What changed in this filing

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Item 1. Financial Statements

2021-11-10 compared with 2021-08-26 · 278 added, 253 removed, 838 unchanged (39% of the section changed)

2 unchanged sentences

(In thousands, except share and par value amounts)

September 30,

Current assets:

3 unchanged sentences

Total current assets

Long-term investments

Property and equipment, net

1 unchanged sentence

Restricted cash

Liabilities, Convertible Preferred Stock and Stockholders' Deficit

Liabilities, Convertible Preferred Stock and Stockholders' Equity (Deficit)

Current liabilities:

8 unchanged sentences

Convertible preferred stock (Series A, B-1 and B-2), $ 0.0001 par value;

97,622,409 shares authorized as of June 30, 2021 and December 31, 2020;

85,516,454 and 69,584,682 shares issued and outstanding as of June 30, 2021 and December 31, 2020, respectively;

aggregate liquidation preference of $ 350,412 and $ 230,924 as of June 30, 2021 and December 31, 2020, respectively

Stockholders' deficit:

no shares and 97,622,409 shares authorized as of September 30, 2021 and December 31, 2020, respectively;

no shares and 69,584,682 shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively;

aggregate liquidation preference of $ 0 and $ 230,924 as of September 30, 2021 and December 31, 2020, respectively

Stockholders' equity (deficit):

Preferred stock, $ 0.0001 par value;

80,000,000 shares and no shares authorized as of September 30, 2021 and December 31, 2020, respectively;

no shares issued and outstanding as of September 30, 2021 and December 31, 2020

Common stock, $ 0.0001 par value;

156,000,000 and 147,027,681 shares authorized as of June 30, 2021 and December 31, 2020, respectively, 27,300,123 and 25,189,673 shares issued at June 30, 2021 and December 31, 2020, respectively;

24,370,599 and 21,923,173 shares outstanding at June 30, 2021 and December 31, 2020, respectively

800,000,000 and 147,027,681 shares authorized as of September 30, 2021 and December 31, 2020, respectively;

121,250,375 and 25,189,673 shares issued at September 30, 2021 and December 31, 2020, respectively;

118,645,593 and 21,923,173 shares outstanding at September 30, 2021 and December 31, 2020, respectively

Additional paid-in capital

Accumulated other comprehensive income (loss)

Accumulated other comprehensive income

Accumulated deficit

Total stockholders' deficit

Total liabilities, convertible preferred stock and stockholders' deficit

Total stockholders' equity (deficit)

Total liabilities, convertible preferred stock and stockholders' equity (deficit)

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

1 unchanged sentence

(In thousands, except share and per share amounts)

Three months ended June 30,

Six months ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Operating expenses:

2 unchanged sentences

General and administrative

Contribution of common stock to Erasca Foundation

Total operating expenses

12 unchanged sentences

Condensed Consolidated Statements of Convertible Preferred Stock and Stock holders’

Three months ended March 31, 2021 and June 30, 2021

Equity (Deficit)

(In thousands, except share data)

3 unchanged sentences

Income (Loss)

Equity (Deficit)

Balance at December 31, 2020

12 unchanged sentences

Balance at June 30, 2021

Conversion of convertible preferred stock into common stock upon initial public offering

Issuance of common stock in initial public offering, net of $ 28,001 in discounts and offering costs

Issuance of common stock to Erasca Foundation

Disgorgement of stockholder's short-swing profits

Exercise of stock options

Vesting of early exercised stock options

Stock-based compensation expense

Unrealized gain on investments, net

Balance at September 30, 2021

Condensed Consolidated Statements of Convertible Preferred Stock and Stockholders’

Three months ended March 31, 2020 and June 30, 2020

(In thousands, except share data)

12 unchanged sentences

Balance at June 30, 2020

Issuance of Series B-1 convertible preferred stock for cash, net of $ 27 in issuance costs and preferred stock purchase right liability of $ 1,618

Exercise of stock options

Vesting of early exercised stock options

Stock-based compensation expense

Unrealized gain on investments, net

Balance at September 30, 2020

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

1 unchanged sentence

(In thousands)

Six Months Ended June 30,

Nine Months Ended September 30,

Cash flows from operating activities:

3 unchanged sentences

In-process research and development expenses

(Accretion) amortization on investments, net

Issuance of common stock to Erasca Foundation

Amortization (accretion) on investments, net

Change in fair value of preferred stock purchase right liability

10 unchanged sentences

Purchases of property and equipment

Net cash provided by (used in) investing activities

Net cash used in investing activities

Cash flows from financing activities:

Proceeds from the issuance of common stock in initial public offering, net of discounts and offering costs

Proceeds from the issuance of convertible preferred stock, net of issuance costs

Proceeds from the exercise of stock options, net of repurchases

Proceeds from the disgorgement of stockholder's short-swing profits

Net cash provided by financing activities

2 unchanged sentences

Cash, cash equivalents and restricted cash at end of the period

Supplemental disclosure of cash flow information:

Cash paid for taxes

Supplemental disclosure of noncash investing and financing activity:

Supplemental disclosure of noncash investing and financing activities:

Issuance of common stock to Erasca Foundation

Issuance of common stock in connection with asset acquisition

1 unchanged sentence

Amounts accrued for purchases of property and equipment

Amounts accrued for deferred offering costs

Conversion of preferred stock to common stock upon initial public offering

Vesting of early exercised options

Preferred stock purchase right liability

Supplemental disclosure of noncash operating activities:

Operating lease assets obtained in exchange for lease obligation

Tenant improvement allowance included in operating lease liabilities

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

8 unchanged sentences

The Company was incorporated under the laws of the State of Delaware on July 2, 2018, as Erasca, Inc., and is headquartered in San Diego, California.

In September 2020, the Company established a wholly-owned Australian subsidiary, Erasca Australia Pty Ltd (Erasca Australia), in order to conduct clinical activities for its development candidates.

In September 2020, the Company established a wholly-owned Australian subsidiary, Erasca Australia Pty Ltd (Erasca Australia), in order to conduct clinical activities in Australia for its development candidates.

In November 2020, the Company entered into an agreement and plan of merger with Asana BioSciences, LLC (Asana) and ASN Product Development, Inc.

(the Asana Merger Agreement), pursuant to which Erasca—ASN Product Development, Inc.

(ASN) became its wholly-owned subsidiary.

(ASN) (the Asana Merger Agreement), pursuant to which ASN became the Company's wholly-owned subsidiary.

In March 2021, the Company established a wholly-owned subsidiary, Erasca Ventures, LLC (Erasca Ventures), to potentially make equity investments in early-stage biotechnology companies that are aligned with the Company’s mission and strategy.

Since inception, the Company has devoted substantially all of its efforts and resources to organizing and staffing the Company, business planning, raising capital, identifying, acquiring and in-licensing the Company’s product candidates, establishing its intellectual property portfolio, conducting research, preclinical studies, and clinical trials, establishing arrangements with third parties for the manufacture of its product candidates and related raw materials, and providing general and administrative support for these operations.

As of June 30, 2021, the Company had $ 193.7 million in cash, cash equivalents, and short-term investments, respectively.

As of June 30, 2021, the Company had an accumulated deficit of $ 161.6 million.

As of September 30, 2021, the Company had $ 486.6 million in cash, cash equivalents, and short-term investments.

As of September 30, 2021, the Company had an accumulated deficit of $ 207.7 million.

The Company has incurred significant operating losses and negative cash flows from operations.

From its inception through June 30, 2021, the Company’s financial support has primarily been provided from the sale of its convertible preferred stock.

From its inception through September 30, 2021, the Company’s financial support has primarily been provided from the sale of its convertible preferred stock and the sale of its common stock in its initial public offering (IPO).

As the Company continues its expansion, it expects to use its cash, cash equivalents, and short-term investments to fund research and development, working capital, and other general corporate purposes.

3 unchanged sentences

The Company’s failure to raise capital or enter into such other arrangements when needed would have a negative impact on the Company’s financial condition and could force the Company to delay, limit, reduce or terminate its research and development programs or other operations, or grant rights to develop and market product candidates that the Company would otherwise prefer to develop and market itself.

The Company believes its cash, cash equivalents, and short-term investments as of June 30, 2021 and the net proceeds of $ 317.7 million received from the Company’s initial public offering (IPO), which closed on July 20, 2021, will be sufficient for the Company to fund operations for at least one year from the issuance date of these condensed consolidated financial statements.

The Company believes its cash, cash equivalents, and short-term investments as of September 30, 2021 will be sufficient for the Company to fund operations for at least one year from the issuance date of these condensed consolidated financial statements.

Initial public offering

On July 20, 2021, the Company completed its initial public offering (IPO) in which the Company issued and sold 21,562,500 shares of common stock (including 2,812,500 shares of common stock in connection with the full exercise of the underwriters’

option to purchase additional shares) at an offering price of $ 16.00 per share.

Proceeds from the IPO, net of underwriting discounts, commissions and estimated offering costs, were $ 317.7 million.

On July 20, 2021, the Company completed its IPO in which the Company issued and sold 21,562,500 shares of its common stock, including the exercise in full by the underwriters of their option to purchase 2,812,500 shares of common stock, at a price to the public of $ 16.00 per share.

Proceeds from the IPO, net of underwriting discounts and commissions of $ 24.2 million and offering costs of $ 3.8 million, were $ 317.0 million.

In connection with the completion of the IPO, all outstanding shares of convertible preferred stock were converted into 71,263,685 shares of common stock.

Reverse stock split

On July 9, 2021, the Company effected a one-for- 1.2 reverse stock split of its issued and outstanding shares of common stock (the Reverse Stock Split).

The par value and the number of authorized shares of the convertible preferred stock and common stock were not adjusted as a result of the Reverse Stock Split.

All issued and outstanding common stock and the conversion prices and ratio of the convertible preferred stock have been retroactively adjusted to reflect this Reverse Stock Split for all periods presented.

Basis of presentation

15 unchanged sentences

Unaudited interim financial information

The accompanying condensed consolidated balance sheet as of June 30, 2021, the condensed consolidated statements of operations and comprehensive loss for the three and six months ended June 30, 2021 and 2020, the condensed consolidated statements of convertible preferred stock and stockholders’

deficit for the three and six months ended June 30, 2021 and 2020 and the condensed consolidated statements of cash flows for the six months ended June 30, 2021 and 2020 are unaudited.

The unaudited condensed consolidated interim financial statements have been prepared on the same basis as the audited annual consolidated financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary for the fair statement of the Company’s condensed consolidated financial position as of June 30, 2021 and the condensed consolidated results of its operations and cash flows for the three and six months ended June 30, 2021 and 2020.

The condensed consolidated financial data and other information disclosed in these notes related to the three and six months ended June 30, 2021 and 2020 are unaudited.

