What changed in this filing

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Item 1. Financial Statements

2024-11-12 compared with 2024-08-12 · 131 added, 102 removed, 517 unchanged (31% of the section changed)

2 unchanged sentences

(In thousands, except share and par value amounts)

September 30,

Current assets:

19 unchanged sentences

Preferred stock, $ 0.0001 par value;

80,000,000 shares authorized at June 30, 2024 and December 31, 2023;

no shares issued and outstanding at June 30, 2024 and December 31, 2023

80,000,000 shares authorized at September 30, 2024 and December 31, 2023;

no shares issued and outstanding at September 30, 2024 and December 31, 2023

Common stock, $ 0.0001 par value;

800,000,000 shares authorized at June 30, 2024 and December 31, 2023;

273,163,958 and 151,462,103 shares issued at June 30, 2024 and December 31, 2023, respectively;

273,039,997 and 151,090,227 shares outstanding at June 30, 2024 and December 31, 2023, respectively

800,000,000 shares authorized at September 30, 2024 and December 31, 2023;

282,690,975 shares issued and outstanding at September 30, 2024;

151,462,103 and 151,090,227 shares issued and outstanding at December 31, 2023, respectively

Additional paid-in capital

Accumulated other comprehensive (loss) income

Accumulated other comprehensive income

Accumulated deficit

4 unchanged sentences

(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:

6 unchanged sentences

Interest income

Other expense, net

Other income (expense), net

Total other income (expense), net

2 unchanged sentences

Other comprehensive income (loss):

Unrealized gain (loss) on marketable securities, net

Unrealized gain on marketable securities, net

Comprehensive loss

4 unchanged sentences

Stockholders'

(Loss) Income

Income (Loss)

Balance at December 31, 2023

12 unchanged sentences

Balance at June 30, 2024

Issuance of common stock in ATM offering, net of $ 847 in commissions and expenses

Exercise of stock options

Vesting of early exercised stock options

Stock-based compensation expense

Unrealized gain on marketable securities, net

Balance at September 30, 2024

Condensed Consolidated Statements of Stockholders’ Equity - Continued

(In thousands, except share data)

Comprehensive

Stockholders'

(Loss) Income

Income (Loss)

Balance at December 31, 2022

10 unchanged sentences

Balance at June 30, 2023

Exercise of stock options

Vesting of early exercised stock options

Stock-based compensation expense

Unrealized gain on marketable securities, net

Balance at September 30, 2023

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:

16 unchanged sentences

In-process research and development

Payment made for investment in equity securities

Purchases of property and equipment

3 unchanged sentences

Proceeds from issuance of common stock in underwritten offering, net of discounts and offering costs

Proceeds from issuance of common stock in ATM offering, net of commissions and expenses

Proceeds from the exercise of stock options

1 unchanged sentence

Net cash provided by financing activities

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

Net decrease in cash, cash equivalents and restricted cash

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

3 unchanged sentences

Vesting of early exercised options

Amounts accrued for offering costs

Amounts accrued for deferred offering costs

Obligation accrued for investment in equity securities

14 unchanged sentences

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, 2024, the Company had $ 408.4 million in cash, cash equivalents, and short-term marketable securities and $ 51.8 million in long-term marketable securities.

As of June 30, 2024, the Company had an accumulated deficit of $ 704.2 million.

As of September 30, 2024, the Company had $ 318.9 million in cash, cash equivalents, and short-term marketable securities and $ 144.4 million in long-term marketable securities.

As of September 30, 2024, the Company had an accumulated deficit of $ 735.4 million.

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

From its inception through June 30, 2024, 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), underwritten offerings, and a private placement of common stock.

From its inception through September 30, 2024, 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), underwritten offerings, a private placement of common stock, and an "at the market" offering (ATM Offering).

The Company expects to use its cash, cash equivalents, and marketable securities 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 marketable securities as of June 30, 2024 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 marketable securities as of September 30, 2024 will be sufficient for the Company to fund operations for at least one year from the issuance date of these condensed consolidated financial statements.

2024 ATM offering

During the three months ended September 30, 2024, the Company sold 9,231,114 shares of common stock at a weighted-average price of $ 2.37 per share under the Open Market Sale Agreement effective August 2022 (the Sale Agreement) with Jefferies LLC (the Agent).

