What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-08-06 compared with 2024-05-07 · 89 added, 123 removed, 179 unchanged (54% of the section changed)

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Factors that could cause or contribute to such differences include, but are not limited to, those discussed in the section of this report entitled “Risk Factors.” Except as may be required by law, we assume no obligation to update these forward-looking statements or the reasons that results could differ from these forward-looking statements.

We are a clinical stage biopharmaceutical company.

Our strategy is to focus our efforts on the development of immune modulator product candidates with the potential to treat solid cancers, T cell lymphomas, autoimmune, allergic and infectious diseases.

We have three product candidates which are in clinical development for the treatment of various solid tumors, lymphomas and autoimmune diseases.

Our lead product candidate is soquelitinib (formerly CPI-818), a selective, covalent inhibitor of ITK (interleukin 2 inducible T cell kinase), and it is in a multi-center Phase 1/1b clinical trial in patients with various recurrent, malignant T cell lymphomas.

Soquelitinib is designed to inhibit the proliferation of certain malignant T cells and also to affect the differentiation of normal T cells, which could enhance immunity to tumor cells.

We believe these properties have the potential to regulate the growth and activity of both abnormal malignant T cells and abnormal T cells involved in autoimmunity and allergy.

We are a clinical stage biopharmaceutical company developing product candidates that precisely target proteins that are critical to immune cell maturation and function.

Our proprietary product candidates, if approved, may have broad applications in cancers, immune mediated diseases and inflammatory diseases.

Our lead product candidate, soquelitinib (formerly CPI-818), binds specifically to a protein, interleukin 2 inducible T cell kinase (ITK), involved in T cell proliferation, differentiation and function.

Based on the mechanism of action, soquelitinib has the potential to be utilized to inhibit the production of a number of cytokines involved diseases such as atopic dermatitis, asthma, psoriasis and fibrotic diseases.

In cancers, soquelitinib has been observed to affect T cell differentiation leading to enhanced function of T cells involved in tumor cell killing.

Since the immune cells affected by our product candidates play a role in many diseases, our strategy is to leverage our research and development capabilities by evaluating our drugs in clinical trials where there is an understanding of the role of specific T cells in the target indication and where we believe such product candidate has optimum chances for success.

We believe this strategy has enabled us to move rapidly from preclinical to clinical trials in diverse disease areas, each with large unmet needs.

Soquelitiib is expected to enter a registrational, Phase 3 clinical trial for relapsed T cell lymphomas later this year and is now being evaluated in a randomized, placebo controlled Phase 1 trial in patients with atopic dermatitis.

We have two additional product candidates which are in clinical development for the treatment of various solid tumors, also based on modulation of immune function.

Soquelitinib is an investigational selective, orally bioavailable, covalent inhibitor of ITK.

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Th1 cells produce interferon gamma and tumor necrosis factor that are cytokines known to destroy cancer cells.

We believe that soquelitinib can lead to reprogramming of normal immune responses that also could be beneficial for the treatment of certain autoimmune and allergic diseases.

Overactive Th2 and Th17 cells play a role in autoimmune and allergic diseases, which can potentially be ameliorated by selective ITK inhibition by blocking Th2 and Th17 function and their production of inflammatory cytokines such as IL4, IL5, IL13, IL17 and others.

T cell signaling involving ITK is required in the development of many T cell lymphomas.

The ITK cell signaling pathway is similar to the signaling that occurs in B cells, which is mediated by a homologous enzyme known as BTK, the target of ibrutinib, an approved treatment for patients with B cell lymphomas and leukemias.

ITK is expressed in many T cell lymphomas, including peripheral T cell lymphoma (“PTCL”), angioimmunoblastic T cell lymphoma (“AITL”), cutaneous T cell lymphomas (“CTCL”), anaplastic large cell lymphomas (“ALCL”), natural killer T cell lymphomas (“NKTCL”) and other T cell malignancies.

In ITK genetic knockout mice, which completely lack expression of ITK, T cells exhibit defects in T helper cell differentiation and cytokine secretion but retain the ability to differentiate into cytotoxic T cells that secrete IL-2 and interferon gamma (“IFNg”), which are the cells responsible for tumor rejection.

We believe that skewing T helper cell differentiation to favor cytotoxic T cells, known as Th1 skewing, may be beneficial in treating T cell lymphomas and many other types of cancer.

Mice with genetic knock-out of ITK also demonstrate a reduction in Th2 cells, which produce the cytokines that are often responsible for autoimmunity and allergy.

We developed soquelitinib by covalently targeting the cysteine amino acid residue at position 442 in the ITK protein.

We believe this irreversible targeting of ITK has the potential to provide a potent, selective and prolonged duration of activity without the need for high systemic exposures and thereby may improve the therapeutic window.

This approach was previously used by our cofounders to generate ibrutinib.

We believe that the potential selectivity of soquelitinib could mimic the immune effects seen in ITK knockout mice and skew the immune response toward a more favorable anti-tumor immune response as well as reducing the activity of Th2 and Th17 cells.

The blockade of Th2 and Th17 differentiation has the potential to suppress inflammatory reactions involved in various autoimmune and allergic diseases.

Soquelitinib was designed to have the necessary selectivity to specifically block ITK function without altering other closely related enzymes involved in T cell differentiation.

We believe such selectivity is required for achieving Th1 skewing and Th2/Th17 blockade, as established by ITK genetic knockout studies in mice.

ITK also plays a role in the proliferation of some T cell lymphomas and we believe its inhibition could lead to growth arrest and/or tumor cell cytotoxicity.

In our preclinical studies of soquelitinib, objective tumor responses were observed in dogs with spontaneous T cell lymphomas.

Soquelitinib is currently being studied in a Phase 1/1b clinical trial that was designed to select the optimal dose of soquelitinib and evaluate its safety, pharmacokinetics (“PK”), target occupancy, immunologic effects, biomarkers and efficacy in patients with various T cell lymphomas.

We believe, based on our preclinical and Phase 1/1b data from our T cell lymphoma clinical trial, that soquelitinib can lead to reprogramming of normal immune responses that also could be beneficial for the treatment of certain autoimmune, inflammatory and allergic diseases.

Overactive Th2 and Th17 cells are known to play a role in autoimmune, inflammatory and allergic diseases, which can potentially be ameliorated by selective ITK inhibition by blocking Th2 and Th17 function and their production of inflammatory cytokines such as IL4, IL5, IL13, IL17 and others.

Soquelitinib is currently being studied both in cancer and in immune mediated disease.

A Phase 1/1b clinical trial is being conducted in patients with relapsed T cell lymphomas that was designed to select the optimal dose of soquelitinib and evaluate its safety, pharmacokinetics (“PK”), target occupancy, immunologic effects, biomarkers and efficacy.

The study employs an adaptive, expansion cohort design, with an initial phase that evaluated escalating doses (100, 200, 400 or 600 mg taken twice a day) in successive cohorts of patients, followed by a second phase that is designed to evaluate safety and tumor response to the recommended dose of soquelitinib in disease-specific patient cohorts.

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No dose limiting toxicities were observed in any of the dose levels.

As of January 22, 2024, and in a safety population of 73 patients, no hematologic, renal or hepatic treatment-related adverse events were observed and the most common grade 3 to 4 adverse event was pruritus, seen in four patients with lymphoma involving skin.

As of July 15, 2024, and in a safety population of 75 patients, no hematologic, renal or hepatic treatment-related adverse events were observed and the most common grade 3 to 4 adverse event was pruritus, seen in four patients with lymphoma involving skin.

The optimum dose was determined to be 200 mg twice per day based on anti-tumor efficacy and pharmacodynamic studies which revealed full occupancy of the ITK active site by the drug.

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At that time, we also announced interim data from the trial as of November 21, 2023 on 21 evaluable patients receiving a dose of 200 mg twice per day and revealed an objective response rate (“ORR”) of 33.3% with 3 complete responses (“CRs”) and 4 partial responses (“PRs”).

Since that report, one of the patients achieving a PR continued to respond and showed a CR resulting in an ORR of 33.3% with 4 CRs and 3 PRs as of an updated cutoff date of January 22, 2024.

As of May 3, 2024, 25 patients were enrolled in the trial at the optimal dose, including 23 evaluable patients.

For the 23 evaluable patients, objective responses (complete response, CR plus partial response, PR) were seen in nine patients (39%), including five CRs (23%) and four PRs.

As of July 16, 2024, 25 patients were enrolled in the trial at the optimal dose, including 23 evaluable patients.

For the 23 evaluable patients, objective responses (complete response, CR plus partial response, PR) were seen in nine patients (39%), including six CRs (26%) and three PRs.

The median progression free survival was 6.2 months.

See waterfall plot below.

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Waterfall Plot for Patients in the 200 mg Dose Cohort of the Soquelitinib Phase 1/1b Clinical Trial for Peripheral T Cell Lymphoma .

The plot shows the best percent change in tumor volume in the 23 evaluable patients (eligible patient population), as of May 3, 2024, that were measurable by CT scan or by Modified Severity-Weighted Assessment Tool (mSWAT) for patients with cutaneous involvement.

The plot shows the best percent change in tumor volume in the 23 evaluable patients (eligible patient population), as of July 16, 2024, that were measurable by CT scan or by Modified Severity-Weighted Assessment Tool (mSWAT) for patients with cutaneous involvement.

PTCL-NOS, peripheral T cell lymphoma not otherwise specified;

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Secondary endpoints will include objective response rate, overall survival and duration of response.

We are recruiting investigators and anticipate that leading academic and private medical centers with significant experience in lymphoma research will participate in the trial, including investigators who have conducted other Phase 3 clinical trials in T cell lymphoma and authored many peer-reviewed articles on lymphomas.

We are recruiting investigators

and anticipate that leading academic and private medical centers with significant experience in lymphoma research will participate in the trial, including investigators who have conducted other Phase 3 clinical trials in T cell lymphoma and authored many peer-reviewed articles on lymphomas.

There are currently no FDA fully approved agents for the treatment of relapsed PTCL.

As reported at the International Conference of Malignant Lymphoma in June 2023, preclinical data suggest that ITK

inhibition with soquelitinib has the potential to treat solid and hematological cancers based on its novel proposed mechanism of action.

Tumor immune responses were enhanced by the modulation of T cell differentiation resulting in increased T cell cytolytic capacity, increased migration of T cells into the tumor and reduced T cell exhaustion.

Highlights of the presentation included:

● monotherapy provided statistically significant inhibition of tumor growth in established tumors in the following cancer models:

EL4 TCL (T cell lymphoma), A20 B cell lymphoma and CT26 colon cancer.

● In the EL4 TCL model, treatment with soquelitinib led to increased infiltration of normal CD8+ T cells into the tumor.

In addition, these CD8+ T cells had higher expression of perforin, an effector molecule produced by killer T cells that is involved in killing cancer cells.

● In the CT26 colon cancer model, the depletion of normal CD8 cells reduced the activity observed for soquelitinib treatment, suggesting that its potential mechanism of action involves the production of normal CD8+ T cells.

● In the CT26 colon cancer model, treatment with soquelitinib reduced the expression of T cell exhaustion markers.

T cell exhaustion is a phenomenon seen in tumors and chronic infections where prolonged exposure to antigens results in exhausted or ineffective T cell function and inability to eliminate tumors or infections.

● In other murine studies using antigen primed T cells that were repeatedly stimulated, soquelitinib reduced the development of T cell exhaustion and reversed it in already exhausted T cells.

These reinvigorated T cells regained their cancer cell killing capacity.

We believe these findings suggest that the inhibition of ITK by soquelitinib produced changes in the tumor microenvironment that enhanced anti-tumor immunity creating a less favorable environment for tumor growth and provides the rationale for clinical investigation in a monotherapy trial of soquelitinib in solid tumors.

We are planning a Phase 1b/2 clinical trial, in collaboration with the Kidney Cancer Research Consortium, of soquelitinib in solid tumors in patients with renal cell cancer (“RCC”) who have failed checkpoint inhibitor therapy.

In July 2023, we announced the posting of preclinical data on soquelitinib in bioRxiv, the online archive for unpublished preprints in the life sciences, which highlighted the potential of selective inhibition of ITK to enhance anti-tumor immune response to hematologic and solid tumors and provide a novel approach to cancer immunotherapy.

Key results from the preclinical studies described in the paper demonstrated that soquelitinib:

● Selectively bound to and inhibited ITK function while sparing other closely related kinases, including resting lymphocyte kinase (“RLK”).

● Inhibited Th2 T cell function and the production of various Th2 cytokines leading to Th1 skewing and production of interferon gamma and tumor necrosis factor, which are important cytokines in tumor rejection.

Th2 cytokines have been previously implicated in promoting tumor growth and are also involved in autoimmune and allergic diseases.

● Activated cytotoxic killer cells and increases infiltration of these cells into tumors.

● Reduced and reversed T cell exhaustion resulting in a more potent and prolonged immune response.

T cell exhaustion is often a major reason for resistance to immune checkpoint therapy.

● Led to in vivo anti-tumor activity in several mouse tumor models, including colon, renal, melanoma, B cell and T cell tumor.

In September 2023, a paper was published by an independent academic group in Scientific Reports supporting the potential of ITK inhibition for treatment of solid tumors.

The preclinical data demonstrated a reduction and reversal of T cell exhaustion markers and an increase in the infiltration of killer T cells into tumors, consistent with soquelitinib’s proposed mechanism of action.

The paper highlights the potential of selective ITK inhibition for the treatment of cancers and helps to confirm preclinical and clinical results generated by Corvus.

In November 2023, we announced the posting of preclinical data on soquelitinib in bioRxiv that demonstrated that ITK’s selective inhibition produced therapeutic benefits in several autoimmune and allergy preclinical models, including psoriasis, asthma, pulmonary fibrosis, scleroderma and graft versus host disease.

The mechanism of action involves the inhibition of Th2 and Th17 cells and their subsequent production of cytokines such as IL-4, IL-5, IL-17 and other cytokines involved in these diseases.

The novel mechanism is a result of ITK inhibition and blockade of formation of Th2 and Th17 cells.

We are enrolling patients at multiple clinical sites in a randomized, placebo-controlled Phase 1 clinical trial of soquelitinib in patients with moderate to severe atopic dermatitis.

As recently announced, soquelitinib has received Fast Track designation for treatment of adult patients with relapsed or refractory peripheral T cell lymphoma after at least 2 lines of systemic therapy.

In addition to the clinical development of soquelitinib for the treatment of PTCL, we are also enrolling patients at multiple clinical sites in a randomized, placebo-controlled Phase 1 clinical trial of soquelitinib in patients with moderate to severe atopic dermatitis.

The trial is planned to enroll 64 patients that have failed at least one prior therapy across four different 28-day dosing regimens of soquelitinib compared to a placebo group.

The endpoints include safety and improvement in Eczema Area and Severity Index (“EASI”).

Patients and physicians will be blinded to treatment assignment.

We expect initial data for this clinical trial before year-end 2024.

We continue to advance our next-generation ITK inhibitor preclinical product candidates, which were designed to deliver precise T-cell modulation that is optimized for specific immunology indications.

Patients and physicians are blinded to treatment assignment.

Initial results, as of July 31, 2024, from three evaluable patients in the first cohort of the trial that completed the 28-day dosing regimen and follow-up visit demonstrated signs of clinical activity and corresponding changes in serum cytokine levels that are consistent with soquelitinib’s mechanism of action.

These patients received a dose of 100 mg two-times a day, the lowest dose level planned for the trial.

We expect additional data for this clinical trial before year-end 2024.

Beyond our current and planned clinical trials for soquelitinib, we also continue to advance our next-generation ITK inhibitor preclinical product candidates, which were designed to deliver precise T-cell modulation that is optimized for specific immunology indications.

The next-generation ITK inhibitor candidates are part of our ongoing business development efforts to maximize the potential of the our ITK inhibitor programs and other programs.

We have issued patents covering composition of matter and uses of our ITK inhibitors and hold exclusive worldwide rights (except for greater China) for all indications.

Our second product candidate, ciforadenant, is an oral, small molecule antagonist of the A2A receptor for adenosine designed to disable a tumor’s ability to subvert attack by the immune system by blocking the binding of immunosuppressive adenosine in the tumor microenvironment to the A2A receptor.

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As of May 31, 2024, the interim analysis of the clinical trial has met the threshold for efficacy and therefore enrollment continues.

Ciforadenant preclinical data were presented at the Japanese Cancer Association and American Association for Cancer Research Precision Cancer Medicine International Conference, which took place June 28 to June 30, 2023 in Kyoto, Japan.

The presentation highlighted data supporting the synergy between ciforadenant and immune checkpoint blockade (“ICB”), leading to a proinflammatory response.

Highlights of the presentation included:

● Depletion of myeloid cells abolished the synergy of ciforadenant and ICB in a murine melanoma model.

● The combination of ciforadenant with ICB upregulated the genes involved in the IL-12/STAT4 signaling axis, which led to the development of CXCR3+ IFNγ-producing Th1 helper cells.

● Ciforadenant treatment increased production of chemokine CXCL10, a ligand for recruitment of CXCR3+ Th1 helper cells into the tumor.

● Ciforadenant modulated antitumor responses by turning the tumor microenvironment into the proinflammatory state.

● The combination of ciforadenant with ICB promoted the production of several proinflammatory cytokines such as IL-6, TNFa, and IFNg.

Our third product candidate is mupadolimab, a humanized monoclonal antibody that is designed to react with a specific site on CD73.

In both preclinical and in vivo studies, mupadolimab has demonstrated binding to various immune cells and the enhancement of immune responses by activating B cells.

While we believe mupadolimab has the potential

to be an important new therapeutic agent with a novel mechanism of action for the treatment of a broad range of cancers and infectious diseases, we are waiting to initiate a potential Phase 2 randomized clinical trial in order to prioritize the development of our other two lead product candidates.

While we believe mupadolimab has the potential to be an important new therapeutic agent with a novel mechanism of action for the treatment of a broad range of cancers and infectious diseases, we are waiting to initiate a potential Phase 2 randomized clinical trial in order to prioritize the development of our other two lead product candidates.

Angel Pharmaceuticals Co.

(“Angel Pharmaceuticals”) is continuing the development of mupadolimab in China and is enrolling patients in a Phase 1/1b clinical trial with mupadolimab alone and together with pembrolizumab in patients with advanced NSCLC and head and neck squamous cell cancer (“HNSCC”).

Our molecularly targeted product candidates are designed to exhibit a high degree of specificity, which we believe have the potential to provide greater safety compared to other cancer therapies and may facilitate their development either as monotherapies or in combination with other cancer therapies such as immune checkpoint inhibitors or chemotherapy.

We believe the breadth and status of our pipeline demonstrates our management team’s expertise in understanding and developing immunology focused assets as well as in identifying product candidates that can be in-licensed and further developed internally to treat many types of cancer.

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In October 2020, we announced the formation and launch of Angel Pharmaceuticals, a China-based biopharmaceutical company with a mission to bring innovative quality medicines to Chinese patients for treatment of serious diseases including cancer, autoimmune diseases and infectious diseases.

We formed Angel Pharmaceuticals as a wholly owned subsidiary and it launched with a post-money valuation of approximately $106.0 million, based on an approximate $41.0 million cash investment from a Chinese investor group that includes funds associated with Tigermed and Betta Pharmaceuticals, Hisun Pharmaceuticals and Zhejiang Puissance Capital.

and Betta Pharmaceuticals, Hisun Pharmaceuticals and Zhejiang Puissance Capital.

Such cash is not available for our use.

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We expect to continue to incur significant research and development and general and administrative expenses related to our operations.