The condensed consolidated results for the three and six months ended

June 30, 2021 are not necessarily indicative of results to be expected for the year ending December 31, 2021, any other interim periods, or any future year or period.

The accompanying condensed consolidated balance sheet as of September 30, 2021, the condensed consolidated statements of operations and comprehensive loss for the three and nine months ended September 30, 2021 and 2020, the condensed consolidated statements of convertible preferred stock and stockholders’

deficit for the three and nine months ended September 30, 2021 and 2020 and the condensed consolidated statements of cash flows for the nine months ended September 30, 2021 and 2020 are unaudited.

The unaudited condensed consolidated interim financial statements have been prepared on the same basis as the audited annual consolidated financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary for the fair statement of the Company’s condensed consolidated financial position as of September 30, 2021 and the condensed consolidated results of its operations and cash flows for the three and nine months ended September 30, 2021 and 2020.

The condensed consolidated financial data and other information disclosed in these notes related to the three and nine months ended September 30, 2021 and 2020 are unaudited.

The condensed consolidated results for the three and nine months ended September 30, 2021 are not necessarily indicative of results to be expected for the year ending December 31, 2021, any other interim periods, or any future year or period.

Concentration of credit risk and off-balance sheet risk

6 unchanged sentences

The Company considers all highly liquid investments with an original maturity of three months or less from the date of purchase to be cash equivalents.

The Company had deposited cash of $ 408,000 and $ 312,000 as of June 30, 2021 and December 31, 2020, respectively, to secure a letter of credit in connection with the lease of the Company’s facilities (see Note 11).

The Company had deposited cash of $ 408,000 and $ 312,000 as of September 30, 2021 and December 31, 2020, respectively, to secure a letter of credit in connection with the lease of the Company’s facilities (see Note 11).

The Company has classified the restricted cash as a noncurrent asset on its condensed consolidated balance sheets.

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the condensed consolidated balance sheets that sum to the total of the same amounts shown in the condensed consolidated statements of cash flows (in thousands):

September 30,

Cash and cash equivalents

30 unchanged sentences

If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the book values of the assets exceed their fair value.

The Company did no t recognize any impairment losses for the three and six months ended June 30, 2021 and 2020.

The Company did no t recognize any impairment losses for the three and nine months ended September 30, 2021 and 2020 .

The Company leases real estate facilities and equipment under non-cancelable and cancelable operating leases with various expiration dates through fiscal year 2032.

10 unchanged sentences

Operating lease expense is recognized on a straight-line basis over the lease term.

Certain of the Company's real estate leases include tenant improvement allowances, which are recognized as lease incentives and amortized on a straight-line basis over the lease term as an offset to rent expense.

Research and development expense

1 unchanged sentence

Research and development costs are expensed as incurred.

The Company’s research and development expenses include external costs, consisting of expenses incurred under arrangements with third parties, such as contract research organizations, contract manufacturers, consultants and its scientific advisors;

The Company’s research and development expenses include external costs, consisting of expenses incurred under arrangements with third parties, such as contract research organizations (CROs), contract manufacturing organizations (CMOs), consultants and its scientific advisors;

and internal costs, consisting of employee-related expenses, including salaries, benefits, and stock-based compensation for those individuals involved in research and development efforts, the costs of laboratory supplies and acquiring, developing and manufacturing preclinical study materials, and facilities and depreciation, which include direct and allocated expenses for rent of facilities and depreciation of equipment.

15 unchanged sentences

Should the in-process equity financing be abandoned, the deferred offering costs will be expensed immediately as a charge to operating expenses in the consolidated statements of operations and comprehensive loss.

As of June 30, 2021, $ 2.6 million of

deferred offering costs were recorded in other assets on the Company’s condensed consolidated balance sheet.

There were no deferred offering costs as of December 31, 2020.

There were no deferred offering costs as of September 30, 2021 and December 31, 2020 .

Common stock valuation

3 unchanged sentences

In determining the exercise prices for options granted, the Company has considered the fair value of the common stock as of the grant date.

The fair value of the common stock has been determined based upon a variety of factors, including valuations of the Company’s common stock performed with the assistance of independent third-party valuation specialists;

Prior to the IPO, the fair value of the common stock was determined based upon a variety of factors, including valuations of the Company’s common stock performed with the assistance of independent third-party valuation specialists;

the Company’s stage of development and business strategy, including the status of research and development efforts of its product candidates, and the material risks related to its business and industry;

9 unchanged sentences

Significant changes to the key assumptions underlying the factors used could result in different fair values of common stock at each valuation date.

After the completion of the IPO, the fair value of each share of common stock is based on the closing price of the Company’s common stock as reported by the Nasdaq Global Select Market (Nasdaq).

Stock-based compensation

The Company measures employee and nonemployee stock-based awards based on the fair value on the date of grant and records compensation expense on a straight-line basis over the requisite service period of the award.

The Company records the expense for stock-based compensation awards subject to performance-based milestone vesting over the implied service period when management determines that achievement of the milestone is probable.

The Company records the expense for stock-based awards subject to performance-based milestone vesting over the implied service period when management determines that achievement of the milestone is probable.

Management evaluates when the achievement of a performance-based milestone is probable based on the expected satisfaction of the performance conditions at each reporting date.

1 unchanged sentence

Forfeitures are accounted for as they occur.

The fair value of each stock option grant is estimated on the date of grant using the Black-Scholes options-pricing model, which requires inputs based on certain subjective assumptions, including the:

The fair value of stock option grants and shares purchasable under the Company's 2021 Employee Stock Purchase Plan (ESPP) is estimated on the date of grant using the Black-Scholes options-pricing model, which requires inputs based on certain subjective assumptions, including the:

Fair value of common stock.

1 unchanged sentence

Risk-free interest rate.

The risk-free interest rate is based on the US Treasury zero-coupon issues in effect at the time of grant for periods corresponding with the expected term of the options.

The risk-free interest rate is based on the US Treasury zero-coupon issues in effect at the time of grant for periods corresponding with the expected term of the stock-based awards.

Expected volatility.

3 unchanged sentences

Expected term.

The expected term represents the period that the options granted are expected to be outstanding.

The expected term represents the period that the stock-based awards are expected to be outstanding.

The expected term of stock options issued is determined using the simplified method (based on the mid-point between the vesting date and the end of the contractual term) as the Company has concluded that its stock option exercise history does not provide a reasonable basis upon which to estimate expected term.

19 unchanged sentences

First, the tax position must be evaluated to determine the likelihood that it will be sustained upon external examination by the taxing authorities.

If the tax position is deemed more-likely-than-not to be sustained, the tax position is then assessed to determine the amount of benefit to recognize in the consolidated financial statements.

If the tax position is deemed more-likely-than-not to be sustained, the tax position is then assessed to determine the amount of benefit to recognize in the consolidated

financial statements.

The amount of the benefit that may be recognized is the largest amount that has a greater than 50% likelihood of being realized upon ultimate settlement.

The provision for income taxes includes the effects of any resulting tax reserves, or unrecognized tax benefits, that are considered appropriate as well as the related net interest and penalties.

As of June 30, 2021, the Company’s tax years since inception are subject to examination by taxing authorities due to the Company’s unutilized net operating losses and tax credits.

As of September 30, 2021 , the Company’s tax years since inception are subject to examination by taxing authorities due to the Company’s unutilized net operating losses and tax credits.

Comprehensive income (loss)

The Company reports all components of comprehensive income (loss), including net loss, in the consolidated financial statements in the period in which they are recognized.

Comprehensive income (loss) is defined as the change in equity during a period from transactions and other events and circumstances from non-owner sources, including unrealized gains and losses on

Comprehensive income (loss) is defined as the change in equity during a period from transactions and other events and circumstances from non-owner sources, including unrealized gains and losses on investments.

Other comprehensive income includes unrealized gains and losses on investments, which was the only difference between net loss and comprehensive loss for the applicable periods.

3 unchanged sentences

Diluted net loss per share is computed by dividing the net loss by the weighted-average number of common shares and potentially dilutive securities outstanding for the period.

For purposes of the diluted net loss per share calculation, the convertible preferred stock, options to purchase common stock and common stock subject to repurchase related to unvested restricted stock and options early exercised are considered to be potentially dilutive securities.

For purposes of the diluted net loss per share calculation, the convertible preferred stock, options to purchase common stock, shares purchasable under the ESPP and common stock subject to repurchase related to unvested restricted stock and options early exercised are considered to be potentially dilutive securities.

Basic and diluted net loss per share is presented in conformity with the two-class method required for participating securities as the convertible preferred stock is considered a participating security because it participates in dividends with common stock.

18 unchanged sentences

The Company qualifies as an “emerging growth company”

as defined in the Jumpstart Our Business Startups Act of 2012 and has elected not to “opt out”

as defined in the Jumpstart Our Business Startups Act of 2012 (JOBS Act) and has elected not to “opt out”

of the extended transition related to complying with new or revised accounting standards, which means that when a standard is issued or revised and it has different application dates for public and nonpublic companies, the Company can adopt the new or revised standard at the time nonpublic companies adopt the new or revised standard and can do so until such time that the Company either (i) irrevocably elects to “opt out”

15 unchanged sentences

The following tables summarize the Company’s financial assets and liabilities measured at fair value on a recurring basis and their respective input levels based on the fair value hierarchy (in thousands):

Fair value measurements as of June 30, 2021 using

Fair value measurements as of September 30, 2021 using

Quoted prices in

active markets

September 30,

for identical

June 30, 2021

assets (level 1)

1 unchanged sentence

Money market funds (1)

US treasury securities (2)

US government securities (2)

2 unchanged sentences

Supranational debt securities (2)

US government securities (3)

Total fair value of assets

1 unchanged sentence

(2) Included as short-term investments on the condensed consolidated balance sheets.

(3) Included as long-term investments on the condensed consolidated balance sheets.

As of June 30, 2021, there were no financial liabilities measured at fair value on a recurring basis.

As of September 30, 2021 , there were no financial liabilities measured at fair value on a recurring basis.

Fair value measurements as of December 31, 2020 using

18 unchanged sentences

There are uncertainties on the fair value measurement of the instrument classified under Level 3 due to the use of unobservable inputs and interrelationships between these unobservable inputs, which could result in higher or lower fair value measurements.

Cash equivalents consist of money market funds, commercial paper and corporate debt securities, short-term investments consist of US treasury and government securities, corporate debt securities, commercial paper and supranational debt securities, and long-term investments consist of US government securities.

Cash equivalents consist of money market funds and commercial paper, and short-term investments consist of US treasury and government securities, corporate debt securities, commercial paper and supranational debt securities.

The Company obtains pricing information from its investment manager and generally determines the fair value of investment securities using standard observable inputs, including reported trades, broker/dealer quotes, and bid and/or offers.

7 unchanged sentences

The Company estimated a 0% dividend yield based on the expected dividend yield and the fact that the Company never paid or declared dividends.

