement after taking into account our other contractual third-party obligations.

Acquisition and License Agreements

We recognized $0.9 million of non-cash royalty income during each of the three and nine months ended

September 30, 2024.

License Agreement with Sun Pharmaceutical Industries, Inc.

5 unchanged sentences

Upon execution of the agreement, we received an upfront payment of $15.0 million from Sun Pharma, a portion of which was payable to third parties.

We recognized $3.0 million of licensing revenue during each of the three and nine months ended September 30, 2024.

License Agreement with Pediatrix Therapeutics, Inc.

1 unchanged sentence

Pediatrix has paid us an upfront payment, and has agreed to pay us development, regulatory and commercial milestone payments upon the achievement of specified milestones set forth in the agreement, and a tiered royalty ranging from a low-to-high single digit percentage of net sales of lepzacitinib by Pediatrix in Greater China.

A portion of consideration received from Pediatrix is payable to the former Confluence equity holders as described below under the caption “Agreement and Plan of Merger with Confluence.”

A portion of the consideration received from Pediatrix is payable to the former Confluence equity holders as described below under the caption “Agreement and Plan of Merger with Confluence.”

License Agreement with Eli Lilly and Company

4 unchanged sentences

We have separate contractual obligations under which we have agreed to pay to third parties an amount equal to any regulatory and commercial milestone payments we receive under the Lilly license agreement, as well as a portion of the upfront consideration and a portion of the royalties we may receive under the license agreement.

In July 2024, we entered into a royalty purchase agreement pursuant to which we sold a portion of our future royalty payments and the remaining anniversary milestones associated with the license to Lilly.

See “Recent Developments—Royalty Purchase Agreement with OCM IP Healthcare Portfolio LP.”

We recorded licensing revenue from Lilly under this agreement of $2.1 million and $0.9 million during the three months ended June 30, 2024 and 2023, respectively, and $3.9 million and $2.3 million during the six months ended June 30, 2024 and 2023, respectively, a portion of which was payable to third parties.

The licensing revenue earned during the three months ended June 30, 2024 was sold to OMERS pursuant to the royalty purchase agreement.

We recognized $0.7 million and $8.3 million of licensing revenue during the three months ended September 30, 2024 and 2023, respectively, and $4.6 million and $10.7 million during the nine months ended September 30, 2024 and 2023, respectively.

Asset Purchase Agreement with EPI Health

3 unchanged sentences

The sale was approved by the bankruptcy court in September 2023.

of the bankruptcy proceedings, all amounts that are due and outstanding by EPI Health have been fully reserved for as of June 30, 2024.

As a result of the bankruptcy proceedings, all amounts that are due and outstanding by EPI Health have been fully reserved.

Agreement and Plan of Merger with Confluence

11 unchanged sentences

The noticed employees are entitled to receive cash severance payments and other benefits, which are contingent upon providing additional services to us.

During the three and six months ended June 30, 2024, we recognized severance expense of $0.1 million and $2.6 million, respectively.

During the six months ended June 30, 2024, we made cash payments of $4.5 million related to severance to impacted employees.

During the three and nine months ended September 30, 2024, we recognized severance expense of $26 thousand and $2.6 million, respectively.

During the nine months ended September 30, 2024, we made cash severance payments of $5.2 million to impacted employees.

Components of Our Results of Operations

49 unchanged sentences

Revaluation of contingent consideration consists of changes in the fair value of our contingent consideration liability between reporting dates, as described below.

Other Income, Net

Other income, net primarily consists of interest earned on our cash, cash equivalents and marketable securities.

Interest Income

Interest income primarily consists of interest earned on our cash, cash equivalents and marketable securities.

Non-cash Royalty Income

In July 2024, we entered into the royalty purchase agreement with OMERS pursuant to which we sold a portion of our royalties due to us under the license agreement with Lilly and received upfront proceeds of $26.5 million.

We evaluated the royalty purchase agreement under Accounting Standards Codification (ASC) 470 – Debt and concluded that the upfront payment should be accounted for as deferred income as the criteria for debt classification were not met.

