What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2024-08-12 compared with 2024-05-08 · 150 added, 75 removed, 186 unchanged (55% of the section changed)

19 unchanged sentences

Our modality-agnostic approach aims to allow us to selectively and potently target critical signaling nodes with the most appropriate modality, including small molecule therapeutics and large molecule therapeutics.

Our purpose-built pipeline includes three clinical-stage programs (a pan-RAF inhibitor, an ERK inhibitor, and a central nervous system (CNS)-penetrant EGFR inhibitor), and additional discovery-stage programs targeting other key oncogenic drivers.

Our purpose-built pipeline consists of several molecules targeting key oncogenic drivers, including:

one clinical-stage program (a pan-RAF inhibitor), two IND-enabling stage programs (a pan-RAS molecular glue and a pan-KRAS inhibitor), and an additional discovery-stage program.

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 candidate is naporafenib, for which we plan to initiate a pivotal Phase 3 trial (SEACRAFT-2) in the second quarter of 2024 for patients with NRAS-mutated (NRASm) melanoma.

We dosed the first patient in a Phase 1b trial (SEACRAFT-1) in August 2023 for patients with RAS Q61X solid tumors to inform additional clinical development pathways for naporafenib.

Naporafenib is a pan-RAF inhibitor with first-in-class and best-in-class potential for patients with NRASm melanoma, RAS Q61X solid tumors, and other RAS/MAPK pathway-driven tumors.

Our lead product candidate is naporafenib, a pan-RAF inhibitor with first-in-class and best-in-class potential for patients with NRASm melanoma, RAS Q61X solid tumors, and other RAS/MAPK pathway-driven tumors.

RAF proteins are ubiquitously expressed serine-threonine kinases that constitute a key node of the RAS/MAPK pathway downstream of RAS and upstream of MEK.

2 unchanged sentences

We in-licensed naporafenib from Novartis Pharma AG (Novartis) in December 2022.

Naporafenib has been dosed in over

500 patients to date, whereby safety, tolerability, pharmacokinetics (PK), and pharmacodynamics have been established in both monotherapy and select combinations, with clinical proof-of-concept (PoC) data in combination with trametinib (MEKINIST) for patients with NRASm melanoma, which includes NRAS Q61X melanoma, and preliminary clinical PoC data in combination with trametinib for patients with RAS Q61X NSCLC.

Naporafenib has been dosed in over 500 patients to date, whereby safety, tolerability, pharmacokinetics (PK), and pharmacodynamics have been established in both monotherapy and select combinations, with clinical proof-of-concept (PoC) data in combination with trametinib (MEKINIST) for patients with NRASm melanoma, which includes NRAS Q61X melanoma, and preliminary clinical PoC

data in combination with trametinib for patients with RAS Q61X NSCLC.

In December 2023, we announced that the US Food and Drug Administration (FDA) granted Fast Track Designation (FTD) to naporafenib in combination with trametinib for the treatment of adult patients with unresectable or metastatic melanoma who have progressed on, or are intolerant to, an anti ‑ programmed death-1 (ligand 1) (PD ‑ (L)1)-based regimen, and whose tumors contain an NRAS mutation (NRASm).

1 unchanged sentence

We are pursuing a broad development strategy for naporafenib, which includes our SEACRAFT trials designed to evaluate naporafenib’s development opportunities in combination with other targeted therapies.

We are prioritizing rapid development for naporafenib plus trametinib in the Phase 1b SEACRAFT-1 trial for patients with RAS Q61X solid tumors, which dosed its first patient in August 2023, and in the planned Phase 3 SEACRAFT-2 trial for patients with NRASm melanoma.

We are prioritizing rapid development for naporafenib plus trametinib in the Phase 1b SEACRAFT-1 trial for patients with RAS Q61X solid tumors, which we initiated in the third quarter of 2023, and in the Phase 3 SEACRAFT-2 trial for patients with NRASm melanoma, which we initiated in the second quarter of 2024.

SEACRAFT-1 is supported by clinical PoC data in patients with NRAS Q61X melanoma and preliminary clinical PoC data in patients with KRAS Q61X NSCLC.

1 unchanged sentence

in the Journal of Clinical Oncology .

In connection with our SEACRAFT-1 and -2 trials, we have entered into clinical trial collaboration and supply agreements (CTCSAs) with Novartis for its MEK inhibitor, trametinib (MEKINIST).

In connection with our SEACRAFT-1 and -2 trials, we have entered into clinical trial collaboration and supply agreements (CTCSAs) with Novartis for its MEK inhibitor, trametinib.