The change in fair value of the purchase right liability was a gain of $ 1.8 million for the three and six months ended June 30, 2020, included in other income (expense) within the condensed consolidated statements of operations and comprehensive loss.

Upon the issuance of the shares of the Company’s Series B-2 convertible preferred stock in January 2021, the purchase right liability was revalued with the gain of $ 1.6 million recorded in change in fair value of the purchase right liability for the six months ended June 30, 2021 within the condensed consolidated statements of operations and comprehensive loss.

The change in fair value of the purchase right liability was a gain of $ 555,000 and $ 2.3 million for the three and nine months ended September 30, 2020 , respectively, included in other income (expense) within the condensed consolidated statements of operations and comprehensive loss.

Upon the issuance of the shares of the Company’s Series B-2 convertible preferred stock in January 2021, the purchase right liability was revalued with the gain of $ 1.6 million recorded in change in fair value of the purchase right liability for the nine months ended September 30, 2021 within the condensed consolidated statements of operations and comprehensive loss.

Significant changes in the assumptions could have a material impact on the value of the preferred stock purchase right liability.

The assumptions used in the

Black-Scholes option pricing model to determine the fair value of the preferred stock purchase right liability at settlement date and December 31, 2020 were as follows:

The assumptions used in the Black-Scholes option pricing model to determine the fair value of the preferred stock purchase right liability at settlement date and December 31, 2020 were as follows:

Settlement Date

6 unchanged sentences

The following tables summarize the Company’s investments accounted for as available-for-sale securities (in thousands, except years):

June 30, 2021

US treasury securities

September 30, 2021

US government securities

2 unchanged sentences

Supranational debt securities

US government securities

December 31, 2020

2 unchanged sentences

Commercial paper

As of June 30, 2021, there were two available-for-sale securities with an estimated fair value of $ 6.5 million in gross unrealized loss positions.

As of September 30, 2021, there were two av ailable-for-sale securities with an estimated fair value of $ 3.0 million i n gross unrealized loss positions.

None had been in such position for greater than 12 months.

As of December 31, 2020, there were six available-for-sale securities with an estimated fair value of $ 15.8 million in gross unrealized loss positions.

Based on the Company’s review of its investments, the Company believes that the unrealized losses were not other-than-temporary as of June 30, 2021 and December 31, 2020.

Based on the Company’s review of its investments, the Company believes that the unrealized losses were not other-than-temporary as of September 30, 2021 and December 31, 2020 .

Property and equipment, net

Property and equipment, net consisted of the following (in thousands):

September 30,

Leasehold improvements

Construction in progress

Laboratory equipment

5 unchanged sentences

Property and equipment, net

Depreciation and amortization expense related to property and equipment was $ 169,000 and $ 318,000 for the three and six months ended June 30, 2021, respectively, and $ 134,000 and $ 255,000 for the three and six months ended June 30, 2020, respectively.

Depreciation and amortization expense related to property and equipment was $ 191,000 and $ 509,000 for the three and nine months ended September 30, 2021 , respectively, and $ 139,000 and $ 394,000 for the three and nine months ended September 30, 2020 , respectively.

Accrued expenses and other current liabilities

Accrued expenses and other current liabilities consisted of the following (in thousands):

September 30,

Accrued research and development expenses

1 unchanged sentence

Unvested early exercised stock option liability

Accrued offering costs

Accrued construction in progress

Accrued legal

7 unchanged sentences

The Company has the right to sublicense (through multiple tiers) the licensed rights under the Asana Agreements, subject to certain conditions.

The foregoing license is subject to Asana’s non-exclusive right to practice the licensed rights to research and conduct preclinical pharmacology activities with a specified combination of compounds, subject to certain specified conditions.

The foregoing license is subject to Asana’s non-exclusive right to practice the

licensed rights to research and conduct preclinical pharmacology activities with a specified combination of compounds, subject to certain specified conditions.

Pursuant to the Asana License Agreement, neither Asana nor ASN can directly or indirectly exploit certain classes of competing products, subject to specified exceptions.

5 unchanged sentences

The Company recorded IPR&D expense of $ 50.0 million during the year ended December 31, 2020 in connection with the asset acquisition.

No IPR&D expense was recorded during the three and six months ended June 30, 2021 and 2020.

As of June 30, 2021 and December 31, 2020, no milestones had been accrued as the underlying contingencies had not yet been resolved.

No IPR&D expense was recorded during the three and nine months ended September 30, 2021 and 2020.

As of September 30, 2021 and December 31, 2020 , no milestones had been accrued as the underlying contingencies had not yet been resolved.

Upon the Company’s payment to Asana of all merger consideration, including upfront cash and equity payments, the equity payment related to the proof-of-concept development milestone, and all other development milestone payments, with the exception of a specific milestone that does not need to be achieved at such time and will remain subject to payment in the event that such milestone is achieved at a later time, all licensed rights will become fully paid-up, perpetual, and irrevocable.

8 unchanged sentences

Under the ELS Purchase Agreement, ELS is committed to performing certain studies on the applicable antibodies to assist in development activities, the costs of which shall be mutually agreed upon and for which the Company will be responsible.

The Company recorded IPR&D expense of $ 0 and $ 3.7 million during the three and six months ended June 30, 2021 in connection with the asset acquisition.

Pursuant to the ELS Purchase Agreement, at any time between 12 months and 36 months after the effective date of the ELS Purchase Agreement, if the Company reasonably determines that none of the Antibodies should be taken into human clinical trials due to safety, efficacy or CMC issues, then the Company has the option to select another antibody developed and solely owned by ELS that is not the subject of a license, collaboration, or option to a third party (the Option).

The Company recorded IPR&D expense of $ 0 and $ 3.7 million during the three and nine months ended September 30, 2021 in connection with the asset acquisition.

Pursuant to the ELS Purchase Agreement, at any time between 12 months and 36 months after the effective date of the ELS Purchase Agreement, if the Company reasonably determines that none of the Antibodies should be taken into human clinical trials due to safety, efficacy or chemistry, manufacturing and controls (CMC) issues, then the Company has the option to select another antibody developed and solely owned by ELS that is not the subject of a license, collaboration, or option to a third party (the Option).

If the Company elects to exercise the Option, then ELS will provide to the Company a list of all available antibodies that meet the aforementioned requirements, and the Company has the right to select one antibody from the list.

12 unchanged sentences

(i) pay tiered royalties on net sales of all licensed products in the mid-single digit percentages, subject to certain reductions;

and (ii) equally split all net sublicensing revenues earned under sublicense agreements that the Company enters into with any third party

before commencement of the first Phase I clinical trial for a licensed product.

As of June 30, 2021 and December 31, 2020, the Company had accrued $ 0 and $ 4.0 million related to a development milestone, respectively.

The Company recorded IPR&D expense of $ 0 during the three and six months ended June 30, 2021 and $ 0 and $ 12.0 million during the three and six months ended June 30, 2020, respectively, related to the upfront and milestone payments.

and (ii) equally split all net sublicensing revenues earned under sublicense agreements that the Company enters into with any third party before commencement of the first Phase I clinical trial for a licensed product.

As of September 30, 2021 and December 31, 2020 , the Company had accrued $ 0 and $ 4.0 million related to a development milestone, respectively.

The Company recorded IPR&D expense of $ 0 during the three and nine months ended September 30, 2021 and $ 0 and $ 12.0 million during the three and nine months ended September 30, 2020, respectively, related to the upfront and milestone payments.

The NiKang Agreement will expire upon the last to expire royalty term, which is determined on a licensed product-by-licensed product and country-by-country basis, and is the later of (i) ten years from the date of first commercial sale, (ii) the last to expire valid claim within the licensed patent rights covering such licensed product, or (iii) the expiration of all regulatory exclusivity for the licensed product in such country.

11 unchanged sentences

The Company is obligated to use commercially reasonable efforts to develop the licensed products first for use within the neuro-oncology field before expanding its development efforts to include other indications in the oncology field.

Following the first achievement of a clinical proof-of-concept for any indication, the Company has the right to submit a non-binding offer to Katmai for (i) the purchase of all licensed patent rights, know-how, and other assets owned by Katmai that are necessary or useful for the exploitation of the licensed products or (ii) for the purchase of Katmai.

Following the first achievement of a clinical

proof-of-concept for any indication, the Company has the right to submit a non-binding offer to Katmai for (i) the purchase of all licensed patent rights, know-how, and other assets owned by Katmai that are necessary or useful for the exploitation of the licensed products or (ii) for the purchase of Katmai.

Pursuant to the Katmai Agreement, neither Katmai nor the Company can directly or indirectly exploit certain specified classes of competing products.

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The Company is obligated to make future development and regulatory milestone payments of up to $ 26.0 million and commercial milestone payments of up to $ 101.0 million.

The Company is also obligated to pay tiered royalties on net sales of each licensed product, at rates ranging from the mid- to high-single digit percentages, subject to a minimum annual royalty

payment in the low six figures and certain permitted deductions.

No IPR&D expense was recorded for the three and six months ended June 30, 2021.

The Company recorded IPR&D expense of $ 0 and $ 5.7 million in connection with the upfront payment during the three and six months ended June 30, 2020, respectively.

The Company is also obligated to pay tiered royalties on net sales of each licensed product, at rates ranging from the mid- to high-single digit percentages, subject to a minimum annual royalty payment in the low six figures and certain permitted deductions.

No IPR&D expense was recorded for the three and nine months ended September 30, 2021 .

The Company recorded IPR&D expense of $ 0 and $ 5.7 million in connection with the upfront payment during the three and nine months ended September 30, 2020, respectively.

The Company’s royalty obligations and the Katmai Agreement will expire, on a licensed product-by-licensed product and country-by-country basis, on the earlier of (i) the ten-year anniversary of the expiration of all valid claims included in the licensed patents covering the composition of matter or method of use of such licensed product in such country or (ii) the twentieth anniversary of the first commercial sale of such licensed product in such country.

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The Company is also obligated to pay royalties on net sales of all licensed products, in the low-single digit percentages, subject to certain reductions.

No IPR&D expense was recorded during the three and six months ended June 30, 2021 and 2020.

No IPR&D expense was recorded during the three and nine months ended September 30, 2021 .

The Company recorded IPR&D expense of $ 75,000 for the three and nine months ended September 30, 2020.

The Company’s royalty obligations and the LifeArc Agreement will expire, on a licensed product-by-licensed product and country-by-country basis, on the later of (i) ten years from the date of first commercial sale, (ii) when there is no longer a valid patent claim covering such licensed product, or (iii) expiration of regulatory exclusivity for the licensed product in such country.

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Prior to the execution of the amendment, the Company was obligated to make a cash payment to the Regents in the event of the Company’s initial public offering, a change of control transaction or a reverse merger (the Corporate Milestone).

