What changed in this filing

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Item 1. Financial Statements

2023-05-08 compared with 2022-11-03 · 112 added, 146 removed, 373 unchanged (41% of the section changed)

14 unchanged sentences

Other Information

Risk Factor Summary

Below is a summary of the principal factors that make an investment in our common stock speculative or risky.

This summary does not address all of the risks that we face.

Additional discussion of the risks summarized in this risk factor summary, and other risks that we face, can be found below under the heading “Risk Factors” and should be carefully considered, together with other information in this Quarterly Report on Form 10-Q and our other filings with the Securities and Exchange Commission (SEC) before making investment decisions regarding our common stock.

● We have incurred significant operating losses since our inception and expect to incur significant losses for the foreseeable future.

We may never generate any revenue or become profitable or, if we achieve profitability, we may not be able to sustain it.

● We will require substantial additional financing to achieve our goals, and a failure to obtain this necessary capital when needed on acceptable terms, or at all, could force us to delay, limit, reduce or terminate our product development, other operations or commercialization efforts.

● The COVID-19 pandemic could adversely impact our business, including our clinical trials, and financial condition.

● Our product candidates are in various stages of development and may fail or suffer delays that materially and adversely affect their commercial viability.

If we are unable to advance our product candidates through clinical development, obtain regulatory approval and ultimately commercialize such product candidates, or experience significant delays in doing so, our business will be materially harmed.

● Clinical drug development involves a lengthy and expensive process with an uncertain outcome, and the results of preclinical studies and early clinical trials are not necessarily predictive of future results.

Any product candidate we or any of our existing or potential future collaborators advance into clinical trials, including CPI-818, ciforadenant and mupadolimab, may not have favorable results in later clinical trials, if any, or receive regulatory approval.

● Any termination or suspension of, or delays in the commencement or completion of, our planned clinical trials could result in increased costs to us, delay or limit our ability to generate revenue and adversely affect our commercial prospects.

● Our product candidates are subject to extensive regulation, compliance with which is costly and time consuming, and such regulation may cause unanticipated delays or prevent the receipt of the required approvals to commercialize our product candidates.

● We are conducting and plan to conduct clinical trials for CPI-818, ciforadenant and mupadolimab, and we and Angel Pharmaceuticals may in the future, conduct additional clinical trials of product candidates at sites outside the United States, and the FDA may not accept data from trials conducted in foreign locations.

● If we encounter difficulties enrolling subjects in our clinical trials, our clinical development activities could be delayed or otherwise adversely affected.

● The occurrence of serious complications or side effects in connection with use of our product candidates, either in clinical trials or post-approval, could lead to discontinuation of our clinical development programs, refusal of regulatory authorities to approve our product candidates or, post-approval, revocation of marketing authorizations or refusal to approve new indications, which could severely harm our business, prospects, operating results and financial condition.

● We may not be successful in our efforts to identify or discover additional product candidates.

● We rely, and expect to continue to rely, on third parties to conduct our clinical trials.

If these third parties do not meet our deadlines or otherwise conduct the trials as required, our clinical development programs could be delayed or unsuccessful and we may not be able to obtain regulatory approval for or commercialize our product candidates when expected, or at all.

● We rely on third parties to conduct some or all aspects of our manufacturing, research and preclinical and clinical testing, and these third parties may not perform satisfactorily.

● We, or our third-party manufacturers, may be unable to successfully scale-up manufacturing of our product candidates in sufficient quality and quantity, which would delay or prevent us from developing our product candidates and commercializing approved products, if any.

● If we are unable to commercialize our product candidates or if we experience significant delays in obtaining regulatory approval for, or commercializing, any or all of our product candidates, our business will be materially and adversely affected.

● If we do not achieve our projected development goals in the time frames we announce and expect, the commercialization of our products may be delayed and, as a result, our stock price may decline.

● We face competition from entities that have developed or may develop product candidates for cancer, including companies developing novel treatments and technology platforms.

If these companies develop technologies or product candidates more rapidly than we do or their technologies are more effective, our ability to develop and successfully commercialize product candidates may be adversely affected.

● An active, liquid and orderly market for our common stock may not be sustained.

● The trading price of the shares of our common stock could be highly volatile, and investors in our common stock could incur substantial losses.