Pursuant to the CTCSAs, we are sponsoring and funding the clinical trials and Novartis is providing its drug to us free of charge.

We anticipate a Phase 1b combination data readout from SEACRAFT-1 between the second and fourth quarters of 2024.

We expect to readout randomized dose optimization data from SEACRAFT-2 in 2025.

Our next most-advanced product candidate is ERAS-007 (our oral ERK1/2 inhibitor), which targets the most distal node of the RAS/MAPK pathway.

In September 2021, we dosed the first patient in HERKULES-3, a Phase 1b/2 master protocol clinical trial for ERAS-007 in combination with various agents in patients with gastrointestinal (GI) cancers.

In connection with our HERKULES-3 trial, we have entered into CTCSAs with Pfizer Inc.

for its BRAF inhibitor, encorafenib (BRAFTOVI), Eli Lilly and Company (Lilly) for its EGFR antibody, cetuximab (ERBITUX), and Pierre Fabre for its BRAF inhibitor, encorafenib (BRAFTOVI), in key international territories.

Pursuant to all of these CTCSAs, we are sponsoring and funding the clinical trial and the partner is providing its drug to us free of charge.

In May 2023, we announced encouraging preliminary data for the ERAS-007 combination with encorafenib and cetuximab (EC) in patients with EC-naïve BRAFm CRC in a poster presentation that we presented at the American Society of Clinical Oncology Annual Meeting in June 2023.

We anticipate a Phase 1b dose expansion data readout for the HERKULES-3 Phase 1b trial for ERAS-007 plus EC in EC-naïve BRAFm CRC patients in the second quarter of 2024.

Our third clinical program is ERAS-801, a CNS-penetrant EGFR inhibitor.

In February 2022, we dosed the first patient in our THUNDERBBOLT-1 Phase 1 clinical trial for ERAS-801 in patients with recurrent glioblastoma (GBM).

In May 2023, we announced that the FDA granted FTD to ERAS-801 for the treatment of adult patients with GBM with EGFR gene alterations.

In June 2023, we announced that the FDA granted Orphan Drug Designation (ODD) to ERAS-801 for the treatment of patients with malignant glioma, which includes GBM.

Provided that the product candidate is approved by the FDA for the orphan-designated disease or condition, ODD entitles a party to the potential for seven years of post-approval marketing exclusivity, subject to certain exemptions, and financial incentives such as tax advantages and user fee waivers.

In November 2023, we announced that a maximum tolerated dose (MTD) was identified for ERAS-801.

We anticipate presenting Phase 1 monotherapy data from THUNDERBBOLT-1 in 2024.

We are also advancing additional programs targeting key oncogenic drivers in the RAS/MAPK pathway, which we will need to successfully progress through discovery and investigational new drug application (IND)-enabling activities prior to advancing these programs into clinical development, if at all.

In addition, we are evaluating additional combinations of naporafenib with our other RAS/MAPK pathway targeting agents and/or external agents in preclinical models.

We anticipate reporting Phase 1b combination data from SEACRAFT-1 in the fourth quarter of 2024.

We expect to readout randomized dose optimization data of naporafenib plus trametinib against a single agent MEK inhibitor (trametinib) from Stage 1 of the SEACRAFT-2 trial in 2025.

Stage 2 of the SEACRAFT-2 trial is expected to compare naporafenib plus trametinib against physician's choice of chemotherapy or trametinib using dual primary endpoints of progression free survival and overall survival for regulatory approval.

Our next two programs are part of our RAS-targeting franchise, which we in-licensed in May 2024, as described below.

These two programs fit within our second approach of targeting RAS directly, both in its active GTP and inactive GDP states.

The RAS targeting landscape can be divided into pan-RAS, pan-KRAS, and mutant-selective approaches.

Pan-RAS and pan-KRAS targeting molecules can address a broad population of patients with G12X, G13X, and possibly Q61X mutations, and also have the potential to address or prevent resistance by blocking wildtype RAS activation.

ERAS-0015 is a potential best-in-class pan-RAS molecular glue for treating patients with RAS-altered solid tumors.

ERAS-0015 has demonstrated approximately 5-10 times greater potency as well as favorable absorption, distribution, metabolism and excretion (ADME) and PK properties in multiple animal species versus the leading pan-RAS molecular glue in development.

More specifically, ERAS-0015 has stronger binding to cyclophilin A relative to the leading pan-RAS molecular glue in development, which enables more potent RAS inhibition.