In the amendment, the amount of the cash payment payable upon the Company’s achievement of a Corporate Milestone was reduced and the Company agreed to issue the Regents 944,945 shares of the Company’s common stock, which issuance is not contingent upon the achievement of a Corporate Milestone and occurred in May 2021.

The Company recorded IPR&D expense of $ 5.5 million during the three and six months ended June 30, 2021 related to the issuance of these 944,945 common stock shares.

No IPR&D expense was recorded during the three and six months ended June 30, 2020.

In the amendment, the amount of the cash payment payable upon the Company’s achievement of a Corporate Milestone was reduced and the Company agreed to issue the Regents 944,945 shares of the Company’s common stock, which issuance was not contingent upon the achievement of a Corporate Milestone and occurred in May 2021.

In August 2021, following the achievement of the Corporate Milestone, the Company made a cash payment to the Regents in the amount of $ 1.7 million.

The Company recorded IPR&D expense of $ 1.7 million and $ 7.2 million during the three and nine months ended September 30, 2021 , respectively, related to the issuance of these 944,945 common stock shares and the Corporate Milestone cash payment.

No IPR&D expense was recorded during the three and nine months ended September 30, 2020.

The UCSF Agreement will expire upon the expiration of the last of the licensed patent rights.

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In February 2021, the Company’s Board of Directors increased the authorized number of shares of its common stock to 156,000,000 shares.

As of June 30, 2021, the Company was authorized to issue 97,622,409 shares of its convertible preferred stock, par value of $ 0.0001 per share, of which 38,103,681 shares are designated as Series A convertible preferred stock, 28,741,400 shares are designated as Series B-1 convertible preferred stock and 30,777,328 shares are designated as Series B-2 convertible preferred stock.

In connection with the IPO, on July 20, 2021, the Company amended and restated its certificate of incorporation to, among other things, (i) increase the number of authorized shares of common stock from 156,000,000 to 800,000,000 and (ii) authorize 80,000,000 shares of undesignated preferred stock with a par value of $ 0.0001 per share.

Convertible preferred stock

In 2018, the Company issued 27,953,681 shares of its Series A convertible preferred stock at $ 1.667 per share.

The Company received proceeds of approximately $ 46.5 million, net of issuance costs.

In 2019, the Company issued 10,150,000 shares of its Series A convertible preferred stock at $ 1.667 per share.

In 2018 and 2019, the Company issued a total of 38,103,681 shares of its Series A convertible preferred stock at $ 1.667 per share.

The Company received proceeds of approximately $ 63.4 million, net of issuance costs.

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Also in 2020, the Company issued 4,000,000 shares of its Series B-2 convertible preferred stock at $ 7.50 per share in connection with an asset acquisition (see Note 7).

Convertible preferred stock consisted of the following (in thousands, except share data):

June 30, 2021

Preferred shares

issuable upon

Series A preferred stock

Series B-1 preferred stock

Series B-2 preferred stock

Convertible preferred stock consisted of the following as of December 31, 2020 (in thousands, except share data):

December 31, 2020

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Series B-2 preferred stock

Upon the closing of the IPO in July 2021, all shares of convertible preferred stock then outstanding converted into 71,263,685 shares of common stock.

There were no shares of convertible preferred stock outstanding as of September 30, 2021.

Convertible preferred stock rights and preferences

The rights and preferences for convertible preferred stock are detailed in the Company’s final prospectus filed with the Securities and Exchange Commission pursuant to Rule 424(b)(4) under the Securities Act of 1933, as amended, on July 16, 2021.

The Company had 156,000,000 and 147,027,681 shares of its common stock authorized as of June 30, 2021 and December 31, 2020, respectively.

The Company had 27,300,123 and 25,189,673 shares of its common stock issued and 24,370,599 and 21,923,173 shares of common stock outstanding as of June 30, 2021 and December 31, 2020, respectively.

As of June 30, 2021 and December 31, 2020, the fair value of common stock was $ 9.28 and $ 3.36 , respectively.

The rights and preferences for convertible preferred stock are detailed in the Company’s final prospectus (the Prospectus) filed with the Securities and Exchange Commission (the SEC) pursuant to Rule 424(b)(4) under the Securities Act of 1933, as amended (the Securities Act), on July 16, 2021.

The Company had 800,000,000 and 147,027,681 shares of its common stock authorized as of September 30, 2021 and December 31, 2020 , respectively.

The Company had 121,250,375 and 25,189,673 shares of its common stock issued and 118,645,593 and 21,923,173 shares of common stock outstanding as of September 30, 2021 and December 31, 2020, respectively.

Shares of common stock subject to repurchase

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Any shares subject to repurchase by the Company are not deemed, for accounting purposes, to be outstanding until those shares vest.

As of June 30, 2021 and December 31, 2020, 394,966 shares and 577,259 shares of common stock, respectively, were subject to repurchase by the Company.

As of September 30, 2021 and December 31, 2020 , 303,820 shares and 577,259 shares of common stock, respectively, were subject to repurchase by the Company.

The unvested stock liability related to these awards is immaterial for all periods presented.

For the three and six months ended June 30, 2021, 91,146 and 182,293 shares vested, respectively.

For the three and six months ended June 30, 2020, 91,146 and 182,292 shares vested, respectively.

For the three and nine months ended September 30, 2021 , 91,146 and 273,439 shares vested, respectively.

For the three and nine months ended September 30, 2020 , 91,146 and 273,438 shares vested, respectively.

Stock-based compensation

In July 2018, the Company adopted the 2018 Equity Incentive Plan (the Plan), which expires ten years from its effective date.

The Plan provides for the grant of incentive stock options, non-statutory stock options, restricted stock awards, restricted stock unit awards, and other stock awards to employees, consultants and directors of the Company.

As of June 30, 2021 and December 31, 2020, a total of 21,545,845 and 13,212,511 shares of common stock, respectively, were authorized for issuance under the Plan.

Options granted under the Plan are exercisable at various dates as determined upon grant and will expire no more than ten years from their date of grant.

In July 2021, the Company’s board of directors adopted and the Company’s stockholders approved the Company’s 2021 Incentive Award Plan (the 2021 Plan), which became effective in connection with the IPO.

Upon the adoption of the 2021 Plan, the Company ceased making equity grants under its 2018 Equity Incentive Plan (the Prior Plan).

Under the 2021 Plan, the Company may grant stock options, restricted stock, restricted stock units, stock appreciation rights, and other stock or cash-based awards to individuals who are then employees, officers, directors or non-entity consultants of the Company.

A total of 15,150,000 shares of common stock were initially reserved for issuance under the 2021 Plan.

In addition, the number of shares of common stock available for issuance under the 2021 Plan will be increased annually on the first day of each fiscal year during the term of the 2021 Plan, beginning with the 2022 fiscal year, by an amount equal to the lesser of (i) 5 % of the shares of common stock outstanding on the final day of the immediately preceding calendar year or (ii) such smaller number of shares as determined by the Company’s board of directors.

As of September 30, 2021 , there were 14,775,660 stock-based awards available for future grant under the 2021 Plan.

Subsequent to July 2021, no further awards will be granted under the Prior Plan and all future stock-based awards will be granted under the 2021 Plan.

To the extent outstanding options granted under the Prior Plan are cancelled, forfeited or otherwise terminated without being exercised and would otherwise have been returned to the share reserve under the Prior Plan, the number of shares underlying such awards will be available for future grant under the 2021 Plan.

Options granted are exercisable at various dates as determined upon grant and will expire no more than ten years from their date of grant.

Stock options generally vest over a four-year term.

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For holders of more than 10% of the Company’s total combined voting power of all classes of stock, incentive stock options may not be granted at less than 110 % of the fair market value of the Company’s common stock on the date of grant and for a term that exceeds five years .

Early exercise is permitted for certain grants.

Early exercise is permitted for certain grants under the Prior Plan.

Stock options

A summary of the Company’s stock option activity under the Plan is as follows (in thousands, except share and per share data and years):

A summary of the Company’s stock option activity under the 2021 Plan and Prior Plan is as follows (in thousands, except share and per share data and years):

average remaining

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Outstanding at December 31, 2020

Outstanding at June 30, 2021

Options exercisable at June 30, 2021

The weighted-average grant date fair value of options granted for the three and six months ended June 30, 2021 was $ 4.59 and $ 3.45 , respectively, and for the three and six months ended June 30, 2020 was $ 0 and $ 0.45 , respectively.

As of June 30, 2021, the unrecognized compensation cost related to unvested stock option grants was $ 29.3 million and is expected to be recognized as expense over approximately 3.68 years.

The aggregate fair value of stock options that vested for the three and six months ended June 30, 2021 was $ 0.5 million and $ 0.8 million, respectively, and for the three and six months ended June 30, 2020 was $ 0.1 million.

Outstanding at September 30, 2021

Options exercisable at September 30, 2021

The weighted-average grant date fair value of options granted for the three and nine months ended September 30, 2021 was $ 12.29 and $ 3.96 , respectively, and for the three and nine months ended September 30, 2020 was $ 0.83 and $ 0.81 , respectively.

As of September 30, 2021, the unrecognized compensation cost related to unvested stock option grants was $ 32.3 million and is expected to be recognized as expense over approximately 3.11 years.

The aggregate fair value of stock options that vested for the three and nine months ended September 30, 2021 was $ 0.4 million and $ 1.0 million, respectively, and for the three and nine months ended September 30, 2020 was $ 0.1 million and $ 0.2 million, respectively.

Certain individuals were granted the ability to early exercise their stock options.

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The cash received in exchange for exercised and unvested shares related to stock options granted is recorded as a liability for the early exercise of stock options on the accompanying consolidated balance sheets and will be transferred into common stock and additional paid-in capital as the shares vest.

As of June 30, 2021 and December 31, 2020, there were 2,149,221 shares and 2,131,510 shares subject to repurchase by the Company, respectively.

As of June 30, 2021 and December 31, 2020, the Company recorded $ 3.2 million and $ 2.5 million of liabilities associated with shares issued with repurchase rights, respectively, which is recorded in accrued expenses and other current liabilities.

As of September 30, 2021 and December 31, 2020 , there were 2,001,823 shares and 2,131,510 shares subject to repurchase by the Company, respectively.

As of September 30, 2021 and December 31, 2020 , the Company recorded $ 3.1 million and $ 2.5 million of liabilities associated with shares issued with repurchase rights, respectively, which is recorded in accrued expenses and other current liabilities.

In January 2019, the Company granted 250,000 options that vest based on a performance milestone.

For the three and six months ended June 30, 2021, the Company recognized $ 22,000 and $ 115,000 of stock-based compensation associated with the performance-based options as the performance milestone was determined to be probable as of March 31, 2021.

For the three and nine months ended September 30, 2021 , the Company recognized $ 0 and $ 115,000 of stock-based compensation associated with the performance-based options as the performance milestone was determined to be probable as of March 31, 2021.