We apply the “units-of-revenue” method of recognizing income in the condensed consolidated statements of operations and comprehensive loss and such amounts are included in non-cash royalty income.

For each of the three and nine months ended September 30, 2024, we recorded $0.9 million of non-cash royalty income.

Critical Accounting Estimates

15 unchanged sentences

Significant assumptions used in our estimates include the probability of achieving regulatory milestones and commencing commercialization, which are based on an asset’s current stage of development and a review of existing clinical data.

Probability of success assumptions ranged between 17% and 40% at June 30, 2024.

Probability of success assumptions ranged between 17% and 40% at September 30, 2024.

Additionally, estimated future sales levels and the risk-adjusted discount rate applied to the potential payments are also significant assumptions used in calculating the fair value.

The discount rate ranged between 6.6% and 7.9% depending on the year of each potential payment.

During the six months ended June 30, 2024 we recorded a charge to the contingent consideration liability of $3.0 million, which was primarily due to changes in estimated sales levels and changes to the probability of success for certain drug candidates.

During the six months ended June 30, 2023, we did not modify any significant assumptions other than the removal of estimated sales from zunsemetinib for moderate to severe hidradenitis suppurativa following our decision to cease pursuing that indication.

This impact was partially offset by lower discount rates resulting from lower risk-free rates and changes in credit spreads being applied to potential payments relative to prior periods, as well as the passage of time, resulting in an overall decrease in contingent consideration of $2.3 million.

During the nine months ended September 30, 2024, we recorded a charge to the contingent consideration liability of $3.8 million, which was primarily due to changes in estimated sales levels, changes to the probability of success for certain drug candidates, and the passage of time.

During the nine months ended September 30, 2023, we removed estimated sales from zunsemetinib for moderate to severe hidradenitis suppurativa following our decision to cease pursuing that indication.

As a result of this, as well as due to higher discount rates resulting from higher risk-free rates and changes in credit spreads being applied to potential payments relative to prior periods, we recorded an overall decrease in contingent consideration of $0.6 million.

This decrease was partially offset by an increase in the probability of success, as well as the passage of time.

Results of Operations

Comparison of Three and Six Months Ended June 30, 2024 and 2023

Three Months Ended June 30,

Six Months Ended June 30,

Comparison of Three and Nine Months Ended September 30, 2024 and 2023

Three Months Ended September 30,

Nine Months Ended September 30,

(In thousands)

8 unchanged sentences

Loss from operations

Other income, net

Other income:

Interest income

Non-cash royalty income

Total other income

Contract research

Contract research revenue was $0.6 million and $0.9 million for the three months ended June 30, 2024 and 2023, respectively, and was comprised of fees earned from the provision of laboratory services.

The decrease was driven by lower overall hours billed and a lower average billing rate.

Contract research revenue was $1.3 million and $1.8 million for the six months ended June 30, 2024 and 2023, respectively, and was comprised of fees earned from the provision of laboratory services.

Contract research revenue was $0.6 million and $0.7 million for the three months ended September 30, 2024 and 2023, respectively, and was comprised of fees earned from the provision of laboratory services.

Contract research revenue was $1.9 million and $2.5 million for the nine months ended September 30, 2024 and 2023, respectively, and was comprised of fees earned from the provision of laboratory services.

The decrease was driven by lower overall hours billed and a lower average billing rate.

Licensing revenue was $2.1 million and $1.0 million for the three months ended June 30, 2024 and 2023, respectively.

The increase was primarily driven by an increase in royalties under the Lilly license agreement during the three months ended June 30, 2024 offset by a decrease of royalties under the EPI Health agreement between periods.

Licensing revenue was $3.9 million and $2.6 million for the six months ended June 30, 2024 and 2023, respectively.

The increase was primarily driven by an increase in royalties under the Lilly license agreement during the six months ended June 30, 2024, offset by the achievement of a commercial milestone under the Lilly license agreement during the six months ended June 30, 2023 and a decrease of royalties under the EPI Health agreement between periods.