Pursuant to the Sale Agreement, the Company may offer and sell shares of its common stock having an aggregate offering price of up to $ 200 million from time to time, in ATM 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.

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

Proceeds from the ATM Offering during the three months ended September 30, 2024 were $ 21.0 million, net of commissions and expenses of $ 847,000 .

2024 underwritten offering

17 unchanged sentences

Unaudited interim financial information

The accompanying condensed consolidated balance sheet as of June 30, 2024, the condensed consolidated statements of operations and comprehensive loss for the three and six months ended June 30, 2024 and 2023, the condensed consolidated statements of stockholders’ equity for the three and six months ended June 30, 2024 and 2023 and the condensed consolidated statements of cash flows for the six months ended June 30, 2024 and 2023 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, 2024 and the condensed consolidated results of its operations and cash flows for the three and six months ended June 30, 2024 and 2023.

The condensed consolidated financial data and other information disclosed in these notes related to the three and six months ended June 30, 2024 and 2023 are unaudited.

The condensed consolidated results for the three and six months ended June 30, 2024 are not necessarily indicative of results to be expected for the year ending December 31, 2024, any other interim periods, or any future year or period.

The accompanying condensed consolidated balance sheet as of September 30, 2024, the condensed consolidated statements of operations and comprehensive loss for the three and nine months ended September 30, 2024 and 2023, the condensed consolidated statements of stockholders’ equity for the three and nine months ended September 30, 2024 and 2023 and the condensed consolidated statements of cash flows for the nine months ended September 30, 2024 and 2023 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, 2024 and the condensed consolidated results of its operations and cash flows for the three and nine months ended September 30, 2024 and 2023.

The condensed consolidated financial data and other information disclosed in these notes related to the three and nine months ended September 30, 2024 and 2023 are unaudited.

The condensed consolidated results for the three and nine months ended September 30, 2024 are not necessarily indicative of results to be expected for the year ending December 31, 2024, any other interim periods, or any future year or period.

These unaudited condensed consolidated financial statements should be read in conjunction with the Company's audited consolidated financial statements included in its Annual Report on Form 10-K for the year ended December 31, 2023 filed with the SEC on March 27, 2024 .

7 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 as of June 30, 2024 and December 31, 2023 to secure a letter of credit in connection with the lease of the Company’s facilities (see Note 10).

The Company had deposited cash of $ 408,000 as of September 30, 2024 and December 31, 2023 to secure a letter of credit in connection with the lease of the Company’s facilities (see Note 10).

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

45 unchanged sentences

The Company is currently evaluating the impact of the standard on the presentation of its consolidated financial statements and related disclosures.

In November 2024, the FASB issued ASU No.

2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40):

Disaggregation of Income Statement Expenses, which is intended to improve the disclosures of expenses by providing more detailed information about the types of expenses in commonly presented expense captions.

The standard is effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027.

Early adoption is permitted.

The standard can be applied either prospectively or retrospectively.

The Company is currently evaluating the impact of the standard on the presentation of its consolidated financial statements and related disclosures.

Fair value measurements

The following tables summarize the Company’s financial assets 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, 2024 using

Fair value measurements as of September 30, 2024 using

Quoted prices in

active markets

September 30,

for identical

2 unchanged sentences

Money market funds (1)

Commercial paper (1)

US treasury securities (2)

25 unchanged sentences

The carrying amounts of the Company’s financial instruments, including cash, prepaid expenses and other current assets, accounts payable and accrued expenses and other current liabilities, approximate fair value due to their short maturities.

As of June 30, 2024 and December 31, 2023 , the Company held $ 1.8 million and $ 2.0 million in equity investments in Affini-T Therapeutics, Inc.

As of September 30, 2024 and December 31, 2023 , the Company held $ 1.8 million and $ 2.0 million in equity investments in Affini-T Therapeutics, Inc.

(Affini-T) at cost, less impairment, respectively.

An impairment adjustment of $ 402,000 was made to the value of the Company’s equity investment in Affini-T during the three months ended June 30, 2024.

An impairment adjustment of $ 402,000 was made to the value of the Company’s equity investment in Affini-T during the nine months ended September 30, 2024.

The Company was notified by Affini-T of an extension financing in June 2024 and the terms of such financing.

Accordingly, the Company reassessed the value of its equity investment in Affini-T using a market approach.