As of December 31, 2020, the milestone for the performance-based options was not probable of achievement, and therefore, no compensation expense for performance-based options had been recognized.

The assumptions used in the Black-Scholes option pricing model to determine the fair value of the employee and nonemployee stock option grants were as follows:

Three months ended June 30,

Six months ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Risk-free interest rate

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0.37 %- 0.40 %

0.59 %- 1.09 %

0.37 %- 1.22 %

Expected volatility

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77.58 %- 77.81 %

81.93 %- 84.98 %

74.72 %- 77.81 %

Expected term (in years)

Expected dividend yield

(1) No stock options were granted during the three months ended June 30, 2020.

Employee stock purchase plan

In July 2021, the Company’s board of directors adopted and the Company’s stockholders approved the ESPP, which became effective in connection with the IPO.

The ESPP permits participants to contribute up to a specified percentage of their eligible compensation during a series of offering periods of 24 months , each comprised of four six-month purchase periods, to purchase the Company’s common stock.

The purchase price of the shares will be 85 % of the fair market value of the Company’s common stock on the first day of trading of the applicable offering period or on the applicable purchase date, whichever is lower.

A total of 1,260,000 shares of common stock was initially reserved for issuance under the ESPP.

The Company recognized $ 278,000 of stock-based compensation expense related to the ESPP during the three and nine months ended September 30, 2021.

As of September 30, 2021, the unrecognized compensation cost related to the ESPP was $ 2.6 million and is expected to be recognized as expense over approximately 1.12 years.

As of September 30, 2021, $ 604,000 has been withheld on behalf of employees for future purchase under the ESPP and is included in accrued expenses and other current liabilities on the condensed consolidated balance sheet.

As of September 30, 2021, no shares have been issued under the ESPP.

Restricted stock

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The weighted-average grant date fair value of restricted stock granted in 2018 was $ 0 .

No shares of restricted stock were granted during the three and six months ended June 30, 2021 and 2020.

No shares of restricted stock were granted during the three and nine months ended September 30, 2021 and 2020.

The restricted stock shares are subject to forfeiture upon the stockholders’

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As such, the Company recognizes the measurement date fair value of the restricted stock over the vesting period as compensation expense.

As of June 30, 2021 and December 31, 2020, 385,337 shares and 557,731 shares of common stock, respectively, were subject to forfeiture.

The summary of the Company’s restricted stock activity during the six months ended June 30, 2021 is as follows:

As of September 30, 2021 and December 31, 2020 , 299,139 shares and 557,731 shares of common stock, respectively, were subject to forfeiture.

The summary of the Company’s restricted stock activity during the nine months ended September 30, 2021 is as follows:

Nonvested at December 31, 2020

Nonvested at June 30, 2021

At June 30, 2021, the total unrecognized compensation related to unvested restricted stock awards granted was $ 0 .

Nonvested at September 30, 2021

At September 30, 2021 , the total unrecognized compensation related to unvested restricted stock awards granted was $ 0 .

Stock-based compensation expense

The allocation of stock-based compensation for all stock awards was as follows (in thousands):

Three months ended June 30,

Six months ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Research and development

1 unchanged sentence

Common stock reserved for future issuance

Common stock reserved for future issuance consisted of the following as of June 30, 2021 and December 31, 2020:

Common stock reserved for future issuance consisted of the following as of September 30, 2021 and December 31, 2020:

September 30,

Conversion of preferred stock outstanding

2 unchanged sentences

Awards available for future grant

Shares available for purchase under the ESPP

Operating leases

The Company has facility leases for office space under non-cancellable and cancelable operating leases with various expiration dates through 2032 and equipment under a non-cancellable operating lease with a term expiring in 2022 .

Operating lease cost was approximately $ 380,000 and $ 742,000 , including variable lease costs of $ 123,000 and $ 228,000 , and short-term lease costs of $ 30,000 and $ 59,000 during the three and six months ended June 30, 2021, respectively.

Operating lease cost was approximately $ 321,000 and $ 661,000 , including variable lease costs of $ 78,000 and $ 175,000 , and short-term lease costs of $ 22,000 and $ 41,000 during the three and six months ended June 30, 2020, respectively.

The Company paid $ 535,000 and $ 470,000 in cash for operating leases that were included in the operating activities section of the consolidated statements of cash flows for the six months ended June 30, 2021 and 2020, respectively.

The weighted-average remaining lease term and the weighted-average discount rate of the Company’s operating leases was 2.71 years and 7.8 % at June 30, 2021, respectively.

Operating lease cost was approximately $ 905,000 and $ 1.6 million, including variable lease costs of $ 96,000 and $ 324,000 , and short-term lease costs of $ 30,000 and $ 89,000 during the three and nine months ended September 30, 2021 , respectively.

Operating lease cost was approximately $ 342,000 and $ 1.0 million, including variable lease costs of $ 94,000 and $ 269,000 , and short-term lease costs of $ 26,000 and $ 67,000 during the three and nine months ended September 30, 2020 , respectively.

The Company paid $ 803,000 and $ 726,000 in ca sh for operating leases that were included in the operating activities section of the consolidated statements of cash flows for the nine months ended September 30, 2021 and 2020, respectively.

The weighted-average remaining lease term and the weighted-average discount rate of the Company’s operating leases was 9 .36 years and 7.1 % a t September 30, 2021 , respectively.

The weighted-average remaining lease term and the weighted-average discount rate of the Company’s operating leases was 3.16 years and 7.8 % at December 31, 2020, respectively.

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The Company is involved in certain aspects of construction and design for certain interior features and leasehold improvements that will be beneficial to the Company to better suit its business needs and intended purpose of the space.

The lease will be accounted for as an operating lease and has a target commencement date of August 2021 .

The lease is accounted for as an operating lease and commenced in August 2021 .

The lease has an initial term of 10.5 years and includes aggregate monthly payments to the lessor of approximately $ 39.5 million beginning in January 2023 with a rent escalation clause, and a tenant improvement allowance of approximately $ 13.4 million.

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The payment associated with the option to cancel the lease after the 84 th month was increased to $ 2.5 million, and the letter of credit provided to the lessor was increased to $ 408,000 .

Future minimum lease payments under non-cancelable operating leases with initial lease terms in excess of one year as of June 30, 2021 are as follows (in thousands):

Future minimum lease payments under the operating leases with initial lease terms in excess of one year as of September 30, 2021 are as follows (in thousands):

Year ending December 31,

2021 (6 months remaining)

2021 (three months remaining)

Total lease payments

Amount representing interest

Tenant improvement allowance receivable

Operating lease liabilities

As of June 30, 2021, the Company had commitments of $ 51.6 million for a cancelable operating lease of a new real estate facility that has not yet commenced, and therefore are not included in the operating lease assets or liabilities.

This operating lease commenced in August 2021 with a lease term of 10.5 years.

Commitments and contingencies

As of June 30, 2021 and December 31, 2020, there was no litigation against the Company.

No provision for federal, state or foreign income taxes has been recorded for the three and six months ended June 30, 2 0 21 and 2 0 20.

As of September 30, 2021 and December 31, 2020 , there was no litigation against the Company.

No provision for federal, state or foreign income taxes has been recorded for the three and nine months ended September 30, 2 0 21 and 2 0 20 .

The Company has incurred net operating losses for all the periods presented and has not reflected any benefit of such net operating loss carryforwards in the accompanying consolidated financial statements due to uncertainty around utilizing these tax attributes within their respective carryforward periods.

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The Company’s policy is to recognize interest expense and penalties related to income tax matters as tax expense.

For the three and six months ended June 30, 2021 and 2020, the Company has no t recognized any interest or penalties related to income taxes.

For the three and nine months ended September 30, 2021 and 2020 , the Company has no t recognized any interest or penalties related to income taxes.

Net loss per share

The following table summarizes the computation of basic and diluted net loss per share of the Company (in thousands, except share and per share data):

Three months ended June 30,

Six months ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Weighted-average shares of common stock used in computing net loss per share, basic and diluted

Net loss per share, basic and diluted

The Company’s potentially dilutive securities, which include its convertible preferred stock, options to purchase common stock and common stock subject to repurchase related to unvested restricted stock and options early exercised, have been excluded from the computation of diluted net loss per share as the effect would be to reduce the net loss per share.

The Company’s potentially dilutive securities, which include its convertible preferred stock, options to purchase common stock, shares purchasable under the ESPP and common stock subject to repurchase related to unvested restricted stock and options early exercised, have been excluded from the computation of diluted net loss per share as the effect would be to reduce the net loss per share.

Therefore, the weighted-average number of common shares outstanding used to calculate both basic and diluted net loss per share is the same.

The Company excluded the following potential common shares, presented based on amounts outstanding at each period end, from the computation of diluted net loss per share for the periods indicated because including them would have had an anti-dilutive effect:

Three months ended June 30,

Six months ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Convertible preferred stock issued

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Options early exercised subject to future vesting

Estimated shares purchasable under the ESPP

Total potentially dilutive shares

Retirement plan

The Company sponsors an employee savings plan that qualifies as a deferred salary arrangement under Section 401(k) of the IRC.

Participating employees may defer up to the Internal Revenue Service annual contribution limit.

The Company sponsors an employee savings plan that qualifies as a deferred salary arrangement under Section 401(k) of the US Internal Revenue Code (IRC).

Participating employees may defer up to the Internal Revenue Service (IRS) annual contribution limit.

Beginning in 2021, the Company provides a safe harbor contribution of 3.0 % of the employee’s compensation, not to exceed eligible limits.

For the three and six months ended June 30, 2021, the Company incurred $ 105,000 and $ 232,000 in expenses related to the safe harbor contribution, respectively.

No expenses were incurred for the three and six months ended June 30, 2020 related to the safe harbor contribution.

For the three and nine months ended September 30, 2021, the Company incurre d $ 146,000 and $ 378,000 in expenses related to the safe harbor contribution, respectively.

No expenses were incurred for the three and nine months ended September 30, 2020 related to the safe harbor contribution.

COVID-19 pandemic

The current COVID-19 pandemic, which is impacting worldwide economic activity, poses the risk 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.

During the three and six months ended June 30, 2021 and 2020, the Company has not experienced significant impact from the pandemic.

During the three and nine months ended September 30, 2021 and 2020 , the Company has not experienced significant impact from the pandemic.

The extent to which the COVID-19 pandemic will impact the Company’s business will depend on future developments that are highly uncertain and cannot be predicted at this time.

Subsequent events

Reverse stock split

On July 9, 2021, the Company effected a one -for-1.2 reverse stock split of its issued and outstanding shares of common stock and a proportional adjustment to the existing conversion ratios for each series of the Company’s Preferred Stock.

Accordingly, all share and per share amounts for all periods presented in the accompanying consolidated financial statements and notes thereto have been adjusted retroactively, where applicable, to reflect this reverse stock split and adjustment of the preferred stock conversion ratios.