Licensing revenue was $3.7 million and $8.6 million for the three months ended September 30, 2024 and 2023, respectively.

The decrease was primarily driven by the achievement of higher milestones under license agreements during the three months ended September 30, 2023 compared to the three months ended September 30, 2024.

The royalty sale to OMERS in July 2024 also contributed to the decrease in licensing revenue.

Licensing revenue was $7.6 million and $11.2 million for the nine months ended September 30, 2024 and 2023, respectively.

The decrease was primarily driven by the achievement of higher milestones under license agreements during the nine months ended September 30, 2023 compared to the nine months ended September 30, 2024.

The royalty sale to OMERS in July 2024 also contributed to the decrease in licensing revenue.

Costs and Expenses

Cost of Revenue

Cost of revenue was $0.6 million and $1.0 million for the three months ended June 30, 2024 and 2023, and in each case, related to providing laboratory services.

Cost of revenue was $0.7 million and $0.8 million for the three months ended September 30, 2024 and 2023, and in each case, related to providing laboratory services.

Changes in cost of revenue generally correlate to changes in contract research revenue.

Cost of revenue included a decrease in expense due to lower variable costs resulting from a decrease in hours billed.

Cost of revenue was $1.4 million and $1.9 million for the six months ended June 30, 2024 and 2023, respectively, and in each case, related to providing laboratory services.

Cost of revenue was $2.1 million and $2.7 million for the nine months ended September 30, 2024 and 2023, respectively, and in each case, related to providing laboratory services.

Changes in cost of revenue generally correlate to changes in contract research revenue.

Cost of revenue decreased in the six months ended June 30, 2024 compared to the corresponding prior year period due to lower variable costs resulting from a decrease in hours billed, which was offset by an increase in termination benefits, as a result of our restructuring that was announced in December 2023.

Cost of revenue decreased in the nine months ended September 30, 2024 compared to the corresponding prior year period due to lower variable costs resulting from a decrease in hours billed, which was offset by an increase in termination benefits, as a result of our restructuring that was announced in December 2023.

Research and Development

1 unchanged sentence

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

(In thousands)

2 unchanged sentences

Total research and development expenses

The decrease in expenses for zunsemetinib during the three and six months ended June 30 , 2024 compared to the three and six months ended June 30, 2023 was primarily due to a decrease in costs associated with clinical development activities for a Phase 2a trial in subjects with hidradenitis suppurativa, which was initiated in December 2021 and was completed in early March 2023, a Phase 2b trial in subjects with rheumatoid arthritis, which was initiated in December 2021 and was completed in November 2023, and a Phase 2b trial in subjects with psoriatic arthritis, which was initiated in June 2022 and was discontinued in December 2023.

The decrease in expenses for zunsemetinib during the three and nine months ended September 30 , 2024 compared to the three and nine months ended September 30, 2023 was primarily due to a decrease in costs associated with clinical development activities for a Phase 2a trial in subjects with hidradenitis suppurativa, which was initiated in December 2021 and was completed in early March 2023, a Phase 2b trial in subjects with rheumatoid arthritis, which was initiated in December 2021 and was completed in November 2023, and a Phase 2b trial in subjects with psoriatic arthritis, which was initiated in June 2022 and was discontinued in December 2023.

Drug candidate manufacturing costs also decreased accordingly.

The decrease in expenses for lepzacitinib during the three and six months ended June 30, 2024 compared to the three and six months ended June 30 , 2023 was primarily due to lower costs associated with preclinical development activities and costs associated with a Phase 2b clinical trial in subjects with atopic dermatitis, which was initiated in May 2022 and was completed in January 2024.

The decrease in expenses for ATI-2138 during the three and six months ended June 30, 2024 compared to the three and six months ended June 30, 2023 was primarily due to a decrease in clinical development expenses associated with a Phase 1 MAD trial which was completed in September 2023, as well as a decrease in preclinical development activities.

This decrease was partially offset by clinical development expenses associated with the initiation of Phase 2a study activities in May 2024.

