What changed in this filing

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Item 5. Market for Registrant’s Common Equity

2023-03-30 compared with 2022-03-29 · 169 added, 141 removed, 238 unchanged (57% of the section changed)

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Market for Registra nt’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Market Information

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Prior to this time, there was no public market for our common stock.

On March 15, 2022, there were approximatel y 219 re gistered holders of record of our common stock.

On March 15, 2023, there were approximately 131 registered holders of record of our common stock.

The actual number of stockholders is greater than this number of record holders, and includes stockholders who are beneficial owners, but whose shares are held in street name by brokers and other nominees.

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Recent Sales of Unregistered Equity Securities

During the period covered by this Annual Report on Form 10-K, we have issued the following securities which were not registered under the Securities Act:

From January 2021 through July 2021, we issued stock options to purchase an aggregate of 661,111 shares of our common stock, with a weighted average exercise price of $5.72, to our employees, directors and consultants pursuant to our 2015 and 2021 Stock Incentive Plan.

These securities were issued under Section 4(a)(2) and Rule 701 of the Securities Act in transactions not involving a public offering.

During the year ended December 31, 2021, we issued 75,946 shares of common stock upon the exercise of warrants to purchase common stock which were issued as part of a previous financing.

The warrants were all exercised for cash at a price of $5.67 per share.

These securities were issued under Section 4(a)(2) of the Securities Act in transactions not involving a public offering.

Use of Proceeds

In July 2021, we issued and sold 9,000,000 shares of our common stock in our IPO at a public offering price of $8.00 per share.

In August 2021, we issued and sold 887,994 common shares at $8.00 a share as a partial exercise of the underwriters’

option to purchase additional shares.

The offer and sale of all the shares in the IPO were registered under the Securities Act pursuant to a registration statement on Form S-1 (File No.

The offer and sale of all the shares of our common stock in our initial public offering were registered under the Securities Act pursuant to a registration statement on Form S-1 (Reg.

333-257444), as amended, which was declared effective by the SEC on July 26, 2021.

The $71.3 million in net proceeds we received from the IPO have been invested in cash and cash equivalents.

There has been no material change in the expected use of the net proceeds from our IPO as described in our final prospectus, dated July 26, 2021, filed with the SEC pursuant to Rule 424(b) relating to our registration statement on Form S-1 on July 28, 2021.

There has been no material change in the expected use of the net proceeds from our Annual Report on Form 10-K for the year ended December 31, 2021 as filed with the SEC on March 29, 2022.

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

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in this Annual Report on Form 10-K for a discussion of important factors that could cause actual results to differ materially from the results described below.

We are a late clinical stage biopharmaceutical company focused on helping patients fight cancer with oncolytic viral immunotherapies.

Our engineered viruses are designed to induce immunogenic death through direct viral-mediated cytotoxicity in cancer cells, thus releasing tumor neo-antigens and creating a pro-inflammatory microenvironment at the site of injection.

Our approach combines an in-depth knowledge of viral immunotherapy with extensive clinical experience across a wide range of indications.

Based on the broad range of data that we have generated from our preclinical models and clinical trials using our approach, we have observed what we believe to be systemic immune response against locally injected tumors and their distant metastases.

We have established two oncolytic viral immunotherapy platforms based on novel, genetically modified adenovirus and herpes simplex virus (HSV) constructs.

In our clinical results to date from CAN-2409, our lead product from our adenovirus platform, and CAN-3110, our lead product candidate from our HSV platform, we have observed that these candidates may have the potential to address significant unmet patient need and improve clinical outcomes in novel indications across broader patient populations.

Since our formation, we have devoted substantially all our resources to developing our oncolytic viral immunotherapy and our adenovirus platform, conducting research and development activities, including product candidate development, recruiting skilled personnel, establishing our intellectual property portfolio, raising capital and providing general and administrative support for these operations.

We have financed our operations primarily through proceeds from the sale of convertible notes, common stock and our convertible preferred stock.

As of December 31, 2021, we have raised approximately $160.6 million through a combination of convertible notes, common stock, convertible preferred stock financings, and government grants.

We were incorporated under the laws of the State of Delaware in June 2003.

Our principal executive office is located at 117 Kendrick St, Suite 450, Needham, Massachusetts 02494.

On November 30, 2020, we formally changed our name to Candel Therapeutics, Inc., previously Advantagene, Inc.

Since our formation, we have incurred significant operating losses and have not generated any revenue from the sale of products.

Our ability to generate any product revenue or product revenue sufficient to achieve profitability will depend on the successful development and eventual commercialization of one or more of our product candidates.

Our net losses were $36.1 million, $17.7 million for the years ended December 31, 2021 and 2020, respectively.

As of December 31, 2021, we had an accumulated deficit of $80.3 million.

We will not generate revenue from product sales unless and until we successfully complete clinical development, obtain regulatory approval for, and successfully commercialize our product candidates.

The lengthy process of securing marketing approvals for new drugs requires the expenditure of substantial resources.

Any significant delay or failure to obtain regulatory approvals would materially adversely affect our product candidates development efforts and our business overall.

In addition, if we obtain regulatory approval for any of our product candidates, we expect to incur significant expenses related to developing our commercialization capability to support product sales, marketing, manufacturing and distribution activities.

In addition, following the closing of this offering, we expect to incur significant additional costs associated with operating as a public company.

We anticipate that our expenses will increase significantly as we:

advance the development of our product candidate pipeline;

initiate and continue research and preclinical and clinical development of potential new product candidates;

maintain, expand and protect our intellectual property portfolio;

acquire or in-license additional product candidates and technologies;

expand our infrastructure and facilities to accommodate our growing employee base and ongoing development activities;

establish agreements with contract research organizations, or CROs, and third-party contract manufacturing organizations, or CMOs, in connection with our preclinical studies and clinical trials and the development of our manufacturing capabilities;

develop the manufacturing process and capabilities for future clinical trials and commercialization;

manufacture larger quantities of our product candidates for clinical development and potential commercialization;

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

establish a sales, marketing and distribution infrastructure to commercialize any products for which we may obtain marketing approval;

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 of these anticipated expenditures, 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 significant revenue from product sales, we expect to finance our cash needs through a combination of public or private equity or debt financings and other sources, which may include collaborations, strategic alliances and licensing arrangements with third parties.