ERAS-0015 also showed sub-nanomolar to nanomolar preclinical IC50 in vitro potency against KRAS G12X, KRAS G13D, and RAS wildtype.

In vivo, ERAS-0015 showed approximately 10 times higher potency than the leading pan-RAS molecular glue in development and good tumor regression in multiple models.

It also showed superior clearance, half-life, oral bioavailability, and kinetic solubility in preclinical evaluations.

The initial clinical trial for ERAS-0015 will be named AURORAS-1, for which we plan to file an investigational new drug application (IND) in the first half of 2025, with an anticipated Phase 1 monotherapy data readout in 2026.

ERAS-4001 is a potential first-in-class pan-KRAS inhibitor for treating patients with KRAS-altered solid tumors.

The preclinical in vitro potency of ERAS-4001 showed good activity against KRAS G12X and G13D mutations, as well as KRAS wildtype amplifications, with no activity against HRAS or NRAS wildtype proteins.

Sparing wild-type HRAS and NRAS has the potential to provide a greater therapeutic window.

In vivo, ERAS-4001 showed good tumor regression in multiple models.

In combination with anti-PD-1, ERAS-4001 was able to achieve complete disappearance of tumors in mice on day 31.

The initial clinical trial for ERAS-4001 will be named BOREALIS-1, for which we plan to file an IND in the first quarter of 2025, with an anticipated Phase 1 monotherapy data readout in 2026.

ERAS-0015 and ERAS-4001 have the potential to address unmet needs in approximately 2.7 million patients who are diagnosed annually globally with RAS-mutant tumors, of which over 2.2 million patients are diagnosed with KRAS-mutant tumors.

In May 2024, in connection with entering into the Joyo License Agreement and Medshine License Agreement, a review of our strategic priorities, and our decision to deemphasize certain drug discovery activities, we approved a strategic reprioritization to focus our resources on our naporafenib program, ERAS-0015, and ERAS-4001.

We deprioritized our HERKULES-3 clinical trial evaluating ERAS-007 in combination with encorafenib and cetuximab (EC) in patients with EC-naïve BRAFm colorectal cancer

as we believe the clinical efficacy data do not support continued evaluation.

We also deprioritized our THUNDERBBOLT-1 clinical trial evaluating ERAS-801 in patients with recurrent glioblastoma (GBM), although we plan to explore further advancement of ERAS-801, including via select investigator-sponsored trials.

Finally, we deprioritized our preclinical ERAS-4 program;

however, certain of our existing ERAS-4 molecules may serve as backup compounds for ERAS-4001.

We are also advancing additional programs targeting key oncogenic drivers in the RAS/MAPK pathway, which we will need to successfully progress through appropriate preclinical activities (e.g., discovery and IND-enabling activities) prior to advancing these programs into clinical development, if at all.

We do not own or operate, and currently have no plans to establish, any manufacturing facilities.

1 unchanged sentence

We are working with our current manufacturers to ensure that we will be able to scale up our manufacturing capabilities to support our clinical plans.

We are also in the process of

locating and qualifying additional manufacturers to build redundancies into our supply chain.

We are also in the process of locating and qualifying additional manufacturers to build redundancies into our supply chain.

In addition, we rely on third parties to package, label, store, and distribute our product candidates, and we intend to continue to rely on third parties with respect to our commercial products if marketing approval is obtained.

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 August 2022, we entered into an Open Market Sale Agreement (the Sale Agreement) with Jefferies LLC (the Agent), pursuant to which we may offer and sell shares of our common stock having an aggregate offering price of up to $200 million from time to time, in “at the market” offerings through the Agent.

Sales of the shares of common stock, if any, will be made at prevailing market prices at the time of sale, or as otherwise agreed with the Agent.

The Agent will receive a commission from us of up to 3.0% of the gross proceeds of any shares of common stock sold under the Sale Agreement.

There have been no shares of our common stock sold under the Sale Agreement as of March 31, 2024.

In December 2022, we completed the 2022 Offering and issued 15,384,616 shares of our common stock at a price to the public of $6.50 per share.

In December 2022, we completed the sale and issuance of 15,384,616 shares of our common stock at a price to the public of $6.50 per share (the 2022 Offering).

Proceeds from the 2022 Offering were $94.9 million, net of underwriting discounts and commissions and offering costs of $5.1 million.

In March 2024, in connection with the 2024 Private Placement, we entered into a stock purchase agreement with the purchasers named therein for the private placement of 21,844,660 shares of our common stock at a price of $2.06 per share.

On April 2, 2024, the 2024 Private Placement closed and the net proceeds were $43.7 million, after deducting placement agent fees and estimated expenses of approximately $1.3 million.