The par value and the number of authorized shares of the convertible preferred stock and common stock were not adjusted in connection with the reverse stock split.

Initial public offering

On July 20, 2021, the Company completed its IPO in which the Company issued and sold 21,562,500 shares of common stock (including 2,812,500 shares of common stock in connection with the full exercise of the underwriters’

option to purchase additional shares) at an offering price of $ 16.00 per share.

Proceeds from the IPO, net of underwriting discounts, commissions and estimated offering costs, were $ 317.7 million.

In connection with the completion of the IPO, all outstanding shares of convertible preferred stock were converted into 71,263,685 shares of common stock.

Related party transactions

Erasca Foundation

In May 2021, the Company established the Erasca Foundation to provide support such as direct research grants, hardship grants, patient advocacy, patient education in underserved populations, and funding for other initiatives to positively impact society.

In July 2021, the Company issued 1,093,557 shares of its common stock to the Erasca Foundation.

Amendment of certificate of incorporation

2021 Incentive award plan

A total of 15,150,000 shares of common stock were initially reserved for issuance under the 2021 Plan.

In addition, the number of shares of common stock available for issuance under the 2021 Plan will be increased annually on the first day of each fiscal year during the term of the 2021 Plan, beginning with the 2022 fiscal year, by an amount equal to the lesser of (a) 5 % of the shares of common stock outstanding on the final day of the immediately preceding calendar year or (b) such smaller number of shares as determined by the Company’s board of directors.

Employee stock purchase plan

In July 2021, the Company’s board of directors adopted and the Company’s stockholders approved the Company’s 2021 Employee Stock Purchase Plan (the ESPP), which became effective in connection with the IPO.

The ESPP permits participants to contribute up to a specified percentage of their eligible compensation during defined rolling six-month periods to purchase the Company’s common stock.

The purchase price of the shares will be 85 % of the lower of the fair market value of the Company’s common stock on the first day of trading of the offering period or on the applicable purchase date.

A total of 1,260,000 shares of common stock was initially reserved for issuance under the ESPP.

UCSF Agreement amendment

In connection with the UCSF Agreement amendment, in August 2021, following the achievement of the Corporate Milestone, the Company made a cash payment to the Regents in the amount of $ 1.7 million.

The Company's chief executive officer and certain board members serve as directors of the Erasca Foundation and the Company's chief executive officer, chief financial officer, and general counsel are also officers of the Erasca Foundation.

In July 2021, the Company issued 1,093,557 shares of its common stock to the Erasca Foundation as a contribution and recorded $ 17.5 million to contribution of common stock to Erasca Foundation in the condensed consolidated statements of operations and comprehensive loss.

Disgorgement of stockholder's short-swing profits

In August 2021, the Company received $ 553,000 related to the recovery of short-swing profits from a private investment fund affiliated with one of its board members, a related party, under Section 16(b) of the Securities Exchange Act of 1934, as amended (the Exchange Act).

The Company recognized these proceeds as a capital contribution from a stockholder with an increase to additional paid-in-capital in its condensed consolidated balance sheet and as cash provided by financing activities in its condensed consolidated statement of cash flows.

Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and notes thereto included elsewhere in this Quarterly Report on Form 10-Q and with our audited consolidated financial statements and notes thereto and management’s discussion and analysis of financial condition and results of operations for the year ended December 31, 2020, included in our Prospectus dated July 15, 2021 filed pursuant to Rule 424(b) under the Securities Act of 1933, as amended (the Securities Act), with the Securities Exchange Commission (SEC) on July 16, 2021 (the Prospectus).

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and notes thereto included elsewhere in this Quarterly Report on Form 10-Q and with our audited consolidated financial statements and notes thereto and management’s discussion and analysis of financial condition and results of operations for the year ended December 31, 2020, included in our Prospectus filed pursuant to Rule 424(b) under the Securities Act, with the SEC on July 16, 2021.

Cautionary Note Regarding Forward-Looking Statements

This Quarterly Report contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act).

All statements other than statements of historical facts contained in this Quarterly Report, including statements regarding our future results of operations and financial position, business strategy, research and development plans, the anticipated timing, costs, design and conduct of our ongoing and planned preclinical studies and planned clinical trials for our product candidates, the timing and likelihood of regulatory filings and approvals for our product candidates, our ability to commercialize our product candidates, if approved, the impact of the COVID-19 pandemic on our business, the pricing and reimbursement of our product candidates, if approved, the potential to develop future product candidates, the potential benefits of strategic collaborations and our intent to enter into any strategic arrangements, the timing and likelihood of success, plans and objectives of management for future operations and future results of anticipated product development efforts, are forward-looking statements.

This Quarterly Report contains forward-looking statements within the meaning of Section 21E of the Exchange Act.

All statements other than statements of historical facts contained in this Quarterly Report, including statements regarding our future results of operations and financial position, business strategy, research and development plans, the anticipated timing, costs, design and conduct of our ongoing and planned preclinical studies and planned clinical trials for our product candidates, the timing and likelihood of regulatory filings and approvals for our product candidates, our ability to commercialize our product candidates, if approved, the impact of the COVID-19 pandemic on our business, the pricing and reimbursement of our product candidates, if approved, the potential to develop future product candidates, the potential benefits of current and future licenses, acquisitions, and strategic arrangements with third parties, and our intent to enter into any future strategic arrangements, the timing and likelihood of success, plans and objectives of management for future operations and future results of anticipated product development efforts, are forward-looking statements.

In some cases, you can identify forward-looking statements by terms such as “may,”

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and (3) targeting escape routes that emerge in response to treatment.

The following figure shows the RAS/MAPK pathway and the manner in which the three therapeutic strategies listed above seek to comprehensively, and perhaps synergistically, shut down the RAS/MAPK pathway.

The target breadth and molecular diversity represented in our pipeline enable us to pursue a systematic, data-driven clinical development effort to identify single agent and combination approaches with the goal of prolonging survival in a wide range of patient populations with high unmet needs.

Our modality-agnostic approach aims to allow us to selectively and potently inhibit or degrade critical signaling nodes with small molecule therapeutics, large molecule therapeutics, and protein degraders.

The following figure shows the RAS/MAPK pathway and how the three therapeutic strategies listed above attempt to comprehensively and synergistically shut down the RAS/MAPK pathway.

The target breadth and molecular diversity represented in our pipeline enable us to pursue a systematic, data-driven clinical development effort to identify single agent and combination approaches with the goal of prolonging survival in numerous patient populations with high unmet medical needs.

Our modality-agnostic approach seeks to selectively and potently inhibit or degrade critical signaling nodes with small molecule therapeutics, large molecule therapeutics, and protein degraders.

Our purpose-built pipeline includes two clinical-stage programs (ERK and SHP2 inhibitors), two preclinical-stage programs (CNS-penetrant KRAS G12C and EGFR inhibitors), and seven discovery-stage programs targeting other key oncogenic drivers.

We believe our world-class team’s capabilities and experience, further guided by our scientific advisory board, which includes the world’s leading experts in the RAS/MAPK pathway, uniquely position us to achieve our bold mission of erasing cancer.

Our lead product candidates are ERAS-007 (our oral ERK1/2 inhibitor) and ERAS-601 (our oral SHP2 inhibitor), which together comprise our first MAPKlamp to target upstream and downstream nodes of the RAS/MAPK pathway.

Our lead product candidates are ERAS-007 (our oral ERK1/2 inhibitor) and ERAS-601 (our oral SHP2 inhibitor), which together comprise our first MAPKlamp approach to target upstream and downstream nodes of the RAS/MAPK pathway.

ERAS-007 is the first prong of our first MAPKlamp.

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In May 2021, we dosed the first patient in HERKULES-1, a Phase 1b/2 clinical trial evaluating ERAS-007 as a single agent and in combination with ERAS-601 (our first MAPKlamp) in advanced solid tumors.

We are planning to dose the first patient in HERKULES-2, a Phase 1b/2 clinical trial for ERAS-007/MAPKlamp in combination with various agents in patients with NSCLC, in the third quarter of 2021.

We are planning to dose the first patient in HERKULES-3, a Phase 1b/2 clinical trial for ERAS-007/MAPKlamp in combination with various agents in patients with CRC, in the second half of 2021.

Finally, in the first quarter of 2022, we plan to dose the first patient in HERKULES-4, a Phase 1b/2 clinical trial for ERAS-007/MAPKlamp in combination with various agents in patients with hematologic malignancies.

In September 2021, we dosed the first patient in HERKULES-2, a Phase 1b/2 master protocol clinical trial for ERAS-007 and/or ERAS-601 in combination with various agents in patients with NSCLC.

In September 2021, we dosed the first patient in HERKULES-3, a Phase 1b/2 master protocol clinical trial for ERAS-007/MAPKlamp in combination with various agents in patients with gastrointestinal malignancies, with an initial focus on advanced CRC.

In September 2021, we announced a clinical trial collaboration and supply agreement with Pfizer Inc.

(Pfizer) in connection with the HERKULES-3 trial.

Under the terms of the collaboration, we are sponsoring and funding the clinical trial and Pfizer is providing its BRAF inhibitor, encorafenib (BRAFTOVI ® ), at no cost.

Finally, in the first quarter of 2022, we plan to dose the first patient in HERKULES-4, a Phase 1b/2 master protocol clinical trial for ERAS-007 and/or

ERAS-601 in combination with various agents in patients with hematologic malignancies.

While providing POC data, these trials may be expanded to enable potential accelerated approvals in their respective indications.

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ERAS-601 is designed to block oncogenic signal transduction and delay the onset of therapeutic resistance, and thereby serve as a backbone of combination therapy.

In the fourth quarter of 2020, we initiated FLAGSHP-1, a Phase 1 clinical trial for ERAS-601 in patients with advanced solid tumors.

We expect to file an investigational new drug application (IND) with the U.S.

Food and Drug Administration (FDA) for ERAS-3490, the development candidate nominated from our CNS-penetrant ERAS-1 KRAS G12C inhibitor program, in the second half of 2022.

In the fourth quarter of 2020, we dosed the first patient in FLAGSHP-1, a Phase 1 clinical trial for ERAS-601 in patients with advanced solid tumors.

We expect to file an investigational new drug application (IND) with the US Food and Drug Administration (FDA) for ERAS-3490, the development candidate nominated from our CNS-penetrant KRAS G12C inhibitor program, in the second half of 2022.

We are conducting IND-enabling studies for ERAS-801, our CNS-penetrant EGFR inhibitor, and expect to file an IND for development in refractory glioblastoma multiforme in the first quarter of 2022.

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We believe that this strategy allows us to maintain a more efficient infrastructure by eliminating the need for us to invest in our own manufacturing facilities, equipment, and personnel while also enabling us to focus our expertise and resources on the design and development of our product candidates.