PART I - FINANCIAL INFORMATION

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(in thousands, except share and per share data)

September 30,

Current assets:

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$ 0.0001 par value;

10,000,000 shares authorized at September 30, 2022 and December 31, 2021;

0 shares issued and outstanding at September 30, 2022 and December 31, 2021

10,000,000 shares authorized at March 31, 2023 and December 31, 2022;

0 shares issued and outstanding at March 31, 2023 and December 31, 2022

Common stock:

$ 0.0001 par value;

290,000,000 shares authorized at September 30, 2022 and December 31, 2021;

46,553,511 shares issued and outstanding at September 30, 2022 and December 31, 2021

290,000,000 shares authorized at March 31, 2023 and December 31, 2022;

46,568,511 and 46,553,511 shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively

Additional paid-in capital

Accumulated other comprehensive (loss) income

Accumulated other comprehensive loss

Accumulated deficit

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Three Months Ended

Nine Months Ended

September 30,

Operating expenses:

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(in thousands, except share data)

Nine Months Ended September 30, 2022

Three Months Ended March 31, 2023

Comprehensive

1 unchanged sentence

Balance at December 31, 2022

Stock-based compensation expense

Unrealized loss on marketable securities

Foreign currency translation adjustment

Balance at March 31, 2022

Stock-based compensation expense

Unrealized loss on marketable securities

Foreign currency translation adjustment

Balance at June 30, 2022

Common stock issued on exercise of stock options

Stock-based compensation expense

1 unchanged sentence

Foreign currency translation adjustment

Balance at September 30, 2022

Nine Months Ended September 30, 2021

Balance at March 31, 2023

Three Months Ended March 31, 2022

Comprehensive

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Stock-based compensation expense

Unrealized gain on marketable securities

Issuance of common stock in connection with at-the-market offering, net

Issuance of common stock upon follow-on public offering, net

Balance at March 31, 2021

Stock-based compensation expense

Unrealized loss on marketable securities

Foreign currency translation adjustment

Issuance of common stock in connection with at-the-market offering, net

Balance at June 30, 2021

Issuance of common stock upon exercise of Exchange Warrants

Common stock issued on exercise of stock options

Stock-based compensation expense

Unrealized loss on marketable securities

Foreign currency translation adjustment

Issuance of common stock in connection with at-the-market offering, net

Balance at September 30, 2021

Balance at March 31, 2022

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

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(in thousands)

Nine Months Ended

September 30,

Three Months Ended

Cash flows from operating activities

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Cash flows from financing activities

Proceeds from issuance of common stock, net (includes $ 4,850 in aggregate gross proceeds from related parties for the nine months ended September 30, 2021)

Proceeds from issuance of common stock in connection with at-the-market offering, net

Proceeds from exercise of common stock options

Net cash provided by financing activities

Net (decrease) increase in cash and cash equivalents

Net decrease in cash and cash equivalents

Cash and cash equivalents at beginning of the period

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and Corvus Hong Kong Limited.

All significant intercompany accounts and transactions have been eliminated from the consolidated financial statements.

All intercompany accounts and transactions have been eliminated from the consolidated financial statements.

Initial Public Offering

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The Company received aggregate net proceeds of approximately $ 70.6 million, after underwriting discounts, commissions and offering expenses.

Immediately prior to the consummation of the IPO, all outstanding shares of redeemable convertible preferred stock were converted into common stock.

Immediately prior to the consummation of the IPO, all outstanding shares of convertible preferred stock were converted into common stock.

Follow-on Public Offerings

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In addition, its operating plan may change as a result of many factors, including those described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022 filed on March 28, 2023 and this Quarterly Report on Form 10-Q.

The Company has incurred significant losses and negative cash flows from operations in all periods since inception and had an accumulated deficit of $ 297.9 million as of September 30, 2022.

The Company has incurred significant losses and negative cash flows from operations in all periods since inception and had an accumulated deficit of $ 315.6 million as of March 31, 2023.

The Company has historically financed its operations primarily through the sale of common stock and redeemable convertible preferred stock.

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Failure to generate sufficient cash flows from operations, raise additional capital or reduce certain discretionary spending would have a material adverse effect on the Company’s ability to achieve its intended business objectives.

As of September 30, 2022, the Company had cash, cash equivalents and short-term marketable securities of $ 49.6 million.

As of March 31, 2023, the Company had cash, cash equivalents and short-term marketable securities of $ 34.5 million.

Management believes that the Company’s current cash, cash equivalents and short-term marketable securities will be sufficient to fund its planned operations for at least 12 months from the date of the issuance of these financial statements.

The current COVID-19 (coronavirus) pandemic, which is impacting worldwide economic activity, poses risks that the Company or its employees, contractors, suppliers, and other partners may be prevented from conducting business activities for an indefinite period of time, including due to shutdowns that may be requested or mandated by governmental authorities.