This represents a Level 3 nonrecurring fair value measurement.

This represented a Level 3 nonrecurring fair value measurement.

Calculating the fair value of the equity investment involves unobservable inputs, including the terms and preferences of the extension financing, and significant estimates and assumptions.

Changes in the estimates and assumptions used could materially affect the amount of impairment loss recognized in the period the equity investment is considered impaired.

This impairment was offset by a new investment obligation of approximately $ 235,000 recorded as of June 30, 2024.

This impairment was offset by a new investment obligation of approximately $ 235,000 recorded during the nine months ended September 30, 2024 .

In July 2024, the Company paid approximately $ 157,000 of the obligation related to the extension financing.

No adjustment was made to the value of the Company’s equity investment in Affini-T during the three months ended September 30, 2024.

No transfers between levels have occurred during the periods presented.

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

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

The Company obtains pricing information from its investment manager and generally determines the fair value of marketable securities usi ng standard observable inputs, including benchmark yields, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, and bid and/or offers.

1 unchanged sentence

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

June 30, 2024

September 30, 2024

US treasury securities

10 unchanged sentences

US treasury securities

The following tables present fair values and gross unrealized losses for those available-for-sale securities that were in an unrealized loss position as of June 30, 2024 and December 31, 2023, aggregated by category and the length of time that the securities have been in a continuous loss position (in thousands):

June 30, 2024

The following tables present fair values and gross unrealized losses for those available-for-sale securities that were in an unrealized loss position as of September 30, 2024 and December 31, 2023, aggregated by category and the length of time that the securities have been in a continuous loss position (in thousands):

September 30, 2024

Unrealized losses less than 12 months

17 unchanged sentences

Commercial paper

As of June 30, 2024, there were 40 available-for-sale securities with an estimated fair value of $ 230.7 million in gross unrealized loss positions, of which four available-for-sale securities with an estimated fair value of $ 22.3 million were in an unrealized loss position for more than 12 months.

As of September 30, 2024, there were seven available-for-sale securities with an estimated fair value of $ 44.8 million in gross unrealized loss positions, of which three available-for-sale securities with an estimated fair value of $ 15.0 million were in an unrealized loss position for more than 12 months.

A s of December 31, 2023 , there were 22 available-for-sale securities with an estimated fair value of $ 105.6 million in gross unrealized loss positions , none of which were in an unrealized loss position for more than 12 months.

As of June 30, 2024 and December 31, 2023, unrealized losses on available-for-sale securities are not attributed to credit risk.

As of September 30, 2024 and December 31, 2023, unrealized losses on available-for-sale securities are not attributed to credit risk.

The Company believes that an allowance for credit losses is unnecessary because the unrealized losses on certain of the Company’s available-for-sale securities are due to market factors and changes in interest rates.

Additionally, the Company does not intend to sell the securities nor is it more likely than not that the Company will be required to sell the securities before recovery of their amortized cost basis.

Accrued interest on the Company’s available-for-sale securities was $ 2.2 million and $ 1.1 million as of June 30, 2024 and December 31, 2023 , respectively, and was included in prepaid expenses and other current assets on the condensed consolidated balance sheets.

Accrued interest on the Company’s available-for-sale securities was $ 2.4 million and $ 1.1 million as of September 30, 2024 and December 31, 2023 , respectively, and was included in prepaid expenses and other current assets on the condensed consolidated balance sheets.

Property and equipment, net

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

September 30,

Laboratory equipment

5 unchanged sentences

Property and equipment, net

Depreciation and amortization expense related to property and equipment was $ 1.1 million and $ 2.1 million for the three and six months ended June 30, 2024 , respectively, and $ 955,000 and $ 1.8 million for the three and six months ended June 30, 2023 , respectively.

Depreciation and amortization expense related to property and equipment was $ 842,000 and $ 3.0 million for the three and nine months ended September 30, 2024 , respectively, and $ 941,000 and $ 2.8 million for the three and nine months ended September 30, 2023 , 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

3 unchanged sentences

Accrued property and equipment

Accrued offering and deferred offering costs

Other accruals

Other accruals and current liabilities

Asset acquisitions

9 unchanged sentences

The Company is not obligated to pay royalties on the net sales of licensed products.