In March 2024, we entered into a stock purchase agreement with the purchasers named therein for the private placement of 21,844,660 shares of our common stock at a price of $2.06 per share, which closed on April 2, 2024 (the 2024 Private Placement).

Proceeds from the 2024 Private Placement were $43.6 million, after deducting placement agent fees and expenses of approximately $1.4 million.

In May 2024, we completed the sale and issuance of 99,459,458 shares of our common stock, including the exercise in full by the underwriters of their option to purchase 12,972,972 shares of our common stock, at a price to the public of $1.85 per share (the 2024 Offering).

Proceeds from the 2024 Offering were $174.4 million, net of underwriting discounts and commissions and offering costs of $9.6 million.

Sales of the shares of common stock, if any, will be made at prevailing market prices at the time of sale, or as otherwise agreed with the Agent.

Pursuant to the Sale Agreement, the Agent will receive a commission from us of up to 3.0% of the gross proceeds of any shares of common stock sold under the Sale Agreement.

As of June 30, 2024, we had not sold any shares of our common stock under the Sale Agreement.

In July 2024, we sold 9,231,114 shares of common stock under the Sale Agreement at a price of $2.37 per share.

Proceeds from the ATM Offering in July 2024 were $21.1 million, net of commissions and expenses of $0.8 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 March 31, 2024, we have raised a total of $765.4 million to fund our operations, comprised primarily of gross proceeds from our IPO and 2022 Offering and the sale and issuance of convertible preferred stock.

In April 2024, we raised an additional $45.0 million in gross proceeds from the 2024 Private Placement.

As of March 31, 2024, we had cash, cash equivalents and short-term marketable securities of $297.7 million, which includes $6.9 million of net proceeds from the prepayment of the 2024 Private Placement.

The remaining $36.8 million of net proceeds were received in April 2024.

As of June 30, 2024, we have raised a total of $994.4 million to fund our operations, comprised primarily of gross proceeds from our IPO, 2022 Offering, 2024 Private Placement, and 2024 Offering and the sale and issuance of convertible preferred stock.

As of June 30, 2024, we had cash, cash equivalents and marketable securities of $460.2 million.

We have incurred significant operating losses since inception.

Our net losses were $35.0 million and $33.2 million for the three months ended March 31, 2024 and 2023, respectively.

As of March 31, 2024, we had an accumulated deficit of $641.0 million.

Our net losses were $63.2 million and $31.8 million for the three months ended June 30, 2024 and 2023, respectively, and $98.2 million and $65.0 million for the six months ended June 30, 2024 and 2023, respectively.

As of June 30, 2024, we had an accumulated deficit of $704.2 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;

5 unchanged sentences

and incur additional costs associated with being a public company.

If we obtain regulatory approval for any of our product candidates, we expect to incur significant commercialization expenses related to product sales, marketing, manufacturing, and distribution.

obtain regulatory approval for any of our product candidates, we expect to incur significant commercialization expenses related to product sales, marketing, manufacturing, and distribution.

In addition, as our product candidates progress through development and toward commercialization, we will need to make milestone payments to the licensors and other third parties from whom we have in-licensed or acquired our product candidates.

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 cash, cash equivalents and short-term marketable securities as of March 31, 2024, together with the net proceeds received in April 2024 from the 2024 Private Placement which closed on April 2, 2024, will be sufficient to fund our operations into the second half of 2026.

Based upon our current operating plans, we believe that our cash, cash equivalents and marketable securities as of June 30, 2024 will be sufficient to fund our operations into the first half of 2027.

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.

3 unchanged sentences

Our financial condition and results of operations may also be impacted by other factors we may not be able to control, such as geopolitical and economic events.

We do not believe that such factors had a material adverse impact on our results of operations during the three months ended March 31, 2024.

We do not believe that such factors had a material adverse impact on our results of operations during the three months ended June 30, 2024.

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.

Guangzhou Joyo license agreement

In May 2024, we entered into an exclusive license agreement (the Joyo License Agreement) with Guangzhou Joyo Pharmatech Co., Ltd.

(Joyo) under which we were granted an exclusive, worldwide (except mainland China, Hong Kong and Macau), royalty-bearing license to certain patent and other intellectual property rights owned or controlled by Joyo to develop, manufacture, and commercialize certain pan-RAS inhibitors in all fields of use.

