What changed in this filing

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Item 7. Management’s Discussion and Analysis

2025-03-26 compared with 2024-03-18 · 42 added, 48 removed, 209 unchanged (30% of the section changed)

7 unchanged sentences

Our strategy is to identify, acquire, and develop molecules that will rapidly translate into high impact therapeutics that generate durable clinical benefit and enhanced patient outcomes.

Our lead clinical stage program is DKN-01, a monoclonal antibody that inhibits Dickkopf-related protein 1, or DKK1.

We are currently studying DKN-01 in multiple ongoing clinical trials in patients with esophagogastric cancer, gynecologic cancers, or colorectal cancer.

Our second clinical stage program is FL-301, a monoclonal antibody that targets cells that express Claudin18.2 on their cell surface.

We also have two preclinical antibody programs, FL-302 and FL-501.

Our lead clinical stage program is sirexatamab (DKN-01), a monoclonal antibody that inhibits Dickkopf-related protein 1, or DKK1.

We are currently studying sirexatamab in multiple ongoing clinical trials in patients with esophagogastric cancer, gynecologic cancers, or colorectal cancer.

We also have a preclinical antibody program FL-501.

We intend to apply our extensive experience identifying and developing transformational products to build a pipeline of programs that have the potential to change the practice of cancer medicine.

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We expect to continue to incur significant expenses and have operating losses for at least the next several years as we:

● continue the development of our product candidates, DKN-01, FL-301, FL-302 and FL-501;

● continue the development of our product candidates,sirexatamab and FL-501;

● seek to obtain regulatory approvals for our product candidates;

● outsource the manufacturing of our product candidates for clinical trials and any indications for which we receive regulatory approval;

● contract with third parties for the sales, marketing and distribution of DKN-01 for any indications for which we receive regulatory approval;

● contract with third parties for the sales, marketing and distribution of sirexatamab for any indications for which we receive regulatory approval;

● maintain, expand and protect our intellectual property portfolio;

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We do not expect to generate revenue from product sales unless and until we successfully complete development and obtain marketing approval for one or more of our product candidates, which we expect will take a number of years and is subject to significant uncertainty.

Accordingly, we will need to raise additional capital prior to the commercialization of DKN-01 or any other product candidate.

Accordingly, we will need to raise additional capital prior to the commercialization of sirexatamab or any other product candidate.

Until such time, if ever, as we can generate substantial revenue from product sales, we expect to finance our operating activities through a combination of equity offerings, debt financings, government or other third-party funding, commercialization, marketing and distribution arrangements and other collaborations, strategic alliances and licensing arrangements.

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

Our failure to raise capital or enter into such other arrangements as and when needed would have a negative impact on our financial condition and our ability to develop our product candidates.

Our failure to raise capital or enter into such other arrangements as and when needed would have a negative impact on our financial condition and our ability to develop our product candidates, and could force us to significantly limit or reduce the scope of our business, operations and activities, or to sell ourselves or engage in some other strategic transaction at an unfavorable price and on other unfavorable terms, or to discontinue our business and operations entirely, wind-up and liquidate.

As of December 31, 2024, we had cash and cash equivalents of $47.2 million.

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Research and Development Expenses

Our research and development activities have included conducting nonclinical studies and clinical trials, manufacturing development efforts and activities related to regulatory filings for our product candidates, primarily DKN-01.

We recognize research and development expenses as they are incurred.

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● fees paid to consultants and CROs for our nonclinical and clinical trials, and other related clinical trial fees, including, but not limited to, laboratory work, clinical trial database management, clinical trial material management and statistical compilation and analysis;

● costs related to acquiring and manufacturing clinical trial materials;

● costs related to acquiring and manufacturing clinical trial material;

● costs related to compliance with regulatory requirements.

We plan to increase our research and development expenses for the foreseeable future as we continue the development of DKN-01 and any other product candidates, subject to the availability of additional funding.

We plan to increase our research and development expenses for the foreseeable future as we continue the development of sirexatamab and any other product candidates, subject to the availability of additional funding.

Our direct research and development expenses are tracked on a program-by-program basis and consist primarily of internal and external costs, such as employee costs, including salaries and stock-based compensation, other internal costs, fees paid to consultants, central laboratories, contractors and CROs in connection with our clinical and preclinical trial development activities.