In July 2021, we completed our IPO and issued 21,562,500 shares of our common stock, including the exercise in full by the underwriters of their option to purchase 2,812,500 shares of our common stock, at a price to the public of $16.00 per share.

Our aggregate net proceeds from the offering were $317.0 million, net of underwriting discounts and commissions of $24.2 million and offering costs of $3.8 million.

Since our inception in 2018, we have devoted substantially all of our resources to organizing and staffing our company, business planning, raising capital, identifying, acquiring, and in-licensing our product candidates, establishing our intellectual property portfolio, conducting research, preclinical studies and clinical trials, establishing arrangements with third parties for the manufacture of our product candidates and related raw materials, and providing general and administrative support for these operations.

We do not have any products approved for sale and have not generated any revenue.

As of June 30, 2021, we have raised a total of $320.4 million to fund our operations, comprised primarily of gross proceeds from the sale and issuance of convertible preferred stock.

As of June 30, 2021, we had cash, cash equivalents and investments of $198.7 million.

In July 2021, we completed our initial public offering (IPO) of 21,562,500 shares of our common stock at a price to the public of $16.00 per share, including the exercise in full by the underwriters of their option to purchase 2,812,500 additional shares of our common stock.

Including the option exercise, our aggregate net proceeds from the offering were $317.7 million, net of underwriting discounts, commissions and estimated offering costs.

As of September 30, 2021, we have raised a total of $665.4 million to fund our operations, comprised primarily of gross proceeds from our IPO and the sale and issuance of convertible preferred stock.

As of September 30, 2021, we had cash, cash equivalents and investments of $486.6 million.

We have incurred significant operating losses since inception.

Our net losses were $28.2 million and $5.5 million for the three months ended June 30, 2021 and 2020, respectively, and $46.2 million and $29.1 million for the six months ended June 30, 2021 and 2020, respectively.

As of June 30, 2021, we had an accumulated deficit of $161.6 million.

Our net losses were $46.1 million and $10.6 million for the three months ended September 30, 2021 and 2020, respectively, and $92.3 million and $39.8 million for the nine months ended September 30, 2021 and 2020, respectively.

As of September 30, 2021, we had an accumulated deficit of $207.7 million.

We expect our expenses and operating losses will increase substantially for the foreseeable future, particularly if and as we conduct our ongoing and planned clinical trials and preclinical studies;

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Our net losses may fluctuate significantly from quarter-to-quarter and year-to-year, depending on the timing of our clinical trials and preclinical studies and our expenditures on other research and development activities.

Based upon our current operating plans, we believe that our existing cash, cash equivalents and investments, together with the net proceeds received from our IPO, will be sufficient to fund our operations for at least the next 24 months.

Based upon our current operating plans, we believe that our cash, cash equivalents and investments as of September 30, 2021 will be sufficient to fund our operations for at least the next 24 months.

We do not expect to generate any revenues from product sales until we successfully complete development and obtain regulatory approval for one or more of our product candidates, which we expect will take a number of years and may never occur.

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

or other operations, or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.

Our failure to raise capital or enter into such other arrangements when needed would have a negative impact on our financial condition and could force us to delay, limit, reduce, or terminate our research and development programs or other operations, or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.

The COVID-19 worldwide pandemic has presented substantial public health and economic challenges and is affecting our employees, patients, physicians and other healthcare providers, communities and business operations, as well as the US and global economies and financial markets.

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Our acquisition and license agreements

In November 2020, we entered into an Agreement and Plan of Merger and an Amended and Restated License Agreement (the Asana Agreements), pursuant to which we acquired an exclusive, worldwide license to certain intellectual property rights relating to inhibitors of ERK1 and ERK2 owned or controlled by Asana to develop and commercialize ERAS-007 and certain other related compounds for all applications.

Under the Asana Agreements, we made an upfront payment of $20 million and issued 4,000,000 shares of our Series B-2 convertible preferred stock at a price of $7.50 per share to Asana.

We are obligated to make future milestone payments of up to $90 million upon the achievement of various development and regulatory milestones and to issue 3,888,889 shares of common stock upon the achievement of a development milestone.

We are not obligated to pay royalties on the net sales of ERAS-007.

We have entered into additional in-license and acquisition agreements pursuant to which we in-licensed or acquired certain intellectual property rights related to our product candidates and development programs, including license agreements with NiKang Therapeutics, Inc.

(NiKang), Katmai Pharmaceuticals, Inc.

(Katmai) and University of California, San Francisco (the Regents), under which we were granted certain intellectual property rights related to ERAS-601, ERAS-801 and ERAS-2/3, respectively, and an asset purchase agreement with Emerge Life Sciences, Pte.

(ELS) under which we acquired certain intellectual property rights related to ERAS-12.

For additional information regarding the Asana Agreements as well as these and other additional agreements, see the section titled “Business—Our acquisition and license agreements”

We have entered into in-license and acquisition agreements pursuant to which we in-licensed or acquired certain intellectual property rights related to our product candidates and development programs, including the Asana Agreements, the ELS Purchase Agreement, the NiKang Agreement, the Katmai Agreement, the LifeArc Agreement, and the UCSF Agreement.

For additional information regarding these agreements, see the section titled “Business—Our acquisition and license agreements”

in our Prospectus.

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Our research and development expenses include:

external costs, including expenses incurred under arrangements with third parties, such as CROs, contract manufacturers, consultants and our scientific advisors;

external costs, including expenses incurred under arrangements with third parties, such as CROs, CMOs, consultants and our scientific advisors;

internal costs, including:

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The following table summarizes our research and development expenses incurred for the following periods (in thousands):

Three months ended June 30,

Six months ended June 30,

Three Months Ended

September 30,

Nine Months Ended

September 30,

Other discovery and preclinical programs

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as defined under US generally accepted accounting principles (US GAAP), the drug has not achieved regulatory approval for marketing and, absent obtaining such approval, has no established alternative future use.

In-process research and development expenses consist primarily of our upfront payment and issuance of our Series B-2 convertible preferred stock to Asana in connection with ERAS-007, our upfront and milestone payments to NiKang in connection with ERAS-601, our upfront payment to Katmai in connection with ERAS-801, our upfront payment and issuance of our common stock to ELS in connection with ERAS-12 and issuance of our common stock to the Regents in connection with ERAS-2/3.

In-process research and development expenses consist primarily of our upfront payment and issuance of our Series B-2 convertible preferred stock to Asana in connection with the Asana Agreements, our upfront and milestone payments to NiKang in connection with the NiKang Agreement, our upfront payment to Katmai in connection with the Katmai Agreement, our upfront payment and issuance of our common stock to ELS in connection with the ELS Purchase Agreement, and issuance of our common stock and cash payment to the Regents in connection with the UCSF Agreement.

General and administrative

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Results of operations

Comparison of the three months ended June 30, 2021 and 2020

The following table summarizes our results of operations for the three months ended June 30, 2021 and 2020 (in thousands):

Three months ended June 30,

Comparison of the three months ended September 30, 2021 and 2020

The following table summarizes our results of operations for the three months ended September 30, 2021 and 2020 (in thousands):

Three Months Ended September 30,

Operating expenses:

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General and administrative

Contribution of common stock to Erasca Foundation

Total operating expenses

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Research and development expenses

Research and development expenses were $17.6 million for the three months ended June 30, 2021 compared to $5.9 million for the three months ended June 30, 2020.

The increase of $11.7 million was primarily driven by a $4.7 million increase in expenses incurred in connection with clinical trials and preclinical studies, a $4.0 million increase in personnel costs due to increased headcount to support increased development activities, and a $2.8 million increase in outsourced services and consulting.

Research and development expenses were $20.0 million for the three months ended September 30, 2021 compared to $9.1 million for the three months ended September 30, 2020.

The increase of $10.9 million was primarily driven by a $4.2 million increase in expenses incurred in connection with clinical trials and preclinical studies, a $3.8 million increase in personnel costs, a $1.6 million increase in stock-based compensation expense, and a $1.1 million increase in outsourced services and consulting.

In-process research and development expenses

In-process research and development expenses were $5.5 million for the three months ended June 30, 2021 related to the issuance of 944,945 shares of our common stock at a price of $5.81 per share or a total fair value of $5.5 million in connection with the amendment to our in-license agreement with the Regents.

There were no in-process research and development expenses for the three months ended June 30, 2020.

In-process research and development expenses were $1.7 million for the three months ended September 30, 2021 related to the cash payment of $1.7 million following the achievement of the Corporate Milestone in connection with the UCSF Agreement.

There were $75,000 in in-process research and development expenses related to the LifeArc Agreement for the three months ended September 30, 2020.

General and administrative expenses

General and administrative expenses were $5.1 million for the three months ended June 30, 2021 compared to $1.4 million for the three months ended June 30, 2020.

The increase of $3.7 million was primarily driven by increases of $2.3 million in personnel costs, $0.6 million in legal fees and $0.3 million in audit fees.

General and administrative expenses were $6.9 million for the three months ended September 30, 2021 compared to $2.0 million for the three months ended September 30, 2020.

The increase of $4.9 million was primarily driven by an increase of $1.8 million in personnel costs, an increase of $1.3 million in stock-based compensation expense, and increases of $1.0 million in insurance costs and $0.1 million in legal fees.

Contribution of common stock to Erasca Foundation

Contribution of common stock to Erasca Foundation of $17.5 million was recognized for the three months ended September 30, 2021 in connection with the issuance of 1,093,557 shares of our common stock as a contribution to the Erasca Foundation in conjunction with our IPO.

No such expenses were recognized for the three months ended September 30, 2020.

Other income (expense), net

Other income (expense), net was $(30,000) for the three months ended June 30, 2021 compared to $1.8 million for the three months ended June 30, 2020.

The decrease of $1.8 million was primarily related to the change in fair value of the preferred stock purchase right liability of $1.8 million as a result of the obligation of the Series B-2 shares being fulfilled upon the Series B-2 issuance in January 2021.

Comparison of the six months ended June 30, 2021 and 2020

The following table summarizes our results of operations for the six months ended June 30, 2021 and 2020 (in thousands):

Six months ended June 30,

Other income (expense), net was $(25,000) for the three months ended September 30, 2021 compared to $0.6 million for the three months ended September 30, 2020.

The decrease of $0.6 million was primarily related to the change in fair value of the preferred stock purchase right liability of $0.6 million recorded in the three months ended September 30, 2020 and no such change in fair value recorded in the three months ended September 30, 2021 as a result of the obligation of the Series B-2 shares being fulfilled upon the Series B-2 issuance in January 2021.

Comparison of the nine months ended September 30, 2021 and 2020

The following table summarizes our results of operations for the nine months ended September 30, 2021 and 2020 (in thousands):

Nine Months Ended September 30,

Operating expenses:

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General and administrative

Contribution of common stock to Erasca Foundation

Total operating expenses

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Research and development expenses

Research and development expenses were $29.8 million for the six months ended June 30, 2021 compared to $10.4 million for the six months ended June 30, 2020.