We have an option to expand the territory of the license to include mainland China, Hong Kong and Macau by making a $50.0 million payment to Joyo on or prior to the first dosing of the first patient in a Phase 2 clinical trial by either us or Joyo, or a payment of $150.0 million after the first dosing of the first patient in a Phase 2 clinical trial by either us or Joyo, and before filing a new drug application (or the foreign equivalent) by either us or Joyo.

We have the right to sublicense (through multiple tiers) our rights under the Joyo License Agreement, subject to certain limitations and conditions, and are required to use commercially reasonable efforts to commercialize licensed products in the United States.

The license granted under the Joyo License Agreement is subject to Joyo’ reserved right to develop, manufacture, use, and commercialize licensed products in mainland China, Hong Kong and Macau, unless we exercise our option to expand the license to include mainland China, Hong Kong and Macau.

Under the Joyo License Agreement, we made an upfront cash payment to Joyo of $12.5 million.

In addition, we are obligated to make development and regulatory milestone payments of up to $51.5 million (or up to $57.5 million if our territory is expanded to include mainland China, Hong Kong, and Macau) and commercial milestone payments of up to $125.0 million upon the achievement of the corresponding milestones.

We are also obligated to pay tiered royalties on net sales of all licensed products, in the low- to mid-single digit percentages, subject to certain reductions.

The Joyo License 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 for the licensed product in such country, (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.

Upon expiration of the Joyo License Agreement, on a licensed product-by-licensed product and country-by-country basis, the license granted to us with respect to such product in such countries shall be deemed to be fully paid-up, royalty-free, non-terminable, irrevocable and perpetual.

The Joyo License Agreement may be terminated in its entirety by either party in the event of an uncured material breach by the other party or in the event the other party becomes subject to specified bankruptcy, insolvency, or similar circumstances.

Joyo may terminate the Joyo License Agreement in the event that we or our affiliates or any of our or their sublicensees institutes, prosecutes or otherwise participates in any challenge to the licensed patents.

We may terminate the Joyo License Agreement in its entirety at any time upon the provision of prior written notice to Joyo.

Upon termination of the Joyo License Agreement for any reason, all rights and licenses granted to us will terminate.

In addition, the licenses granted to Joyo under certain patent and other intellectual property rights owned or controlled by us to develop, manufacture, use, and commercialize the licensed products in mainland China, Hong Kong and Macau will survive the termination of the Joyo License Agreement for any reason, unless we exercise our option to expand the license to include mainland China, Hong Kong and Macau, in which case such licenses to Joyo will terminate automatically;

and Joyo has an option to negotiate a license under any patent rights, know-how, or other intellectual property rights relating to the licensed products that are owned or controlled by us for the purpose of developing, manufacturing and commercializing the licensed products in our territory on terms to be negotiated between the parties.

Medshine license agreement

In May 2024, we entered into an exclusive license agreement (the Medshine License Agreement) with Medshine Discovery Inc.

(Medshine) under which we were granted an exclusive, worldwide, royalty-bearing license to certain patent and other intellectual property rights owned or controlled by Medshine to develop, manufacture and commercialize certain pan-KRAS inhibitors in all fields of use.

We have the right to sublicense (through multiple tiers) our rights under the Medshine License Agreement, subject to certain limitations and conditions, and are required to use commercially reasonable efforts to commercialize licensed products in certain geographical markets.

Under the Medshine License Agreement, we made an upfront cash payment to Medshine of $10.0 million.

In addition, we are obligated to make development and regulatory milestone payments of up to $30.0 million and commercial milestone payments of up to $130.0 million upon the achievement of the corresponding milestones.

We are also obligated to pay a low-single digit percentage royalty on net sales of all licensed products, subject to certain reductions.

The Medshine License 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:

Upon expiration of the Medshine License Agreement, on a licensed product-by-licensed product and country-by-country basis, the license granted to us with respect to such product in such countries shall be deemed to be fully paid-up, royalty-free, non-terminable, irrevocable and perpetual.

The Medshine License Agreement may be terminated in its entirety by either party in the event of an uncured material breach by the other party or in the event the other party becomes subject to specified bankruptcy, insolvency, or similar circumstances.

Medshine may terminate the Medshine License Agreement in the event that we or our affiliates or any of our or their sublicensees commences or actively and voluntarily participates in any challenge to the licensed patents.

We may terminate the Medshine License Agreement in its entirety at any time upon the provision of prior written notice to Medshine.

Upon termination of the Medshine License Agreement for any reason, all rights and licenses granted to us will terminate.

In addition, upon termination of the Medshine License Agreement by Medshine for cause, Medshine has an option to negotiate a license under any patent rights, know-how, or other intellectual property rights relating to the licensed products that are owned or controlled by us for the purpose of developing, manufacturing and commercializing the licensed products on terms to be negotiated between the parties.