The extent to which COVID-19 impacts the Company’s business, including its clinical trials and financial condition, will depend on future developments, which are highly uncertain and cannot be predicted with confidence, such as the spread of the disease, the duration of the pandemic, travel restrictions and social distancing in the United States and other countries, business closures or business disruptions and the effectiveness of actions taken in the United States and other countries to contain and treat the disease.

As COVID-19 continues to spread around the globe, including the spread of more contagious and virulent variants, we will likely experience disruptions, including delays or difficulties in enrolling patients in our clinical trials, delays or difficulties in clinical site initiation, interruption of key clinical trial activities, delays in clinical sites receiving the supplies and materials needed to conduct our clinical trials and delays in necessary interactions with local regulatory authorities.

COVID-19 may also impact the Company’s ability to raise additional capital on a timely basis or at all, which could negatively impact short-term and long-term liquidity.

Exchange Warrants

On November 8, 2019, the Company entered into an exchange agreement (the “Exchange Agreement”) with an investor and its affiliates (the “Exchanging Stockholders”), pursuant to which the Company exchanged an aggregate of 1,458,000 shares of the Company’s common stock, par value $ 0.0001 per share, owned by the Exchanging Stockholders for pre-funded warrants (the “Exchange Warrants”) to purchase an aggregate of 1,458,000 shares of common stock (subject to adjustment in the event of any stock dividends and splits, reverse stock split, recapitalization, reorganization or similar transaction, as described in the Exchange Warrants), with an exercise price of $ 0.0001 per share.

The Exchange Warrants were exercisable at any time prior to expiration.

In accordance with Accounting Standards Codification Topic 505, Equity, and Accounting Research Bulletin 43, the Company recorded the retirement of the common stock exchanged as a reduction of common shares outstanding and elected to record the excess over par value as a debit to additional paid-in-capital at the fair value of the Exchange Warrants on the issuance date.

The Exchange Warrants were classified as equity in accordance with Accounting Standards Codification Topic 480, Distinguishing Liabilities from Equity, and Accounting Standards Codification Topic 815, Derivatives and Hedging, and the fair value of the Exchange Warrants was recorded as a credit to additional paid-in capital and is not subject to remeasurement.

The Company determined that the fair value of the Exchange Warrants is substantially similar to the fair value of the retired shares on the issuance date due to the negligible exercise price for the Exchange Warrants.

In September 2021, the Exchange Warrants were fully exercised, resulting in the issuance of 1,457,947 shares of common stock on a net exercise basis.

As of March 28, 2023, at the time of the filing of the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, and during the sixty-day period preceding this date, its calculated public float was below $ 75.0 million.

As a result, it has been and will be subject to baby shelf rules for any offerings conducted on its shelf registration statement, including any sales under its ATM with Jefferies LLC (“Jefferies”).

Such rules limit the amount the Company can raise until such time that its public float is above $ 75.0 million.

Summary of Significant Accounting Policies

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The accompanying condensed consolidated financial statements have been prepared on a going-concern basis, which contemplates the realization of assets and discharge of liabilities in the normal course of business.

Since its inception, the Company has incurred significant losses and negative cash flows from operations.

As of September 30, 2022, the Company had an accumulated deficit of $ 297.9 million and cash, cash equivalents and marketable securities of $ 49.6 million.

The Company has financed its operations primarily with the proceeds from the sale of stock.

The Company will need to raise additional capital to meet its business objectives.

The Company believes that its current cash, cash equivalents and marketable securities will be sufficient to fund its planned expenditures and meet its obligations through at least the next twelve months from the issuance of these financial statements.

Unaudited Interim Financial Information

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The year-end condensed consolidated balance sheet data was derived from audited financial statements, but does not include all disclosures required by GAAP.

The condensed consolidated results of operations for the three and nine months ended September 30, 2022 are not necessarily indicative of the results to be expected for the full year or for any other future year or interim period.

The condensed consolidated results of operations for the three months ended March 31, 2023 are not necessarily indicative of the results to be expected for the full year or for any other future year or interim period.

The accompanying condensed consolidated financial statements should be read in conjunction with the audited financial statements and the related notes for the year ended December 31, 2022 included in the Company’s Annual Report on Form 10-K filed with the SEC on March 28, 2023.

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Actual results could differ from such estimates.

Foreign Currency Translation

Angel Pharmaceuticals Co., Ltd.’s (“Angel Pharmaceuticals”) functional currency is the Chinese renminbi (RMB).

Angel Pharmaceuticals’ consolidated financial statements are reported in RMB.

Financial information is translated from RMB to the U.S.

dollar (the reporting currency) for inclusion in its condensed consolidated financial statements.

Income, expenses and cash flows are translated at average exchange rates prevailing during the fiscal period, assets and liabilities are translated at fiscal period-end exchange rates, and stockholders’ equity is held at historical rates.

Resulting translation adjustments are included as a component of accumulated other comprehensive income in stockholders' equity.

Investments in Equity Securities

The Company uses the equity method of accounting for its equity investment if the investment provides the ability to exercise significant influence, but not control, over operating and financial policies of the investee.

The Company’s proportionate share of the net income (loss) resulting from the equity method investment is reported under the line item captioned “loss from equity method investment” in the Consolidated Statements of Operations and Comprehensive Loss and the carrying value of the equity method investments is reported under the line captioned “Investment in Angel” in the Consolidated Balance Sheets.

The Company’s equity method investments are reported at cost and adjusted each period for the Company’s share of the investee’s income or loss and the foreign currency translation adjustment as applicable.

For equity method investees with a functional currency different than the Company’s reporting currency, the Company follows the guidance under ASC 830-10-15-5, pursuant to which, the foreign currency financial statements of a foreign investee accounted for by the equity method should be translated to the reporting entity's reporting currency.

The Company evaluates equity method investments for impairment whenever events or changes in circumstances indicate that the carrying amount of the investment might not be recoverable.

Factors considered by the Company when reviewing an equity method investment for impairment include the length of time (duration) and the extent (severity) to which the fair value of the equity method investment has been less than cost, the investee’s financial condition and near-term prospects and the intent and ability to hold the investment for a period of time sufficient to allow for anticipated recovery.

An impairment that is other-than-temporary is recognized in the period identified.

Concentrations of Credit Risk and Other Risks and Uncertainties

Substantially all of the Company’s cash and cash equivalents are deposited in accounts with two financial institutions that management believes are of high credit quality.

Such deposits may, at times, exceed federally insured

Such deposits may, at times, exceed federally insured limits.

The Company maintains its cash with an accredited financial institution and accordingly, such funds are subject to minimal credit risk.

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If the Company does not successfully commercialize or partner any of its product candidates, it will be unable to generate product revenue or achieve profitability.

Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision-maker in making decisions regarding resource allocation and assessing performance.

allocation and assessing performance.

The Company views its operations and manages its business in one operating segment, that of the development of and commercialization of precisely targeted oncology therapies.

1 unchanged sentence

The Company’s significant accounting policies are described in Note 2 to its consolidated financial statements for the year ended December 31, 2022, included in its Annual Report on Form 10-K.

There have been no material changes to the Company’s significant accounting policies during the nine months ended September 30, 2022.

There have been no material changes to the Company’s significant accounting policies during the three months ended March 31, 2023.

Recent Accounting Pronouncements

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The adoption of the guidance did not have a material impact on its financial statements and related disclosures.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments.

The standard amends the impairment model by requiring entities to use a forward-looking approach based on expected losses to estimate credit losses for most financial assets and certain other instruments that are not measured at fair value through net income.

For available-for-sale debt securities, entities will be required to recognize an allowance for credit losses rather than a reduction in carrying value of the asset.

Entities will no longer be permitted to consider the length of time that fair value has been less than amortized cost when evaluating when credit losses should be recognized.

This new guidance is effective in the first quarter of 2023 for calendar-year SEC filers that are smaller reporting companies as of the one-time determination date.

The Company has adopted the new guidance as of January 1, 2023, and it did not have a material impact on its financial statements and related disclosures.

Net Loss per Share

1 unchanged sentence

Three Months Ended

Nine Months Ended

September 30,

Net loss - basic and diluted

1 unchanged sentence

Net loss per share, basic and diluted

Weighted average common shares outstanding for the three and nine months ended September 30, 2021 include 1,458,000 shares of common stock issuable on the conversion of pre-funded warrants described in Note 1.

The amounts in the table below were excluded from the calculation of diluted net loss per share, due to their anti-dilutive effect:

Three Months Ended

Nine Months Ended

September 30,

Outstanding options

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These inputs include reported trades of and broker/dealer quotes on the same or similar investments, issuer credit spreads, benchmark investments, prepayment/default projections based on historical data and other observable inputs.

The following tables present information as of September 30, 2022 and December 31, 2021 about the Company’s assets that are measured at fair value on a recurring basis and indicate the level of the fair value hierarchy the Company utilized to determine such fair values (in thousands):

September 30, 2022

The following tables present information as of March 31, 2023 and December 31, 2022 about the Company’s assets that are measured at fair value on a recurring basis and indicate the level of the fair value hierarchy the Company utilized to determine such fair values (in thousands):

March 31, 2023

Fair Value Measured Using

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Marketable securities

As of September 30, 2022, marketable securities had a maximum remaining maturity of eleven months .

As of September 30, 2022 and December 31, 2021, the fair value of available for sale marketable securities by type of security were as follows (in thousands):

September 30, 2022

As of March 31, 2023 marketable securities had a maximum remaining maturity of nine months .

As of March 31, 2023 and December 31, 2022, the fair value of available for sale marketable securities by type of security were as follows (in thousands):

March 31, 2023

Treasury securities

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Equity Method Investment

As of September 30, 2022 and December 31, 2021, the Company’s ownership interest in Angel was approximately 49.7 %, excluding 7 % of Angel’s equity reserved for issuance under the Angel ESOP.

The Company recognized its share of losses in Angel for the total amount of $ 2.7 million and $ 5.4 million as loss from equity method investment on the consolidated statement of operations for the three and nine months ended September 30, 2022, respectively.

As of March 31, 2023 and December 31, 2022, the Company’s ownership interest in Angel was approximately 49.7 %, excluding 7 % of Angel’s equity reserved for issuance under the Angel ESOP.

The Company recognized its share of losses in Angel for the total amount of $ 1.7 million and $ 1.0 million as loss from equity method investment on the consolidated statement of operations for the three months ended March 31, 2023 and 2022, respectively.

Summary Financial Information

Summary financial information for Angel Pharmaceuticals is as follows:

Balance Sheet Data (unaudited)

September 30, 2022

Balance Sheet Data

March 31, 2023

December 31, 2022

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Three Months Ended

Nine Months Ended

September 30,

Statement of Operations Data (unaudited)

Statement of Operations Data

(in thousands)

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Under this license agreement, Scripps has agreed not to grant any additional commercial licenses with respect to such materials, other than march-in rights granted to the U.S.

Upon execution of the agreement, the Company made a one-time cash payment to Scripps of $ 10,000 in 2015 and is also obligated to pay a minimum annual fee to Scripps of $ 25,000 .

The one-time cash payment was recorded as research and development expense as technological feasibility of the asset had not been established and there was no alternative future use.

A minimum annual fee payment is due on each anniversary of the effective date of the agreement for the term of the agreement.

Upon execution of the agreement, the Company made a one-time cash payment to Scripps of $ 10,000 and is also obligated to pay a minimum annual fee to Scripps of $ 25,000 .

The first minimum annual fee payment is due on each anniversary of the effective date of the agreement and will be due on each subsequent anniversary of the effective date for the term of the agreement.

The Company is also required to make performance-based cash payments upon successful completion of clinical and sales milestones.

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In addition, should the Company sublicense the rights licensed under the agreement, it has agreed to pay a percentage of sublicense revenue received at specified rates that start at double digit percentages and decrease to single digit percentages based on the elapsed time from the effective date of the agreement and the time of entry into such sublicense.

To date, no milestone payments have been made.

The Company’s license agreement with Scripps will terminate upon expiration of its obligation to pay royalties to Scripps under the license agreement.

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In addition, Scripps may terminate the license on a product-by-product basis, or the entire agreement, if the Company fails to meet specified diligence obligations related to the development and commercialization of licensed products.

Scripps may also terminate the agreement after the third anniversary of the effective date of the agreement if it reasonably believes, based on reports the Company provides to

Scripps, that the Company has not used commercially reasonable efforts as required under the agreement, subject to a specified notice and cure period.

Scripps may also terminate the agreement after the third anniversary of the effective date of the agreement if it reasonably believes, based on reports the Company provides to Scripps, that the Company has not used commercially reasonable efforts as required under the agreement, subject to a specified notice and cure period.

Vernalis Licensing Agreement

In February 2015, the Company entered into a license agreement with Vernalis (R&D) Limited (“Vernalis”), which was subsequently amended as of November 5, 2015, and, pursuant to which the Company was granted an exclusive, worldwide license under certain patent rights and know-how, including a limited right to grant sublicenses, for all fields of use to develop, manufacture and commercialize products containing certain adenosine receptor antagonists, including ciforadenant (formerly CPI-444).

Pursuant to this agreement, the Company made a one-time cash payment to Vernalis in the amount of $ 1.0 million, which was recorded as research and development expense as technological feasibility of the asset had not been established and there was no alternative future use.

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In February 2017, the Company made a milestone payment of $ 3.0 million to Vernalis following the expansion of a cohort of patients with renal cell cancer treated with single agent ciforadenant in the Company’s Phase 1/1b clinical trial.

The aggregate potential milestone payments are approximately $ 220 million for all indications.

During the three months ended March 31, 2023, no clinical or regulatory milestones were completed or paid to Vernalis and the aggregate potential milestone payments were approximately $ 220 million for all indications as of March 31, 2023.

The Company has also agreed to pay Vernalis tiered incremental royalties based on the annual net sales of licensed products containing ciforadenant on a product by product and country by country basis, subject to certain offsets and reductions.

The tiered royalty rates for products containing ciforadenant range from the mid single digits up to the low double digits on a country by country net sales basis.

The royalties on other licensed products that do not include ciforadenant also increase with the amount of net sales on a product-by-product and country by country basis

and range from the low single digits up to the mid single digits on a country by country net sales basis.

The Company is also obligated to pay to Vernalis certain sales milestones as indicated above when worldwide net sales reach specified levels over an agreed upon time period.

The Company has also agreed to pay Vernalis tiered incremental royalties based on the annual net sales of licensed products containing ciforadenant on a product-by-product and country-by-country basis, subject to certain offsets and reductions.

The tiered royalty rates for products containing ciforadenant range from the mid-single digits up to the low-double digits on a country-by-country net sales basis.

The royalties on other licensed products that do not include ciforadenant also increase with the amount of net sales on a product-by-product and country-by-country basis and range from the low-single digits up to the mid-single digits on a country-by-country net sales basis.

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Vernalis may also terminate the agreement if the Company challenges a licensed patent or undergoes a bankruptcy event.

Genentech Collaboration Agreements

In October 2015, the Company entered into a clinical trial collaboration agreement with Genentech to evaluate the safety, tolerability and preliminary efficacy of ciforadenant combined with Genentech’s investigational cancer immunotherapy, Tecentriq, a fully humanized monoclonal antibody targeting PD-L1, in a variety of solid tumors in the Company’s Phase 1/1b clinical trial.

Pursuant to this agreement, the Company will be responsible for the conduct and cost of the relevant studies, under the supervision of a joint development committee made up of the Company’s representatives and representatives of Genentech.

Genentech will supply Tecentriq.

At this time, no further patients are being enrolled in this trial.

As part of the agreement, the Company granted Genentech certain rights of first negotiation to participate in future clinical trials that the Company may conduct evaluating the administration of ciforadenant in combination with an anti-PD-1 or anti-PD-L1 antibody.

If both parties do not reach agreement on the terms of any such participation by Genentech within a specified time period, the Company retains the right to collaborate with third parties in such activities.

The Company also granted Genentech certain rights of first negotiation should the Company decide to license development and commercialization rights to ciforadenant.

Should both parties not reach agreement on the terms of such a license within a specified time of period, the Company retains the right to enter into a license with another third party.

This agreement will expire after a set period of time following the provision by the Company of the final clinical study report to Genentech, which has not yet been finalized.

In May 2017, the Company entered into a second clinical trial collaboration agreement with Genentech.

Under the new agreement, ciforadenant administered in combination with Tecentriq will be evaluated in a Phase 1b/2 randomized, controlled clinical study as second-line therapy in patients with non small cell lung cancer (“NSCLC“) who are resistant and/or refractory to prior therapy with an anti-PD-(L)1 antibody.

This study has completed patient enrollment of 16 patients.

Genentech was responsible for the conduct of the study and the Company will share the cost of the Phase 1b/2 trial, which began enrolling patients in the fourth quarter of 2017.

The Company is responsible for supplying ciforadenant and retains global development and commercialization rights to ciforadenant.

This agreement will expire after a set period of time following the provision by Genentech of a final study report to the Company.

Monash License Agreement

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Upon execution of the agreement, the Company made a one time cash payment to Monash of $ 275,000 and reimbursed Monash for certain patent prosecution costs incurred prior to execution of the agreement.

The Company recorded these payments as research and development expenses for the year ended December 31, 2017.

The Company is also obligated to pay an annual license maintenance fee to Monash of $ 25,000 until a certain development milestone is met with respect to the licensed product, after which no further maintenance fee will be due.

The Company is also required to make development and sales milestone payments to Monash with respect to the licensed products in the aggregate of up to $ 45.1 million.

The Company is also required to make development and sales milestone payments to Monash with respect to the licensed products.

During the three months ended March 31, 2023, no development or sales milestones were completed or paid to Monash and the aggregate potential milestones were $ 45.1 million as of March 31, 2023.

The Company is also required to pay to Monash tiered royalties on net sales of licensed products sold by it, its affiliates and its sublicensees at a rate ranging in the low single digits.

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Balance Sheet Components (in thousands)

September 30,

Prepaid and Other Current Assets

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Accrued legal and accounting

As of September 30, 2022, the amended and restated certificate of incorporation authorizes the Company to issue 290 million shares of common stock and 10 million shares of preferred stock.

During the three months ended March 31, 2023 and 2022, the Company recorded approximately $ 57,000 and $ 87,000 in depreciation expense, respectively.

As of March 31, 2023, the amended and restated certificate of incorporation authorizes the Company to issue 290 million shares of common stock and 10 million shares of preferred stock.

Each share of common stock is entitled to one vote.

Common stockholders are entitled to dividends if and when declared by the board of directors.

As of September 30, 2022, no dividends on common stock had been declared.

As of March 31, 2023, no dividends on common stock had been declared.

In March 2020, the Company entered into an open market sale agreement (the “2020 Sales Agreement”) with Jefferies LLC (“Jefferies”) to sell shares of the Company’s common stock, from time-to-time, with aggregate gross sales proceeds of up to $ 50,000,000 , through an at-the-market equity offering program under which Jefferies will act as its sales agent.

In November 2021, the Company entered into another Sale Agreement (“2021 Sales Agreement”) with Jefferies to sell shares of our common stock from time-to-time, with aggregate gross sales proceeds of up to $ 40,000,000 .

The issuance and sale of shares of common stock by the Company pursuant to the Sales Agreements are deemed an “at-the-market” offering under the Securities Act of 1933, as amended.

Jefferies is entitled to compensation for its services equal to up to 3.0 % of the gross proceeds of any shares of common stock sold through Jefferies under the Sales Agreements.

During the nine months ended September 30, 2022, the Company did not sell any shares of common stock under it’s at-the-market offering program.

As of September 30, 2022, the Company had sold 6,920,339 shares of common stock for gross proceeds of $ 31.1 million under the 2020 Sales Agreement and $ 18.9 million and $ 40.0 million remained for sale under the 2020 Sales Agreement and 2021 Sales Agreement, respectively.

In November 2021, the Company entered into another Sale Agreement (“2021 Sales Agreement”) with Jefferies to sell shares of its common stock from time-to-time, with aggregate gross sales proceeds of up to $ 40,000,000 .

On March 28, 2023, the Company terminated both the 2020 Sales Agreement and the 2021 Sales Agreement and concurrently entered into a new open market sale agreement (the “2023 Sales Agreement”) with Jefferies to sell shares of the Company’s common stock, from time-to-time, with aggregate gross sales proceeds of up to $ 90,000,000 , through an at-the-market equity offering program under which Jefferies will act as its sales agent.

The issuance and sale of shares of common stock by the Company pursuant to the 2023 Sales Agreement are deemed an “at-the-market” offering under the Securities Act of 1933, as amended.

Jefferies is entitled to compensation for its services equal to 3.0 % of the gross proceeds of any shares of common stock sold through Jefferies under the 2023 Sales Agreement.

During the three months ended March 31, 2023, the Company did no t sell any shares of common stock under its at-the-market offering program.

As of March 31, 2023, the Company had sold 6,920,339 shares of common stock for gross proceeds of $ 31.1 million under the 2020 Sales Agreement.

The Company has reserved shares of common stock for issuance as follows:

September 30,

Shares available for future option grants

18 unchanged sentences

Options granted

( 1,704,400 )

Options exercised

Options forfeited

Balance at September 30, 2022

Balance at March 31, 2023

Stock-Based Compensation

1 unchanged sentence

Three Months Ended

Nine Months Ended

September 30,

Research and development

General and administrative

During the nine months ended September 30, 2022 and 2021, the Company recorded no income tax benefits for the net operating losses (NOLs) incurred due to the uncertainty of realizing a benefit from those items.

During the three months ended March 31, 2023 and 2022, the Company recorded no income tax benefits for the net operating losses (NOLs) incurred due to the uncertainty of realizing a benefit from those items.

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

11 unchanged sentences

As a result of this lease extension, the Company recorded a $ 2.4 million increase in the operating lease right-of-use asset and a corresponding increase in the operating lease liability .

As of September 30, 2022 and December 31, 2021, the right-of-use asset under operating lease was $ 2.5 million and $ 3.2 million, respectively.

The elements of lease expense for the three and nine months ended September 30, 2022 and 2021 were as follows (in thousands):

As of March 31, 2023 and December 31, 2022, the right-of-use asset under operating lease was $ 2.0 million and $ 2.2 million, respectively.

The elements of lease expense for the three months ended March 31, 2023 and 2022 were as follows (in thousands):

Three Months Ended

Nine Months Ended

Statements of operations and

September 30,

comprehensive loss location

11 unchanged sentences

Discount rate

As of September 30, 2022, minimum rental commitments under this lease were as follows (in thousands):

As of March 31, 2023, minimum rental commitments under this lease were as follows (in thousands):

Year Ended December 31 (in thousands)

10 unchanged sentences

Sublease income is recognized on a straight-line basis as other income in our consolidated statements of operations.

For the three and nine months ended September 30, 2022 the Company recognized $ 0.1 million and $ 0.4 million of sublease income, respectively.

For the three months ended March 31, 2023 and 2022, the Company recognized approximately $ 56,000 and $ 146,000 of sublease income, respectively.

Commitments and Contingencies

17 unchanged sentences

Related Party Transactions

In February 2021, the Company completed a follow-on public offering in which the Company sold 9,783,660 shares of common stock at a price of $ 3.50 per share, which included 1,212,231 shares issued pursuant to the underwriters’ exercise of their option to purchase additional shares of common stock.

The aggregate net proceeds received by the Company from the offering were approximately $ 32.0 million, net of underwriting discounts and commissions and offering expenses.

The following aggregate number of shares of common stock were sold to the Company’s owners of more than 5% of our common stock, directors, or executive officers during the February 2021 underwritten public offering:

Owners of More Than 5% of Our Common Stock

OrbiMed Advisors LLC (1)

Board of Directors

(1) Peter Thompson, M.D., a member of our Board of Directors since November 2014, is a Private Equity Partner at OrbiMed Advisors, LLC.

As more fully described in Note 5 to the Company’s consolidated financial statements for the year ended December 31, 2022, included in the Annual Report on Form 10-K, the Company holds a 49.7 % ownership in Angel Pharmaceuticals and, in connection with intellectual property licensing agreements between the Company and Angel Pharmaceuticals, the Company provides operational support and clinical drug supplies to Angel Pharmaceuticals.

Third-party and internal personnel costs incurred by the Company are billed to Angel Pharmaceuticals in the period incurred and recorded as an offset to expenses.

During the nine months ended September 30, 2022 and 2021, the Company billed Angel for approximately $ 140,000 and $ 167,000 , respectively, in internal personnel costs and $ 631,000 and $ 470,000 , respectively, in third-party party costs.

During the three months ended March 31, 2023 and 2022, the Company billed Angel for $ 0.0 million and approximately $ 50,000 , respectively, in internal personnel costs and approximately $ 48,000 and $ 101,000 , respectively, in third-party party costs.

In addition to the provision of clinical supplies to Angel Pharmaceuticals, Angel Pharmaceuticals may provide clinical supplies or research services to the Company on an as needed basis.

These costs are recorded as research and development expense.

During the three months ended March 31, 2023, Angel Pharmaceuticals billed the Company for approximately $ 0.1 million in research services.

In August 2021, the Company entered into an agreement to sublease 7,585 square feet of its office and laboratory space in Burlingame, California to Angel Pharmaceuticals.

2 unchanged sentences

Sublease income is recognized on a straight-line basis as other income in our consolidated statements of operations.

For the three and nine months ended September 30, 2022, the Company recognized approximately $ 146,000 and $ 440,000 of sublease income, respectively.

For the three months ended March 31, 2023 and 2022, the Company recognized approximately $ 56,000 and $ 146,000 of sublease income, respectively.

In July 2021, Linda S.

1 unchanged sentence

ICON is a clinical research organization and provides services to support the Company’s clinical trials.

During the nine months ended September 30, 2022 and 2021, the Company recorded approximately $ 330,000 and $ 205,000 , respectively, in clinical trial expenses under its agreements with ICON.

During the three months ended March 31, 2023 and 2022, the Company recorded approximately $ 118,000 and $ 69,000 , respectively, in clinical trial expenses under its agreements with ICON.

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

What changed 10-Q

Item 1. Financial Statements