No IPR&D expense was recorded during the three and six months ended June 30, 2024 and 2023.

As of June 30, 2024 and December 31, 2023 , no milestones had been accrued as the underlying contingencies were not probable or estimable.

No IPR&D expense was recorded during the three and nine months ended September 30, 2024 and 2023.

As of September 30, 2024 and December 31, 2023 , no milestones had been accrued as the underlying contingencies were not probable or estimable.

License agreements

7 unchanged sentences

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, 2024 and 2023.

No IPR&D expense was recorded during the three and nine months ended September 30, 2024 and 2023.

Guangzhou Joyo Pharmatech Co., Ltd

7 unchanged sentences

The Company is 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.

For the three and six months ended June 30, 2024 , the Company recorded $ 12.5 million in IPR&D expense related to the upfront cash payment.

The Company recorded IPR&D expense of $ 0 and $ 12.5 million in connection with the upfront cash payment made during the three and nine months ended September 30, 2024, respectively.

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:

14 unchanged sentences

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

For the three and six months ended June 30, 2024 , the Company recorded $ 10.0 million in IPR&D expense related to the upfront cash payment.

The Company recorded IPR&D expense of $ 0 and $ 10.0 million in connection with the upfront cash payment made during the three and nine months ended September 30, 2024, respectively.

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:

14 unchanged sentences

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 during the three and six months ended June 30, 2024 and 2023.

No IPR&D expense was recorded during the three and nine months ended September 30, 2024 and 2023.

NiKang Therapeutics, Inc.

7 unchanged sentences

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.

No IPR&D expense was recorded during the three and six months ended June 30, 2024 and 2023.

As of June 30, 2024 and December 31, 2023, no milestones are accrued for any license agreements as the underlying contingencies are not probable or estimable.

No IPR&D expense was recorded during the three and nine months ended September 30, 2024 and 2023.

As of September 30, 2024 and December 31, 2023 , no milestones are accrued for any license agreements as the underlying contingencies are not probable or estimable.

Stock-based compensation

4 unchanged sentences

In addition, the number of shares of common stock available for issuance under the 2021 Plan may be increased annually on the first day of each calendar year during the term of the 2021 Plan, beginning in 2022, 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 or an authorized committee of the board of directors.

As of June 30, 2024, there were 12,913,020 stock-based awards available for future grant under the 2021 Plan.

As of September 30, 2024, there were 12,912,223 stock-based awards available for future grant under the 2021 Plan.

Subsequent to July 2021, no further awards will be granted under the 2018 Plan and all future stock-based awards will be granted under the 2021 Plan.

11 unchanged sentences

Outstanding at December 31, 2023

Outstanding at June 30, 2024

Options exercisable at June 30, 2024

The weighted-average grant date fair value of options granted for the three and six months ended June 30, 2024 was $ 1.48 and $ 1.28 , respectively, and for the three and six months ended June 30, 2023 was $ 2.05 and $ 2.83 , respectively.

As of June 30, 2024, the unrecognized compensation cost related to unvested stock option grants was $ 47.4 million and is expected to be recognized as expense over approximately 2.67 years.

The intrinsic value of the options exercised for the three and six months ended June 30, 2024 was $ 123,000 and $ 170,000 , respectively.

The intrinsic value of the options exercised for the three and six months ended June 30, 2023 was $ 376,000 and $ 893,000 , respectively.

Outstanding at September 30, 2024

Options exercisable at September 30, 2024

The weighted-average grant date fair value of options granted for the three and nine months ended September 30, 2024 was $ 1.86 and $ 1.29 , respectively, and for the three and nine months ended September 30, 2023 was $ 1.99 and $ 2.74 , respectively.

As of September 30, 2024, the unrecognized compensation cost related to unvested stock option grants was $ 41.9 million and is expected to be recognized as expense over approximately 2.53 years.

The intrinsic value of the options exercised for the three and nine months ended September 30, 2024 was $ 535,000 and $ 705,000 , respectively.

The intrinsic value of the options exercised for the three and nine months ended September 30, 2023 was $ 21,000 and $ 914,000 , respectively.

Prior to the Company's IPO, certain individuals were granted the ability to early exercise their stock options.

3 unchanged sentences

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 condensed consolidated balance sheets and will be transferred into common stock and additional paid-in capital as the shares vest.