In addition to the Joyo License Agreement and the Medshine License Agreement, 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.

For additional information regarding these agreements, see the section titled “Business—Our acquisition and license agreements” in our Annual Report on Form 10-K for the year ended December 31, 2023 filed with the SEC on March 27, 2024.

13 unchanged sentences

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

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Other clinical programs

41 unchanged sentences

Results of operations

Comparison of the three months ended March 31, 2024 and 2023

The following table summarizes our results of operations for the three months ended March 31, 2024 and 2023 (in thousands):

Three Months Ended March 31,

Comparison of the three months ended June 30, 2024 and 2023

The following table summarizes our results of operations for the three months ended June 30, 2024 and 2023 (in thousands):

Three Months Ended June 30,

Operating expenses:

Research and development

In-process research and development

General and administrative

3 unchanged sentences

Research and development expenses

Research and development expenses were $28.6 million for the three months ended March 31, 2024 compared to $27.6 million for the three months ended March 31, 2023.

The increase of $1.0 million was primarily driven by an increase of $2.4 million in expenses incurred in connection with clinical trials, preclinical studies and discovery activities, partially offset by a decrease of $1.1 million in outsourced services and consulting fees.

Research and development expenses were $33.0 million for the three months ended June 30, 2024 compared to $26.2 million for the three months ended June 30, 2023.

The increase of $6.8 million was primarily driven by an impairment charge of $3.0 million on operating lease assets, leasehold improvements, and furniture related to the sublease plan of the first floor of our San Diego facility during the three months ended June 30, 2024, and increases of $1.2 million in expenses incurred in connection with clinical trials, preclinical studies and discovery activities, $1.0 million in personnel costs primarily due to termination benefits in connection with the reduction in force, $0.7 million in facilities-related expenses and depreciation, and $0.7 million in outsourced services and consulting fees.

In-process research and development expenses

In-process research and development expenses were $22.5 million for the three months ended June 30, 2024 compared to $0 for the three months ended June 30, 2023.

The increase was driven by upfront payments of $22.5 million in connection with our license agreements with Joyo and Medshine.

General and administrative expenses

General and administrative expenses were $10.3 million for the three months ended March 31, 2024 compared to $9.4 million for the three months ended March 31, 2023.

The increase of $0.8 million was primarily driven by increases of $0.7 million in legal fees and $0.6 million in personnel costs, including stock-based compensation expense, partially offset by a decrease of $0.3 million in insurance costs.

General and administrative expenses were $12.3 million for the three months ended June 30, 2024 compared to $9.8 million for the three months ended June 30, 2023.

The increase of $2.5 million was primarily driven by an impairment charge of $1.7 million on operating lease assets, leasehold improvements, and furniture related to the sublease plan of the first floor of our San Diego facility during the three months ended June 30, 2024, and an increase of $0.7 million in legal fees.

Other income (expense), net

Other income (expense), net was $3.8 million for the three months ended March 31, 2024 and 2023.

Other income (expense), net was $4.6 million for the three months ended June 30, 2024 compared to $4.2 million for the three months ended June 30, 2023.

The increase of $0.4 million was primarily related to an increase in interest earned on our cash, cash equivalents and marketable securities of $0.8 million, partially offset by a $0.4 million impairment charge on our investment in equity securities during the three months ended June 30, 2024.

Comparison of the six months ended June 30, 2024 and 2023

The following table summarizes our results of operations for the six months ended June 30, 2024 and 2023 (in thousands):

Six Months Ended June 30,

Operating expenses:

Research and development

In-process research and development

General and administrative

Total operating expenses

Loss from operations

Total other income (expense), net

Research and development expenses

Research and development expenses were $61.6 million for the six months ended June 30, 2024 compared to $53.8 million for the six months ended June 30, 2023.

The increase of $7.8 million was primarily driven by a $3.7 million increase in expenses incurred in connection with clinical trials, preclinical studies and discovery activities, an impairment charge of $3.0 million on operating lease assets, leasehold improvements, and furniture related to the sublease plan of the first floor of our San Diego facility during the three months ended June 30, 2024, and a $1.1 million increase in personnel costs primarily due to termination benefits in connection with the reduction in force.

In-process research and development expenses

In-process research and development expenses were $22.5 million for the six months ended June 30, 2024 compared to $0 for the six months ended June 30, 2023.

The increase was driven by upfront payments of $22.5 million in connection with our license agreements with Joyo and Medshine.