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

Our inability to raise capital as and when needed would have a negative impact on our financial condition and our ability to pursue our business strategy.

We cannot assure you that we will ever generate sufficient revenue to achieve profitability.

Because of the numerous risks and uncertainties associated with the development of therapeutics, 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.

Even if we can generate revenue from product sales, we may not become profitable.

If we fail to become profitable or are unable to sustain profitability on a continuing basis, then we may be required to raise additional capital on terms that are unfavorable to us or we may be unable to continue our operations at planned levels and be forced to reduce or terminate our operations.

We are a clinical stage biopharmaceutical company focused on developing and commercializing viral immunotherapies to help patients fight cancer.

Our engineered viruses are designed to induce a systemic anti-tumor response due to immunogenic cell death through direct viral-mediated cytotoxicity in cancer cells, thus releasing tumor neo-antigens and creating a pro-inflammatory microenvironment.

Our viral immunotherapy approach utilizes intratumoral administration of genetically engineered viruses to induce tumor cell death and elicit a systemic anti-tumor response.

Local delivery enables us to achieve these effects while aiming to minimize systemic toxicity.

The immune cells induced by these viral immunotherapies are believed to target patients’

specific tumor antigens, potentially improving responses in immunologically “hot”

tumors while at the same time infiltrating the tumor microenvironment, transforming non-inflamed “cold”

tumors with limited immune response into “hot”

While our product candidates are administered directly into the tumor, we have observed systemic immune response in our preclinical studies and clinical trials that may indicate the potential of our product candidates to induce systemic immune response against distal, uninjected tumors, also known as an “abscopal”

We believe viral immunotherapy is among the most promising cancer treatment modalities today.

Our goal is to further improve patient outcomes through viral immunotherapies by selecting the optimal vector, specific transgenes and clinical indications for each tumor type while optimizing product candidate attributes, such as high-titer formulation, intratumoral administration to induce systemic anti-tumor immunity, and storage conditions that could potentially lower logistical barriers for patients and clinicians.

We have established two clinical stage viral immunotherapy platforms based on novel, genetically modified adenovirus and herpes simplex virus (HSV) constructs, respectively.

Our most advanced product candidate, CAN-2409, is an off-the-shelf adenovirus product candidate which is combined with the prodrug, valacyclovir, that has generated promising clinical activity across a range of solid tumor indications.

CAN-2409 is currently being studied in the following ongoing clinical trials:

Prostate Cancer

o a Phase 3 randomized, triple-blinded and placebo-controlled clinical trial in the United States under a Special Protocol Assessment (SPA), with the U.S.

Food and Drug Administration (FDA) evaluating 711 patients with newly diagnosed, localized prostate cancer who have an intermediate or high-risk for progression.

We completed enrollment of this trial in September 2021 and we expect to present topline data at the end of 2024.

o a Phase 2 randomized, double blind, placebo-controlled clinical trial in the United States evaluating 187 patients with low-to-intermediate risk, localized prostate cancer undergoing active surveillance.

We completed enrollment of this trial in June 2019 and we expect topline data from this clinical trial to be available in the fourth quarter of 2024.

Non-small Cell Lung Cancer (NSCLC) –

an open-label Phase 2 clinical trial in the United States evaluating CAN-2409 plus valacyclovir in combination with continued PD-(L)1 checkpoint inhibitors in 80 patients with stage III/IV NSCLC who have inadequate response to PD-(L)1 checkpoint inhibitors.

We reported initial data from this trial at the American Society for Clinical Oncology (ASCO) Annual Meeting in June 2022 and an update during our Research and Development Day in December 2022, demonstrating the following:

o Evidence of local and systemic anti-tumor activity

o Disease control rate of 77% (20/26) in patients entering trial with disease progression (cohort 2)

o Sustained and ongoing clinical responses greater than 1 year

o Favorable change in trajectory of tumor progression

o Decreased tumor size of RECIST target lesions in most patients

o Reduced uninjected tumor size in 14/21 patients (67%)

o Overall response rate of 13% (4/30) across cohorts 1 and 2

o Durable disease stabilization translating into encouraging preliminary evidence of progression-free survival

o Consistent induction of local and systemic cytotoxic T cell response

o Increased infiltration of CD8+ T cells in the tumor microenvironment

o Systemic expansion of effector T cells and increase in soluble granzyme B levels in peripheral blood

o Favorable safety/tolerability data with most treatment-related adverse events being grade 1/2

We anticipate presenting additional updated clinical data from this ongoing clinical trial in the third quarter of 2023.

Pancreatic Cancer –

we have initiated a randomized Phase 2 clinical trial in the United States evaluating CAN-2409 in borderline resectable pancreatic adenocarcinoma.

In March 2023, in connection with our cost management and dynamic portfolio management initiatives, we elected to pause new enrollment in this randomized Phase 2 clinical trial, subject to additional funding.

Despite the pause in patient enrollment, we continue to expect to present initial clinical data in the fourth quarter of 2023.

In a previous Phase 1b trial, patients with pancreatic cancer treated with CAN-2409 in addition to standard of care demonstrated a greater survival duration over the expected survival of the patients treated with the existing standard of care alone in a comparison to historical trial results.

Furthermore, in the group of patients where pre- and post-treatment tumor biopsies were available, a statistically significant increase in the number of CD8+ tumor infiltrating lymphocytes was observed.

Our lead HSV-based product candidate, CAN-3110, is currently in an ongoing investigator-sponsored Phase 1 clinical trial in our initial target indication of recurrent high-grade glioma (HGG).

These patients have failed standard of care treatment and have a poor prognosis.

Initial clinical data from this trial was presented in an oral presentation at the ASCO Annual Meeting in June 2021, and additional biomarker data was reported in November 2021.

During our Research and Development Day in December 2022, we presented updated data demonstrating that the treatment was well tolerated with no observed dose-limiting toxicity;

achieved 11.6 months mOS with a single dose;

and showed evidence of persistent HSV-1 antigen and HSV-1 replication consistent with mechanism of action

as well as robust evidence of immune activation.

We are currently evaluating the effects of multiple doses of CAN-3110 in HGG supported by the Break Through Cancer foundation.

We are also designing other novel viral immunotherapy candidates using our proprietary enLIGHTEN Discovery Platform, the first systematic, iterative HSV-based discovery platform leveraging human biology and advanced analytics to create new viral immunotherapy candidates for solid tumors.

In October 2022, we entered into a collaboration with the University of Pennsylvania (Penn) Center for Cellular Immunotherapies to study the impact of novel viral immunotherapy candidates based on Candel’s enLIGHTEN Discovery Platform to strengthen the activity of Penn’s investigational CAR-T cell therapies in difficult to treat solid tumors.

We currently own development and commercialization rights for our programs in major markets, including the United States, Europe and Asia, allowing us to control development and seek approval in those areas as we prepare our commercialization efforts.

We were incorporated in Delaware in June 2003 as Advantagene, Inc.

(Advantagene).

In December 2019, Advantagene licensed substantially all the assets of Periphagen, a company focused on engineering HSV as a gene therapy vector, and in September 2020, licensed CAN-3110 from Mass General Brigham (MGB).

In December 2020, we formally changed our name from Advantagene to Candel Therapeutics, Inc.

We completed our initial public offering (IPO) in July 2021.

As of December 31, 2022, we had cash and cash equivalents of $70.1 million, which we believe will enable us to fund our operating expenses and capital expenditure requirements into the second quarter of 2024.

Collaborations

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The primary classes of assets are HSV-derived assets expressing neurotrophin-3 (or NT-3 Assets) and other HSV-derived assets (Gene Transfer Neuro-Assets).

Under the license agreement, Periphagen granted us a worldwide exclusive license with the right to grant sublicenses through multiple tiers under the Licensed IP Rights to conduct research and to develop, make, have made, use, have used, offer for sale, have sold, export and import products incorporating the Licensed IP Rights in all fields of use except the treatment, diagnosis, and prevention of nononcologic skin diseases and conditions (including use as an aesthetic).

On January 20, 2018, we entered into an exclusive option agreement, or the Option Agreement, with MGB.

Pursuant to the Option Agreement, we obtained the exclusive right from MGB to negotiate a world-wide, royalty-bearing license to develop and commercialize products covered by certain MGB patents, including those patents covering CAN-3110, in the field of gene therapy and oncolytic vector therapy for the treatment or prevention of cancerous tumors in humans or animals, as such field is further detailed in the Option Agreement, or the Licensed Field.

(including use as an aesthetic).

We are currently engaged with Periphagen under a dispute and escalation provision in our exclusive license agreement with Periphagen concerning whether we have used commercially reasonable efforts to complete a human proof of concept clinical trial of an NT-3 Asset.

See Part I, Item 3 “Legal Proceedings”.

Mass General Brigham (MGB).

On January 20, 2018, we entered into an exclusive option agreement (the Option Agreement) with MGB.

In consideration for MGB’s granting of the exclusive option, we paid MGB a non-refundable fee of $40,000.

Under the Option Agreement, we were required to use reasonable efforts to enter into a clinical trial agreement with MGB.

We entered into such clinical trial agreement with MGB, or the MGB Clinical Trial Agreement, on June 19, 2018.

We entered into such clinical trial agreement with MGB (MGB Clinical Trial Agreement) on June 19, 2018.

Under the MGB Clinical Trial Agreement, we have committed to remitting financial support for the performance of a specified Phase 1 clinical trial by MGB pursuant to a protocol summary contained in the Option Agreement.

On September 15, 2020, we exercised our option and entered into an exclusive patent license agreement with MGB, or the MGB License Agreement.

Under the MGB License Agreement, MGB granted to us (a) an exclusive, royalty-bearing license under certain of MGB’s patents to make, have made, use, have used, sell and have sold certain products covered by such licensed patents, or the Licensed Products and otherwise practice processes covered by such licensed patents, or Licensed Processes;

On September 15, 2020, we exercised our option and entered into an exclusive patent license agreement with MGB (the MGB License Agreement).

Under the MGB License Agreement, MGB granted to us (a) an exclusive, royalty-bearing license under certain of MGB’s patents to make, have made, use, have used, sell and have sold certain products covered by such licensed patents (Licensed Products) and otherwise practice processes covered by such licensed patents (Licensed Processes);

and (b) a non-exclusive, royalty-bearing license under certain other of MGB’s patents to make, have made, use, have used, sell and have sold Licensed Products, but not to sell or have sold Licensed Processes.

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In connection with executing the MGB License Agreement, we paid a license issue fee and also agreed to reimburse MGB for all reasonable fees and expenses MGB had incurred and will incur for the preparation, filing, prosecution and maintenance of the licensed patent rights.

On March 1, 2014, we entered into an exclusive license agreement, or the Ventagen Agreement, with Ventagen, a related party.

The Ventagen Agreement provides Ventagen an exclusive license, with rights to grant

sublicense (subject to certain terms and conditions) under any worldwide patent rights and know-how owned or controlled by us during the term of the Ventagen Agreement which cover applicable technology utilizing the delivery method of the herpes derived TK protein to tumors or other tissues via a viral vector (as further specified therein), to research, use, have used, import, have imported, export, have exported, offer for sale, have sold, sell, distribute and market certain products for the prevention or treatment of cancer in humans and any use in animals (or the Field of Use), or the Licensed Products, for commercial sale and distribution within Mexico, Belize, Guatemala, Honduras, El Salvador, Costa Rica, Nicaragua, Panama, Colombia and Bolivia.

Ventagen is 49.5% owned by certain of our shareholders.

As of December 31, 2021, we had cash and cash equivalents of $82.6 million.

On February 24, 2022, we entered into a loan and security agreement (the Loan Agreement) with a bank pursuant to which the bank has agreed to provide term loans to the Company in an aggregate principal amount of up to $25.0 million.

We borrowed $20.0 million upon entering into the Loan Agreement.

We believe the existing cash and cash equivalents on hand as of December 31, 2021 plus the proceeds under the Loan Agreement will enable us to fund our operating expenses and capital expenditure requirements into the fourth quarter of 2023.

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.

See “Liquidity and capital resources.”

On March 1, 2014, we entered into an exclusive license agreement ( the Ventagen Agreement) with Ventagen, a related party.

The Ventagen Agreement provides Ventagen an exclusive license, with rights to grant sublicense (subject to certain terms and conditions) under any worldwide patent rights and know-how owned or controlled by us during the term of the Ventagen Agreement which cover applicable technology utilizing the delivery method of the herpes derived TK protein to tumors or other tissues via a viral vector (as further specified therein), to research, use, have used, import, have imported, export, have exported, offer for sale, have sold, sell, distribute and market certain products for the prevention or treatment of cancer in humans and any use in animals (or the Field of Use), or the Licensed Products, for commercial sale and distribution within Mexico, Belize, Guatemala, Honduras, El Salvador, Costa Rica, Nicaragua, Panama, Colombia and Bolivia.

Ventagen is 49.5% owned by certain of our stockholders.

Components of our Results of Operations

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At this time, we cannot accurately estimate or know the nature, timing and costs of the efforts that will be necessary to complete the clinical development of, or obtain regulatory approval for, any of our current or future product candidates.

The duration, costs,

and timing of clinical trials and development of CAN-2409 and CAN-3110 and any other product candidate we may develop will depend on a variety of factors, including:

The duration, costs, and timing of clinical trials and development of CAN-2409 and CAN-3110 and any other product candidate we may develop will depend on a variety of factors, including:

the scope, rate of progress, expense and results of clinical trials;

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the progress of the development efforts of parties with whom we may enter into collaboration agreements, and the terms and timing of any additional collaboration agreements, license or other arrangement, including the timing of any payments thereunder;

our ability to enter into agreements with CMOs for the commercial manufacture of our product candidate CAN-2409 and the clinical scale manufacture of our product candidate CAN-3110 as well as complete the development, construction and qualification of our clinical manufacturing facility in Needham;

our ability to enter into agreements with CMOs for the commercial manufacture of our product candidate CAN-2409 and the clinical-scale manufacture of our product candidate CAN-3110 as well as complete the qualification of our clinical manufacturing capabilities, internally or through CMOs;

costs related to manufacturing of our product candidates or to account for any future changes in our manufacturing plans;

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effectively competing with other products if our product candidates are approved;

the impact of any business interruptions to our operations, including the timing and enrollment of patients in our planned clinical trials, or to those of our manufacturers, suppliers, or other vendors resulting from the ongoing COVID-19 pandemic or similar public health crisis;

our ability to maintain a continued acceptable safety profile for our therapies following approval;

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We expect that our general and administrative expenses will increase in the future as we increase our personnel headcount to support our continued clinical development and manufacturing activities and to meet the requirements of a public company.

We expect to incur increased expenses associated with being a public company, including costs of accounting, audit, legal, regulatory, and tax-related services associated with maintaining compliance with exchange listing and Securities and Exchange Commission, or SEC, requirements;

director and officer insurance costs;

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Interest, Dividend, and Investment Income

Interest, dividend and investment income consists of amounts earned on investment of cash equivalents and short-term investments.

Interest, dividend and investment income consists of amounts earned on investment of cash equivalents.

Change in Fair Value of Warrant Liability

In connection with the November 13, 2018 issuance of Series B preferred stock we issued warrants to the purchasers of the Series B preferred stockholders, to purchase up to 7,344,982 shares of our common stock with an exercise price of $6.81 per share, and a warrant to the NC Incorporated Ohio Trust, an irrevocable trust funded by us, to purchase 162,740 shares of our common stock, $0.01 par value, at an exercise price of $1.46 per share, subject to adjustments as specified in the warrant agreement.

In connection with the November 13, 2018 issuance of Series B preferred stock we issued warrants to the purchasers of the Series B preferred stock, to purchase up to 7,344,968 shares of our common stock with an exercise price of $6.81 per share.

We also issued a warrant to the NC Incorporated Ohio Trust, an irrevocable trust funded by us, to purchase 162,740 shares of our common stock, $0.01 par value, at an exercise price of $1.46 per share, subject to adjustments as specified in the warrant agreement (the NC Ohio Warrants).

Certain of those warrants are recorded as a liability on our balance sheet.

The warrants recorded as a liability are remeasured to their fair value at each reporting date with changes in the fair value recognized as a component of other income (expense), net in the statements of operations and comprehensive loss.

We will continue to recognize changes in the fair value of the warrant liability until the warrants are exercised, expire or qualify for equity classification.

The fair value of the warrant liability is determined based on significant inputs not observable in the market.

The fair value of the warrant liability uses various valuation methods, including the Monte Carlo method, the option-pricing method, probability-weighted expected return and the hybrid method, all of which incorporate assumptions and estimates, to value the common stock warrants.

We will continue to recognize changes in the fair value of the warrants until they are exercised, expire or qualify for equity classification.

The fair value of the warrants is determined based on significant inputs not observable in the market.

The fair value of the warrants uses various valuation methods, including the Monte Carlo method, the option-pricing method, probability-weighted expected return and the hybrid method, all of which incorporate assumptions and estimates, to value the common stock warrants.

The hybrid method is often used when a company is expecting a liquidity event in the near future and is a combination of the option-pricing and probability-weighted expected return methods.

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Since our inception, we have generated cumulative federal and state net operating loss and research and development credit carryforwards for which we have not recorded any net tax benefit due to uncertainty around utilizing these tax attributes within their respective carryforward periods.

As of December 31, 2021, we had federal net operating loss carryforwards, or NOLs, of approximat ely $51.6 milli on and state NOLs of approximately $48.4 million which may be available to offset future taxable income.

Our federal NOLs include $8.8 m illion available to reduce future taxable income through 2028 and approximatel y $42.8 million of NOLs that do not expire and are available to reduce future taxable income indefinitely.

As of December 31, 2022, we had gross federal net operating loss carryforwards (NOLs) of approximately $65.9 million and state NOLs of approximately $61.9 million which may be available to offset future taxable income.

Our federal NOLs include $8.8 million available to reduce future taxable income through 2028 and approximately $57.1 million of NOLs that do not expire and are available to reduce future taxable income indefinitely.

The state NOLs are available to offset future taxable income through 2032.

As of December 31, 2021, we also had federal and state research and development tax credit carryforwards o f $2.0 million and $1.1 million, respectively, which are available to offset federal and state tax liabilities through 2036 and 2028, respectively.

As of December 31, 2022, we also had federal and state research and development tax credit carryforwards of $3.4 million and $1.8 million, respectively, which are available to offset federal and state tax liabilities through 2036 and 2028, respectively.

Realization of future tax benefits is dependent on many factors, including our ability to generate taxable income within the NOL period.

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As a result, a full valuation allowance has been established at December 31, 2022.

NOL and tax credit carryforwards may become subject to an annual limitation in the event of certain cumulative changes in the ownership interest of significant shareholders over a three-year period in excess of 50%, as provided under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended, or the Code, as well as under similar state provisions.

NOL and tax credit carryforwards may become subject to an annual limitation in the event of certain cumulative changes in the ownership interest of significant stockholders over a three-year period in excess of 50%, as provided under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended (the Code), as well as under similar state provisions.

These ownership changes may limit the amount of NOLs that can be utilized annually to offset future taxable income.

In general, an ownership change, as defined under Section 382 of the Code, or Section 382, results from transactions increasing the ownership of certain shareholders or public groups in the stock of a corporation by more than 50% over a three-year period.

In general, an ownership change, as defined under Section 382 of the Code (Section 382), results from transactions increasing the ownership of certain stockholders or public groups in the stock of a corporation by more than 50% over a three-year period.

We have completed several financings and not yet determined if such a limitation would be placed against our NOL.

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Loss from operations

Interest, dividend and investment (expense) income, net

Interest and dividend income (expense), net

Change in fair value of warrant liability

Comparison of the Years End December 31, 2021 and 2020

We had research and development service revenue of $125,000 for each of the years ended December 31, 2021 and 2020.

Comparison of the Years Ended December 31, 2022 and 2021

We had research and development service revenue of $0.1 million for each of the years ended December 31, 2022 and 2021.

This represents the recognition as research and development service revenue of a portion of the $1.0 million that we received in 2014 and 2015 from Ventagen, a related party, which is being recognized over the period during which we provide the services.

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Employee - related

Clinical development costs

Recruiting costs

Clinical development

Depreciation and impairment of fixed assets

Research and development expenses for the year ended December 31, 2021 were $15.2 million, compared to $8.8 million for the year ended December 31, 2020 and consisted primarily of $8.9 million and $5.3 million, respectively, of employee-related costs, including $1.2 million and $847,000, respectively, of non-cash stock compensation expense, $3.8 million and $2.2 million, respectively, of clinical development costs related to our clinical trial sites and the cost of treating and following up on patients in our clinical trials, $746,000 and $0, respectively, of recruiting costs, $717,000 and $91,000, respectively, of depreciation and impairment charges on fixed assets, and $584,000 and $812,000, respectively, of facility and occupancy-related costs.

The increase of $6.4 million in research and development expenses for the year ended December 31, 2021, was primarily due to an increase of $3.7 million in employee-related costs, an increase of $1.7 million in clinical development costs, 746,000 of search fees and costs to recruit research and development employees, and a $553,000 charge for the impairment of certain fixed assets.

The decrease in occupancy cost is due to the termination of the lease on the Company’s lease on its prior facility at the end of 2020.

The $3.7 million increase in employee-related costs was primarily due to the increase of $1.0 million in non-cash compensation expense and an increase in the research and development headcount.

Pre-clinical research

Research and development expenses increased $5.6 million from $15.2 million for the year ended December 31, 2021 to $20.8 million for the year ended December 31, 2022.

The increase was primarily attributable to a $3.7 million increase in employee compensation costs due to increased research and development headcount, $1.0 million of severance costs, a $1.8 million increase in clinical development costs which was primarily driven by increased manufacturing, clinical, and regulatory costs in support of CAN-2409 programs, and a $0.4 million increase in preclinical costs.

These increases were partially offset by a $0.4 million decrease in recruiting expense.

General and Administrative Expenses

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Employee-related

Professional and consulting

General and administrative expenses were $10.7 million for the year ended December 31, 2021 compared to $5.2 million for the year ended December 31, 2020 and consisted primarily of $5.6 million and $2.7 million, respectively, of employee-related costs, including $1.7 million and $1.3 million, respectively, of non-cash stock compensation expense, $3.0 million and $2.0 million, respectively, of professional and consulting fees and $1.2 million and $27,000, respectively, of insurance costs.

The increase of $5.5 million in general and administrative expenses was primarily due to an increase of $2.9 million in employee –

related costs as we increased our general and administrative headcount to manage growth and operate a public company, including an increase of $477,000 in non-cash compensation expense, an increase of $968,000 in professional and consulting fees, and an increase of $1.2 million in insurance expense.

Insurance expense due to the cost of directors and officers insurance upon completion of the IPO.

The increase in professional and consulting fees is primarily due to an increase in fees paid to personnel search firms, public relations consultants, commercial market research firms and legal and accounting firms.

Grant income was $1.1 million for the year ended December 31, 2021 compared to $624,000 for the year ended December 31, 2020.

Grant represents amounts received under a grant from the National Institutes of Health for development of CAN-2409 for use as a therapy for pancreatic cancer and in 2021, grant income also includes $464,000 for the forgiveness of a Paycheck Protection Plan loan in April 2021.

Professional and consulting fees

General and administrative expenses increased $3.4 million from $10.7 million for the year ended December 31, 2021 to $14.1 million for the year ended December 31, 2022.

The increase was primarily attributable to a $1.2 million increase in insurance expense due to the cost of director and officers insurance that has been in place since completion of the IPO in 2021, a $0.9 million increase in employee compensation due to increased headcount to manage growth and operate as a public company, $0.7 million increase in professional and consulting fees due to increased legal, accounting, and investor and public relations, and a $0.6 million increase in recruiting expense as a result of bringing on three new members to our board of directors and hiring of a new Chief Financial Officer.

Grant income was $48,000 for the year ended December 31, 2022, compared to $1.1 million for the year ended December 31, 2021.

Grant income in 2021 represents amounts received under a grant from the National Institutes of Health for development of CAN-2409 for use as a therapy for pancreatic cancer and includes $464,000 for the forgiveness of a Paycheck Protection Plan loan in April 2021.

The National Institutes of Health grant for development of CAN-2409 for use as a therapy for pancreatic cancer has expired at the end of 2021.

Interest, dividend and investment (expense) income, net

Interest, dividend and investment (expense) income, net was ($53,000) for the year ended December 31, 2021 compared to $111,000 of interest, dividend and investment income, net for the year ended December 31, 2020 and represents the earnings on our cash equivalents and short-term investments net of interest expense on outstanding debt obligations.

The decrease in interest, dividend, and investment income in 2021 is primarily due to a decrease in the yields earned on cash equivalents.

Grant income in 2022 relates to the recognition of income from a grant from the Massachusetts Life Sciences Center.

Interest, Dividend Expense, Net

Interest, dividend and expense was $0.5 million for the year ended December 31, 2022 compared to $53,000 for the year ended December 31, 2021, and represents the earnings on our cash equivalents net of interest expense on outstanding debt obligations.

The increase is primarily due to increased interest expense incurred as a result of increased borrowing in the first quarter of 2022.

Change in Fair Value of Warrant Liability

The change in fair value of our warrant liability was an increase in value of $11.4 million for the year ended December 31, 2021 compared to an increase in value of $4.6 million for the year ended December 31, 2020.

The increase is primarily driven by an increase in the underlying value of our stock price.

The change in fair value of our warrant liability was a decrease in the fair value of $16.4 million for the year ended December 31, 2022, compared to an increase in the fair value of $11.4 million for the year ended December 31, 2021.

The change in the fair value of the warrant liability is primarily driven by changes in the underlying value of our stock price.

Liquidity and Capital Resources

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We expect to continue to incur significant expenses and operating losses for the foreseeable future as we advance the clinical development of our product candidates.

We expect that our research and development and general and administrative costs will continue to increase significantly, including in connection with conducting clinical trials for our product candidates, developing our manufacturing capabilities which may include the cost of establishing a relationship with contract manufacturers to support commercial launch of our product candidate CAN-2409 and costs associated with equipping our laboratory and clinical manufacturing facility to support clinical trials and commercialization and providing general and administrative support for our operations, including the cost associated with operating as a public company.

We expect that our research and development and general and administrative costs will continue to increase significantly, including in connection with conducting clinical trials for our product candidates, developing our manufacturing capabilities which may include the cost of establishing a relationship with contract manufacturers to support commercial launch of our product candidate CAN-2409 and costs associated with equipping our laboratory and manufacturing facility to support clinical trials and commercialization and providing general and administrative support for our operations, including the cost associated with operating as a public company.

As a result, we will need additional capital to fund our operations, which we may obtain from additional equity or debt financings, collaborations, licensing arrangements or other sources.

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We have financed our operations primarily through proceeds from government grants and proceeds from the sale of convertible notes, common stock, and our convertible preferred stock.

As of December 31, 2021, we have raised approximately $160.6 million, including $15.4 million of government grants, $66.1 million from the sale of convertible preferred stock,

and $79.1 million from the sale of our common in our IPO.

As of December 31, 2022, we have raised approximately $160.8 million, including $15.6 million of government grants, $66.1 million from the sale of convertible preferred stock, and $79.1 million from the sale of our common stock in our IPO.

Our cash and cash equivalents totaled $70.1 million as of December 31, 2022.

We had $560,000 of long-term debt as of December 31, 2021 with a maturity in November 2027.

On February 24, 2022, the Company entered into a loan and security agreement Loan Agreement with a bank pursuant to which the bank has agreed to provide term loans to the Company in an aggregate principal amount of up to $25.0 million.

We had $20.9 million of long-term debt as of December 31, 2022.

On February 24, 2022, the Company entered into a loan and security agreement Loan Agreement with SVB pursuant to which SVB agreed to provide term loans to the Company in an aggregate principal amount of $20.0 million.

The Company borrowed $20.0 million upon entering into the Loan Agreement.

The Company can borrow up to an additional aggregate principal amount not to exceed $5.0 million, at any time on or prior to December 31, 2022, following the Company having provided evidence to the bank of (a) achievement of positive Phase 2 clinical activity data from the Company’s CAN-2409 NSCLC clinical trial, (b) dosing of its first patient in its Phase 3 CAN-2409 high grade glioma clinical trial and (c) receipt on or prior to December 31, 2022, of net cash proceeds in an amount equal to at least $75.0 million from the issuance and sale of equity securities to investors acceptable to SVB.

The Company could have borrowed up to an additional aggregate principal amount not to exceed $5.0 million, at any time on or prior to December 31, 2022, upon the achievement of all of the following milestones, inclusively:

(a) positive Phase 2 clinical activity data from the Company’s CAN-2409 NSCLC clinical trial, (b) dosing of its first patient in its Phase 3 CAN-2409 high-grade glioma clinical trial;

and (c) receipt on or prior to December 31, 2022, of net cash proceeds in an amount equal to at least $75.0 million from the issuance and sale of equity securities to investors acceptable to SVB.

The Company did not borrow any of the additional aggregate principal amount on or prior to December 31, 2022.

The term loans are secured by substantially all of the Company’s properties, rights and assets, except for its intellectual property, which is subject to a negative pledge under the Loan Agreement.

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The Company is required to make monthly interest payments, and commencing on February 1, 2024, 24 consecutive installments of principal plus monthly payments of accrued interest.

The term loans mature on January 1, 2026.

Upon repayment in full of the term loans, the Company will be required to pay a final payment fee equal to 4.50% of the original principal amount of any funded term loan being repaid.

The Loan Agreement permits voluntary prepayment of all, but not less than all, of the SVB term loans, subject to a prepayment premium of 1% to 3% based upon the timing of the prepayment.

On August 5, 2022, we filed a shelf registration statement on Form S-3 (the Shelf) with the SEC, which covers the offering, issuance and sale by us of up to an aggregate of $200.0 million of our common stock, preferred stock, debt securities, warrants and/or units of any combination thereof.

We simultaneously entered into a sales agreement with Jefferies LLC, as sales agent, to provide for the issuance and sale by us of up to $75.0 million of our common stock from time to time in “at-the-market”

offerings under the Shelf (the ATM Program).

The Shelf was declared effective by the SEC on August 12, 2022.

As of the date hereof, no sales have been made pursuant to the ATM Program.

As of December 31, 2022, we had cash and cash equivalents of $70.1 million.

As a result of prudent cost management and the management of our clinical program portfolio, we believe our cash resources will enable us to fund our operating expenses and capital expenditure requirements into the second quarter of 2024, compared to our previous expectation of the first quarter of 2024.

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

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Net cash used in operating activities

Net cash provided by (used in) investing activities

Net cash used in investing activities

Net cash provided by financing activities

Net increase in cash and cash equivalents

Net increase (decrease) in cash and cash equivalents

Cash Flows for the Years Ended December 31, 2022 and 2021

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Net cash used in operating activities for the year ended December 31, 2022 was $31.4 million, primarily consisting of a net loss of $18.8 million as we incurred expenses associated with our clinical programs, we increased our headcount and had costs associated with being a public company in the second half of the year.

In addition, we had non-cash income of $16.4 million as a result of the change in the fair value of our warrant liability, which was partially offset by $3.1 million of non-cash stock-based compensation and depreciation expense.

Net cash used in operating activities was also impacted by $0.1 million in changes in operating assets and liabilities, primarily driven by an increase of $1.3 million in accrued expenses and a decrease in prepaid expenses and other current assets of $0.4 million.

These changes were partially offset by a decrease of $1.2 million in accounts payable and a decrease of $0.5 million in lease-related liabilities.

Net cash used in operating activities for the year ended December 31, 2021 was $22.2 million, primarily consisting of a net loss of $36.1 million as we incurred expenses associated with our clinical programs, increased our headcount and had costs associated with being a public company in the second half of the year.

In addition, we had non-cash charges of $14.8 million for the change in the fair value of the warrant liability, stock-based compensation expense, and impairment and depreciation of fixed assets.

Net cash used in operating activities was also impacted by $876,000 in changes in operating assets and liabilities, primarily driven by an increase of $669,000 in accounts payable, $410,000 in deferred rent, $297,000 in accrued expenses, which were offset by an increase of $2.2 million in prepaids and other long term assets.

Net cash used in operating activities for the year ended December 31, 2020 was $9.1 million, primarily consisting of a net loss of $17.7 million as we incurred expenses associated with our clinical programs and we increased our headcount.

In addition, we had non-cash charges of $6.8 million for the change in the fair value of the warrant liability, stock-based compensation expense and depreciation and amortization.

Net cash used in operating activities was also impacted by $1.8 million in changes in operating assets and liabilities, primarily driven by an increase of $1.5 million in accrued expenses, $289,000 in accounts payable.

Net cash used in operating activities was also impacted by $0.9 million in changes in operating assets and liabilities, primarily driven by an increase of $0.7 million in accounts payable, $0.4 million in deferred rent, $0.3 million in accrued expenses, which were offset by an increase of $2.2 million in prepaids and other long term assets.

Investing Activities

Net cash used in investing activities for the year ended December 31, 2022 was $1.3 million, which was attributable to the use of $1.3 million for purchases of fixed assets.

Net cash provided by investing activities for the year ended December 31, 2020 was $38.5 million, which was attributable to a net sale of $39.9 million in available-for-sale securities and the use of $1.5 million for purchases of fixed assets.

Net cash used in investing activities for the year ended December 31, 2021 was $1.8 million, which was attributable to the use of $1.8 million for purchases of fixed assets.

Financing Activities

Net cash provided by financing activities for the year ended December 31, 2022 was $20.0 million, primarily consisting of $19.9 million of net proceeds from a term loan with SVB.

Net cash provided by financing activities for the year ended December 31, 2021 was $71.8 million, consisting of $71.3 million in net proceeds from our IPO and $465,000 in proceeds received from warrant and option exercises.

Net cash provided by financing activities for the year ended December 31, 2020 was $490,000 consisting of $460,000 received under the Paycheck Protection Program and $30,000 of proceeds from exercise of stock options.

Funding Requirements

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advance the clinical development of CAN-2409 and CAN-3110;

pursue the preclinical and clinical development of other product candidates using our HSV platform;

pursue the preclinical and clinical development of other product candidates using our HSV-based platform;

develop our manufacturing capabilities, including establishing a relationship with a contract manufacturer for commercial manufacturing of our product candidate CAN-2409 and the construction of our laboratory and clinical manufacturing facility for our product candidate CAN-3110;

expand our operational, financial, and management systems and increase personnel, including personnel to support our operations as a public company.

We believe that our existing cash and cash equivalents, including the receipt of $20.0 million on February 24, 2022 under the Loan Agreement with a bank, will enable us to fund our operating expenses and capital expenditure requirements into the fourth quarter of 2023.

We believe that our existing cash and cash equivalents will enable us to fund our operating expenses and capital expenditure requirements into the second quarter of 2024.

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

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the costs and timing of internal process development for our manufacturing capabilities;

the scope, progress, results, and costs of any product candidates that we may derive from our HSV platform or with collaborators;

the scope, progress, results, and costs of any product candidates that we may derive from our HSV-based platform or with collaborators;

the costs of preparing, filing and prosecuting patent applications, obtaining, maintaining and enforcing our intellectual property rights and defending intellectual property-related claims;

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To the extent that we raise additional capital through the sale of equity or convertible debt securities, your ownership interest may be diluted, and the terms of these securities may include liquidation or other preferences that could 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, that could adversely impact our ability to conduct our business.

Debt financing and 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, that could adversely impact our ability to conduct our business, in addition to those restrictive covenants contained in the Loan Agreement.

If we raise additional funds through other sources, such as collaboration agreements, strategic alliances, licensing arrangements or marketing and distribution arrangements, we may have to relinquish valuable rights to our technologies, future revenue streams, product development, and 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 when needed, we may be required to delay, limit, reduce, or terminate our product development or future commercialization efforts or grant rights to develop and market products or product candidates that we would otherwise prefer to develop and market ourselves.

Our primary contractual obligation is our facility lease which extends to August of 2026.

Contractual Obligations and Commitments

Our primary contractual obligations are our facility lease, the Loan Agreement with SVB, and the Periphagen Note.

The table below summarizes the contractual obligations that will become due as of December 31, 2022:

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Operating lease obligation (1)

(1) Represents future minimum lease payments under our operating leases for office and laboratory space at our Needham, Massachusetts facility (see our financial statements included elsewhere in this Annual Report on Form 10-K for additional information on these lease agreements).

We also enter into contracts in the normal course of business with hospitals, clinics, universities, and other third parties for clinical trials and testing and with construction contractors and process developers for the construction of our manufacturing facility.

Loan Agreement with SVB (2)

Periphagen Note (3)

(1) Represents future minimum lease payments under our operating leases for office and laboratory space at our Needham, Massachusetts facility.

Our facility lease extends to August of 2026.

(2) Represents future principal and interest payments on our Loan Agreement with SVB, which matures on January 1, 2026.

(3) Represents a $1.0 million promissory note under the terms of our asset purchase agreements with Periphagen, Inc.

The promissory note is due upon maturity in November 2027.

See our financial statements included elsewhere in this Annual Report on Form 10-K for additional information on these agreements.

We also enter into contracts in the normal course of business with hospitals, clinics, universities, and other third parties for clinical trials.

These contracts do not contain minimum purchase commitments and are cancelable by us upon prior written notice.

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Examples of estimated accrued research and development expenses include fees paid to the following:

contractors and vendors working on the construction and development of our commercial-scale manufacturing facility;

clinical trial sites where patients are being treated with our product candidates;

consultants providing services related to process development, regulatory and other services;

CMOs who are manufacturing commercial-scale quantities of our product candidates

Actual services performed may vary from our estimates, resulting in adjustments to research and development costs or inventories in future periods.

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Determination of Fair Value of Warrants

In connection with the Series B Convertible Preferred Stock issuance, the Company issued warrants to purchase shares of common stock of which certain warrants are shown as a liability on the balance sheet .

The fair value of the warrant liability was determined based on significant inputs not observable in the market.

In connection with the Series B convertible preferred stock issuance in November 2018, the Company issued warrants to purchase shares of common stock of which certain warrants are shown as a liability on the balance sheet.

The fair value of the warrants was determined based on significant inputs not observable in the market.

The hybrid method is often used when a company is expecting a liquidity event in the near future and is a combination of the option-pricing and probability-weighted expected return methods.

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The most significant assumption in the model impacting the fair value of the common stock warrants is the fair value of the Company’s common stock as of each remeasurement date.

Prior to the IPO, the Company determined the fair value per share of the underlying common stock by taking into consideration the most recent sales of preferred stock, results obtained from third-party valuations and additional factors that are deemed relevant.

Stock-Based Compensation

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Determination of Fair Value of Common Stock

Prior to the IPO, there had been no public market for our common stock and as such, the estimated fair value of our common stock had been determined by our board of directors as of the date of each option grant, with input from management, taking into consideration our most recently available third-party valuations of common stock at the time of the grants, as well as our board of directors’

Prior to the IPO in July 2021, there had been no public market for our common stock and as such, the estimated fair value of our common stock had been determined by our board of directors as of the date of each option grant, with input from management, taking into consideration our most recently available third-party valuations of common stock at the time of the grants, as well as our board of directors’

assessment of additional objective and subjective factors that it believed were relevant and which may have changed from the date of the most recent valuation through the date of the grant.

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the lack of an active public market for our common stock and our convertible preferred stock;

the likelihood of achieving a liquidity event, such as an initial public offering, or IPO, or sale of our company considering prevailing market conditions;

the analysis of IPOs and the market performance of similar companies in the biotechnology industry.

the likelihood of achieving a liquidity event, such as an initial public offering or sale of our company considering prevailing market conditions;

the analysis of initial public offerings and the market performance of similar companies in the biotechnology industry.

The assumptions underlying these valuations were highly complex and subjective and represented management’s best estimates, which involved inherent uncertainties and the application of management’s judgment.

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Emerging Growth Company Status

In April 2012, the Jumpstart Our Business Startups Act of 2012, or the JOBS Act, was enacted.

In April 2012, the Jumpstart Our Business Startups Act of 2012 (the JOBS Act) was enacted.

Section 107 of the JOBS Act provides that an “emerging growth company,”

or an EGC, can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act of 1933, as amended, or the Securities Act, for complying with new or revised accounting standards.

or an EGC, can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act of 1933, as amended (the Securities Act) for complying with new or revised accounting standards.

Thus, an EGC can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies.

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and (4) the last day of the fiscal year ending after the fifth anniversary of our initial public offering.

Inflation has increased during the periods covered by this Annual Report, and is expected to continue to increase for the near future.

Inflationary factors, such as increases in the cost of our product components, interest rates and overhead costs may adversely affect our operating results.

Although we do not believe that inflation has had a material impact on our financial position or results of operations to date, we may experience some effect in the future, especially if inflation rates continue to rise.

Quantitative and Qualitative Disclosures about Market Risk.

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934, as amended, and are not required to provide the information under this item.

Financial Statements and Supplementary Data.

Our consolidated financial statements, together with the report of our independent registered public accounting firm, appear beginning on page F-1 of this Annual Report for the year ended December 31, 2022.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

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 5. Market for Registrant’s Common Equity