As of June 30, 2024 and December 31, 2023, there were 123,961 shares and 371,876 shares subject to repurchase by the Company, respectively.

As of June 30, 2024 and December 31, 2023, the Company recorded $ 155,000 and $ 464,000 of liabilities associated with shares issued with repurchase rights, respectively, which is recorded in accrued expenses and other current liabilities.

As of September 30, 2024 and December 31, 2023 , there were zero shares and 371,876 shares subject to repurchase by the Company, respectively.

As of September 30, 2024 and December 31, 2023, the Company recorded $ 0 and $ 464,000 of liabilities associated with shares issued with repurchase rights, respectively, which is recorded in accrued expenses and other current liabilities.

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

27 unchanged sentences

In addition, the number of shares of common stock available for issuance under the ESPP may be increased annually on the first day of each calendar year during the term of the ESPP, beginning in 2022, by an amount equal to the lesser of (i) 1% 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 or an authorized committee of the board of directors.

The Company recognized stock-based compensation expense related to the ESPP of $ 103,000 and $ 444,000 during the three and six months ended June 30, 2024, respectively, and $ 349,000 and $ 1.1 million during the three and six months ended June 30, 2023, respectively.

As of June 30, 2024, the unrecognized compensation cost related to the ESPP was $ 1.0 million and is expected to be recognized as expense over approximately 1.47 years.

As of June 30, 2024 and December 31, 2023, $ 43,000 and $ 46,000 has been withheld on behalf of employees for future purchase under the ESPP, respectively, and is included in accrued expenses and other current liabilities on the condensed consolidated balance sheets.

The Company issued and sold 252,444 shares under the ESPP during the three and six months ended June 30, 2024 and 223,696 shares under the ESPP during the three and six months ended June 30, 2023.

The Company recognized stock-based compensation expense related to the ESPP of $ 156,000 and $ 600,000 during the three and nine months ended September 30, 2024, respectively, and $ 198,000 and $ 1.3 million during the three and nine months ended September 30, 2023, respectively.

As of September 30, 2024, the unrecognized compensation cost related to the ESPP was $ 891,000 and is expected to be recognized as expense over approximately 1.22 years.

As of September 30, 2024 and December 31, 2023, $ 305,000 and $ 46,000 has been withheld on behalf of employees for future purchase under the ESPP, respectively, and is included in accrued expenses and other current liabilities on the condensed consolidated balance sheets.

The Company issued and sold zero and 252,444 shares under the ESPP during the three and nine months ended September 30, 2024, respectively, and zero and 223,696 shares under the ESPP during the three and nine months ended September 30, 2023, respectively.

The assumptions used in the Black-Scholes option pricing model to determine the fair value of the stock to be purchased under the ESPP 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

1 unchanged sentence

4.70 %- 5.35 %

4.75 %- 5.39 %

4.70 %- 5.35 %

Expected volatility

1 unchanged sentence

72.54 %- 82.79 %

68.73 %- 74.72 %

72.54 %- 82.79 %

Expected term (in years)

Expected dividend yield

(1) No grants were made under the ESPP during the three months ended September 30, 2024 and 2023.

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, 2024 and December 31, 2023:

Common stock reserved for future issuance consisted of the following as of September 30, 2024 and December 31, 2023:

September 30,

Stock options issued and outstanding

3 unchanged sentences

The Company has facility leases for office space under non-cancellable and cancellable operating leases with various expiration dates through 2032 and equipment under a non-cancellable operating lease with a term expiring in 2026 .

Total lease costs were approximately $ 3.2 million and $ 5.9 million, including operating lease costs of $ 2.4 million and $ 4.3 million, variable lease costs of $ 918,000 and $ 1.8 million, and sublease income of $ 132,000 and $ 216,000, durin g the three and six months ended June 30, 2024, respectively.

Total lease costs were approximately $ 2.8 million and $ 5.8 million, including operating lease costs of $ 1.9 million and $ 3.8 million and variable lease costs of $ 859,000 and $ 2.0 million, durin g the three and six months ended June 30, 2023, respectively.

The Company paid $ 4.1 million and $ 2.6 million in cash for operating leases, net of sublease income, that is included in the operating activities section of the condensed consolidated statements of cash flows for the six months ended June 30, 2024 and 2023, respectively.

The weighted-average remaining lease term and the weighted-average discount rate of the Company’s operating leases were 7.81 years and 8.96 %, respectively, at June 30, 2024 .

Total lease costs were approximately $ 2.4 million and $ 8.4 million, including operating lease costs of $ 1.8 million and $ 6.2 million, variable lease costs of $ 940,000 and $ 2.8 million, and sublease income of $ 361,000 and $ 577,000 , durin g the three and nine months ended September 30, 2024, respectively.

Total lease costs were approximately $ 2.8 million and $ 8.6 million, including operating lease costs of $ 1.9 million and $ 5.7 million and variable lease costs of $ 859,000 and $ 2.9 million, durin g the three and nine months ended September 30, 2023, respectively.

The Company paid $ 6.1 million and $ 4.7 million in cash for operating leases, net of cash received from subleases, that is included in the operating activities section of the condensed consolidated statements of cash flows for the nine months ended September 30, 2024 and 2023, respectively.

The weighted-average remaining lease term and the weighted-average discount rate of the Company’s operating leases were 7.57 years and 8.96 %, respectively, at September 30, 2024 .

The weighted-average remaining lease term and the weighted-average discount rate of the Company’s operating leases were 8.29 years and 8.95 %, respectively, at December 31, 2023.

26 unchanged sentences

Pursuant to the agreement, the subleased space is approximately 10,000 square feet of office space with a sublease term of three years which includes an option for the subtenant to renew for an additional year and an early termination clause.

The Company determined the sublease to be an operating lease.

Therefore, the Company recognizes sublease income on a straight-line basis over the lease term in its condensed consolidated statements of operations and comprehensive loss as a reduction to operating lease costs because the sublease is outside of the Company's normal business operations.

The Company will continue to account for the operating lease asset and related liability of the original lease as it did prior to the commencement of the sublease.

The Company recorded a reduction to operating lease costs of $ 132,000 and $ 216,000 related to income from this sublease during the three and six months ended June 30, 2024, respectively.

In June 2024, the Company committed to a plan to sublease the first floor of its corporate headquarters in San Diego, California and in July 2024, the Company executed an agreement to sublease such space.

Pursuant to the agreement, the subleased space is approximately 18,421 square feet of office space with a sublease term of 61 months beginning in October 2024, with early access in August 2024.

In July 2024, the Company executed an agreement to sublease the first floor of its corporate headquarters.

Pursuant to the agreement, the subleased space is approximately 18,421 square feet of office space with a sublease term of 61 months beginning in October 2024, and early access in August 2024.

The agreement includes an option for the subtenant to renew for an additional year and an early termination clause.

In connection with the sublease plan of the first floor, the Company reassessed its asset groups for testing long-lived assets for impairment and determined the first floor operating lease assets and related property and equipment represented an asset group separate from the entity wide asset group.

In September 2024, the Company entered into an agreement to sublease a portion of the third floor of its corporate headquarters in San Diego, California.

Pursuant to the agreement, the subleased space is approximately 5,000 square feet of laboratory space with a sublease term of one year which includes an option for the subtenant to renew for an additional year.

The Company determined the subleases to be operating leases.

Therefore, the Company recognizes sublease income on a straight-line basis over the lease term in its condensed consolidated statements of operations and comprehensive loss as a reduction to operating lease costs because the subleases are outside of the Company's normal business operations.

The Company will continue to account for the operating lease assets and related liabilities of the original lease as it did prior to the commencement of the subleases.

The Company recorded a reduction to operating lease costs of $ 361,000 and $ 577,000 related to income from these subleases during the three and nine months ended September 30, 2024, respectively.

In connection with committing to the plan to sublease the first floor in June 2024, the Company reassessed its asset groups for testing long-lived assets for impairment and determined the first floor operating lease assets and related property and equipment represented an asset group separate from the entity wide asset group.

The Company concluded that the carrying value of the first floor asset group was not recoverable as it exceeded the future net undiscounted cash flows that are expected to be generated from the use and eventual disposition of the assets within the asset group.

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The cash flows used in the model were discounted using a rate of 13.5 %.

Based on this analysis, the Company recognized a noncash impairment charge of $ 4.7 million, including $ 2.4 million for the operating lease assets and $ 2.3 million for the leasehold improvements and furniture, of which $ 3.0 million was recorded to research and development expense and $ 1.7 million was recorded to general and administrative expense during the three and six months ended June 30, 2024.