The decrease in expenses for lepzacitinib during the three and nine months ended September 30, 2024 compared to the three and nine months ended September 30 , 2023 was primarily due to lower costs associated with preclinical development activities and costs associated with a Phase 2b clinical trial in subjects with atopic dermatitis, which was initiated in May 2022 and was completed in January 2024.

The decrease in expenses for ATI-2138 during the three and nine months ended September 30, 2024 compared to the three and nine months ended September 30, 2023 was primarily due to a decrease in clinical development expenses associated with a Phase 1 MAD trial which was completed in September 2023, as well as a decrease in preclinical development activities.

This decrease was partially offset by clinical development expenses associated with a Phase 2a trial which initiated in August 2024.

Personnel and stock-based compensation

The decrease in personnel and stock-based compensation expenses during the three and six months ended June 30, 2024 compared to the three and six months ended June 30, 2023 was primarily due to lower headcount and higher forfeiture credits, partially offset by an increase in termination benefits, as a result of our restructuring that was announced in December 2023.

The decrease in personnel and stock-based compensation expenses during the three and nine months ended September 30, 2024 compared to the three and nine months ended September 30, 2023 was primarily due to lower headcount and higher forfeiture credits, partially offset by an increase in termination benefits, as a result of our restructuring that was announced in December 2023.

General and Administrative

1 unchanged sentence

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

(In thousands)

5 unchanged sentences

Personnel and stock-based compensation

Professional and legal fees

Professional and legal fees, including accounting, investor relations and corporate communication costs, decreased during the three and six months ended June 30, 2024 compared to the three and six months ended June 30, 2023.

The decrease was primarily driven by a decrease in patent, legal and accounting related expenses, which were partially offset by an increase in other professional fees.

Professional and legal fees, including accounting, investor relations and corporate communication costs, increased during the three months ended September 30, 2024 compared to the three months ended September 30, 2023.

The increase was primarily due to business development expenses incurred in connection with the royalty purchase agreement with OMERS.

Professional and legal fees decreased during the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023, which was primarily driven by a decrease in accounting related expenses, which were partially offset by an increase in business development expenses.

Facility and support services

Facility and support services, including general office expenses, information technology costs and other expenses, decreased during the three and six months ended June 30, 2024 compared to the three and six months ended June 30, 2023 primarily as a result of a decrease in rent expense and information technology expenses.

Bad debt expenses were related to our determination that amounts due to us as of June 30, 2023 pursuant to the asset purchase agreement with EPI Health are uncertain as a result of the bankruptcy filing by EPI Health in July 2023.

There was no bad debt expense during the three and six months ended June 30, 2024.

The increase in licensing expenses during the three and six months ended June 30, 2024 compared to the three and six months ended June 30, 2023 was due to an increase in royalties earned under the Lilly license agreement.

Facility and support services, including general office expenses, information technology costs and other expenses, decreased during the three and nine months ended September 30, 2024 compared to the three and nine months ended September 30, 2023 primarily as a result of a decrease in rent expense and information technology expenses.

Bad debt expenses were related to our determination that amounts due to us as of September 30, 2023 pursuant to the asset purchase agreement with EPI Health are uncertain as a result of the bankruptcy filing by EPI Health in July 2023.

There was no bad debt expense during the three and nine months ended September 30, 2024.

The decrease in licensing expenses during the three and nine months ended September 30, 2024 compared to the three and nine months ended September 30, 2023 was primarily driven by the achievement of higher milestones under

license agreements during the three months ended September 30, 2023 compared to the three months ended September 30, 2024.

Revaluation of Contingent Consideration

The revaluation of contingent consideration loss during the three months ended June 30, 2024 was primarily due to the passage of time, compared to the revaluation of contingent consideration gain during the three months ended June 30, 2023 which was primarily due to a change in discount rates, including risk-free rates and credit spreads, on potential future payments.

The gain during the three months ended June 30, 2023 was partially offset by adjustments to other assumptions for certain clinical programs and an increase in the probability of success of zunsemetinib in psoriatic arthritis.

