What changed in this filing

/stocks — the workspaceLOADING

Item 7. Management’s Discussion and Analysis

2023-03-09 compared with 2022-03-17 · 84 added, 66 removed, 191 unchanged (44% of the section changed)

5 unchanged sentences

Please also see the section entitled “Special Note Regarding Forward-Looking Statements.”

We are a precision oncology medicine company pioneering the discovery and development of MasterKey therapies.

We target undrugged oncogenic driver mutations in patients with genetically defined cancers.

The foundation of our company is built upon a deep understanding of cancer genetics, protein structure and function, and medicinal chemistry.

Our proprietary technology platform, which we refer to as our Mutation-Allostery-Pharmacology, or MAP, drug discovery engine, is designed to allow us to analyze population-level genetic sequencing data to discover oncogenic mutations that promote cancer across tumor types.

We are a clinical-stage precision oncology medicine company focused on pioneering the discovery and development of novel MasterKey therapies.

We target families of oncogenic mutations in patients with genetically defined cancers.

The foundation of our company is built upon a deep understanding of cancer genetics, onco-protein structure and function, and medicinal chemistry.

Our proprietary technology platform, which we refer to as our Mutation-Allostery-Pharmacology (MAP) drug discovery engine, is designed to allow us to analyze population-level genetic sequencing data to discover oncogenic mutations that promote cancer across tumor types.

Our goal is to identify families of mutations that can be inhibited with MasterKey therapies, thereby providing precision oncology to greater numbers of patients with genetically defined tumors.

We have designed our clinical-stage product candidates, BDTX-1535 and BDTX-189, to potently and selectively inhibit families of oncogenic mutations which occur across a range of tumor types that affect the ErbB-1 epidermal growth factor receptor, or EGFR, and in the case of BDTX-189 also affect the tyrosine-protein kinase ErbB-2, or HER2.

We have designed these product candidates to bind to the active site of these mutant kinases and inhibit their function.

BDTX-1535 and BDTX-189 are also designed to spare normal, or wild type, EGFR (EGFR WT), which we believe will improve upon the toxicity profiles of current ErbB family inhibitors.

We are also leveraging our MAP drug discovery engine to identify other families of non-canonical mutations in validated oncogenes beyond the ErbB family, which has the potential to expand the reach of targeted therapies.

We have designed our product candidates to be potent, brain penetrant and selective MasterKey inhibitors of oncogenic mutational families which occur across a range of tumor types.

Our lead product candidate, BDTX-1535, is designed to selectively and irreversibly inhibit a family of oncogenic mutations in the ErbB-1 epidermal growth factor receptor (EGFR) which are resistant to current generation tyrosine kinase inhibitors (TKIs), while sparing wild type EGFR (EGFR WT) activity.

We are currently evaluating BDTX-1535 in the dose escalation portion of a Phase 1 clinical trial in non-small cell lung cancer (NSCLC) patients with EGFR resistance mutations, with or without brain metastases and glioblastoma multiforme (GBM).

Our second product candidate, BDTX-4933, is designed to be a brain penetrant and highly selective and potent inhibitor of oncogenic BRAF Class I, II, III and active RAF dimers promoted by upstream oncogenic alterations, such as RAS mutations, which has the potential to avoid paradoxical activation.

We expect to initiate a Phase 1 clinical trial for BDTX-4933 in select indications for patients harboring all-class BRAF or RAS mutations in the first half of 2023.

We are also leveraging our MAP drug discovery engine to identify other families of oncogenic mutations in validated oncogenes, which have the potential to expand the reach of MasterKey therapies.

In order to focus on progressing our pipeline through important upcoming milestones for BDTX-1535 and BDTX-4933, as well as on our discovery efforts, in April 2022, we announced the discontinuation of the development of BDTX-189, our EGFR/HER2 Exon 20 targeted therapy.

In December 2022, we announced the spinout of certain early discovery stage antibody programs enabled by the MAP drug discovery engine into Launchpad Therapeutics, Inc.

(Launchpad), a new company formed to exploit the MAP drug discovery engine for the discovery, development and commercialization of large molecule therapeutics.

Since our inception in 2014, we have devoted substantially all of our efforts and financial resources to organizing and staffing our company, business planning, raising capital, discovering product candidates and securing related intellectual property rights while conducting research and development activities for our programs.

2 unchanged sentences

We have not yet successfully completed any pivotal clinical trials, obtained any regulatory approvals, manufactured a commercial-scale drug, or conducted sales and marketing activities.

In July 2020, we were granted Fast Track designation for BDTX-189 for the treatment of adult patients with solid tumors harboring an allosteric human epidermal growth factor receptor 2 (HER2) mutation or an epidermal growth factor receptor (EGFR) or HER2 Exon 20 insertion mutation who have progressed following prior treatment and who have no satisfactory treatment options.

To date, we have funded our operations with proceeds from the sale of preferred stock and common stock.

4 unchanged sentences

We expect that our expenses and capital requirements will increase substantially in connection with our ongoing activities, particularly if and as we:

• continue preclinical studies and initiate or advance clinical trials for BDTX-1535, BDTX-189, our programs and other product candidates;

• continue to develop and expand our proprietary MAP drug discovery engine to identify additional product candidates;

• advance clinical studies for BDTX-1535 and BDTX-4933 and continue preclinical studies for our other product candidates;

• continue to identify additional product candidates from our proprietary MAP drug discovery engine;

• obtain, maintain, expand and protect our intellectual property portfolio;

• hire additional clinical, scientific and commercial personnel;

• attract and retain key clinical, scientific, management and commercial personnel;

• seek marketing approvals for our product candidates that successfully complete clinical trials, if any;

• acquire or in-license additional product candidates.

• expand our infrastructure and facilities to accommodate our growing employee base;

• add operational, financial and management information systems and personnel, including personnel to support our research and development programs, any future commercialization efforts and our transition to operating as a public company.

As a result, we will need substantial additional funding to support our continuing operations and pursue our growth strategy.

5 unchanged sentences

If we fail to become profitable or are unable to sustain profitability on a continuing basis, then we may be unable to continue our operations at planned levels and be forced to reduce or terminate our operations.

As of December 31, 2021, we had cash, cash equivalents and investments of $209.8 million, which we believe will fund our operating expenses and capital expenditure requirements into 2024.

As of December 31, 2022, we had cash, cash equivalents and investments of $122.8 million, which we believe will fund our operating expenses and capital expenditure requirements into the third quarter of 2024.

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.

2 unchanged sentences

COVID-19 Considerations

The ongoing COVID-19 pandemic has presented and continues to present a substantial public health and economic challenge around the world, and to date has led to the implementation of various responses, including government-imposed quarantines, stay-at-home orders, travel restrictions, mandated business closures and other public health safety measures.

We have been closely monitoring the impact of the ongoing COVID-19 pandemic on all aspects of our business, including how it has and may continue to impact our operations and the operations of our suppliers, vendors and business partners, and may take further precautionary and preemptive actions as may be required by federal, state or local authorities.

In addition, we have taken steps to minimize the current environment’s impact on our business and strategy, including devising contingency plans and securing additional resources from third party service providers.

For the safety of our employees and families, we have introduced enhanced safety measures for scientists to be present in our labs and increased the use of third party service providers for the conduct of certain experiments and

studies for research programs.

Certain of our third party service providers have also experienced shutdowns or other business disruptions.

We do not yet know the full extent of potential delays or impacts on our business, our clinical trials, our research programs, healthcare systems or the global economy and we cannot presently predict the scope and severity of any potential business shutdowns or disruptions.

In particular, our ability to conduct our clinical trials in a timely manner that meets our current projected timelines could be adversely impacted.

Potential COVID-19-associated risks include delays in patient recruitment and principal investigator availability, clinical trial site shutdowns or other interruptions and potential limitations on the quality, completeness and interpretability of data we are able to collect.

Additionally, our drug product supply chain, early stage research & development programs and activities and other aspects of our business operations could be negatively impacted by the pandemic and COVID-19-related delays or disruptions.

Beyond the impact on our pipeline, the extent to which COVID-19 ultimately impacts our business, results of operations and financial condition will depend on future developments, which, despite progress in vaccination efforts, remain highly uncertain and cannot be predicted with confidence, such as the duration of the ongoing COVID-19 pandemic, new strains of the virus, including the Delta and Omicron variants and any future variants that may emerge, which may impact rates of infection and vaccination efforts, developments or perceptions regarding the safety of vaccines, new information that may emerge concerning the severity of COVID-19 and the effectiveness of any additional preventative and protective actions taken to contain COVID-19 or treat its impact in the short and long term, among others.

While certain measures have been relaxed in certain parts of the world as increasing numbers of people have received COVID-19 vaccines, others have remained in place with some areas continuing to experience renewed outbreaks and surges in infection rates.

The extent to which such measures are removed or new measures are put in place will depend upon how the pandemic continues to evolve, as well as the distribution of available vaccines, the rates at which they are administered and the emergence of new variants of the virus.

If we or any of the third parties with whom we engage, however, were to experience any additional shutdowns or other prolonged business disruptions, our ability to conduct our business in the manner and on the timelines presently planned could be materially or negatively affected, which could have a material adverse impact on our business, results of operations and financial condition.

The estimates of the impact on our business may change based on new information that may emerge concerning COVID-19 and the actions to contain it or treat its impact and the economic impact on local, regional, national and international markets.

We continue to monitor the impact of the COVID-19 pandemic on all aspects of our business and have taken steps to minimize its impact on our business and strategy, including devising contingency plans and securing additional resources from third-party service providers.

Scientists in our labs continue to operate under enhanced safety measures and we continue to support hybrid work arrangements for our office employees.

The extent to which future COVID-19 developments may impact our business, results of operations and financial condition are uncertain and cannot be predicted with confidence.

If we or any of the third parties with whom we engage, including our manufacturers, suppliers, clinical trial sites, service providers, regulators and other third parties with whom we conduct business, were to experience prolonged business shutdowns or other business disruptions, our ability to conduct our business in the manner and on the timelines presently planned could be materially and negatively impacted.

In particular, if the operations of our third-party manufacturers of drug substances and drug products in China were to be negatively affected, it could result in delays or disruptions in the supply of our product candidates and the conduct of experiments and studies.

Our assessment of the impact on our business may change based on new information that may emerge concerning COVID-19 and the actions to contain or treat its impacts and the economic impacts on local, regional, national and international markets.

COVID-19 has also caused, and may continue to cause for an extended period, volatility in the global financial markets and a slowdown in the global economy, which would reduce our ability to access capital and could negatively affect our liquidity.

Additionally, inflation due in part to COVID-19 generally affects us by increasing our employee-related costs and clinical trial expenses, as well as other operating expenses.

Our financial condition and results of operations may also be impacted by other factors we may not be able to control, such as global supply chain disruptions, global trade disputes or political instability.

Increases in interest rates, especially if coupled with reduced government spending and volatility in financial markets, may have the effect of further increasing economic uncertainty and heightening these risks.

Components of our results of operations

7 unchanged sentences

• expenses incurred to conduct the necessary preclinical studies and clinical trials required to obtain regulatory approval;

contract manufacturing organizations, or CMOs, that are primarily engaged to provide preclinical and clinical drug substance and product for our research and development programs;

• expenses incurred under agreements with contract research organizations, or CROs, that are primarily engaged in the oversight and conduct of our drug discovery efforts and preclinical studies, clinical trials and contract manufacturing organizations, or CMOs, that are primarily engaged to provide preclinical and clinical drug substance and product for our research and development programs;

• other costs related to acquiring and manufacturing materials in connection with our drug discovery efforts and preclinical studies and clinical trial materials, including manufacturing validation batches, as well as investigative sites and consultants that conduct our clinical trials, preclinical studies and other scientific development services;

14 unchanged sentences

Product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials.

As a result, we expect that our research and development expenses will increase substantially over the next several years as we continue our clinical trials for BDTX-189, as well as conduct other preclinical and clinical development, including submitting regulatory filings for our other product candidates, including BDTX-1535.

We expect our discovery research efforts and our related personnel costs will increase and, as a result, we expect our research and development expenses, including costs associated with stock-based compensation, will increase above historical levels.

As a result, we expect that our research and development expenses will increase substantially over the next several years as we continue our clinical trials for BDTX-1535, as well as conduct other preclinical and clinical development, including submitting regulatory filings for other product candidates.

In addition, we may incur additional expenses related to milestone and royalty payments payable to third parties with whom we may enter into license, acquisition and option agreements to acquire the rights to future product candidates.

19 unchanged sentences

We anticipate that our general and administrative expenses will increase in the future as we increase our headcount to support our continued research activities and development of our product candidates and prepare for potential commercialization activities.

We also anticipate that we will incur significantly increased accounting, audit, legal, regulatory, compliance and director and officer insurance costs as well as investor and public relations expenses associated with operating as a public company.

Additionally, if and when we believe a regulatory approval of a product candidate appears likely, we anticipate an increase in payroll and other employee-related expenses as a result of our preparation for commercial operations, especially as it relates to the sales and marketing of that product candidate.

Other income (expense)

Other income (expense) consists primarily of interest income earned on our cash equivalents and investment balances, and realized and unrealized foreign currency transaction gains and losses.

Other income (expense) consists primarily of interest income earned on our cash equivalents and investment balances, realized and unrealized foreign currency transaction gains and losses, and gain (loss) on sale of IP related to equity method investment.

Equity in (losses) of unconsolidated entity

Equity in (losses) of unconsolidated entity consists of our share of equity method investee losses on the basis of our equity ownership percentage and IPR&D charges resulting from basis differences.

Results of operations

9 unchanged sentences

Other income (expense):

Interest expense — (1) 1

Interest income 2,031 3,464 (1,433)

Other expense (2,188) (1,724) (464)

Other income (expense) (354) (2,188) 1,834

Gain on sale of IP 2,232 — 2,232

Total other income (expense), net 3,909 1,276 2,633

Equity in (losses) of unconsolidated entity (2,250) — (2,250)

Net loss $ (91,169) $ (125,596) $ 34,427

1 unchanged sentence

Research and development expenses were $64.4 million for the year ended December 31, 2022, compared to $96.8 million for the year ended December 31, 2021.

The following table summarizes our research and development expenses for the year ended December 31, 2021 and 2020.

The following table summarizes our research and development expenses for the years ended December 31, 2022 and 2021:

Year Ended December 31,

2 unchanged sentences

BDTX-1535 research and development expenses 8,414 6,659 1,755

BDTX-4933 research and development expenses 6,934 — 6,934

Other research programs and platform development expenses 13,466 33,295 (19,829)

3 unchanged sentences

$ 64,437 $ 96,829 $ (32,392)

The increase of $48.6 million was primarily due to an increase of $16.7 million in other research programs and platform development as we increased research activities related to our platform and new programs.

In addition, we incurred an additional $10.0 million and $6.2 million for BDTX-189 and BDTX-1535, respectively, for the year ended December 31, 2021, compared to the year ended December 31, 2020.

Personnel expenses increased $11.7 million as we have increased our headcount and related personnel expenses.

Facility costs increased $2.7 million for the year ended December 31, 2021, compared to the year ended December 31, 2020 due to the signing of a new lease.

The decrease of $32.4 million was primarily due to a net $12.9 million decrease in BDTX-4933 and other research programs and platform development expenses as we decreased research activities related to our platform and new programs, not including BDTX-4933.

We begin tracking expenses by development candidate at nomination;

therefore, BDTX-4933 expenses prior to January 2022 are included in other research programs and platform development expenses.

BDTX-189 expenses decreased $19.1 million due to reduced clinical trial activities stemming from the discontinuation of the development of BDTX-189 to focus on upcoming milestones for our pipeline programs, BDTX-1535 and BDTX-4933.

Costs related to BDTX-1535 increased $1.8 million due to the progression of our clinical trial.

Personnel expenses decreased $2.1 million as a result of the realignment of our workforce to focus on upcoming milestones for our pipeline programs.

General and administrative

General and administrative expenses were $28.4 million for the year ended December 31, 2022, compared to $30.0 million for the year ended December 31, 2021.

The increase of $8.7 million was primarily due to an increase in personnel expenses of $6.2 million related to an increase in headcount and external fees of $1.1 million related to legal and other professional fees due to operating as a public company.

The decrease of $1.7 million was primarily due to an decrease in legal and other professional fees.

Other income (expense)

Other income was $1.3 million for the year ended December 31, 2021, compared to other income of $2.3 million for the year ended December 31, 2020.

The decrease was primarily attributable to amortization of premium on investments increasing at a higher rate in 2021 compared to 2020 and interest income staying relatively flat.

Other income was $3.9 million for the year ended December 31, 2022, compared to $1.3 million for the year ended December 31, 2021.

The increase was primarily attributable to the gain on sale of IP related to the equity method investment in Launchpad as well as amortization of premium on investments increasing at a higher rate in 2022 compared to 2021 and interest income staying relatively flat.

Equity in (losses) of unconsolidated entity

Equity in (losses) of unconsolidated entity was $2.3 million for the year ended December 31, 2022, compared to zero for the year ended December 31, 2021.

The decrease was attributable to our share of equity method investee losses on the basis of our equity ownership percentage and IPR&D charges resulting from basis differences, and no equity method investments in 2021.

Liquidity and capital resources

2 unchanged sentences

We have not yet commercialized any of our product candidates, and we do not expect to generate revenue from sales of any product candidates for several years, if at all.

We have funded our operations to date primarily with proceeds from the sale of preferred stock.

We have funded our operations to date primarily with proceeds from the sale of preferred stock and common stock.

On February 3, 2020, we completed an IPO of 12,174,263 shares of our common stock, including the exercise in full by the underwriters of their option to purchase up to 1,587,947 additional shares of common stock, for aggregate gross proceeds of $231.3 million.

1 unchanged sentence

Through December 31, 2022, we had received net cash proceeds of $200.6 million from previous sales of our preferred stock and as of December 31, 2022, we had cash, cash equivalents and investments of $122.8 million.

On November 14, 2022, we filed a shelf registration statement on Form S-3 (the Shelf Registration Statement) with the SEC, which covers the offering, issuance and sale of our common stock, preferred stock, debt securities, warrants and/or units of any combination thereof up to a maximum price of $500 million.

We simultaneously entered into an Open Market Sale Agreement SM (the Sales Agreement) with Jefferies LLC (Jefferies), as sales agent, to provide for the issuance and sale by us of up to $150 million of our common stock, or the Shares, from time to time through Jefferies as our sales agent (the ATM Program).

The Shelf Registration Statement became effective on November 22, 2022.

Upon delivery of a placement notice and subject to the terms and conditions of the Sales Agreement, Jefferies may sell the Shares by any method permitted by law deemed to be an “at the market offering” as defined in Rule 415(a)(4) promulgated under the Securities Act.

We may sell the Shares in amounts and at times to be determined by us from time to time subject to the terms and conditions of the Sales Agreement, but we have no obligation to sell any Shares under the Sales Agreement.

We or Jefferies may suspend or terminate the offering of Shares upon notice to the other party and subject to other conditions.

As of December 31, 2022, no sales have been made pursuant to the ATM Program.

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

1 unchanged sentence

Cash used in operating activities $ (85,082)

Cash provided by (used in) investing activities

Cash provided by investing activities

Cash provided by financing activities 177

1 unchanged sentence

Operating activities

During the year ended December 31, 2021, we used cash in operating activities of $100.1 million, primarily resulting from our net loss of $125.6 million, partially offset by the non-cash charge related to stock compensation expense of $14.0 million, and an increase in prepaid expenses and other current assets.

During the year ended December 31, 2022, we used cash in operating activities of $85.1 million, primarily resulting from our net loss of $91.2 million, partially offset by the non-cash charge related to stock compensation expense of $12.2 million, and a decrease in accounts payable, accrued expenses and other current liabilities.

During the year ended December 31, 2021, we used cash in operating activities of $100.1 million, primarily resulting from our net loss of $125.6 million, partially offset by the non-cash charge related to stock compensation expense of $14.0 million, an increase in prepaid expenses and other current assets due to payments for research services and a decrease in deferred offering costs.

2 unchanged sentences

During the year ended December 31, 2022, we had cash provided by investing activities of $53.4 million primarily from the sales and maturities of investments.

During the year ended December 31, 2020, we used cash in investing activities of $281.7 million for the purchase of investments.

During the year ended December 31, 2021, we had cash provided by investing activities of $130.6 million primarily from the sales and maturities of investments.

Financing activities

During the year ended December 31, 2022, we had cash provided by financing activities of $0.2 million, consisting of proceeds from the exercise of stock options.

During the year ended December 31, 2020, we had cash provided by financing activities of $214.9 million, consisting primarily of proceeds from the IPO.

During the year ended December 31, 2021, we had cash provided by financing activities of $0.7 million, consisting of proceeds from the exercise of stock options.

Funding requirements

3 unchanged sentences

• advance BDTX-1535 and BDTX-4933 through clinical trials;

• advance preclinical development of our early stage programs, including BDTX-4933 IND-enabling related activities;

• advance preclinical development of our early stage programs, including our FGFR and other undisclosed program, including plans for nominating development candidates;

• manufacture, or have manufactured on our behalf, our preclinical and clinical drug material and develop processes for late state and commercial manufacturing;

2 unchanged sentences

• hire additional clinical, quality control and scientific personnel;

• expand our operational, financial and management systems and increase personnel, including personnel to support our clinical development, manufacturing and commercialization efforts and our operations as a public company;

• obtain, maintain, expand and protect our intellectual property portfolio.

As of December 31, 2021, we had cash, cash equivalents and investments of $209.8 million, which we believe will fund our operating expenses and capital expenditure requirements into 2024.

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

1 unchanged sentence

If we receive regulatory approval for any of our product candidates, we expect to incur significant commercialization expenses related to product manufacturing, sales, marketing and distribution, depending on where we choose to commercialize.

Because of the numerous risks and uncertainties associated with research, development and commercialization of product candidates, we are unable to estimate the exact amount of our working capital requirements.

Because of the numerous risks and uncertainties associated with research, development and commercialization of product candidates, we are unable to predict the timing or amount of increased expenses or when or if we will be able to achieve or maintain profitability.

If we fail to become profitable or are unable to sustain profitability on a continuing basis, then we may be unable to continue our operations at planned levels and be forced to further reduce or terminate our operations.

Our future funding requirements will depend on and could increase significantly as a result of many factors, including:

3 unchanged sentences

• the costs of future activities, including product sales, medical affairs, marketing, manufacturing and distribution, for any of our product candidates for which we receive marketing approval;

• the costs of manufacturing commercial-grade product and necessary inventory to support commercial launch;

• subject to receipt of regulatory approval, the costs of commercialization activities for our product candidates, to the extent such costs are not the responsibility of any future collaborators, including the costs and timing of establishing product sales, marketing, distribution and manufacturing capabilities;

• the ability to receive additional non-dilutive funding;

3 unchanged sentences

• the extent to which we acquire or in-license other product candidates and technologies;

Until such time, if ever, as we can generate substantial product revenue, we expect to finance our operations through a combination of public or private equity offerings, debt financings, collaborations, strategic partnerships and alliances or marketing, distribution or licensing arrangements with third parties.

To the extent that we raise additional capital through the sale of equity or convertible debt securities, your ownership interest may be materially diluted, and the terms of such securities could include liquidation or other preferences that adversely affect your rights as a common stockholder.

Debt financing and preferred equity financing, if available, may involve agreements that include restrictive covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends.

In addition, debt financing would result in fixed payment obligations.

• the costs of operating as a public company.

As a result, we will need substantial additional funding to support our continuing operations and pursue our growth strategy.

Until such time, if ever, as we can generate substantial product revenue from product sales, we expect to finance our operations through a combination of public or private equity offerings, debt financings, collaborations, strategic partnerships and alliances or marketing, distribution or licensing arrangements with third parties or through other sources of financing.

In addition, we may seek additional capital due to favorable market conditions or strategic considerations, even if we believe that we have sufficient funds for our current or future operating plans.

However, the trading prices for our common stock and for other biopharmaceutical companies have been highly volatile.

As a result, we may face difficulties raising capital through sales of our common stock, and such sales may be on unfavorable terms.

Similarly, adverse macroeconomic conditions and market volatility resulting from global economic developments, political unrest, high inflation, the ongoing COVID-19 pandemic or other factors could materially and adversely affect our ability to consummate an equity or debt financing on favorable terms or at all.

We may be unable to raise additional funds or enter into such other agreements or arrangements when needed on favorable terms, or at all.

To the extent that we raise additional capital through the sale of private or public equity or convertible debt securities, the ownership interest of our stockholders may be materially diluted, and the terms of such securities could include liquidation or other preferences and anti-dilution protections that could adversely affect the your rights as a of our common stockholders.

In addition, debt financing may involve significant cash payment obligations and specific financial ratios that may restrict our ability to operate our business would result in fixed payment obligations.

If we raise additional funds through collaborations, strategic partnerships and alliances or marketing, distribution or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates, or grant licenses on terms that may not be favorable to us.

If we are unable to raise additional funds through equity or debt financings or other arrangements when needed, we may be required to delay, limit, reduce or terminate our research, product development or future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves, obtain capital through arrangements with collaborators on terms unfavorable to us or pursue merger or acquisition strategies, all of which could adversely affect the holdings or the rights of our stockholders.

Critical accounting policies and significant judgments and use of estimates

Our consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States, or GAAP.

Our consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States (GAAP).

The preparation of our consolidated financial statements and related disclosures requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, costs and expenses.

29 unchanged sentences

For grants of restricted stock units, we base the fair value on the stock price as of the date of grant.

The Company accounts for stock-based awards granted to employees and non-employees at fair value, which is measured using the Black-Scholes option-pricing model.

We account for stock-based awards granted to employees and non-employees at fair value, which is measured using the Black-Scholes option-pricing model.

The measurement date for the awards is generally the date of grant.

Stock-based compensation costs are recognized as expenses over the requisite service period, which is generally the vesting period, on a straight-line basis for all time-vested awards.

We estimate the fair value of each stock option grant using the Black-Scholes option-pricing model, which uses as inputs the fair value of our common stock and assumptions we make for the volatility of our common stock, the expected term of our stock options, the risk-free interest rate for a period that approximates the expected term of our stock options and our expected dividend yield (see Note 2 to our consolidated financial statements).

Recently issued accounting pronouncements

A description of recently issued accounting pronouncements that may potentially impact our financial position and results of operations is disclosed in Note 2 to our consolidated financial statements appearing elsewhere in this Annual Report.

There are no recently issued accounting pronouncements that are expected to have a material effect on our financial condition, results of operations or cash flows.

Emerging growth company and smaller reporting company status

The Jumpstart Our Business Startups Act of 2012 permits an “emerging growth company” such as us to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies until those standards would otherwise apply to private companies.

The Jumpstart Our Business Startups Act of 2012 (the JOBS Act) permits an “emerging growth company” such as us to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies until those standards would otherwise apply to private companies.

We have elected to not “opt out” of this provision and, as a result, we will adopt new or revised accounting standards at the time private companies adopt the new or revised accounting standard and will do so until such time that we either (i) irrevocably elect to “opt out” of such extended transition period or (ii) no longer qualify as an emerging growth company.

4 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-K

Item 7. Management’s Discussion and Analysis