This represents a Level 3 nonrecurring fair value measurement.

Based on this analysis, the Company recognized a noncash impairment charge of $ 4.7 million, including $ 2.4 million for the operating lease assets and $ 2.3 million for the leasehold improvements and furniture, of which $ 3.0 million was recorded to research and development expense and $ 1.7 million was recorded to general and administrative expense, during the nine months ended September 30, 2024 .

No impairment was recorded during the three months ended September 30, 2024.

This represented a Level 3 nonrecurring fair value measurement.

Calculating the fair value of the asset group involves significant estimates and assumptions, including projected future cash flows and a discount rate.

Changes in the estimates and assumptions used could materially affect the amount of impairment loss recognized in the period the asset group is considered impaired.

Future minimum lease payments under operating leases as of June 30, 2024 are as follows (in thousands):

Future minimum lease payments under operating leases as of September 30, 2024 are as follows (in thousands):

Year ending December 31,

2024 (remaining six months)

2024 (remaining three months)

Total lease payments

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The Company deprioritized its HERKULES-3 clinical trial evaluating ERAS-007 in combination with encorafenib and cetuximab (EC) in patients with EC-naïve BRAFm colorectal cancer, its THUNDERBBOLT-1 clinical trial evaluating ERAS-801 in patients with recurrent glioblastoma, and its ERAS-4 pan-KRAS program.

The Company will explore further advancement of the ERAS-801 program, including via select investigator-sponsored trials, and certain of the existing ERAS-4 molecules may serve as backup compounds for ERAS-4001.

The Company will explore further advancement of the ERAS-801 program, including via partnerships and select investigator-sponsored trials, and certain of the existing ERAS-4 molecules may serve as backup compounds for ERAS-4001.

In connection with this strategic reprioritization, the Company also approved a reduction in the Company’s workforce by approximately 18 %, primarily affecting employees working in certain drug discovery functions or on the deprioritized programs and trials.

As a result, the Company recognized $ 2.2 million in total charges in the three and six months ended June 30, 2024 in the condensed consolidated statements of operations and comprehensive loss based upon the underlying employees’ role within the Company in connection with the reduction in force.

As a result, the Company recognized $ 0 and $ 2.2 million in total charges in the three and nine months ended September 30, 2024 in the condensed consolidated statements of operations and comprehensive loss based upon the underlying employees’ role within the Company in connection with the reduction in force.

These charges consisted primarily of one-time cash charges for termination benefits which were substantially all paid in June 2024.

No provision for federal, state or foreign income taxes has been recorded for the three and six months ended June 30, 2024 and 2023.

No provision for federal, state or foreign income taxes has been recorded for the three and nine months ended September 30, 2024 and 2023.

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 condensed 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, 2024 and 2023 , the Company has no t recognized any interest or penalties related to income taxes.

For the three and nine months ended September 30, 2024 and 2023 , 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

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The Company excluded the following potential common shares, presented as 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:

September 30,

Options to purchase common stock

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In December 2023, the Erasca Foundation repaid the note.

In April 2024, the Company donated $ 125,000 to the Erasca Foundation, which is recorded in general and administrative expense in the condensed consolidated statements of operations and comprehensive loss for the three and six months ended June 30, 2024.

No such expense was recorded for the three months ended September 30, 2024.

Affini-T Therapeutics, Inc.

As of June 30, 2024 and December 31, 2023 , the Company held a $ 1.8 million and $ 2.0 million equity investment in Affini-T, respectively (see Note 3).

As of September 30, 2024 and December 31, 2023 , the Company held a $ 1.8 million and $ 2.0 million equity investment in Affini-T, respectively (see Note 3).

One of the Company’s board members is also a member of the board of Affini-T.

Subsequent event

July 2024 ATM Offering

From July 1, 2024 through the date of this filing, the Company sold 9,231,114 shares of common stock at a weighted average price of $ 2.37 per share under the Open Market Sale Agreement effective August 2022 (the Sale Agreement) with Jefferies LLC (the Agent).

Pursuant to the Sale Agreement, the Company may offer and sell shares of its common stock having an aggregate offering price of up to $ 200 million from time to time, in “at the market” offerings (an ATM Offering) 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.

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

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

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