The revaluation of contingent consideration loss during the six months ended June 30, 2024 was primarily due to changes in estimated sales levels and changes to the probability of success for certain drug candidates, compared to the revaluation of contingent consideration gain during the six months ended June 30, 2023 which was primarily due to changes in discount rates, including risk-free rates and credit spreads, on potential future payments.

The gain during the six months ended June 30, 2023 was partially offset by adjustments to other assumptions for certain clinical programs, including the removal of estimated future sales levels of zunsemetinib for moderate to severe hidradenitis suppurativa following our decision to cease pursuing this indication.

Other Income, net

Other income, net decreased during the three and six months ended June 30, 2024 compared to the three and six months ended June 30, 2023 primarily due to lower interest income on investment portfolio balances.

The revaluation of contingent consideration loss decreased during the three months ended September 30, 2024 compared to the three months ended September 30, 2023 mainly due to adjustments to assumptions for certain clinical programs during the three months ended September 30, 2023.

The revaluation of contingent consideration loss during the nine months ended September 30, 2024 was primarily due to changes in estimated sales levels and changes to the probability of success for certain drug candidates, compared to the gain during the nine months ended September 30, 2023 which was primarily due to changes in discount rates, including risk-free rates and credit spreads, on potential future payments.

The gain during the nine months ended September 30, 2023 was partially offset by adjustments to other assumptions for certain clinical programs.

Interest Income

Interest income decreased during the three and nine months ended September 30, 2024 compared to the three and nine months ended September 30, 2023 primarily due to lower interest income on investment portfolio balances.

Non-cash Royalty Income

Non-cash royalty income was $0.9 million for each of the three and nine months ended September 30, 2024.

Liquidity and Capital Resources

5 unchanged sentences

In addition, to the extent we are able to consummate transactions with potential third-party partners to further develop, obtain marketing approval for and/or commercialize our drug candidates, we may receive upfront payments, milestone payments or royalties from such arrangements that would increase our liquidity.

As of June 30, 2024, we had cash, cash equivalents and marketable securities of $149.9 million.

In July 2024, we sold to OMERS a portion of the future royalty payments and the remaining anniversary milestones associated with our existing license to Lilly for an upfront payment of $26.5 million and are eligible to receive up to an additional $5.0 million upon the achievement of certain sales milestones.

As of September 30, 2024, we had cash, cash equivalents and marketable securities of $173.4 million.

Cash in excess of immediate requirements is invested in accordance with our investment policy, primarily with a view towards liquidity and capital preservation.

We currently have no ongoing material financing commitments, such as lines of credit or guarantees, that are expected to affect our liquidity, other than our contingent obligations under the Confluence Agreement, which is summarized above under “Overview—Acquisition and License Agreements, ” and our lease obligations.

Cash and cash equivalents were $22.8 million as of June 30, 2024 compared to $39.9 million as of December 31, 2023.

We also had $127.1 million in short- and long-term marketable securities as of June 30, 2024 compared to $142.0 million as of December 31, 2023.

Cash and cash equivalents were $47.7 million as of September 30, 2024 compared to $39.9 million as of December 31, 2023.

We also had $125.7 million in short- and long-term marketable securities as of September 30, 2024 compared to $142.0 million as of December 31, 2023.

The sources and uses of cash that contributed to the change in cash and cash equivalents were:

Six Months Ended

Nine Months Ended

September 30,

(In thousands)

6 unchanged sentences

Cash flow related to operating activities was the result of:

Six Months Ended

Nine Months Ended

September 30,

(In thousands)

1 unchanged sentence

Change in accounts payable and accrued expenses

Change in deferred income

Change in accounts receivable

1 unchanged sentence

Net cash used in operating activities

Net cash used in operating activities decreased for the six months ended June 30, 2024 compared to the six months ended June 30, 2023 primarily as a result of lower net losses after adjusting for non-cash items.

Net cash used in operating activities decreased for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023 primarily as a result of lower net losses after adjusting for non-cash items, lower prepayments on vendor contracts and proceeds from the royalty sale to OMERS.