General and administrative expenses

General and administrative expenses were $22.5 million for the six months ended June 30, 2024 compared to $19.2 million for the six months ended June 30, 2023.

The increase of $3.3 million was primarily driven by an impairment charge of $1.7 million on operating lease assets, leasehold improvements, and furniture related to the sublease plan of the first floor of our San Diego facility during the three months ended June 30, 2024, increases of $1.4 million in legal fees and $1.0 million in personnel related costs, including stock-based compensation, partially offset by a decrease of $0.6 million in insurance costs.

Other income (expense), net

Other income (expense), net was $8.4 million for the six months ended June 30, 2024 compared to $8.0 million for the six months ended June 30, 2023.

Liquidity and capital resources

3 unchanged sentences

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

In August 2022, we entered into the Sale Agreement with the Agent, pursuant to which we may offer and sell shares of our common stock having an aggregate offering price of up to $200 million from time to time, in “at the market” offerings through the Agent.

Sales of the shares of common stock, if any, will be made at prevailing market prices at the time of sale, or as otherwise agreed with the Agent.

The Agent will receive a commission from us of up to 3.0% of the gross proceeds of any shares of common stock sold under the Sale Agreement.

There have been no shares of our common stock sold under the Sale Agreement as of March 31, 2024.

Pursuant to the Sale Agreement, the Agent will receive a commission from us of up to 3.0% of the gross proceeds of any shares of common stock sold under the Sale Agreement.

There have been no shares of our common stock sold under the Sale Agreement as of June 30, 2024.

In July 2024, we sold 9,231,114 shares of common stock under the Sale Agreement at a price of $2.37 per share.

Proceeds from the ATM Offering in July 2024 were $21.1 million, net of commissions and expenses of $0.8 million.

In December 2022, we completed the 2022 Offering and issued 15,384,616 shares of our common stock at a price to the public of $6.50 per share.

Proceeds from the 2022 Offering were $94.9 million, net of underwriting discounts and commissions and offering costs of $5.1 million.

In March 2024, in connection with the 2024 Private Placement, the Company entered into a stock purchase agreement with the purchasers named therein for the private placement of 21,844,660 shares of its common stock at a price of $2.06 per share.

On April 2, 2024, the 2024 Private Placement closed and the gross proceeds were $45.0 million, before deducting placement agent fees and estimated expenses of approximately $1.3 million.

The Company received $6.9 million of the proceeds in March 2024 prior to the close of the 2024 Private Placement.

Proceeds from the 2024 Private Placement were $43.6 million, net of placement agent fees and expenses of approximately $1.4 million.

In May 2024, we completed the 2024 Offering and issued 99,459,458 shares of our common stock, including the exercise in full by the underwriters of their option to purchase 12,972,972 shares of our common stock, at a price to the public of $1.85 per share.

Proceeds from the 2024 Offering were $174.4 million, net of underwriting discounts and commissions and offering costs of $9.6 million.

Future capital requirements

The remaining $36.8 million of net proceeds were received in April 2024.

Based upon our current operating plans, we believe that our cash, cash equivalents and short-term marketable securities, together with the net proceeds from the 2024 Private Placement, will be sufficient to fund our operations into the second half of 2026.

As of June 30, 2024, we had cash, cash equivalents and marketable securities of $460.2 million.

Based upon our current operating plans, we believe that our cash, cash equivalents and marketable securities will be sufficient to fund our operations into the first half of 2027.

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.

23 unchanged sentences

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

Three Months Ended March 31,

Six Months Ended June 30,

Net cash (used in) provided by:

2 unchanged sentences

Financing activities

Net decrease in cash, cash equivalents and restricted cash

Net increase (decrease) in cash, cash equivalents and restricted cash

Operating activities

Cash used in operating activities was $33.3 million during the three months ended March 31, 2024, primarily resulting from a net loss of $35.0 million, changes in operating assets and liabilities of $3.7 million and accretion on marketable securities of $2.3 million, partially reduced by stock-based compensation expense of $6.8 million and depreciation and amortization expense of $1.0 million.

Net cash used by changes in operating assets and liabilities consisted primarily of a decrease in accrued expenses and other current liabilities of $3.6 million, an increase in prepaid expenses and other current and long-term assets of $0.5 million, and a decrease in operating lease assets and liabilities, net of $0.2 million, offset by an increase in accounts payable of $0.6 million.

Cash used in operating activities was $26.4 million during the three months ended March 31, 2023, primarily resulting from a net loss of $33.2 million and accretion on marketable securities of $1.0 million, partially reduced by stock-based compensation expense of $6.8 million and depreciation and amortization expense of $0.9 million.