Our net loss for the three months ended March 31, 2024 was $5.7 million.

As of March 31, 2024, we had an accumulated deficit of $340.4 million.

Our net loss for the three and six months ended June 30, 2024 was $4.3 million and $10.0 million, respectively.

As of June 30, 2024, we had an accumulated deficit of $344.7 million.

We expect our losses will increase as we continue our development of, seek regulatory approval for and begin to commercialize soquelitinib, ciforadenant and mupadolimab, and as we develop other product candidates.

Even if we achieve profitability in the future, we may not be able to sustain profitability in subsequent periods.

Since our inception and through March 31, 2024, we have funded our operations primarily through the sale and issuance of preferred and common stock, including through our initial public offering (“IPO”) in March 2016, in which we raised net proceeds of approximately $70.6 million, a follow-on offering of our common stock in March 2018, in which we raised net proceeds of approximately $64.9 million and a follow on offering in February 2021, in which we raised net proceeds of approximately $32.0 million, in each case net of underwriting discounts and commissions and offering expenses.

Since our inception and through June 30, 2024, we have funded our operations primarily through the sale and issuance of preferred and common stock, including through our initial public offering (“IPO”) in March 2016, in which we raised net proceeds of approximately $70.6 million, a follow-on offering of our common stock in March 2018, in which we raised net proceeds of approximately $64.9 million, a follow on offering in February 2021, in which we raised net proceeds of approximately $32.0 million and a registered direct offering in May 2024, in which we sold shares of our common stock, pre-funded warrants and common warrants for net proceeds of $30.3 million.

Immediately prior to the consummation of the IPO, all of our outstanding shares of redeemable convertible preferred stock were converted into 14.3 million shares of our common stock.

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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, 2024, we did not sell any shares of common stock under our at-the-market offering program.

As of March 31, 2024, $81.9 million remained available for sale under the 2023 Sales Agreement.

On May 1, 2024, we amended the 2023 Sales Agreement to decrease the aggregate gross sales proceeds from $90.0 million to $8.2 million, which decreased the amount available for sale under the 2023 Sales Agreement from $81.9 million to $100,000.

On May 1, 2024, we amended the 2023 Sales Agreement to decrease the aggregate gross sales proceeds that may be sold pursuant to the 2023 Sales Agreement from $90.0 million to $8.2 million, which decreased the amount available for sale to $100,000.

During the six months ended June 30, 2024, we did not sell any shares of common stock under our at-the-market offering program.

As of June 30, 2024, $100,000 remained available for sale under the 2023 Sales Agreement.

Our three product candidates, soquelitinib, ciforadenant and mupadolimab, are in clinical development by us and / or our partner, Angel Pharmaceuticals.

Except for Greater China, we own the world-wide rights to these product candidates.

We plan to focus our development efforts in 2024 on soquelitinib with the start of a potentially registrational Phase 3 clinical trial of soquelitinib in relapsed PTCL and a randomized, placebo-controlled Phase 1 trial of soquelitinib in patients with moderate to severe atopic dermatitis.

As a result of our ongoing development efforts, we anticipate needing to spend substantial resources for the foreseeable future.

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

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

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

to pursue our business strategy.

We will need to generate significant revenue to achieve profitability, and we may never do so.

As of March 31, 2024, we had capital resources consisting of cash, cash equivalents and marketable securities of approximately $22.1 million.

On May 6, 2024, we closed a registered direct offering which resulted in gross proceeds of approximately $30.6 million.

Based on our currently available cash resources, the proceeds from our recent financing and our currently planned level of operations and cash flows, we expect that our cash resources will be sufficient to enable us to advance our programs into the fourth quarter of 2025.

In accordance with applicable accounting standards, we evaluated whether there are conditions and events, considered in the aggregate, that raise substantial doubt about our ability to continue as a going concern for at least the next 12 months after the date of the issuance of the condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q and concluded that our existing cash, cash equivalents and marketable securities, including the approximate gross proceeds of $30.6 million from our May 2024 registered direct offering, are sufficient to fund our operations for at least the next 12 months from issuance of the condensed consolidated financial statements.

As of June 30, 2024, we had capital resources consisting of cash, cash equivalents and marketable securities of approximately $47.2 million.

Based on our currently available cash resources and our currently planned level of operations and cash flows, we expect that our cash resources will be sufficient to enable us to advance our programs into the fourth quarter of 2025.

In accordance with applicable accounting standards, we evaluated whether there are conditions and events, considered in the aggregate, that raise substantial doubt about our ability to continue as a going concern for at least the next 12 months after the date of the issuance of the condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q and concluded that our existing cash, cash equivalents and marketable securities are sufficient to fund our operations for at least the next 12 months from issuance of the condensed consolidated financial statements.

However, the Company will need to continue to raise additional capital to fund its operations.

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Our significant accounting policies are described in Note 2 to our condensed consolidated financial statements for the year ended December 31, 2023 included in our Annual Report on Form 10-K.

There have been no material changes to our significant accounting policies during the three months ended March 31, 2024.

There have been no material changes to our significant accounting policies during the six months ended June 30, 2024 from those discussed in our Form 10-K.

Components of Results of Operations

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● completion of our ongoing Phase 1 clinical trial of soquelitinib in atopic dermatitis;

● a potential Phase 3 registrational clinical trial for soquelitinib in PTCL;

● initiation of a Phase 3 registrational clinical trial for soquelitinib in PTCL;

● enrollment and completion of our Phase 1b/2 clinical trial with ciforadenant in collaboration with the Kidney Cancer Research Consortium;

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● process development and manufacturing of drug supply of soquelitinib and ciforadenant;

● preclinical studies under our other programs in order to select development product candidates.

In addition to our product candidates that are in clinical development, we believe it is important to continue substantial investment in potential new product candidates to build the value of our product candidate pipeline and our business.

In addition to our product candidates that are in clinical development, we believe it is important to continue substantial investment in potential new product candidates, including our preclinical next-generation ITK inhibitors, to build the value of our product candidate pipeline and our business.

Our expenditures on current and future preclinical and clinical development programs are subject to numerous uncertainties related to timing and cost to completion.

The duration, costs and timing of clinical trials and development

of product candidates will depend on a variety of factors, including many of which are beyond our control.

The duration, costs and timing of clinical trials and development of product candidates will depend on a variety of factors, including many of which are beyond our control.

The process of conducting the necessary clinical research to obtain regulatory approval is costly and time consuming, and the successful development of our product candidates is uncertain.

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Three Months Ended

Six Months Ended

Operating expenses:

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Interest income and other expense, net

Change in fair value of warrant liability

Sublease income - related party

Loss before equity method investment

Income (loss) from equity method investment

Loss from equity method investment

Research and Development Expenses

Research and development expenses for the three months ended March 31, 2024 and 2023 consisted of the following costs by program as well as unallocated employee costs and overhead costs (specific program costs consist solely of external costs) (in thousands):

Research and development expenses for the three and six months ended June 30, 2024 and 2023 consisted of the following costs by program as well as unallocated employee costs and overhead costs (specific program costs consist solely of external costs) (in thousands):

Three Months Ended

Six Months Ended

Unallocated employee and overhead costs

For the three months ended March 31, 2024, the decrease in soquelitinib costs of $0.3 million as compared to the three months ended March 31, 2023, primarily consisted of a decrease of $0.8 million in drug manufacturing costs and a decrease of $0.1 million in clinical trial expenses, which were partially offset by an increase of $0.6 million in other outside service costs.

For the three months ended March 31, 2024, the decrease in ciforadenant and mupadolimab costs were negligible.

For the three months ended March 31, 2024, the decrease in unallocated costs of $0.2 million as compared to the three months ended March 31, 2023, primarily consisted of a decrease in other outside service costs.

For the three months ended June 30, 2024, the increase in soquelitinib costs of $0.5 million as compared to the three months ended June 30, 2023, primarily consisted of an increase of $0.5 million in clinical trial expenses and an increase of $0.2 million in other outside service costs, which were partially offset by decrease of $0.2 million in drug manufacturing costs.

For the six months ended June 30, 2024, the increase in soquelitinib costs of $0.2 million as compared to the six months ended June 30, 2023, primarily consisted of an increase of $0.4 million in clinical trial expenses and an increase of $0.8 million in other outside service costs, which were partially offset by decrease of $1.0 million in drug manufacturing costs.

For the three months ended June 30, 2024, the decrease in ciforadenant costs of $0.1 million as compared to the three months ended June 30, 2023, primarily consisted of a decrease in other outside service costs.

For the six months ended June 30, 2024, the decrease in ciforadenant costs of $0.1 million as compared to the six months ended June 30, 2023, primarily consisted of a decrease of $0.2 million in other outside service costs, which was partially offset by an increase of $0.1 million in clinical trial expenses.

For the three months ended June 30, 2024, the decrease in mupadolimab costs of $0.5 million as compared to the three months ended June 30, 2023, primarily consisted of a decrease of $0.3 million in manufacturing costs and a decrease of $0.2 million in clinical trial expenses.

For the six months ended June 30, 2024, the decrease in mupadolimab costs of $0.5 million as compared to the months ended June 30, 2023, primarily consisted of a decrease of $0.2 million in manufacturing costs and a decrease of $0.3 million in clinical trial expenses.

For the three months ended June 30, 2024, the increase in unallocated costs of $0.2 million as compared to the three months ended June 30, 2023, primarily consisted of an increase in personnel and related costs.

For the six months ended June 30, 2024, the increase in unallocated costs of $0.1 million as compared to the three months ended June 30, 2023, primarily consisted of an increase in personnel and related costs.

General and Administrative Expense

For the three months ended March 31, 2024, the increase in general and administrative expenses of $0.2 million as compared to the three months ended March 31, 2023, primarily consisted of an increase in personnel and related costs.

For the three months ended June 30, 2024, the increase in general and administrative expenses of $0.2 million as compared to the three months ended June 30, 2023, primarily consisted of an increase in personnel and related costs.

For the six months ended June 30, 2024, the increase in general and administrative expenses of $0.4 million as compared to the six months ended June 30, 2023, primarily consisted of an increase in personnel and related costs.

Interest Income and Other Expense, net

For the three months ended March 31, 2024, the decrease in interest income and other expense, net of $0.1 million as compared to the three months ended March 31, 2023, primarily consisted of a decrease in interest income earned due to a decrease in cash equivalents and marketable securities.

For the three and six months ended June 30, 2024, the change in interest income and other expense, net was negligible.

Change in fair value of warrant liabilities

For the three and six months ended June 30, 2024, the change in fair value of warrant liabilities represents a decrease in the fair value of common warrants from the issuance date of May 6, 2024 to June 30, 2024.

Sublease Income – Related Party

For the three months ended March 31, 2024, the decrease in sublease income of $0.1 million as compared to the three months ended March 31, 2023, was due to the expiration of the building sublease agreement with Angel Pharmaceuticals in January 2023.

For the three months ended June 30, 2024 and 2023, there was no sublease income.

For the six months ended June 30, 2024, the decrease in sublease income of $0.1 million as compared to the six months ended June 30, 2023, was due to the expiration of the building sublease agreement with Angel Pharmaceuticals in January 2023

Income (loss) from equity method investment

For the three months ended March 31, 2024, the decrease in loss from equity method investment of $2.0 million as compared to the three months ended March 31, 2023, primarily consisted of a decrease in Angel Pharmaceuticals’ loss for the three months ended March 31, 2024.

For the three months ended June 30, 2024, the decrease in loss from equity method investment of $0.7 million as compared to the three months ended June 30, 2023, primarily consisted of a decrease in Angel Pharmaceuticals’ loss for the three months ended June 30, 2024.

For the six months ended June 30, 2024, the decrease in loss from equity method investment of $2.7 million as compared to the six months ended June 30, 2023, primarily consisted of a decrease in Angel Pharmaceuticals’ loss for the six months ended June 30, 2024.

Liquidity and Capital Resources

As of March 31, 2024, we had cash, cash equivalents and marketable securities of $22.1 million, and an accumulated deficit of $340.4 million, compared to cash and cash equivalents and marketable securities of $27.1 million and an accumulated deficit of $334.7 million as of December 31, 2023.

On May 6, 2024, we closed a registered direct offering which resulted in gross proceeds of approximately $30.6 million.

Since our inception and through March 31, 2024, we have funded our operations primarily through the sale and issuance of preferred and common stock, including through our IPO in March 2016, in which we raised net proceeds of approximately $70.6 million, a follow-on offering of our common stock in March 2018, in which we raised net proceeds of approximately $64.9 million and a follow on offering in February 2021, in which we raised net proceeds of approximately $32.0 million, in each case net of underwriting discounts and commissions and offering expenses.

During the three months ended March 31, 2024, we did not sell any shares of common stock under our at-the-market offering program.

As of March 31, 2024, $81.9 million remained available for sale under the 2023 Sales Agreement.

As of June 30, 2024, we had cash, cash equivalents and marketable securities of $47.2 million, and an accumulated deficit of $344.7 million, compared to cash and cash equivalents and marketable securities of $27.1 million and an accumulated deficit of $334.7 million as of December 31, 2023.

Since our inception and through June 30, 2024, we have funded our operations primarily through the sale and issuance of preferred and common stock, including through our IPO in March 2016, in which we raised net proceeds of approximately $70.6 million, a follow-on offering of our common stock in March 2018, in which we raised net proceeds of approximately $64.9 million, a follow on offering in February 2021, in which we raised net proceeds of approximately $32.0 million and a registered direct offering in May 2024, in which we sold shares of our common stock, pre-funded warrants and common warrants for net proceeds of approximately $30.3 million.

During the six months ended June 30, 2024, we did not sell any shares of common stock under our at-the-market offering program.

As of June 30, 2024, $100,000 remained available for sale under the 2023 Sales Agreement.

Funding Requirements

Since our inception, we have incurred significant losses and negative cash flows from operations.

We have an accumulated deficit of $340.4 million through March 31, 2024.

We have an accumulated deficit of $344.7 million through June 30, 2024.

We do not expect positive cash flows from operations in the foreseeable future, if ever.

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We expect to incur substantial additional losses in the future as we conduct our planned research and development activities.

We believe that our existing cash, cash equivalents and marketable securities and the proceeds from our recent financing will be sufficient to enable us to advance our programs into the fourth quarter of 2025.

However, our forecast of the period of time through which our financial resources will be adequate to support our operations is a forward-looking statement that involves risks and uncertainties, and actual results could vary materially based on a number of factors.

We believe that our existing cash, cash equivalents and marketable securities, which includes proceeds from our recent financing, will be sufficient to enable us to advance our programs into the fourth quarter of 2025.

However, our forecast of the period of time through which our financial resources will be adequate to support our

operations is a forward-looking statement that involves risks and uncertainties, and actual results could vary materially based on a number of factors.

We have based our projections of operating capital requirements on assumptions that may prove to be incorrect and we may use all our available capital resources sooner than we expect.

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Our future capital requirements depend on many factors, including:

● the progress, timing, costs and results of clinical trials for soquelitinib, including the potential registrational clinical trial for soquelitinib, and to a lesser extent, the timing, costs and results of the clinical trials for ciforadenant and mupadolimab;

● the progress, timing, costs and results of clinical trials for soquelitinib, including the planned Phase 3 registrational clinical trial for soquelitinib for the treatment of PTCL, and to a lesser extent, the timing, costs and results of the clinical trials for ciforadenant and mupadolimab;

● the timing, progress, costs and results of preclinical and clinical development activities for our other product candidates;

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The following table summarizes our cash flows for the periods indicated (in thousands):

Three Months Ended

Six Months Ended

Net cash provided by (used in):

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Cash Flows from Operating Activities

Cash used in operating activities during the three months ended March 31, 2024 was $5.2 million, which primarily consisted of a net loss of $5.7 million, adjusted by non-cash charges of $0.4 million, that primarily consisted of $0.7 million of stock compensation expense and $0.2 million of income from equity method investment;

a decrease of $0.1 million in prepaid and other current assets, an increase of $0.1 million in accounts payable, an increase of $0.1 million in accrued and other current liabilities and a decrease of $0.1 million in operating lease liability net of operating lease right-of-use assets amortization.

Cash used in operating activities during the three months ended March 31, 2023 was $8.1 million, which primarily consisted of a net loss of $7.9 million, adjusted by non-cash charges of $2.0 million, that primarily consisted of $0.5 million of stock compensation expense and $1.7 million of loss from equity method investment, a decrease of $0.1 million in prepaid and other current assets, a decrease of $0.6 million in accounts payable and a decrease of $1.9 million in accrued and other current liabilities.

Cash used in operating activities during the six months ended June 30, 2024 was $10.6 million, which primarily consisted of a net loss of $10.0 million, adjusted by net non-cash transactions of $0.3 million, that primarily consisted of $1.5 million of stock compensation expense, $0.3 million of loss from equity method investment and a decrease of $1.8 million in the fair value of warrant liability;

an increase of $0.2 million in prepaid and other current assets, a decrease of $0.3 million in accounts payable, an increase of $0.3 million in accrued and other current liabilities and a decrease of $0.1 million in operating lease liability net of operating lease right-of-use assets amortization.

Cash used in operating activities during the six months ended June 30, 2023 was $13.3 million, which primarily consisted of a net loss of $14.4 million, adjusted by non-cash charges of $3.6 million, that primarily consisted of $1.0 million of stock compensation expense and $3.0 million of loss from equity method investment;

an increase of $0.1

million in prepaid and other current assets, an increase of $0.1 million in accounts payable, a decrease of $3.1 million in accrued and other current liabilities and a decrease of $0.6 million in accounts receivable – related party.

Cash Flows from Investing Activities

During the three months ended March 31, 2024, net cash flows from investing activities was negligible and primarily consisted of proceeds from maturities of marketable securities of $4.6 million, which were offset by purchases of marketable securities of $4.6 million.

During the three months ended March 31, 2023, cash provided by investing activities was $4.6 million, which primarily consisted of proceeds from maturities of marketable securities of $17.7 million, which were partially offset by purchases of marketable securities of $13.1 million.

During the six months ended June 30, 2024, net cash flows used in investing activities was $17.5 million, which primarily consisted of purchases of marketable securities of $30.9 million, which were partially offset by maturities of marketable securities of $13.4 million.

During the six months ended June 30, 2023, cash provided by investing activities was $0.3 million, which primarily consisted of proceeds from maturities of marketable securities of $34.2 million, which were partially offset by purchases of marketable securities of $33.8 million.

Cash Flows from Financing Activities

During the three months ended March 31, 2024, there were no cash flows from financing activities.

During the three months ended March 31, 2023, the cash provided by financing activities were negligible.

During the six months ended June 30, 2024, cash provided by financing activities was $30.4 million, which primarily consisted of net proceeds of $16.4 million from the issuance of common stock, net proceeds of $5.0 million from the issuance of pre-funded warrants and proceeds of $8.9 million from the issuance of common warrants.

During the six months ended June 30, 2023, the cash provided by financing activities of $7.5 million primarily consisted of net proceeds from the issuance of common stock through our at-the-market offering program.

Contractual Obligations

There have been no material changes outside the ordinary course of our business to our contractual obligations during the three months ended March 31, 2024, as compared to those disclosed in our Annual Report on Form 10-K.

There have been no material changes outside the ordinary course of our business to our contractual obligations during the six months ended June 30, 2024, as compared to those disclosed in our Annual Report on Form 10-K.

Critical Accounting Estimates

There have been no changes to our critical accounting estimates during the six months ended June 30, 2024, as compared to those disclosed in our Annual Report on Form 10-K

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 2. Management’s Discussion and Analysis