This change was partially offset by an increase in cash used for accounts payable and accrued expenses, which was due to the timing of payments to vendors as well as third parties in connection with amounts earned under licensing agreements.

1 unchanged sentence

Cash flow related to investing activities was the result of:

Six Months Ended

Nine Months Ended

September 30,

(In thousands)

3 unchanged sentences

Net cash provided by investing activities

The increase in net cash provided by investing activities for the six months ended June 30, 2024 compared to the six months ended June 30, 2023 resulted primarily from lower purchases of marketable securities during the six months ended June 30, 2024, partially offset by lower sales and maturities of marketable securities during the six months ended June 30, 2024.

The decrease in net cash provided by investing activities for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023 resulted primarily from lower sales and maturities of marketable securities during the nine months ended September 30, 2024, partially offset by lower purchases of marketable securities during the nine months ended September 30, 2024.

Financing Activities

Cash flow related to financing activities was the result of:

Six Months Ended

Nine Months Ended

September 30,

(In thousands)

4 unchanged sentences

Net cash (used in) provided by financing activities

Net cash used in financing activities for the six months ended June 30, 2024 was $0.1 million compared to net cash provided by financing activities during the six months ended June 30, 2023 of $26.7 million.

The change was primarily due to proceeds in the six months ended June 30, 2023 from sales under our at-the-market sales agreement.

Net cash used in financing activities for the nine months ended September 30, 2024 was $44 thousand compared to net cash provided by financing activities during the nine months ended September 30, 2023 of $26.7 million.

The change was primarily due to proceeds in the nine months ended September 30, 2023 from sales under our at-the-market sales agreement.

Funding Requirements

4 unchanged sentences

As a publicly traded company, we incur and will continue to incur significant legal, accounting, and other similar expenses.

In addition, the Sarbanes-Oxley Act of 2002, as well as rules adopted by the SEC and the Nasdaq Stock Market

LLC, requires public companies to implement specified corporate governance practices that could increase our compliance costs.

In addition, the Sarbanes-Oxley Act of 2002, as well as rules adopted by the SEC and the Nasdaq Stock Market LLC, requires public companies to implement specified corporate governance practices that could increase our compliance costs.

We believe our existing cash, cash equivalents and marketable securities are sufficient to fund our operating and capital expenditure requirements for a period greater than 12 months from the date of issuance of our condensed consolidated financial statements that appear in Item 1 of this Quarterly Report on Form 10-Q based on our current operating assumptions.

1 unchanged sentence

Additional funds may not be available on a timely basis, on commercially acceptable terms, or at all, and such funds, if raised, may not be sufficient to enable us to continue to implement our long-term business strategy.

Our ability to raise additional capital may be adversely impacted by potentially worsening global economic conditions caused by a variety of factors including geopolitical tensions, rising interest rates, and inflationary pressures.

If we are unable to raise sufficient additional capital or generate revenue from transactions with potential third-party partners for the development and/or commercialization of our drug candidates, we may need to substantially curtail our planned operations.

12 unchanged sentences

We also occupy office and laboratory space in St.

Louis, Missouri under a sublease agreement which has a term through June 2029.

Our aggregate remaining lease payment obligation for these two spaces was $3.6 million as of June 30, 2024.

Louis, Missouri under a sublease agreement which has a term through May 2029.

Our aggregate remaining lease payment obligation for these two spaces was $3.4 million as of September 30, 2024.

Agreement and Plan of Merger – Confluence

2 unchanged sentences

In addition to the payments described above, if we sell, license or transfer any of the intellectual property acquired from Confluence pursuant to the Confluence Agreement to a third party, we will be obligated to pay the former Confluence equity holders a portion of any consideration received from such sale, license, or transfer in specified circumstances.

As of June 30, 2024, the balance of our contingent consideration liability was $9.2 million.

As of September 30, 2024, the balance of our contingent consideration liability was $10.0 million.

R&D Obligations

6 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis