Item 2. Management’s Discussion and Analysis
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our financial condition and results of operations and the unaudited interim condensed consolidated financial statements and related notes included in this Quarterly Report on Form 10-Q (“Quarterly Report) should be read in conjunction with the financial statements and related notes thereto as of and for the year ended December 31, 2023 contained in the prospectus (the “IPO Prospectus”) filed on October 11, 2024 pursuant to Rule 424(b) under the Securities Act of 1933, as amended (the “Securities Act”), with the Securities and Exchange Commission (the “SEC”). This discussion and analysis and other parts of this Quarterly Report contain forward-looking statements. Our actual results and the timing of selected events could differ materially from those described in or implied by these forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in the sections of this Quarterly Report titled “Special Note Regarding Forward-Looking Statements” and “Risk Factors,” under Part II, Item 1A.
We are a clinical-stage biopharmaceutical company pioneering the discovery and development of regulatory RNA-based therapeutics with the goal of upregulating gene expression and restoring healthy protein levels to treat a broad range of genetic diseases. Regulatory RNAs (“regRNAs”) play a central role in the regulation of every protein-coding gene by contributing to gene activation and suppression. Our approach is designed to amplify messenger RNA (“mRNA”) expression by harnessing the power of regRNAs that form localized complexes with transcription factors and regulate gene expression. Our proprietary RNA Actuating Platform, or RAP Platform, allows us to rapidly and systematically identify and characterize the active regulatory elements controlling every expressed gene and tens of thousands of druggable enhancer and promoter regRNA sequences that control protein-coding genes. Once a disease-associated target gene is identified, we apply our RAP Platform to identify the controlling regRNA and rapidly generate novel antisense oligonucleotide (“ASO”) candidates, which we also refer to as RNA Actuators. These ASOs are designed to bind to the identified regRNA and amplify the expression of the target gene in a specific and controllable way. We are initially focused on metabolic and central nervous system diseases with validated disease biology, and we believe our RAP Platform allows us to address a broad range of genetic diseases in which a modest increase in protein expression has the potential to be clinically meaningful.
Since our inception in 2015, we have focused substantially all of our resources primarily on developing our RAP Platform, identifying, developing and progressing our product candidates through preclinical and clinical development, organizing and staffing our company, research and development activities, establishing and protecting our intellectual property portfolio, and raising capital. To date, we have primarily funded our operations with proceeds from the sale of convertible preferred stock and common stock, including in our initial public offering (“IPO”), which closed on October 15, 2024, as well as through revenues from our license and collaboration agreements. Through September 30, 2024, we have received gross proceeds of $188.3 million from the sale of our convertible preferred stock. In addition, through September 30, 2024, we have recognized $17.4 million in research collaboration and license revenue through our development and license agreements. Our ability to generate any product revenue and, in particular, our ability to generate product revenue sufficient to achieve profitability, will depend on the successful development and eventual commercialization of product candidates.
We have incurred significant operating losses and negative cash flows from operations since our inception. Our net losses were $13.5 million and $11.7 million for the three months ended September 30, 2024 and 2023, respectively, and were $38.5 million and $36.3 million for the nine months ended September 30, 2024 and 2023, respectively. As of September 30, 2024, we had an accumulated deficit of $198.5 million. Substantially all of our net losses have resulted from costs incurred in connection with our research and development programs and, to a lesser extent, from general and administrative costs associated with our operations. Our net losses may fluctuate significantly from quarter-to-quarter and year-to-year, depending on the timing of our clinical trials and preclinical studies, our other research and development activities and capital expenditures, and the timing and amount of any milestone or royalty payments due under our existing or future license or collaboration agreements. In addition, following the closing of our IPO on October 15, 2024, we expect to incur additional costs associated with operating as a public company, including significant legal, audit, accounting, regulatory and tax-related services associated with maintaining compliance with exchange listing and SEC requirements, director and officer liability insurance costs, investor and public relations costs, and other expenses that we did not incur as a private company. If we obtain regulatory approval for our product candidates, we expect to incur significant expenses related to developing our commercialization capability to support product sales, marketing and distribution. We anticipate that our expenses will increase substantially if and as we:
● advance our lead product candidate, CMP-CPS-001, through clinical trials;
● finalize preclinical development for our program in SYNGAP1-related disorders;
● conduct preclinical studies and clinical trials for any future product candidates;
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● expand the capabilities of our RAP Platform and seek to identify and develop additional product candidates;
● seek marketing approvals for any product candidates that successfully complete clinical trials;
● obtain, expand, maintain, defend and enforce our intellectual property portfolio;
● hire additional clinical, regulatory and scientific personnel;
● contract with third party manufacturers for preclinical and clinical drug supply supporting any future product candidates we may develop, and commercial supply with respect to any such product candidates that receive regulatory approval;
● ultimately establish a sales, marketing and distribution infrastructure to commercialize any products for which we may obtain marketing approval; and
● add operational, legal, compliance, financial and management information systems and personnel to support our research, product development and future commercialization efforts, as well as to support our operations as a public company.
Because of the numerous risks and uncertainties associated with the development of therapeutics, we are unable to accurately predict the timing or amount of increased expenses and when, or if, we will be able to achieve or maintain profitability. Even if we are able to generate 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 unable to continue our operations as planned and may be forced to reduce or terminate our operations.
We do not have any products approved for sale and have not generated any revenue from product sales. We will not generate revenue from product sales unless and until we successfully complete clinical development and obtain regulatory approval for our current or future product candidates, which we expect will take a number of years and may never occur. As a result, we will need substantial additional funding to support our continuing operations and pursue our growth strategy. Until such time as we can generate significant revenue from product sales, if ever, we expect to finance our operations through equity offerings, debt financings, or other capital sources, including current and potential future collaborations, license agreements, and other similar arrangements. However, we may be unable to raise additional funds or enter into such other agreements or arrangements when needed on favorable terms, or at all. If we fail to raise capital or enter into such agreements or arrangements as and when needed, we may delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market product candidates that we would otherwise intend to develop and market ourselves, or even cease operations.
As of September 30, 2024, we had cash and cash equivalents of $2.5 million. On October 15, 2024, upon the closing of the IPO, we received aggregate proceeds, net of underwriting discounts and commissions, of $69.8 million. In addition, on November 1, 2024, we received additional proceeds of $6.6 million pursuant to the partial exercise by the underwriters of their option to purchase additional shares in the IPO. Collectively, we received aggregate net proceeds of $76.4 million from the IPO and the subsequent partial exercise by the underwriters of their option to purchase additional shares (the “IPO Proceeds”). Based on our current operating plan, we estimate that our existing cash and cash equivalents as of the date of this Quarterly Report, including the IPO Proceeds, will be sufficient to fund our projected operating expenses and capital expenditure requirements through at least 12 months from the date of this Quarterly Report. We have based this estimate on assumptions that may prove to be wrong, and our operating plan may change as a result of many factors currently unknown to us. In addition, we could utilize our available capital resources sooner than we expect. See the sections titled “—Liquidity and Capital Resources” and “Risk Factors—Risks Related to Our Financial Position and Need for Additional Capital” included elsewhere in this Quarterly Report.
We do not own or operate, and currently have no plans to establish, any manufacturing facilities. We rely, and expect to continue to rely, on third parties for clinical supply as well as commercial supply if we obtain marketing approval. In addition, we rely on third parties to package, label, store, and distribute our clinical supply and we intend to rely on third parties to conduct the same activities for our commercial products if we obtain regulatory approval. We believe that this strategy allows us to maintain a more efficient infrastructure by eliminating the need to invest in our own manufacturing facilities, equipment and personnel while also enabling us to focus our expertise and resources on the development of product candidates and continued enhancement of our RAP Platform.
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Collaboration and License Agreements
Below is a summary of the key terms and financial statement impact of certain of our license and collaboration agreements:
In-License Agreements
Whitehead Institute for Biomedical Research
In October 2019, we entered into a patent license agreement with the Whitehead Institute for Biomedical Research (the “Whitehead Institute”), which was subsequently amended on December 14, 2021 (the “Whitehead First Amendment”), and on November 7, 2023 (the “Whitehead Second Amendment”). Under the agreement, we were granted a worldwide, royalty-bearing, sublicensable license under certain patent rights owned or controlled by the Whitehead Institute. As part of the agreement, we paid an initial $0.1 million license issuance fee, and de minimis additional fees in connection with each of the Whitehead First Amendment and Whitehead Second Amendment that were recorded as research and development expense in our condensed consolidated statement of operations and comprehensive loss. We are also obligated to pay annual license maintenance fees for the term of the agreement, pursuant to which we have paid an aggregate of $0.20 million through September 30, 2024. In addition, we are obligated to pay certain filing, prosecution and maintenance fees with respect to certain patent rights licensed to us under the agreement, pursuant to which we have paid an aggregate of $0.27 million through September 30, 2024. We are obligated to pay potential development milestone payments to the Whitehead Institute of up to an aggregate of $1.9 million under the terms of the agreement upon the achievement of certain specified contingent events. In addition, if we successfully commercialize a product under the agreement, we are also obligated to pay tiered royalties at percentage rates ranging from less than one percent to the mid-single digits of net sales or of running royalties of net sales, subject to specified reductions, until either the last-to-expire valid claim of a Whitehead Institute patent covering the product or seven years after the first commercial sale, in each case on a product-by-product and country-by-country basis. We incurred de minimis amounts of license maintenance and amendment issuance fees during each of the three and nine months ended September 30, 2024 and 2023 under the amended agreement and recorded the amounts in our research and development expense in our condensed consolidated statements of operations and comprehensive loss.
Children’s Medical Center Corporation
In April 2018, we entered into a development and license agreement (the “Children’s Medical Center Corporation Agreement”) with Children’s Medical Center Corporation (“CMCC”). The agreement allows us to use CMCC’s proprietary intellectual property to conduct research, development and commercialization of products utilizing CMCC’s proprietary intellectual property in return for specified payments. The proprietary intellectual property licensed pursuant to this agreement is related to certain legacy programs we are not pursuing and which were subsequently sublicensed to Fulcrum Therapeutics, Inc. (“Fulcrum”), as described below. As part of the agreement, we issued a total of 15,123 shares of common stock to CMCC and its affiliates based on the fair value of the common stock on the date of issuance.
We are obligated to pay potential development milestone payments under the terms of the Children’s Medical Center Corporation Agreement of up to $7.7 million for the first licensed target, $3.9 million for the second licensed target and $1.9 million for the third licensed target upon the achievement of certain specified contingent events. If commercial sales of a licensed product commence, we will pay CMCC royalties at percentage rates ranging in the low- to mid-single digits on net sales of licensed products in countries where such product is protected by patent rights. We incurred less than $0.1 million of royalties owed to CMCC under the agreement during each of the three and nine months ended September 30, 2024 and 2023, and recorded the amounts in research and development (“R&D”) expense in the condensed consolidated statements of operations and comprehensive loss. We re-evaluate the likelihood of achieving future milestones at the end of each reporting period. As of September 30, 2024, we determined that the likelihood of achieving future milestones was not probable.
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Out-License Agreements
Fulcrum Therapeutics, Inc.
In July 2023, we entered into a license agreement with Fulcrum. Under this license agreement, we granted an exclusive license related to our related intellectual property and granted a non-exclusive sublicense for the intellectual property obtained through the Children’s Medical Center Corporation Agreement. In exchange for the license rights, Fulcrum paid us a $0.35 million upfront payment. In the event that Fulcrum achieves development and commercial milestones, Fulcrum will be obligated to pay us one-time milestone payments ranging from $1.0 million to $20.0 million (with respect to a Tier 1 Product, as defined in the agreement) or $0.6 million to $12.0 million (with respect to a Tier 2 Product, as defined in the agreement), depending on the milestone achieved. In addition, this license agreement includes both potential nominal minimum annual royalty payments as well as sales-based royalties upon commercialization of up to the low-double digits.
During each of the three and nine months ended September 30, 2024, we did not record any license revenue pursuant to the Fulcrum Agreement. During the three and nine months ended September 30, 2023, we recorded $0.35 million of license revenue pursuant to the Fulcrum Agreement.
Collaborative Arrangement
Eli Lilly and Company
In July 2023, we executed a Material Transfer Agreement (“MTA”) with Eli Lilly and Company (“Eli Lilly”), which was subsequently amended in July 2024. As part of the MTA, we and Eli Lilly agreed to perform research and development activities to generate up to three ASOs in accordance with a prescribed workplan. For the nine months ended September 30, 2024, we received $0.4 million from Eli Lilly related to the MTA. For the three and nine months ended September 30, 2024, we recorded $0.1 million and $0.3 million, respectively, as a reduction in R&D expense in the condensed consolidated statement of operations and comprehensive loss. For the three and nine months ended September 30, 2023, we recorded $0.2 million and $0.2 million, respectively, as a reduction in R&D expense in the condensed consolidated statement of operations and comprehensive loss.
Research and Collaboration Agreement
BioMarin Pharmaceutical, Inc.
On September 26, 2024, we entered into a Collaboration and License Agreement (the “BioMarin Agreement”) with BioMarin Pharmaceutical Inc. (“BioMarin”), pursuant to which we and BioMarin agreed to collaborate with respect to the research and discovery of regulatory RNA-targeting ASOs using our proprietary RAP Platform to modulate the expression of two undisclosed genetic targets under two distinct programs. Under the terms of the BioMarin Agreement, BioMarin will pay an upfront, nonrefundable payment of $1.0 million, and will reimburse us for the research activities we will conduct for each program under an agreed research plan and budget. On a per-program basis, we will be eligible to receive up to $5.0 million in future contingent preclinical milestones, up to $75.0 million in future contingent development and regulatory milestones and up to $105.0 million in commercial sales milestones. We will be further eligible to receive tiered royalties at percentage rates ranging from the low single digits to the high single digits of net sales, subject to specified reductions, until either the last-to-expire valid claim of a patent covering the product, ten years after the first commercial sale, or the expiration of any applicable regulatory exclusivity obtained for the product, in each case on a product-by-product and country-by-country basis. The agreement may be terminated in its entirety or on a program-by-program basis for convenience by BioMarin. The agreement may also be terminated by either us or BioMarin under certain other circumstances, including material breach, as set forth in the agreement. The notice periods for termination provisions range from 30 days to 270 days depending on the reason for termination.
During the three and nine months ended September 30, 2024, we did not record any research collaboration and license revenue pursuant to the BioMarin Agreement.
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Components of Our Results of Operations
Revenue
For the three and nine months ended September 30, 2023, we recognized $0.35 million in research collaboration and license revenue through our collaboration and license agreements. We did not recognize any research collaboration and license revenue during the three and nine months ended September 30, 2024. We have not generated any revenue from the sale of products, however, and do not expect to generate any revenue from the sale of products in the foreseeable future, if at all. If our or our collaborators’ development efforts for product candidates and any future product candidates are successful and result in regulatory approval, we may generate revenue in the future from product sales, payments from existing or potential future collaboration or license agreements with third parties, or any combination thereof.
Operating Expenses
Our operating expenses consist of (i) R&D expenses and (ii) general and administrative expenses.
Research and Development Expenses
Research and development expenses consist primarily of external and internal costs incurred in performing clinical and preclinical development activities.
Our R&D expenses consist of:
● external costs incurred under agreements with contract research organizations (“CROs”), contract manufacturing organizations (“CMOs”), consultants and other third parties to conduct and support our clinical trials and preclinical studies;
● internal costs, including R&D personnel-related expenses such as salaries and stock-based compensation and benefits, as well as allocated facilities costs and depreciation; and
● costs associated with our licensing activities.
We expense R&D costs as incurred. Certain third-party costs for R&D activities are recognized based on an evaluation of the progress to completion of specific tasks using information and data provided to us by our management and scientific personnel, vendors and third-party service providers. Non-refundable advance payments for goods and services that will be used over time for R&D are deferred and capitalized as R&D prepaid expenses on our consolidated balance sheets. The capitalized amounts are recognized as an expense as the goods are delivered or as the related services are performed. Since our inception, substantially all of our external costs were related to the development of product candidates. We use internal resources for platform development, early pipeline discovery, preclinical development, management of clinical development activities, technical operations and oversight of manufacturing partners. We do not track our research and development expenses on a program-by-program basis. Our third-party research and development expenses consist primarily of fees paid to outside consultants, CROs, CMOs and academic research laboratories in connection with our preclinical development, process development, manufacturing and clinical development activities. Our other R&D costs are internal costs primarily associated with our discovery efforts, laboratory supplies, and facilities, including depreciation, that are allocated across multiple programs.
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Although R&D activities are central to our business model, the successful development of any future product candidates is highly uncertain. There are numerous factors associated with the successful development of any product, including future trial design and various regulatory requirements, many of which cannot be determined with accuracy at this time based on our stage of development. In addition, future regulatory factors beyond our control may impact our clinical development programs. 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 longer duration of later-stage clinical trials. As a result, we expect our R&D expenses will increase substantially in connection with our ongoing and planned clinical and preclinical development activities in the near term and in the future. At this time, we cannot accurately estimate or know the nature, timing and costs of the efforts that will be necessary to complete the preclinical and clinical development of our current product candidates and any future product candidates. Our future R&D expenses may vary significantly based on a wide variety of factors such as:
● the number and scope, rate of progress, expense and results of our clinical trials and preclinical studies and any future product candidates we may choose to pursue, including any modifications to clinical development plans based on feedback that we may receive from regulatory authorities;
● per patient trial costs;
● the number of trials required for approval;
● the number of sites included in the trials;
● the countries in which the trials are conducted;
● the length of time required to enroll eligible patients;
● the number of patients that participate in the trials;
● the number of doses that patients receive;
● the drop-out or discontinuation rates of patients;
● the potential additional safety monitoring requested by regulatory agencies;
● the duration of patient participation in the trials and follow-up;
● the cost and timing of manufacturing clinical supply;
● the extent of changes in government regulation and regulatory guidance;
● the timing, receipt, and terms of any approvals from applicable regulatory authorities; and
● the extent to which we establish additional collaboration, license, or other arrangements.
A change in the outcome of any of these variables with respect to the development of our product candidates or any future product candidates could significantly change the costs and timing associated with the development of that product candidate.
General and Administrative Expenses
General and administrative expenses consist primarily of personnel-related expenses such as salaries and stock-based compensation and benefits for our personnel in executive, legal, finance and accounting, human resources and other administrative functions. General and administrative expenses also include legal fees relating to patent and corporate matters and professional fees paid for accounting, audit, consulting and tax services, as well as facilities-related costs not otherwise included in R&D expenses and other costs such as insurance costs and travel expenses.
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We anticipate our general and administrative expenses will increase substantially in the future as we expand our operations, including increasing our headcount to support our continued R&D activities and continue to advance the development of our product candidates. We also anticipate we will incur increased accounting, audit, legal, regulatory, compliance, director and officer insurance, and investor and public relations expenses associated with operating as a public company.
Other Income (Expense), Net
Interest Income
Interest income relates to interest earned on our invested cash and cash equivalent balances.
Other (Expense)
Other (expense) consists of miscellaneous items, such as foreign exchange gains and losses and other insignificant amounts.
Results of Operations
Comparison of the Three Months Ended September 30, 2024 and 2023
The following table summarizes our results of operations for the three months ended September 30, 2024 and 2023 (in thousands):
Three months ended September 30,
2024
2023
Change ($)
Revenue
Research and collaboration revenue
$
—
$
350
$
(350)
Operating Expenses:
Research and development
$
9,702
$
9,819
$
(117)
General and administrative
3,814
2,869
945
Total operating expenses
13,516
12,688
828
Loss from operations
(13,516)
(12,338)
(1,178)
Other income (expense), net:
Interest income
94
689
(595)
Other expense
(62)
(47)
(15)
Total other income, net
32
642
(610)
Net loss and comprehensive loss
$
(13,484)
$
(11,696)
$
(1,788)
Research and Collaboration Revenue
We did not recognize any research and collaboration revenue during the three months ended September 30, 2024. We recognized $0.35 million in research and collaboration revenue during the three months ended September 30, 2023. The decrease of $0.35 million was due to revenue generated from the sublicense agreement with Fulcrum.
Research and Development Expenses
The following table summarizes our R&D expenses for the three months ended September 30, 2024 and 2023 (in thousands):
Three months ended September 30,
2024
2023
Change ($)
Clinical and pre-clinical expenses
$
4,511
$
5,053
$
(542)
Personnel-related expenses
2,941
2,979
(38)
Professional fees
558
332
226
Facility-related and other expenses
1,692
1,455
237
Total research and development expenses
$
9,702
$
9,819
$
(117)
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Research and development expenses were $9.7 million for the three months ended September 30, 2024 compared to $9.8 million for the three months ended September 30, 2023. The decrease of $0.1 million in R&D expenses for the three months ended September 30, 2024 as compared to the prior period was primarily due to a decrease of $0.5 million in workforce-related expenses, offset in part by an increase of $0.2 million in lab operations and information technology expenses, and an increase of $0.2 million in professional and consulting fees associated with preclinical, regulatory and clinical affairs and continued development of our lead product candidate.
General and Administrative Expenses
The following table summarizes our general and administrative expenses for the three months ended September 30, 2024 and 2023 (in thousands):
Three months ended September 30,
2024
2023
Change ($)
Personnel-related expenses
2,419
$
1,893
$
526
Professional and consultant fees
903
546
357
Facilities-related fees and other related costs
492
430
62
Total general and administrative expenses
$
3,814
$
2,869
$
945
General and administrative expenses were $3.8 million for the three months ended September 30, 2024 compared to $2.9 million for the three months ended September 30, 2023. The increase of $0.9 million in general and administrative expenses for the three months ended September 30, 2024 as compared to the prior period was primarily due to an increase of $0.5 million related to stock-based compensation associated with the forgiveness of promissory notes originally issued to certain executive officers, and an increase in accounting and consulting fees and fees paid to prosecute patents of $0.4 million.
Other Income (Expense), Net
Other income, net was less than $0.1 million for the three months ended September 30, 2024 compared to $0.6 million for the three months ended September 30, 2023. The decrease of $0.6 million was primarily due to a decrease in interest income on lower average cash equivalent balances in 2024.
Results of Operations
Comparison of the Nine Months Ended September 30, 2024 and 2023
The following table summarizes our results of operations for the nine months ended September 30, 2024 and 2023 (in thousands):
Nine months ended September 30,
2024
2023
Change ($)
Revenue
Research and collaboration revenue
$
—
$
350
$
(350)
Operating expenses:
Research and development
$
28,821
$
29,955
$
(1,134)
General and administrative
10,233
8,798
1,435
Total operating expenses
39,054
38,753
301
Loss from operations
(39,054)
(38,403)
(651)
Other income (expense), net:
Interest income
720
2,239
(1,519)
Other expense
(178)
(137)
(41)
Total other income, net
542
2,102
(1,560)
Net loss and comprehensive loss
$
(38,512)
$
(36,301)
$
(2,211)
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Research and Collaboration Revenue
We did not recognize any research and collaboration revenue during the nine months ended September 30, 2024. We recognized $0.35 million in research and collaboration revenue during the nine months ended September 30, 2023. The decrease of $0.35 million was due to revenue generated from the sublicense agreement with Fulcrum.
Research and Development Expenses
The following table summarizes our R&D expenses for the nine months ended September 30, 2024 and 2023 (in thousands):
Nine months ended September 30,
2024
2023
Change ($)
Clinical and pre-clinical expenses
$
13,030
$
14,183
$
(1,153)
Personnel-related expenses
9,197
10,365
(1,168)
Professional fees
1,665
1,087
578
Facility-related and other expenses
4,929
4,320
609
Total research and development expenses
$
28,821
$
29,955
$
(1,134)
Research and development expenses were $28.8 million for the nine months ended September 30, 2024 compared to $30.0 million for the nine months ended September 30, 2023. The decrease of $1.2 million in R&D expenses for the nine months ended September 30, 2024 as compared to the prior period was primarily due to a decrease of $1.2 million in workforce-related expenses and a decrease of $1.2 million in preclinical contract research spend due to fewer external preclinical research activities, offset in part by an increase of $0.6 million in lab operations and information technology expenses, and an increase of $0.6 million in professional and consulting fees associated with preclinical, regulatory and clinical affairs and continued development of our lead product candidate.
General and Administrative Expenses
The following table summarizes our general and administrative expenses for the nine months ended September 30, 2024 and 2023 (in thousands):
Nine months ended September 30,
2024
2023
Change ($)
Personnel-related expenses
5,978
$
5,364
$
614
Professional and consultant fees
2,801
1,984
817
Facilities-related fees and other related costs
1,454
1,450
4
Total general and administrative expenses
$
10,233
$
8,798
$
1,435
General and administrative expenses were $10.2 million for the nine months ended September 30, 2024 compared to $8.8 million for the nine months ended September 30, 2023. The increase of $1.4 million in general and administrative expenses for the nine months ended September 30, 2024 as compared to prior period was primarily due to an increase of $0.6 million related to stock-based compensation associated with the forgiveness of promissory notes originally issued to certain executive officers and an increase in accounting and consulting fees and fees paid to maintain patents of $0.8 million.
Other Income (Expense), Net
Other income, net was less than $0.5 million for the nine months ended September 30, 2024 compared to $2.1 million for the nine months ended September 30, 2023. The decrease of $1.6 million was primarily due to a decrease in interest income on lower average cash equivalent balances in 2024.
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Liquidity and Capital Resources
Sources of Liquidity
Since our inception, we have not generated any revenue from product sales and have incurred significant operating losses and negative cash flows from operations. We expect to incur significant expenses and operating losses in the foreseeable future as we advance the development of product candidates. Through September 30, 2024, we have primarily funded our operations with proceeds from the sale of shares of our convertible preferred stock and revenues from our license and collaboration agreements. Through September 30, 2024, we have received aggregate gross proceeds of $188.3 million from the sale of shares of our convertible preferred stock. In addition, through September 30, 2024, we have recognized $17.4 million in research and collaboration revenue through our collaboration and license agreements. As of September 30, 2024, we had cash and cash equivalents of $2.5 million.
On October 15, 2024, upon the closing of our IPO, we received aggregate proceeds, net of underwriting discounts and commissions, of $69.8 million. In addition, on November 1, 2024, we received additional proceeds of $6.6 million pursuant to the partial exercise by the underwriters of their option to purchase additional shares in the IPO. Collectively, we received IPO Proceeds of $76.4 million. Based on our current operating plan, we estimate that our existing cash and cash equivalents as of the date of this Quarterly Report, including the IPO Proceeds, will be sufficient to fund our projected operating expenses and capital expenditure requirements through at least 12 months from the date this Quarterly Report was issued. However, we have based this estimate on assumptions that may prove to be wrong, and our operating plan may change as a result of many factors currently unknown to us. In addition, we could utilize our available capital resources sooner than we expect. See the sections titled “—Liquidity and Capital Resources” and “Risk Factors—Risks Related to Our Financial Position and Need for Additional Capital” included elsewhere in this Quarterly Report.
Future Funding Requirements
We expect our expenses to increase substantially in connection with our ongoing activities, particularly as we continue our development of, seek regulatory approval for, and potentially commercialize our product candidates and seek to discover and develop additional product candidates, conduct our ongoing and planned clinical trials and preclinical studies, continue our research and development activities, hire additional personnel, expand and protect our intellectual property, and incur additional costs associated with being a public company.
The timing and amount of our funding requirements will depend on many factors, including:
● the scope, timing and progress of our ongoing CMP-CPS-001 clinical trial;
● the initiation, type, number, scope, progress, expansions, results, costs and timing of preclinical studies and clinical trials of our product candidates and any future product candidates we may choose to pursue, including the costs of modification to clinical development plans based on feedback that we may receive from regulatory authorities and any third-party products used as combination agents in our clinical trials;
● the costs and timing of manufacturing for our product candidates, including commercial manufacturing at sufficient scale, if any product candidate is approved;
● the costs, timing and outcome of regulatory meetings and reviews of product candidates or any future product candidates, including requirements of regulatory authorities in any additional jurisdictions in which we may seek approval and any future product candidates;
● the costs of obtaining, maintaining, enforcing and protecting our patents and other intellectual property and proprietary rights;
● our efforts to enhance operational systems and hire additional personnel to satisfy our obligations as a public company, including enhanced internal control over financial reporting;
● the costs associated with hiring additional personnel and consultants as our clinical and preclinical activities increase and as we operate as a public company;
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● the timing and payment of milestone, royalty or other payments we must make or may receive pursuant to our existing and potential future license or collaboration agreements with third parties;
● the costs and timing of establishing or securing sales and marketing capabilities if our product candidates or any future product candidate is approved;
● our ability to achieve sufficient market acceptance, coverage, and adequate reimbursement from third-party payors and adequate market share and revenue for any approved products;
● patients’ ability and willingness to pay out-of-pocket for any approved products in the absence of coverage and/or adequate reimbursement from third-party payors;
● the terms and timing of establishing and maintaining collaborations, licenses and other similar arrangements; and
● costs associated with any products or technologies that we may in-license or acquire.
Our operating plans and other demands on our cash resources may change as a result of many factors currently unknown to us, and we may need to seek additional funds sooner than planned.
We have no other committed sources of capital. Until such time, if ever, we can generate substantial product revenues, we expect to finance our operations through the sale of equity securities, debt financings, working capital lines of credit, strategic alliances and/or license arrangements, grant funding, interest income earned on invested cash balances or a combination of two or more of these sources. However, we may be unable to raise additional funds or enter into such other arrangements when needed, on favorable terms or at all. To the extent we raise additional capital through the sale of equity or convertible debt securities, investors’ ownership interest will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of a common stockholder. Debt financing and preferred equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, engaging in acquisition, merger or collaboration transactions, selling or licensing our assets, making capital expenditures, redeeming our stock, making certain investments or declaring dividends. If we raise additional funds through collaborations or license agreements 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 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 product candidates that we would otherwise prefer to develop and market ourselves, or even cease operations.
Material Cash Requirements for Known Contractual and Other Obligations
Leases
We have entered into two non-cancellable operating leases for our office and lab space in Cambridge, Massachusetts and Boulder, Colorado. The Cambridge, Massachusetts operating lease expires on June 30, 2027 and the Boulder, Colorado operating lease expires on September 30, 2028. See Note 7 to our condensed consolidated financial statements as of September 30, 2024 for additional details related to our noncancellable operating leases.
Finance Leases
We have entered into various finance leases for lab equipment. See Note 7 to our condensed consolidated financial statements as of September 30, 2024 for additional details related to our finance leases.
Restricted Cash
In connection with our operating leases, we are required to maintain security deposits, which were issued in the form of letters of credit with a bank. See Note 2 to our condensed consolidated financial statements as of September 30, 2024 for additional details related to our restricted cash.
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Research and Development Costs
We are continuing to invest in the clinical development of CMP-CPS-001 and have entered into contractual obligations with CROs relating to the performance of clinical trial services. Each contract shall continue until the completion of the trial. Our clinical trial costs are dependent on, among other things, the size and length of our clinical trial. We also incur research and development costs related to the enhancement of our existing product candidates.
Other capital requirements and additional royalty obligations
We enter into agreements in the normal course of business with various vendors, which are generally cancellable with a contractually defined notice period. Payments due upon cancellation typically consist of payments for services provided or expenses incurred, as well as non-cancellable obligations of service providers, up to the date of cancellation.
The timing of when we will pay or receive royalty payments is uncertain as the payments are contingent upon future activities, including the successful discovery, development, regulatory approval and commercialization of product candidates.
Cash Flows
For the Nine Months Ended September 30, 2024 and 2023
The following table provides information regarding our cash flows for the nine months ended September 30, 2024 and 2023 (in thousands):
Nine months ended September 30,
2024
2023
Net cash used in operating activities
$
(34,274)
$
(32,372)
Net cash used in investing activities
(178)
(435)
Net cash (used in) provided by financing activities
(1,400)
364
Net (decrease) increase in cash and cash equivalents
$
(35,852)
$
(32,443)
Operating Activities
During the nine months ended September 30, 2024, operating activities used $34.2 million of cash, primarily resulting from our net loss of $38.5 million and net cash used in changes in our operating assets and liabilities of $1.6 million, partially offset by non-cash charges of $5.9 million, including depreciation and amortization, stock-based compensation expense and non-cash operating lease expense.
During the nine months ended September 30, 2023, operating activities used $32.4 million of cash, primarily resulting from our net loss of $36.3 million and net cash used in changes in our operating assets and liabilities of $1.0 million, partially offset by non-cash charges of $4.9 million, including depreciation and amortization, stock-based compensation expense and non-cash operating lease expense.
Investing Activities
During the nine months ended September 30, 2024, net cash used in investing activities was $0.2 million, due to purchases of property and equipment.
During the nine months ended September 30, 2023, net cash used in investing activities was $0.4 million, due to purchases of property and equipment.
Financing Activities
During the nine months ended September 30, 2024, net cash used in financing activities was $1.4 million, consisting primarily of $0.8 million of deferred offering cost payments and $0.6 million of finance lease principal payments and repayments for our financing liability.
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During the nine months ended September 30, 2023, net cash provided by financing activities was $0.4 million, consisting primarily of net proceeds of $0.7 million from a financing obligation, offset by $0.2 million of finance lease principal payments and less than $0.2 million of repayments for our financing liability related to such financing obligation.
Critical Accounting Policies and Significant Judgments and Estimates
Our management’s discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”). The preparation of our financial statements and related disclosures requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, expenses, and the disclosure of our contingent liabilities in our financial statements. We base our estimates on historical experience, known trends and events and various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. We evaluate our estimates and assumptions on an ongoing basis. Our actual results may differ from these estimates under different assumptions or conditions.
There have been no significant changes to our critical accounting estimates from those described in Management’s Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies and Significant Estimates and Judgments and our audited financial statements as of and for the year ended December 31, 2023 as included in the IPO Prospectus.
Off-Balance Sheet Arrangements
We did not have, during the periods presented, and we do not currently have, any off-balance sheet arrangements, as defined in the rules and regulations of the SEC.
Recently Issued Accounting Standards
A description of recently issued accounting standards that may potentially impact our financial position, cash flows, and results of operations is included in Note 2 to our condensed consolidated financial statements.
Emerging Growth Company and Smaller Reporting Company Status
We are an emerging growth company, as defined in the Jumpstart Our Business Startups Act of 2012, as amended (the “JOBS Act”), and we may remain an emerging growth company until December 31, 2029 or until such earlier time that we are no longer an emerging growth company. For so long as we remain an emerging growth company, we are permitted and intend to rely on certain exemptions from various public company reporting requirements, including not being required to have our internal control over financial reporting audited by our independent registered public accounting firm pursuant to Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and any golden parachute payments not previously approved and an exemption from compliance with the requirements regarding the communication of critical audit matters in the auditor’s report on financial statements.
In addition, the JOBS Act provides that an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards. We have elected to avail ourselves of this extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, we will adopt the new or revised standard at the time private companies adopt the new or revised 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. We may choose to early adopt any new or revised accounting standards whenever such early adoption is permitted for private companies. As a result of this election, our financial statements may not be comparable to those of companies that are not emerging growth companies.
We will remain an emerging growth company until the earliest to occur of: (i) the last day of the fiscal year in which we have at least $1.235 billion in annual revenue; (ii) the last day of the fiscal year in which we are deemed to be a “large accelerated filer,” as defined in Rule 12b-2 under the Exchange Act, which would occur if the market value of our common stock held by non-affiliates exceeded $700.0 million as of the last business day of the second fiscal quarter of such year; (iii) the date on which we have issued more than $1.0 billion in nonconvertible debt securities during the prior three-year period; and (iv) December 31, 2029.
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We are also a “smaller reporting company,” meaning that the market value of our shares held by non-affiliates is less than $700 million and our annual revenue was less than $100 million during the most recently completed fiscal year. We may continue to be a smaller reporting company if either: (i) the market value of our shares held by non-affiliates is less than $250 million or (ii) our annual revenue was less than $100 million during the most recently completed fiscal year and the market value of our shares held by non-affiliates is less than $700 million. If we are a smaller reporting company at the time we cease to be an emerging growth company, we may continue to rely on exemptions from certain disclosure requirements that are available to smaller reporting companies. Specifically, as a smaller reporting company, we may choose to present only the two most recent fiscal years of audited financial statements in our Annual Report on Form 10-K and, similar to emerging growth companies, smaller reporting companies have reduced disclosure obligations regarding executive compensation.
Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.