What changed in this filing

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Item 1. Financial Statements

2021-08-05 compared with 2021-05-10 · 262 added, 178 removed, 576 unchanged (43% of the section changed)

26 unchanged sentences

Commitments and contingencies (Note 12)

Stockholders’ equity:

Preferred Stock, $ 0.0001 par value;

10,000,000 shares authorized as of March 31, 2021 and December 31, 2020;

no shares issued and outstanding as of March 31, 2021 and December 31, 2020

Stockholders’ equity (deficit):

10,000,000 shares authorized as of June 30, 2021 (unaudited) and December 31, 2020, respectively;

no shares issued and outstanding as of June 30, 2021 (unaudited) and December 31, 2020, respectively

Common stock, $ 0.0001 par value;

320,000,000 shares authorized as of March 31, 2021 (unaudited) and December 31, 2020, respectively;

38,147,205 and 38,120,606 shares issued and outstanding as of March 31, 2021 (unaudited) and December 31, 2020, respectively

320,000,000 shares authorized as of June 30, 2021 (unaudited) and December 31, 2020, respectively;

38,200,121 and 38,120,606 shares issued and outstanding as of June 30, 2021 (unaudited) and December 31, 2020, respectively

Additional paid-in capital

2 unchanged sentences

Total stockholders’ equity

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

Total liabilities, preferred stock, and stockholders’ equity

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

2 unchanged sentences

Three Months Ended

Six Months Ended

Revenue from collaborations

4 unchanged sentences

Loss from operations

Interest and other income, net

Interest and other income (expense), net

Loss before income tax expense

Income tax expense

Other comprehensive gain (loss):

Income tax income (expense)

Other comprehensive income (loss):

Unrealized gain (loss) on available-for-sale securities

Unrealized gain on pension plans

Unrealized gain (loss) on pension plans

Other comprehensive income (loss)

5 unchanged sentences

(In thousands, except share and per share data)

Three Months Ended March 31, 2021

Three Months Ended June 30, 2021

Comprehensive

Stockholders’

Income (Loss)

Balance as of March 31, 2021

Issuance of common stock upon exercise of

stock options

Stock-based compensation

Vesting of early exercised common

stock options

Other comprehensive loss

Balance as of June 30, 2021

Six Months Ended June 30, 2021

Comprehensive

Stockholders’

Balance as of December 31, 2020

Issuance of common stock

upon exercise of stock

Issuance of common stock upon exercise of

stock options

Stock-based compensation

Vesting of early exercised

common stock options

Other comprehensive income

Balance as of March 31,

Vesting of early exercised common

stock options

Other comprehensive loss

Balance as of June 30, 2021

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

Three Months Ended March 31, 2020

Series A Redeemable Convertible

Preferred Stock

Series B-1 Redeemable Convertible

Preferred Stock

Three Months Ended June 30, 2020

Series A Redeemable

Convertible Preferred Stock

Series B-1 Redeemable

Convertible Preferred Stock

Comprehensive

1 unchanged sentence

Income (Loss)

Balance as of March 31, 2020

Stock-based compensation

Vesting of early exercised

Issuance of common stock

upon exercise of stock options

Issuance of common stock

upon early exercise of stock options

Other comprehensive loss

Balance as of June 30, 2020

Six Months Ended June 30, 2020

Series A Redeemable

Convertible Preferred Stock

Series B-1 Redeemable

Convertible Preferred Stock

Comprehensive

Stockholders’

Income (Loss)

Balance as of December 31, 2019

4 unchanged sentences

Issuance of common stock

upon exercise

of stock options

Vesting of early exercised

existing exercises

upon exercise of stock options

Issuance of common stock

upon early exercise of stock options

Other comprehensive income

Balance as of March 31,

Balance as of June 30, 2020

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

1 unchanged sentence

(In thousands)

Three Months Ended March 31,

Six Months Ended June 30,

Cash flows from operating activities:

3 unchanged sentences

Depreciation expense

Stock-based compensation

Stock-based compensation including ESPP

Change in fair value of derivative liability

1 unchanged sentence

Changes in operating assets and liabilities:

Right of use assets

Accounts payable

6 unchanged sentences

Activities in available-for-sale investments:

Maturities of investments

Purchase of short-term investments

7 unchanged sentences

Payment of Series B-1 redeemable convertible preferred stock issuance cost

Payments of deferred offering costs

Payments on finance lease

7 unchanged sentences

(In thousands)

Three Months Ended March 31,

Six Months Ended June 30,

Reconciliation to amounts on the consolidated balance sheet:

11 unchanged sentences

Property and equipment purchases in accounts payable

Receivable from exercise of common stock options

Change in pension obligation

Deferred offering costs in AP and accrued liabilities

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

1 unchanged sentence

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In dollars, expect share and per share data)

Description of business

2 unchanged sentences

On September 10, 2018, the Company formed Aligos Belgium BVBA (Aligos-Belgium), a limited liability company organized under the laws of Belgium.

On March 30, 2020, the Company formed as a wholly owned subsidiary, Aligos Australia Pty LTD (Aligos-Australia), a proprietary limited company, and together with Aligos-US and Aligos-Belgium being the Company or Aligos.

Aligos is a clinical-stage biopharmaceutical company developing novel therapeutics to address unmet medical needs in viral and liver diseases, including chronic hepatitis B and coronaviruses therapeutics for non-alcoholic steatohepatitis (NASH).

On March 30, 2020, the Company formed as a wholly owned subsidiary, Aligos Australia Pty LTD (Aligos-Australia), a proprietary limited company.

On May 18, 2021, the Company formed as a wholly owned subsidiary, Aligos Therapeutics (Shanghai) Co.

(Aligos-Shanghai) and together with Aligos-US, Aligos-Belgium, and Aligos-Australia being the Company or Aligos.

Aligos is a clinical-stage biopharmaceutical company developing novel therapeutics to address unmet medical needs in viral and liver diseases, including for chronic hepatitis B, coronaviruses and non-alcoholic steatohepatitis (NASH).

The Company is devoting substantially all of its efforts to the research and development of its drug candidates.

11 unchanged sentences

The Company has incurred losses and negative cash flows from operations since its inception.

As of March 31, 2021 and December 31, 2020, the Company had an accumulated deficit of $202.4 million and $174.7 million, respectively.

As of June 30, 2021 and December 31, 2020, the Company had an accumulated deficit of $ 232.2 million and $ 174.7 million, respectively.

Management expects to continue to incur additional substantial losses in the foreseeable future as a result of expanded research and development activities.

As of March 31, 2021, the Company has unrestricted cash, cash equivalents and investments of approximately $213.4 million which is available to fund future operations.

As of June 30, 2021, the Company has unrestricted cash, cash equivalents and short-term investments of approximately $ 190.7 million which is available to fund future operations.

The Company expects to continue to spend substantial amounts to continue the nonclinical and clinical development of its current and future programs.

4 unchanged sentences

In addition, the Company may seek additional capital to take advantage of favorable market conditions or strategic opportunities even if the Company believes it has sufficient funds for its current or future operating plans.

Based on the Company’s research and development plans, it is expected that the Company’s existing cash, cash equivalents and investments, will enable the Company to fund its operations for at least 12 months following the date the condensed consolidated financial statements are issued.

Based on the Company’s research and development plans, it is expected that the Company’s existing cash, cash equivalents and short-term investments, will enable the Company to fund its operations for at least 12 months following the date the condensed consolidated financial statements are issued.

However, the Company’s operating plan may change as a result of many factors currently unknown, and the Company may need to seek additional funds sooner than planned.

7 unchanged sentences

Summary of significant accounting policies

The accompanying condensed consolidated financial statements have been prepared on a basis that assumes the Company will continue as a going concern and contemplates the continuity of operations, realization of assets and the satisfaction of liabilities and commitments in the normal course of business.

The accompanying condensed consolidated financial statements have been prepared on a basis consistent with that used to prepare the audited annual consolidated financial statements and contemplates the continuity of operations, realization of assets and the satisfaction of liabilities and commitments in the normal course of business.

Risks and uncertainties

13 unchanged sentences

Certain information and note disclosures normally included in the financial statements prepared in accordance with U.S.

GAAP have been condensed or omitted pursuant to such rules and regulations.

GAAP have been condensed or omitted pursuant to requirements for interim financial statements.

As such, the information included in this Quarterly Report on Form 10-Q should be read in conjunction with the audited consolidated financial statements and the related notes thereto as of and for the year ended December 31, 2020, included in the Company’s Annual Report on Form 10-K filed with the SEC on March 23, 2021.

Principles of consolidation

The accompanying condensed consolidated financial statements include Aligos-US and its wholly owned subsidiaries Aligos-Belgium and Aligos-Australia.

The accompanying condensed consolidated financial statements include Aligos-US and its wholly owned subsidiaries Aligos-Belgium, Aligos-Australia and Aligos-Shanghai.

All intercompany balances and transactions have been eliminated.

7 unchanged sentences

Unaudited interim financial information

The accompanying consolidated balance sheet as of March 31, 2021, the consolidated statements of operations and comprehensive loss for the three months ended March 31, 2021 and 2020, the consolidated statements of redeemable convertible preferred stock and stockholders’ equity (deficit) for the three months ended March 31, 2021 and 2020, and the consolidated statements of cash flows for the three months ended March 31, 2021 and 2020 are unaudited.

The unaudited consolidated interim financial statements have been prepared on the same basis as the audited annual consolidated financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary for the fair presentation of the Company’s consolidated financial position as of March 31, 2021 and the consolidated results of its operations and cash flows for the three months ended March 31, 2021 and 2020.

The consolidated financial data and other information disclosed in these notes related to the three months ended March 31, 2021 and 2020 are unaudited.

The consolidated results for the three months ended March 31, 2021 are not necessarily indicative of results to be expected for the year ending December 31, 2021, any other interim periods, or any future year or period.

The accompanying consolidated balance sheet as of June 30, 2021, the consolidated statements of operations and comprehensive loss for the three and six months ended June 30, 2021 and 2020, the consolidated statements of redeemable convertible preferred stock and stockholders’ equity (deficit) for the three and six months ended June 30, 2021 and 2020, and the consolidated statements of cash flows for the six months ended June 30, 2021 and 2020 are unaudited.

The unaudited consolidated interim financial statements have been prepared on the same basis as the audited annual consolidated financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary for the fair presentation of the Company’s consolidated financial position as of June 30, 2021 and the consolidated results of its operations and cash flows for the three and six months ended June 30, 2021 and 2020.

The consolidated financial data and other information disclosed in these notes related to the three and six months ended June 30, 2021 and 2020 are unaudited.

The consolidated results for the three and six months ended June 30, 2021 are not necessarily indicative of results to be expected for the year ending December 31, 2021, any other interim periods, or any future year or period.

Deferred offering costs

The Company capitalizes certain legal, professional accounting and other third-party fees that are directly associated with in-process equity financings as deferred offering costs until such financings are consummated, including the Company’s July 2021 follow-on offering and issuance of 4,400,000 shares of the Company’s common stock at a price to the public of $ 19.00 per share for net proceeds of $ 77.9 million, after deducting underwriting discounts and commissions and estimated offering expenses payable by the Company (the Follow-on Offering).

After consummation of the financing, these costs are recorded as a reduction of the proceeds received from the equity financing.

If a planned equity financing is abandoned, the deferred offering costs are expensed immediately as a charge to operating expenses in the condensed consolidated statements of operations and comprehensive loss.

There were $ 737,000 and $ 0 in deferred offering costs recorded within other assets on the Company’s condensed consolidated balance sheets as at June 30, 2021 and December 31, 2020, respectively.

Foreign currency

2 unchanged sentences

Monetary assets and liabilities are then re-measured at exchange rates in effect at the end of each period, and non-monetary assets and liabilities are converted at historical rates.

A re-measurement gain was recognized during the three months ended March 31, 2021 and 2020 of $50,000 and $45,000, respectively, and are reflected within interest and other income, net on the consolidated statements of operations and comprehensive loss.

A re-measurement loss was recognized during the three and six months ended June 30, 2021 of $ 258,000 and $ 207,000 , respectively, and a re-measurement gain was recognized during the three and six months ended June 30, 2020 of $ 7,000 and $ 52,000 , respectively.

This is reflected within interest and other income (expense), net on the consolidated statements of operations and comprehensive loss.

Segment information

The Company has determined that the Chief Executive Officer is its Chief Operating Decision Maker.

The Company’s Chief Executive Officer reviews financial information presented on a consolidated basis for the purposes of assessing the performance and making decisions on how to allocate resources.

The Company’s Chief Executive Officer reviews financial information presented on a consolidated basis for the purposes of assessing the performance and

making decisions on how to allocate resources.

Accordingly, the Company has determined that it operates in a single reportable segment.

No product revenue has been generated since inception.

The Company has $6.3 million and $1.3 million of fixed assets in Aligos-US and Aligos-Belgium, respectively, as of March 31, 2021 and $6.6 million and $1.4 million of fixed assets in Aligos-US and Aligos‑Belgium, respectively as of December 31, 2020.

The Company has $ 5.9 million and $ 1.1 million of fixed assets in Aligos-US and Aligos-Belgium, respectively, as of June 30, 2021 and $ 6.6 million and $ 1.4 million of fixed assets in Aligos-US and Aligos‑Belgium, respectively as of December 31, 2020.

Cash equivalents

1 unchanged sentence

Restricted cash

As of March 31, 2021 and December 31, 2020, the restricted cash balance was $ 556,000 and $ 560,000 , respectively, and was used to secure the letters of credit in relation to the Company’s operating leases and deposits on rental assets (Note 6).

As of June 30, 2021 and December 31, 2020, the restricted cash balance was $ 193,000 and $ 560,000 , respectively, and includes funds to secure the letters of credit in relation to the Company’s operating leases and deposits on rental assets (Note 6), as well as employee withholdings for the employee stock purchase plan.

The Company determines if an arrangement is a lease at the inception of the lease.

23 unchanged sentences

Impairment of long-lived assets

The Company regularly reviews the carrying amount of its property, equipment and intangible assets to determine whether indicators of impairment may exist which warrant adjustments to carrying values or estimated useful lives.

If indications of impairment exist, projected future undiscounted cash flows associated with the asset are compared to the carrying amount to determine whether the asset’s value is recoverable.

The Company reviews quarterly the carrying amount of its property, equipment and intangible assets to determine whether indicators of impairment may exist which warrant adjustments to carrying values or estimated useful lives.

If indications of impairment exist, projected future undiscounted cash flows associated with the asset are compared to the carrying amount to

determine whether the asset’s value is recoverable.

If the carrying value of the asset exceeds such projected undiscounted cash flows, the asset will be written down to its estimated fair value.

No impairment charges were recorded during the three months ended March 31, 2021 or 2020.

The Company determines the appropriate classification of debt securities at the time of purchase and re-evaluates such designation as of each balance sheet date.

Debt securities are classified as held-to-maturity when the Company has the positive intent and ability to hold the securities to maturity, otherwise debt securities are classified as available-for sale.

No impairment charges were recorded during the three and six months ended June 30, 2021 and 2020 .

The Company generally invests its excess cash in money market funds and investment grade short-to-intermediate-term fixed income securities.

Such investments are included in cash and cash equivalents or short-term investments on the condensed consolidated Balance Sheets.

The Company determines the appropriate classification of short-term securities at the time of purchase and re-evaluates such designation as of each balance sheet date.

Securities are classified as held-to-maturity when the Company has the positive intent and ability to hold the securities to maturity, otherwise securities are classified as available-for sale.

Held-to-maturity securities are carried at amortized cost.

Available-for-sale debt securities are measured and reported at fair value using quoted prices in active markets for similar securities.

Unrealized gains and losses on available-for-sale debt securities are reported as a separate component of stockholders’ equity.

Unrealized gains and losses on available-for-sale securities are reported as a separate component of stockholders’ equity.

Premiums or discounts from par value are amortized to investment income over the life of the underlying investment.

The cost of securities sold is determined on a specific identification basis, and realized gains and losses are included in interest and other income, net within the condensed consolidated statements of operations and comprehensive loss.

The cost of securities sold is determined on a specific identification basis, and realized gains and losses are included in interest and other income (expense), net within the condensed consolidated statements of operations and comprehensive loss.

For both held-to-maturity and available-for-sale investments, the Company periodically reviews each individual security position that has an unrealized loss, or impairment, to determine if that impairment is other-than-temporary.

If the Company believes an impairment of a security position is other than temporary, based on available quantitative and qualitative information as of the report date, the loss will be recognized as other income in the Company’s condensed consolidated statements of operations and a new cost basis in the investment is established.

No impairment charges were recorded during the three months ended March 31, 2021 and 2020.

As of March 31, 2021 and December 31, 2020, short-term investments consisted of U.S.

If the Company believes an impairment of a security position is other than temporary, based on available quantitative and qualitative information as of the report date, the loss will be recognized as other income (expense), net, in the Company’s condensed consolidated statements of operations and a new cost basis in the investment is established.

No impairment charges were recorded during the three and six months ended June 30, 2021 and 2020.

As of June 30, 2021 and December 31, 2020, short-term investments consisted of U.S.

Treasury securities with original maturities of less than one year.

14 unchanged sentences

To the extent that the arrangement falls within the scope of ASC 808, the Company assesses whether the payments between the parties fall within the scope of other accounting literature such as ASC 606, Revenue from Contracts with Customers (ASC 606).

During the three months ended March 31, 2021 and 2020, no milestones were met and no royalties were due;

During the three and six months ended June 30, 2021 and 2020, no milestones were met and no royalties were due;

therefore, the Company did not pay or expense any milestone or royalties.

8 unchanged sentences

Stock-based compensation

The Company’s stock-based awards consist of restricted stock awards and stock options.

The Company’s stock-based awards consist of restricted stock awards, stock options and the employee stock purchase plan.

For stock-based awards issued to employees and nonemployees with service-based vesting, the Company measures the estimated fair value of the stock-based awards on the date of grant and recognizes compensation expense for those awards over the requisite service period, which is generally the vesting period of the respective award.

7 unchanged sentences

The fair value of each stock option award is estimated on the date of grant using the Black-Scholes option pricing model.

The Black-Scholes option-pricing model requires the use of a number of complex assumptions including the fair value of the common stock, expected volatility, risk-free interest rate, expected dividends, and expected term of the option.

The Black-Scholes option-pricing model requires the use of a number of assumptions including the fair value of the common stock, expected volatility, risk-free interest rate, expected dividends, and expected term of the option.

The Company had been a private company prior to the IPO and lacks company-specific historical and implied fair value information.

9 unchanged sentences

Treasury yield curve in effect at the time of grant of the award for time periods approximately equal to the expected term of the award.

The Company has not paid, and does not anticipate paying, cash dividends on its common stock;

The Company has no t paid, and does not anticipate paying, cash dividends on its common stock;

therefore, the expected dividend yield is assumed to be zero .

See Note 9 for the assumptions used by the Company in determining the grant date fair value of stock-based awards granted, as well as a summary of the stock-based award activity under the Company’s stock-based compensation plan, for the three months ended March 31, 2021 and 2020.

The fair value of the employee stock purchase plan (ESPP) is determined on the date the offering period begins using a Black-Scholes option-pricing model and similar assumptions for stock options as described above.

Net loss per share

13 unchanged sentences

Property and equipment

The components of property and equipment as of March 31, 2021 and December 31, 2020 were as follows:

The components of property and equipment as of June 30, 2021 and December 31, 2020 were as follows:

Leasehold improvements

5 unchanged sentences

Accumulated depreciation

Depreciation expense was $741,000 for the three months ended March 31, 2021, and $331,000 for the three months ended March 31, 2020, respectively.

Depreciation expense was $ 764,000 and $ 1.5 million for the three and six months ended June 30, 2021, and $ 680,000 and $ 1.3 million for the three and six months ended June 30, 2020, respectively.

Finance leases are also included in property and equipment as vehicles on the condensed consolidated balance sheets (Note 6).

As of March 31, 2021 and December 31, 2020, amortized cost, gross unrealized gains and losses, and estimated fair values of total fixed-maturity securities were as follows:

March 31, 2021

As of June 30, 2021 and December 31, 2020, amortized cost, gross unrealized gains and losses, and estimated fair values of total fixed-maturity securities were as follows:

June 30, 2021

Available-for-sale securities

7 unchanged sentences

The Company expects to collect all contractual principal and interest payments.

The following is a summary of maturities of securities held-to-maturity and available-for-sale as of March 31, 2021:

The following is a summary of maturities of securities held-to-maturity and available-for-sale as of June 30, 2021:

Available-for-sale

3 unchanged sentences

Total investments

The Company recorded interest income of $105,000 for three months ended March 31, 2021, and $468,000 for the three months ended March 31, 2020, respectively, as a component of interest and other income, net on the Company’s condensed consolidated statement of operations and comprehensive loss.

The Company recorded interest income of $ 72,000 and $ 178,000 for the three and six months ended June 30, 2021, and $ 374,000 and $ 752,000 for the three and six months ended June 30, 2020, respectively, as a component of interest and other income (expense), net on the Company’s condensed consolidated statement of operations and comprehensive loss.

Accrued liabilities

2 unchanged sentences

Accrued compensation

Liability with early exercised stock options

Liability for early exercised stock options

The Company has operating and finance leases for corporate offices, research and development facilities, and certain vehicles.

5 unchanged sentences

Leases with an initial term of 12 months or less are not recorded on the balance sheet, and the Company recognizes lease expense for these leases on a straight-line basis over the lease terms.

Leases with terms greater than 12 months are included in operating lease ROU assets and operating lease liabilities in the Company’s condensed consolidated balance sheets as of March 31, 2021 and December 31, 2020.

Lease expense for lease payments is recognized on a straight-line basis over the lease term.

Maturities of lease liabilities as of March 31, 2021 and are as follows:

Maturities of lease liabilities as of June 30, 2021 and are as follows:

Year ending December 31:

4 unchanged sentences

Lease liabilities net of current portion

The components of lease expense were as follows for the three months ended March 31, 2021 and 2020:

The components of lease expense were as follows for the three and six months ended June 30, 2021 and 2020:

Three Months Ended

Six Months Ended

Operating lease cost

3 unchanged sentences

Total finance lease cost

The Company made payments of $638,000 during the three months ended March 31, 2021, respectively, and $607,000 during the three months ended March 31, 2020, respectively, which are included as cash flow from operations on the condensed consolidated statements of cash flows.

As of March 31, 2021 and December 31, 2020, $296,000 of finance lease ROU assets were presented as part of property and equipment on the condensed consolidated balance sheet with accumulated amortization of $126,000 and $107,000, respectively.

Additional information related to the Company’s leases was as follows as of March 31, 2021 and December 31, 2020:

The Company made payments of $ 659,000 and $ 1.3 million during the three and six months ended June 30, 2021, respectively, and $ 636,000 and $ 1.2 million during the three and six months ended June 30, 2020, respectively, which are included as cash flow from operations on the condensed consolidated statements of cash flows.

As of June 30, 2021 and December 31, 2020, $ 296,000 of finance lease ROU assets were presented as part of property and equipment on the condensed consolidated balance sheet with accumulated amortization of $ 144,000 and $ 76,000 , respectively.

Additional information related to the Company’s leases was as follows as of June 30, 2021 and December 31, 2020:

Operating Lease:

11 unchanged sentences

The fair value of the Warrants upon issuance on April 20, 2018 and June 6, 2018, was $ 0.7 million and $ 238,000 , respectively.

The fair value of the Warrants was $0 and $0 as of March 31, 2021 and December 31, 2020, respectively as, due to the IPO in October 2020, all outstanding warrants were automatically exercised for the issuance of Common Stock, and upon that exercise, such warrants were no longer outstanding.

No warrants were exercised during the three months ended March 31, 2021, or during the three months ended March 31, 2020.

As of June 30, 2021 and December 31, 2020, due to the IPO in October 2020, all outstanding warrants were automatically exercised for the issuance of Common Stock, and upon that exercise, such warrants were no longer outstanding.

As Series A contained a conditional obligation for the Company to repurchase the shares for cash consideration, the Warrants were exercised as of the IPO date, with changes in fair value being recorded on the consolidated statements of operations and comprehensive loss.

The Company recorded a change in fair value of derivative liabilities of $0 and $20,000 for the three months ended March 31, 2021 and March 31, 2020, respectively.

The Company recorded a change in fair value of derivative liabilities of $ 76,000 and $ 56,000 for the three and six months ended June 30, 2020, respectively.

Redeemable convertible preferred stock liability

3 unchanged sentences

On the date of the initial closing, the Company recorded the Redeemable Convertible Preferred Stock Liability at a fair value of $ 3.2 million.

As of March 31, 2021 and December 31, 2020, all of the Series B-2 shares were issued and then, as a result of the IPO, converted to shares of common stock.

The Company recorded a change in fair value of the liability of $0 and $166,000 during the three months ended March 31, 2021 and 2020.

As of June 30, 2021 and December 31, 2020, all of the Series B-2 shares were issued and then, as a result of the IPO, converted to shares of common stock.

The Company recorded a change in fair value of derivative liabilities of $ 198,000 and $ 364,000 for the three and six months ended June 30, 2020, respectively.

Capital stock

11 unchanged sentences

As of December 31, 2020, in connection with the Company’s IPO, all shares of Series A converted into Common Stock.

0 million for the issuance and sale of shares of Series B-1 and Series B-2 (collectively, the Series B), at a price of $ 10.18690 and $ 11.20563 per share, respectively.

The Company issued 8,344,034 shares of Series B-1 for cash proceeds of $ 85 .

0 million at the initial closing.

On December 23, 2019, the Company entered into the Series B-1 and Series B-2 Preferred Stock Purchase Agreement (the Series B Purchase Agreement), pursuant to which the investors committed to invest an aggregate amount of up to $ 125.0 million for the issuance and sale of shares of Series B-1 and Series B-2 (collectively, the Series B), at a price of $ 10.18690 and $ 11.20563 per share, respectively.

The Company issued 8,344,034 shares of Series B-1 for cash proceeds of $ 85.0 million at the initial closing.

The investors also committed to purchase and the Company committed to sell 3,569,630 shares of Series B-2 in a subsequent closing (the Second Closing), contingent upon achievement by the Company of certain development milestones or a receipt of a waiver of achievement of the milestones.

No shares of Series B-2 were issued as of March 31, 2021 .

In connection with the issuance of Series B-1, the Company incurred $ 442,000 in issuance costs which have offset amounts reported as temporary equity as of December 31, 2019.

1 unchanged sentence

In connection with the Company’s IPO, all shares of Series B-1 converted into common stock.

As of December 31, 2020, there was 10,000,000 shares of preferred stock authorized and no preferred stock issued.

As of June 30, 2021 , there was 10,000,000 shares of preferred stock authorized and no preferred stock issued.

Stock-based compensation

Stock options

During the periods ended March 31, 2021 and 2020, the Company’s stock option compensation expense was approximately $2.7 million and $240,000, respectively, and there was no recognized tax benefit in either of the periods.

As of March 31, 2021, unamortized expense balance was $37.1 million, to be amortized over a weighted average period of 3.21 years.

Stock option activity during the three months ended March 31, 2021 is as follows:

Time-based options

During the three and six months ended June 30, 2021, the Company’s stock option compensation expense was approximately $ 3.1 million and $ 5.8 million.

During the three and six months ended June 30, 2020, the Company’s stock option compensation expense was approximately $ 237,000 and $ 478,000 .

There was no recognized tax benefit in either of the periods.

As of June 30, 2021, unamortized expense balance was $ 37.2 million, to be amortized over a weighted average period of 2.97 years.

Stock option activity during the six months ended June 30, 2021 is as follows:

Outstanding as of January 1, 2021

Outstanding as of March 31, 2021

Options vested and expected to vest as of March 31, 2021

Options vested and exercisable as of March 31, 2021

The weighted-average grant date fair value of options granted was $17.33 per share during the three months ended March 31, 2021.

Outstanding as of June 30, 2021

Options vested and expected to vest as of June 30, 2021

Options vested and exercisable as of June 30, 2021

The weighted-average grant date fair value of options granted was $ 17.70 and $ 17.61 per share during the three and six months ended June 30, 2021.

Restricted stock awards

During the three months ended March 31, 2021 and 2020, the Company recorded a total stock-based compensation expense of $90,000 and $90,000 related to the restricted stock awards.

As of March 31, 2021, unrecognized stock-based compensation expense related to outstanding unvested shares of restricted stock that are expected to vest were approximately $421,000, expected to be recognized over a weighted-average period of 1.00 years.

The following table summarizes the Company’s restricted common stock activity for the three months ended March 31, 2021:

During the three and six months ended June 30, 2021, the Company recorded a total stock-based compensation expense related to the restricted stock awards of $ 89,000 and $ 179,000 , respectively.

During the three and six months ended June 30, 2020, the Company recorded a total stock-based compensation expense related to the restricted stock awards of $ 90,000 and $ 180,000 , respectively.

As of June 30, 2021, unrecognized stock-based compensation expense related to outstanding unvested shares of restricted stock that are expected to vest were approximately $ 272,000 , expected to be recognized over a weighted-average period of 0.8 years.

The following table summarizes the Company’s restricted common stock activity for the six months ended June 30, 2021:

Issued and unvested as of January 1, 2021

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Restricted stock awards vested

Issued and unvested as of March 31, 2021

Stock-based compensation expense was allocated as follows for the three months ended March 31, 2021 and 2020:

March 31, 2021

March 31, 2020

Issued and unvested as of June 30, 2021

During the six months ended June 30, 2021, the Company issued 262,982 shares of common stock, upon exercise of unvested stock options or purchases for unvested restricted stock awards.

As of June 30, 2021 and December 31, 2020, there were 280,195 and 396,522 shares of Common Stock held by employees subject to repurchase at an aggregate price of $ 0.4 million and $ 0.6 million, respectively.

A corresponding liability was recorded and included in accrued expenses on the condensed consolidated balance sheet as of June 30, 2021 and December 31, 2020, respectively.

Employee stock purchase plan

During the three and six months ended June 30, 2021, the Company recorded a total stock-based compensation expense of $ 240,000 and $ 240,000 , respectively, related to the employee stock purchase plan.

No purchase of common stock had been made by the Company as of June 30, 2021.

Stock-based compensation expense was allocated as follows for the three and six months ended June 30, 2021 and 2020:

Three Months Ended

Six Months Ended

Research and development

General and administrative

During the three months ended March 31, 2021, the Company issued 317,456 shares of common stock, upon exercise of unvested stock options or purchases for unvested restricted stock awards.

As of March 31, 2021 and December 31, 2020, there were 338,358 and 396,522 shares of Common Stock held by employees subject to repurchase at an aggregate price of $0.5 million and $0.6 million, respectively.

A corresponding liability was recorded and included in accrued expenses on the condensed consolidated balance sheet as of March 31, 2021 and December 31, 2020, respectively.

The following tables present the fair value of the Company’s financial instruments that are measured or disclosed at fair value on a recurring basis:

Fair Value Measurements

as of March 31, 2021

as of June 30, 2021

Cash equivalents

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Agreement with Emory University (Emory)

In June 2018, the Company entered into a license agreement with Emory (the Emory License Agreement), pursuant to which Emory granted the Company a worldwide, sublicenseable license under certain of its intellectual property rights to make, have made, develop, use, offer to sell, sell, import and export products containing certain compounds relating to Emory’s hepatitis B virus capsid assembly modulator technology, for all therapeutic and prophylactic uses.

In June 2018, the Company entered into a license agreement with Emory (the Emory License Agreement), pursuant to which Emory granted the Company a worldwide, sublicensable license under certain of its intellectual property rights to make, have made, develop, use, offer to sell, sell, import and export products containing certain compounds relating to Emory’s hepatitis B virus capsid assembly modulator technology, for all therapeutic and prophylactic uses.

Such license is initially exclusive with respect to specified licensed patents owned by Emory and non-exclusive with respect to certain of Emory’s specified know-how.

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The Company has agreed to pay Emory up to an aggregate of $ 125.0 million upon the achievement of specified development, regulatory, and commercial milestones, and all ongoing patent costs.

During the three months ended March 31, 2021, the Company had $80,000 expenses related to milestone payments.

During the six months ended June 30, 2021, the Company had $ 147,000 expenses related to milestone payments.

The Company also agreed to pay Emory tiered single-digit royalties on worldwide annual net sales of licensed products, on a quarterly basis and calculated on a product-by-product basis.

With respect to licensed products containing any of a specified subset of the licensed compounds, such royalties range from a mid-single digit to a high-single digit percentage rate.

With respect to licensed products which do not contain such compounds, the royalties span a range of percentage rates within the mid-single digits if a Phase 1 clinical trial is initiated for the product within three years of the effective date of the Emory License Agreement, and range from a low-single digit to a mid-single digit rate if a Phase 1 clinical trial is initiated more than three years after the effective date.

During the three months ended March 31, 2021 and 2020, the Company made no payments associated with royalties and recognized no expense or accruals.

more than three years after the effective date.

During the three and six months ended June 30, 2021 and 2020 , the Company made no payments associated with royalties and recognized no expense or accruals .

Agreement with Luxna Biotech Co., Ltd.

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The Company is obligated to make payments to Luxna, in aggregate, totaling up to but no more than $ 55.5 million upon the achievement of specified development, regulatory, and commercial milestones.

During the three months ended March 31, 2021 and 2020, the Company recognized no expenses related to milestone payments.

During the three and six months ended June 30, 2021 and 2020, the Company recognized no expenses related to milestone payments.

The Company is also required to pay Luxna a low-single digit royalty percentage on net sale of applicable products, if any.

During the three months ended March 31, 2021 and 2020, the Company made no payments associated with royalties.

During the three and six months ended June 30, 2021 and 2020, the Company made no payments associated with royalties.

Agreement with Katholieke Universiteit Leuven (KU Leuven)

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As consideration for this license, the Company is obligated to make payments to KU Leuven, in aggregate, totaling up to but no more than $ 30.0 million upon the achievement of certain commercial sales milestones.

For each licensed product developed through KU Leuven and the Company’s collaborative effort, the Company is

obligated to make payments to KU Leuven, in aggregate, totaling up to $ 32 .

0 million upon the achievement of certain development and regulatory milestones.

For each licensed product developed through KU Leuven and the Company’s collaborative effort, the Company is obligated to make payments to KU Leuven, in aggregate, totaling up to $ 32.0 million upon the achievement of certain development and regulatory milestones.

The Company is also required to pay KU Leuven a low-to-mid-single digit royalty percentage, subject to certain adjustments, on net sales of applicable products, if any.

Unless terminated earlier by either party, the agreement shall continue until the expiration of the last to expire royalty term, which is the later of the expiration or termination of the last valid patent claim covering the manufacture, use, sale or importation of the licensed product in a particular country or 10 years after the first commercial sale of a licensed product.

During the three months ended March 31, 2021 , the Company recognized no expenses related to milestone payments.

During the three and six months ended June 30, 2021 and 2020, the Company recognized no expenses related to milestone payments.

Agreement with Merck

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The Company determined that the Merck agreement falls within the scope of ASC 808 and we analogized to ASC 606 for the accounting of payments such as upfront payments and other milestones.

During the three months ended March 31, 2021 the Company recognized $910,000 of revenue from collaborative arrangements related to milestone payments.

During the three months ended March 31, 2020 the Company did not recognize any revenue from collaborative arrangements.

Revenue is recognized based on percentage of completion of the overall project.

During the three and six months ended June 30, 2021 the Company recognized $ 1.5 million and $ 2.5 million, respectively, of revenue from collaborative arrangements related to milestone payments.

Commitments and contingencies

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The Company accrues a liability for such matters when it is probable that future expenditures will be made and such expenditures can be reasonably estimated.

The Company had no contingent liabilities requiring accrual as of March 31, 2021 and December 31, 2020.

The Company has a history of losses and expected to record a loss in 2021.

The Company had no contingent liabilities requiring accrual as of June 30, 2021 and December 31, 2020.

The Company has a history of losses and projects losses for the full year 2021.

The Company continues to maintain a full valuation allowance its net deferred tax assets.

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Three Months Ended

Weighted average common stock outstanding, basic and

Six Months Ended

Weighted average common stock outstanding,

basic and diluted

Net loss per share - basic and diluted

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Therefore, the weighted-average number of shares of Common Stock outstanding used to calculate both basic and diluted net loss per share is the same.

The Company excluded the

following potential shares of Common Stock, presented based on amounts outstanding at each period end, from the computation of diluted net loss per share for the periods indicated because including them would have had an anti-dilutive effect:

The Company excluded the following potential shares of Common Stock, presented based on amounts outstanding at each period end, from the computation of diluted net loss per share for the periods indicated because including them would have had an anti-dilutive effect:

Three Months Ended

Six Months Ended

Convertible preferred stock

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Subsequent events

In preparing the interim financial statements as of March 31, 2021 and for the three months then ended, the Company evaluated subsequent events for recognition and measurement purposes.

The Company concluded that no events or transactions have occurred that require disclosure in the accompanying financial statements.

In preparing the interim financial statements as of June 30, 2021 and for the three and six months then ended, the Company evaluated subsequent events for recognition and measurement purposes during which time nothing has occurred outside of the normal course of business operations that would require disclosure other than the event discussed below.

Follow-on Offering

On July 6, 2021, the Company closed its Follow-on Offering and issued 4,400,000 shares of its common stock at a public offering price of $ 19.00 per share for net proceeds of $ 77.9 million, after deducting underwriting discounts and commissions and estimated offering expenses payable by the Company.

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

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Our actual results could differ materially from these forward-looking statements as a result of many factors, including those discussed in “Risk factors” and “Special note regarding forward-looking statements.”

We are a clinical-stage biopharmaceutical company currently focused on developing novel therapeutics to address unmet medical needs in viral and liver diseases.

We are a clinical-stage biopharmaceutical company focused on developing novel therapeutics to address unmet medical needs in viral and liver diseases.

We utilize our proprietary oligonucleotide and small molecule platforms to develop pharmacologically optimized drug candidates for use in combination regimens designed to achieve improved treatment outcomes.

Our lead effort is to develop a functional cure for Chronic Hepatitis B (CHB), which often results in other life-threatening conditions such as cirrhosis, end-stage liver disease (ESLD) and the most common form of liver cancer, hepatocellular carcinoma (HCC).

Our lead effort is to develop a functional cure for Chronic Hepatitis B (CHB), which often results in life-threatening conditions such as cirrhosis, end-stage liver disease (ESLD) and the most common form of liver cancer, hepatocellular carcinoma (HCC).

The most widely used treatment for CHB, nucleos(t)ide analogs, suppresses viral replication but only achieves low rates of functional cure and often requires long-term administration.

To address this issue, we have developed a portfolio of differentiated drug candidates for CHB, including an S-antigen Transport-inhibiting Oligonucleotide Polymers (STOPS) molecule, a small molecule Capsid Assembly Modulator (CAM), and oligonucleotides (ASO and siRNA), each of which is designed against clinically validated targets in the Hepatitis B Virus (HBV) life cycle.

To address this issue, we have developed a portfolio of differentiated drug candidates for CHB, including an S-antigen Transport-inhibiting Oligonucleotide Polymers (STOPS) molecule, a small molecule Capsid Assembly Modulator (CAM), and oligonucleotides (Antisense Oligonucleotides (ASO) and Small Interfering Ribonucleic Acids (siRNA)), each of which is designed against clinically validated targets in the Hepatitis B Virus (HBV) life cycle.

We believe that combination regimens utilizing our portfolio of CHB drug candidates may lead to higher rates of functional cure.

Phase 1 proof of concept trials evaluating the properties of our STOPS molecule and CAM are ongoing in New Zealand, Hong Kong, and Moldova.

We may also in the future conduct clinical trials for our STOPS molecule and CAM and other drug candidates in other countries and territories, including South Korea, the United Kingdom, and China.

Initial Phase 1a studies in healthy volunteers for our STOPS molecule and CAM have been completed.

Phase 1b dose range studies, evaluating the properties of our STOPS molecule and CAM as monotherapy in CHB patients, are approved in many countries, including New Zealand, Hong Kong, the United Kingdom, South Korea, China and Moldova, and dosing in patients in both of these studies is ongoing.

The STOPS molecule drug candidate, ALG-010133, was generally well tolerated in healthy volunteers (HVs) when given as single and multiple (3 weekly) subcutaneous doses of up to 200 mg and 180 mg, respectively.

No serious adverse events (SAEs) or treatment emergent adverse events (TEAEs) leading to premature discontinuation of study drug occurred.

Injection site reactions (ISRs) occurred in 19% of ALG-010133-treated subjects and were generally characterized by localized erythema that was mild to moderate in severity and resolved over time.

One ISR that occurred after receiving a single 200 mg dose of ALG-010133 was considered severe based on surface area criteria (>100 cm 2 ).

Prophylactic use of topical steroids is being utilized in Phase 1b to potentially mitigate future ISRs.

Based on the pharmacokinetic (PK) exposures achieved in HVs, weekly subcutaneous doses of 120 mg and higher will be evaluated in CHB cohorts.

Currently, doses of 120 mg and 200 mg given weekly over 12 weeks are being evaluated in two separate cohorts of patients with CHB.

For the CAM drug candidate, ALG-000184, preliminary data in both HVs and CHB subjects indicate the drug has predictable PK and was well tolerated, with no SAEs or TEAEs leading to discontinuation reported.

Additionally, antiviral activity data in eight treatment naive/currently not treated CHB subjects receiving a daily dose of 100 mg ALG-000184 for 14 days were promising, showing a mean HBV DNA reduction of 2.9 log 10 IU/mL.

In the future, we may also conduct clinical trials for our STOPS molecule and CAM and other drug candidates in other countries and territories.

Additionally, we recently filed a clinical trial application (CTA) seeking regulatory approval to initiate a two-part Phase 1a/1b study evaluating the safety, pharmacokinetics, and antiviral activity of our ASO, ALG-020572, in HVs and CHB subjects, respectively.

Finally, our preclinical efforts to advance our siRNA targeted against HBV are ongoing, with ALG-125755 CTA filing on-track for 1H 2022.

Our second area of focus is in non-alcoholic steatohepatitis (NASH), a complex, chronic liver disease where combination regimens may likewise prove beneficial.

Our most advanced drug candidate for NASH is ALG‑055009, a small molecule THR-ß agonist currently in nonclinical studies to enable a first-in-human clinical trial.

Our most advanced drug candidate for NASH is ALG-055009, a small molecule THR-ß agonist is currently in nonclinical studies to enable a first-in-human clinical trial.

We plan to file a CTA for a Phase 1a/1b study in HVs and subjects with hyperlipidemia in Q3 2021.

We believe ALG-055009 has the potential to become an integral component of future combination regimens for NASH.

Our third area of focus is to develop drug candidates with pan-coronavirus activity, including SARS-CoV-2, the virus responsible for COVID-19.

Our third area of focus is to develop drug candidates with pan-coronavirus activity, including Severe Acute Respiratory Syndrome coronavirus 2 (SARS-CoV-2), the virus responsible for COVID-19.

Our efforts to identify a coronavirus therapeutic are multipronged and utilize both our small molecule and oligonucleotide expertise.

For our small molecule approach, we are exploring coronavirus protease inhibitors in collaboration with KU Leuven / CISTIM / CD3.

In the oligonucleotide areas, we are investigating a siRNA modality and are exploring the potential for targeted lung delivery with this approach.

In October 2020, we completed our initial public offering (IPO) and issued 10,000,000 shares of our common stock at a price to the public of $15.00 per share for net proceeds of $135.4 million, after deducting underwriting discounts and commissions of $10.5 million and expenses of $4.1 million.

In connection with the IPO, all shares of Series A, Series B-1 and Series B-2 redeemable convertible preferred stock converted into 19,761,870 shares of voting common stock and 3,092,338 shares of non-voting common stock.

On November 5, 2020, the underwriters of the IPO partially exercised their overallotment option by purchasing an additional 1,150,000 shares from the Company, resulting in an additional $16.0 million, after deducting underwriting discounts and commissions of $1.2 million.

of $1.2 million.

Prior to our IPO, we had received gross proceeds of approximately $186.9 million from sales of our preferred stock and our issuance of convertible debt.

In July 2021, we completed a follow-on offering and issued 4,400,000 shares of our common stock at a price to the public of $19.00 per share for net proceeds of $77.9 million, after deducting underwriting discounts and commissions and estimated offering expenses payable by us.

We have incurred net losses and negative cash flows from operations in each year since our formation in February 2018.

Our net losses were $27.7 million and $20.0 million for the three months ended March 31, 2021 and 2020, respectively.

Our net losses were $57.5 million and $40.8 million for the six months ended June 30, 2021 and 2020, respectively.

We have had no revenue from product sales.

As of March 31, 2021, we had an accumulated deficit of $202.4 million.

As of June 30, 2021, we had an accumulated deficit of $232.2 million.

Substantially all of our net losses have resulted from costs incurred in connection with our research and development programs and from general and administrative costs associated with our operations.

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We also expect to incur increased expenses associated with operating as a public company, including costs of accounting, audit, legal, regulatory and tax-related services associated with maintaining compliance with exchange listing rules and requirements of the Securities and Exchange Commission (the SEC), director and officer insurance costs, and investor and public relations costs.

Interest and other income, net

Interest and other income, net comprises interest income, net and other income, net.

Interest and other income (expense), net

Interest and other income (expense), net comprises interest income, net and other income (loss), net.

Interest income, net primarily consists of interest earned on our cash, cash equivalents, and short-term investments and interest expense related to our convertible note instruments.

Other income, net consists primarily of the change in fair value of our derivative liabilities.

We classify our warrants and the commitment to sell redeemable convertible preferred stock as liabilities on our consolidated balance sheets and record changes in fair value at each balance sheet date with the corresponding change recorded as other income, net.

We will continue to record adjustments to the fair value of the warrants and the redeemable convertible preferred stock liability at each balance sheet date until they are exercised, automatically converted into common stock or expire.

Prior to our IPO, all outstanding warrants were exercised for the issuance of shares of common stock and, upon that exercise, such warrants were no longer outstanding.

We anticipate other income, net to fluctuate in the future based on changes in our short - term investments .

Other (loss) income, net consists primarily of the change fair value of derivative liabilities and our short-term investments.

Results of Operations

Comparison of the three months ended March 31, 2021 and 2020

Comparison of the three months ended June 30, 2021 and 2020

Operating expenses

The following table summarizes our operating expenses for the three months ended March 31, 2021 and 2020:

The following table summarizes our operating expenses for the three months ended June 30, 2021 and 2020:

Three Months Ended

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Research and development expenses

Research and development expenses were $22.9 million for the three months ended March 31, 2021, compared to $17.3 million for the three months ended March 31, 2020, an increase of $5.6 million.

The increase was primarily due to an increase of $2.7 million of additional employee-related costs, including a $1.5 million increase in stock-based compensation.

The increase also includes $1.8 million in third-party expenses for our preclinical programs and the continued increase in expenditures related to research and development activities associated with our STOPs molecule and CAM candidates, as well as activities related to our NASH program, and $0.9 million of allocated facilities and related expenses.

Research and development expenses were $24.6 million for the three months ended June 30, 2021, compared to $17.2 million for the three months ended June 30, 2020, an increase of $7.4 million.

The increase was primarily due to an increase of $2.2 million of additional employee-related costs, of which $1.8 million related to stock-based compensation.

The increase also includes $3.8 million in third-party expenses for our preclinical programs and the continued increase in expenditures related to research and development activities associated with our STOPs molecule and CAM candidates as well as activities related to our NASH program, a $0.3 million increase in consulting services, a $0.2 million increase in depreciation, a $0.2 million in recruiting costs due to increased headcount, and $0.7 million of facilities and related expenses.

General and administrative expenses

General and administrative expenses were $5.8 million for the three months ended March 31, 2021, compared to $3.4 million for the three months ended March 31, 2020, an increase of $2.4 million.

The increase was primarily due to $1.5 million in increased employee-related costs, including an increase of $0.9 million of additional stock-based compensation expense, a $2.1 million increase in third-party expenses primarily due to increased administrative costs and D&O insurance to support our status as a public company, offset by a decrease of $0.9 million in allocated facilities and related expenses.

Interest and other income, net

General and administrative expenses were $6.6 million for the three months ended June 30, 2021, compared to $4.1 million for the three months ended June 30, 2020, an increase of $2.5 million.

The increase was primarily due to an increase of $2.1 million additional employee-related costs, of which $1.3 million related to stock-based compensation, $1.2 million increase in third-party expenses primarily due to increased administrative costs, patent costs and D&O insurance to support our status as a public company, offset by a decrease of $0.6 million in facilities and related expenses and a decrease of $0.2 million in depreciation and other costs.

Interest and other income (expense) , net

Three Months Ended

Interest income, net

Other income, net

Total interest and other income, net

Interest income, net decreased to $0.1 million for the three months ended March 31, 2021 from $0.5 million for the three months ended March 31, 2020, a decrease in $0.4 million, primarily due to the change in our portfolio of cash equivalents, short-term investments and long-term investments which results in lower interest yield.

Other income, net decreased to a loss of $0.0 million for the three months ended March 31, 2021 from a loss of $0.2 million for the three months ended March 31, 2020, a decrease of $0.2 million, primarily due to the fair value change recognized on the net increase in fair value of both our redeemable convertible preferred stock liability and warrant liabilities in the prior year.

Other (loss) income, net

Total interest and other income (expense), net

Interest income, net decreased to $0.1 million for the three months ended June 30, 2021 from $0.4 million for the three months ended June 30, 2020, a decrease in $0.3 million, primarily due to the change in our portfolio of cash equivalents and short-term investments which results in lower interest yield.

Other (loss) income, net decreased to a loss of $0.3 million for the three months ended June 30, 2021 from income of $0.0 million for the three months ended June 30, 2020, a decrease of $0.3 million, primarily due to the fair value change recognized on the net increase in fair value of both our redeemable convertible preferred stock liability and warrant liabilities in the prior year.

Comparison of the six months ended June 30, 2021 and 2020

Operating expenses

The following table summarizes our operating expenses for the six months ended June 30, 2021 and 2020:

Six Months Ended

Operating expenses:

Research and development

General and administrative

Total operating expenses

Research and development expenses

Research and development expenses were $47.4 million for the six months ended June 30, 2021, compared to $34.5 million for the six months ended June 30, 2020, an increase of $12.9 million.

The increase was primarily due to an increase of $4.9 million of additional employee-related costs, of which $3.3 million related to stock-based compensation.

The increase also includes $5.6 million in third-party expenses for our preclinical programs and the continued increase in expenditures related to research and development activities associated with our STOPs molecule and CAM candidates, as well as activities related to our NASH program, a $0.4 million increase in depreciation, a $0.6 million increase in consulting and recruiting costs due to increased headcount, a $1.5 million increase of facilities and related expenses, partially offset by a $0.2 million decrease in lab expenses.

General and administrative expenses

General and administrative expenses were $12.3 million for the six months ended June 30, 2021, compared to $7.5 million for the six months ended June 30, 2020, an increase of $4.8 million.

The increase was primarily due to an increase of $3.6 million of additional employee-related costs, of which $2.2 million related to stock-based compensation, $3.3 million increase in third-party expenses primarily due to increased administrative costs, patent costs and D&O insurance to support our status as a public company, offset by a decrease of $1.6 million in facilities and related expenses, a decrease of $0.3 million in consulting and recruitment costs, and a decrease of $0.2 million in depreciation and lab expenses.

Interest and other income (expense), net

Six Months Ended

Interest income, net

Other (loss) income, net

Total interest and other income (expense), net

Interest income, net decreased to $0.2 million for the six months ended June 30, 2021 from $0.8 million for the six months ended June 30, 2020, a decrease in $0.6 million, primarily due to the change in our portfolio of cash equivalents and short-term investments which results in lower interest yield.

Other (loss) income, net decreased to a loss of $0.3 million for the six months ended June 30, 2021 from income of $0.3 million for the six months ended June 30, 2020, a decrease of $0.6 million, primarily due to the fair value change recognized on the net increase in fair value of both our redeemable convertible preferred stock liability and warrant liabilities in the prior year.

Liquidity and capital resources

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To date, we have financed our operations through private placements of preferred stock, issuances of common stock and convertible debt.

Through March 31, 2021, we had received gross proceeds of $186.9 million from sales of our preferred stock, issuances of common stock and our issuance of convertible debt.

As of March 31, 2021, we had cash, cash equivalents and investments of $213.4 million.

Through June 30, 2021, we had received gross proceeds of $186.9 million from sales of our preferred stock, issuances of common stock and our issuance of convertible debt.

As of June 30, 2021, we had cash, cash equivalents and short-term investments of $190.7 million.

Funding requirements

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add operational, financial and management information systems and personnel, including personnel to support our drug development, any future commercialization efforts and our transition to becoming a public company.

As of March 31, 2021, we had cash, cash equivalents and investments of $213.4 million.

In October 2020, we issued an aggregate of 3,569,630 shares of our Series B-2 redeemable convertible preferred stock in the second tranche of our Series B convertible preferred stock financing for aggregate proceeds to us of $40.0 million.

In addition, we have received net proceeds of $151.4 million from the sale of an aggregate of 11,150,000 shares of our common stock on October 20, 2020 and on November 5, 2020 as part of our IPO.

We believe that our existing cash, cash equivalents and investments will enable us to fund our planned operating expenses and capital expenditure requirements through at least the next twelve months.

As of June 30, 2021, we had cash, cash equivalents and short-term investments of $190.7 million.

In October 2020, we issued an aggregate of 3,569,630 shares of our Series B-2 redeemable convertible preferred stock in the second tranche of our Series B

convertible preferred stock financing for aggregate proceeds to us of $40.0 million.

In addition, we have received net proceeds of $151.4 million from the sale of an aggregate of 11,150,000 shares of our common stock on October 20, 2020 and on November 5, 2020 as part of our IPO , and net proceeds of $77.9 million from the sale of 4,400,000 shares of our common stock on July 6, 2021 as part of our Follow-on Offering.

We believe that our existing cash, cash equivalents and short-term investments will enable us to fund our planned operating expenses and capital expenditure requirements through at least the next twelve months.

We have based this estimate on assumptions that may prove to be wrong, and we could exhaust our available capital resources sooner than we expect.

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

Three Months Ended

Six Months Ended

Net cash used in operating activities

Net cash provided by (used in) investing activities

Net cash (used in) provided by investing activities

Net cash (used in) provided by financing activities

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Operating activities

During the three months ended March 31, 2021, operating activities used $29.8 million of cash, primarily resulting from our net loss of $27.7 million and cash used in changes in our operating assets and liabilities of $5.8 million, partially offset by non-cash charges of $3.7 million.

Net cash provided by changes in our operating assets and liabilities of $5.8 million consisted of a decrease of $4.7 million in accounts payable and accrued liabilities, a decrease of $0.9 million in deferred revenue from collaborations, a $0.3 million in other assets, partially offset by an increase of $0.3 million in operating lease liability.

The decrease in accounts payable and accrued liabilities was largely due to payment of the annual bonus in 2021 that was accrued for in 2020.

The decrease in other assets was largely due to an increase in prepayments for services.

The increase in the operating lease liability was a result of an extension of the facilities lease.

During the three months ended March 31, 2020, operating activities used $20.3 million of cash, primarily resulting from our net loss of $20.0 million and cash used in changes in our operating assets and liabilities of $1.2 million, partially offset by non-cash charges of $0.9 million.

Net cash provided by changes in our operating assets and liabilities of $1.2 million consisted of a decrease of $0.1 million in accounts payable and accrued liabilities, an increase of $0.3 million in operating lease liability, an increase of $0.2 million in right of use assets, and an increase of $0.5 million in other current assets.

The decrease in accounts payable and accrued liabilities was largely due to an increase in external research and development costs.

During the six months ended June 30, 2021, operating activities used $52.8 million of cash, primarily resulting from our net loss of $57.5 million and cash used in changes in our operating assets and liabilities of $3.4 million, partially offset by non-cash charges of $8.1 million.

Net cash used in changes in our operating assets and liabilities of $3.4 million consisted of a decrease of $2.5 million in deferred revenue from collaborations, a decrease of $0.6 million in operating lease liabilities, a decrease of $0.1 million in other liabilities, and an increase of $0.3 in other assets.

The decrease in deferred revenue from collaborations was a result of recognition of revenue from collaborations due to progress towards the completion of the project.

The decrease in the operating lease liability was a result of payments made on outstanding lease obligations.

During the six months ended June 30, 2020, operating activities used $38.0 million of cash, primarily resulting from our net loss of $40.8 million, partially offset by cash provided by changes in our operating assets and liabilities of $0.8 million and non-cash charges of $2.0 million.

Net cash provided by changes in our operating assets and liabilities of $0.8 million consisted of an increase of $2.0 million in accounts payable and accrued liabilities, partially offset by a decrease of $0.6 million in operating lease liability and an increase of $0.6 million in other current assets.

The increase in accounts payable and accrued liabilities was largely due to an increase in external research and development costs.

The decrease in the operating lease liability was a result of payments made on outstanding lease obligations.

The increase in other assets was largely due to an increase in prepayments for services.

Investing activities

During the three months ended March 31, 2021, investing activities provided $9.7 million of cash, consisting primarily of $10.0 million of investment maturities, offset by $0.3 million of purchases of property and equipment.

During the three months ended March 31, 2020, investing activities used $23.8 million of cash, consisting primarily of $22.6 million of investment maturities, offset by $45.3 million of investment purchases, and $1.1 million of purchases of property and equipment.

During the six months ended June 30, 2021, investing activities provided $19.5 million of cash, consisting primarily of $20.0 million of investment maturities, offset by $0.5 million of purchases of property and equipment.

During the six months ended June 30, 2020, investing activities used $8.8 million of cash, consisting primarily of $45.3 million of short-term and long-term investment purchases and $1.7 million of purchases of property and equipment, offset by $38.1 million of short-term investment maturities.

Financing activities

During the three months ended March 31, 2021, net cash provided by financing activities was $0.1 million, consisting primarily of $0.1 million proceeds from the exercise of stock options.

During the three months ended March 31, 2020, net cash used in financing activities was $0.1 million, consisting primarily of $0.3 million proceeds from the exercise of warrants offset by $0.4 million of preferred stock issuance costs.

During the six months ended June 30, 2021, net cash provided by financing activities was $0.2 million, consisting primarily of $0.3 million proceeds from the exercise of stock options, partially offset by $0.1 million of payments of deferred offering costs.

During the six months ended June 30, 2020, net cash used in financing activities was $0.0 million, consisting primarily of a $0.4 million payment of Series B-1 convertible preferred stock issuance costs, partially offset by the proceeds from the exercise of warrants to purchase shares of Series A convertible preferred stock of $0.4 million and proceeds from the exercise of stock options of $0.1 million.

Contractual obligations and commitments

We have no material changes to our contractual obligations and commitments as of March 31, 2021 as disclosed in the contractual obligations and commitment section in our Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 23, 2021.

We have no material changes to our contractual obligations and commitments as of June 30, 2021 as disclosed in the contractual obligations and commitment section in our Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 23, 2021.

Off-balance sheet arrangements

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Actual results may differ from these estimates under different assumptions or conditions.

For a discussion of our critical accounting estimates, see “Management’s discussion and analysis of financial condition and results of operations” in our annual report on Form 10-K, the notes to our audited financial statements appearing in the Form 10-K and the notes to the financial statements appearing elsewhere in this Quarterly Report on Form 10-Q.

There have been no material changes to these critical accounting policies and estimates through March 31, 2021 from those discussed in our Prospectus.

For a discussion of our critical accounting estimates, see “Management’s discussion and analysis of financial condition and results of operations” in our annual report on Form 10-K for the year ended December 31, 2020, previously filed with the SEC, the notes to our audited financial statements appearing in the Form 10-K and the notes to the financial statements appearing elsewhere in this Quarterly Report on Form 10-Q.

There have been no material changes to these critical accounting policies and estimates through June 30, 2021 from those discussed in our Form 10-K.

Recently issued and adopted accounting pronouncements

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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 1. Financial Statements