The increase of $19.4 million was primarily driven by a $6.7 million increase in personnel costs due to increased headcount to support increased development activities, a $6.5 million increase in expenses incurred in connection with clinical trials and preclinical studies and a $5.8 million increase in outsourced services and consulting.

Research and development expenses were $49.8 million for the nine months ended September 30, 2021 compared to $19.5 million for the nine months ended September 30, 2020.

The increase of $30.3 million was primarily driven by a $10.7 million increase in expenses incurred in connection with clinical trials and preclinical studies, a $9.2 million increase in personnel costs, a $6.9 million increase in outsourced services and consulting, and a $2.9 million increase in stock-based compensation expense.

In-process research and development expenses

In-process research and development expenses were $9.2 million for the six months ended June 30, 2021 compared to $17.7 million for the six months ended June 30, 2020.

In-process research and development expenses for the six months ended June 30, 2021 related to the issuance of 944,945 shares of our common stock at a price of $5.81 per share or a total fair value of $5.5 million in connection with the amendment to our in-license agreement with the Regents and a $2.0 million upfront payment and issuance of 500,000 shares of our common stock at a price of $3.36 per share or a total fair value of $1.7 million in connection with the ELS asset acquisition.

In-process research and development expenses for the six months ended June 30, 2020 related to a $5.0 million upfront payment and a $7.0 million milestone payment in connection with the in-license agreement with NiKang and a $5.7 million upfront payment in connection with the in-license agreement with Katmai.

In-process research and development expenses were $10.8 million for the nine months ended September 30, 2021 compared to $17.7 million for the nine months ended September 30, 2020.

In-process research and development expenses for the nine months ended September 30, 2021 related to the cash payment of $1.7 million following the achievement of the Corporate Milestone and the issuance of 944,945 shares of our common stock at a price of $5.81 per share or a total fair value of $5.5 million in connection with the amendment to the UCSF Agreement, and a $2.0 million upfront payment and issuance of 500,000 shares of our common stock at a price of $3.36 per share or a total fair value of $1.7 million in connection with the ELS Purchase Agreement.

In-process research and development expenses for the nine months ended September 30, 2020 related to a $5.0 million upfront payment and a $7.0 million milestone payment in connection with the NiKang Agreement, a $5.7 million upfront payment in connection with the Katmai Agreement, and a $75,000 license payment in connection with the LifeArc Agreement.

General and administrative expenses

General and administrative expenses were $8.8 million for the six months ended June 30, 2021 compared to $3.0 million for the six months ended June 30, 2020.

The increase of $5.7 million was primarily driven by increases of $3.6 million in personnel costs, $0.9 million in legal fees and $0.4 million in audit fees.

General and administrative expenses were $15.7 million for the nine months ended September 30, 2021 compared to $5.1 million for the nine months ended September 30, 2020.

The increase of $10.6 million was primarily driven by a $4.5 million increase in personnel costs, a $2.2 million increase in stock-based compensation expense, and increases of $1.1 million in insurance costs, $1.0 million in legal fees and $0.4 million in audit fees.

Contribution of common stock to Erasca Foundation

Contribution of common stock to Erasca Foundation of $17.5 million was recognized for the nine months ended September 30, 2021 in connection with the issuance of 1,093,557 shares of our common stock as a contribution to the Erasca Foundation in conjunction with our IPO.

No such expenses were recognized for the nine months ended September 30, 2020.

Other income (expense), net

Other income (expense), net was $1.6 million for the six months ended June 30, 2021 compared to $2.0 million for the six months ended June 30, 2020.

Other income (expense), net was $1.5 million for the nine months ended September 30, 2021 compared to $2.5 million for the nine months ended September 30, 2020.

The decrease of $1.0 million was primarily related to the decrease of $0.2 million in interest and accretion income earned on our cash, cash equivalents and investments and a decrease of $0.7 million in the change in fair value of the preferred stock purchase right liability.

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Sources of liquidity

From our inception through June 30, 2021, we have received aggregate gross proceeds of $320.4 million from the sale of shares of our convertible preferred stock.

In July 2021, we completed our IPO of 21,562,500 shares of our common stock at a price to the public of $16.00 per share, including the exercise in full by the underwriters of their option to purchase 2,812,500 additional shares of our common stock.

Including the option exercise, our aggregate net proceeds from the offering were $317.7 million, net of underwriting discounts, commissions and estimated offering costs.

Our aggregate net proceeds from the offering were $317.0 million, net of underwriting discounts and commissions of $24.2 million and offering costs of $3.8 million.

Prior to the IPO, we received aggregate gross proceeds of $320.4 million from the sale of shares of our convertible preferred stock.

Future capital requirements

As of June 30, 2021, we had cash, cash equivalents and investments of $198.7 million, which did not include net proceeds of $317.7 million received in July 2021 from the sale of shares in our IPO.

Based upon our current operating plans, we believe that our existing cash, cash equivalents and investments, together with the net proceeds from our IPO, will be sufficient to fund our operations for at least the next 24 months.

As of September 30, 2021, we had cash, cash equivalents and investments of $486.6 million, which includes net proceeds of $317.0 million received in July 2021 from the sale of shares in our IPO.

Based upon our current operating plans, we believe that our cash, cash equivalents and investments, will be sufficient to fund our operations for at least the next 24 months.

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.

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The following table shows a summary of our cash flows for the periods presented (in thousands):

Six months ended June 30,

Nine Months Ended September 30,

Net cash (used in) provided by:

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Operating activities

Cash used in operating activities was $33.9 million during the six months ended June 30, 2021, primarily resulting from a net loss of $46.2 million, partially reduced by in-process research and development expenses of $9.2 million, which is reflected in noncash and investing activities, stock-based compensation of $2.4 million, changes in operating assets and liabilities of $2.0 million and depreciation expense of $0.3 million, partially offset by a $1.6 million change in fair value of the preferred stock purchase right liability.

Cash used in operating activities was $57.1 million during the nine months ended September 30, 2021, primarily resulting from a net loss of $92.3 million, partially reduced by the issuance of common stock to the Erasca Foundation of $17.5 million, which is reflected in noncash investing and financing activities, in-process research and development expenses of $10.8 million, which are reflected in noncash and investing activities, stock-based compensation of $5.4 million, changes in operating assets and liabilities of $2.4 million and depreciation expense of $0.5 million, partially offset by a $1.6 million change in fair value of the preferred stock purchase right liability.

Net cash provided by changes in operating assets and liabilities consisted primarily of increases in accounts payable, accrued expenses and other current liabilities of $7.6 million, partially offset by an increase in prepaid expenses and other current and long-term assets of $5.6 million.

Cash used in operating activities was $12.1 million during the six months ended June 30, 2020, primarily resulting from a net loss of $29.1 million, partially reduced by in-process research and development expenses of $17.7 million, which is reflected in investing activities, changes in operating assets and liabilities of $0.7 million, depreciation expense of $0.3 million and stock-based compensation expense of $0.2 million, partially offset by a $1.8 million change in fair value of the preferred stock purchase right liability.

Net cash provided by changes in operating assets and liabilities consisted primarily of increases in accrued expenses and other current liabilities of $1.5 million, partially offset by a decrease in accounts payable of $0.5 million and an increase in prepaid expenses and other current and long-term assets of $0.2 million.

Cash used in operating activities was $19.6 million during the nine months ended September 30, 2020, primarily resulting from a net loss of $39.8 million, partially reduced by in-process research and development expenses of $17.7 million, which is reflected in investing activities, changes in operating assets and liabilities of $4.0 million, depreciation expense of $0.4 million and stock-based compensation expense of $0.4 million, partially offset by a $2.3 million change in fair value of the preferred stock purchase right liability.

Net cash provided by changes in operating assets and liabilities consisted primarily of increases in accrued expenses and other current liabilities of $4.5 million, partially offset by an increase in prepaid expenses and other current and long-term assets of $0.4 million.

Investing activities

Net cash provided by investing activities was $4.3 million during the six months ended June 30, 2021 as compared to cash used in investing activities of $38.6 million during the six months ended June 30, 2020.

The increase in cash provided by investing activities of $42.9 million was primarily the result of additional maturities of investments of $23.1 million, a decrease in in-process research and development of $11.7 million and a decrease in purchases of investments of $8.1 million.

Net cash used in investing activities was $0.6 million during the nine months ended September 30, 2021 as compared to cash used in investing activities of $87.8 million during the nine months ended September 30, 2020.

The decrease in cash used in investing activities of $87.1 million was primarily the result of a decrease in purchases of investments of $55.7 million, additional maturities of investments of $25.8 million, and a decrease in in-process research and development of $10.1 million, offset by an increase in purchases of property and equipment of $4.5 million.

Financing activities

Net cash provided by financing activities was $120.7 million during the six months ended June 30, 2021 as compared to $125.5 million during the six months ended June 30, 2020.

During the six months ended June 30, 2021, we received $119.4 million from the sale of shares of our Series B-2 convertible preferred stock, net of issuance costs and $1.3 million from the exercise of stock options.

During the six months ended June 30, 2020, we received $125.0 million from the sale of shares of our Series B-1 convertible preferred stock, net of issuance costs, and $0.5 million from the exercise of stock options.

Net cash provided by financing activities was $438.3 million during the nine months ended September 30, 2021 as compared to $140.1 million during the nine months ended September 30, 2020.

During the nine months ended September 30, 2021, we received $317.0 million from the issuance of common stock in our IPO, net of underwriting discounts and commissions and offering costs, $119.4 million from the sale of shares of our Series B-2 convertible preferred stock, net of issuance costs, $1.3 million from the exercise of stock options and $0.6 million from the disgorgement of a stockholder's short-swing profits.

During the nine months ended September 30, 2020, we received $137.0 million from the sale of shares of our Series B-1 convertible preferred stock, net of issuance costs, and $3.1 million from the exercise of stock options.

Contractual obligations and commitments

As of June 30, 2021, there have been no material changes outside the ordinary course of our business to the contractual obligations we reported in “Management’s discussion and analysis of financial condition and results of operations –

As of September 30, 2021, there have been no material changes outside the ordinary course of our business to the contractual obligations we reported in “Management’s discussion and analysis of financial condition and results of operations –

Contractual obligations and commitments,”

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Actual results may differ materially from these estimates.

As of June 30, 2021, there have been no material changes to our critical accounting policies and estimates from those disclosed in “Management’s discussion and analysis of financial condition and results of operations –

As of September 30, 2021, there have been no material changes to our critical accounting policies and estimates from those disclosed in “Management’s discussion and analysis of financial condition and results of operations –

Critical accounting policies and estimates,”

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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-Q

Item 1. Financial Statements