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FL-501 program

FL-101 program

In-process research and development acquired from Flame

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As a result, we have reduced our deferred tax assets related to the federal and state NOL’s and R&D credits which are offset by the corresponding decrease in the valuation allowance.

As of December 31, 2023, we also had federal and state R&D tax credits of $1.5 million and $0.2 million, respectively, which begin to expire in 2030.

As of December 31, 2024, we also had federal and state R&D tax credits of $3.0 million and $0.6 million, respectively, which begin to expire in 2043 and 2038, respectively, for federal and state tax purposes.

There is no provision for income taxes in the United States because we have historically incurred operating losses and maintain a full valuation allowance against our deferred tax assets in these jurisdictions.

A provision for income taxes was recorded in Australia based on the results of our foreign subsidiary.

Critical Accounting Policies and Significant Judgments and Estimates

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Accrued Research and Development Expenses

As part of the process of preparing consolidated financial statements, we are required to estimate accrued research and development expenses.

This process involves communicating with our applicable personnel to identify services that have been performed on our behalf and estimating the level of service performed and the associated cost incurred for the service when we have not yet been invoiced or otherwise notified of actual cost.

As part of the process of preparing consolidated financial statements, we are required to account for research and development expenses.

This process involves communicating with our applicable personnel and service providers to identify services that have been performed on our behalf and the level of service performed and the associated cost incurred for the service when we have not yet been invoiced or otherwise notified of actual cost.

The majority of our service providers invoice us monthly for services performed.

We make estimates of our accrued research and development expenses as of each balance sheet date in our consolidated financial statements based on facts and circumstances known to us.

We periodically confirm the accuracy of our estimates with selected service providers and make adjustments, if necessary.

To date, we have not adjusted our estimate at any particular balance sheet date by any material amount.

Examples of estimated accrued research and development expenses include:

We accrue for our research and development expenses as of each balance sheet date in our consolidated financial statements based on facts and circumstances known to us.

We periodically confirm the accuracy of the data that we use to accrue for research and development expenses with selected service providers and make adjustments, if necessary.

To date, we have not adjusted our accruals at any particular balance sheet date by any material amount.

Examples of accrued research and development expenses include:

● fees paid to CROs for management of our clinical trial activities;

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● professional services and fees.

We base our expenses related to clinical trials on our estimates of the services received and efforts expended pursuant to contracts with multiple research institutions and CROs that conduct and manage clinical trials on our behalf.

We base our expenses related to clinical trials on the services received and efforts expended pursuant to contracts with multiple research institutions and CROs that conduct and manage clinical trials on our behalf.

The financial terms of these agreements are subject to negotiation, vary from contract to contract and may result in uneven payment flows.

Payments under some of these contracts depend on factors such as the successful enrollment of patients and the completion of clinical trial milestones.

In accruing service fees, we estimate the time period over which services will be performed and the level of effort to be expended in each period.

If we do not accurately identify costs that we have begun to incur or if we underestimate or overestimate the level of services performed or the costs of these services, our actual expenses could differ from our estimates.

If we do not accurately identify costs that we have incurred, our actual expenses could differ from our accruals.

Stock-Based Compensation

9 unchanged sentences

As a result, if factors change and we use different assumptions, our stock-based compensation expense could be materially different in the future.

Previously, we were an “emerging growth company”, or EGC, as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”).

The JOBS Act permits an “emerging growth company” to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies until those standards would otherwise apply to private companies.

We elected to use the extended transition period for complying with new or revised accounting standards under Section 102(b) (1) of the JOBS Act.

This election allowed us to delay the adoption of new or revised accounting standards that have different effective dates for public and private companies until those standards apply to private companies.

We were able to take advantage of these reporting exemptions until we were no longer an emerging growth company.

We were an EGC until the last day of our 2022 fiscal year, containing the fifth anniversary of the date on which shares of our common stock became publicly traded in the U.S.

As of January 1, 2023, we ceased to be an EGC.

Results of Operations

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Interest income

Interest expense

Australian research and development incentives

3 unchanged sentences

Provision for income taxes

Dividend attributable to down round feature of warrants

Net loss attributable to common stockholders

Research and Development Expenses

7 unchanged sentences

FL-501 program

FL-101 program

In-process research and development acquired from Flame

1 unchanged sentence

Research and development expenses were $57.2 million for the year ended December 31, 2024, compared to $73.2 million for the year ended December 31, 2023.

The increase of $28.2 million in research and development expenses was primarily due to $29.6 million of in-process research and development (“IPR&D”) acquired in the Flame merger which we expensed during the year ended December 31, 2023, as we concluded that the IPR&D acquired did not have an alternative future use.

There was also an increase of $3.8 million in clinical trial costs due to patient enrollment and the duration of patients on study, an increase of $3.0 million in payroll and other related expenses due to an increase in headcount of our research and development full-time employees and an increase of $0.1 million in stock-based compensation expense due to new stock options granted to employees during the year ended December 31, 2023.

These increases were partially offset by a decrease of $8.1 million in manufacturing costs related to clinical trial material due to timing of manufacturing campaigns and a decrease of $0.2 million in consulting fees associated with research and development activities.

The decrease of $16.0 million in research and development expenses was primarily due to $29.6 million of in-process research and development (“IPR&D”) acquired in the Flame merger which we expensed during the year ended December 31, 2023, as we concluded that the IPR&D acquired did not have an alternative future use.

This decrease was partially offset by an increase of $8.8 million in clinical trial costs due to due to patient enrollment, the duration of patients on study, the enhancement of correlative studies, the increase in site activity associated with Part C of the DisTinGuish study, and the expansion of the size of Part B of the DeFianCe study.

There was also an increase of $2.8 million in manufacturing costs related to clinical trial material due to timing of manufacturing campaigns, an increase of $1.6 million in payroll and other related expenses due to an increase in headcount of our research and development full-time employees, an increase of $0.2 million in stock based compensation expense due to new stock options granted to employees during the year ended December 31, 2024 and an increase of $0.2 million in consulting fees associated with research and development activities.

General and Administrative Expenses

General and administrative expenses were $12.8 million for the year ended December 31, 2024, compared to $13.8 million for the year ended December 31, 2023.

The increase of $2.0 million was primarily due to an increase of $1.4 million in professional fees due to higher finance and legal costs associated with our business development activities and an increase of $0.8 million in payroll and other related expenses due to an increase in headcount of our general and administrative full-time employees.

These increases were partially offset by a decrease in stock-based compensation expense of $0.2 million.

The decrease of $1.0 million was primarily attributable to a $1.3 million decrease in professional fees due to lower finance and legal costs associated with our business development activities during the year ended December 31, 2024 as compared to the year ended December 31, 2023.

This decrease was partially offset by an increase of $0.2 million in stock-based compensation expense due to new stock options granted to employees during the year ended December 31, 2024 and an increase of $0.1 million in payroll and other related expenses.

Interest Income

We recorded interest income of $3.1 million and $4.0 million, respectively, during the years ended December 31, 2024 and 2023.

The increase during the year ended December 31, 2023 as compared to the same period in 2022 was due to higher interest rates earned on interest bearing cash accounts.

The decrease during the year ended December 31, 2024 as compared to the same period in 2023 was due to a lower average cash and cash equivalents balance.

Australian Research and Development Incentives

We recorded R&D incentive income of $1.1 million and $2.1 million for the years ended December 31, 2023 and 2022, respectively, based upon the applicable percentage of eligible research and development activities under the Australian Incentive Program, net of our Australian tax liability, which expenses included the cost of manufacturing of clinical trial material.

We recorded R&D incentive income of $1.1 million for the year ended December 31, 2023, based upon the applicable percentage of eligible research and development activities under the Australian Incentive Program, net of our Australian tax liability, which expenses included the cost of manufacturing of clinical trial material.

We did not recognize any R&D incentive income during the year ended December 31, 2024.

We perform certain supporting research and development activity outside of Australia when there are no Australian facilities that support the activity (“Overseas research and development activities”).

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During the year ended December 31, 2023, we received $2.3 million of research and development tax incentive payments from the Commonwealth of Australia as a result of the 2022 research and development activities.

During the year ended December 31, 2022, we received $1.1 million of research and development tax incentive payments from the Commonwealth of Australia as a result of the 2021 research and development activities.

During the year ended December 31, 2024, we did not receive any research and development tax incentive payments from the Commonwealth of Australia as a result of the 2023 research and development activities.

We expect to receive $0.8 million of research and development tax incentive payments during the year ended December 31, 2025 for research and development activities performed during 2023.

The remaining R&D incentive receivable has been recorded as “Research and development incentive receivable” in the consolidated balance sheets.

Foreign Currency Losses

We recorded foreign currency losses of $0.6 million for the year ended December 31, 2022.

We recorded an immaterial amount of foreign currency losses for the year ended December 31, 2023.

We recorded an immaterial amount of foreign currency losses for the years ended December 31, 2024 and 2023.

The change in foreign currency losses is due to the changes in the Australian dollar exchange rate related to activities of the Australian entity.

Interest Expense

We recorded an immaterial amount of interest expense for the years ended December 31, 2023 and 2022.

Liquidity and Capital Resources

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If we do not obtain additional funding or development program cost-sharing, we could be forced to delay, reduce or eliminate certain clinical trials or research and development programs, reduce or eliminate discretionary operating expenses, and delay company and pipeline expansion, which could adversely affect our business prospects.

The inability to obtain funding, as and when needed, could have a negative impact on Leap’s financial condition and our ability to pursue our business strategies.

The inability to obtain funding, as and when needed, could have a negative impact on Leap’s financial condition and our ability to pursue our business strategies and could force us to sell ourselves or engage in some other strategic transaction at an unfavorable price and on other unfavorable terms or to discontinue our business and operations entirely, wind-up and liquidate.

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

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Cash provided by investing activities

Cash used in financing activities

Cash provided by (used in) financing activities

Effect of exchange rate changes on cash and cash equivalents

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Net cash used in operating activities for the year ended December 31, 2024 was primarily related to our net loss of $67.6 million and net changes in working capital, including a decrease in lease liabilities of $0.4 million.

These changes were partially offset by an increase in accounts payable and accrued expenses of $0.9 million, an increase in income tax payable of $0.6 million, a decrease of $0.1 million in prepaid expenses and other assets, a decrease of $0.2 million in other assets, noncash stock-based compensation expense of $5.5 million and change in a right-of-use asset of $0.4 million.

Net cash used in operating activities for the year ended December 31, 2023 was primarily related to our net loss of $81.4 million and net changes in working capital, including a decrease in lease liabilities of $0.4 million.

These changes were partially offset by a decrease in research and development incentive receivable of $1.3 million, a decrease of $0.7 million in other assets, an increase in accounts payable and accrued expenses of $0.7 million, a decrease of $0.2 million in prepaid expenses and other assets, noncash IPR&D expense of $29.6 million, noncash stock-based compensation expense of $5.1 million and change in a right-of-use asset of $0.4 million.

Net cash used in operating activities for the year ended December 31, 2022 was primarily related to our net loss of $54.6 million and net changes in working capital, including an increase in research and development receivable of $1.0 million, an increase of $0.8 million in other assets and a decrease in lease liabilities of $0.4 million.

These changes were partially offset by an increase in accounts payable and accrued expenses of $0.9 million and a decrease in prepaid expenses and other assets of $0.4 million, decrease in deferred tax assets of $0.2 million, noncash stock-based compensation expense of $5.2 million and noncash lease expense of $0.4 million.

There was also a noncash change of $0.6 million due to foreign currency losses.

Investing Activities.

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Financing Activities.

Net cash used in financing activities for the year ended December 31, 2024 consisted of $40.0 million in gross proceeds from the April 2024 Private Placement and $0.1 million of proceeds upon the exercise of stock options and warrants, partially offset by $2.9

million of offering costs paid.

Net cash used in financing activities for the year ended December 31, 2023 primarily consisted of an immaterial amount paid by the Company for the redemption of 10,000 shares of the warrants issued in connection with a public offering in 2019.

Net cash used in financing activities for the year ended December 31, 2022 consisted of payments of offering costs of $0.2 million.

Capital Requirements

1 unchanged sentence

Our expenses will also increase as we:

● pursue the clinical development of our most advanced product candidate, DKN-01, and our recently acquired product candidates, FL-301, FL-302 and FL-501;

● pursue the clinical development of our most advanced product candidate, sirexatamab, and our preclinical product candidate, FL-501;

● maintain, expand and protect our intellectual property portfolio;

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

What changed 10-K

Item 7. Management’s Discussion and Analysis