Net cash provided by changes in operating assets and liabilities consisted primarily of an increase in operating lease assets and liabilities, net of $3.3 million primarily due to the receipt of $2.3 million in reimbursement from our landlord for tenant improvements, an increase in accounts payable of $0.4 million, and a decrease in prepaid expenses and other current and long-term assets of $0.7 million, offset by a decrease in accrued expenses and other current and long-term liabilities of $4.4 million.

Cash used in operating activities was $62.4 million during the six months ended June 30, 2024, primarily resulting from a net loss of $98.2 million, accretion on marketable securities of $4.7 million and changes in operating assets and liabilities of $3.2 million, partially reduced by in-process research and development expenses of $22.5 million in connection with our license agreements with Joyo and Medshine, which are reflected in investing activities, stock-based compensation expense of $14.0 million, an impairment charge of $4.7 million on operating lease assets, leasehold improvements and furniture and depreciation and amortization expense of $2.1 million.

Cash used in operating activities was $52.3 million during the six months ended June 30, 2023, primarily resulting from a net loss of $65.0 million, accretion on marketable securities of $2.4 million, and changes in operating assets and liabilities of $0.6 million, partially reduced by stock-based compensation expense of $13.9 million and depreciation and amortization expense of $1.8 million.

Net cash used from changes in operating assets and liabilities consisted primarily of a decrease in accounts payable, accrued expenses and other current and long-term liabilities of $5.9 million, partially offset by an increase in operating lease assets and liabilities, net of $3.5 million primarily due to the receipt of $2.3 million in reimbursement from our landlord for tenant improvements, and a decrease in prepaid expenses and other current and long-term assets of $1.8 million.

Investing activities

Net cash provided by investing activities was $10.0 million during the three months ended March 31, 2024 as compared to $14.7 million during the three months ended March 31, 2023.

The decrease in cash provided by investing activities of $4.7 million was primarily the result of an increase in purchases of marketable securities of $19.7 million and a decrease in maturities of marketable securities of $6.2 million, partially offset by decreases in in-process research and development of $20.0 million and purchases of property and equipment of $1.2 million.

Net cash used in investing activities was $76.6 million during the six months ended June 30, 2024 as compared to $94.0 million during the six months ended June 30, 2023.

The decrease in cash used in investing activities of $17.3 million was primarily the result of decreases in purchases of marketable securities of $55.1 million and property and equipment of $1.4 million, partially offset by a decrease in maturities of marketable securities of $36.7 million and an increase in in-process research and development of $2.5 million.

Financing activities

Net cash provided by financing activities was $6.9 million during the three months ended March 31, 2024 as compared to $0.2 million during the three months ended March 31, 2023.

During the three months ended March 31, 2024, we received $6.9 million of proceeds for the prepayment of the 2024 Private Placement which closed in April 2024.

During the three months ended March 31, 2023, we received $0.2 million from the exercise of stock options.

Net cash provided by financing activities was $218.8 million during the six months ended June 30, 2024 as compared to $0.8 million during the six months ended June 30, 2023.

During the six months ended June 30, 2024, we received $174.6 million of net proceeds for the issuance of common stock from the 2024 Offering, $43.6 million in net proceeds for the issuance of common stock from the 2024 Private Placement, $0.4 million from the issuance of common stock under our Employee Stock Purchase Plan (ESPP) and $0.1 million from the exercise of stock options.

During the six months ended June 30, 2023, we received $0.5 million from the issuance of common stock under our ESPP and $0.3 million from the exercise of stock options.

Contractual obligations and commitments

As of March 31, 2024, 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 – Cash requirements due to contractual obligations and other commitments,” included in our Annual Report on Form 10-K for the year ended December 31, 2023 filed with the SEC on March 27, 2024.

As of June 30, 2024, 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 – Cash requirements due to contractual obligations and other commitments,” included in our Annual Report on Form 10-K for the year ended December 31, 2023 filed with the SEC on March 27, 2024.

Critical accounting policies and estimates

5 unchanged sentences

Actual results may differ materially from these estimates.

As of March 31, 2024, 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,” included in our Annual Report on Form 10-K for the year ended December 31, 2023 filed with the SEC on March 27, 2024.

As of June 30, 2024, 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,” included in our Annual Report on Form 10-K for the year ended December 31, 2023 filed with the SEC on March 27, 2024.

Recently issued and adopted accounting pronouncements

13 unchanged sentences

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis